More key retirement-related regulatory news for plan sponsors to monitor carefully, including links to get detailed information.
DOL extends comment period on proposed amendments relating to target-date disclosure
The Department of Labor (DOL) Employee Benefits Security Administration has issued a notice announcing the reopening of the period for public comment on proposed regulatory amendments relating to enhanced disclosure concerning target-date or similar investments, originally proposed in a previously published document in the Federal Register. Written comments on the proposed regulation should be received by the Department of Labor no later than 45 days after the notice is published. A PDF with more information is available here (scroll down).
GAO: Increased educational outreach and broader oversight for 401(k) plans may help reduce plan fees
A new report from the GAO to Congress looks at issues of fees in defined contribution (DC) 401(k) retirement plans and how they affect small, medium-sized, and large plans, saying in part:
Studies have been conducted to better understand the fees 401(k) plan sponsors and their participants pay. However, these studies focus on larger plans. Thus, uncertainty remains about the amounts paid by small and medium-sized plans and the level of knowledge and expertise these sponsors have to assess the fees charged by service providers.
GAO addressed the following related to small, medium-sized, and large plans: (1) amounts plan sponsors and participants pay for services, (2) challenges sponsors face in understanding how fees are charged, and (3) actions Labor has taken to help sponsors better understand and monitor the fees charged by service providers. GAO reviewed relevant federal laws, regulations, and retirement research, and interviewed federal officials and industry experts. GAO also conducted a survey of 1,000 401(k) plans to collect information about fees paid for plan services. The response rate allowed GAO to generalize to the population of 401(k) plans for most of the survey questions.
The full report is available here.
IRS issues notice seeking comment on use of electronic media to provide transportation fringe benefits
The Internal Revenue Service (IRS) has issued Notice 2012-38 requesting public comment on additional guidance regarding employers’ provision of smartcards and debit or credit cards to provide qualified transportation fringe benefits under tax code Sections 132(a)(5) and (f).
The request for comments was prompted by changes in technology in transit benefit administration, the IRS said. The comment request follows Revenue Ruling 2006-57, which took effect January 1 this year, and provides guidance on the use of electronic media to provide transit passes to employees who commute or to reimburse them for parking or bicycle commuting.
The agencies would like comments on how electronic media may meet the statutory requirements under section 132(f) for providing transit benefits, either as vouchers or transit passes or through bona fide cash reimbursement arrangements in a manner other than those described in situations one through four in Rev. Rul. 2006-57.
Also, Treasury and the IRS request comments on the availability of terminal-restricted cards and any other electronic media qualifying as vouchers or transit passes for purposes of determining whether such items are readily available and, therefore, whether cash reimbursement arrangements for providing transit benefits should be prohibited.
Finally, Treasury and the IRS request comments on challenges employers encounter in transitioning from paper transit passes or vouchers to electronic media that qualify as vouchers or transit passes, or from cash reimbursement arrangements to electronic media qualifying as transit passes or vouchers.
Notice 2012-38 will be published June 6 in Internal Revenue Bulletin 2012-24. It is temporarily available here.
Pension Benefit Guaranty Corporation Office of Inspector General management advisory report
The Pension Benefit Guaranty Corporation (PBGC) recently released a management advisory report from its Office of Inspector General (OIG), “Ensuring the Integrity of Policy Research and Analysis Department’s Actuarial Calculations.” The report says in part:
Attached is a Management Advisory Report (MAR) prepared to inform PBGC management of a serious internal control issue that came to OIG’s attention as a result of the review of a whistle-blower complaint received through the OIG Hotline. Our review confirmed the complainant’s assertion that the Present Value of Financial Assistance Payments for multiemployer plans, as reported in PBGC’s FY 2010 Annual Exposure Report issued November 10, 2011, was unrealistically low. Based on a review of available documentation, interviews with key PBGC officials, and analysis, we concluded that PBGC had issued the report with errors and inconsistencies in both the multiemployer and single employer sections. This occurred because PBGC had not established a quality control or quality review process to ensure the integrity of reported actuarial estimates. Early in our review, the Policy Research and Analysis Department (PRAD) Director acknowledged the errors and explained that his department did not have policies in place for quality control…
The PBGC Director instructed that all estimates used for PBGC reports be reviewed outside PRAD. However, instead of requesting a quality assurance review, the PRAD Director implemented the PBGC Director’s guidance by instructing the actuary ‘to dot our numbers for the 2011 Exposure Report, both SE and ME.’ [emphasis added] As described in the attached MAR, the process of ‘dotting’ is simply verification that a particular value is correctly copied and transferred from on place to another. The process of dotting does not involve verification of underlying calculation or supporting documentation and is not sufficient for quality control. Thus, based on our review of the changes referenced in the attached response from PBGC, the revised process is still inadequate to ensure the integrity of PRAD’s actuarial estimates.
The attached MAR includes a request for PBGC to provide a written response detailing the actions to be taken to address the reported issues. As part of that response, PBGC should include information about additional enhancements – over and above the process of “dotting” – to ensure that the actuarial data published by PBGC is accurate and supported by appropriate documentation…
The full report is available here.