Tag Archives: defined contribution

2018 year-end compliance issues for single-employer retirement plans

By the end of the year, 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 and compliance issues—that sponsors of such defined benefit or defined contribution plans should address by December 31.

State-run defined contribution plan considerations

Soon, retirement is going to be largely funded by the individual rather than an employer. What does this mean for the 27% of workers who don’t have access to an employer-sponsored defined contribution plan?

In 2016, the Employee Benefits Security Administration of the U.S. Department of Labor (DOL) released a final rule that provided a safe harbor for state payroll deduction individual retirement accounts from ERISA coverage. This change offered protection for workers’ rights by ensuring that employees are notified and given sufficient time to opt out of participation. In 2017, Congress overrode the DOL’s action, repealed the rule, and made it easier for state-run plans to exist.

The ERISA exemption would have permitted employers to avoid state mandates in benefit plans because they offer the savings plan under federal pension law.

Despite Congress repealing the action, California, Connecticut, Illinois, Maryland, Massachusetts, New Jersey, Oregon, and Washington state have already enacted legislation to establish a state-run defined contribution (DC) plan. And over 30 states have considered such legislation.

In this article, Milliman’s Darlene Laursen Medrano and Jinnie Olson discuss the possible effects of a state-run plan on participants and employers and outline what an ideal plan design would include.

Bitcoin considerations for retirement plan sponsors

Bitcoin is a digital “currency” or cryptocurrency not tied to a sovereign or bank. It is mainly a tool for transactions (purchase of goods, payment of services), and the number of bitcoins is governed by the blockchain technology that underlies its use.

Bitcoin is most popular with people and institutions on the leading edge of technology, and a large number of investors, rather than the everyday consumer. Very few businesses currently accept bitcoin or other cryptocurrencies as payment, but cryptocurrencies are being used by a small number of companies and may be used more often in the coming years.

In this article, Milliman’s Charles Hodge discusses bitcoin and whether it is an appropriate investment vehicle for retirement plan sponsors.

Dealing with disability claim procedures: Plan sponsors need foolproof plan by April 1

In order to avoid an unwanted April Fools’ Day surprise, employee benefit plan sponsors need to review their existing ERISA claims procedures and plan documents to determine whether any revisions are required to comply with the new U.S. Department of Labor (DOL) regulations that become effective for disability claims filed after April 1, 2018.

Which types of plans may be subject to the new rules?
The rules potentially apply to any ERISA employee benefit plan that provides disability benefits. As a result, in addition to employers’ health and welfare plans, all qualified retirement plans, whether they are defined contribution or defined benefit, need to be reviewed. Furthermore, while exempt from many of ERISA’s provisions, nonqualified deferred compensation plans are not exempt from the ERISA claims procedures requirements and thus must also be checked. This blog will only discuss the rules as they pertain to qualified and nonqualified retirement plans.

Which plans will have to change their procedures to comply with the new rules?
The good news is that not all plans of the types described above will have to revise their claims procedures. The only ones that are affected by the new rules are those that grant the plan administrator the authority and discretion to determine a participant’s disability status. If the plan’s “disability” definition provides that a participant is considered disabled if such participant qualifies for disability benefits either under Social Security or the plan sponsor’s long-term disability plan, then the new rules don’t apply and no change is required.

What are the new rules?
In general, the updated claims procedure rules require impartiality and independence in decision-making and will require plan administrators to go through additional steps and provide more detailed information when denying claims (either initially or upon appeal). In addition, the rules specify circumstances under which plans will be required to include culturally and linguistically appropriate language in denial notices and offer translation assistance.

For more information, please see the DOL Fact Sheet’s description of the rules here.

What should affected plan sponsors do before April 1?
For those sponsors of plans that currently leave disability determinations to the plan administrator, there are two options:

(1) Amend the plan’s disability provisions so that, effective for claims filed after April 1, 2018, participants’ eligibility for disability benefits under Social Security or the plan sponsor’s long-term disability plan will qualify such participants for disability benefits under the plan.

(2) Administer any claims after April 1 in accordance with the new rules. If this option is elected, and the plan document currently includes a detailed description of the claims procedures, the plan document will need to be amended, effective for claims filed after April 1, 2018, to reflect the new rules so that the plan will be administered in accordance with the plan’s terms. A summary of material modifications to the plan’s summary plan description will also be needed to communicate the change to participants.

Given the complexity of the new ERISA claims procedure requirements for disability claims, plan sponsors may wish to consider option 1 if they wish to avoid having to administer and communicate these rules. However, before proceeding with this alternative, they will need to first consult their ERISA advisers to ensure that their current plan provisions may be amended without violating the applicable Internal Revenue Service (IRS) anti-cutback rules for any plan provided disability benefits or rights already earned before the amendment effective date.

If you have any questions regarding the new rules or the above-described two alternatives, please contact your Milliman consultant.

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.