Tag Archives: DoL

Regulatory roundup

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

DOL announces temporary nonenforcement policy on fiduciary conflict rules
The U.S. Department of Labor (DOL) released Field Assistance Bulletin (FAB) 2018-02, which announces a temporary enforcement policy on prohibited transaction exemption (PTE) rules applicable to investment advice fiduciaries. The FAB states that, temporarily, the DOL will not pursue prohibited transaction claims against investment advice fiduciaries (advisers and broker-dealers) who are working diligently and in good faith to comply with the 2016 fiduciary rule that became applicable June 9, 2017. The nonenforcement period will extend until after the DOL issues regulations or exemptions or other administrative guidance.

For more information, click here.

Regulatory roundup

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

Employee Plans Compliance Unit report on complete discontinuance of contributions
The Employee Plans Compliance Unit (EPCU) of the Internal Revenue Service (IRS) designed the Complete Discontinuance of Contributions Project to determine whether profit-sharing plans, including IRC Section 401(k) plans, may have experienced a complete discontinuance of contributions. If there is a complete discontinuance of contributions in a profit-sharing plan, the plan is treated as terminated for vesting purposes and affected employees must be 100% vested in their accrued benefits.

For more information, click here.

FAB issued clarifying issues regarding proxy voting, shareholder engagement, and economically targeted investments
The Employee Benefits Security Administration (EBSA) of the U.S. Department of Labor (DOL) released a Field Assistance Bulletin (FAB) providing guidance to EBSA’s national and regional offices regarding proxy voting, shareholder engagement, and economically targeted investments by fiduciaries of private-sector employee benefit plans covered by ERISA. FAB 2018-01, clarifies earlier interpretations set forth in Interpretive Bulletins (IBs) 2015-01 and 2016-01. In IB 2015-01, the DOL held that fiduciaries may not sacrifice returns or assume greater risks to promote collateral environmental, social, or corporate governance (ESG) policy goals when making investment decisions. In IB 2016-01, the DOL addressed issues surrounding written statements of investment policy, proxy voting, and other exercises of shareholder rights by fiduciaries when managing plan assets that are corporate stock.

For more information, click here.

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.

Searching for missing plan participants per the U.S. Department of Labor

The U.S. Department of Labor (DOL), the Internal Revenue Service (IRS), the Social Security Administration (SSA), and the Pension Benefit Guaranty Corporation (PBGC) all review whether retirement plans have paid their participants on time. Last year, the Philadelphia office of the DOL conducted a pilot program that recovered $274 million owed to missing plan participants. Because of this success, DOL offices nationwide added “missing participant search compliance” to their plan audits. Plans failing to locate and contact plan participants regarding unpaid benefits could be found in breach of their ERISA duty to act on behalf of participants. Before receiving a letter of inquiry from the local DOL office, plan sponsors should review the protocols used to locate and pay their plans’ list of unpaid participants.

How do the various agencies learn of unpaid vested participants? Any terminated plan participant with an unpaid benefit at year-end is added to a plan’s running list of unpaid participants, one time, via IRS Form 8955. Terminated participants include alternate payees and beneficiaries. The IRS shares this information with both the SSA and the DOL, each of which maintains a running list of unpaid benefits from a plan. Once a vested participant starts a benefit, or cashes it out, an update via Form 8955 informs the IRS, SSA, and the DOL. Depending on whether the plan administrator removed participants as they were paid, the agencies may have an inflated list of unpaid participants.

When is a participant’s payment considered late? Just before age 65, the SSA sends letters to participants informing them that they “may have a benefit from their former employer.” The IRS considers payments late after a participant’s required minimum date. The DOL, however, reviews a plan’s overall list of vested participants regardless of age. Based on the participant’s earliest retirement age, the DOL could determine that a plan sponsor is not notifying and then paying participants in a timely manner. Please note that beneficiary or alternate payee required start dates can vary due to either 401(a)(9) rules or the participant’s, not the alternate payee’s, actual age.

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Regulatory roundup

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

Updated revenue procedures for employee plans and exempt organizations
The Internal Revenue Service (IRS) has published revisions to various revenue procedures for issuing letters, rulings, determination letters, and technical advice on specific issues related to employee benefits.

To download Internal Revenue Bulletin 2018-1, click here.

IRS provides statement on 2018 withholding
In a statement published on its website, the IRS mentioned it was working to develop withholding guidance to implement the tax reform bill signed into law on December 22. The agency anticipates issuing the initial withholding guidance in January. Employers and payroll service providers will be encouraged to implement the changes in February. The IRS emphasized that this information will be designed to work with the existing Forms W-4 that employees have already filed, and no further action by taxpayers is needed at this time.

To learn more, click here.

Annual inflation-adjusted civil penalties released
The Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015 (Inflation Adjustment Act) requires the U.S. Department of Labor (DOL) to annually adjust its civil money penalty levels for inflation no later than January 15 of each year. The DOL has published a final rule establishing its 2018 annual adjustments.

To read the entire final rule, click here.

Regulatory roundup

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

Report shows Senate tax bill will yield a 10-year revenue loss of $1 trillion
The Joint Committee on Taxation (JCT) published a new analysis indicating that the Senate tax bill would generate enough economic growth to lower its $1.4 trillion revenue cost by only about $458 billion over a decade. After accounting for interest rates, the growth figure would fall to $407 billion, said the JCT. That would leave a 10-year revenue loss of roughly $1 trillion.

To download the report, click here.

Fiduciary rule extended
The Department of Labor (DOL) has extended for 18 months the special transition period under Sections II and IX of the Best Interest Contract Exemption and Section VII of the Class Exemption for Principal Transactions in Certain Assets Between Investment Advice Fiduciaries and Employee Benefit Plans and IRAs.

The document also delays the applicability of certain amendments to Prohibited Transaction Exemption 84-24 for the same period. The primary purpose of the amendments is to give the DOL the time necessary to consider public comments under the criteria set forth in the presidential memorandum of February 3, 2017, including whether possible changes and alternatives to these exemptions would be appropriate in light of the current comment record and potential input from, and action by, the U.S. Securities and Exchange Commission (SEC) and state insurance commissioners.

For more information, click here.

DOL’s Office of Inspector General releases Semiannual Report to Congress
Regarding the Employee Benefits Security Administration (EBSA), the Office of Inspector General (OIG) notes it remains concerned with the DOL’s ability to administer and enforce ERISA requirements that protect the benefit plans of approximately 149 million plan participants and beneficiaries, particularly in light of statutory limitations on DOL’s authority.

One challenge facing the EBSA for decades has been that ERISA allows billions in pension assets held in otherwise regulated entities, such as banks, to escape full audit scrutiny. These concerns were renewed by recent audit findings that as much as $3.3 trillion in pension assets, including an estimated $800 billion in hard-to-value alternative investments, received limited-scope audits that provided few assurances to participants regarding the financial health of their plans.

To download the OIG report click here.