Tag Archives: DOL

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 the Employee Retirement Income Security Act of 1974 (ERISA or the Act) 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 individual retirement account (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 pre-approved 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 IRS published commentary concerning recently found discriminatory plan designs in DC plans, defined benefit (DB) 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.

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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.

Regulatory roundup

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

DOL releases additional research papers on investment advice rule
The U.S. Department of Labor (DOL) has released the following three research papers on the conflict of interest proposed rule.

Comments on a review of a White House report on conflicted investment advice

Financial advice markets: A cross-country comparison

Effective disclosures in financial decision making

IRS issues minimum funding guidance for cooperative, small-employer charity pensions
The Internal Revenue Service (IRS) has released Notice 2015-58, providing guidance on minimum funding requirements and related rules applicable to defined benefit pension plans maintained by groups of cooperatives and related entities and groups of charities.

The guidance applies requirements established by the Cooperative and Small Employer Charity Pension Flexibility Act (CSEC Act, P.L.113-97). The CSEC Act provides a number of rules relating to the minimum funding requirements for certain defined benefit plans maintained by groups of cooperatives and related entities and groups of charities.

To read the entire notice, click here.

EBRI Notes: Improving retirement security through a qualifying longevity annuity contract
A new Employee Benefit Research Institute (EBRI) analysis models two scenarios under which qualifying longevity annuity contracts (QLACs) could be utilized as part of a 401(k) plan. The first scenario would attempt to convert 15% of the 401(k) balance with the current employer to a QLAC premium while simultaneously attempting to partially mitigate the risk of purchasing the product when interest rates are low. The second proposal assumes some plan sponsors would be willing to convert the accumulated value of their 401(k) contributions to a QLAC purchase at retirement age on either an opt-in or opt-out basis for the employees.

The full report, “How much can qualifying longevity annuity contracts improve retirement security?,” is published in the August 2015 EBRI Notes and is available for download here.

DOL guidance on worker misclassification may have benefit program implications

The Wage and Hour Division of the U.S. Department of Labor (DOL) recently issued guidance on the classification of workers as employees or independent contractors under the Fair Labor Standards Act (FLSA) that may have implications for employer-sponsored benefit programs (in addition to an employer’s compensation and related policies and practices). Administrator’s Interpretation No. 2015-1 focuses on the FLSA’s pertinent definitions and considers the “economic realities” factors that various courts (including the U.S. Supreme Court) have applied to determine whether a worker is economically dependent on the employer (and thus an employee) or in business for himself or herself (and thus an independent contractor).

In general, the DOL concludes that “most workers” are employees under the broad definitions of the FLSA.

Employers should review the DOL’s new guidance for the effects it could have on their retirement, health, and other benefit programs (separate from but in addition to the worker classification issue), particularly in light of the DOL’s heightened enforcement and investigation activities, or as individuals file suits to claim rights to pay and benefits as employees. Misclassification of workers could raise numerous concerns, such as retirement or health plan coverage, contributions to those programs, or nondiscrimination testing issues, along with employer liability for retroactive pay and taxes as well as other penalties.

For additional information about the DOL’s guidance, please contact your Milliman consultant.

DOL proposes overtime pay rule

The Wage and Hour Division of the U.S. Department of Labor (DOL) has issued a proposed rule that calls for more than a doubling of the annual salary threshold—from the current $23,660 to $50,440 (to be adjusted annually)—for “white-collar” employees to remain exempt from receiving overtime compensation when working more than 40 hours per week. The proposed rule under the Fair Labor Standards Act (FLSA) makes no changes to the “duties” test for employees falling into this category (primarily executive, administrative, professional, computer, and outside sales employees), but seeks comments on this issue.

The proposed rule, which the DOL estimates could entitle more than 4.5 million currently exempt white-collar workers to overtime pay in the first year that the rule is implemented, also would:

• Increase the total annual compensation requirement needed to qualify for the FLSA’s highly compensated employee exemption, from the current $100,000 to $122,148 (with yearly adjustments)
• Establish a mechanism for automatically updating the salary threshold levels using either a fixed percentage of earnings of full-time salaried workers or changes based on the Consumer Price Index
• Permit nondiscretionary bonuses and incentive payments to count toward the salary threshold requirement (but not discretionary bonuses, board or lodging, medical or life insurance payments, retirement plan contributions, or other fringe benefits)

The proposed rule will not take effect until it is issued in final form, which the DOL is expected to do in 2016.

Employers should begin considering how the proposed changes to the salary threshold will affect their compensation practices and the benefits offered to employees. Some retirement plans, for example, take into account only base pay, possibly raising the specter of nondiscrimination testing failures if “includable compensation” excludes overtime and bonus payments when non-highly-compensated participants become newly eligible for overtime (for example, see this blog post). Similarly, an employer that offers different health benefits plans based on workers being classified as “salaried” or “hourly” could experience employees (and their dependents) potentially being covered under a plan that had been limited to staff, according to its FLSA exempt/nonexempt status.

For additional information about the DOL’s proposed rule on overtime pay, please contact your Milliman consultant.