Tag Archives: DoL

Regulatory roundup

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

DOL issues ERISA fiduciary advisor
The Department of Labor’s (DOL) Employee Benefits Security Administration (EBSA) has published the ERISA Fiduciary Advisor. The ERISA Fiduciary Advisor provides information and answers to a variety of questions about who is a fiduciary and their responsibilities under the Employee Retirement Income Security Act (ERISA). This Advisor was developed by the EBSA in its continuing effort to increase awareness and understanding about basic fiduciary responsibilities when operating a retirement plan.

For more information, click here.

IRS issues draft Instructions for Forms 1094-C and 1095-C
The IRS released draft Instructions for 2016 Form 1094-C and 1095-C with new revisions. On Form 1094-C, line 22, box B is designated “Reserved.” The Qualifying Offer Method Transition Relief is not applicable for 2016. In Part III, column (b), “Section 4980H” was inserted before “Full-Time Employee Count for ALE Member” to remind filers that the section 4980H definition of “full-time employee” applies for purposes of this column, not any other definition that an ALE Member may use for other purposes. On Form 1095-C, the language “Do not attach to your tax return. Keep for your records.” was inserted under the title of the form to inform the recipient that Form 1095-C should not be submitted with the return.

To download the draft instructions, click here.

IRS issues draft Instructions for Forms 1094-B and 1095-B
The IRS released draft Instructions for 2016 Form 1094-B and 1095-B with new revisions. The language “Do not attach to your tax return. Keep for your records.” was inserted on the Form 1095-B under the title of the form. Form 1095-B, Part I, lines 2 and 3, and Part IV, columns (b) and (c) were updated to reflect the rule that a taxpayer identification number (TIN) may be entered. Form 1095-B, line 9 is now reserved. The heading to Part II was revised to read “Information about Certain Employer-Sponsored Coverage” to clarify that Part II will be blank or some individuals with employer-sponsored coverage. Other minor clarifying changes were made to Form 1095-B.

To download the draft instructions, click here.

IRS revises Form 8717
The Internal Revenue Service revised 2016 Form 8717 (Determination Letter Request User Fee) and Form 8717-A (Opinion or Advisory Letter Request User Fee). The new form has been revised so that it does not contain specific user fee amounts. One must now enter the appropriate user fee when completing line 5 of the Form and the IRS has indicated that the amounts and number of forms submitted on line 5 of Form 8717 revised in August 2014) should not be used. One should now use the following fee schedule to determine the user fee for employee plan determination letter requests mailed to the IRS on or after February 1, 2016.

Revenue Procedure 2016-8 changed the fee schedule shown on lines 5a and 5b of Form 8717-A. Do not use the applications and fee schedule shown on lines 5a and 5b of Form 8717-A (Rev. August 2014) to determine the appropriate user fee. Instead, use the following updated schedule to determine the user fee for Form 8717-A mailed to the IRS on or after February 1, 2016.

For more information, click here.

Regulatory roundup

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

New process for DB plan determination letter applications
The Internal Revenue Service (IRS) published a post on its website highlighting the new process for defined benefit plan determination letter applications.

To read the entire post, click here.

IRS releases draft Form 5300
The IRS issued a draft of the revision for Form 5300, Application for Determination for Employee Benefit Plan. Form 5300 is used to request a favorable determination letter (DL) from the IRS on the qualified status of these plans and the exempt status of any related trust.

Form 5300 has undergone major revisions in format and information required. Many of the revisions reflect the changes affecting individually designed plans described in Announcement 2015-19, and Revenue Procedure 2016-37. The revised form significantly simplifies the information that plan sponsors must provide and is expected to reduce the taxpayer burden in filling out the form.

The IRS expects the final version of Form 5300 to be available by December 2016. If you wish, you can submit comments about the draft Form 5300.

Federal agencies release proposed revisions to improve Form 5500
The Employee Benefits Security Administration (EBSA) of the Department of Labor (DOL), the IRS, and the Pension Benefit Guaranty Corporation (PBGC) are seeking public comments on proposed revisions to modernize and improve the Form 5500 Annual Return/Report filed by private-sector employee benefit plans. The EBSA also published a related notice of proposed changes to its annual reporting regulations under Title I of ERISA.

Form 5500 is the primary source of information about the operations, funding, and investments of private-sector, employment-based pension and welfare benefit plans in the United States.

To read the proposed rule, click here.

 

Regulatory roundup

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

Technical corrections to best of interest rule; class exemption for principal transaction in certain assets
The Department of Labor (DOL) filed technical corrections to the Best Interest Contract Exemption, which was published on April 8, 2016. The Best Interest Contract Exemption allows certain persons that are fiduciaries under ERISA, or the Internal Revenue Code (the Code), or both, by reason of providing investment advice, to receive compensation that may otherwise be prohibited.

The corrections in this document fix typographical errors, make minor clarifications to provisions that might otherwise be confusing, and confirm insurers’ broad eligibility to rely on the exemption, consistent with the exemption’s clearly intended scope and the analysis and data relied upon in the DOL’s final regulatory impact analysis (RIA).

For more information, click here.

Office of Chief Counsel memo regarding testing otherwise excludable employees
The Office of Chief Counsel of the Internal Revenue Service (IRS) released Memorandum 201615013 concerning testing otherwise excludable employees. The taxpayer asked whether certain positions related to the definition of “otherwise excludable employees,” used for purposes of coverage testing under § 410(b)(4)(B) and computing the actual deferral percentage (ADP) under § 401(k)(3), are supportable.

To read the entire memo, click here.

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.