More retirement-related regulatory news for plan sponsors, including links to detailed information.
IRS ruling provides certainty, benefits, protections under federal law for same-sex married couples
The U.S. Department of the Treasury and the Internal Revenue Service (IRS) recently ruled that same-sex couples, legally married in jurisdictions that recognize their marriages, will be treated as married for federal tax purposes. The ruling applies regardless of whether the couple lives in a jurisdiction that recognizes same-sex marriage or a jurisdiction that does not recognize same-sex marriage.
The ruling implements federal tax aspects of the June 26 Supreme Court decision invalidating a key provision of the 1996 Defense of Marriage Act (DOMA).
Under the ruling, same-sex couples will be treated as married for all federal tax purposes, including income and gift and estate taxes. The ruling applies to all federal tax provisions where marriage is a factor, including filing status, claiming personal and dependency exemptions, taking the standard deduction, employee benefits, contributing to an IRA, and claiming the earned income tax credit or child tax credit.
Any same-sex marriage legally entered into in one of the 50 states, the District of Columbia, a U.S. territory, or a foreign country will be covered by the ruling. However, the ruling does not apply to registered domestic partnerships, civil unions, or similar formal relationships recognized under state law.
To read Revenue Ruling 2013-17, click here.
Also, for a set of frequently asked questions (FAQs) on same-sex married couples, click here. For FAQs on registered domestic partners and individuals in civil unions, click here.
IRS issues proposed rules on retirement plan returns required on magnetic media
The IRS has issued proposed regulations relating to the requirements for filing certain employee retirement benefit plan statements, returns, and reports on magnetic media. The term magnetic media includes electronic filing, as well as other magnetic media specifically permitted under applicable regulations, revenue procedures, publications, forms, instructions, or other guidance on the IRS.gov website. These regulations would affect plan administrators and employers maintaining retirement plans that are subject to various employee benefit reporting requirements under the Internal Revenue Code (Code).
The proposed rule was published in the Federal Register on August 30, 2013. Comments and requests for a public hearing must be received by October 29, 2013.
To read the entire proposal, click here.
IRS updates web posting on automatic contribution increases
A plan can automatically increase salary deferral contributions for participants if it has or adopts an automatic contribution arrangement feature. An automatic-contribution-increase feature can periodically increase the amount employees contribute from their wages to the plan, and help employees save more for their retirement.
A set of 17 frequently asked questions (FAQs) are available here. For more information on automatic contribution increases, click here.
FASB education session including post-retirement benefit obligations scheduled for September 4
The Financial Accounting Standards Board (FASB) scheduled an education session to discuss projects including pensions and other post-retirement benefits. The webcast will be held on Wednesday, September 4, 2013, at 9:00 am EDT. Register to observe the meeting in person.
To register, click here. Also, to view the notice of open meetings, click here.
EBRI: Retirement plan sponsorship, participation grows post-recession
Since the end of the economic recession, a higher percentage of workers are working for employers that offer retirement plans and a higher percentage of them are participating in the plans, according to a new report by the nonpartisan Employee Benefit Research Institute (EBRI).
In 2012, 61% of all workers age 16 or older worked for an employer or union that sponsored a pension or retirement plan for any of its employees in 2012—up from 59% in 2009. In addition, workers participating in a retirement plan increased to 46% in 2012, up slightly from 2009 (45%) but below the level measured in 2003 (48%).
The vesting rate (the percentage of workers who say they were entitled to some pension benefit or lump-sum distribution if they left their job) stood at 43% in 2012, up from 24% in 1979. This increase is largely due to the increased number of workers participating in defined contribution (DC) retirement plans, such as 401(k) plans, where employee contributions are immediately vested, and the faster vesting requirements in private-sector pension plans established since 1979, EBRI noted.
Defined contribution plans were considered the primary plan by 78% of workers with a plan. Defined benefit (DB, or pension) plans were the primary plan for 21% of workers, the EBRI report notes.
Copeland noted that while the worker participation rates in salary reduction plans (such as 401[k]s) have been going up, the average employee contribution to those plans dropped in 2012 (6.7% of salary) from 2009 (7.4% of salary). This is at least partially driven by the growth of automatic enrollment in 401(k) plans, which tend to bring in more first-time, lower-income participants but often at lower contribution rates.