Category Archives: Benefit News

Regulatory roundup

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

Required amendments list for qualified retirement plans
The IRS released Notice 2017-72, “2017 Required Amendments List for Qualified Retirement Plans.” Pursuant to section 5.05(3) of Rev. Proc. 2016-37, this notice provides that December 31, 2019, is generally the last day of the remedial amendment period with respect to a disqualifying provision arising as a result of a change in qualification requirements that appears on this 2017 RA List.

To read the entire notice, click here.

Guidance under Section 409A for pre-2009 Section 457A deferrals
The IRS released Notice 2017-75 providing guidance on the application of §§ 409A and 457A. Specifically, this guidance addresses the transition provisions enacted as part of § 457A that generally provide that amounts deferred and attributable to services before January 1, 2009, that would otherwise have been subject to inclusion in income under § 457A, are includible in gross income in the later of the last taxable year beginning before 2018 or the date of vesting. This notice provides that service recipients may accelerate distributions to pay federal and state taxes on amounts includible in 2017 and after without violating § 409A.

To read the entire notice, click here.

Regulatory roundup

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

Report shows Senate tax bill will yield a 10-year revenue loss of $1 trillion
The Joint Committee on Taxation (JCT) published a new analysis indicating that the Senate tax bill would generate enough economic growth to lower its $1.4 trillion revenue cost by only about $458 billion over a decade. After accounting for interest rates, the growth figure would fall to $407 billion, said the JCT. That would leave a 10-year revenue loss of roughly $1 trillion.

To download the report, click here.

Fiduciary rule extended
The Department of Labor (DOL) has extended for 18 months the special transition period under Sections II and IX of the Best Interest Contract Exemption and Section VII of the Class Exemption for Principal Transactions in Certain Assets Between Investment Advice Fiduciaries and Employee Benefit Plans and IRAs.

The document also delays the applicability of certain amendments to Prohibited Transaction Exemption 84-24 for the same period. The primary purpose of the amendments is to give the DOL the time necessary to consider public comments under the criteria set forth in the presidential memorandum of February 3, 2017, including whether possible changes and alternatives to these exemptions would be appropriate in light of the current comment record and potential input from, and action by, the U.S. Securities and Exchange Commission (SEC) and state insurance commissioners.

For more information, click here.

DOL’s Office of Inspector General releases Semiannual Report to Congress
Regarding the Employee Benefits Security Administration (EBSA), the Office of Inspector General (OIG) notes it remains concerned with the DOL’s ability to administer and enforce ERISA requirements that protect the benefit plans of approximately 149 million plan participants and beneficiaries, particularly in light of statutory limitations on DOL’s authority.

One challenge facing the EBSA for decades has been that ERISA allows billions in pension assets held in otherwise regulated entities, such as banks, to escape full audit scrutiny. These concerns were renewed by recent audit findings that as much as $3.3 trillion in pension assets, including an estimated $800 billion in hard-to-value alternative investments, received limited-scope audits that provided few assurances to participants regarding the financial health of their plans.

To download the OIG report click here.

Social Security adjusts taxable wage base and related figures for 2018

On November 27, the Social Security Administration (SSA) updated the 2018 taxable maximum amount, based on a national payroll service provider’s corrected Internal Revenue Service (IRS) Forms W-2 (Wage and Tax Statement) provided to the agency in late October 2017, after the SSA announced cost-of-living adjustments (COLAs) for 2018. The new data lowers the national average wage index for 2016, which in turn reduces the 2018 Social Security taxable maximum amount (also known as the taxable wage base or the contribution and benefit base), the primary insurance amount (PIA) bend points used to calculate benefits, and the family maximum bend points.

The adjusted figures are:

• The 2018 Social Security taxable wage base: $128,400 (corrected from $128,700).
• The 2018 PIA bend points that are used to determine individual beneficiaries’ Average Index Monthly Earnings (AIME): $895 and $5,397 (corrected from $896 and $5,399). Thus, the monthly PIA formula will be 90% of the first $895 of AIME, plus 32% of the AIME over $895 and through $5,397, plus 15% of the AIME over $5,397.
• The 2018 bend points in the family maximum formula: $1,144/$1,651/$2,154 (corrected from $1,145/$1,652/$2,155).
• The 2016 national average wage index: $48,642.15 (corrected from $48,664.73).

Milliman has posted a revised Client Action Bulletin (CAB 17-4R) to reflect the Social Security Administration’s adjusted figures.

For additional information about the 2018 updated Social Security figures, please contact your Milliman consultant.

Regulatory roundup

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

CBO issues cost estimate of House GOP tax bill and scores estimated deficits and debts under Senate tax bill
In the House, H.R. 1, the Tax Cuts and Jobs Act, would amend numerous provisions of U.S. tax law. The staff of the Joint Committee on Taxation (JCT) estimates that enacting the bill would reduce revenues by about $1,438 billion over the 2018-2027 period, and decrease outlays by $2 billion over the same period, leading to an increase in the deficit of $1,437 billion over the next 10 years. For the Senate’s tax bill, the staff of the Joint Committee on Taxation determined that provisions in the Chairman’s Mark would increase deficits over the 2018-2027 period by $1.5 trillion (not including any macroeconomic effects). By the estimate of the Congressional Budget Office (CBO), additional debt service would boost the 10-year increase in deficits to $1.7 trillion. As a result of those higher deficits, debt held by the public would increase from the 91.2% of gross domestic product in CBO’s June 2017 baseline to 97.3%.

For more information, click here and here.

IRS releases new information package
Defined Contribution Listing of Required Modifications and Information Package contains samples of plan provisions that have been found to satisfy certain specific requirements of the Internal Revenue Code, taking into account changes in the plan qualification requirements, regulations, revenue rulings, and other guidance in the 2017 Cumulative List of Changes in Plan Qualification Requirements (Notice 2017-37, 2017-29 I.R.B. 89). The package has been prepared to assist providers who are drafting or redrafting plans to conform to applicable law and regulations, with the goal that it will be a key factor in enabling the Internal Revenue Service (IRS) to process and approve preapproved plans more quickly.

For more information, click here.

Multiemployer program deficit widens to $65.1 billion, single-employer program improves according to PBGC annual report
The Fiscal Year 2017 Annual Report of the Pension Benefit Guaranty Corporation (PBGC) shows that the deficit in its insurance program for multiemployer plans rose to $65.1 billion at the end of fiscal year (FY) 2017, up from $58.8 billion a year earlier. The increase was driven primarily by the ongoing financial decline of several large multiemployer plans that are expected to run out of money in the next decade.

The PBGC’s Single-Employer Insurance Program continued to improve as the deficit dropped to $10.9 billion at the end of FY 2017, compared to $20.6 billion at the end of FY 2016. The primary drivers of the continued improvement include premium and investment income and increases in the interest factors used to measure the value of future liabilities.

For more information, click here.

Equal Employment Opportunity Commission reports twice as many discrimination lawsuits in 2017
The Equal Employment Opportunity Commission (EEOC) filed more than twice as many discrimination lawsuits in FY 2017 as it did in the previous year, while also putting a significant dent in a persistent backlog of pending investigations that had recently drawn the ire of lawmakers, according to an agency report.

For more information, click here.

Year-end compliance issues for single-employer retirement plans

By year-end 2017, 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 (CAB) looks at key areas—including administrative compliance issues—that sponsors of such defined benefit (DB) or defined contribution (DC) plans should address by December 31, 2017.

Regulatory roundup

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

Relief for victims of Hurricane Maria and the California wildfires
Internal Revenue Service (IRS) Announcement 2017-15 provides relief to taxpayers adversely affected by Hurricane Maria and recent wildfires in California (California Wildfires). The announcement allows individuals in qualified employer plans to use retirement assets to alleviate hardships caused by these disasters. The IRS announcement also provides relief from certain verification procedures that may be required under retirement plans with respect to loans and hardship distributions.

For more information, click here.

Memo regarding missing participants and beneficiaries and required minimum distributions
The IRS released a memorandum directing employee plans examiners not to challenge a qualified plan as failing to satisfy the required minimum distribution (RMD) standards under Internal Revenue Code (IRC) § 401(a)(9) in the circumstances set forth below. The memo addresses only the application of IRC §401(a)(9) to certain circumstances involving a plan’s action related to a benefit of a participant or beneficiary whom the plan is unable to locate. It does not address the application of any other qualification requirements or other applicable law, including Title I of ERISA.

For more information, click here.

Guarantee limit for single-employer defined benefit plans for 2018 announced
The Pension Benefit Guaranty Corporation (PBGC) announced that the guarantee limits for single-employer plans that fail in 2018 will be 0.95% higher than the limits that applied for 2017 as a result of the indexing rules provided in ERISA. A table showing the single-employer plan guarantee limits for various ages and payment forms is available on the PBGC’s website. The guarantee limits for multiemployer plans are not indexed and, therefore, have not changed.

To view the table, click here.

Treasury final rule on mortality tables
The Government Accountability Office (GAO) released a report on the final rule published by the U.S. Department of the Treasury, IRS, entitled “Mortality Tables for Determining Present Value under Defined Benefit Pension Plans.”

According to the GAO analysis, the IRS summarized the costs of this final rule by stating that substantially all of the amounts involved (decreased tax revenue, increased plan contributions and PBGC premiums) constitute transfer payments rather than costs. The amounts are monetary payments from one entity to another that do not affect total resources available to society. The IRS believes that the incremental administrative costs to implement this regulation are negligible because plan sponsors would have to incur the same costs to update their plan administration software to reflect the new mortality tables under these regulations as they would incur in implementing the annual update to the mortality tables that would apply in the absence of these regulations. The final rule has tables showing the impact of the rule and revenue collection, contribution requirements, and PBGC premiums.

For more information, click here.

Present value of PBGC maximum guarantee
The PBGC posted a table showing the applicable present values for 2018 plan years. The PBGC also posted a two-column version of the table for convenient copying.

For more information, click here.