Tag Archives: IRS

Regulatory roundup

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

IRS nixes use of safe harbor if lump sum is not equal to cash balance plan hypothetical account balance
The Internal Revenue Service (IRS) released Chief Counsel Memorandum 2016032811224324, which responds to a taxpayer’s question about a cash balance plan’s eligibility for the tax code section 411(b)(1)(H) safe harbor rules that pertain to lump-sum based benefit formulas and indexed benefits.

The memo focuses on cash balance plans that provide that a lump-sum distribution that is not equal to the participant’s hypothetical account balance but instead is determined as the present value of the participant’s accrued benefit using the actuarial assumptions specified in tax code section 417(e)(3). The IRS concludes that because the amount of the single-sum distribution is not equal to the hypothetical account balance, the plan is not eligible for the safe harbor rules.

To read the entire memo, click here.

Recurring plan issues found in determination case review
The IRS posted a number of defects in plan language that would require corrective amendments and delay the issuance of a determination letter.

For more information, click here.

IRS Chief Counsel issues memo on minimum participation standards; testing otherwise excludable employees
The IRS released Chief Counsel Memorandum 201615013, which responds to 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.

IRS webinar on related to 401(b) retirement plan
The IRS has scheduled a free webcast entitled “Understanding the universal availability rules in a 403(b) retirement plan” on Thursday, May 19, 2016 at 2 pm EST. The webinar will focus on the following:

• Basic universal availability rules
• Treatment of adjunct faculty at universities
• Treatment of part-time, seasonal, and temporary employees
• The 20 hours per week and the 1,000 hours rules
• Controlled group situations and concerns
• Mayo ruling on medical residents and its impact
• The required notice to employees each year
• Ways to find, fix, and avoid universal availability errors

To register for the webinar, click here.

Regulatory roundup

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

Withdrawal of proposed nondiscrimination rules
The Department of the Treasury and the IRS announce that they will withdraw certain provisions of proposed regulations published on January 29, 2016 relating to nondiscrimination requirements applicable to qualified retirement plans under § 401(a)(4).

The provisions of the proposed regulations that will be withdrawn are the provisions that would modify §§ 1.401(a)(4)-2(c) and 1.401(a)(4)-3(c). These provisions were intended to address certain qualified retirement plan designs that take advantage of flexibility in the existing nondiscrimination rules to provide a special benefit formula for selected employees without extending that formula to a classification of employees that is reasonable and established under objective business criteria.

For more information, click here.

New PBGC multiemployer data tables
The Pension Benefit Guaranty Corporation (PBGC) released the “2013 PBGC data tables: Multiemployer supplement” containing 10 charts that illustrate zone status over time (participant); zone status over time (plans); direction of zone status changes; zone status and tests for declining status; and administrative expenses (across various parameters).

To download the tables, click here.

GASB releases pension guidance addressing issues raised by stakeholders during implementation
The Governmental Accounting Standards Board (GASB) issued guidance addressing practice issues raised by stakeholders during implementation of the GASB’s pension accounting and financial reporting standards for state and local governments. GASB Statement No. 82, Pension Issues, addresses:

• Presentation of payroll-related measures in required supplementary information
• Selection of assumptions and the treatment of deviations from guidance in Actuarial Standards of Practice for financial reporting purposes
• Classification of payments made by employers to satisfy plan member contribution requirements.

The statement is designed to improve consistency in the application of the pension standards by clarifying or amending related areas of existing guidance.

For more information, click here.

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.

Comment request for the annual return/report of employee benefit plan
The Department of the Treasury, as part of its continuing effort to reduce paperwork and respondent burden, invites the general public and other federal agencies to take this opportunity to comment on proposed and/or continuing information collections, as required by the Paperwork Reduction Act of 1995, Public Law 104-13 (44 U.S.C. 3506(c)(2)(A)). The Internal Revenue Service (IRS) is currently soliciting comments concerning the Annual Return/Report of Employee Benefit Plan.

For more information, click here.

PBGC report suggests multiemployer program needs additional premiums
The Pension Benefit Guaranty Corporation (PBGC) issued the study “PBGC insurance of multiemployer pension plans: A five year report.” The study assesses revenues needed for the agency to continue to protect participants in multiemployer plans that are likely to run out of money.

While the Kline-Miller Multiemployer Pension Reform Act of 2014 (MPRA) increased premiums paid by multiemployer pension plans to PBGC, the program is still deeply underfunded. The report illustrates the effects of increasing premium revenues on PBGC’s continued solvency under a variety of scenarios, reflecting different assumptions as to how many plans would suspend benefits or apply for partition under MPRA. Under each scenario in the study, the likelihood that the multiemployer program will be insolvent before 2034 exceeds 50%, even if premium revenues are doubled.

To download the entire study, click here.

FASB issues update on improvements to employee share-based payment accounting
The Financial Accounting Standards Board (FASB) issued “Accounting Standards Update No. 2016-09, Compensation—stock compensation (topic 718): Improvements to employee share-based payment accounting.” The Accounting Standards Update (ASU) affects all organizations that issue share-based payment awards to their employees. The ASU simplifies the accounting for share-based payment award transactions, including: the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows.

For more information, click here.

IRS issues data book showing 22% fewer determination letters in 2015
The IRS released the 2015 Internal Revenue Service Data Book, which covers the period October 1, 2014, through September 30, 2015. The data book provides an annual snapshot of agency activities for the fiscal year.

According to the report, in FY 2015, the IRS issued a total of 8,976 determination letters on employee retirement plans. They consisted of 2,829 determination letters for defined benefit plans and 6,147 determination letters for defined contribution plans. The number of determination letters was down 22% from the 11,478 it issued the year before.

For more information, click here.

Regulatory roundup

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

New projects focusing on filing errors on Form 5500 Series and Form 5330
The Employee Plans Compliance Unit (EPCU) of the Internal Revenue Service (IRS) has listed new projects regarding filing errors in the Form 5500 Series and Form 5330. The EPCU develops compliance projects and performs data analysis to focus on areas of potential noncompliance. The projects involve contacting plan sponsors by letter to resolve recordkeeping, reporting, and other issues without an audit. EPCU indicates that most issues are resolved without an on-site examination of the books and records of the plan, saving time and money for both the taxpayer and the IRS. To date, the EPCU has completed close to 70 projects and conducted over 38,000 compliance checks.

For more information, click here.

Defined benefit plan assets increase 2.8% in 2016
The Federal Reserve has released its quarterly report “Financial Accounts of the United States.” The report shows that public and private defined benefit (DB) plan assets totaled $11.63 trillion at the end of 2015, up 2.83% from the end of 2014. Other highlights include:

• Corporate DB assets totaled $3.14 trillion as of December 31, up 1.29% from the end of 2014. Corporate defined contribution (DC) assets totaled $5.38 trillion, up 0.19% from the end of 2014.
• State and local government DB assets reached $5.16 trillion at the end of the year, up 3.82% from December 31, 2014.
• State and local government DC assets totaled $478 billion, down 2.05% from the end of 2014.

To download the 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.

Guidance on midyear amendments to safe harbor 401(k) plans and notices
The Internal Revenue Service (IRS) has posted a summary of Notice 2016-16. This issued guidance is intended to help plan sponsors comply with the safe harbor plan and notice rules if they make midyear plan changes.

To read the entire notice, click here.

IRS compliance questions on the 2015 Form 5500-series returns
Because the proposed 2015 IRS compliance questions on the Forms 5500 and 5500-SF and Schedules H, I, and R were not approved by the Office of Management and Budget when the 2015 Form 5500 and Form 5500-SF were published on December 7, 2015, the IRS has decided that plan sponsors should not complete these questions for the 2015 plan year.

Trends in employer costs for defined benefit plans
A new article published on the Bureau of Labor Statistics website explores how defined benefit plan costs fluctuate by industry, occupation, establishment size, and region. The article also reviews trends in costs for employees with access to these plans from 2008 to 2015.

To read the entire article, 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.

Proposed rule on nondiscrimination relief for closed DB plans
The Internal Revenue Service (IRS) has released a proposed rule on nondiscrimination relief for closed defined benefit (DB) plans and additional changes to retirement plan nondiscrimination requirements. The rule would modify the nondiscrimination requirements applicable to certain retirement plans that provide additional benefits to a grandfathered group of employees following certain changes in the coverage of a defined benefit plan or a defined benefit plan formula.

The proposed rule also makes certain other changes to the nondiscrimination rules that are not limited to these plans. The regulation would affect participants in, beneficiaries of, employers maintaining, and administrators of tax-qualified retirement plans.

To read the entire proposed rule, click here.

Proposed improvements to financial reporting of pension and other postretirement benefit plans
The Financial Accounting Standards Board (FASB) has issued two proposed Accounting Standards updates intended to improve financial reporting by employers related to defined benefit pension and other postretirement benefit plans. The proposed updates are entitled:

• Compensation—retirement benefits—defined benefit plans—general (subtopic 715-20): Changes to the disclosure requirements for defined benefit plans
• Proposed Accounting Standards update—compensation—retirement benefits (topic 715): Improving the presentation of net periodic pension cost and net periodic postretirement benefit cost

To download the proposed updates, click here.

Proposed rule on applicability of normal retirement age regulations to governmental pension plans
The IRS released a proposed rule under section 401(a) providing guidance on the applicability of the 2007 normal retirement age (NRA) regulations to governmental plans.
The proposed rule are intended to assist in determining whether the normal retirement age under a governmental plan satisfies the requirements of section 401(a) by amending the 2007 NRA regulations to provide additional rules for governmental plans.

To read the entire proposed rule, click here.

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Regulatory roundup

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

Deadline to adopt restated preapproved DC plans
The Internal Revenue Service (IRS) has published deadlines for employers to adopt preapproved defined contribution (DC) retirement plans.

• April 30, 2016, is the deadline for employers using preapproved retirement plan documents to sign an updated version of their 401(k), profit-sharing, or other defined contribution retirement plans.
• April 30, 2017, is the extended deadline for any defined contribution preapproved plan adopted on or after January 1, 2016, other than a plan that is adopted as a modification and restatement of a defined contribution preapproved plan that had been maintained by the employer prior to January 1, 2016. This extension is to facilitate a plan sponsor’s ability to convert an existing individually designed plan into a current defined contribution preapproved plan. See Notice 2016-3.

For more information, click here.