Tag Archives: GAO

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.

Regulatory roundup

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

Final fiduciary conflict of interest rule issued
The Department of Labor (DOL) released its final “Conflict of interest rule.” The rule contains final regulation defining who is a “fiduciary” of an employee benefit plan under ERISA as a result of giving investment advice to a plan or its participants or beneficiaries. The final rule also applies to the definition of a “fiduciary” of a plan (including an IRA) under the Internal Revenue Code of 1986 (Code). The final rule treats persons who provide investment advice or recommendations for a fee or other compensation with respect to assets of a plan or IRA as fiduciaries in a wider array of advice relationships.

To read the entire final rule, click here.

Correct the failure to adopt the preapproved plan by the applicable deadline
The IRS introduced a new option for an employer to correct not signing a pre-approved defined contribution (DC) retirement plan by the deadline. The new option allows the financial institution or service provider that offers the plan document to request a closing agreement on behalf of all adopters who missed the deadline.

For more information, click here.

Cautionary note on discriminatory plan designs using short service
The Internal Revenue Service (IRS) published commentary concerning recently found discriminatory plan designs in defined benefit (DB) plans, defined contribution (DC) plans, and DB/DC combination plans. These plans provide significant benefits to the highly compensated employees (HCEs) and a specified group of non-highly compensated employees (NHCEs), who work very few hours or receive very little compensation, and exclude other NHCEs from plan participation.

For more information, click here.

GAO publishes report on retirement security
The Government Accountability Office (GAO) released “Retirement security: Shorter life expectancy reduces projected lifetime benefits for lower earners.” The report examines the implications of increasing life expectancy for retirement planning and the effect of life expectancy on the retirement resources for different groups, especially those with low incomes.

To read the entire report, click here.

Regulatory roundup

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

PBGC releases FY 2014 projections report
The projected insolvency date for the insurance program for multiemployer pension plans, which cover more than 10 million Americans, has been delayed by three years, according to the fiscal year (FY) 2014 projections report released by the Pension Benefit Guaranty Corporation (PBGC). The risk of program insolvency has decreased over the near term, which is due primarily to the new premium revenues anticipated under the Multiemployer Pension Reform Act of 2014 (MPRA). It is more likely than not that the program’s assets will be depleted in 2025, compared with 2022 in last year’s report, and the risk of insolvency grows rapidly thereafter.

Projections for the PBGC’s insurance program for single-employer plans, which cover about 31 million people, show that the program’s financial condition continues to be likely to improve and conclude that it is highly unlikely to run out of funds in the next 10 years. The PBGC modeled 5,000 simulations for the 2014 projections report, and none showed that the program would be unable to pay the benefits it owes in 2025.

To read the PBGC’s entire projections report, click here.

JCT provides background on proposed fiduciary rule
The Joint Committee on Taxation (JCT) has released a report explaining information regarding the fiduciary rule proposed by the U.S. Department of Labor (DOL). The document provides a description of present law relating to prohibited transactions, investment advice, and fiduciary status with respect to retirement plans and individual accounts.

To read the entire report (JCX-131-15), click here.

GAO report on pension advance transactions
The U.S. Government Accountability Office (GAO) has released a report entitled “Pension advance transactions – questionable business practices and the federal response” (GAO-15-846T). The report is based on testimony provided by Stephen Lord, managing director of forensic audits and investigative services at the GAO, before the U.S. Senate Special Committee on Aging. The testimony examines companies attempting to take advantage of retirees using pension advances. The report describes the number and characteristics of pension advance companies and marketing practices; evaluates how pension advance terms compare with those of other products; and evaluates the extent to which there is federal oversight.

To read the entire report, click here.

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