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IRS Issues Guidance on Changes to Determination Letter Program for Retirement Plans

The Internal Revenue Service recently issued Revenue Procedure 2016-37, which sets forth in detail the significant changes to the IRS’s determination letter program for qualified retirement plans, which we have written about in previous alerts. The changes will be effective January 1, 2017. The most significant change is the IRS’s elimination of the staggered five-year remedial amendment cycle for individually designed plans. As of January 1, 2017, sponsors of individually designed plans will be permitted to submit determination letter applications only for initial plan qualification, qualification upon plan termination, and certain other circumstances that will be determined each year by the IRS.

Employer-Sponsored Benefits in the Gig Economy

As the gig economy grows, policymakers are asking, “what happens with employee benefits?” Specifically, if gig workers are not classified as employees, what options should they have for retirement savings and health insurance? And what should gig businesses do?

IRS Proposes Regulations on Group Health Benefit Opt-Out Payments

The IRS has issued proposed regulations that confirm the position it took in Notice 2015-87 with regard to unconditional opt-out payments - payments made to employees who forgo group health benefits and increase the amount of their monthly premium by the amount of the payments. The proposed regulations, which also cover eligible conditional opt-out payments, would take effect for plan years beginning in 2017. The IRS anticipates issuing final regulations before the end of 2016.

Proposed Changes to Section 409A are Welcome (for the Most Part)

The Internal Revenue Service recently issued proposed regulations under Section 409A of the Internal Revenue Code (“Section 409A”) in an effort to clarify and modify parts of the current final regulations (issued in 2007) and proposed income inclusion regulations. For the most part, the proposed regulations are consistent with how most practitioners have been interpreting and applying the final regulations. The proposed regulations do provide some helpful new guidance as well. However, the revisions to the proposed income inclusion regulations limit the ability to make changes to unvested amounts without incurring Section 409A penalties.

Employee Benefits Newsletter – Summer 2016

What the New Fiduciary Rule Means for Plan Sponsors and Fiduciaries. On April 8, 2016, the Department of Labor published its final rule on who is a fiduciary as a result of giving investment advice under the Employee Retirement Income Security Act of 1974 (the “New Fiduciary Rule”) as well as related exemptions. Although the New Fiduciary Rule is targeted mainly at the providers of investment advice, it contains a number of provisions that are relevant to sponsors and fiduciaries of qualified retirement plans (e.g., 401(k) plans and traditional pension plans).

Employers Wonder How to Respond to Marketplace Notices

Many employers have begun receiving Health Insurance Marketplace notices – letters stating that a particular employee reported that he or she wasn’t offered affordable minimum value coverage for one or more months during 2016. The letter states that the employee has been determined to be eligible for subsidized Marketplace coverage. This means, if the employer is an “applicable large employer” for purposes of the Affordable Care Act’s employer shared responsibility penalties, the employer may be subject to penalties with respect to that employee.

More Clarity on Expatriate Health Plans and the ACA

Expatriate health plans have been surprisingly difficult to reconcile with the Affordable Care Act (ACA). Proposed regulations set to take effect in 2017 provide some useful guidance to U.S. employers that sponsor expatriate plans as they try to avoid triggering ACA penalties.

DOL Rule Imposes Significant Increases in Penalties for Employee Benefit Plan Violations

On June 30, 2016, the U.S. Department of Labor (“DOL”) issued an interim final rule that significantly increases various penalties under the Employee Retirement Income Security Act of 1974 (“ERISA”). The interim rule is the result of a 2015 amendment to the Federal Civil Monetary Penalties Inflation Adjustment Act of 1990, which required federal agencies to issue an interim final rule by July 1, 2016, that adjusts civil penalties for inflation. The amendment further requires federal agencies to continue to adjust civil penalties for inflation on an annual basis.

DETERMINATION LETTER RATIONING: IRS REVEALS THE BRAVE NEW WORLD

Last year’s announcement by the Internal Revenue Service (IRS) of the elimination of the current five-year remedial amendment cycle system for determination letter approval of restated individually-designed qualified plan documents provoked bitter criticism and calls to reverse course. The Service cited budget constraints allowing a median time of only three hours of agent review per plan for the necessity of severely restricting the issuance of letters.

IRS Issues Proposed Regulations on Health Plan Opt-Out Payments

The Internal Revenue Service (“IRS”) has issued proposed regulations that include additional guidance on the treatment of employer-provided opt-out payments for purposes of affordability under the Affordable Care Act (“ACA”). An “opt-out” payment is a cash payment made to employees who decline to enroll in the employer’s group health plan.