News Items

"Section 409A compliance present[s] perhaps the most challenging question for sponsors of nonqualified deferred compensation plans (NDCPs) during a merger and acquisition (M&A) due diligence test.... Two [additional] questions are 'fit' related: [1] will the NDCPs still fit within the top-hat exemption post-merger; and [2] have the NDCPs' [FICA] taxes been properly applied to the benefits? This article prepares NDCP sponsors to answer these two important topics and alert them to any trick questions they may pose."

50 pages. "With the exception of meals provided so that certain employees are available to respond to emergencies, Taxpayer has not demonstrated that its belief that its reasons for furnishing meals to its employees qualified such meals for the exclusion from income under section 119 was an objectively reasonable belief based on an understanding of the law, IRS guidance related to section 119, and application of section 119 in case law. The snack areas and employee desks used for consuming meals ... do not qualify as an eating facility as defined in Section 1.132-7, and therefore fair market value must be used in determining the amount to include for meals furnished to employees by Taxpayer[.]" [Dated Sept. 14, 2018; published online Feb. 15, 2019.]

"What is CalSavers? ... Which employers must participate? ... When is it effective? ... What are the advantages of participating in the CalSavers program? ... What are the drawbacks of the CalSavers law? ... How does an employer participate in CalSavers? ... What are the penalties for failing to comply with CalSavers? ... What is the status of CalSavers? ... Do any other states or cities have similar laws?"

23 pages. "In 2017, per-person spending reached $5,641, a new all-time high for this population.... Average prices increased 3.6% in 2017. Year-over-year price growth decelerated throughout the five-year period, rising 4.8% between 2013 and 2014 and slowing to 3.6% in 2016 and 2017.... The overall use of health care services changed very little over the 2013 to 2017 period, declining 0.2%.... Out-of-pocket spending per-person increased 2.6% in 2017." [Also available: data download in .CSV file format, HCCI's updated analytic methodology, and a State-level interactive tool.]

"It's critical to meet these deadlines if you are responsible for administering your company's defined benefit plan. From making quarterly contributions to issuing the annual funding notice to participants, it can feel overwhelming. [This calendar will] help you stay on track[.]"

"[A]lthough the average nominal public pension fund investment return has been declining, because the average rate of assumed inflation has been dropping more quickly, the average real rate of return has risen, from 4.21 percent in FY02 to 4.56 percent in FY17. One factor ... is public pension funds' higher allocations to alternative assets, particularly to private equities, which usually have a higher expected return than other asset classes."

24 pages. "Most of the plans studied received insufficient contributions to reduce their unfunded liabilities ... The percentage of plans whose contributions were insufficient to reduce unfunded liabilities as a dollar amount ... but were sufficient to reduce unfunded liabilities as a percent of payroll ... increased from 36% in fiscal year 2003 to 77% in 2017 ... [Of] plans whose contributions did not reduce unfunded liabilities as a dollar amount, ... more than half also fell short of the plans' Actuarially Determined Contributions (ADC) or other target contributions"

Feb. 11, 2019. "How to avoid the mistake: [1] Review the plan document language ... [2] When you amend your plan document, make certain the language for hardship distributions is in the most recent document. [3] Establish hardship distribution procedures ... [4] Only allow hardship distributions that meet the plan document and IRC Section 401(k) requirements. [5] Look for signs that the hardship distribution program is being abused or badly managed."

"[This] toolkit for IRS Sections 6055 and 6056 reporting requirements will help reporting employers comply with the requirements and avoid penalties.... Although the penalty for the individual mandate was reduced to $0 on January 1, 2019, employers are still required to report to the IRS and provide statements to employees."

"[This] chart provides an explanation of key plan events and the deadline for each for Section 401(a) and 401(k) defined contribution plans with a plan year ending December 31, 2019. Off-calendar year plans should adjust the deadlines accordingly based on the time frames described in the chart."

"Employers with health plans that provide prescription drug coverage to individuals who are eligible for Medicare Part D are subject to certain disclosure requirements. Plan sponsors must complete an online disclosure form with CMS within 60 days after the start of the plan year, or March 1, 2019, for calendar year plans."

"Recently, the National Tax-Deferred Savings Association [NTSA] released a report titled Improving Retirement Savings for America's Public Educators in which it aims to provide evidence that increasing or maintaining (many) choices for public educators increases participation.... The main conclusion was that 'The data shows a decrease in the participation rates for 403(b) plans when the number of choices are reduced.' If true, this report would be evidence that Nobel winning research on behavioral finance is wrong. However, it's not true. The data doesn't confirm the claims[.]"

"[A]ssuming that the law evolves to more clearly require courts to enforce those provisions in ERISA cases, employers should give serious consideration to whether they want to include those provisions in their employment agreements and/or plan documents, or attempt to compel arbitration of cases that would otherwise be litigated in federal court under ERISA. The decision is not as straightforward as it may at first seem."

Updated Feb. 6, 2019. "Plan sponsors should ensure that their plan document allows loans before allowing participants to borrow money from the plan. Some plan documents include a complete description of loan rules. Others make only a statement that the plan allows participant loans, subject to a separate written loan program. A participant loan must meet several rules under IRC Section 72(p) to prevent the law from treating it as a taxable distribution."

"[ASPE] assessed the degree to which behavioral health coverage and medical/surgical coverage in individual and small group plans changed after federal parity requirements in coverage took effect in 2014. The results focus on changes in scope of coverage (what conditions and services are covered) and level of coverage (quantitative restrictions, such as the co-payment and limits on visits). The findings suggest that parity legislation may have had the intended effect."

35 pages. "This report presents the current-law structure of auxiliary benefits for spouses, divorced spouses, and surviving spouses. It makes note of adequacy and equity concerns of current-law spousal and widow(er)'s benefits, particularly with respect to female beneficiaries, and discusses the role of demographics, the labor market, and current-law provisions on adequacy and equity. The report concludes with a discussion of proposed changes to spousal and widow(er) benefits to address these concerns." [Report R41479, updated Feb. 6, 2019]

45 pages. "It has been nearly 40 years since a federal commission has conducted a comprehensive evaluation of the nation's approach to financing retirement. Without a more comprehensive re-evaluation of the challenges across all three pillars of the system, it may be difficult to identify effective, enduring solutions. Unless timely action is taken, many older Americans risk not having sufficient means for a secure and dignified retirement." [GAO-19-342T, Feb. 6, 2019]

"[W]hen an S corporation makes an employer contribution to an employer-sponsored retirement plan, that contribution, itself, reduces corporate profits.... [F]or some S corporation owners, a contribution to an employer-sponsored retirement plan will effectively result in a partial deduction, but still subject the entire contribution, plus all future earnings, to income tax upon distribution."

"The proposed regulations may especially be useful for small and medium-sized companies that want to be able to define the costs that they are willing to pay towards employee health insurance coverage by using HRAs with a fixed annual employer contribution and that have a small enough workforce to satisfy some of the consistency requirements of the proposed regulations."

"The purpose of this column is to translate some key actuarial and investment concepts into something approaching plain English, and to provide a framework for helping an employer who has a DB plan understand what they have and what to do with it. The purpose is not to teach the basics, but to attempt to show a path toward communicating the basics meaningfully."

27 pages. "[This report] combines: [1] Background on the local government workforce; [2] A review of the literature on what is known about financial literacy; [3] Data from a survey of elected officials and human resources directors from local governments across the United States; [4] Insights gained from discussions with city managers and budget officers; [5] Recommendations for practitioners, focusing on program topic and mode, tailoring programs to diverse groups ... and assessing results."

"Regional associations launched 71 percent of new AHPs.... 4 out of 5 new AHPs are insured through a third-party insurance company as opposed to self-funded. Maximum savings claims average higher for self-funded plans than fully-insured plans, though both are in double digits.... Half of new AHPs are limited to companies of 2-50 employees. 43 percent of new AHPs are available to sole proprietors and the self-employed. Benefit information trends toward comprehensive health coverage that includes items such as mental health benefits and prescription drug coverage alongside mandated benefits such as maternity."

12 pages. "Despite variability among these plans, most contain the core features known to promote retirement security: mandatory participation, shared financing between employers and employees, pooled assets invested by professionals, targeted income replacement with survivor and disability protection, and a benefit that cannot be outlived."

"[1] Medicare's share of the nation's retail prescription drug spending has increased from 18% in 2006 to 30% in 2017.... [2] Prescription drugs covered under both Part B and Part D accounted for 19% of all Medicare spending in 2016.... [3] Ten drugs accounted for 17% of all Part D spending in 2016 ... [4] Prescription drugs accounted for $1 in every $5 that Medicare beneficiaries spent out-of-pocket on health care services in 2016, not including premiums."

"This note presents analysis of theoretical internal real rates of return for hypothetical workers with various earnings patterns and levels under the Old-Age, Survivors, and Disability Insurance (OASDI) program.... [I]nternal rates of return attempt to answer the question: If an individual or group of workers with selected characteristics were to invest contributions to fund future benefits (including dependents), what real annual yield would be required to finance those future benefits?"