Tag Archives: IRS

Regulatory roundup

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

Social Security announces 1.6% COLA increase for 2020

The Social Security Administration announced a 1.6% cost-of-living adjustment (COLA) for benefits payable starting in 2020. For 2020, the Social Security taxable wage base will increase to $137,700, up from $132,900 in 2019. The Social Security Old-Age, Survivors, and Disability Insurance (OASDI) tax rate will remain at 6.2% on wages up to the $137,700 wage base.

For more information, click here.

PBGC releases 2018 Actuarial Report

The Pension Benefit Guaranty Corporation (PBGC) published the 2018 Actuarial Report containing a summary of the results of the September 30, 2018, actuarial valuation. The agency calculated and validated the present value of future benefits for both the single-employer and multiemployer programs and of non-recoverable future financial assistance under the multiemployer program.

To read the entire report, click here.

PBGC announces the 2020 premium rates

The PBGC has determined the premium rates for single-employer and multiemployer plans applicable for 2020 plan years in accordance with the indexing rules provided in section 4006 of ERISA.

To see the updated premium rates, click here.

PBGC posts 2017 pension insurance data tables

The PBGC published the first installment of the 2017 data tables, which include statistics for PBGC’s single-employer and multiemployer programs and for the private defined benefit pension system. This installment provides detailed information about PBGC’s single-employer program, including claims activity, financial position, premium revenue, benefit payments, and administrative expenses.

To see the pension insurance data, click here.

Proposed rule on contribution limits applicable to ABLE accounts issued

The Internal Revenue Service (IRS) issued a proposed rule related to section 529A of the Internal Revenue Code, which allows a state (or its agency or instrumentality) to establish and maintain a tax-advantaged savings program under which contributions may be made to an ABLE account for the purpose of paying for the qualified disability expenses of the designated beneficiary of the account.

Section 529A was amended by the Tax Cuts and Jobs Act, signed into law on December 22, 2017. The 2017 Act allows certain designated beneficiaries to contribute a limited amount of compensation income to their own ABLE accounts.

To read the entire proposed rule, click here.

Regulatory roundup

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

Revenue Procedure providing remedial amendment periods for correcting form defects in 403(b) plans released

The Internal Revenue Service (IRS) released Revenue Procedure 2019-39, which sets forth a system of recurring remedial amendment periods for correcting form defects in a § 403(b) plan first occurring after March 31, 2020—the ending date for the initial remedial amendment period under Rev. Proc. 2013-22, 2013-18 I.R.B. 985.

To learn more, click here.

PBGC issues proposed rule on administrative review of decisions

The Pension Benefit Guaranty Corporation (PBGC) is amending its regulation on rules for administrative review of agency decisions. The PBGC’s proposed rule would clarify and make changes to the review process for certain agency determinations and the procedures for requesting administrative review.

To learn more, click here.

Regulatory roundup

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

Modifications to 2020 Form 5500 Series proposed

The Pension Benefit Guaranty Corporation (PBGC) requested that the Office of Management and Budget (OMB) extend approval (with modifications) of its collection of information for annual reporting. PBGC is proposing modifications to the 2020 Schedule R (Retirement Plan Information) and its related instructions. The proposed modifications to Schedule R affect multiemployer defined benefit (DB) plans covered by Title IV of ERISA. PBGC is also proposing minor modifications to the Form 5500 Series to improve the accuracy of reported information.

For more information, click here.

IRS extends temporary nondiscrimination relief for closed DB plans through 2020

The Internal Revenue Service (IRS) issued Notice 2019-49, which extends the temporary nondiscrimination relief for closed DB plans that is provided in Notice 2014-5, 2014-2 I.R.B. 276, by making that relief available for plan years beginning before 2021 if the conditions of Notice 2014-5 are satisfied.

The IRS and the Department of the Treasury expect that the final regulations making amendments to the § 401(a)(4) regulations will include a number of significant changes in response to comments received.

However, it is anticipated that the final regulations will not be published in time for plan sponsors to make plan design decisions based on the final regulations before expiration of the relief provided under Notice 2014-5 (as last extended by Notice 2018-69). Accordingly, the IRS and the Treasury have determined that it is appropriate to extend the relief provided under Notice 2014-5 for an additional year.

For more information, click here.

Retirement plan considerations related to expanded determination letter program

Earlier this year, the Internal Revenue Service (IRS) released Revenue Procedure (Rev Proc) 2019-20 announcing an expansion of the determination letter program for certain retirement plans. The determination letter program, previously restricted in 2017 (Rev Proc 2016-37), will be expanded on September 1, 2019. This action opens the program up to statutory hybrid plans to apply during a 12-month window, and also allows certain merged plans indefinitely. Milliman’s Carrie Vaughn offers more perspective in this Multiemployer Review article.

Updated mortality tables proposed for pension plans

On May 22, the Society of Actuaries (SOA) released an exposure draft that includes new mortality tables that private-sector defined benefit pension plan sponsors and their actuaries consider in measuring retirement plan obligations. The proposed new tables, referred to as “Pri-2012” in the exposure draft, are generally designed to replace the tables known as “RP-2006.” The RP-2006 tables currently serve as the mortality basis for funding valuations and lump sum calculations, as well as for many companies’ accounting valuations.

The SOA indicates that most plan sponsors that update their mortality assumptions from the RP-2006 tables to the Pri-2012 tables “will experience only a small change in their pension liabilities, usually within plus or minus 1%.” The SOA also notes that the pension liability change will vary depending on a plan’s demographics and other assumptions (e.g., the discount rate) that are used to compute pension liabilities. According to the SOA, significant indicators of mortality are the participants’ “collar type”—white or blue—and income level, with the collar type being a stronger predictor of longevity than a plan’s benefit amount.

The total data set for the study included a substantial amount of multiemployer plan experience. However, the SOA found no significantly different mortality experience for participants in multiemployer versus single-employer plans, and thus did not produce separate Pri-2012 tables for multiemployer plans.

With regard to measuring retirement plan obligations under the Financial Accounting Standards Board’s accounting standards, employers that historically have chosen to use the most recent mortality tables published by the SOA will consider applying the Pri-2012 tables for measurement dates that occur after the SOA publishes the final version of the study, which is expected in the fall of 2019. At that time, the SOA also will likely and concurrently release an updated mortality improvement scale to succeed the currently used MP-2018 scale to estimate how mortality rates will change in the future.

Looking ahead, the IRS has already released the required mortality tables to measure pension obligations for 2020 funding valuations and to calculate lump sums for stability periods beginning in 2020. Therefore, the Pri-2012 tables will not be used for these purposes until at least 2021.

The SOA’s exposure draft can be found here. The deadline to submit comments on the exposure draft to the SOA is July 31, 2019. For additional information about the exposure draft or to assess the impact on your specific retirement plans, please contact your Milliman consultant.

IRS expands Self-Correction Program for retirement plans

The Internal Revenue Service (IRS) has expanded the Self-Correction Program (SCP) to enable retirement plan sponsors to more easily fix certain common plan document and operational failures, effective beginning April 19, 2019. Revenue Procedure 2019-19 updates the Employee Plans Compliance Resolution System (EPCRS), which covers the SCP, the Voluntary Correction Program (VCP), and the Audit Closing Agreement Program (Audit CAP). The expanded SCP permits: self-correction options for specified participant loan failures and possible deemed distribution relief under Internal Revenue Code (IRC) section 72(p); self-correction of certain plan document failures; and additional self-correction opportunities for certain operational failures by a retroactive plan amendment. This Client Action Bulletin provides some more perspective.