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Posts Tagged ‘PBGC’

Regulatory roundup

April 21st, 2014 No comments

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

PBGC posts 2014 premium filing information
The Office of Management and Budget (OMB) has approved the 2014 premium filing instructions consistent with the Pension Benefit Guaranty Corporation’s (PBGC) recent final rule making its premium regulations more effective and less burdensome.

The web pages showing premium due dates and interest rates used to determine the variable-rate premium have been updated to reflect the new regulations.

For more information, click here.

PBGC announces My PAA ready for 2014 premium filings
My PAA has been updated to reflect recent changes to the premium regulation (first effective for 2014 plan years) as described in the 2014 premium filing instructions. Comprehensive filings for plan years beginning in 2014 may now be electronically submitted via My PAA. Information about how to e-file via My PAA (e.g., demos and FAQs) is on the online premium filing with My PAA page of the PBGC website.

A reminder that the new rules have no impact on premium filings for plan years beginning in 2013 (e.g., small calendar plans whose 2013 premium filing is due April 30th, 2014).

IRS issues PLR stating that VEBA can extend benefits to domestic partners of participants
The Internal Revenue Service (IRS) has issued Private Letter Ruling 201415011 stating that a voluntary employees’ beneficiary association (VEBA) can extend benefits to domestic partners of participants.

To read the entire letter, click here.

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Regulatory roundup

March 24th, 2014 No comments

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

IRS discuss current issues EP compliance unit is reviewing
The Internal Revenue Service (IRS) has posted a discussion with Monika Templeman, director of Employee Plans Examinations, regarding current issues that the Employee Plans Compliance Unit (EPCU) is reviewing. Topics discussed include:

• Confirming higher educational organizations’ compliance with the universal availability rule, which is one of the main errors found in 403(b) plan examinations.
• Form 5500 series returns that show no plan participants, yet the plan received employer contributions.
• Terminated plans that have assets remaining. This could be a violation of Revenue Ruling 89-87, which requires plan assets be distributed as soon as administratively feasible after the stated plan termination date.
• Form 5310 returns that had over a 20% drop in participants from one year to the next to determine if a partial termination occurred and, if so, whether affected plan participants were 100% vested. Because of this project, over 250 participants were 100% vested as required by Revenue Ruling 2007-43.
• Form 5500 Non-Filer Project. Plan sponsors are contacted if their latest Form 5500 returns were not marked ‘final’ and they have not filed a subsequent return. EPCU began by selecting returns that were due for the plan year ending January 31, 2010 (originally due August 31 if no extension was filed) and that have still not filed by February 2011.
• Qualifying Employer Securities Project contacted plan sponsors who reported over 10% of their plans’ net assets were invested in employer securities.
• Two projects focusing on improving international compliance.

To read the entire discussion, click here.

PBGC requests extension of collection of multiemployer plan information
The Pension Benefit Guaranty Corporation (PBGC) issued a notice asking the Office of Management and Budget (OMB) to extend approval of a collection of information under its regulations on multiemployer plans that expires March 31, 2014, April 30, 2014, or July 31, 2014. The collection of information for which PBGC is requesting approval includes various reporting requirements related to:

• Termination of multiemployer plans
• Extension of special withdrawal liability rules
• Variances for sale of assets
• Reduction or waiver of complete withdrawal liability
• Reduction or waiver of partial withdrawal liability
• Allocating unfunded vested benefits to withdrawing employers
• Notice, collection, and redetermination of withdrawal liability
• Procedures for PBGC approval of plan amendments
• Notice of insolvency

Comments should be submitted no later than 30 days after publication in the Federal Register. The notice was published on March 19, 2014. To read the entire notice, click here.

IRS posts guidance on withdrawal of Cycle C cash balance applications; provides FAQs on Cycle C
Cycle C determination letter applicants who intend to adopt a preapproved cash balance plan may withdraw their applications for individually designed cash balance plans by May 31, 2014, if they sign Form 8905, Certification of Intent to Adopt a Pre-approved Plan, by March 31, 2014.

Announcement 2014-4 extended the submission period for preapproved defined benefit (DB) pension plans from January 31, 2014, to February 2, 2015, to allow time for the IRS to expand the preapproved program to permit plans with cash balance features. The announcement also allowed Cycle C plan sponsors who want to adopt a preapproved cash balance plan to complete Form 8905 by March 31, 2014, instead of submitting determination letter applications for individually designed plans by the Cycle C deadline of January 31, 2014.

For more information, click here.

IRS updates posting on checking the status of determination, opinion, and advisory letters
The IRS has updated its posting titled “Determination, opinion, and advisory letter for retirement plans – check the status of your letter.” The posting provides a chart with information regarding receipt of an application and important links.

To view the updated posting, click here.

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Regulatory roundup

March 17th, 2014 No comments

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

Senate strikes bipartisan deal on unemployment benefits; pensions affected
Senators Jack Reed (R-RI) and Dean Heller (R-Nev) have penned a bipartisan proposal that would extend federal unemployment benefits for five months and allow for retroactive payments to December 28, 2013. The program expired on December 28, 2013.

The deal, which was crafted from both Republican and Democratic proposals, would pay for the $10 billion cost by including the pension offset provisions from the 2012 highway bill (MAP-21), which were set to be phased-out this year. The proposal also would:

• Allow single-employer defined benefit pension plans to prepay their flat rate premiums to the Pension Benefit Guaranty Corporation (PBGC).
• Extend customs user fees through 2024.
• End federal unemployment insurance (UI) payments to any individual whose adjusted gross income in the preceding year was $1 million or more.
• Strengthen reemployment and eligibility assessment (REA) and ReEmployment Services (RES) programs. In an effort to help get job seekers back into the workforce, individuals receiving emergency unemployment compensation will be eligible for enhanced, personalized assessments and referrals to reemployment services when they begin their 27th week of UI (Tier I) and 55th week of UI (Tier III).

DOL issues proposed rule that would require service providers to furnish disclosure guide to pension plans
The Employee Benefit Security Administration of the U.S. Department of Labor (DOL) has issued a proposed rule that would require certain retirement plan service providers to disclose information about the service providers’ compensation and potential conflicts of interest. The proposed rule would amend the DOL’s final rule on fee disclosures to require covered service providers to furnish a guide along with the initial disclosures to help fiduciaries if the disclosures contain multiple or lengthy documents.

To read the entire proposed rule, click here.
The DOL has also released a fact sheet to accompany the proposed rule.

PBGC issues final rule on premium rates, payment of premiums
The PBGC has issued a final rule making its premium rules more effective and less burdensome. Based on its regulatory review under Executive Order 13563, PBGC proposed to simplify due dates, coordinate due dates for terminating plans with the termination process, make conforming and clarifying changes to the variable-rate premium rules, give small plans time to value benefits, provide relief from penalties, and make other changes.

On January 3, 2014, PBGC published a final rule moving the flat-rate premium due date for large single employer and multiemployer plans (500 or more participants) to the variable-rate premium due date for single-employer plans, starting with the 2014 plan year. This final rule finalizes the rest of the proposal.

PBGC has now completed the process of simplifying the due-date rules by making small plans’ premiums due at the same time as large and mid-size plans’ premiums. However, because of a transition rule that gives small plans more time to adjust to the new provisions, the due dates will not be completely uniform until 2015.

To read the entire final rule, click here.

Read more…

Regulatory roundup

February 25th, 2014 No comments

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

PBGC issues notice for OMB review of information collection with modifications of Form 5500 schedule MB and SB
The Pension Benefit Guaranty Corporation (PBGC) issued a notice of intention to request extension of Office of Management and Budget (OMB) approval, with modifications, to the schedule MB (multiemployer defined benefit [DB] plan actuarial information) and the schedule SB (single-employer DB plan actuarial information) and related instructions.

The proposed modifications to the schedule MB would require plan administrators of multiemployer DB plans to specify the documentation required regarding progress under the applicable funding improvement or rehabilitation plan. Plan administrators of multiemployer plans in critical status would be required to provide information about the plan year in which the plan is projected to emerge from critical status and, if the rehabilitation plan is based on forestalling possible insolvency, the plan year in which insolvency is expected. The proposed modifications to the schedule SB would require plan administrators of single-employer DB plans to report the funding target (vested and total) for each type of participant (active, retired, terminated vested).

To read the entire PBGC notice, click here.

IRS employee plans updates publication on DB plans Section 436 limitations
The Employee Plans Division of the Internal Revenue Service (IRS) has updated examination worksheet number 14 to identify major problems with respect to the limitations under Section 436. The worksheet applies to single-employer defined benefit plans (including multiple employer plans) that are subject to the minimum funding requirements of Section 412. The worksheet does not apply to governmental plans and non-electing church plans.

To read the entire examination worksheet, click here.

IRS updates instruction manual on 401(k) ADP/ACP correction methods
The IRS has updated, under the Employee Plans Continuing Professional Education (CPE) Technical Instruction Program, its chapter on section 401(k) and (m), average deferral percentage (ADP)/average contribution percentage (ACP) test correction methods.

The chapter covers 401(k) and (m) correction methods under the Employee Plans Compliance Resolution System (EPCRS). It also covers correction methods for ADP/ACP failures, section 402(g) failures, improperly excluding employees, improperly excluding employees’ catch-up and matching contributions, failure to implement employees’ elections, and coordination with correction of other failures.

To view the updated chapter, click here.

IRS continuing education: Post-PPA legislation, plan terminations, and DB plan schedule SB and related schedules
The IRS has posted three chapters of continuing education material for employee plans personnel: post-Pension Protection Act (PPA) pension legislation, plan terminations, and defined benefit plans schedule SB (Form 5500) and related schedules.

Read more…

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PBGC variable premiums: Standard vs. alternative premium funding target

February 11th, 2014 No comments

Peatrowsky-MikeAs part of the Pension Protection Act of 2006 (PPA), plan sponsors have two options for calculating their “unfunded vested benefits” (UVB) to determine the variable premium owed to the Pension Benefit Guaranty Corporation (PBGC) each year. The amount by which the vested liability, called the funding target, exceeds the fair market value of plan assets determines the plan’s unfunded vested benefits. The required variable premium for 2014 is $14 per $1,000 of UVB.

The plan’s UVB is determined under one of two different methods: The standard premium funding target or the alternative premium funding target.

So what’s the difference?
The only difference in the two methods is the discount rate used. All other assumptions (mortality, turnover, etc.) are the same for both calculations. However, the discount rate plays a vital role in determining the plan’s funding target.

The standard premium funding target is the default method. The discount rate used for the calculation of the standard method is based on spot rates for the month prior to the plan year (i.e., a one month of average of such rates).

The alternative premium funding target is the other method. The calculation of the alternative method is based on the rates used to calculate a plan’s funding target for the premium payment year, before reflecting Moving Ahead for Progress in the 21st Century Act (MAP-21) stabilization rules. Typically, the discount rates used for the purpose are a 24-month average of the current spot rates.

When a plan sponsor elects to switch from one method to the other, they are locked into that election for five years.

Why is this important for 2014?
In a declining interest rate environment, as we experienced from the end of 2008 through the beginning of 2013, the trailing 24-month average produces higher interest rates than current monthly spot rates. Higher discount rates produce a smaller plan liability for PBGC purposes, resulting in smaller variable premiums. Many plan sponsors who had underfunded plans in 2009 elected to move to the alternative method. Over the past 12 months, we are in an increasing interest rate environment, making current monthly spot rates higher than a 24-month average.

So the question becomes: is 2014 the year to switch back to the standard method? Depending on funding status of the plan, it could decrease variable premiums by a significant amount. With the passage of the budget accord, as stated in Tim Herman’s blog, the amount of variable premiums is expected to increase significantly over the next few years. If the plan sponsor believes interest rates will continue to rise or stay flat over the next couple years, it may be time to make the switch. The flip side is that, if you switch and interest rates decline, you could be required to pay higher PBGC premiums and would be locked into this method for five years.

Regulatory roundup

February 3rd, 2014 No comments

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

Sen. Harkin proposes bill aimed at small employers, but with other retirement system reforms
Sen. Tom Harkin’s USA Retirement Fund draft bill language has now been released and it contains provisions that extend beyond the “small employer that does not offer a retirement plan” arena. The draft bill (not yet introduced, and no number available) also includes sections on “defined contribution plan reforms,” “defined benefit system reforms,” and “other systemic reforms” that will be of interest to employers that currently offer retirement plans.

For a “snapshot” of the bill, click here.
A summary of the bill is available here.
Also, a frequently asked questions (FAQs) sheet is available here.

GASB issues guidance for implementing pension standards
The Governmental Accounting Standards Board (GASB) has published an implementation guide for the new GASB standards regarding accounting and financial reporting for pensions. The Guide to Implementation of GASB Statement 68 on Accounting and Financial Reporting for Pensions is an authoritative resource designed to assist preparers and auditors of state and local government financial statements as they implement the Statement, which is effective for periods beginning after June 15, 2014.

The implementation guide for Statement 68 answers key questions about putting the new standards into practice. Topics addressed in the guide include:

• The scope and applicability of GASB Statement No. 68, Accounting and Financial Reporting for Pensions
• Considerations regarding the identification of special funding situations
• Measurement of defined benefit pension liabilities of employers and nonemployer contributing entities
• Pension expense and deferred inflows and outflows of resources related to pensions
• Note disclosures and required supplementary information
• Unique issues related to cost-sharing employers and certain nonemployer contributing entities
• Transition to the new standards

To read the entire implementation guide, click here.
Read the GASB’s news release here.

PBGC issues proposed rule on multiemployer plans; valuation and notice requirements
The Pension Benefit Guaranty Corporation (PBGC) has issued a proposed rule to amend its multiemployer regulations to make the provision of information to PBGC and plan participants more efficient and effective and to reduce burden on plans and sponsors. The amendments would:

• Reduce the number of actuarial valuations required for certain small terminated but not insolvent plans
• Shorten the advance notice filing requirements for mergers in situations that do not involve a compliance determination
• Remove certain insolvency notice and update requirements

To read the proposed rule, click here.

Read more…

PBGC moves flat-rate premium due date for large plans

January 6th, 2014 No comments

The Pension Benefit Guaranty Corporation (PBGC) has issued a final rule moving the flat-rate premium due date for large defined benefit pension plans (those with 500 or more participants) from February 28, 2014, to October 15, 2014, for calendar-year plans. The new rule, which applies to both single-employer and multiemployer defined benefit pension plans, sets the flat-rate premium due date as the same date when variable-rate premiums are due, beginning with the 2014 plan year. No changes are made to the flat-rate premium due dates for smaller plans operating on a calendar-year basis: those with 100 to 499 participants continue to have an October 15 payment date for the current calendar year, and those with fewer than 100 participants continue to have an April 30 payment date for the prior calendar year.

On July 23, 2013, the PBGC proposed to replace the system of three premium due dates (based on plan size and premium type) with a single due date corresponding to the Form 5500 extended filing due date. The proposed rule also called for: coordinating the premium due date for a terminating plan with the termination process; conforming and clarifying changes to the variable-rate premium rules; providing penalty relief; and making other changes. Because of the time-sensitive aspect of the flat-rate premium due date, the PBGC finalized this particular change ahead of the proposed rule’s other revisions that the agency intends to address later in a separate final rule.

For additional information about the PBGC’s final rule, please contact your Milliman consultant.

Regulatory roundup

December 30th, 2013 No comments

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

President signs bill with PBGC single-employer pension plan premium hikes
President Obama has signed the Bipartisan Budget Act into law. The law includes an increase in the annual premiums that sponsors of single-employer defined benefit plans pay to the Pension Benefit Guaranty Corporation (PBGC) to insure the plans in the event of a plan termination. The budget agreement includes no changes to the PBGC premiums for multiemployer pension plans.

Under the agreement:

• The flat-rate premium would increase to $57 per participant for plan year 2015 and to $64 per participant for plan year 2016, and then adjust those amounts in subsequent years based on the growth in the national wage index for Social Security (for plan year 2014, the flat-rate premium of $49 per participant that was approved under a prior law will not change).
• The variable-rate premium would increase by $10 per $1,000 of unfunded vested benefits in plan year 2015 and an additional $5 per $1,000 of underfunding in plan year 2016, and then adjust those amounts in subsequent years based on the growth in the Social Security national wage index (for plan year 2014, the $14 per $1,000 of underfunding that was approved under a prior law will not change).
• The cap on the variable-rate premium would be set at $500 times the number of participants for plan year 2016 and later, with adjustments based on the growth in the Social Security national wage index (for plan year 2014, the cap is $412 times the number of participants).

IRS releases 2014 pension withholding Form W-4P
The Internal Revenue Service (IRS) has released Form W-4P (Withholding Certificate for Pension or Annuity Payments) for 2014, which recipients of pensions, annuities, and certain other deferred compensation use to tell payers the correct amount of federal income tax to withhold. The form also may be used to elect not to have any federal income tax withheld from the payment (except for eligible rollover distributions or payments to U.S. citizens delivered outside the United States or its possessions); or to have an additional amount of tax withheld. Previously filed Forms W-4P remain in effect unless a new one is filed.

The 2014 Form W-4P is available here.

IRS updates two publications about 403(b) plans
Publication 4482, 403(b) Tax-Sheltered Annuities for Participants, and Publication 4483, 403(b) Tax-Sheltered Annuity Plans for Sponsors, both list common mistakes the agency finds in these plans.

Publication 4482 is available here.
Publication 4483 is available here.

IRS issues 2014 Form W-2; Forms W-2 and W-3 instructions
The IRS has released the 2014 Form W-2 as well as instructions for Form W-2 and Form W-3.

To access Form W-2, click here.
To access instructions for Form W-2 and W-3, click here.

IRS releases 2014 Employer Tax, Fringe Benefits Guides
The IRS has released its 2014 version of Publication 15 (Circular E), Employer Tax Guide, which explains employers’ tax responsibilities. The publication includes the tax tables needed to figure the amount of taxes to withhold from each employee.

The agency also released Publication 15-B, Employer’s Tax Guide to Fringe Benefits, which includes descriptions of most fringe benefit issues that often cross into payroll administration. The latest guide includes the 2014 business mileage rates and the qualified parking exclusion and commuter transportation benefit, as well as recent changes to the rules for cafeteria plans.

To access the Employer Tax Guide, click here.
To access the Employer’s Tax Guide to Fringe Benefits, click here.

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PBGC premium increases in the federal budget agreement

December 20th, 2013 No comments

The U.S. Congress has approved and sent to the president a federal budget agreement that includes an increase in the annual premiums that sponsors of single-employer defined benefit plans pay to the Pension Benefit Guaranty Corporation (PBGC) to insure the plans in the event of a plan termination. The budget agreement, which the president will sign, includes no changes to the PBGC premiums for multiemployer pension plans. The budget accord’s PBGC provisions are effective for plan years beginning after December 31, 2013. This Client Action Bulletin offers more perspective.

Regulatory roundup

December 10th, 2013 No comments

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

DOL releases advance copies of 2013 Form 5500 annual report
The U.S. Department of Labor (DOL) Employee Benefits Security Administration, the Internal Revenue Service (IRS), and the Pension Benefit Guaranty Corporation (PBGC) have released advance informational copies of the 2013 Form 5500 annual return/report and related instructions. These advance copies of the 2013 Form 5500 are for informational purposes only and cannot be used to file a 2013 Form 5500 annual return/report. Pension and welfare benefit plans that are required to file electronically an annual return/report regarding their financial conditions, investments, and operations each year generally satisfy that requirement by filing the Form 5500 or Form 5500-SF and any required attachments.

Informational copies of the forms, schedules, and instructions are available here. For more information on the Form 5500 Series, click here.

PBGC issues final rule with new table for determining expected retirement ages
The PBGC has issued a final rule amending 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 2014. This table is needed in order to compute the value of early retirement benefits and, thus, the total value of benefits under a plan.

To read the entire rule, click here.

PBGC requests OMB approval and public comment for 11 collections of information on multiemployer regulations
The PBGC intends to request that the U.S. Office of Management and Budget (OMB) extend approval, under the Paperwork Reduction Act, of collections of information in PBGC’s regulations on multiemployer plans under ERISA.

For more information, click here.

IRS issues reminder on saver’s credit
The IRS has issued IR-2013-93 on how low- and moderate-income workers can take steps now to save for retirement and earn a special tax credit in 2013.

For more information, click here.

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