Category Archives: Benefit News

Regulatory roundup

More retirement-related regulatory news for plan sponsors, including links to detailed information.

IRS issues memo on the application of section 409A to back-to-back arrangement
The Internal Revenue Services’ Office of Chief Counsel issues a memorandum (No. 201725027) on the application of section 409A to back-to-back arrangement. According to the memo, “Treas. Reg. Section 1.409A-3(i)(6) provides that the amount of the payment under the ultimate service recipient plan may not exceed the amount of the payment under the intermediate service recipient plan. Therefore, the USR Plan fails to meet the requirements of section 409A because the USR Plan provision providing for a payment to Taxpayer in the event of a Participant’s separation from service before vesting is an impermissible payment event.”

For more information, read the entire memo here.

Higher paid workers more likely to have access to retirement benefits
According to data published by the Bureau of Labor Statistics (BLS), “Sixty-six percent of private industry workers had access to employer-provided retirement plans in March 2016. Having access means employers offered the benefit, regardless of whether employees chose to participate. Forty-nine percent of private industry workers participated in retirement plans in March 2016. That results in a take-up rate—the percentage of workers with access to a plan who participate in the plan—of 75 percent. Access, participation, and take-up rates were all higher for workers in higher wage groups than for workers in lower wage groups.”

To learn more about the BLS’ data, click here.

Regulatory roundup

More retirement-related regulatory news for plan sponsors, including links to detailed information.

PBGC releases final rule on examination and copying of records
The Pension Benefit Guaranty Corporation (PBGC) is amending its regulation on Examination and Copying of PBGC Records to incorporate statutory changes to the Freedom of Information Act (FOIA).

The majority of the regulatory changes are specifically required by the FOIA Improvement Act of 2016. Section 3 of the 2016 Act requires federal agencies to review their FOIA regulations and to make conforming amendments, as necessary, to incorporate the 2016 Act’s changes to the FOIA. In addition to the changes required under the 2016 Act, PBGC is making one other amendment to its FOIA regulation that incorporates a previous statutory change under the Open Government Act of 2007.

As amended, the FOIA requires each agency to affirmatively release certain records that the agency determines are likely to be the subject of future requests, as well as certain others that have been the subject of three or more requests. The FOIA also requires agencies to redact such records to the extent necessary to protect personal privacy interests before adding them to the electronic reading room.

PBGC is amending its FOIA regulation by increasing the appeal deadline from 30 to 90 days, in conformity with the 90-day minimum time period established by the 2016 Act.

To read the entire final rule, click here.

Milliman & Barnett Waddingham announce pensions joint venture

Milliman and Barnett Waddingham, UK’s largest independent provider of actuarial, administration and consultancy services, today announced a joint venture.

Operating under the name of MBW International, the joint venture brings together the significant expertise of the two independent firms to deliver superior global retirement benefits advice to companies with headquarters in the UK and global companies with UK operations. The new organisation will offer truly independent global pensions advice from a single source, with full access to the experience and resources that live within the Barnett Waddingham and Milliman businesses. It will follow their shared values of providing quality, independent advice to their clients.

Nick Salter, Senior Partner at Barnett Waddingham, said: “MBW International will allow us to extend our global pensions expertise to support the full needs of multinational organisations with their overseas pension arrangements, whilst retaining the independent ownership structure of Barnett Waddingham. Clients of MBW International can expect to receive the same high quality, independent advice that Barnett Waddingham and Milliman are already known for.”

Steve White, Milliman CEO, said: “The establishment of MBW International enhances the range of retirement consulting services Milliman can offer its multinational and UK-headquartered clients. The obvious synergies between Milliman and Barnett Waddingham are built on our shared values: Independence, quality, and dedication to superior client service.”

Regulatory roundup

More retirement-related regulatory news for plan sponsors, including links to detailed information.

Guidance for remedial amendment period for 403(b) plan
The Internal Revenue Service (IRS) issued Revenue Procedure 2017-18 providing the last day of the remedial amendment period for § 403(b) plans, for purposes of section 21 of Rev. Proc. 2013-22, 2013-18 I.R.B. 985.

According to the guidance, the last day of the remedial amendment period described in section 2 of this revenue procedure and in section 21 of Rev. Proc. 2013-22 is March 31, 2020. A plan that does not satisfy the requirements of § 403(b) in form on any day during the remedial amendment period (that is, the period beginning on the later of January 1, 2010, or the plan’s effective date, and ending on March 31, 2020) will be considered to have satisfied those requirements if, on or before March 31, 2020, all provisions of the plan that are necessary to satisfy § 403(b) have been adopted and made effective in form and operation from the beginning of the remedial amendment period.

To read the revenue procedure, click here.

Final Rule to adjust for inflation civil monetary penalties
The Department of Labor (DoL) published a final rule to adjust for inflation the civil monetary penalties assessed or enforced in its regulations, pursuant to the Federal Civil Penalties Inflation Adjustment Act of 1990 as amended by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Inflation Adjustment Act).

The Inflation Adjustment Act requires the DoL to annually adjust its civil money penalty levels for inflation no later than January 15 of each year. The Inflation Adjustment Act provides that agencies shall adjust civil monetary penalties notwithstanding Section 553 of the Administrative Procedure Act (APA). Additionally, the Inflation Adjustment Act provides a cost-of-living formula for adjustment of the civil penalties. Accordingly, this final rule sets forth the DoL’s 2017 annual adjustments for inflation to its civil monetary penalties, effective January 13, 2017.

To read the final rule, click here.

Summary and audit indicators: 403(b) Universal Availability Requirement
The IRS has updated its webpage 403(b) Universal Availability Requirement. A common error occurs when employees, working less than full-time, are automatically excluded from making elective deferrals under the 403(b) plan. A plan that wants to apply the statutory exclusion for part-time employment must determine eligibility for the 403(b) elective deferrals based on whether the employee is reasonably expected to normally work less than 20 hours per week and has actually never worked more than 1,000 hours in the applicable 12-month period.

To visit the webpage, click here.

New mortality assumptions proposed for defined benefit retirement plans

The Treasury Department and the Internal Revenue Service (IRS) released a proposed rule on December 29, 2016, to update the mortality assumptions that tax-qualified defined benefit (DB) pension plans use to calculate the contributions required under the minimum funding standards of Internal Revenue Code section 430. The proposed effective date is for plan years beginning on or after January 1, 2018; no immediate action by plan sponsors is necessary with regard to the proposed tables, which are expected to increase the plan’s actuarial liabilities and annual benefit accrual costs (i.e., “target liability” and “target normal cost,” respectively).

Once finalized, the mortality tables will also be used to develop pension obligations for reporting to the Pension Benefit Guaranty Corporation (PBGC), and Treasury and the IRS will publish a blended version of the tables to be used to calculate “non-level” optional forms of pension payments (e.g., lump-sum distributions) under tax code section 417(e).

The proposed rule adopts base mortality tables derived from the most recent study of the Society of Actuaries (SOA) Retirement Plans Experience Committee, with 2006 being the central year of the mortality experience, and mortality improvement rates from the SOA’s most recent mortality improvement study (MP-2016). The proposed rule offers three choices for selecting mortality tables: “static” tables, “generational” tables, and “plan-specific substitute” tables.

The table below illustrates the increases in actuarial liabilities for sample lives (comparing 2017 vs. 2018 “static” tables at an interest rate of 4%):

Age Male Female
45 (deferred to 65*) 2.8% 6.2%
55 (deferred to 65*) 2.8% 5.9%
65 (in pay status) 3.5% 4.6%
75 (in pay status) 7.2% 4.8%
*The pension benefit commences at age 65.

Plan sponsors should not draw any conclusions of the financial impact on actuarial liabilities or possible increases in cash contributions for a specific pension plan. The benefit formulas, plan demographics, status (“frozen,” “partially frozen,” “open”), and other complex variables are unique to a given plan and must be carefully evaluated.

The IRS seeks public comments on the proposed rule by March 29 and will hold a public hearing in April for plan participants, plan sponsors, pension actuaries, and other interested parties to express their views before issuing a final rule.

For additional information about the proposed revised mortality tables, please contact your Milliman consultant.

Regulatory roundup

More retirement-related regulatory news for plan sponsors, including links to detailed information.

IRS updates 2017 revenue procedures
In an Internal Revenue Bulletin, the Internal Revenue Service (IRS) published various revenue procedures, revised for 2017, for issuing letters, rulings, determination letters, and technical advice on specific issues related to employee benefits.

To read the bulletin, click here.

PBGC posts 2017 premium filing instructions
The Comprehensive Premium Filing Instructions for 2017 Plan Years has been approved by Office of Management and Budget (OMB) and is now available on the website of the Pension Benefit Guaranty Corporation (PBGC).

To read the filing instructions, click here.

PBGC issues RFI for approving certain alternative methods for computing withdrawal liability
The PBGC is requesting information from the public on issues arising from arrangements between employers and multiemployer plans involving an alternative “two-pool” withdrawal liability method.

PBGC seeks information from the general public and all interested stakeholders, including multiemployer plan participants and beneficiaries, organizations serving or representing retirees and other such individuals, multiemployer plan sponsors and professional advisors, and contributing employers, unions, and other interested parties, about these arrangements, including the various forms they may take, the terms and conditions that apply to new and existing contributing employers who enter into such arrangements, and the benefits and risks these arrangements may present to multiemployer plans and their participants, employers, the multiemployer pension insurance program, and other stakeholders in the multiemployer system.

For more information, click here.

FAQ update on preapproved plan adopting employers
The IRS has updated a series of frequently asked questions (FAQ) providing guidance to employers adopting preapproved retirement plans.

To learn more, click here.