The Internal Revenue Service (IRS) recently announced cost-of-living adjustments to the applicable dollar limits for health savings accounts and high-deductible health plans for 2020. Nearly all of the dollar limits currently in effect for 2019 will change for 2020.
See a comparison of the applicable dollar limits for HSAs and HDHPs for 2019 and 2020.
In certain cases of a facility sale, restructuring or cessation, recently released information by the Pension Benefit Guaranty Corporation (PBGC) leaves many unanswered questions about plan sponsor liability for single-employer defined benefit plans. Given the lack of clarity, these plan sponsors should continue to consult their lawyer in any type of transaction, restructuring or cessation that approaches a 15 percent demographic change in a plan sponsor’s controlled group over a three-year period.
Recently the Internal Revenue Service (IRS) and the Social Security Administration announced the cost-of-living adjustments to the applicable dollar limits on various employer-sponsored retirement and welfare plans and the Social Security wage base for 2019. The table below compares the applicable dollar limits for certain employee benefit programs and the Social Security wage base for 2018 and 2019.*
UPDATE: On Thursday, November 11, 2018, the Internal Revenue Service announced that, for calendar year 2019, the annual maximum salary reduction limit for contributions to a health flexible spending account was increased by $50 to $2,700.
RETIREMENT PLAN LIMITS 2018 2019 Annual compensation limit $275,000 $280,000 401(k), 403(b) & 457(b) before-tax contributions $18,500 $19,000 Catch-up contributions (if age 50 or older) $6,000 $6,000 Highly compensated employee threshold $120,000 $125,000 Key employee officer compensation threshold $175,000 $180,000 Defined benefit plan annual benefit and accrual limit $220,000 $225,000 Defined contribution plan annual contribution limit $55,000 $56,000 Employee stock ownership plan (ESOP) limit for determining the lengthening of the general five-year distribution period $220,000 $225,000 ESOP limit for determining the maximum account balance subject to the general five-year distribution period $1,105,000 $1,130,000 HEALTH AND WELFARE PLAN LIMITS Health Flexible Spending Accounts Maximum salary reduction limit $2,650 $2,700 High Deductible Health Plans (HDHP) and Health Savings Accounts (HSA) HDHP – Maximum annual out-of-pocket limit (excluding premiums): Self-only coverage $6,650 $6,750 Family coverage $13,300 $13,500 HDHP – Minimum annual deductible: Self-only coverage $1,350 $1,350 Family coverage $2,700 $2,700 HSA – Annual contribution limit: Self-only coverage $3,450 $3,500 Family coverage $6,900 $7,000 Catch-up contributions (age 55 or older) $1,000 $1,000 SOCIAL SECURITY WAGE BASE Social Security Maximum Taxable Earnings (dollars) $128,400 $132,900
Plan sponsors should update payroll and plan administration systems for the 2019 cost-of-living adjustments and should incorporate the new limits in relevant participant communications, like open enrollment materials and summary plan descriptions.
For further information about applying the new employee benefit plan limits for 2019, contact your regular McDermott lawyer.
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*The dollar limits are generally applied on a calendar year basis; however, certain dollar limits are applied on a plan-year, tax-year, or limitation-year basis.
Late last month, the IRS released the latest version of its Employee Plans Compliance Resolution System, the IRS’s program for correcting retirement plan errors. The newest version of the correction program—effective beginning in 2019—includes mostly minor changes and clarifications. Most importantly, however, it requires electronic filing of Voluntary Correction Program submissions beginning April 1, 2019.
The Internal Revenue Service (IRS) recently released “Issue Snapshots” on a number of topics related to tax-qualified retirement plans, including both pension and savings plans. Historically, the snapshots have explained new(er) laws and guidance, and have often included audit tips for IRS examiners. As a result, although the IRS has indicated that the snapshots are not official pronouncements of law or directives, the snapshots provide helpful insight into issues that the IRS thinks merit further discussion or clarification. Therefore, the snapshots can be instructive for plan sponsors and plan administrators.
The Department of Labor’s fiduciary rule has recently been rendered unenforceable following a recent 5th Circuit Court of Appeals decision. In an article published by the Society for Human Resource Management, McDermott partner Brian Tiemann weighs in on what this means for plan sponsors. “As a result of the Fifth Circuit’s ruling, the suitability standard is effectively restored” for advising plan participants on investments, distributions and rollovers, Tiemann observed. He also points out that advisors may want to revise service agreements with plan fiduciaries to clarify the scope of advice that fiduciaries will provide participants.
Originally published by the Society for Human Resource Management, May 2018.
In a recent 2-1 decision, the Fifth Court vacated the US Department of Labor’s controversial expansion of the ERISA fiduciary regulations (the New Fiduciary Rule). If the DOL does not seek a rehearing, the Fifth Circuit will enter a mandate revoking the New Fiduciary Rule nationwide. However, given recent fiduciary regulations proposed by the Securities and Exchange Commission, the DOL may be less likely to appeal the ruling and no longer seek to enforce the New Fiduciary Rule.
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.
CMS released a broad-ranging proposed rule for the Medicare Advantage and Part D Programs on Thursday, November 16, 2017. The proposed rule addresses a broad and diverse range of MA and Part D regulatory requirements, affecting not only Medicare Advantage Organizations and Part D Sponsors, but also health care providers, pharmacies, pharmaceutical manufacturers and others.
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