Tag Archives: PBGC

Regulatory roundup

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

Revised favorable determination letter publication
The Internal Revenue Service (IRS) issued a revised version of Publication 794, “Favorable determination letter.” The publication explains the significance of a favorable determination letter, points out some features that may affect the qualified status of an employee retirement plan and nullify the determination letter without specific notice from the IRS, and provides general information on the reporting requirements for the plan.

To download the entire publication, click here.

PBGC final rule – Appendix D to Part 4044 amended with Table I-17
The Pension Benefit Guaranty Corporation (PBGC) issued a final rule amending Appendix D to Part 4044 with Table 1-17 for determining expected retirement ages for participants in pension plans undergoing distress or involuntary termination with valuation dates falling in 2016.

To read the entire final rule, click here.

Booklet on automatic enrollment in 401(k) plans
The IRS and the Department of Labor (DoL) released “Automatic enrollment 401(k) plans,” which provides an overview of the defined contribution plan feature. The publication contains a checklist to assist an employer when establishing an automatic enrollment.

To download the entire publication, click here.

Regulatory roundup

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

IRS releases guidance on pension equity plans
The Internal Revenue Service (IRS) issued Notice 2016-67, which describes the applicability of the market rate of return limitation rules to defined benefit plans expressing a participant’s accumulated benefit as the current value of an accumulated percentage of the participant’s final average compensation, highest average compensation, or highest average compensation during a limited period of years (a type of plan often referred to as a “pension equity plan” or “PEP”).

To read the entire notice, click here.

Agencies release advance informational copies of the 2016 Form 5500
The Employee Benefits Security Administration of the U.S. Department of Labor (DoL), the IRS, and the Pension Benefit Guaranty Corporation (PBGC) released advance informational copies of the 2016 Form 5500 annual return/report and related instructions.

For more information, click here.

Regulatory roundup

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

IRS announces pension plan limits for 2017
The Internal Revenue Service (IRS) announced cost-of-living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2017. The IRS issued technical guidance detailing these items in Notice 2016-62.

For more information, click here.

Private pension plan bulletin abstract of 2014 Form 5500 annual report
The U.S. Department of Labor (DoL) published its Private Pension Plan Bulletin featuring highlights from the 2014 Form 5500 report. Over the past four decades, as the U.S. private pension system has shifted from defined benefit (DB) plans toward defined contribution (DC) plans, often 401(k) type DC plans, the financing of retirement benefits has shifted from employers to participants. In 1978, when legislation was enacted authorizing 401(k) type plans that allow employees to contribute to their own retirement plan on a pretax basis, participants made 29% of the contributions to DC plans and only 11% of total contributions to all DB and DC pension plans. In the years following 1978, employee contributions to DC plans steadily rose to a peak of approximately 60% in 1999, where it has remained. Other findings from Form 5500 series reports for 2014 plan years are summarized in the bulletin.

To download the bulletin, click here.

PBGC announces guarantee limit for 2017
The Pension Benefit Guaranty Corporation (PBGC) announced that, as a result of the indexing rules provided in ERISA, the guarantee limits for single-employer plans that fail in 2017 will be 7.1% higher than the limits that applied for 2015 and 2016. A table showing the single-employer plan guarantee limits for various ages and payment forms is available on the PBGC’s website. The guarantee limits for multiemployer plans are not indexed and therefore have not changed.

To view the maximum monthly guarantee tables, click here.
For more information on multiemployer benefit guarantees, click here.

Regulatory roundup

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

PBGC posts 2017 premium rates
The Pension Benefit Guaranty Corporation (PBGC) has updated its “Premium Rates” web page to show premium rates for 2017.

Flat-rate premiums
The per-participant flat premium rate for plan years beginning in 2017 is $69 for single-employer plans (up from a 2016 rate of $64) and $28 for multiemployer plans (up from a 2016 rate of $27).

The increase in the single-employer rate was provided in the Bipartisan Budget Act of 2015. The increase in the multiemployer rate is the result of indexing.

Variable-rate premiums (single-employer plans only)
For plan years beginning in 2017, the variable-rate premium (VRP) for single-employer plans is $34 per $1,000 of unfunded vested benefits (UVBs), up from a 2016 rate of $30. This $4 increase reflects a $3 increase provided in the Bipartisan Budget Act of 2015 plus a $1 increase that is due to indexing.

For 2017, the VRP is capped at $517 times the number of participants (up from a 2016 cap of $500). Plans sponsored by small employers (generally fewer than 25 employees) may be subject to a lower cap.

For more information, click here.

IRS issues directive concerning EP determinations on pension equity plans
The Internal Revenue Service (IRS) release a new memorandum (TE/GE-07-1016-0026) that supersedes memorandum #TEGE-07-1114-0028, dated October 9, 2014. The new memo provides direction to employee plan (EP) contract labor (R&A) employees on the application of the accrued benefit rules under section 411(b)(1)(G) of the Internal Revenue Code (IRC) to pending requests for determination letters by PEPs.

To read the entire memo, click here.

IRS announces retirement plans can make loans, hardship distributions to victims of Hurricane Matthew
The IRS announced that 401(k) and similar employer-sponsored retirement plans can make loans and hardship distributions to victims of Hurricane Matthew and members of their families.

Retirement plans can provide this relief to employees and certain members of their families who live or work in disaster area localities affected by Hurricane Matthew and designated for individual assistance by the Federal Emergency Management Agency (FEMA). Currently, parts of North Carolina, South Carolina, Georgia, and Florida qualify for individual assistance. For a complete list of eligible counties, visit fema.gov. To qualify for this relief, hardship withdrawals must be made by March 15, 2017.

The IRS is also relaxing procedural and administrative rules that normally apply to retirement plan loans and hardship distributions. As a result, eligible retirement plan participants will be able to access their money more quickly with a minimum of red tape. In addition, the six-month ban on 401(k) and 403(b) contributions that normally affects employees who take hardship distributions will not apply.

For more information, click here.

Proposed Form 5500 revisions seek new retirement plan details

ERISA-covered retirement plan sponsors would be required to provide significantly detailed information about their plans when filing the Form 5500 (Annual Return/Report of Employee Benefit Plan), under a proposed rule from the U.S. Department of Labor (DoL), along with a separate proposed rule issued jointly by the DoL, Treasury/Internal Revenue Service (IRS), and the Pension Benefit Guaranty Corporation (PBGC). (For simplicity, this Client Action Bulletin [CAB] refers to both sets of rules as the DoL’s proposed rule.)

The DoL’s proposal, which affects only ERISA-covered plans, would amend the reporting and disclosure requirements applicable to all employee benefits, but this CAB focuses on the key revisions applicable to defined contribution (DC) and defined benefit (DB) retirement plans, including certain small plans (with fewer than 100 participants) with new requirements to file certain information. (See CAB 16-5 for the proposed rule’s effects on group health plans.)

The DoL seeks comments on the proposed rule by December 5, 2016; if adopted, the DoL anticipates applying the new requirements to plan years starting in 2019 (i.e., forms filed in 2020). The IRS, however, proposes that retirement plan sponsors answer certain compliance-related questions about the plans for the 2016 plan year when filing the Form 5500 in 2017.

Regulatory roundup

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

Final rule lowering rates of penalty charged for late payment of pension premiums
The Pension Benefit Guaranty Corporation (PBGC) is lowering the rates of penalty charged for late payment of premiums by all pension plans, and providing a waiver of most of the penalty for plans with a demonstrated commitment to premium compliance.

The penalty for late payment of a premium is a percentage of the amount paid late multiplied by the number of full or partial months the amount is late, subject to a floor of $25 (or the amount of premium paid late, if less). There are two levels of penalty, which heretofore have been 1% per month (with a 50% cap) and 5% per month (capped at 100%). The lower rate applies to “self-correction”—that is, where the premium underpayment is corrected before PBGC gives notice that there is or may be an underpayment.

This final rule cuts the rates and caps in half (i.e., to 0.5% with a 25% cap and 2.5% with a 50% cap, respectively) and eliminates the floor. The rulemaking also creates a new penalty waiver that applies to underpayments by plans with good compliance histories if corrected promptly after notice from PBGC. PBGC will waive 80% of the penalty assessed for such a plan.

For more information, click here.

Notice extends temporary nondiscrimination relief for closed defined benefit plans
The Internal Revenue Service (IRS) released Notice 2016-57, extending the temporary nondiscrimination relief for closed defined benefit plans provided in Notice 2014-5 and 2014-2, through 2017.

The temporary nondiscrimination relief for closed plans that is provided in Notice 2014-5 is hereby extended to plan years beginning before 2018 if the conditions of Notice 2014-5 are satisfied. This extension is provided in anticipation of the issuance of final amendments to the § 401(a)(4) regulations. Those regulations are expected to be effective for plan years beginning on or after January 1, 2018, and are expected to permit plan sponsors to apply the provisions of the regulations that apply specifically to closed plans for certain earlier plan years.

To read Notice 2016-57, click here.

To read and review Notice 2014-5, click here.

DoL extends deadline for public comments on Form 5500 modernization proposal
The U.S. Department of Labor (DoL) announced a two-month extension of the comment period on the Form 5500 modernization proposals. A range of stakeholder groups asked for an extension of time to submit comments, given the scope and significance of the proposed forms revisions and regulatory amendments. The DoL, IRS, and PBGC decided to extend the public comment period on the proposed forms revisions and regulatory amendments from the original October 4, 2016, deadline to the new December 5, 2016, deadline.

For more information, click here.

Proposal to expand missing participant program
The PBGC administers a program to hold retirement benefits for missing participants and beneficiaries in terminated retirement plans and to help those participants and beneficiaries find and receive the benefits held for them. The program is currently limited to single-employer defined benefit pension plans covered by the pension insurance system under Title IV of ERISA.

The PBGC proposes to make changes to its existing program and, as authorized by the Pension Protection Act of 2006, to establish similar programs for multiemployer plans covered by Title IV, certain defined benefit plans that are not covered by Title IV, and most defined contribution plans. The proposed rule is needed to implement amendments to section 4050 of ERISA.

To read the proposed rule, click here.

For an overview of the proposed missing participants program for defined contribution and other terminated plans, click here.

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