Category Archives: Benefit News

PBGC’s missing participants program now covers defined contribution plans

The recently released final rule from the Pension Benefit Guaranty Corporation (PBGC) updating the agency’s regulations on missing participants in terminated single-employer defined benefit (DB) plans newly extends the program to retirement plans not previously covered. These plans include most defined contribution (DC) retirement plans (e.g., 401[k] and profit-sharing plans), PBGC-covered multiemployer pension plans (MEPPs), and small (25 or fewer participants) professional service organizations’ defined benefit plans.

The final rule, which will include a “unified unclaimed pension database,” applies to plans—other than MEPPs—that terminate on or after January 1, 2018, and gives DC plan sponsors the option to transfer the assets to the PBGC, rather than to establish individual retirement accounts at financial institutions for the missing participants. For terminating MEPPs, the rule applies to plans where the actual date of payment (i.e., plan close-out) is on or after January 1, 2018. This Client Action Bulletin provides some more perspective.

Regulatory roundup

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

IRS releases guidance on withholding rules for 2018
The Internal Revenue Service (IRS) has published Notice 2018-14 providing guidance on withholding rules. This notice extends the effective period of Form W-4, Employee’s Withholding Allowance Certificate, furnished to claim exemption from income tax withholding under section 3402(n) of the Internal Revenue Code (Code) for 2017 until February 28, 2018.

For more information, click here.

Nearly one in five workers had access to financial planning benefits
According to the Bureau of Labor Statistics, about one-fifth of private industry workers were offered free or subsidized financial planning services from their employers in 2017. These services help employees make decisions about savings, borrowing, investing, home buying, education expenses, or retirement. While union and nonunion workers had similar rates of access to financial planning services, access varied based on size of establishment, wage level, and industry.

For more information, click here.

Regulatory roundup

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

Amendment for cash balance plan’s pre-conversion benefit granted
The Internal Revenue Service (IRS) has released a ruling, Private Letter Ruling 201803006, which states that the interest rate look-back month for a cash balance plan’s pre-conversion benefit can be amended.

For more information, click here.

Form 5500-EZ released
The IRS has released 2017 Form 5500-EZ, Annual Return of One-Participant (Owners and Their Spouses) Retirement Plan and its instructions.

Form 5500-EZ is available here. The form’s instructions are available here.

IRS reduces fees for qualified retirement plan sponsors to correct errors

For 2018, the Internal Revenue Service (IRS) has significantly lowered the fees that most tax-qualified retirement plan sponsors must pay to correct errors under the Employee Plans Compliance Resolution System’s Voluntary Correction Program (VCP). The VCP’s new, lowered user fees are provided in Revenue Procedure 2018-4, and are based on plan assets and capped at $3,500. Previously, the fees were based on the number of plan participants and capped at $15,000. In addition, the fee covers all eligible errors and a single submission may cover multiple errors, but the reduced fees for streamlined filings (e.g., to correct minor errors such as loan or minimum distribution failures) no longer are available.

Small plans with 50 or fewer participants will experience an increase in costs, as previously the VCP user fees were $500 for 20 or fewer participants and $750 for 21 to 50 participants.

The fees effective for VCP applications mailed to the IRS on or after January 2, 2018, are:

Plan Assets Fees for 2018
$0 to $500,000 $1,500
Over $500,000 to $10,000,000 $3,000
Over $10,000,000 $3,500

The most recently filed Form 5500-series return (Annual Return/Report of Employee Benefit Plan) is used to determine a plan’s net assets. Special rules apply to plan sponsors that are not required to file Form 5500, as well as for very small plans (e.g., SEPs, SARSEPs, SIMPLE IRAs). The new fee schedule does not apply to group VCP submissions, nor to “orphan” plans or 457(b) tax-deferred plans.

Reporting fees on Form 8951
The IRS is currently revising Form 8951, User Fee for Application for Voluntary Correction Program (VCP). Until a revised form is available, the IRS advises plan sponsors to:

• Continue using the current Form 8951 (rev. September 2016), ignoring the information on the form that suggests VCP fees are determined based upon the number of plan participants.
• Not check boxes on Lines 8(a) through 8(c) because they no longer apply.
• Attach a check for the fee amount specified in Rev. Proc. 2018-4, Appendix A.09.

For information about the new VCP fees and for assistance with assessing whether to proceed with VCP or other, possibly more appropriate correction programs, please contact your Milliman consultant.

Regulatory roundup

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

Final rule adjusting maximum civil penalties for certain multiemployer plan notices issued
The Pension Benefit Guaranty Corporation (PBGC) is required to amend its regulations annually to adjust for inflation the maximum civil penalty for failure to provide certain notices or other material information and for failure to provide certain multiemployer plan notices. The final rule adjusts, as required for 2018, the maximum civil penalties under 29 CFR part 4071 and 29 CFR part 4302 that PBGC may assess for failure to provide certain notices or other material information and certain multiemployer plan notices.

The new maximum amounts are $2,140 for section 4071 penalties and $285 for section 4302 penalties.

Section 4302, added to ERISA by the Multiemployer Pension Plan Amendments Act of 1980, authorizes PBGC to assess a civil penalty of up to $100 a day for failure to provide a notice under subtitle E of title IV of ERISA (dealing with multiemployer plans). Section 4071, added to ERISA by the Omnibus Budget Reconciliation Act of 1987, authorizes PBGC to assess a civil penalty of up to $1,000 a day for failure to provide a notice or other material information under subtitles A, B, and C of title IV and sections 303(k)(4) and 306(g)(4) of title I of ERISA.

This rule is effective as of January 12, 2018.

For more information, click here.

PBGC releases 2018 premium filing instructions
The Comprehensive Premium Filing Instructions for 2018 Plan Years are now available on the PBGC website. The document now features a new section alerting practitioners to the most common premium filing mistakes. In addition, the examples in the section, about how to determine premiums in a year when a plan is involved with a spinoff, merger, or consolidation, have been expanded.

For more information, click here.

IRS compliance project published
The Employee Plans Compliance Unit of the Internal Revenue Service (IRS) has issued a summary of a compliance project related to pension feature code(s) missing, inconsistent, or incomplete on line 8a of the Form 5500, line 9a of the Form 5500-SF, and line 8 of the Form 5500-EZ for certain plan years. The primary goal is to correct and verify the pension feature codes on the selected returns in order to have useful information. Additional goals are to identify the underlying causes for missing pension feature codes and to make recommendations to improve IRS systems.

For more information, click here.