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Regulatory roundup

March 23rd, 2015 No comments

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

DOL rules on timing of annual disclosures for participant-directed account plans
The Department of Labor (DOL) has released a direct final rule and a companion proposed rule on the timing of annual disclosures that affect fiduciary requirements for disclosure in participant-directed account plans. The direct final rule amends the DOL’s participant level fee disclosure regulation by making a technical adjustment to a timing requirement of the current regulation. It amends the definition of the term “at least annual thereafter” and substitutes the term “14-month period” for the term “12-month period.” The amendment provides plan administrators with flexibility as to when they must furnish annual disclosures.

The accompanying proposed rule would make the technical amendment necessary to implement the direct final rule’s annual timing requirement. If the DOL receives no significant adverse comments during the 90-day comment period, the direct final rule will go into effect without the agency taking further action. But if it receives significant adverse public comment, the direct final rule will be withdrawn.

To read the entire direct final rule, click here.
To read the entire proposed rule, click here.
Also, for a fact sheet, click here.

IRS extends temporary nondiscrimination relief for closed defined benefit plans
The Internal Revenue Service (IRS) recently published Notice 2015-28, extending the temporary nondiscrimination relief provided in Notice 2014-5 for an additional year. The new guidance applies relief to defined benefit plan years beginning before 2017 if the conditions of Notice 2014-5 are satisfied. During the period for which this extension applies, the remaining provisions of the nondiscrimination regulations under § 401(a)(4), including the rules relating to the timing of plan amendments under § 1.401(a)(4)-5), continue to apply.

To read Notice 2015-28, click here.

Joint Committee on Taxation issues explanation of tax legislation enacted in the 113th Congress
Twelve tax bills passed the 113th Congress and were signed by the president—including several that have an impact on retirement savings—according to a Joint Committee on Taxation report detailing each piece of legislation.

Read the entire report here.

Regulatory roundup

March 16th, 2015 No comments

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

OMB approves PBGC 2015 premium filing instructions
The Office of Management and Budget (OMB) has approved 2015 premium filing instructions. My PAA has been updated and is now ready to accept electronic premium fillings for plan years beginning in 2015.

For more information, click here.

IRS updates 403(b) listing of required modifications package
The Internal Revenue Service (IRS) has updated its Section 403(b) plan listing of required modifications. Also updated was a redlined version showing changes to 403(b) plan LRM from 2013. The package contains sample plan provisions that satisfy certain specific Internal Revenue Code requirements applicable to Internal Revenue Code Section 403(b) plans.

For 403(b) plan listing of required modifications and information package (LRM) (3-2015), click here. For the redlined version showing changes to 403(b) plan LRM (3-2013) (revised 3-2015), click here.

Senate finance letter addresses affordable retirement advice
Chairman Lamar Alexander (R-Tenn.) led a group of eight Republicans on the Senate labor committee in a letter recently cautioning Office of Management and Budget (OMB) Director Shaun Donovan on the potential negative impact of approving the Department of Labor’s (DOL) proposed rule to redefine and expand the term “fiduciary” if the current proposal has not changed significantly from the proposal DOL offered in 2010.

To read the entire letter, click here.

PBGC study: Multiemployer guarantee
The Pension Benefit Guaranty Corporation (PBGC) has published a new study entitled “Multiemployer guarantee.” The study found that more than half of the people in terminated multiemployer plans running out of money in the near future face a reduction in benefits under current PBGC guarantees. This compares to 20 percent of workers and retirees who saw reduced benefits under plans that have already run out of money and are relying on PBGC financial assistance.

To download the entire study, click here.

March 15 alert: Ides of March is a 409A fateful day for employers’ bonus programs

March 11th, 2015 No comments

Pizzano-DominickJust as ignoring the seer’s warning to “Beware the Ides of March” led to Julius Caesar’s demise on that fateful March 15, employers with calendar fiscal years must be wary of this date. Otherwise, when they distribute their bonuses, they may find the payments falling victim to a similarly highly undesirable outcome – becoming subject to Internal Revenue Code Section 409A. It is true that 409A, the now infamous rule that so strictly regulates the time and form of payment of nonqualified deferred compensation, includes a helpful exemption for “short-term deferrals.” However, to qualify for this “get out of 409A free” card, a payment must be made on or prior to the 15th day of the third month (i.e., March 15 for calendar fiscal years) following the end of the employees’ (or, if later, the employer’s) taxable year in which the bonus amount is no longer subject to a “substantial risk of forfeiture” (SROF).

Payment of the bonus is considered subject to a SROF if the employees only earn the right to payment once they have completed a specified number of years of service and/or met certain performance goals. Once such conditions are met, employees are considered to be “vested” in the benefit (i.e., entitled to the payment when it is made regardless of their employment status on the payment date). Employers sometimes add an extra condition by attaching a non-compete restriction under which employees forfeit the bonus if they terminate employment and enter employment with one of the employer’s competitors prior to the payment date. However, the inclusion of such a restriction is not recognized by the 409A rules as sufficient to create a SROF.

The following two examples illustrate how these rules are applied to employers with calendar fiscal years. Under the first scenario, the employer rewards an annual bonus based on both the employer’s financials and the employees’ individual performances. Payment of the bonus is scheduled to be made in the first quarter of 2015 as soon as administratively practicable following the determination of the amounts. Participants must actually be employed with the employer on the payment date to receive the bonus. Due to this “active employment on payment date” requirement, the employees never become vested in the benefit until the actual payment date. Therefore, employers with this design need not be concerned with missing the March 15 payment deadline.

In contrast, assume the same facts as the previous example except that in order to receive the bonus payment made in 2015, the employees must be employed on December 31, 2014, and must not violate a non-compete agreement prior to the payment being made. Because 409A does not recognize the non-compete condition, the vesting occurs in 2014. Consequently, in order to avoid 409A coverage, the bonus must be paid by no later than March 15, 2015, unless one of 409A’s limited late payment exception applies: (1) an unforeseen administrative delay, (2) the need to retain such funds because their disbursement would jeopardize the employer’s ability to continue as a going concern, or (3) the employer reasonably anticipating that its deduction of the bonus will be subject to the $1 million IRS deduction limit (and the employer did not reasonably anticipate the application of Section 162(m) when the bonus award was originally made). Each of these three exemptions will only be considered valid if the employer promptly makes the delayed bonus payment as soon as the applicable cause for the delay no longer exists.

What happens in the case of a bonus plan where the amounts were vested in 2014, the March 15 payment deadline is missed, and none of the three exemptions are available? Does 409A coverage automatically spell doom in the form of noncompliance and the corresponding penalties? The good news is that it’s possible to structure bonus plans so that they comply with the 409A rules. So for any employer that currently has a bonus program that needs to meet the March 15 deadline (i.e., those programs that vest employees in the prior year), it’s crucial to examine their current bonus determination and delivery processes. Do they have any intrinsic procedures (i.e., thereby eliminating the “unforeseen” exemption) that could cause the program to pay bonuses later than March 15 more than just on a one-time accidental basis? If the answer is “yes,” these employers should consult with their employee benefits specialist to review such bonus programs to make sure they are covered by a compliant 409A document so that even if the payment date is missed and their “short-term deferral exemption” blown, the bonus payment does not violate 409A, thereby risking the costly consequences of such noncompliance. One does not need to be a seer to know that to do otherwise would tempt the fates of the Ides of March, which history has shown never to be sound policy whether for emperors or employers.

Regulatory roundup

March 9th, 2015 No comments

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

Changes to the employee plans determination letter process begin in 2015
The Internal Revenue Service (IRS) has posted changes to the EP determination letter process for 2015. The changes, effective February 1, 2015, will begin with Cycle E2 applications and are expected to improve the program’s efficiency and consistency.

For more information, click here.

PBGC seeks to extend actuarial reporting collection with modifications (Form 5500 Series)
The Pension Benefit Guaranty Corporation (PBGC) is requesting that the Office of Management and Budget extend approval of a collection of information with modifications on annual financial and actuarial reporting under the Form 5500 series, specifically the 2015 Schedule MB (multiemployer defined benefit plan and certain money purchase plan actuarial information) and instructions and the Schedule SB (single-employer defined benefit plan actuarial information) instructions.

Analysis of the information helps the agency anticipate potential demands on the system and allows the PBGC to direct its resources to situations that would create the largest risk to the system.

To read the entire notice, click here.

GASB issues final statement on fair value measurement and application
The Governmental Accounting Standards Board (GASB) has issued final guidance on accounting and financial reporting issues related to fair value measurements, which primarily applies to investments made by state and local governments.

GASB Statement No. 72, Fair Value Measurement and Application, defines fair value and describes how fair value should be measured, what assets and liabilities should be measured at fair value, and what information about fair value should be disclosed in the notes to the financial statements.

To read the entire guidance, click here.

IRS issues plan feature comparison chart for tax-exempt and governmental entities
The IRS’s Employee Plans publication has issued a comparison of plan types available to employees of tax-exempt and governmental entities. The publication includes a plan feature comparison chart with highlights of eight types of retirement plans—noting the latest tax laws specific to each plan.

To download the entire publication, click here.

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Regulatory roundup

March 2nd, 2015 No comments

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

New GAO report focuses on lump-sum information for plan participants
The Government Accountability Office (GAO) has released “Private pensions: Participants need better information when offered lump-sums that replace their lifetime benefits” (GAO-15-74). The report reviews the critical issues associated with lump-sum window offerings by large pension plan sponsors. The GAO’s review focused on the prevalence of lump-sum offers and sponsors’ incentives to use them, the implications for participants, and the extent to which selected lump-sum materials provided to participants include key information.

To read the entire report, click here.

SEC no-action letter extending Rule 482 relief
The Securities and Exchange Commission (SEC) has released a letter sent to the American Retirement Association in which it extends its position concerning Rule 482 to certain information furnished to participants and beneficiaries in certain retirement savings plans under Section 403(b) of the Internal Revenue Code of 1986 (Code) that are not subject to ERISA, i.e., non-ERISA 403(b) plans.

According to the letter, the SEC agrees to treat investment information required by the U.S. Department of Labor (DOL) furnished, in the manner described, to non-ERISA 403(b) plans, and participants and beneficiaries in such plans, as if it were a communication that satisfies the requirements of Rule 482 under the Securities Act.

The views expressed in the letter also extend to retirement savings plans that similarly are not subject to ERISA, including governmental 457(b) and 401(a) plans, 415(m) plans, church 401(a) plans, non-governmental 457(b) plans, and 409A plans or 457(f) plans of governmental or tax-exempt entities, i.e., other non-ERISA plans.

To read the entire letter, click here.

IRS changes address for 403(b) pre-approved plan determination letters submissions
The Internal Revenue Service (IRS) has issued Revenue Procedure 2015-22 containing a modification to Revenue Procedure 2013-22, 2013-18 I.R.B. 985, as modified by Revenue Procedure 2014-28, 2014-16 I.R.B. 944, and modifications to Revenue Procedure 2015-8, 2015-1 I.R.B. 235.

In particular, this revenue procedure changes the addresses to which applications for opinion and advisory letters for § 403(b) preapproved plans should be submitted and inserts a user fee that was omitted from Rev. Proc. 2015-8. This revenue procedure will be in Internal Revenue Bulletin 2015-11 dated March 16, 2015.

For more information, click here.

IRS issues employee plans newsletter
The IRS has issued the February 27, 2015, edition of Employee Plans News. To download the newsletter, click here.

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Regulatory roundup

February 17th, 2015 No comments

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

IRS schedules phone forums on retirement plan loans and second Cycle E determination letter application process

The Internal Revenue Service (IRS) has announced it will be holding two phone forums:

1. Retirement plan loans to participants (March 26, 2015)
• What type of plans can make loans to participants?
• What are the conditions a plan must follow to make loans?
• What are the required terms of a plan loan?
• How may plan loans be taxable under IRC Section 72(p)?
• When do plan loans violate the prohibited transaction rules of IRC Section 4975?
• How to fix plan errors involving loans.

To register, click here.

2. Highlights of the second Cycle E determination letter application process (March 5, 2015):
• Who may submit during the second Cycle E?
• What you must include with your application.
• How we will process your application.
• What are the new reference lists?
• What changes you must make to your plan (Notice 2014-77 – 2014 cumulative list).

To register, click here.

Request for comments on MEPRA’s benefit suspension provisions
The U.S. Department of the Treasury invites public comments with regard to future guidance required to implement provisions of the Multiemployer Pension Reform Act of 2014, Division O of the Consolidated and Further Continuing Appropriations Act, 2015, Public Law No. 113-235 (MEPRA). MEPRA generally permits a sponsor of a multiemployer defined benefit plan that is in critical and declining status to suspend certain benefits following the provision of specified notice, consideration of public comments, approval of an application for suspension, and satisfaction of other specified conditions (including a participant vote).

The request for comments is scheduled to be published in the February 18 Federal Register. Comments are due 45 days after publication.

To read the request, click here.

Regulatory roundup

February 2nd, 2015 No comments

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

DOL issues final rule on DB plan annual funding notice requirements
The U.S. Department of Labor (DOL) has released its final rule on the annual funding notice requirement for defined benefit plans. The rule will become effective 30 days after February 2 with an applicability date of plan years beginning on or after January 1.

To read the entire rule, click here.

PBGC announces OMB approval of standard and distress terminations and missing participants forms and instructions
The Office of Management and Budget (OMB) has approved revisions to the standard and distress termination forms and instructions. The new forms and instructions can be found on the plan terminations page of the Pension Benefit Guaranty Corporation (PBGC) website. Under the revisions, a plan administrator of a plan terminating in a standard termination (or a distress termination that closes out in the private sector) must submit with the post-distribution certification the most recent plan document and proof of benefit distributions for lump sums paid and annuities purchased.

Plan administrators must provide this information with any post-distribution certification filed on or after March 1, 2015. Filers may contact standard@pbgc.gov or distress@pbgc.gov for more information.

IRS updates its rollover-eligible retirement plans and IRA combinations chart for 2015
The Internal Revenue Service (IRS) has published a one-page summary listing the eight plans and IRAs that can make rollover-eligible distributions as well as the corresponding eight plans and IRAs into which those distributions can or cannot be rolled over.

For more information, click here.

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Regulatory roundup

January 26th, 2015 No comments

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

PBGC announces Section 4062(e)—new law is enacted
On December 16, President Obama signed into law H.R. 83, which made major changes to the provision of ERISA that created liability in certain situations where there was a reduction in active participants in a plan as a result of a cessation of operations (Section 4062[e]).

With the new law in effect the Pension Benefit Guaranty Corporation (PBGC) will not continue the six-month moratorium on the enforcement of Section 4062(e) that expired December 31.

The new law generally applies both to future cessations of operations and to those that have already occurred, except where a settlement agreement was entered into before June 1, 2014. The PBGC has outlined some of the major changes in the law and provided a point of contact for questions here. Further guidance will be issued in the future.

PBGC seeks OMB approval of modifications to Forms 10, 10-A, and 200
The PBGC has issued Forms 10 and 10-Advance (10-A) and related instructions under subparts B and C. The PBGC has also issued Form 200 and related instructions under subpart D. The approval of the Office of Management and Budget (OMB) for both of these collections of information expires March 31, 2015. The PBGC intends to request that OMB extend its approval for three years with modifications.

IRS issues relief for certain participants in Section 414(d) governmental plans
The Internal Revenue Service (IRS) has issued Notice 2015-07. The notice announces that the IRS and U.S. Treasury Department anticipate issuing proposed regulations that would permit a state or local retirement system that is a governmental plan (within the meaning of section 414[d]) to cover public charter school employees if certain requirements are satisfied. The notice also announces that broader transition relief will be addressed in the proposed regulations. The notice includes a request for public comments.

To read Notice 2015-07, click here.

IRS posts 2014 reference list of changes in qualification requirements for retirement plans
The IRS has published a 2014 reference list, which contains items that first appeared on the 2014 cumulative list of changes in plan qualification requirements.

• Determination letter applications: For an individually designed plan submitted on Form 5300, complete the five reference lists for the five years of your remedial amendment cycle (RAC). These are the years covered by the cumulative list applicable to your submission. For an employer adopting a volume submitter plan and submitting on Form 5307, complete the six reference lists for the six years in your RAC.
• Interim amendments: Complete each year’s reference list to check whether your plan document is up-to-date. If you missed any relevant amendments, your plan may have a qualification failure and you must correct the error.

To download the reference list, click here.

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Regulatory roundup

January 12th, 2015 No comments

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

PBGC requests OMB approval for reporting of pension plan de-risking measures
The Pension Benefit Guaranty Corporation (PBGC) is modifying the collection of information under its regulation on payment of premiums and is requesting that the Office of Management and Budget (OMB) approve the revised collection of information under the Paperwork Reduction Act for three years.

PBGC is revising the 2015 filing procedures and instructions for payment of premiums to require after-the-fact reporting of certain risk transfers through lump-sum windows and annuity purchases. Risk transfers can substantially reduce the premiums that plans otherwise would pay to PBGC. Because PBGC premiums and the investment income earned on them are a major source of income for PBGC, information about risk transfers is critical to its ability to assess its future financial condition. There is currently no available comprehensive, detailed, and reliable source for information on risk transfers.

PBGC is also changing certain premium declaration certification procedures, offering the option for a plan to provide a telephone number specifically for inclusion in the PBGC Search Plan List on its website, updating the premium rates (including reflecting the Consolidated and Further Continuing Appropriations Act, 2015, Pub. L. 113-235), and making conforming, clarifying, and editorial changes.

To read the entire notice, click here.

PBGC issues changes to ERISA Section 4062(e)
This announcement provides information about two important changes regarding ERISA Section 4062(e). First, on December 16, 2014, the president signed into law H.R. 83, which made major changes to section 4062(e). Second, the PBGC is ending the moratorium on enforcement of 4062(e) cases that it announced in July 2014.

For more information on the changes to ERISA Section 4062(e), click here.

IRS updates 2015 revenue procedures for employee plans and exempt organizations
The Internal Revenue Service (IRS) published its January 2, 2015, Internal Revenue Bulletin, which includes the various revenue procedures, revised for 2015, for issuing letters, rulings, determination letters, and technical advice on specific issues related to employee benefits. The documents are:

• Rev. Proc. 2015-1
• Rev. Proc. 2015-2
• Rev. Proc. 2015-3
• Rev. Proc. 2015-4
• Rev. Proc. 2015-5
• Rev. Proc. 2015-6
• Rev. Proc. 2015-7
• Rev. Proc. 2015-8

For an electronic version of Internal Revenue Bulletin 2015-1, which contains these revenue procedures and user fee schedules, click here.

IRS provides guidance on automatic approval of change in funding method for takeover plans
The IRS has released Announcement 2015-03, providing guidance on the automatic approval of a change in funding method for single-employer defined benefit plans under certain circumstances in which the change in method results from a change in a plan’s enrolled actuary.

To read Announcement 2015-03 in its entirety, click here.

PBGC publishes First Annual Report of the Participant and Plan Sponsor Advocate
The PBGC has released the first annual report of the participant and plan sponsor advocate.

To read the entire report, click here.

DOL issues fact sheet on EBSA’s enforcement efforts
Through its enforcement of ERISA, the Employee Benefits Security Administration (EBSA) of the U.S. Department of Labor (DOL) is responsible for ensuring the integrity of the private employee benefit plan system in the United States. EBSA’s oversight authority extends to nearly 684,000 retirement plans, approximately 2.4 million health plans, and a similar number of other welfare benefit plans, such as those providing life or disability insurance. These plans cover about 141 million workers and their dependents and include assets of over $7.6 trillion (as of October 29, 2014). In FY 2014, EBSA recovered $599.7 million for direct payment to plans, participants, and beneficiaries.

For more information, click here.

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Regulatory roundup

December 29th, 2014 No comments

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

IRS issues guidance on rollovers of after-tax contributions in retirement plans
Prior to the issuance of Notice 2014-54, the Internal Revenue Service (IRS) treated disbursements from a retirement plan that were rolled over to multiple destinations as separate distributions to each destination, with each distribution treated as containing a pro rata portion of the pretax and after-tax amounts. Notice 2014-54, which was issued September 18, 2014, provides that all disbursements from a retirement plan scheduled to be made at the same time are treated as a single distribution even if they are sent to multiple destinations.

As a result of this notice, taxpayers with pretax and after-tax amounts in their plans, for example, can transfer through direct rollovers the pretax portion of the distribution (including earnings on after-tax amounts) to a traditional IRA and the after-tax portion of the distribution to a Roth IRA. (Previous interpretations allowed accomplishing this result through 60-day rollovers but not direct rollovers.) The guidance provided in Notice 2014-54 applies only to distributions from qualified plans described in section 401(a) of the Code (such as profit-sharing and 401[k] plans), section 403(b) plans, and section 457(b) governmental plans. The guidance in Notice 2014-54 is generally effective January 1, 2015; however, transitional rules included in the guidance permit taxpayers to utilize the new rules provided in the guidance prior to the effective date.

The guidance in Notice 2014-54 does not apply to distributions from IRAs.

For more information, click here and here.

IRS proposes changes to annual employee benefit plan report
The IRS has issued a notice and request for comment on continuing information collections: Annual Return/Report of Employee Benefit Plan, with proposed changes. Currently, employee benefit plans are required to annually file Form 5500 or Form 5500-SF, and schedules. The IRS uses the report to determine if the plan is operating properly or whether the plan should be audited.

The IRS proposes revising a currently approved collection by creating Form 5500-SUP (DRAFT), a paper-only form, to be used by retirement plan sponsors and administrators to satisfy the reporting requirements of Section 6058. Form 5500–SUP would only be used if certain IRS compliance questions are not answered electronically on the Form 5500 or Form 5500–SF. Comments are due on or before February 23, 2015.

To read the entire notice, click here.

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