Tag Archives: GAO

Regulatory roundup

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

Relief for victims of Hurricane Maria and the California wildfires
Internal Revenue Service (IRS) Announcement 2017-15 provides relief to taxpayers adversely affected by Hurricane Maria and recent wildfires in California (California Wildfires). The announcement allows individuals in qualified employer plans to use retirement assets to alleviate hardships caused by these disasters. The IRS announcement also provides relief from certain verification procedures that may be required under retirement plans with respect to loans and hardship distributions.

For more information, click here.

Memo regarding missing participants and beneficiaries and required minimum distributions
The IRS released a memorandum directing employee plans examiners not to challenge a qualified plan as failing to satisfy the required minimum distribution (RMD) standards under Internal Revenue Code (IRC) § 401(a)(9) in the circumstances set forth below. The memo addresses only the application of IRC §401(a)(9) to certain circumstances involving a plan’s action related to a benefit of a participant or beneficiary whom the plan is unable to locate. It does not address the application of any other qualification requirements or other applicable law, including Title I of ERISA.

For more information, click here.

Guarantee limit for single-employer defined benefit plans for 2018 announced
The Pension Benefit Guaranty Corporation (PBGC) announced that the guarantee limits for single-employer plans that fail in 2018 will be 0.95% higher than the limits that applied for 2017 as a result of the indexing rules provided in ERISA. A table showing the single-employer plan guarantee limits for various ages and payment forms is available on the PBGC’s website. The guarantee limits for multiemployer plans are not indexed and, therefore, have not changed.

To view the table, click here.

Treasury final rule on mortality tables
The Government Accountability Office (GAO) released a report on the final rule published by the U.S. Department of the Treasury, IRS, entitled “Mortality Tables for Determining Present Value under Defined Benefit Pension Plans.”

According to the GAO analysis, the IRS summarized the costs of this final rule by stating that substantially all of the amounts involved (decreased tax revenue, increased plan contributions and PBGC premiums) constitute transfer payments rather than costs. The amounts are monetary payments from one entity to another that do not affect total resources available to society. The IRS believes that the incremental administrative costs to implement this regulation are negligible because plan sponsors would have to incur the same costs to update their plan administration software to reflect the new mortality tables under these regulations as they would incur in implementing the annual update to the mortality tables that would apply in the absence of these regulations. The final rule has tables showing the impact of the rule and revenue collection, contribution requirements, and PBGC premiums.

For more information, click here.

Present value of PBGC maximum guarantee
The PBGC posted a table showing the applicable present values for 2018 plan years. The PBGC also posted a two-column version of the table for convenient copying.

For more information, click here.

Regulatory roundup

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

House committee approves bill to repeal fiduciary rule
The U.S. House Committee on Education and the Workforce recently voted to approve the “Affordable Retirement Advice for Savers Act” (H.R. 2823), which would repeal the U.S. Department of Labor (DOL) rule defining “fiduciary” and restore the regulations and prohibited transaction exemptions that the rule had amended or repealed.

According to a summary released by the committee, the bill would amend ERISA and the tax code to establish a statutory definition of “investment advice” and “ensure that all financial professionals providing personalized advice about retirement investments, distributions, or the use of other advisors are legally required to act in the best interest of their clients.”

To learn more about the bill, click here.

IRS releases draft Form 8717
The Internal Revenue Service (IRS) has released Draft Form 8717, User Fee for Employee Plan Determination Letter Request, updated for September 2017. Specific user fee amounts are no longer listed on Form 8717. You must now enter the appropriate user fee when completing line 5. Notice 2011-86 is obsolete.

To download a copy of the draft, click here.

IRS releases final and temporary regulations on W-2 Series, Form W-3, Form 990 Series, and others
The IRS filed final and temporary regulations that update the due dates and extensions of time to file certain tax returns and information returns. The dates are updated to reflect the new statutory requirements set by section 2006 of the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 and section 201 of the Protecting Americans from Tax Hikes Act of 2015.

These regulations affect taxpayers who file Form W-2 (series, except Form W-2G), Form W-3, Form 990 (series), Form 1099-MISC, Form 1041, Form 1041-A, Form 1065, Form 1120 (series), Form 4720, Form 5227, Form 6069, Form 8804, or Form 8870.

To read more about the final and temporary regulations, click here. To read more about the proposed regulation, click here.

IRS releases draft W-4P for 2018
The IRS has released a draft copy of Form W-4P, Withholding Certificate for Pension or Annuity Payments, for 2018. The form is for U.S. citizens and resident aliens, or their estates, who are recipients of pensions, annuities (including commercial annuities), and certain other deferred compensation. Use Form W-4P to tell payers the correct amount of federal income tax to withhold from your payment(s). One also may use Form W-4P to choose (a) not to have any federal income tax withheld from the payment (except for eligible rollover distributions or for payments to U.S. citizens to be delivered outside the United States or its possessions) or (b) to have an additional amount of tax withheld.

To download a copy of the draft, click here.

GAO publishes report on older workers and phased retirement programs
The Government Accountability Office (GAO) has released “Older Workers – Phased Retirement Programs, Although Uncommon, Provide Flexibility for Workers and Employers” (GAO-17-536). The report examines:

• Recent trends in the labor force participation of older workers
• The extent to which employers have adopted phased retirement programs and what type of employers offer them
• What challenges and benefits, if any, exist in designing and operating phased retirement programs.

GAO analyzed data from two nationally representative surveys: the Health and Retirement Study (2004-2014) and the Current Population Survey (2005-2016). The agency also reviewed relevant federal laws and regulations, conducted a literature review, and interviewed 16 experts on retirement and nine employers that offer or considered offering phased retirement programs. While phased retirement programs exist in both the private sector and government, the GAO report focuses on private sector programs.

To read the entire report, click here.

Regulatory roundup

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

IRS issues new process for information document requests regarding retirement plan audits
The Commissioner for the Tax Exempt and Government Entities (TE/GE) of the Internal Revenue Service (IRS) issued a memorandum containing new procedures for all TE/GE examiners on Information Document Requests (IDR). The IRS in the past had been flexible with the extension of response deadlines for document requests as long as the examiner views the sponsor as acting in good faith, especially once a professional becomes involved in the process.

This new memorandum takes flexibility out of the manner in which the IRS collects plan and employer information to conduct an audit. These new rules center on the timing of the IDRs, which are central to an audit.

To learn more, click here.

GAO publishes survey on 401(k) plans
The Government Accountability Office (GAO) issued “401(K) plans – effects of eligibility and vesting policies on workers’ retirement savings” (GAO-17-69). The publication is a non-generalizable survey of 80 401(k) plans ranging in size from fewer than 100 participants to more than 5,000. The GAO found that many plans have policies that affect workers’ ability to (1) save in plans (eligibility policies), (2) receive employer contributions, and (3) keep those employer contributions if they leave their job (vesting policies).

To download a copy of the entire publication, click here.

Proposed rule issued regarding minimum present value requirements for DB plan distributions
The IRS filed a proposed rule providing guidance on changes made by the Pension Protection Act of 2006 (PPA) relating to the minimum present value requirements applicable to certain defined benefit (DB) pension plans. These proposed regulations would amend the current final regulations under section 417(e) regarding the minimum present value requirements of section 417(e)(3) in several areas. Specifically, the proposed regulations would update the regulations for changes made by PPA and eliminate certain obsolete provisions. The proposed regulations also contain a few other clarifying changes.

To read the entire proposed rule, click here.

Regulatory roundup

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

Actions to better address potential noncompliance for Roth individual retirement arrangement conversions
The Treasury Inspector General for Tax Administration (TIGTA) recently released “Actions can be taken to better address potential noncompliance for Roth individual retirement arrangement conversions.” The report notes that for tax year 2011, Internal Revenue Service (IRS) records show that approximately 400,000 taxpayers converted more than $10 billion in assets from traditional to Roth IRAs. This TIGTA audit was initiated to assess whether the IRS has sufficient processes in place to address taxpayers who underreport taxes due when converting assets to Roth IRAs.

To read the entire report, click here.

DoL posts comments on agencies’ proposed rule—Form 5500
The U.S. Department of Labor (DoL) has made available on its website 23 comment letters received to date regarding the proposed rule that would amend Form 5500 and its schedules.

To access the comments, click here.

Improvements to claims process could help people make better informed decisions about retirement
The Government Accountability Office (GAO) released “Social Security – Improvements to claims process could help people make better informed decisions about retirement benefits” (GAO-16-786). Many eligible individuals claim Social Security retirement benefits at the earliest eligibility age, even though they would receive higher benefits if they waited until older ages. In order to make an informed decision about when to claim, people need to understand how various Social Security rules and other factors affect benefit amounts. The GAO was asked to examine these issues.

To read the entire report, click here.

Regulatory roundup

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

Study reveals accumulation potential of 401(k) by looking at consistent participants’ balances
The average 401(k) plan account balance of workers who participated consistently in one 401(k) plan increased significantly over the four-year period ending at year-end 2014, according to new data published today by the Employee Benefit Research Institute (EBRI) and the Investment Company Institute (ICI).

The study, “What Does Consistent Participation in 401(k) Plans Generate? Changes in 401(k) Account Balances, 2010–2014,” examines the accounts of about 8.8 million “consistent participants”—those who remained active in the same 401(k) plan for the four-year period covering year-end 2010 through year-end 2014. It finds that average account balances increased during this period for consistent participants in all age cohorts.

To read the entire study, click here.

Modifications to minimum present value requirements for partial annuity distribution options
The Internal Revenue Service (IRS) issued a final rule providing guidance relating to the minimum present value requirements applicable to certain defined benefit pension plans. The rule changes the regulations regarding the minimum present value requirements for defined benefit plan distributions to permit plans to simplify the treatment of certain optional forms of benefit that are paid partly in the form of an annuity and partly in a single sum or other more accelerated form.

To read the entire final rule, click here.

GAO report explores 401(k) lifetime income options
The U.S. Government Accountability Office (GAO) released a report entitled “401(k) plans: DOL could improve use of lifetime income options” (GAO-16-433), presenting the results of a questionnaire the GAO sent to 401(k) plan recordkeepers. Among other issues, this report examines what is known about the adoption of lifetime income options in 401(k) plans, barriers that deter plan sponsors from offering such options, and the defaults that exist for participants who do not choose a lifetime income option.

The GAO made seven recommendations to the U.S. Department of Labor (DOL), including that it clarify the criteria to be used by plan sponsors to select an annuity provider, consider providing limited liability relief for offering an appropriate mix of lifetime income options, issue guidance to encourage plan sponsors to select recordkeepers that offer annuities, and consider providing default lifetime income to retirees based on required minimum distributions (RMDs). The DOL has described actions it would take to address the intent of the recommendations.

To read the entire report, click here.

 

Regulatory roundup

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

Treasury Department denies Central States Pension Plan application
The Department of the Treasury issued its long awaited letter to the Central States, Southeast and Southwest Areas (Central States) Pension Plan. The letter denies the Central States plan its application to reduce benefits under Multiemployer Pension Reform Act (MPRA).

To read the entire letter, click here.

Final rule on additional limitation on suspension of benefits applicable to multiemployer plans
The Internal Revenue Service (IRS) released a final rule that provides guidance relating to a limitation that governs the application of a suspension of benefits under any plan that includes benefits directly attributable to a participant’s service with any employer that has withdrawn from the plan in a complete withdrawal, paid its full withdrawal liability, and, pursuant to a collective bargaining agreement, assumed liability for providing benefits to participants and beneficiaries equal to any benefits for such participants and beneficiaries reduced as a result of the financial status of the plan.

The final rule affects active, retired, and deferred vested participants and beneficiaries under any such multiemployer plan in critical and declining status as well as employers contributing to, and sponsors and administrators of, those plans. These regulations were effective on May 5, 2016.

For more information, click here.

GAO publishes retirement security report
The Government Accountability Office (GAO) released “Retirement security: Low defined contribution savings may pose challenges” (GAO-16-408). The report focuses on recent trends in defined contribution (DC) plan participation and account savings, and how much households could potentially save in DC plans over their careers. In addition, the report explores how key individual and employer decisions affect plan saving.

To download the entire report, click here.