News Items

17 pages. "The windfall elimination provision (WEP) is a modified benefit formula that reduces the Social Security benefits of certain retired or disabled workers who are also entitled to pension benefits based on earnings from jobs that were not covered by Social Security and thus not subject to the Social Security payroll tax.... WEP's supporters argue that the formula is a reasonable means to prevent overgenerous payments and unintended benefits to people who have earnings not covered by Social Security and receive pensions from noncovered work. Opponents argue that the provision substantially reduces a benefit that workers may have included in their retirement plans, and it reduces benefits disproportionately for lower-earning households." [Report 98-35, updated Feb. 10, 2020]

"Although the Act's primary focus is on defined contribution plans, several provisions of the Act and its sister legislation apply only to defined benefit plans.... [1] Earlier in-service withdrawal age ... [2] Increased required beginning date age  ... [3] Nondiscrimination testing and participation relief ... Both soft-frozen and hard-frozen plans can experience compliance testing issues over time as the participant population becomes older or decreases in size. The SECURE Act provides nondiscrimination and participation testing relief for such plans, subject to specific requirements."

"This post will set forth ... concerns about the new requirements and will highlight some of the open issues that the forthcoming guidance from the DOL is expected to address, including: [1] Assumptions for: commencement date of [lifetime income stream equivalent (LISE)] monthly payments; pre-commencement date investment return; post-commencement date investment return; mortality; future inflation; [2] whether LISE payments at assumed commencement are to be expressed in future dollars (unadjusted for inflation) or in today's dollars (inflation-adjusted); [3] whether LISE payments after assumed commencement are expected to remain fixed or are expected to increase with inflation like Social Security benefits or increase with some other index."

"Millennials, also known as Gen Y, contributed $373 million to IRAs in the fourth quarter, a 46 percent increase over the total amount contributed for the same period in 2018.... Millennials are overwhelmingly putting their money into Roth IRAs[.]"

Revised Feb. 2020. "A separate Form 2848 must be completed for each taxpayer. Form 2848 will not be honored for any purpose other than representation before the IRS."

"The bill allows all self-employed individuals, sole proprietors, and nongovernmental employers to allow their employees to participate in the Plan. It provides for automatic enrollment of an employer's employees if such employer chooses to participate in the Plan.... The Plan shall allow an enrollee to contribute to an account at a default rate and modify his contributions within the parameters of the Internal Revenue Code. The Plan allows but does not require a participating employer to contribute to the account of any enrollee."

"Employers with self-funded benefit plans are performing an increasingly tenuous balancing act when it comes to unpredictable and budget-busting specialty drug costs. They want to meet the needs of plan members and their families whose lives may depend on one of the growing number of 'miracle' drugs being developed. But what should you do when high cost drug claims significantly change the organization's benefits plan?"

"[A]verage liquidity among low-earning households is only $855 ... Add a financial shock to limited resources, and the researchers discovered a cascading effect, not only on employees' financial stability but also on the stability of their employers' business operations.... [Researchers] found that one offering in particular -- the income-advance (IA) loan -- helped employees who need assistance the most."

"[The article includes a link to] a detailed analysis of the Act based upon the type of Plan, e.g., defined contribution, defined benefit, IRA, health and welfare plan ...[and] a chart showing the effective date of all provisions of the Act, whether the changes are mandatory or discretionary, and whether the change requires a plan amendment."

"When people ignorant of the workings of defined benefit plans propose reforms to save money they come up with SCR170 in the last legislative session and SCR38 this time which creates a cash balance plan for new participants and those with less than 5 years of service ... What needs to be understood is that a cash balance plan IS a defined benefit plan with funding rules and investment risk shouldered by the plan sponsor and can be just as expensive as a plan with a benefit formula based on a percentage of salary and service."

[1] [It] is not clear how the elimination of the safe harbor notice for nonelective 401(k) safe harbor plans impacts the current regulatory requirements that in order to either eliminate or add a safe harbor in the middle of the plan year, certain information must be included in the safe harbor notice and/or follow-up notices provided.... [2] [U]nder current regulations a plan must be using the current year testing method in order to add a safe harbor provision to the plan during the year. It is not clear how this requirement would apply in light of the statutory change permitting a plan to add a safe harbor provision up to 12 months after the end of the plan year.... [3] [U]nder current regulations under IRC section 401(m), a plan that uses safe harbor nonelective contributions, complies with the limitations on matching contributions, and complies with the notice requirement ... satisfies the ACP safe harbor provisions of IRC section 401(m)(11). It is not clear how this ACP safe harbor for matching contributions made to a nonelective 401(k) safe harbor plan is impacted by the elimination of the safe harbor notice for nonelective 401(k) safe harbor plans."

Topics include: [1] Multiple Employer Plans; Pooled Employer Plans; [2] Fiduciary safe harbor for selection of lifetime income provider; [3] Disclosure regarding lifetime income; [4] Combined annual report for Group of Plans; [5] Inclusion of long-term part-time employees.

"[S]hould employers let them text that they're off for [FMLA] reasons rather than call in? In some jurisdictions, they must be allowed this flexibility but in many other regions employers still may prefer to enforce call-in policies.... However, getting a text message or e-mail provides the employer with evidence of the reason, as opposed to a call to a live person whose recollection of the reason may differ from the employee's or a recording that may be erased[.]"

"The notice includes important proposed rules and parameters for the operation of the individual and small group health insurance markets in 2021 and potentially 2022.... Those who are enrolled in a health reimbursement arrangement (HRA) with a noncalendar year plan year will be eligible for the special enrollment period annually. HHS has established that individuals and dependents who are provided a qualified small employer health reimbursement arrangement (QSEHRA) with a non-calendar year plan year may qualify for this special enrollment period. Although these individuals would be eligible for a [special enrollment period], their plan accumulators would reset if they made a plan change."

"The CDC encourages employers not to require employees who have an acute respiratory illness to present a doctor’s note to validate their illness or to return to work because the medical facilities may be overwhelmed.... All employers should review the CDC’s complete Guidance for Businesses and Employers. The CDC’s guidance is not a legal mandate for employers. OSHA and many state laws, however, impose a general duty on all employers to provide workers with work environments free from recognized hazards."

26 pages; rev. Feb. 14, 2020. "What's New: [1] Form 1099-R ... Section 113 of the [SECURE Act] ... added section 72(t)(2)(H). This new section provides for a distribution of up to $5,000 for a qualified birth or adoption that is exempt from the 10% early distribution tax and that can be repaid.... [2] Form 5498 ... We have added code 'BA' for reporting a repayment of a qualified birth or adoption distribution.... The SECURE Act, section 114, has increased the RMD age from 70-1/2 to 72 for taxpayers turning 70-1/2 after December 31, 2019." [Also available: Draft 2020 IRS Form 5498 and Instructions: IRA Contribution Information and Draft of 2020 IRS Form 1099-R]

10 pages; rev. Feb. 6, 2020. "What's New: ... These instructions have been revised to reflect the changes made by the Taxpayer Certainty and Disaster Tax Relief Act of 2019. The form has also been revised to reflect changes due to this act. Use these instructions with the 2018 version of the form." [Also available: Draft Revised 2018 IRS Form 5329: Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts] 

55 pages. "In most cases, you must withhold tax on the gross amount of pensions and annuities that you pay that are from sources within the United States.... Most tax treaties provide an exemption from tax on non-government pensions and annuities.... The exemption may not apply to lump-sum payments.... The withholding rules that apply to payments to foreign persons generally take precedence over any other withholding rules that would apply to distributions from qualified plans and other qualified retirement arrangements."

"[N]early 70 percent of health economists are comfortable charging people more if they engage in unhealthy behaviors that lead to higher health costs. The ACA allows marketplace plans to do just that based on smoking.... Many of today's conversations about reducing health spending focus on prescription drugs. A good deal of drug spending ends up as profits for the pharmaceutical industry -- drug company profit margins above 15 percent are not uncommon.... A plurality of health economists seem to question this argument."

"Average healthcare spending for people with employer-sponsored insurance rose to an all-time high in 2018, costing $5,892 per person annually, according to a study released Thursday from the Health Care Cost Institute. Average out-of-pocket spending increased to $907 per person annually."

"The Federal Retirement Thrift Investment Board (FRTIB) is proposing to amend its regulations to increase the automatic enrollment percentage from 3 percent to 5 percent of basic pay for all participants who are automatically enrolled in the Thrift Savings Plan (TSP) on or after October 1, 2020 and for Blended Retirement Service (BRS) participants who are automatically re-enrolled in the TSP on or after January 1, 2021."

"This wrongdoing in this case continued when the plan participant, after discovering her claims would not be paid, requested a copy of the plan documents. She wanted to be able to review the documents to determine how to appeal and what rights she had under the plan. The plan sponsor failed to provide plan documents. In order to remedy the situation, the plan participant chose to sue her employer in order to cover her medical costs. During discovery, the requested plan documents were finally provided, several years late." [Kinsinger v. SmartCore, LLC, No. 17-643 (W.D.N.C. Aug. 27, 2019)]

"[CMS] has proposed methods to calculate and impose civil money penalties (CMPs) when a group health plan (GHP) or a non‑group health plan (NGHP) entity fails to comply with Medicare Secondary Payer (MSP) reporting requirements. ... Should a GHP fail to perform the required Section 111 reporting within one year of the coverage effective date, it would be subject to a CMP of $1,000 for each day of noncompliance for each individual whose coverage information should have been reported.... Entities that have performed Section 111 reporting as required, but subsequently provide information that contradicts reported information in response to MSP recovery efforts, would be subject to a CMP based on the number of days that the entity failed to appropriately report updates to beneficiary records.... CMS has proposed an error tolerance that would not exceed a 20% threshold."

21 Q&As. Topics: [1] Retail Customer; [2] Recommendation; [3] Disclosure Obligation; [4] Care Obligation; [5] Conflict of Interest Obligation; [6] Compliance Obligation.

"Because the [Thrift Savings Plan (TSP)] has relied on the IRS' disaster relief announcements to authorize hardship withdrawals for expenses and lost income relating to natural disasters, and because those announcements will no longer be made by the IRS in light of its amended regulation, the FRTIB proposes to add to its list of authorized hardship expenses, the expenses and losses (including loss of income) resulting from a natural disaster as declared by the FEMA in order to allow TSP participants to make financial hardship withdrawals for such natural disaster expenses."