Guest Article
(From the June 8, 2009 issue of Deloitte's Washington Bulletin, a periodic update of legal and regulatory developments relating to Employee Benefits.)
IRS and DOL Reveal Their Priorities: Spring 2009 Regulatory Agenda
In the first Semiannual Regulatory Agenda released during the Obama Administration, the Department of Labor and the Internal Revenue Service list their priorities for the coming year.
Semiannual Regulatory Agenda
Every spring and fall, approximately 60 departments, agencies and commissions within the Federal Government report on their regulatory activities. They identify the matters on which they expect to propose or finalize rules within the next 12 months -- and may also list, as "long-term actions," those matters on which any further regulatory action is expected to be more than 12 months away.
The Spring 2009 Semiannual Regulatory Agenda -- the first of such agendas to be released during the Obama Administration -- identifies the following matters as among the priorities of the Department of Labor and the Internal Revenue Service.
Department of Labor
- Mental Health Parity and Addiction Equity Act: Interim final regulations will be issued to implement the changes made to ERISA § 712 by the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 (i.e., requiring parity in substance use disorder benefits).
- Periodic Pension Benefit Statements: Proposed regulations will be issued under ERISA § 105 as it was amended (by the Pension Protection Act (PPA) of 2006) to require plans to automatically provide individual benefit statements.
- Electronic Communication by Pension and Welfare Benefit Plans: Proposed regulations will be issued to update the current electronic disclosure safe harbor at § 2520.104b-1(c) to reflect events that have occurred since its initial publication.
- HIPAA: Final regulations will be issued to provide additional guidance under the Health Insurance Portability and Accountability Act of 1996 (e.g., to address the amendments made by the Children's Health Insurance Program Reauthorization Act of 2009).
- Definition of Plan Assets: Final regulations will be issued to amend the current regulation which defines when participant contributions to an employee benefit plan constitute "plan assets" for purposes of ERISA (i.e., the final regulation will reportedly establish a safe harbor period during which the moneys will not constitute "plan assets").
- Annual Funding Notice: Interim final regulations will be issued under ERISA § 101(f) as it was amended by the PPA to require the administrator of a defined benefit plan to provide an annual funding notice to participants, beneficiaries and others.
- Multiemployer Plan Information on Request: Final regulations will be issued to implement ERISA § 101(k) as it was added by the PPA to require the administrator of a multiemployer plan to furnish copies of certain financial and funding-related documents to any participant, beneficiary, employee representative, or employer that has an obligation to contribute to the plan, within 30 days of a written request.
- Genetic Information Nondiscrimination: Interim final regulations will be issued to provide regulatory guidance on the Genetic Information Nondiscrimination Act (GINA) of 2008 (i.e., to prohibit discrimination in group premiums based on genetic information, limit genetic testing, prohibit collection of genetic information, and the civil monetary penalties). [Both the Department of Labor and the Internal Revenue Service have regulatory authority under GINA, and both have scheduled the release of regulations.]
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The Department of Labor lists the following items as "long-term actions" for which the next regulatory action is expected to be more than 12 months away:
- Fiduciary Disclosure Obligations in Participant-Directed Individual Account Plans: This rulemaking is under ERISA § 404 to ensure that participants in participant-directed individual account plans are provided the information they need to make informed investment decisions, including information about fees and expenses. Amendments to the regulations governing ERISA § 404(c) may be included. Proposed regulations were issued on July 23, 2007 at 73 Federal Register 43014.
- General Statutory Exemption for Services: This rulemaking is under the ERISA § 408(b)(2) which provides an exemption for contracting or making reasonable arrangements with a party in interest for office space or services. The rulemaking will amend the current regulation to provide fiduciaries with the information necessary to determine whether an arrangement is "reasonable" within the meaning of the exemption. Proposed regulations were issued on December 13, 2007 at 72 Federal Register 70988.
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The Department of Labor's final regulations regarding the provision of investment advice to participants in individual-account plans -- regulations which were recently postponed until November 18, 2009 -- remain listed on the Agenda as a "completed action."
Internal Revenue Service
- Determination of Governmental Plan Status: Advance notice of proposed rulemaking will be issued to provide guidance under IRC § 414(d) on the determination of whether a plan is a governmental plan.
- Calculation of the Applicable Premium for COBRA Coverage: Advance notice of proposed rulemaking will be issued to provide guidance on how to calculate the applicable premium, which limits the amount that group health plans can require individuals to pay for COBRA continuation coverage.
- Definition of "Highly Compensated Employee": Proposed regulations will be issued under IRC § 414(g) regarding definition of the term "highly compensated employee."
- Actuarial Services Performed under ERISA: Proposed regulations will be issued to set forth the professional standards for the performance of actuarial services under ERISA.
- Multiple Annuity Starting Date Limitations on Benefits: Proposed regulations will be issued on determining the annual benefit under a defined benefit plan in applying the IRC § 415 limitations where there has been more than one annuity starting date.
- Compensation Deferred under Eligible Deferred Compensation Plans: Proposed regulations will be issued to provide guidance on the definition of a "bona fide severance pay plan" under IRC § 457(e)(11) and a "substantial risk of forfeiture" under section IRC § 457(f)(1)(B).
- Multiemployer Plan Funding Guidance: Both proposed regulations and final regulations will be issued to implement the new rules under IRC § 432 for multiemployer plans that are in endangered or critical status.
- Additional Rules Regarding Hybrid Retirement Plans: Both proposed regulations and final regulations will be issued under IRC § 411 regarding hybrid retirement plans. Final regulations will be issued regarding the vesting and payment of benefits under IRC § 411(a)(13), and regarding age discrimination under IRC § 411(b)(5).
- Definition of Dependent under IRC § 152: Proposed regulations will be issued to reflect changes made to the IRC § 152 definition of dependent by recent legislation (i.e., the Working Families Tax Relief Act of 2004 and the Fostering Connections to Success and Increasing Adoptions Act of 2008).
- Employer Contributions to Health Savings Accounts: Final regulations will be issued on employer comparable contributions to Health Savings Accounts under IRC § 4980G as amended by the Tax Relief and Health Care Act of 2006. Proposed regulations will be issued on the interaction between the IRC § 4980G comparability rules and the IRC § 125 nondiscrimination rules in instances where not all of the employer's employees contribute to a Health Saving Account through a cafeteria plan.
- Allocation of Accrued Benefits Between Employer and Employee Contributions: Undetermined action is scheduled to be taken by December 2009 regarding prior proposed regulations under IRC § 411(c) on the calculation of the portion of an employee's accrued benefit derived from the employee's contributions to a defined benefit plan.
- HIPAA Portability: Special Enrollment Procedures, Tolling, and Interaction with FMLA: Final regulations will be issued to enhance the existing HIPAA portability regulations (e.g., by tolling the running of time periods in certain circumstances, clarifying the procedures for requesting special enrollment, addressing how the portability requirements apply to individuals taking leave under the Family and Medical Leave Act, etc.).
- Cafeteria Plans: Final regulations will be issued on cafeteria plans under IRC § 125.
- IRC § 409A and Income Inclusion: Final regulations will be issued to provide further guidance on the measurement of income inclusion and calculation of applicable taxes under IRC § 409A.
- Medical and Accident Insurance Benefits under Qualified Plans: Final regulations will be issued under IRC § 402(a) regarding the tax treatment of payments by qualified plans for medical or accident insurance.
- Notice for Amendments Significantly Reducing the Rate of Future Benefit Accrual: Final regulations will be issued regarding the interaction of IRC § 4980F with a plan amendment that is permitted to reduce benefits accrued before the applicable amendment date.
- Benefit Restrictions for Underfunded Pension Plans: Final regulations will be issued under IRC §§ 430 & 436 on the use of funding balances maintained for defined benefit plans, and regarding benefit restrictions for underfunded defined benefit pension plans.
- Diversification Requirements for Certain Defined Contribution Plans: Final regulations will be issued on implementation of the new diversification requirements for certain defined contribution plans under IRC § 401(a)(35).
- Measurement of Liabilities and Assets for Pension Funding Purposes: Final regulations will be issued on the determination of benefit liabilities and assets for purposes of the funding requirements that apply to single employer defined benefit plans under IRC § 430.
- Accrual Rules for Defined Benefit Plans: Final regulations will be issued under IRC § 411 on the application of the accrual rules to defined benefit plans whose benefits are determined on the basis of the greater of two or more separate formulas.
- Employee Stock Purchase Plans: Final regulations will be issued under IRC § 423 to reflect updated regulations under IRC §§ 421, 422 and 424.
- Minimum Required Contributions: Final regulations will be issued on the determination of minimum required contributions for single employer defined benefit plans under IRC § 430.
- Failure to Defer under IRC § 411(a): Final regulations will be issued regarding notice to a participant of the right to defer receipt of an immediately distributable benefit and the consequences of failing to defer receipt.
- Genetic Information Nondiscrimination Act: Both final regulations and temporary regulations will be issued to provide guidance on the prohibitions against group health plans using genetic tests, genetic services, and genetic information in the administration of the plan, with limited exceptions for payment of benefits and research. [As described above, both the Department of Labor and the Internal Revenue Service have regulatory authority under GINA, and both have scheduled the release of regulations.]
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| The information in this Washington Bulletin is general in nature only and not intended to provide advice or guidance for specific situations.
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