News Items

"IRAs are individually owned investment contracts, which are under the control of the former participant -- even though they are set up by the former employer.... [T]he DOL made it clear that negative consent will not suffice to relieve the program's sponsor from the fiduciary obligations related to the decision to move the money from the IRA to the new plan.... Then there is that nasty problem of securities laws and other state laws ... The question ... is how a fiduciary which is not appointed by the individual IRA holder has any legal authority to do ANYTHING with a registered security (or even any other investment) after it is set up by the original employer, as the investments are legally owned by the former participant."

"For taxable years beginning in 2019,

• "the dollar amount in effect under Section 45R(d)(3)(B) is $27,100. This amount is used under Section 45R(c) for limiting the small employer health insurance credit and under Section 45R(d)(1)(B) for determining who is an eligible small employer for purposes of the credit....
• "the dollar limitation under Section 125(i) on voluntary employee salary reductions for contributions to health flexible spending arrangements is $2,700....
• "the monthly limitation under Section 132(f)(2)(A) regarding the aggregate fringe benefit exclusion amount for transportation in a commuter highway vehicle and any transit pass is $265. The monthly limitation under Section 132(f)(2)(B) regarding the fringe benefit exclusion amount for qualified parking is $265....
• "under Section 137(a)(2), the amount that can be excluded from an employee's gross income for the adoption of a child with special needs is $14,080.... under Section 137(b)(1) the maximum amount that can be excluded from an employee's gross income for the amounts paid or expenses incurred by an employer for qualified adoption expenses furnished pursuant to an adoption assistance program for other adoptions by the employee is $14,080."

"[Budget] four-to-six weeks for your review of the responses.... [S]ince all of the responses on pricing in particular will almost certainly not be uniform or completely clear, you'll need time to analyze, ask questions and assess. You should create a master list of items you want to see addressed by each respondent. This can, essentially, be the items in your RFP. You'll want to create a fairly detailed spreadsheet to analyze the fee component of the proposals."

"[T]he employer or plan sponsor needs to contact its plan's record keeper to determine when their system might be updated to accommodate the new options under the proposed regulations. Some of the provisions in the proposed regulations can be effective earlier than Plan years beginning on or after January 1, 2020, but the systems need to be ready to support the plan changes and record keepers may wait for final regulations before commencing the programming changes."

"This practice note explains the application of Internal Revenue Code Section 457A, which restricts the ability of certain tax-indifferent entities (so-called nonqualified entities) to defer compensation for services provided by their service providers. It provides guidance on practical steps for attorneys advising such entities on nonqualified deferred compensation plans."

"The Departments issued proposed regulations that allow for stand-alone, excepted benefit HRAs [EBHRAs].... The EBHRA is not subject to the Market Reform Rules, and coverage under the EBHRA does not make an individual ineligible for the PTC. There are four requirements for the EBHRA.... Prior to the passage of the ACA, many employers offered HRAs to employees. Due to the limitations in the ACA, these plans became scarce ... Employers will likely welcome having the opportunity to offer employees an EBHRA."

"Evaluating the Department's Regulations and Guidance on ERISA Bonding Requirements and Exploring Reform Considerations: The Council recommends that the Department publish the following new guidance ... [1] A new Interpretive Bulletin, incorporating much of the content of its 2008 Field Assistance Bulletin 2008‑04. [2] A summary of the requirements for securing a fidelity bond that complies with the Department's guidance....

"Lifetime Income Solutions as a Qualified Default Investment Alternative (QDIA): [1] Amend the QDIA regulations to address using [lifetime income (LTI)] in a QDIA.... [2] The Department should publish guidance confirming that a named plan fiduciary may appoint a 3(38) investment manager to select and monitor annuity and other LTI options for DC plan decumulation, as well as accumulation.... [3] The Department should encourage plan sponsors to adopt plan design features that facilitate LTI, including, but not limited to: allowing participants to take ad hoc distributions, enabling installment payments, providing Social Security bridge options and allowing for payment of required minimum distributions."

"The first initiative clarifies and liberalizes the conditions for multiple employer retirement plans (MEPs) under the existing provisions of [ERISA].... The second initiative considers auto-portability ... By providing an automated means for participants to preserve and consolidate their retirement savings in a single account as they change employment, auto-portability is intended to improve the quality and quantity of retirement savings."

"The final religious beliefs regulations include several clarifications to the October 2017 interim final regulations, based on more than 56,000 comments that the Departments received in response to the interim final rules. The final religious beliefs and moral convictions regulations do not change HRSA's discretion to require contraceptive and sterilization coverage where no recognized objection exists."

"The new guidance directs the Departments to assess the availability of comprehensive and affordable coverage: a change from past practice where the Departments assessed the coverage that residents actually purchase.... The new guidance directs the Departments to assess the impact of state waiver applications in the aggregate."

"RCH is constructing a system to share data on 401(k) participants with recordkeepers to find a departing employee's new plan and facilitate the transfer.... RCH plans to charge a maximum one-time fee of $59 for each transfer. For accounts with $590 or less, the charge will be 10 percent of the balance, and the service is free for accounts with $50 or less. There also is a 20-percent reduction in the fee charged to a plan when the annual volume of roll-in transactions exceeds 1 million transactions per year, meaning the benefits of scale are passed on to participants in the form of reduced fees[.]"

"In October 2018, the Society of Actuaries published its new Mortality Improvement Scale MP-2018, showing mortality improvement rates that are 'slightly lower than the corresponding Scale MP-2017 rates.' ... Presumably, IRS will not take into account the new SOA MP-2018 scale until sometime later this year or next, for purposes of 2020 valuations.... Plan distributions are a 2019 IRS 'compliance' target."

"Attracting and retaining a competitive workforce is the number one operational priority again at 60%, up 2 points over 2017.... [C]ontrolling employee benefit costs (37%) dropped 6 points.... There's a rise in employers that consider their health benefits more competitive within their industry or region -- to 74% from 71% in 2017 -- but they also say employees' satisfaction with these options hasn't budged.... While nearly three-quarters of employers (74%) consider cost management of their health benefits a top priority, just 44% agree they have an effective strategy to support that objective."

10 pages. "While insurers have not reacted in a unified way, the claim environment has become much more active and severe during the past 24‑36 months, highlighted by well-publicized excessive fee litigation under ERISA. This ... report discusses ... the many excessive fee cases brought against universities, why proprietary funds are more challenging risks, and recent results from a Boston College study examining the causes and consequences of 401(k) lawsuits."

"The loan program idea introduced in legislation earlier this year is considered a way for some critically underfunded plans to extend projected insolvency dates and reduce the risk to the PBGC.... The analysis used 500 trials with asset returns varied stochastically to model plans projected to become insolvent within 30 years. According to the analysis, the average total number of participants in plans projected to become insolvent is 3.1 million in the baseline scenario, and 2 million if the loan program is implemented."

"US employers paid nearly $880 billion in health care benefits for employees and dependents. However, illness-related lost productivity costs them another $530 billion per year ... That amounts to 60 cents for every dollar employers spend on health care benefits. Employees covered for sick time, workers' compensation, disability, and family and medical leave benefits are absent about 893 million days due to illness and incur an estimated 527 million lost work days due to impaired performance. This totals almost 1.4 billion days annually of employees absent -- greater than every nurse in the US missing a year of work."

"In this period of rising interest rates, managers of frozen plans will want to be sure their hedge ratio is consistent with both their capital market views and their investment policy, rather than a residual of past allocations.... By planning ahead and anticipating the likely future development of the fund value, plans can make appropriately sized commitments to illiquid assets and avoid overallocation a few years down the road--a condition that can be difficult to remedy."

"When Congress passed a law back in February creating the Joint Select Committee on Solvency of Multiemployer Pension Plans, it gave the committee until November 30 to find a bipartisan solution to a looming plan insolvency crisis.... Congressional leaders set the committee's deadline after the election to ensure that committee members had several weeks to operate in a low political pressure environment to reach across the political divide and broker a compromise solution. That time has arrived, and affected retirees are keenly aware of the opportunity it presents."

"Notice 2018‑68 proposes a definition of 'covered employee' that contradicts the statutory text, as revised by the Tax Cut and Jobs Act (TCJA). Specifically, the Service disregards statutory language requiring that a 'covered employee' be an 'employee' -- i.e., an individual who is an employee at some point during the tax year.... As a result of this plain meaning, payments delayed until after the year in which a covered employee ceases to be an employee should not be subject to Section 162(m)'s deduction limit. These include the vast majority of non-qualified retirement plans, severance arrangements, and equity pay exercised after termination of employment." [Also available: Executive Summary.]

"The average number of companies per state in 2018 was 3.5, ranging from one company in eight states (Alaska, Delaware, Iowa, Mississippi, Nebraska, Oklahoma, South Carolina, and Wyoming) to more than 10 insurers in three states (Wisconsin, California, and New York). In 2018, 48% of enrollees (living in about 18% of counties) had a choice of three or more insurers.... [T]here were no counties without at least one insurer in 2018."

18 pages. "To provide the kinds of affordable insurance options Americans really want, options that cover preventive care and protect them from financial devastation if they get sick, it is imperative we tackle the real problem -- misaligned incentives and sky-high unit prices."

"Because it involves the storage and analysis of large volumes of information, Big Data is creating new opportunities for efficiency and innovation in the insurance and pension sectors. At the same time, Big Data has the potential to disrupt the way insurance and pensions are traditionally marketed, designed, and sold to consumers. As advancements in data analysis and storage continue to evolve, actuaries will play an important role in helping insurers and pension plan sponsors navigate the opportunities and challenges posed by Big Data."

"Officially known as Letter 226-J, the notices inform employers of a preliminary employer mandate penalty calculation under Section 4980H. In late 2017, the IRS began mailing notices for 2015 -- with a reported 30,000 applicable large employers receiving Letter 226-J. Now the IRS has progressed to issuing Letter 226-J for 2016. The move to issuing 2016 penalty notices is significant because the pool of employers that may be subject to employer mandate penalties is much wider."

"Rebate alternative #1: Point-of-sale (POS) rebates ... generated when the consumer fills a prescription. A portion of the negotiated rebate between the manufacturer and the PBM/health plan is used to offset the consumer's out-of-pocket expense at the pharmacy.... Rebate alternative #2: Negotiated discount price ... [P]harmacies would likely continue to acquire products from wholesalers and distributors using today's list price. PBMs and plan sponsors would then pay the pharmacies based on the negotiated discount price, which would be less than their acquisition cost."

"Friction is caused by the degree of difficulty to access HSA investments, which could be in terms of excess fees, non-integrated trading platforms, unnecessary forms, or other red tape. The easier it is for your employees to invest their HSA is an indication of a provider's understanding of and alignment with your employee's long-term HSA investment success."