Category Archives: Benefit News

Federal court blocks implementation of DoL’s overtime rule

A federal district court has blocked implementation of the Department of Labor’s overtime pay regulation that was set to take effect on December 1, 2016 (Nevada v. U.S. Department of Labor (U.S.D.C., E.D. Tex., No. 4:16-cv-00731, motion granted 11/22/2016)). In granting the nationwide preliminary injunction, the court agreed with the 21 states and a coalition of business groups in the consolidated suit that the DoL exceeded its authority by issuing a rule that increased the salary level for an exemption from the Fair Labor Standards Act’s overtime pay requirements for most white-collar employees. (See Client Action Bulletin 16-2 for a discussion of the DoL’s final rule and its implications for benefit programs.)

The DoL might appeal the decision, but unless the appeal to overturn the injunction is expedited and successful, the agency cannot implement the final rule starting on December 1. In addition, the new Administration and/or the 115th Congress that convenes in January will have an opportunity to modify or nullify the rule.

Employers that have not altered their overtime pay policies and considered the “job duties” test for the final rule’s overtime pay exemption need not do so before December 1, but they should monitor developments as the suit progresses through the courts. Those that have taken action, including employee benefit plan sponsors with programs that have been affected (e.g., a retirement plan that changed its definition of compensation to include overtime pay), should discuss the implications of the court’s ruling – and appropriate courses of action, including those involving communications with affected employees – with their legal counsel and other professional advisors. Employers should also discuss their decisions with their third-party payroll administrators.

For additional information about the court’s decision on the DoL’s rule, please contact your Milliman consultant.

Regulatory roundup

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

IRS issues new process for information document requests regarding retirement plan audits
The Commissioner for the IRS’ Tax Exempt and Government Entities (TE/GE) issued a memorandum containing new procedures for all TE/GE examiners on Information Document Requests (IDR). The IRS in the past had been flexible with the extension of response deadlines for document requests as long as the examiner views the sponsor as acting in good faith, especially once a professional becomes involved in the process.

This new memorandum takes flexibility out of the manner in which the IRS collects plan and employer information to conduct an audit. These new rules center on the timing of the IDRs, which are central to an audit.

To learn more, click here.

GAO publishes survey on 401(k) plans
The Government Accountability Office (GAO) issued “401(K) plans – effects of eligibility and vesting policies on workers’ retirement savings” (GAO-17-69). The publication is a non-generalizable survey of 80 401(k) plans ranging in size from fewer than 100 participants to more than 5,000. The GAO found that many plans have policies that affect workers’ ability to (1) save in plans (eligibility policies), (2) receive employer contributions, and (3) keep those employer contributions if they leave their job (vesting policies).

To download a copy of the entire publication, click here.

Proposed rule issued regarding minimum present value requirements for DB plan distributions
The Internal Revenue Service (IRS) filed a proposed rule providing guidance on changes made by the Pension Protection Act of 2006 (PPA) relating to the minimum present value requirements applicable to certain defined benefit (DB) pension plans. These proposed regulations would amend the current final regulations under section 417(e) regarding the minimum present value requirements of section 417(e)(3) in several areas. Specifically, the proposed regulations would update the regulations for changes made by PPA and eliminate certain obsolete provisions. The proposed regulations also contain a few other clarifying changes.

To read the entire proposed rule, click here.

Regulatory roundup

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

Revised favorable determination letter publication
The Internal Revenue Service (IRS) issued a revised version of Publication 794, “Favorable determination letter.” The publication explains the significance of a favorable determination letter, points out some features that may affect the qualified status of an employee retirement plan and nullify the determination letter without specific notice from the IRS, and provides general information on the reporting requirements for the plan.

To download the entire publication, click here.

PBGC final rule – Appendix D to Part 4044 amended with Table I-17
The Pension Benefit Guaranty Corporation (PBGC) issued a final rule amending Appendix D to Part 4044 with Table 1-17 for determining expected retirement ages for participants in pension plans undergoing distress or involuntary termination with valuation dates falling in 2016.

To read the entire final rule, click here.

Booklet on automatic enrollment in 401(k) plans
The IRS and the Department of Labor (DoL) released “Automatic enrollment 401(k) plans,” which provides an overview of the defined contribution plan feature. The publication contains a checklist to assist an employer when establishing an automatic enrollment.

To download the entire publication, click here.

Regulatory roundup

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

IRS memorandum on matching contributions related to NQDC plans
The IRS released a memorandum from the Office of Chief Counsel which concludes that the salary that an employee has elected to defer under a nonqualified deferred compensation (NQDC) plan is subject to a “substantial risk of forfeiture” if the employer provides a 25 percent matching contribution.

To read the entire memo, click here.

FASB issues proposed taxonomy implementation guide on retirement benefits
The Financial Accounting Standards Board (FASB) published the document “Proposed taxonomy implementation guide” (Version 1.0) related to the proposed 2017 U.S. GAAP Financial Reporting Taxonomy. The purpose of the proposed guide is to demonstrate the modeling of disclosures related to retirement benefits.

To download a copy of the entire guide, click here.

Year-end compliance issues for single-employer retirement plans

By year-end 2016, sponsors of calendar-year single-employer retirement plans must adopt necessary and discretionary plan amendments to ensure compliance with the statutory and regulatory requirements of ERISA and the tax code. This Client Action Bulletin looks at key areas – including administrative compliance issues – that sponsors of such defined benefit (DB) or defined contribution (DC) plans should address by Dec. 31, 2016.

Regulatory roundup

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

IRS releases guidance on pension equity plans
The Internal Revenue Service (IRS) issued Notice 2016-67, which describes the applicability of the market rate of return limitation rules to defined benefit plans expressing a participant’s accumulated benefit as the current value of an accumulated percentage of the participant’s final average compensation, highest average compensation, or highest average compensation during a limited period of years (a type of plan often referred to as a “pension equity plan” or “PEP”).

To read the entire notice, click here.

Agencies release advance informational copies of the 2016 Form 5500
The Employee Benefits Security Administration of the U.S. Department of Labor (DoL), the IRS, and the Pension Benefit Guaranty Corporation (PBGC) released advance informational copies of the 2016 Form 5500 annual return/report and related instructions.

For more information, click here.