Tag Archives: DOL

DOL’s final overtime rule may affect retirement, other benefit programs

The Department of Labor issued a final rule on the overtime pay requirements of the Fair Labor Standards Act (FLSA) for most “white-collar employees,” effective December 1, 2016. Although the final rule focuses on paying time-and-a-half for hours worked in excess of 40 per week, it includes other new requirements that could have implications for sponsors of retirement plans (primarily 401[k] and similar arrangements), depending on the inclusion or exclusion of overtime pay and/or bonuses in the plan’s formula for employer contributions. The final rule also might affect a retirement or other benefit plan’s participation base, if salaried (exempt) employees are treated differently from hourly (nonexempt) employees, or it could raise concerns if the programs shift toward favoring the highly compensated. Milliman’s latest Client Action Bulletin offers more perspective.

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).

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% 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.

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 roll over funds from an employer-sponsored 401(k) plan or on what funds to invest in for 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 April 10, 2017, although portions become effective January 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.

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.

Agencies release instructions for 2015 Form 5500, Annual return-report of employee benefit plan
The Internal Revenue Service (IRS), U.S. Department of Labor (DOL), and Pension Benefit Guaranty Corporation (PBGC) have revised the 2015 instructions for the Form 5500. These instructions reflect a new IRS announcement concerning questions that were added to Schedules H and I (Lines 4o, 4p 6c, and 6d). The IRS has decided not to require plan sponsors to complete these questions for the 2015 plan year and plan sponsors should skip these questions when completing the form.

For more information, click here.

Covered compensation tables for 2016 plan year
The IRS has issued Revenue Ruling 2016-5, providing the covered compensation tables under Section 401 for the 2016 plan year.

For more information, click here.

DOL solicits comments on proposed research study
The DOL is planning to undertake a long-term research study to develop a panel that will track U.S. households over several years in order to collect data and answer important research questions on how retirement planning strategies and decisions evolve over time.

Relatively little is known about how people make planning and financial decisions before and during retirement. A major hurdle to retirement research is the lack of data on how people make these decisions related to retirement. Gaining insight into Americans’ decision-making processes and experiences will provide policy makers and the research community with valuable information that can be used to guide future policy and research.

For more information, click here.

Regulatory roundup

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

Private letter ruling on unsubsidized single lump-sum benefits
The Internal Revenue Service (IRS) has released a private letter ruling (PLR), Number 201605006, on unsubsidized single lump-sum benefits provided by a company’s defined benefit and defined contribution plans.

To read the entire letter, click here.

Report on benefit reductions in the Central States Multiemployer DB Pension Plan
The Congressional Research Service (CRS) has issued a report entitled “Benefit reductions in the Central States Multiemployer Defined Benefit Plan: Frequently asked questions.” The report answers the following questions:

• What is the Central States Pension Fund?
• Why is the plan proposing to reduce benefits?
• Is the Pension Benefit Guaranty Corporation (PBGC) supposed to pay benefits when a plan cannot?
• How does the Multiemployer Pension Reform Act (MPRA) dictate which benefits to cut and by how much?
• What is the process for approving benefit reductions?
• Is a vote of participants required to approve benefit reductions?
• Has any legislation been introduced that could prevent implementation of the benefit reductions?

To read the entire report, click here.

Guidance on 2016 inflation-adjusted figure for qualified transportation fringe benefit
The IRS has released Revenue Procedure 2016-14 containing additional inflation-adjusted items resulting from the enactment of the Protecting Americans from Tax Hikes Act of 2015.

The Revenue Procedure contains figures for the qualified transportation fringe benefit 132(f). For taxable years beginning in 2016, the monthly limitation under § 132(f)(2)(A) regarding the aggregate fringe benefit exclusion amount for transportation in a commuter highway vehicle and any transit pass is $255. This section modifies section 3.17 of Revenue Procedure 2015-53.

Revenue Procedure 2016-14 will be published in IRB 2016-09, dated February 29, 2016.

For more information, click here.

DOL issues 2015 Form M-1
The U.S. Department of Labor (DOL) has released the 2015 Form M-1, an annual report that must be filed by multiple employer welfare arrangements (MEWAs). The Form M-1 must be filed no later than March 1 following any calendar year for which a filing is required. A one-time extension of time to file will automatically be granted if the administrator of the MEWA or entity claiming exemption (ECE) requests an extension.

For more information, click here.

Regulatory roundup

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

DOL posts 2015 Form 5500 and Form 5500-SF for information purposes only
The U.S. Department of Labor (DOL) has made available advance copies of the 2015 Form 5500, Annual Return/Report of Employee Benefit Plan, on its website, along with instructions that highlight new electronic filing requirements and various form modifications.

The electronic filing requirements for filing the Form 5500 and Form 5500-SF, Short Form Annual Return/Report of Small Employee Benefit Plan, to the Internal Revenue Service (IRS) apply to employee benefit plans that are required to file at least 250 returns in a calendar year. They go into effect in 2016 for reporting on plan years that begin in or after 2015. Plans were already required to file electronically to the DOL.

For more information, click here.

OMB approval of revised collections of information for e-filing requirements
The Pension Benefit Guaranty Corporation (PBGC) has issued a notice stating that the Office of Management and Budget (OMB) has approved revisions to five collections of information under the PBGC’s regulations.

On September 17, 2015, the PBGC published a final rule amending its regulations on filing, issuance, computation of time, record retention, termination of multiemployer plans, and duties of plan sponsors following mass withdrawals that require mandatory e-filing of certain multiemployer plan notices starting in 2016. New amendments affect three collections of information:

• Duties of plan sponsor following mass withdrawal
• Notice of insolvency
• Termination of multiemployer plans

For more information, click here.

On September 11, 2015, the PBGC published a final rule amending its regulation on reportable events and certain other notification requirements to modify the system of waivers from reporting, implement provisions of the Pension Protection Act of 2006, and make other changes. The PBGC made changes to two collections of information:

• Reportable events
• Notice of failure to make required contributions

OMB approved the revised collections of information through November 30, 2018.

For more information, click here.

FASB issues proposed accounting standards update on fair value measurement
The Financial Accounting Standards Board (FASB) has issued a proposed Accounting Standards Update (ASU) intended to improve the effectiveness of disclosure requirements on fair value measurements. Stakeholders are asked to review and provide comment on the proposed ASU by February 29, 2016.

The proposed ASU is part of the FASB’s broader disclosure framework project to improve the effectiveness of disclosures in the notes to financial statements by clearly communicating the information that is most important to users of a reporting organization’s financial statements.

The proposed ASU would improve existing disclosure requirements related to fair value measurement and clarify disclosure requirements, as well as identify ways to improve the FASB’s decision process.

Fair value measurement is one of four areas where the FASB will evaluate and improve existing disclosure requirements. Other areas the FASB will address include an employer’s disclosure of defined benefit plans, income taxes, and inventory.

For more information, click here.

PBGC issues Table I-16 used to value benefits in plans with 2016 valuation dates
The Pension Benefit Guaranty Corporation (PBGC) has issued a final rule amending its regulation on allocation of assets in single-employer plans by substituting a new table for determining expected retirement ages for participants in pension plans undergoing distress or involuntary termination, with valuation dates falling in 2016. This table is needed in order to compute the value of early retirement benefits and, thus, the total value of benefits under a plan.

The final rule amends Appendix D to replace Table I-15 with Table I-16 in order to provide an updated correlation, appropriate for calendar year 2016, between the amount of a participant’s benefit and the probability that the participant will elect early retirement. Table I-16 will be used to value benefits in plans with valuation dates during calendar year 2016. The final rule is effective on January 1, 2016.

To read the entire final rule, click here.

Regulatory roundup

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

IRS extends comment period on proposed rule related to Form W-2 series
The Internal Revenue Service (IRS) has issued an extension to its comment period on its proposed rule relating to extensions of time to file information returns on forms in the W-2 series (except Form W-2G). Written or electronic comments and requests for a public hearing for the notice of proposed rule-making published on August 13, 2015 (80 FR 48472), is extended to January 11, 2016.

For more information, click here.

Employee Benefits Security Administration publishes new fact sheet
The U.S. Department of Labor’s Employee Benefits Security Administration (EBSA) released a fact sheet regarding the private employee benefit plan system in the United States. In FY 2015, EBSA recovered $696.3 million for direct payment to plans, participants, and beneficiaries.

To read the entire fact sheet, click here.

Regulatory roundup

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

IRS announces pension plan limits for 2016
The Internal Revenue Service (IRS) has announced the dollar limitations applicable to pension plans for 2016. In addition, an IRS news release notes that:

• The Savings Incentive Match Plan for Employees (SIMPLE) retirement accounts limitation remains at $12,500
• The “key employee” definition in a top-heavy plan remains unchanged at $170,000
• The “catch-up” contribution amount remains at $6,000
• The dollar amount for determining the maximum account balance in an employee stock ownership plan subject to a five-year distribution period remains at $1,070,000, while the dollar amount used to determine the lengthening of the five-year distribution period remains at $210,000
• For a participant who separated from service before 2016, the adjusted high-three-year compensation limitation for defined benefit plans, under Section 415(b)(1)(B), is computed by multiplying the participant’s compensation limitation, as adjusted through 2015, by 1.0011
• The annual compensation limit for eligible participants in certain governmental plans that, under the plan as in effect on July 1, 1993, allowed cost-of-living adjustments to the compensation limit under the plan to be taken into account, remains at $395,000
• The Simplified Employee Pension (SEP) compensation amount remains at $600
• The compensation amounts concerning the definition of “control employee” for fringe benefit valuation purposes remains unchanged at $105,000, and the compensation amount remains at $215,000

To read the entire news release, click here.

DOL files interpretive bulletin on fiduciary standard under ERISA
The U.S. Department of Labor (DOL) has filed an interpretive bulletin that sets forth supplemental views of the DOL concerning the legal standard imposed by Sections 403 and 404 of Part 4 of Title I of ERISA, with respect to a plan fiduciary’s decision to invest plan assets in “economically targeted investments” (ETIs).

ETIs are generally defined as investments that are selected for the economic benefits they create in addition to the investment return to the employee benefit plan investor. In the document, the DOL withdraws Interpretive Bulletin 08-01 and replaces it with Interpretive Bulletin 2015-01, which reinstates the language of Interpretive Bulletin 94-01.

The new guidance, Interpretive Bulletin (IB) 2015-01, confirms the DOL’s longstanding view from IB 94-01 that fiduciaries may not accept lower expected returns or take on greater risks in order to secure collateral benefits, but may take such benefits into account as “tiebreakers” when investments are otherwise equal with respect to their economic and financial characteristics.

To read the entire interpretive bulletin, click here.

Continue reading

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.