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Regulatory roundup

September 15th, 2014 No comments

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

IRS issues pension funding stabilization guidance under HATFA
The Internal Revenue Service (IRS) has released Notice 2014-53 providing guidance on the changes to the funding stabilization rules for single-employer pension plans under the Internal Revenue Code (Code) and the Employee Retirement Income Security Act of 1974 (ERISA) that were made by section 2003 of the Highway and Transportation Funding Act of 2014 (HATFA).

To read the entire notice, click here.

House Ways and Means announces hearing on private single-employer and multiemployer pension plans
The Committee on Ways and Means will be holding a hearing on defined benefit pension plans offered by private sector employers, including both multiemployer plans and single employer plans. The hearing will take place on Wednesday, September 17, at the 1100 Longworth House Office Building, beginning at 10:15 A.M.

For more information, click here.

GASB issues two Other Postemployment Benefit (OPEB) related exposure drafts

September 5th, 2014 No comments

The Governmental Accounting Standards Board (GASB) issued two Exposure Drafts regarding OPEB-related financial reporting by state and local governments. These proposed standards will significantly alter the methods used to account for postemployment OPEBs, similar to the new GASB 67/68 pension standards.

Like the pension standards, the unfunded liability will become a balance sheet item rather than a note disclosure. These proposed changes in OPEB reporting are sweeping in scope, and they will serve to increase the balance sheet liability and may significantly increase the volatility of annual OPEB expense. This PERiScope alert provides  some perspective.

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Regulatory roundup

September 2nd, 2014 No comments

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

Treasury and IRS release priority guidance plan 2014-2015
The Department of the Treasury and the IRS recently released their annual Priority Guidance Plan for the July 2014 to July 2015 fiscal year. The plan lists 317 project priorities based on the suggestions of taxpayers, tax practitioners, and industry groups and is revised and republished throughout the fiscal year to reflect additional projects and guidance.

List focuses resources on guidance items that are most important to taxpayers and tax administration. Published guidance plays an important role in increasing voluntary compliance by helping to clarify ambiguous areas of the tax law.

To download the entire 2014-2015 Priority Guidance Plan, click here.

Census Bureau: Survey of public pensions: State-administered DB data
The Census Bureau has published its “2013 Annual survey of public pensions: State-administered defined benefit data.” The survey provides a comprehensive look at the financial activity of the nation’s state-administered defined benefit pension systems, including cash and investment holdings, receipts, payments, pension obligations, and membership information. Statistics are shown at the national level and for individual states. The total cash and investment holdings of the nation’s state-administered defined benefit pensions systems totaled $2.7 trillion in 2013. By comparison, total cash and investment holdings totaled $2.5 trillion in 2012, yielding a 7.8 percent increase from 2012 to 2013.

For more information, click here.

IRS issues draft Form 8955-SSA for 2014
The IRS has released a draft copy of Form 8955-SSA, Annual Registration Statement Identifying Separated Participants with Deferred Vested Benefits.

To download a copy of the form, click here.

Regulatory roundup

August 25th, 2014 No comments

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

DOL issues notice for to review use of brokerage windows in participant-directed individual account retirement plans
The Department of Labor’s (DOL) Employee Benefits Security Administration has published a notice as part of its review of the use of brokerage windows (including self-directed brokerage accounts or similar arrangements) in participant-directed individual account retirement plans covered by the Employee Retirement Income Security Act of 1974 (ERISA).

The Request for Information contained in the notice will assist the DOL in determining whether, and to what extent, regulatory standards or other guidance concerning the use of brokerage windows by plans are necessary to protect participants’ retirement savings. It also will assist the DOL in preparing any analyses that it may need to perform pursuant to Executive Order 12866, the Paperwork Reduction Act, and the Regulatory Flexibility Act.

To read the entire Request for Information, click here.

IRS updated Forms 8717 and 8717-A for determination letters
The Internal Revenue Service (IRS) issued a new version of Form 8717, User Fee for Employee Plan Determination Letter Request, reflecting increases in some fees for 2014. It also updated Form 8717-A, User Fee for Employee Plan Opinion or Advisory Letter Request.

The updated user fee schedule on the form is effective for all determination letter applications postmarked after Jan. 31. The revised form must be used after July 1, the IRS said on the form’s instructions.

To download Form 8717, click here.
To download Form 8717-A, click here.

IRS issues revenue ruling stating some Puerto Rican retirement plans qualify as group trusts

The IRS issued Revenue Ruling 2014-24 stating that certain retirement plans qualified only under Puerto Rico’s tax code may be included on the list of group trust retiree benefit plans eligible to participate in 81-100 group trusts.

Revenue Ruling 2014-24 will be published in the Internal Revenue Bulletin on September 8, 2014.

To read a copy of Revenue Ruling 2014-24, click here.

Bureau of Labor Statistics issues annual health and retirement plan provisions survey
The Bureau of Labor Statistics has issued the National Compensation Survey: Health and retirement plan provisions in private industry in the United States, 2013. The National Compensation Survey (NCS) provides comprehensive measures of compensation cost trends, the incidence of benefits, and detailed benefit provisions. This bulletin presents estimates of the detailed provisions of employer-provided health and retirement plans in private industry in 2013.

To read the entire survey, click here.

Categories: Benefit News Tags: , , ,

Regulatory roundup

August 11th, 2014 No comments

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

Social Security published article on two benefits provisions
A new article published by the Social Security Administration (SSA) uses health and retirement study data to investigate the effects of the SSA’s Windfall Elimination Provision (WEP) and Government Pension Offset (GPO) on Social Security benefits received by households. The provisions reduce benefits for individuals or the dependents of individuals whose work histories include jobs for which they were entitled to a pension and were not subject to Social Security payroll taxes (“noncovered” employment).

To read the entire article, click here.

IRS updates FAQ on 403(b) preapproved plan program remedial amendment period
The Internal Revenue Service (IRS) has updated a frequently asked question (FAQ) regarding the 403(b) preapproved plan program remedial amendment period. According to the IRS, by adopting a 403(b) preapproved plan by the deadline (to be established and announced by the IRS), the program allows an eligible employer to retroactively correct defects in the form of its written 403(b) plan back to the first day of the plan’s remedial amendment period, which is the later of: January 1, 2010, or the plan’s effective date.

The employer’s adoption of a preapproved 403(b) plan that has a favorable opinion of advisory letter automatically corrects any defects in its prior written 403(b) plan, but not defects in any documents incorporated by reference into the prior plan). Interim amendments are not required for a plan to be eligible for this remedial amendment period.

403(b) plans sponsors who didn’t adopt a written plan before December 31, 2009, can use the 403(b) Voluntary Program Submission Kit to correct this error.

The IRS also indicated that at this time it does not anticipate opening a determination letter program for individually designed 403(b) plans.

For more information, click here.

IRS updates guide to common qualified plan requirements
The IRS has recently updated its web page on common qualified retirement plan requirements. The list highlights some of the more important plan requirements to help employers in implementing practices, procedures, and internal controls to monitor plan operations.

For more information, click here.

JCT releases estimates of federal tax expenditures for fiscal years 2014-2018
The Joint Committee on Taxation (JCT) has released its latest summary of federal tax expenditures entitled “Estimates of federal tax expenditures for fiscal years 2014-2018” (JCX-97-14). The JCT says that the employer health exclusion will cost the government $785.1 billion in forgone revenue from 2014 to 2018 and that the next exclusion of defined contribution plans will cost $399 billion.

To download a copy of the report, click here.

IRS updates posting on Voluntary Correction Program fee schedule and Form 8951
The IRS has updated its web page in regards to the Voluntary Correction Program (VCP) fee schedule and Form 8951 (Compliance Fee for Application for Voluntary Correction Program [VCP]).

To access Form 8951, click here.
To view the updated VCP fee schedule page, click here.

HATFA requires immediate action on 2013 defined benefit plan valuations

August 6th, 2014 No comments

President Obama is expected to sign into law the recently passed Highway and Transportation Funding Act (HATFA). As enacted, single-employer and multiemployer defined benefit pension plan sponsors will see temporary reductions in minimum required contributions and may be able to avoid benefit restrictions. Because the new law as written applies retroactively to the 2013 plan year (absent an election to opt out), affected plan sponsors will have to make decisions soon, ideally equipped with yet-to-be published technical guidance from the Internal Revenue Service (IRS).

At a minimum, plan sponsors will need to quickly instruct their plan actuaries to redo the 2013 actuarial valuation calculations or formally elect to opt out.

In general, the new law modifies the 2012 Moving Ahead for Progress in the 21st Century (MAP-21) Act interest-rate corridors used by affected sponsors to determine their minimum funding liabilities. HATFA maintains a narrower corridor than MAP-21 for the 2013 to 2017 plan years and then phases in a wider corridor over four years beginning in 2018. A plan sponsor may elect, in writing, to retain its use of the MAP-21 interest-rate corridor only for the 2013 plan year; starting in 2014, use of the HATFA corridors by all plan sponsors is required.

Plan sponsors face a number of time-sensitive decisions and actions as a result of HATFA’s enactment. For example, absent an election to opt out, the narrower 2013 plan year interest-rate corridor will require a revised actuarial valuation. Plan sponsors will also have to revise their disclosures to reflect the HATFA changes in the next annual funding notices. As the HATFA change temporarily reduces the amount a sponsor must contribute and the tax deductions for those contributions, the employers’ taxable income could increase. And longer term, required pension plan contributions should increase after the temporary “smoothing” provision expires, depending on corporate bond interest rates and other factors at that time.

The HATFA provision does not affect multiemployer defined benefit pension plans nor Pension Benefit Guaranty Corporation (PBGC) premiums. The pension-related provisions in HATFA also include changes for certain plan sponsors in bankruptcy, and companies subject to the rules of the Cost Accounting Standards Board (CASB) will have to adjust their CASB recovery calculations. Cooperative/small employer charity plans will need to recalculate their plans’ full funding limits.

For additional information about HATFA’s pension provisions and assistance with exploring the short- and long-term pension funding options, please contact your Milliman consultant.

Rulings from the U.S. Supreme Court: Fiduciaries, ACA, and union fees

August 5th, 2014 No comments

The U.S. Supreme Court in late June decided three cases that, while apparently narrow in scope, may be of broad interest to employers. The cases involve: standards for fiduciaries in ERISA-covered retirement plans with employer stock as an investment option; the requirement of the Patient Protection and Affordable Care Act (ACA) that certain preventive healthcare benefits—which include coverage for contraceptives—be provided at no cost to group health plan participants; and the required payment of union fees by certain state workers under a state law.

For Milliman perspective regarding the three rulings, read this Client Action Bulletin.

Regulatory roundup

August 4th, 2014 No comments

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

IRS private letter ruling on lump sum window for those in pay status will not violate MDR
The Internal Revenue Service (IRS) recently released a private letter ruling (PLR 201431034) stating that a lump sum window for participants in pay status will not violate minimum distribution requirements (MDR).

According to the PLR:

Under the amendment, the Covered Individuals would have a specified limited window period of no more than 180 days during which they could elect to receive in lieu of their current annuity what Company A represents is the actuarial present value of their remaining benefits under the aforementioned Plans, in the form of a single lump sum payment. The window period may consist of multiple phases, such as an opt-in phase during which Covered Individuals would have the opportunity to proceed through the remainder of the window program and an election phase during which Covered Individuals could elect to receive, in lieu of their current annuity, the actuarial present value of their remaining annuity payments in the form of an immediate lump sum, and the extent the law requires, a qualified joint and survivor annuity (including a single annuity for retirees who are not married), or a qualified optional survivor annuity.

To read the entire private letter ruling, click here.

Social Security trustees retain projected year of trust fund reserve depletion
The Social Security Board of Trustees recently released its annual report on the long-term financial status of the Social Security Trust Funds. The combined asset reserves of the Old-Age and Survivors Insurance, and Disability Insurance (OASDI) Trust Funds are projected to become depleted in 2033, unchanged from last year, with 77% of benefits still payable at that time. The DI Trust Fund will become depleted in 2016, also unchanged from last year’s estimate, with 81% of benefits still payable.

To read the entire report, click here.

PBGC creates online resource guide on choosing between lump sum or annuity
The Pension Benefit Guaranty Corporation (PBGC) recently created an online resource that provides information to assist with “Making a choice: Lump sum or annuity?”

The new resource page allows the public to get some insight on key questions that should be answered when making this important decision and offers other hypothetical scenarios.

To read the entire guide, click here.

401(k) plans: Improvements can be made to better protect participants in managed accounts
The U.S. Government Accountability Office (GAO) has issued the report “401(k) plans: Improvements can be made to better protect participants in managed accounts.” The report reviews eight managed account providers that represented an estimated 95% of the industry involved in defined contribution plans in 2013, showing that the providers varied in how they structured managed accounts, including the services they offered and their reported fiduciary roles.

To read the entire report, click here.

IRS posts three FAQs regarding EGTRRA determination letter program for preapproved plans
The IRS has posted three new frequently asked questions (FAQs) regarding the Economic Growth and Tax Relief Reconciliation Act (EGTRRA) determination letter program for preapproved plans.

Question #4: “If I file a determination letter application for my pre-approved defined benefit plan by April 30, 2012, and the Service determines that additional remedial amendments are needed, will I have time to adopt the amendments?”
Question #6: “I am an adopter of a volume submitter plan and I wish to make certain changes to the pre-approved document. When I file a determination letter application, must I incorporate these changes in the pre-approved plan document or may I make the changes as separate amendments to the plan?”
Question #8: “I am filing Form 5310 to terminate my EGTRRA-approved M&P or volume submitter plan. Must I include copies of interim amendments with my application?”

Regulatory roundup

July 28th, 2014 No comments

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

IRS updates FAQs on retirement plan terminations and plan participant rights and plan events
The Internal Revenue Service (IRS) has updated its frequently asked questions (FAQs) regarding retirement plan terminations. An employer can terminate a plan for various reasons including bankruptcy, merger, or voluntary termination. Questions and answers are provided on terminating a retirement plan and partial plan terminations.

The second updated posting provides an explanation of plan events that may trigger retirement plan participant rights, what notices retirement plan participants should receive based upon these plan events, and when these notices should be issued.

To read the updated web page about retirement plan terminations, click here.
To read the updated web page about retirement plan participant rights, click here.

Senate HELP Committee approves bill making ERISA clarifications
Senator Tom Harkin (D-IA), chairman of the U.S. Senate Health, Education, Labor, and Pensions (HELP) Committee, issued S.2511 after the committee approved the bill on July 23.

S.2511 will bring clarity to the pension downsizing liability rules and will ensure that there is a workable mechanism to protect pension benefits when employers show symptoms of financial distress. The bill will now be considered by the full Senate.

To read the entire provision, click here.

Regulatory roundup

July 15th, 2014 No comments

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

MAP-21 pension extension moves in highway trust fund bills from congressional panels
The U.S. House Ways and Means Committee has approved by voice vote a bill (H.R.5021) that would provide highway funding through May 2015 in part by using about $6.4 billion from an extension of the Moving Ahead for Progress in the 21st Century (MAP-21) Act pension funding stabilization provision. The House is expected to vote on the “Highway and Transportation Funding Act” next week.

Regarding the pension smoothing provisions, the House bill, as described by the Joint Committee on Taxation, revises the specified percentage ranges (that is, the range from the applicable minimum percentage to the applicable maximum percentage of average segment rates) for determining whether a segment rate must be adjusted upward or downward. Under the proposal, the specified percentage range for a plan year is determined by reference to the calendar year in which the plan year begins as follows:

• 90% to 110% for 2012 through 2017
• 85% to 115% for 2018
• 80% to 120% for 2019
• 75% to 125% for 2020
• 70% to 130% for 2021 or later

In addition, for purposes of the additional information that must be provided in a funding notice for an applicable plan year, an applicable plan year includes any plan year that begins after December 31, 2011, and before January 1, 2020, and that otherwise meets the definition of applicable plan year.

To read the Congressional Budget Office’s report on the bill, click here.

PBGC issues moratorium on 4062(e) enforcement
The Pension Benefit Guaranty Corporation (PBGC) has announced a moratorium, until the end of 2014, on the enforcement of 4062(e) cases. The moratorium will enable PBGC to ensure that its efforts are targeted to cases where pensions are genuinely at risk. The six-month period will also allow the PBGC to work with the business community, labor, and other stakeholders.

During the moratorium, from July 8 to December 31, 2014, PBGC will cease enforcement efforts on open and new cases. Companies should continue to report new 4062(e) events, but PBGC will take no action on those events during the moratorium.

For more information, click here.

GAO report: Private pensions: Targeted revisions could improve usefulness of Form 5500 information
In a two-phase online U.S. Government Accountability Office (GAO) survey, stakeholders identified problems with the usefulness, reliability, and comparability of data from the Form 5500 (see table in report). Despite longstanding concerns with the Form 5500—the annual report that employee benefit plans file with the federal government—agency officials have made only minimal changes over the last three years.

Key challenges identified with Form 5500:

• Weaknesses in the format
Plan asset categories break out plan assets differently from the investment industry, and provide little insight into plan investments, their structures, or the levels of associated risk. In particular, the majority of respondents indicated that the “other” plan asset category in the form is too broad because it can include many disparate types of investments. Respondents also indicated challenges in identifying the underlying holdings of plan assets invested in indirect investments.

• Challenges in finding key information
The form lacks detailed information on plan investments because there is no structured, data-searchable format for attachments to the form and the filing requirements on plan investments are limited for small plans, which have less than 100 participants.

• Inconsistent data
Naming conventions and identification numbers may be inconsistent, making it difficult to collect and accurately match records.

To read the entire GAO report, click here.