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.
House approves bill to limit taxes on wages of employees working in multiple states
The U.S. House of Representatives voted on and approved the Mobile Workforce State Income Tax Simplification Act (H.R. 2315). The legislation would prohibit wages earned by an employee who works for an employer in more than one state from being subject to income tax in any state other than: 1) the state of the employee’s residence, and 2) the state within which the employee is present and performing employment duties for more than 30 days during the calendar year.
The bill requires Senate action; a comparable bill (S.386) has not advanced since its introduction last year in February.
Overview and guidance issued related to hardship distributions
The IRS posted guidance providing an overview of the hardship distribution rules as well as guidance on how to correct common hardship distribution errors.
For more information on hardship distribution rules, click here.
For more information on common hardship distribution errors, click here.