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 has published Notice 2018-14 providing guidance on withholding rules. This notice extends the effective period of Forms 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.

Outsourcing enhances a small pension plan’s administration

When a small pension plan disaffiliated from its larger pension group, it lost access to the retirement system infrastructure that helped administer its plan. In this article, employee benefits analyst Julie Sinke explains the sponsor’s decision to fully outsource its plan administration to Milliman and how the firm provided a more efficient and streamlined solution.

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.

Due diligence reduces pension plan’s purchase price

A Milliman client was considering an acquisition. But first, it needed to review the target’s single-employer defined benefit pension plan. On the client’s behalf, the firm reviewed the target’s latest pension valuation report and five-year projections to make a determination. Would this potential acquisition—and its pension plan—fit in with the client?

Consultant Bret Linton explains in more detail the work that Milliman did and what it meant for the client’s bottom line in his article “Mergers & acquisitions: Pension plan due diligence.”

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.