Posts Tagged ‘Social Security’

Regulatory roundup

June 23rd, 2014 No comments

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

Social Security Administration defines policy for same-sex married couples
The Social Security Administration (SSA) has published new instructions that allow the agency to process more claims in which entitlement or eligibility is affected by a same-sex relationship. These instructions come in response to last year’s U.S. Supreme Court decision in U.S. vs. Windsor, which found Section 3 of the Defense of Marriage Act unconstitutional.

This latest policy development lets the agency recognize some nonmarital legal relationships as marriages for determining entitlement to benefits. These instructions also allow Social Security to begin processing many claims in states that do not recognize same-sex marriages or nonmarital legal relationships.

For more information, click here.

GASB’s OPEB proposals and related resources
The Governmental Accounting Standards Board (GASB) has published two proposed statements intended to significantly improve financial reporting by state and local governments of other post-employment benefits (OPEB), such as retiree health insurance. The GASB also published a third exposure draft that would establish requirements for pensions and pension plans that are outside the scope of the pension standards the GASB released in 2012.

To download the three exposure drafts, click here.

FASB issues guidance on stock compensation
The Financial Accounting Standards Board (FASB) has issued Update No. 2014-12, guidance intended for companies that award stock compensation that hinges on a performance target being met and allows vesting if the covered employee isn’t working when the target is hit.

The guidance is to be effective for annual periods and interim periods within those annual periods starting after December 15, 2015, according to the FASB. The rules prescribe the same effective date for private and public business entities.

To learn more about the FASB guidance, click here.

Thanks again, identity thieves!

January 10th, 2014 No comments

Benbow-DavidOnce again, the bad deeds of a few are making it more difficult for many honest people to do their jobs. Remember the Social Security Death Index? It was a free and extremely useful site that allowed you to look up people and determine if and when they had died. A nice thing to know if you happen to pay pension benefits for life.

But security concerns caused the free lookup service to be taken offline. Searches can now be conducted for $10 each or an unlimited subscription to the “Death Master File” can be purchased for $995. For most pension administrators, the price tag is too steep (unless you’re aware that a few groups used their unlimited subscriptions to provide free lookup services again), but an identity thief can get enough information from the Death Master File for it to be a very profitable business model.

This situation caught the eye of U.S. Senator Bill Nelson (D-FL), who related the story of a child who died just before her 5th birthday, only to have her identity stolen from the Death Master File and used to file for a bogus tax refund. This led to a line item in the budget deal that was signed last month calling for further restrictions to the Death Master File.

The U.S. Commerce Department, which administers the Death Master File, has been tasked to create a process to certify individuals with legitimate needs for the file within three months. Meanwhile, all the pension administrators, insurance companies, and genealogy buffs who use the information legitimately can look forward to navigating the new certification process, and the identity thieves can figure out how to steal the identity of someone who’s already been certified.

Regulatory roundup

August 12th, 2013 No comments

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

DOL requests approval to conduct focus groups and survey regarding pension benefit statements
The U.S. Department of Labor (DOL) is requesting the Office of Management and Budget’s (OMB) approval of an information collection request (ICR) titled, “Focus Groups and Survey Regarding Pension Benefit Statements.”

ERISA, section 105(a), requires an ERISA-covered individual account plan administrator to furnish periodic benefit statements to participants and beneficiaries. This new ICR seeks OMB approval to conduct a survey and an experiment on participants in an existing household American Life Panel (ALP) via the Internet and to conduct four focus groups of non-panel members. The survey and focus groups would explore whether information contained in sample benefit statements can be presented in a way that improves recipients’ understanding of the statements and helps them better plan for retirement. Specifically, the Employee Benefits Security Administration (EBSA) would collect data through four focus groups that will pretest the model benefits statements, each containing slightly different information, and conduct a survey of 2,900 ALP respondents.

Interested parties are encouraged to send comments to the OMB’s Office of Information and Regulatory Affairs within 30 days of publication of this notice in the Federal Register. The notice was published on August 9.

To read the entire notice, click here.

SSA now processing some retirement spouse claims/paying benefits for same-sex couples
Carolyn W. Colvin, acting commissioner of the Social Security Administration (SSA), issued a statement indicating that Social Security is now processing some retirement spouse claims for same-sex couples and paying benefits where they are due.

To read the entire press release, click here.

IRS updates FAQs on designated Roth accounts in retirement plans
The IRS has updated its web page on designated Roth accounts. These frequently asked questions (FAQ) and answers provide general information and should not be cited as any type of legal authority. They provide responses to general inquiries. Because these answers do not apply to every situation, yours may require additional research. The answers are based on the final regulations Designated Roth Contributions to Cash or Deferred Arrangements Under Section 401(k) and Designated Roth Accounts Under Section 402A.

To view the updated web page, click here.

SSA analysis: Pension plan participation among married couples; both DB and DC
A recent article presents descriptive statistics on the overall participation in employer-provided pension plans by plan type among married couples over a decade, from 1998 to 2009. The private sector’s pension environment during this period was characterized by a continued shift from traditional defined benefit (DB) pensions to defined contribution (DC) retirement accounts.

This decade saw a rising prevalence of employers “freezing” their DB plans while also establishing new DC plans or increasing the employer match to current DC retirement plans and thus shifting the risks and responsibilities for retirement from employers to employees. Furthermore, the 2006 Pension Protection Act, which permitted employers to automatically enroll their employees into DC plans, is likely to have had an impact on this trend. In addition, during the global financial crisis of 2007 to 2009, the decline in the financial markets led to sharp declines in retirement account balances, whereas the drastic increase in unemployment led to decreases in participation and contributions to DC plans and increases in loan activities from those accounts.

These changes revealed more clearly some of the causes that may derail employees in DC plans from accumulating sufficient funds for retirement. Finally, the decade was a period when women’s labor force participation declined particularly among unmarried women, those with no children, and women with more than 16 years of education, which is likely to translate into lower participation in pension plans.

To read the entire analysis, click here.

Regulatory roundup

July 23rd, 2013 No comments

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

Social Security Administration working on DOMA implications to Social Security benefits
The president has directed the attorney general to work with other members of his cabinet to review the recent Supreme Court decision on the Defense of Marriage Act (DOMA) and determine its impact on federal benefit programs—including benefits administered by Social Security—to ensure swift and smooth implementation.

To read the news release issued by the Social Security Administration, click here.

PBGC requests OMB approval of information collection of multiemployer plan data
The Pension Protection Act of 2006 (Pub. L. No. 109-280), or PPA, requires the actuary of a multiemployer plan in effect on July 16, 2006, to certify the plan’s status within certain zones established under PPA to the plan’s trustees and the Secretary of the Treasury within 90 days after the beginning of each plan year.

The certification must state whether or not the plan meets any of the tests to be considered in critical or endangered status, whether a plan already is in critical or endangered status, or whether the plan is progressing as scheduled toward the applicable statutory target for improved funding. Plans in endangered and critical status are restricted with respect to the types of actions they may take and the types of amendments they may adopt, as well as required to follow special rules during the adoption period of collective bargaining agreements.

The Pension Benefit Guaranty Corporation (PBGC) is researching the effects of potential changes to its multiemployer program. The PBGC’s objective is to quantify the effect of potential policy proposals on multiemployer plans that are or could enter critical status with respect to projected dates of insolvency, amount of financial assistance that PBGC would be required to provide, and the benefit changes plan participants would experience.

To assist in this research, PBGC is requesting that the Office of Management and Budget (OMB) approve an information collection request of multiemployer pension plans, their actuarial service providers, and their stakeholders, including unions and relevant professional and trade organizations.

Read the entire Request for OMB Approval at the Federal Register.

IRS Notices (CP216F, -G, or -H) – Application of Time Extension to File an Employee Plan Return
The Internal Revenue Service (IRS) has updated its posting on Notices (CP216F, -G, or -H) – Application of Extension of Time to File an Employee Plan Return. The web posting, in the form of questions and answers, provides guidance to:

• What is a CP216F, -G, or -H notice?
• Why are CP216F, -G, or -H notices generated?
• If customers receive a CP216G can they resubmit the EP Extension with the missing signature to get the extension approved?
• What should the customer do if a CP216H is received?
• Is there any recourse to being subject to the late filing penalties?

IRS posts sample automatic enrollment and default investment notice
Although this sample notice is designed for use in satisfying the qualified automatic contribution arrangement (QACA) and eligible automatic contribution arrangement (EACA) notice requirements, and the notice requirements under ERISA sections 404(c)(5) and 514(e)(3), plan sponsors may also find the sample notice to be helpful in drafting an employee explanation for an automatic contribution arrangement that is neither a QACA nor an EACA.

To read the entire notice, click here.

IRS answers: How much salary can be deferred by those eligible for more than one retirement plan?
The amount you can contribute to retirement plans is your individual limit each calendar year no matter how many plans in which you participate. This limit must be aggregated for these plan types:

• 401(k)
• 403(b)
• SIMPLE plans (SIMPLE IRA and SIMPLE 401[k] plans)

If you’re eligible to defer to a 457(b) plan, you have a separate limit that includes both employee and employer contributions.

Make sure you don’t exceed your individual limit. If you do and the excess isn’t returned by April 15 of the next year, you could be subject to double taxation:

• Once in the year you deferred your salary
• Again when you receive a distribution

For more information, click here.

IRS provides links to fixing common plan mistakes
The IRS has updated its website to provide links to information for fixing common plan mistakes. Links to more information include:

403(b) plans
403(b) Plans with Operational Failures
Available correction methods may depend on when the failure occurred.

Not Correcting ADP/ACP Mistakes Timely
How to fix a 401(k) plan’s failure to timely satisfy ADP or ACP tests.

Failure to Timely Adopt Interim Amendments
How to fix a failure to adopt interim amendments on time.

Help! I Missed the April 30 Deadline for Signing My Defined Contribution Plan
How to fix the failure to adopt an EGTRRA plan on time (for adopters of preapproved defined contribution plans).

Help! I Missed the April 30 Deadline for Signing My Defined Benefit Plan
How to fix the failure to adopt an EGTRRA plan on time (for adopters of preapproved defined benefit plans)

Nonamender Failures and the Voluntary Correction Program (VCP)
Overview of types of late amendment failures and relief available under the VCP.

IRS updates FAQs for enrolled actuaries
The IRS has updated its 11 frequently asked questions (FAQs) for enrolled actuaries. For example, one may find answers to the following questions:

• How do I update my address or other contact information?
• How can I find out whether a practitioner is an enrolled actuary in good standing with the Joint Board?
• How do I obtain my Joint Board examination answer sheet?

To access the FAQ, click here.

GAO report: Retirement security, challenges, and prospects for employees of small businesses
This testimony describes 1) the challenges small employers face in helping ensure that their workers secure retirement income, and 2) types of multiemployer plans (MEPs) and their potential to address these challenges. The Government Accountability Office (GAO) drew from its previous reports related to small employer challenges in establishing and maintaining a retirement plan and recent work on MEPs issued from March 2012 through September 2012.

To read the entire report, click here.

Regulatory roundup

June 11th, 2013 No comments

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

DOL/SSA/CMS jointly launch online retirement toolkit
The U.S. Department of Labor (DOL) has announced the launch of an online toolkit to help workers identify key issues related to retirement planning. The DOL’s Employee Benefits Security Administration developed the toolkit in cooperation with the Social Security Administration (SSA) and the Centers for Medicare and Medicaid Services (CSM) to help workers understand important decisions related to employment-based plans, Social Security, and Medicare.

For more information, click here.

SEC issues proposed rule on money market fund reform; Amendments to form PF
The Securities and Exchange Commission is proposing two alternatives for amending rules that govern money market mutual funds (or “money market funds”) under the Investment Company Act of 1940. The two alternatives are designed to address money market funds’ susceptibility to heavy redemptions, to improve their ability to manage and mitigate potential contagion from such redemptions, and to increase the transparency of their risks, while preserving, as much as possible, the benefits of money market funds.

The first alternative proposal would require money market funds to sell and redeem shares based on the current market-based value of the securities in their underlying portfolios, rounded to the fourth decimal place (e.g., $1.0000), i.e., transact at a “floating” net asset value per share (NAV).

The second alternative proposal would require money market funds to impose a liquidity fee (unless the fund’s board determines that it is not in the best interest of the fund) if a fund’s liquidity levels fell below a specified threshold and would permit the funds to suspend redemptions temporarily, i.e., to “gate” the fund under the same circumstances. Under this proposal, either alternative could be adopted by itself or in a combination of the two alternatives.

Comments are due 90 days after publication in the Federal Register.

For a prepublished copy of the proposed rule, click here.

Regulatory roundup

June 5th, 2013 No comments

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

GAO: Social Security’s long-term strategy needed to address key management challenges
According to a report by the U.S. Government Accountability Office (GAO), the Social Security Administration (SSA) will experience management challenges in four key areas over the next decade.

Human capital. SSA has not updated its succession plan since 2006 although the agency faces an ongoing retirement wave and hiring freeze which will make it difficult to respond to growing workload demands.
Disability program issues. SSA faces ongoing challenges incorporating a more modern concept of disability into its programs, while balancing competing needs to reduce backlogs of initial and appealed claims and ensure program integrity.
Information technology (IT). SSA has made strides in modernizing its IT systems to address growing workload demands, but faces challenges with these modernization efforts and correcting internal weaknesses in information security.
Physical infrastructure. SSA is moving toward centralized facilities management, but the agency lacks a proactive approach to evaluating its office structure that will identify potential efficiencies, such as consolidating offices.

To read the entire GAO report, click here.

Social Security and Medicare trustees report for 2013
The U.S. Social Security Board of Trustees has released its annual report on the long-term financial status of the Social Security Trust Funds. The combined assets of the Old-Age and Survivors Insurance, and Disability Insurance (OASDI) Trust Funds are projected to become depleted in 2033, unchanged from last year, with 77% of benefits still payable at that time. The Disability Insurance Trust Fund will become depleted in 2016, also unchanged from last year’s estimate, with 80% of benefits still payable.

To read the entire report, click here.

The Medicare Trustees has projected that the trust fund that finances Medicare’s hospital insurance coverage will remain solvent until 2026, two years beyond what was projected in last year’s report.

A number of factors have contributed to the improved outlook, including lower-than-expected Part A spending in 2012, and lower projected Medicare Advantage program costs. Recent data from the Medicare Advantage program indicate that certain provisions of the Patient Protection and Affordable Care Act (ACA) will help reduce the growth of spending in this program by more than was previously projected. Partially offsetting these lower spending projections are somewhat lower projected levels of tax revenue.

The benefits of this slower growth accrue to both taxpayers and beneficiaries. For example, although the Part B premium for 2014 will not be determined until later this year, the preliminary estimate in the report indicates that it will remain unchanged from the 2013 premium.

Read the entire report here.

CBO report: The distribution of major tax expenditures in the individual income tax system
A number of exclusions, deductions, preferential rates, and credits in the U.S. federal tax system cause revenues to be much lower than they would be otherwise for any given structure of tax rates. Some of those provisions—in both the individual and corporate income tax systems—are termed “tax expenditures” because they resemble federal spending by providing financial assistance to specific activities, entities, or groups of people. Tax expenditures, like traditional forms of federal spending, contribute to the federal budget deficit; influence how people work, save, and invest; and affect the distribution of income.

A report by the Congressional Budget Office (CBO) examines how 10 of the largest tax expenditures in the individual income tax system in 2013 are distributed among households with different amounts of income.

To read the CBO entire report, click here.

Regulatory roundup

February 11th, 2013 No comments

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

DOL issues advisory opinion on swaps
The Employee Benefits Security Administration of the U.S. Department of Labor (DOL) has released an advisory opinion on the fiduciary status of those who clear swaps for retirement plans and the prohibited transaction provisions of ERISA, as permitted by the Dodd-Frank Wall Street Reform and Consumer Protection Act.

In Advisory Opinion 2013-01A, the DOL examined the relationship between clearing members and plans in swap transactions, where the plan has defaulted on its obligations under a cleared swap.

The letter states the DOL intends to defer to the Congressional understanding of how Clearing Members would operate and interprets ERISA so as to not impair or impinge upon the swaps framework. Furthermore, the department has “conferred with officials of the CFTC regarding this letter. They have authorized us to state that they concur with our description of ‘cleared swap’ transactions conducted pursuant to provisions of the CEA, and that they do not believe the conclusions reached in this letter are inconsistent with the CEA or the CFTC’s regulation of cleared swap transactions under the CEA. To the extent issues raised by this interpretation affect current practice in the futures or swaps marketplace or relevant provisions or restrictions of the CEA, as amended by the Dodd-Frank Act, the Department is prepared to examine such issues in the context of providing additional regulatory guidance or future prohibited transaction relief.”

To read the entire advisory opinion, click here.

IRS requests comments on modifications to method of determining applicable federal rates
The Internal Revenue Service has issued Notice 2013-04 requesting comments regarding what modifications the Treasury Department should make to its method of determining adjusted applicable federal rates under section 1288(b) of the Internal Revenue Code and the adjusted federal long-term rate under section 382(f) of the Internal Revenue Code. The notice provides interim guidance describing the modifications to the method that will be in effect pending the issuance of further guidance.

Notice 2013-04 will be published in Internal Revenue Bulletin 2013-9 on February 25, 2013.

For more information, click here.

IRS issues 2013 covered compensation tables (Revenue Ruling 2013-02)
The IRS has issued Revenue Ruling 2013-02, which provides tables of covered compensation under § 401(l)(5)(E) of the Internal Revenue Code (Code) and the income tax regulations thereunder, for the 2013 plan year.

Read more…

COLAs for retirement, Social Security, and health benefits

October 23rd, 2012 No comments

With the release of the September 2012 Consumer Price Index (CPI) the Bureau of Labor Statistics, the Social Security Administration (SSA), and the Internal Revenue Service (IRS) have announced cost-of-living adjustment (COLA) figures for Social Security and retirement plan benefits, respectively, for 2013.

The 2013 adjusted figures for high-deductible health plans (HDHPs) and health savings accounts (HSAs) included in this Client Action Bulletin were released by the IRS earlier this year and are provided here for convenience.

Calculating Social Security benefits

July 3rd, 2012 No comments

If you have ever compared the estimate of your Social Security benefit generated by any financial forecast engine and the estimate that you can get at any time from the official website of the Social Security Administration (SSA), you’ve probably noticed that they are different. And in the cases of many individuals who are “young,” they are likely to be radically different. So is one calculation better than the other?

The unfortunate answer is that both answers are probably fine, but you need to have some understanding of how the calculations are created. Let’s take a brief look under the hood of both.

The SSA recently announced that it has ended the annual mailing of the statement to your home of your actual salary history, based on which you paid your FICA payroll taxes. Now you must log in to its secure website at and follow the specific instructions to retrieve it. Once you generate your official Social Security statement, you can find the calculations the SSA uses and compare them to your own assumptions.

Let’s assume that you have properly filed your 2011 personal income taxes. The SSA will use the compensation you reported in 2011 as the amount to be earned in each of the future years until you are able to commence Social Security benefits at your “Social Security Retirement Age,” which can be as high as age 67. In 2011, if you were age 47 and earned $45,000, the SSA calculation engine assumes you will earn $45,000 in 2012, 2013, 2014, and so on for as many years as it needs for the calculation.

For any common calculation engine you may be using, you are probably able to include an assumption for your wage growth. Call it 3% per year as an example—$45,000 thus becomes almost $60,500 after 10 years of 3% increases. So your calculation engine is likely going to produce a Social Security benefit estimate that is much higher when compared to the SSA calculation.

There are many other differences in the calculation to consider, including if your 2011 wages for payroll tax were much lower than before 2011. But careful inspection of the forecast assumption in your calculation engine will enable you to begin to understand why the estimates of your Social Security benefits can be so different.

Social Security: The sky is not falling

May 1st, 2012 No comments

The Social Security Trustees issued their annual report on April 23 and the messages are somewhat dour. However, the headlines that scream that payments will stop and drop to zero after 2033 are based on a fundamental misunderstanding about how the system will work.

Although the Social Security Trust Fund is projected to be “exhausted” after 2033, the payroll taxes collected on wages earned after that point will provide the source of revenue to pay retirement benefits. The system will then be a true pay-as-you-go system.

After 2033, projected continuing income to the trust funds equals about 75% of program cost, meaning that retirees will only receive 75¢ for every $1 under the current (complex) formula—but not zero. After 2085, continuing income equals about 73% of program cost, so retirees will only receive 73¢ for every $1 under the current (complex) formula.

Note that these forecasts do not anticipate any change in the current aforementioned complex formula. It does however reflect a set of economic, demographic, and actuarial assumptions that are “medium” in three sets of assumptions, commonly referred to as low, medium, and high.

And while we’re on the topic, the Social Security Administration today announced the availability of online statements. For more information, go here.