Category Archives: Benefit News

Regulatory roundup

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

DOL releases final overtime rule
The Department of Labor (DOL) issued its final overtime rule. The rule focuses primarily on updating the salary and compensation levels needed for executive, administrative and professional workers to be exempt. Specifically, the final rule:

1. Sets the standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage census region, currently the south ($913 per week; $47,476 annually for a full-year worker);

2. Sets the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers nationally ($134,004); and

3. Establishes a mechanism for automatically updating the salary and compensation levels every three years to maintain the levels at the above percentiles and to ensure that they continue to provide useful and effective tests for exemption.

Additionally, the rule amends the salary basis test to allow employers to use nondiscretionary bonuses and incentive payments, including commissions, to satisfy up to 10 percent of the new standard salary level.

To read the entire rule, click here.

IRS publishes final rule related to Roth accounts
The Internal Revenue Service (IRS) released a final rule eliminating the requirement that each disbursement from a designated Roth account that is directly rolled over to an eligible retirement plan be treated as a separate distribution from any amount paid directly to the employee, and therefore, separately subject to the rule in section 72(e)(2) of the Internal Revenue Code (the Code) allocating pretax and after-tax amounts to each distribution.

As a result of this change, if disbursements are made from a taxpayer’s designated Roth account to the taxpayer and also to the taxpayer’s Roth IRA or designated Roth account in a direct rollover, then pretax amounts will be allocated first to the direct rollover, rather than being allocated pro rata to each destination.

To read the entire final rule, click here.

Regulatory roundup

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

PBGC issues interim final rule on adjustment of civil penalties
The Pension Benefit Guaranty Corporation (PBGC) is amending its regulations to adjust the penalties provided for in sections 4071 and 4302 of the Employee Retirement Income Security Act of 1974 (ERISA). This interim final rule adjusts the maximum civil penalties that PBGC may assess under sections 4071 and 4302 of ERISA. The new maximum amounts are $2,063 for section 4071 penalties and $275 for section 4302 penalties.

The amendments are effective August 1, 2016. The increases in the civil monetary penalties under sections 4071 and 4302 provided for in this rule apply on and after August 1, 2016.

To read the entire rule, click here.

FAF releases updated print editions of FASB and GASB accounting standards codifications
The Financial Accounting Foundation (FAF) has released updated print editions of the Financial Accounting Standards Board’s FASB Accounting Standards Codification® and the Governmental Accounting Standards Board’s (GASB) Codification of Governmental Accounting and Financial Reporting Standards.

The FASB codification is the single, authoritative source of generally accepted accounting principles (GAAP) for public and private companies and not-for-profit organizations. For more information, click here.

The GASB codification is the single, authoritative source of GAAP for state and local governments. For more information, click here.

DOL issues final rule on fiduciary/conflicts of interest

The Department of Labor (DOL) has released a final rule redefining “fiduciary” under ERISA, focusing on individuals who provide investment advice or recommendations to retirement plan savers for a fee. The rule requires investment advisers to adhere to a fiduciary standard – that is, they must act in a client’s best interest – when advising retirement plan participants, such as on whether to rollover funds from an employer-sponsored 401(k) plan or on what funds to invest in for individual retirement accounts (IRAs). The agency concurrently published related guidance to exempt certain activities from the conflict-of-interest rule, allowing advisers to continue to receive fees or compensation if they comply with the fiduciary standard. The final rule generally applies beginning Apr. 10, 2017, although portions become effective Jan. 1, 2018.

The package of the final rule and related guidance on class exemptions and prohibited transaction exemption amendments is lengthy and complex; this Client Action Bulletin highlights the key areas covered for retirement plan sponsors. The rule applies to tax-qualified plans under ERISA; it does not affect 457 governmental plans or 403(b) tax-sheltered annuities under a governmental plan or a nonelecting church plan.

Regulatory roundup

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

Treasury Department denies Central States Pension Plan application
The Department of the Treasury issued its long awaited letter to the Central States, Southeast and Southwest Areas Pension Plan (“Central States”). The letter denies the Central States plan its application to reduce benefits under Multiemployer Pension Reform Act (MPRA).

To read the entire letter, click here.

Final rule on additional limitation on suspension of benefits applicable to multiemployer plans
The Internal Revenue Service (IRS) released a final rule that provides guidance relating to a limitation that governs the application of a suspension of benefits under any plan that includes benefits directly attributable to a participant’s service with any employer that has withdrawn from the plan in a complete withdrawal, paid its full withdrawal liability, and, pursuant to a collective bargaining agreement, assumed liability for providing benefits to participants and beneficiaries equal to any benefits for such participants and beneficiaries reduced as a result of the financial status of the plan.

The final rule affects active, retired, and deferred vested participants and beneficiaries under any such multiemployer plan in critical and declining status as well as employers contributing to, and sponsors and administrators of, those plans. These regulations are effective on May 5, 2016.

For more information, click here.

GAO publishes retirement security report
The Government Accountability Office (GAO) released “Retirement security: Low defined contribution savings may pose challenges” (GAO-16-408). The report focuses on recent trends in DC plan participation and account savings, and how much households could potentially save in DC plans over their careers. In addition, the report explores how key individual and employer decisions affect plan saving.

To download the entire report, click here.

Regulatory roundup

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

PBGC issues proposed rule on payment of premiums, late payment penalty relief
The Pension Benefit Guaranty Corporation (PBGC) proposes to lower the rates of penalty charged for late payment of premiums by all plans, and to provide a waiver of most of the penalty for plans with a demonstrated commitment to premium compliance. PBGC seeks public comment on its proposal.

For more information, click here.

Regulatory roundup

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

IRS nixes use of safe harbor if lump sum is not equal to cash balance plan hypothetical account balance
The Internal Revenue Service (IRS) released Chief Counsel Memorandum 2016032811224324, which responds to a taxpayer’s question about a cash balance plan’s eligibility for the tax code section 411(b)(1)(H) safe harbor rules that pertain to lump-sum based benefit formulas and indexed benefits.

The memo focuses on cash balance plans that provide that a lump-sum distribution that is not equal to the participant’s hypothetical account balance but instead is determined as the present value of the participant’s accrued benefit using the actuarial assumptions specified in tax code section 417(e)(3). The IRS concludes that because the amount of the single-sum distribution is not equal to the hypothetical account balance, the plan is not eligible for the safe harbor rules.

To read the entire memo, click here.

Recurring plan issues found in determination case review
The IRS posted a number of defects in plan language that would require corrective amendments and delay the issuance of a determination letter.

For more information, click here.

IRS Chief Counsel issues memo on minimum participation standards; testing otherwise excludable employees
The IRS released Chief Counsel Memorandum 201615013, which responds to whether certain positions related to the definition of “otherwise excludable employees,” used for purposes of coverage testing under § 410(b)(4)(B) and for computing the actual deferral percentage (ADP) under § 401(k)(3), are supportable.

To read the entire memo, click here.

IRS webinar related to 401(b) retirement plan
The IRS has scheduled a free webcast entitled “Understanding the universal availability rules in a 403(b) retirement plan” on Thursday, May 19, 2016, at 2 p.m. EST. The webinar will focus on the following:

• Basic universal availability rules
• Treatment of adjunct faculty at universities
• Treatment of part-time, seasonal, and temporary employees
• The 20 hours per week and the 1,000 hours rules
• Controlled group situations and concerns
• Mayo ruling on medical residents and its impact
• The required notice to employees each year
• Ways to find, fix, and avoid universal availability errors

To register for the webinar, click here.

Regulatory roundup

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

Withdrawal of proposed nondiscrimination rules
The Department of the Treasury and the Internal Revenue Service (IRS) announced that they will withdraw certain provisions of proposed regulations published on January 29, 2016, relating to nondiscrimination requirements applicable to qualified retirement plans under § 401(a)(4).

The provisions of the proposed regulations that will be withdrawn are the provisions that would modify § 1.401(a)(4)-2(c) and § 1.401(a)(4)-3(c). These provisions were intended to address certain qualified retirement plan designs that take advantage of flexibility in the existing nondiscrimination rules to provide a special benefit formula for selected employees without extending that formula to a classification of employees that is reasonable and established under objective business criteria.

For more information, click here.

New PBGC multiemployer data tables
The Pension Benefit Guaranty Corporation (PBGC) released the “2013 PBGC data tables: Multiemployer supplement” containing 10 charts that illustrate zone status over time (participant); zone status over time (plans); direction of zone status changes; zone status and tests for declining status; and administrative expenses (across various parameters).

To download the tables, click here.

GASB releases pension guidance addressing issues raised by stakeholders during implementation
The Governmental Accounting Standards Board (GASB) issued guidance addressing practice issues raised by stakeholders during implementation of the GASB’s pension accounting and financial reporting standards for state and local governments. GASB Statement No. 82, Pension Issues, addresses:

• Presentation of payroll-related measures in required supplementary information
• Selection of assumptions and the treatment of deviations from guidance in Actuarial Standards of Practice for financial reporting purposes
• Classification of payments made by employers to satisfy plan member contribution requirements.

The statement is designed to improve consistency in the application of the pension standards by clarifying or amending related areas of existing guidance.

For more information, click here.

Regulatory roundup

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

Final fiduciary conflict of interest rule issued
The Department of Labor (DOL) released its final “Conflict of interest rule.” The rule contains final regulation defining who is a “fiduciary” of an employee benefit plan under ERISA as a result of giving investment advice to a plan or its participants or beneficiaries. The final rule also applies to the definition of a “fiduciary” of a plan (including an IRA) under the Internal Revenue Code of 1986 (Code). The final rule treats persons who provide investment advice or recommendations for a fee or other compensation with respect to assets of a plan or IRA as fiduciaries in a wider array of advice relationships.

To read the entire final rule, click here.

Correct the failure to adopt the preapproved plan by the applicable deadline
The IRS introduced a new option for an employer to correct not signing a pre-approved defined contribution (DC) retirement plan by the deadline. The new option allows the financial institution or service provider that offers the plan document to request a closing agreement on behalf of all adopters who missed the deadline.

For more information, click here.

Cautionary note on discriminatory plan designs using short service
The Internal Revenue Service (IRS) published commentary concerning recently found discriminatory plan designs in defined benefit (DB) plans, defined contribution (DC) plans, and DB/DC combination plans. These plans provide significant benefits to the highly compensated employees (HCEs) and a specified group of non-highly compensated employees (NHCEs), who work very few hours or receive very little compensation, and exclude other NHCEs from plan participation.

For more information, click here.

GAO publishes report on retirement security
The Government Accountability Office (GAO) released “Retirement security: Shorter life expectancy reduces projected lifetime benefits for lower earners.” The report examines the implications of increasing life expectancy for retirement planning and the effect of life expectancy on the retirement resources for different groups, especially those with low incomes.

To read the entire report, click here.

Regulatory roundup

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

Comment request for the annual return/report of employee benefit plan
The Department of the Treasury, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995, Public Law 104-13 (44 U.S.C. 3506(c)(2)(A)). The Internal Revenue Service (IRS) is currently soliciting comments concerning the Annual Return/Report of Employee Benefit Plan.

For more information, click here.

PBGC report suggests multiemployer program needs additional premiums
The Pension Benefit Guaranty Corporation (PBGC) issued the study “PBGC insurance of multiemployer pension plans: A five year report.” The study assesses revenues needed for the agency to continue to protect participants in multiemployer plans that are likely to run out of money.

While the Kline-Miller Multiemployer Pension Reform Act of 2014 (MPRA) increased premiums paid by multiemployer pension plans to PBGC, the program is still deeply underfunded. The report illustrates the effects of increasing premium revenues on PBGC’s continued solvency under a variety of scenarios, reflecting different assumptions as to how many plans would suspend benefits or apply for partition under MPRA. Under each scenario in the study, the likelihood that the multiemployer program will be insolvent before 2034 exceeds 50%, even if premium revenues are doubled.

To download the entire study, click here.

FASB issues update on improvements to employee share-based payment accounting
The Financial Accounting Standards Board (FASB) issued “Accounting Standards Update No. 2016-09, Compensation—stock compensation (topic 718): Improvements to employee share-based payment accounting.” The Accounting Standards Update (ASU) affects all organizations that issue share-based payment awards to their employees. The ASU simplifies the accounting for share-based payment award transactions, including: the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.

For more information, click here.

IRS issues data book showing 22% fewer determination letters in 2015
The IRS released the 2015 Internal Revenue Service Data Book, which covers the period October 1, 2014, through September 30, 2015. The data book provides an annual snapshot of agency activities for the fiscal year.

According to the report, in FY 2015, the IRS issued a total of 8,976 determination letters on employee retirement plans. They consisted of 2,829 determination letters for defined benefit plans and 6,147 determination letters for defined contribution plans. The number of determination letters was down 22% from the 11,478 it issued the year before.

For more information, click here.

Regulatory roundup

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

PBGC issues final rule on ERISA 4010 reporting
The Pension Benefit Guaranty Corporation (PBGC) released a final rule amending its regulation on annual financial and actuarial information reporting under ERISA section 4010. Some key provisions of the final rule include interest rate stabilization, changes to the $15 million aggregate underfunding waiver, and new waivers.

The final rule also provides alternative methods of compliance for reporting certain actuarial information and makes a few technical changes to the regulation.

To read the final rule, click here.

PBGC issues notice of arbitration association’s request for fee update
The PBGC has released a notice stating that the agency has received a request to update the fee schedule—which will affect disputed multiemployer plan withdrawal liability determinations—from the American Arbitration Association.

For more information, read the entire notice here.