Tag Archives: DoL

Regulatory roundup

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

Final Rule lowering rates of penalty charged for late payment of pension premiums
The PBGC is lowering the rates of penalty charged for late payment of premiums by all pension plans, and providing a waiver of most of the penalty for plans with a demonstrated commitment to premium compliance.

The penalty for late payment of a premium is a percentage of the amount paid late multiplied by the number of full or partial months the amount is late, subject to a floor of $25 (or the amount of premium paid late, if less). There are two levels of penalty, which heretofore have been 1 percent per month (with a 50 percent cap) and 5 percent per month (capped at 100 percent). The lower rate applies to “self-correction” — that is, where the premium underpayment is corrected before PBGC gives notice that there is or may be an underpayment.

This final rule cuts the rates and caps in half (i.e., to ½ percent with a 25 percent cap and 2½ percent with a 50 percent cap, respectively) and eliminates the floor. The rulemaking also creates a new penalty waiver that applies to underpayments by plans with good compliance histories if corrected promptly after notice from PBGC. PBGC will waive 80 percent of the penalty assessed for such a plan.

For more information, click here.

Notice extends temporary nondiscrimination relief for closed defined benefit plans
The Internal Revenue Service (IRS) released Notice 2016-57, extending the temporary nondiscrimination relief for closed defined benefit plans provided in Notice 2014-5 and 2014-2, through 2017.

The temporary nondiscrimination relief for closed plans that is provided in Notice 2014-5 is hereby extended to plan years beginning before 2018 if the conditions of Notice 2014-5 are satisfied. This extension is provided in anticipation of the issuance of final amendments to the § 401(a)(4) regulations. Those regulations are expected to be effective for plan years beginning on or after January 1, 2018, and are expected to permit plan sponsors to apply the provisions of the regulations that apply specifically to closed plans for certain earlier plan years.

To read Notice 2016-57, click here.

To read and review Notice 2014-5, click here.

DoL Extends deadline for public comments on Form 5500 modernization proposal
The Department of Labor (DoL) announced a two-month extension of the comment period on the Form 5500 modernization proposals. A range of stakeholder groups asked for an extension of time to submit comments given the scope and significance of the proposed forms revisions and regulatory amendments. The DoL, IRS, and the Pension Benefit Guaranty Corporation (PBGC) decided to extend the public comment period on the proposed forms revisions and regulatory amendments from the original Oct. 4, 2016, deadline to the new Dec. 5, 2016, deadline.

For more information, click here.

Proposal to expand missing participant program
The PBGC administers a program to hold retirement benefits for missing participants and beneficiaries in terminated retirement plans and to help those participants and beneficiaries find and receive the benefits being held for them. The program is currently limited to single-employer defined benefit pension plans covered by the pension insurance system under title IV of the Employee Retirement Income Security Act of 1974 (ERISA).

The PBGC proposes to make changes to its existing program and, as authorized by the Pension Protection Act of 2006, to establish similar programs for multiemployer plans covered by title IV, certain defined benefit plans that are not covered by title IV, and most defined contribution plans. The proposed rule is needed to implement amendments to section 4050 of ERISA.

To read the proposed rule, click here.

For an overview of the proposed missing participants program for defined contribution and other terminated plans, click here.

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Regulatory roundup

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

Actions to better address potential noncompliance for Roth individual retirement arrangement conversions
The Treasury Inspector General for Tax Administration (TIGTA) recently released “Actions can be taken to better address potential noncompliance for Roth individual retirement arrangement conversions.” The report notes that for tax year 2011, IRS records show that approximately 400,000 taxpayers converted more than $10 billion in assets from traditional to Roth Individual Retirement Arrangements (IRA). This TIGTA audit was initiated to assess whether the IRS has sufficient processes in place to address taxpayers who underreport taxes due when converting assets to Roth IRAs.

To read the entire report, click here.

DoL posts comments on agencies’ proposed rule – Form 5500
The Department of Labor (DoL) has made 23 comment letters received to date regarding the proposed rule that would amend Form 5500 and its schedules available on its website.

To access the comments, click here.

Improvements to claims process could help people make better informed decisions about retirement
The Government Accountability Office (GAO) released “Social Security – Improvements to claims process could help people make better informed decisions about retirement benefits” (GAO-16-786). Many eligible individuals claim Social Security retirement benefits at the earliest eligibility age, even though they would receive higher benefits if they waited until older ages. In order to make an informed decision about when to claim, people need to understand how various Social Security rules and other factors affect benefit amounts. GAO was asked to examine these issues.

To read the entire report, click here.

Regulatory roundup

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

DOL files final rule on savings arrangements established by states for nongovernmental employees
The U.S. Department of Labor (DoL) filed at the Federal Register a final rule entitled “Savings Arrangements Established by States for Non-Governmental Employees.” The final rule describes circumstances in which state payroll deduction savings programs with automatic enrollment would not give rise to the establishment of employee pension benefit plans under ERISA.

The final rule provides guidance for states in designing such programs so as to reduce the risk of ERISA preemption of the relevant state laws. The final rule also provides guidance to private-sector employers that may be covered by such state laws. This rule affects individuals and employers subject to such state laws.

The final rule is effective 60 days after publication in the Federal Register. It is scheduled for publication on August 30, 2016.

To read the entire final rule, click here.

Proposed rule on savings arrangements established by states for nongovernmental employees
The DoL filed a proposed rule entitled “Savings Arrangements Established by State Political Subdivisions for Non-Governmental Employees.” The proposed rule would amend a regulation that describes how states may design and operate payroll deduction savings programs, using automatic enrollment, for private-sector employees without causing the states or private-sector employers to establish employee pension benefit plans under ERISA. The proposed amendments would expand the current regulation beyond states to cover programs of qualified state political subdivisions that otherwise comply with the current regulation. This rule would affect individuals and employers subject to such programs.

Written comments should be received on or before 30 days after the date of publication in the Federal Register. Publication is scheduled for August 30, 2016.

To read the entire proposed rule, click here.

New procedure to help people making IRA and retirement plan rollovers
The Internal Revenue Service (IRS) provided a self-certification procedure designed to help recipients of retirement plan distributions who inadvertently miss the 60-day time limit for properly rolling these amounts into another retirement plan or IRA.

IRS Revenue Procedure 2016-47 explains how eligible taxpayers, encountering a variety of mitigating circumstances, can qualify for a waiver of the 60-day time limit and avoid possible early distribution taxes. In addition, the revenue procedure includes a sample self-certification letter that a taxpayer can use to notify the administrator or trustee of the retirement plan or IRA receiving the rollover that they qualify for the waiver.

To read the entire revenue procedure, click here.
For more information on rollovers and transfers, click here and here.

Guidance for one-participant plan sponsors
One of the most common reasons why a retirement plan becomes an orphan plan is because the plan sponsor no longer exists. The IRS has published some information offering sponsors guidance on how to prevent orphan plans.

For more information, click here.

SEC adopts rules to enhance information reported by investment advisers
The Securities and Exchange Commission (SEC) adopted amendments to several Investment Advisers Act rules and the investment adviser registration and reporting form to enhance the reporting and disclosure of information by investment advisers. The amendments will improve the quality of information that investment advisers provide to investors and the SEC.

For more information, click here.

Regulatory roundup

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

DOL issues ERISA fiduciary advisor
The Employee Benefits Security Administration (EBSA) of the U.S. Department of Labor (DOL) 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 what a fiduciary’s responsibilities are under 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 Internal Revenue Service (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, this language was inserted under the title of the form to inform the recipient that Form 1095-C should not be submitted with the return: “Do not attach to your tax return. Keep for your records.”

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. This language was inserted on the Form 1095-B under the title of the form: “Do not attach to your tax return. Keep for your records.” 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 for 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 IRS 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. 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. The following fee schedule should now be used 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.