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DOL provides flexibility in timing of annual defined contribution plan disclosures

May 15th, 2015 No comments

Sponsors of 401(k) and other participant-directed defined contribution retirement plans will have more flexibility in the timing of providing annual plan and investment disclosures to participants, under a direct final rule from the Department of Labor (DOL). Instead of disclosing the required information “at least annually” which the agency had interpreted to mean no more than 365 days after the sponsor provided the prior annual disclosure, sponsors will have up to 14 months to do so. The modification will require disclosures to be made “at least once in any 14-month period, without regard to whether the plan operates on a calendar year or fiscal year basis.”

The change to the timing requirement will ease the administrative burdens faced by many plan sponsors and administrators.

The flexibility provided by the direct final rule is slated to be effective June 17, 2015, and will apply to disclosures made on or after that date, unless the DOL withdraws the rule before then due to adverse comments received.

The DOL’s direct final rule also announces an immediate, temporary enforcement policy (until June 17), so that plan sponsors and administrators may take advantage of the two-month grace period before the June 17 effective date, as long as they reasonably determine that doing so will benefit participants and beneficiaries. The relief granted by the enforcement policy is in addition to the one-time, 18-month “re-set” opportunity provided by the DOL’s Field Assistance Bulletin 2013-02.

For more information about the DOL’s direct final rule or a related proposed rule, please contact your Milliman consultant.

Labor Department proposes new “conflict of interest” fiduciary rule

May 11th, 2015 No comments

The Department of Labor (DOL) has proposed a definition of “fiduciary” that covers individuals who provide investment advice or recommendations for a fee to ERISA-covered and non-ERISA plans and participants (and individual retirement account (IRA) owners). The proposed rule aims to reduce conflicts of interest that may arise when investment advisers make recommendations that favor their own financial well-being over a client’s best interest. The proposal is the DOL’s second attempt at addressing this concern, having withdrawn a 2010 proposed rule that came under heavy criticism.

This Client Action Bulletin provides an overview of the DOL’s proposed rule and related proposed prohibited transaction exemptions (PTEs) as they apply to plan sponsors and participants (and does not cover the requirements relating to advice given to IRA owners). Although the proposed rule focuses on the defined contribution retirement plan arena, it also has implications for defined benefit plan sponsors and their advisers. In addition, the proposed rule affects a broad range of individual account plans (e.g., 403(b) arrangements), including, potentially, nonretirement programs such as health savings accounts.

Regulatory roundup

May 11th, 2015 No comments

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

PBGC updates premium payment addresses
The Pension Benefit Guaranty Corporation (PBGC) has updated addresses for pension plan premium payments made by electronic funds transfer outside of the agency’s electronic filing and payment system.

For more information, click here.

FASB releases accounting standards update on fair value measurement
The Financial Accounting Standards Board (FASB) has issued Accounting Standards Update 2015-07 on fair value measurement (Topic 820) disclosures for investments in certain entities that calculate net asset value per share (or its equivalent).

To read the entire FASB update, click here.

IRS new issue of employee plans newsletter
The latest edition of the IRS’s Employee Plans News provides information on changes to the EP determination letter application processing, new revenue procedure updates related to the Employee Plans Compliance Resolution System (EPCRS), and more.

To read the entire newsletter, click here.

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Regulatory roundup

May 4th, 2015 No comments

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

IRS provides guidance on changes to the EP determination process
The Internal Revenue Service (IRS) has made changes to the determination letter program for retirement plans. The revised procedures generally apply to Form 5300 series determination letter applications received after February 1, 2015. These changes will improve the program’s efficiency and consistency.

For more information, click here.

ERISA to address pension risk transfers and plan sponsor education and lifetime plan participation
The ERISA Advisory Council has issued two statements:

• Statement on model notices and pension risk transfers
The 2015 council will supplement the work of the 2013 council by focusing specifically on the information that participants need to make informed decisions when faced with lump-sum risk transfers and insurance annuity risk transfers, and best practices for plan sponsors in communicating that information. The goal of the 2015 council is to offer the U.S. Department of Labor (DOL) draft model notices and disclosures that can be used by plan sponsors, participants, and the public.

For more information, click here.

• Statement on model notices and plan sponsor education and lifetime plan participation
The council would like to hear recommendations related to the drafting of model notices concerning lifetime participation in ERISA plans. The council would welcome witnesses and others to submit examples of model notices or other communications, including documents that are currently being delivered to participants. The council would like to hear recommendations related to outreach materials the DOL can provide to plan sponsors on the topic of innovative plan features that may encourage lifetime participation. The council requests testimony as it relates to data security issues.

For more information, click here.

IRS issues correction concerning the failure to comply with Section 409A
The IRS’s chief counsel has issued Memorandum 201518013 regarding the correction of a failure to comply with Section 409A. To read the entire memo, click here.

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Regulatory roundup

April 27th, 2015 No comments

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

EBRI publishes 2015 retirement confidence survey
The Employee Benefit Research Institute (EBRI) has released its 25th annual Retirement Confidence Survey. This year’s survey finds that the percentage of workers confident about having enough money for a comfortable retirement—at record lows between 2009 and 2013—increased in 2014 and again in 2015. Of those surveyed, 22% are now very confident (up from 13% in 2013 and 18% in 2014), while 36% are somewhat confident. Overall, 24% are not at all confident (statistically unchanged from 28% in 2013 and 24% in 2014).

To read the entire 2015 survey, click here.

EBRI publishes papers on end-of-life finances; big data and employee benefits
The April 2015 issue of EBRI Notes features two reports: “A look at the end-of-life financial situation in America” and “Measured matters: The use of ‘big data’ in employee benefits.”

The first report takes a comprehensive look at the financial situation of older Americans at the end of their lives. In particular, it documents the percentage of households with a member who recently died with few or no assets. It also documents the income, debt, home-ownership rates, net home equity, and dependency on Social Security for households that experienced a recent death.

This second report summarizes the presentations and discussion held at the Employee Benefit Research Institute (EBRI) policy forum in December 2014. The discussion focused on the use of massive amounts of data and computer-driven data analytics to determine how people behave when it comes to health and retirement plans, which programs work or do not work, and how to get better results at lower cost.

To download the latest issue of EBRI Notes, click here.

FASB issues proposed accounting standards updates for retirement plans
The Financial Accounting Standards Board (FASB) has issued the following accounting standards for defined benefit plans and defined contribution plans:

• Plan accounting: Defined benefit pension plans (Topic 960)
• Plan accounting: Defined contribution pension plans (Topic 962)

To read the FASB’s entire exposure draft, click here.

FEDS Notes paper examines DC plans for state and local government employees
A recent FEDS Notes article provides some background information on the defined contribution (DC) plans available to state and local government workers. It briefly discusses the methodology used to construct the estimates of assets held by state and local DC plans, and presents the estimates currently reported in the financial accounts of the United States. Finally, the article discusses the impact of the introduction of state and local DC plan assets on the balance sheet of the household sector.

To read the entire article, click here.

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Regulatory roundup

April 20th, 2015 No comments

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

DOL issues proposed fiduciary rule
The U.S. Department of Labor (DOL) has released a proposed rule that will protect 401(k) and IRA investors by mitigating the effect of conflicts of interest in the retirement investment marketplace. Under the proposals, retirement advisers will be required to put their clients’ best interests before their own profits. Those who wish to receive payments from companies selling products they recommend and forms of compensation that create conflicts of interest will need to rely on one of several proposed prohibited transaction exemptions.

To read the entire proposed rule, click here.

Bureau of Labor Statistics: A look at today’s pension equity plans
Among the changes in pension plans tracked by the U.S. Bureau of Labor Statistics (BLS) since the late 1970s are different formulas for calculating benefits. One of those formula types is the pension equity plan (PEP). These plans were first identified by BLS private industry surveys conducted in the late 1990s; today, they make up a small share of all pension plans. The latest issue of BLS’s Beyond the Numbers examines the concept behind pension equity plans and looks at some unique features of these plans.

To read the latest issue, click here.

FASB issues accounting standards update on employer’s defined benefit obligation and assets
The Financial Accounting Standards Board (FASB) has issued a new accounting standards update, “Practical expedient for the measurement date of an employer’s defined benefit obligation and plan assets.” The update gives companies “practical expedient” to decide fair value measurement dates for plan benefits when there is a mismatch in timing.

The amendments are effective for public business entities for financial statements issued for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. For all other entities, the amendments in this update are effective for financial statements issued for fiscal years beginning after December 15, 2016, and interim periods within fiscal years beginning after December 15, 2017. Earlier application is permitted. The amendments in this update should be applied prospectively.

To read the entire update, click here.

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IRS eases correction methods for common 401(k)/403(b) plan failures

April 14th, 2015 No comments

This Client Action Bulletin discusses recently issued IRS Revenue Procedure 2015-28 that will allow sponsors of 401(k) and 403(b) plans to fix two common administrative errors. The Internal Revenue Service (IRS) released guidance that will allow sponsors of 401(k) and 403(b) plans to easily correct two common administrative errors without first having to obtain approval from the agency. Revenue Procedure 2015-28 modifies and improves the Employee Plans Compliance Resolution System (EPCRS) by providing a new safe harbor relating to automatic contribution features (including automatic enrollment and automatic escalation of elective deferrals) and a separate new special safe harbor correction method for faulty elective deferrals that occur over a period of limited duration.

Regulatory roundup

April 13th, 2015 No comments

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

IRS updates determination letter guidance and FAQs
The Internal Revenue Service (IRS) has updated its web guidance on applying for a determination letter as it applies to individually designed plans. The IRS also updated its set of frequently asked questions (FAQs).

To read the updated determination letter guidance, click here.
To read the updated FAQs, click here.

NTIS receives comment letters on the Death Master File
Section 203 of the Bipartisan Budget Act of 2013 requires the U.S. Secretary of Commerce to establish a program to certify persons who may access the Social Security Administration’s Death Master File (DMF). As a result of this action, the National Technical Information Service (NTIS) created regulations that establish the requirements and procedures for access to the DMF. Additionally, this action established a fee structure for the certification program for access to the DMF for any deceased individual, within three years of the individual’s death.

The NTIS issued proposed regulations with a comment period that ended on March 30, 2015. To read the comment letters, click here.

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Regulatory roundup

April 6th, 2015 No comments

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

IRS releases guidance on safe harbor correction methods
The Internal Revenue Service (IRS) has issued Revenue Procedure 2015-28, which contains modifications to Revenue Procedure 2013-12, 2013-4 I.R.B. 313. The modifications reflected in this revenue procedure include new safe harbor Employee Plans Compliance Resolution System (EPCRS) correction methods relating to automatic contribution features, including automatic enrollment and automatic escalation of elective deferrals, in plans described in § 401(k) and § 403(b). The special safe harbor correction methods include plans with automatic contribution features that have failures that are of limited duration involving elective deferrals.

To read the entire guidance, click here.

PBGC issues proposed rule on electronic filing of multiemployer plans
The Pension Benefit Guaranty Corporation (PBGC) is proposing to amend its regulations to require electronic filing of certain multiemployer notices. These changes would make the provision of information to the PBGC more efficient and effective. The proposed rule would require the following notices to be filed electronically with PBGC:

• Notices of termination under part 4041A
• Notices of insolvency and of insolvency benefit level under part 4245
• Notices of insolvency and of insolvency benefit level under part 4281 (following mass withdrawal)
• Applications for financial assistance under part 4281 (following mass withdrawal)

To read the entire proposed rule, click here.

IRS reminds plan sponsors to keep track of loans and hardship distributions
Even if plan sponsors use a third-party administrator (TPA) to handle participant transactions, they are ultimately responsible for the proper administration of their retirement plans. The IRS has published recordkeeping requirements regarding loans and hardship distributions.

For more information, click here.

IRS issues guidance on plan distributions to foreign persons
The IRS has published information for plan sponsors making distributions to foreign individuals. To read the entire guidance, click here.

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Regulatory roundup

March 30th, 2015 No comments

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

IRS issues private letter ruling on VEBA income used to pay benefits
The Internal Revenue Service (IRS) released a private letter ruling on the treatment of income received by a voluntary employees’ beneficiary association (VEBA) to pay plan benefits. The IRS ruled that a VEBA established by an earlier collective bargaining agreement between a union and a liquidating company to provide health insurance for retired union members is maintained pursuant to a collective bargaining agreement for the purposes of Section 419A(f)(5) of the tax code. Also, employer contributions and any income received by the VEBA and set aside to pay plan benefits is exempt function income under Section 512 and therefore won’t constitute unrelated business taxable income within the meaning of that section.

To read the entire private letter ruling, click here.

IRS posts information on multiemployer actuarial certification
The multiemployer defined benefit plan actuary must complete an annual actuarial certification of the plan’s funding status (IRC Section 432[b][3]). This must be submitted to the IRS no later than 90 days after the beginning of the plan year. The determination of endangered and critical status is detailed in Section 432(b).

For more information, click here.

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