Tag Archives: Client Action Bulletin

COLAs for retirement, Social Security, and health benefits for 2020

The IRS has announced the cost-of-living-adjusted figures for retirement plan benefits for 2020. The Social Security Administration announced its 2020 changes in October based on the Consumer Price Index for the quarter ended September 2019 from the Bureau of Labor Statistics. The 2020 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.

Year-end compliance issues for single-employer retirement plans

By year-end 2019, sponsors of calendar-year single-employer retirement plans must adopt necessary and discretionary plan amendments to ensure compliance with the statutory and regulatory requirements of ERISA and the tax code. This Client Action Bulletin looks at key areas – including administrative compliance issues – that defined benefit (DB) and/or defined contribution (DC) plan sponsors should address by Dec. 31, 2019.

Social Security adjusts taxable wage base and related figures for 2018

On November 27, the Social Security Administration (SSA) updated the 2018 taxable maximum amount, based on a national payroll service provider’s corrected Internal Revenue Service (IRS) Forms W-2 (Wage and Tax Statement) provided to the agency in late October 2017, after the SSA announced cost-of-living adjustments (COLAs) for 2018. The new data lowers the national average wage index for 2016, which in turn reduces the 2018 Social Security taxable maximum amount (also known as the taxable wage base or the contribution and benefit base), the primary insurance amount (PIA) bend points used to calculate benefits, and the family maximum bend points.

The adjusted figures are:

• The 2018 Social Security taxable wage base: $128,400 (corrected from $128,700).
• The 2018 PIA bend points that are used to determine individual beneficiaries’ Average Index Monthly Earnings (AIME): $895 and $5,397 (corrected from $896 and $5,399). Thus, the monthly PIA formula will be 90% of the first $895 of AIME, plus 32% of the AIME over $895 and through $5,397, plus 15% of the AIME over $5,397.
• The 2018 bend points in the family maximum formula: $1,144/$1,651/$2,154 (corrected from $1,145/$1,652/$2,155).
• The 2016 national average wage index: $48,642.15 (corrected from $48,664.73).

Milliman has posted a revised Client Action Bulletin (CAB 17-4R) to reflect the Social Security Administration’s adjusted figures.

For additional information about the 2018 updated Social Security figures, please contact your Milliman consultant.

IRS proposes additional guidance for nonqualified deferred compensation under 409A

Concluding that clarifications and modifications could help taxpayers comply with the requirements applicable to nonqualified deferred compensation plans (NDCPs) under tax code section 409A, the Internal Revenue Service (IRS) issued additional guidance in the form of a proposed rule. Compliance with the 409A requirements enables individuals covered by and employers sponsoring NDCPs to avoid adverse tax treatment of the amounts payable under these arrangements. The proposed rule, which taxpayers may rely upon immediately, is lengthy and complex, covering a diverse range of topics, most of which are beyond the scope of this Client Action Bulletin, which focuses on four key areas that may have the broadest application to NDCP sponsors.

DOL’s final overtime rule may affect retirement, other benefit programs

The Department of Labor issued a final rule on the overtime pay requirements of the Fair Labor Standards Act (FLSA) for most “white-collar employees,” effective December 1, 2016. Although the final rule focuses on paying time-and-a-half for hours worked in excess of 40 per week, it includes other new requirements that could have implications for sponsors of retirement plans (primarily 401[k] and similar arrangements), depending on the inclusion or exclusion of overtime pay and/or bonuses in the plan’s formula for employer contributions. The final rule also might affect a retirement or other benefit plan’s participation base, if salaried (exempt) employees are treated differently from hourly (nonexempt) employees, or it could raise concerns if the programs shift toward favoring the highly compensated. Milliman’s latest Client Action Bulletin offers more perspective.

Year-end compliance for single-employer plans

By year-end 2012, sponsors for calendar-year single-employer retirement plans must act on necessary and discretionary amendments and perform a range of administrative procedures to ensure compliance with statutory and regulatory requirements. There also are year-end issues that employers sponsoring nonqualified deferred compensation plans (NDCPs) should consider. This Client Action Bulletin looks at key areas that such employers and sponsors of defined benefit (DB) or defined contribution (DC) plans should address by December 31, 2012.