Category Archives: Benefit News

Regulatory roundup

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

PBGC releases FY2014 projections report
The projected insolvency date for the insurance program for multiemployer pension plans, which cover more than 10 million Americans, has been delayed by three years, according to the FY 2014 projections report released by the Pension Benefit Guaranty Corporation. The risk of program insolvency has decreased over the near term due primarily to the new premium revenues anticipated under the Multiemployer Pension Reform Act of 2014 (MPRA). It is more likely than not that the program’s assets will be depleted in 2025, compared with 2022 in last year’s report, and the risk of insolvency grows rapidly thereafter.

Projections for the PBGC’s insurance program for single-employer plans, which cover about 31 million people, show that the program’s financial condition continues to be likely to improve and conclude that it is highly unlikely to run out of funds in the next 10 years. PBGC modeled 5,000 simulations for the 2014 Projections Report, and none showed that the program would be unable to pay the benefits it owes in 2025.

To read the PBGC’s entire projections report, click here.

JCT provides background on proposed fiduciary rule
The Joint Committee on Taxation has released a report explaining information regarding the Department of Labor’s proposed fiduciary rule. The document provides a description of present law relating to prohibited transactions, investment advice, and fiduciary status with respect to retirement plans and individual accounts.

To read the entire report (JCX-131-15), click here.

GAO report on pension advance transactions
The Government Accountability Office (GAO) have released a report entitled “Pension advance transactions – questionable business practices and the federal response” (GAO-15-846T). The report is based on testimony provided by Stephen Lord, managing director, forensic audits and investigative service at the GAO, before the Senate Special Committee on Aging. The testimony examines companies attempting to take advantage of retirees using pension advances. The report describes the number and characteristics of pension advance companies and marketing practices; evaluates how pension advance terms compare with those of other products; and evaluates the extent to which there is federal oversight.

To read the entire report, click here.

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Regulatory roundup

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

Access to specific provisions of employer-provided benefits
The U.S. Bureau of Labor Statistics released a new Beyond the Numbers article describing the prevalence with which people working for private employers in the United States are given the opportunity to enroll in health and retirement plans with various provisions—the extent to which they have access to those provisions.

To read the entire article, click here.

Summary of the quarterly survey of public pensions
The U.S. Census Bureau has released the summary of its quarterly survey on public pensions. The report for the 100 largest public-employee pension systems in the country shows that cash and security holdings totaled $3,369.0 billion in the second quarter of 2015. This is a decrease of 1.0% from the first quarter total of $3,401.5 billion. Earnings in the second quarter totaled $32.0 billion, a decrease of 59.2% from $78.3 billion in the previous quarter.

To read the entire survey, click here.

National Compensation Survey: Employee benefits in the United States
The National Compensation Survey (NCS) provides comprehensive measures of compensation cost trends, the incidence of benefits, and detailed benefit provisions. A newly published bulletin presents estimates of the incidence and key provisions of selected employee benefit plans. Estimates presented are on benefits for civilian workers—workers in private industry and in state and local government—by various employee and employer characteristics.

To read the entire bulletin, click here.


Regulatory roundup

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

PBGC issues final rule on electronic filing requirements for multiemployer plan
The Pension Benefit Guaranty Corporation (PBGC) has released a final rule that will require electronic filing of certain multiemployer notices (e.g., notices of termination under part 4041A, notices of insolvency and of insolvency benefit level under parts 4245 and 4281, and applications for financial assistance under part 4281). The agency says the changes will make the provision of information to PBGC more efficient and effective.

To read the entire final rule, click here.

PBGC posts premium filings reminders
The PBGC has posted a checklist of reminders on its website to help ensure premium filings are timely and accurate. To review the checklist, click here.

Regulatory roundup

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

PBGC issues final rule on reportable events and certain other notification requirements
The Pension Benefit Guaranty Corporation (PBGC) has issued this final rule to make the requirements of the sponsor risk-based safe harbor more flexible, make the funding level for satisfying the well-funded plan safe harbor lower and tied to the variable-rate premium, and add public company waivers for five events. The waiver structure under the final rule will further reduce unnecessary reporting requirements, while at the same time better targeting PBGC’s resources to plans that pose the greatest risks to the pension insurance system.

To read the entire final rule, click here.

IRS issues final rule on determination of minimum required pension contributions
The Internal Revenue Service (IRS) has issued a final rule providing guidance on the determination of minimum required contributions for single-employer defined benefit pension plans. In addition, this document contains final regulations regarding the excise tax for failure to satisfy the minimum funding requirements for both single employer and multiemployer defined benefit pension plans.

The final regulations for minimum contributions reflect provisions of the Pension Protection Act of 2006 (PPA), Worker, Retiree, and Employer Recovery Act of 2008 (WRERA), Moving Ahead for Progress in the 21st Century Act of 2012 (MAP-21), and the Highway and Transportation Funding Act of 2014 (HATFA).

The final rule is effective as of September 9, 2015, and applies to plan years beginning on or after January 1, 2016.

To read the entire final rule, click here.

EBSA posts transcripts of hearings on conflict of interest proposed rule
The U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) posted transcripts of the four-day public hearing on the conflicts of interest proposed regulation.

To read the transcripts, click here.

Regulatory roundup

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

GAO publishes 401(k) plan report
The U.S. Government Accountability Office (GAO) issued “401(k) plans: Clearer regulations could help plan sponsors choose investments for participants” (GAO-15-578). According to the GAO, employers that sponsor 401(k) plans report using a range of default investment types to automatically enroll employees in their plans based on each type’s design and other attributes. From 2009 through 2013, the majority of employers that sponsored 401(k) plans reported using a target-date fund as their default, according to data from three annual industry surveys that GAO reviewed. Fewer plan sponsors reported using the other two default investment types that the U.S. Department of Labor (DOL) identified: balanced funds (products with a fixed ratio of equity to fixed-income investments) or managed account services (investment services that use participant information to customize asset allocations).

To read the entire report, click here.

EPCU: Forms 5330/4979 excise tax report
The Employee Plans Compliance Unit (EPCU) published a project to verify compliance with deferrals and the proper calculation and reporting of excise tax under Internal Revenue Code (IRC) Section 4979 for plans with cash or deferred arrangement (CODA) limits. The project ensures Forms 5330, Return of Excise Taxes Related to Employee Benefit Plans, are filed appropriate to the Form 5500. The project focused on those returns that indicated excess deferrals were made for plan years ending between December 31, 2006, and November 30, 2008, and having filed the applicable Form 5330.

To learn more, click here.

IRS issues temporary and proposed rules regarding multiemployer plans under MPRA
The Multiemployer Pension Reform Act of 2014 (MPRA) pertains to multiemployer plans that are projected to have insufficient funds, at some point in the future, to pay the full plan benefits to which individuals will be entitled (referred to as plans in “critical and declining status”). The sponsor of such a plan is permitted to reduce the pension benefits payable to plan participants and beneficiaries if certain conditions are satisfied (referred to as a “suspension of benefits”). A suspension of benefits is not permitted to take effect prior to a vote of the participants of the plan with respect to the suspension.

The Internal Revenue Service (IRS) released a document containing temporary regulations that provide guidance related to the administration of that vote. The text of these temporary regulations also serves as the text of the proposed regulations set forth in the notice of proposed rule-making (REG-123640-15) on this subject. These temporary regulations are effective on September 2, 2015, and will apply after June 17, 2015, and expire on June 15, 2018.

To read the temporary rule, click here. To read the proposed rule, click here.

Comparisons of multiemployer actuarial certifications received each year by status
The IRS has published charts of comparisons of the certification information received each year by status from multiemployer plans. The first four charts discuss the following types of plans between 2008 through 2013: critical status, seriously endangered status, endangered status, and neither endangered nor critical.

To view the charts, click here.

EPCU: Multiemployer actuarial certification projects
The EPCU has issued an interim report on its multiemployer actuarial certification projects. To read the results of the projects, click here.

EPCU: Form 5500 non-filers
The EPCU will collaborate with the DOL’s Office of the Chief Accountant (OCA) to contact Form 5500 non-filers identified using payroll and plan data in their records. The primary goal is to ensure compliance with annual filing requirements. Additional goals include identifying the underlying causes for noncompliance and making recommendations for removing impediments to compliance.

To learn more, click here.


Regulatory roundup

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

DOL releases additional research papers on investment advice rule
The U.S. Department of Labor (DOL) has released the following three research papers on the conflict of interest proposed rule.

Comments on a review of a White House report on conflicted investment advice

Financial advice markets: A cross-country comparison

Effective disclosures in financial decision making

IRS issues minimum funding guidance for cooperative, small-employer charity pensions
The Internal Revenue Service (IRS) has released Notice 2015-58, providing guidance on minimum funding requirements and related rules applicable to defined benefit pension plans maintained by groups of cooperatives and related entities and groups of charities.

The guidance applies requirements established by the Cooperative and Small Employer Charity Pension Flexibility Act (CSEC Act, P.L.113-97). The CSEC Act provides a number of rules relating to the minimum funding requirements for certain defined benefit plans maintained by groups of cooperatives and related entities and groups of charities.

To read the entire notice, click here.

EBRI Notes: Improving retirement security through a qualifying longevity annuity contract
A new Employee Benefit Research Institute (EBRI) analysis models two scenarios under which qualifying longevity annuity contracts (QLACs) could be utilized as part of a 401(k) plan. The first scenario would attempt to convert 15% of the 401(k) balance with the current employer to a QLAC premium while simultaneously attempting to partially mitigate the risk of purchasing the product when interest rates are low. The second proposal assumes some plan sponsors would be willing to convert the accumulated value of their 401(k) contributions to a QLAC purchase at retirement age on either an opt-in or opt-out basis for the employees.

The full report, “How much can qualifying longevity annuity contracts improve retirement security?,” is published in the August 2015 EBRI Notes and is available for download here.

DOL guidance on worker misclassification may have benefit program implications

The Wage and Hour Division of the U.S. Department of Labor (DOL) recently issued guidance on the classification of workers as employees or independent contractors under the Fair Labor Standards Act (FLSA) that may have implications for employer-sponsored benefit programs (in addition to an employer’s compensation and related policies and practices). Administrator’s Interpretation No. 2015-1 focuses on the FLSA’s pertinent definitions and considers the “economic realities” factors that various courts (including the U.S. Supreme Court) have applied to determine whether a worker is economically dependent on the employer (and thus an employee) or in business for himself or herself (and thus an independent contractor).

In general, the DOL concludes that “most workers” are employees under the broad definitions of the FLSA.

Employers should review the DOL’s new guidance for the effects it could have on their retirement, health, and other benefit programs (separate from but in addition to the worker classification issue), particularly in light of the DOL’s heightened enforcement and investigation activities, or as individuals file suits to claim rights to pay and benefits as employees. Misclassification of workers could raise numerous concerns, such as retirement or health plan coverage, contributions to those programs, or nondiscrimination testing issues, along with employer liability for retroactive pay and taxes as well as other penalties.

For additional information about the DOL’s guidance, please contact your Milliman consultant.

DOL proposes overtime pay rule

The Wage and Hour Division of the U.S. Department of Labor (DOL) has issued a proposed rule that calls for more than a doubling of the annual salary threshold—from the current $23,660 to $50,440 (to be adjusted annually)—for “white-collar” employees to remain exempt from receiving overtime compensation when working more than 40 hours per week. The proposed rule under the Fair Labor Standards Act (FLSA) makes no changes to the “duties” test for employees falling into this category (primarily executive, administrative, professional, computer, and outside sales employees), but seeks comments on this issue.

The proposed rule, which the DOL estimates could entitle more than 4.5 million currently exempt white-collar workers to overtime pay in the first year that the rule is implemented, also would:

• Increase the total annual compensation requirement needed to qualify for the FLSA’s highly compensated employee exemption, from the current $100,000 to $122,148 (with yearly adjustments)
• Establish a mechanism for automatically updating the salary threshold levels using either a fixed percentage of earnings of full-time salaried workers or changes based on the Consumer Price Index
• Permit nondiscretionary bonuses and incentive payments to count toward the salary threshold requirement (but not discretionary bonuses, board or lodging, medical or life insurance payments, retirement plan contributions, or other fringe benefits)

The proposed rule will not take effect until it is issued in final form, which the DOL is expected to do in 2016.

Employers should begin considering how the proposed changes to the salary threshold will affect their compensation practices and the benefits offered to employees. Some retirement plans, for example, take into account only base pay, possibly raising the specter of nondiscrimination testing failures if “includable compensation” excludes overtime and bonus payments when non-highly-compensated participants become newly eligible for overtime (for example, see this blog post). Similarly, an employer that offers different health benefits plans based on workers being classified as “salaried” or “hourly” could experience employees (and their dependents) potentially being covered under a plan that had been limited to staff, according to its FLSA exempt/nonexempt status.

For additional information about the DOL’s proposed rule on overtime pay, please contact your Milliman consultant.

Regulatory roundup

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

2015 PBGC premium filings for small plans
The Pension Benefit Guaranty Corporation (PBGC) recently sent out a news release regarding 2015 premium filings for small plans. This is a reminder of regulatory changes that affect small plans for plan years beginning in 2015.

For plan years starting in 2015, small plans are subject to the same normal due date rules as all other plans. For example, a small plan with a plan year commencing date of January 1, 2015, now has a due date of October 15, 2015. Further details are in the “When to file” section of the premium instructions.

New developments affecting defined benefit pension plans

Several key developments—in the form of Internal Revenue Service (IRS) guidance, Pension Benefit Guaranty Corporation (PBGC) proposed regulations, and a new law—have occurred recently for employers that sponsor defined benefit pension plans. This Client Action Bulletin provides an overview of these items, which affect: the mortality tables used for a variety of pension plan requirements; the elimination of lump-sum payouts to current annuitants as part of a “de-risking” strategy; the reporting of financial and actuarial information by “underfunded” plans; and transfers of excess plan assets to retiree health and group-term life accounts.