The Bipartisan Budget Act helped avoid another government shutdown, but did it cause problems for your benefit plans? Sarah L. Engle and D. Finn Pressly will discuss everything you need to know about the new legislation, including changes to hardship distributions and new wildfire relief. The panel will also bring you up to speed on other key developments in the employee benefits sphere over the last month.
The Department of Labor announced increased penalties for employee benefit plans under ERISA. The increases generally apply to penalties that involve employee benefit reporting and disclosure failings if the penalty is assessed after January 2, 2018, and if the violation occurred after November 2, 2015. We’ve compiled a resource outlining the ERISA penalty amounts assessed for violations on or before January 2, 2018, and those amounts assessed after January 2.
Last month, the Internal Revenue Service (IRS) published Revenue Procedure 2018-4, which modified the user fee schedule for submissions under the IRS’s Voluntary Correction Program (VCP).
Under the new fee schedule, all VCP compliance fees are now based on the total net plan assets reported on a plan’s annual Form 5500-series return. This means that for VCP submissions filed on or after January 2, 2018, compliance fees will be:
Prior to January 2, 2018, compliance fees were generally based on the total number of plan participants reported on a plan’s Form 5500, and ranged from $500 (for plans with 20 or fewer participants) to as much as $15,000 (for plans with 10,000 or more participants). In addition, special reduced compliance fees applied to VCPs involving some of the most common plan failures (e.g. certain plan loan and required minimum distribution failures). However, under the new fee schedule, most reduced fees have been eliminated. Only the reduced user fee for group submissions and the special fee waiver for terminating orphan plans remains unchanged.
Ultimately, for many large plan sponsors, the new asset-based fee schedule could significantly reduce the VCP compliance fee for correcting certain plan errors. However, for small plans covering fewer than 100 participants, the cost of correcting plan errors will increase to at least $1,500 (and perhaps even more, depending on the total net assets held by the plan). In addition, for all plan sponsors, the cost of correcting many of the most common plan errors will actually increase significantly.
After some speculation about a delay in implementation of the final rules on claims adjudication of disability claims under welfare and retirement plans (the Final Rule), the US Department of Labor (DOL) confirmed that the Final Rule will be applicable beginning April 1, 2018. McDermott’s article detailing the new requirements in the Final Rule can be found here. A disability welfare or retirement benefit claim, as well as claims under certain executive compensation arrangements, severance plans and other payment plans subject to ERISA’s claims procedures, will be subject to the Final Rule if the benefit is conditioned upon a claimant’s disability, and the claims adjudicator must make a determination of disability in order to decide the claim. However, if a plan links the finding of disability to a determination made by a party other than the plan (e.g., a finding made under the employer’s long-term disability plan or a determination of disability made by the Social Security Administration), then the special rules for disability claims are not applicable to a claim for benefits under such plan.
Plan sponsors and administrators should review retirement, welfare, executive compensation and severance plans to determine whether such benefits are subject to the Final Rule’s additional requirements. Any language detailing claim procedures in plan documents and summary plan descriptions should be updated, and disability claim and appeal administrative practices and procedures, as well as disability claim and appeal notices should be revised to comply with the Final Rule.
The Tax Cuts and Jobs Act made significant changes to the tax code and will have a significant impact on businesses and individual taxpayers. However, although initial proposals included potentially significant changes to employer-sponsored retirement plans, the impact of the final bill on employer sponsored retirement plans will be relatively minor.
Make a New Year’s resolution to improve the fiduciary governance practices for your employee benefit plans. Join McDermott lawyers Brian Tiemann and Finn Pressly for a refresher course on your fiduciary duties, an overview of common pitfalls and best practice tips to keep your plan administration on track in 2018. We will also provide an update on the Department of Labor’s expansion of the fiduciary rule and what the latest extension of the special transition period means for plan sponsors and service providers.
Date: Friday, January 5, 2017
Time: 10:00 – 10:45 am PST
11:00 – 11:45 am MST
12:00 – 12:45 pm CST
1:00 – 1:45 pm EST
Mark your calendars for the first Friday of every month! McDermott’s Employee Benefits Group will be delivering timely topics in our “Fridays With Benefits” monthly webinar series.
Tax-exempt organizations—especially hospitals and health systems—face a new tax reality now that both houses of Congress have voted to pass the final tax reform bill.
On Wednesday, both houses of Congress voted to pass the final tax reform bill (the Act) and send it to President Trump for signature. The Act represents the most sweeping overhaul of the tax code in decades and will have a significant impact on businesses and individual taxpayers. The final bill also includes changes that will impact employer-provided benefits, including fringe benefits, certain types of executive compensation and benefits provided through tax-qualified retirement plans.
For more information about some of these changes, please see our On The Subject publications or visit our Tax Reform Resource Center.
Joe Urwitz, Todd Solomon and Chris Nemeth discuss provisions of The Employee Retirement Income Security Act of 1974 (ERISA) of particular relevance to tax-exempt entities and their investment managers, as well as ongoing litigation against Section 403(b) plans.
On Saturday, the Senate passed its version of the Tax Cuts and Jobs Act. The process of reconciling the House and Senate versions of the bill has already begun in earnest. Currently, the retirement-plan-related changes included in each version of the bill still differ in many respects, and it is unclear which (if any) changes will be included in the final bill. As a result, with only a few weeks left until the holiday recess, a clear picture of the potential impact of tax reform on retirement plan sponsors has yet to emerge.
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