IRS Announces COLA Adjusted Retirement Plan Limitations for 2019

The Internal Revenue Service today released Notice 2018-83 announcing cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2019.

Highlights Affecting Plan Sponsors of Qualified Plans for 2019

  • The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from  $18,500 to $19,000. The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans and the federal government’s Thrift Savings Plan remains unchanged at $6,000.
  • The limit on annual contributions to an IRA, which last increased in 2013, is increased from $5,500 to $6,000. The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
  • The limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) is increased from $220,000 to $225,000.
  • The limitation for defined contribution plans under Section 415(c)(1)(A) is increased in 2019 from $55,000 to $56,000.
  • The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $275,000 to $280,000.
  • The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan is increased from $175,000 to $180,000.
  • The dollar amount under Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a five year distribution period is increased from $1,105,000 to $1,130,000, while the dollar amount used to determine the lengthening of the five year distribution period is increased from $220,000 to $225,000.
  • The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) is increased from $120,000 to $125,000.
  • The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts is increased from $12,500 to $13,000.

The IRS previously Updated Health Savings Account limits for 2019. See our post here.

The following chart summarizes various significant benefit Plan limits for 2017 through 2019:

Type of Limitation 2019 2018 2017
415 Defined Benefit Plans $225,000 $220,000 $215,000
415 Defined Contribution Plans $56,000 $55,000 $54,000
Defined Contribution Elective Deferrals $19,000 $18,500 $18,000
Defined Contribution Catch-Up Deferrals $6,000 $6,000 $6,000
SIMPLE Employee Deferrals $13,000 $12,500 $12,500
SIMPLE Catch-Up Deferrals $3,000 $3,000 $3,000
Annual Compensation Limit $280,000 $275,000 $270,000
SEP Minimum Compensation $600 $600 $600
SEP Annual Compensation Limit $280,000 $275,000 $270,000
Highly Compensated $125,000 $120,000 $120,000
Key Employee (Officer) $180,000 $175,000 $175,000
Income Subject To Social Security Tax  (FICA) $132,900 $128,400 $127,200
Social Security (FICA) Tax For ER & EE (each pays) 6.20% 6.20% 6.20%
Social Security (Med. HI) Tax For ERs & EEs (each pays) 1.45% 1.45% 1.45%
SECA (FICA Portion) for Self-Employed 12.40% 12.40% 12.40%
SECA (Med. HI Portion) For Self-Employed 2.9% 2.9% 2.9%
IRA Contribution $6,000 $5,500 $5,500
IRA Catch-Up Contribution $1,000 $1,000 $1,000
HSA Max. Contributions Single/Family Coverage $3,500/ $7,000 $3,450/ $6,900 $3,400/ $6,750
HSA Catchup Contributions $1,000 $1,000 $1,000
HSA Min. Annual Deductible Single/Family $1,350/ $2,700 $1,350/ $2,700 $1,300/ $2,600
HSA Max. Out Of Pocket Single/Family $6,750/ $13,500 $6,650/ $13,300 $6,550/ $13,100

ERISA Benefits Law Receives Recognition as a Top Tier Law firm in 2018 U.S. News – Best Lawyers® “Best Law Firms” Rankings

We are happy to announce that ERISA Benefits Law has again been recognized as a top tier law firm in the 2018 U.S. News – Best Lawyers® “Best Law Firms” rankings. The firm received a Tier 1 metropolitan ranking in Tucson, Arizona in Employee Benefits (ERISA) Law. We are grateful for the recognition of our peers, and the trust of our clients, as a niche ERISA and employee benefits law firm focused on providing the highest quality legal services at the most affordable rates anywhere.

The U.S. News – Best Lawyers “Best Law Firms” rankings are based on a rigorous evaluation process that includes the collection of client and lawyer evaluations, peer review from leading attorneys in their field, and review of additional information provided by law firms as part of the formal submission process.

PBGC’s Expanded Missing Participant Program Final Rule Covers DC Plans and non-PBGC Insured DB Plans

As authorized by the Pension Protection Act of 2006 (PPA), the Pension and  Benefit Guarantee Corporation (PBGC) has issued a final regulation that expands PBGC’s missing participants program, effective as of plan terminations that occur on or after January 1, 2018. PBGC’s missing participant program was previously limited to terminated single-employer DB plans covered by title IV’s insurance program. It is now available to other terminated retirement plans.

Summary of How the PBGC MIssing Participant Program Applies to Defined Contribution (DC) Plans and non-PBGC Defined Benefit Plans

The revised program now provides that PBGC’s missing participants program is voluntary for terminated non-PBGC-insured plans, e.g.,DC plans.

In addition, a non-PBGC-insured plan that chooses to use the program may elect to be a “transferring plan” or a “notifying plan.” A transferring plan sends the benefit amounts of missing distributees to PBGC’s missing participants program. A notifying plan informs PBGC of the disposition of the benefits of one or more of its missing distributees. Section 4050(d)(1) of ERISA permits but does not require non-PBGC-insured plans covered by the program to turn missing participants’ benefits over to PBGC.

A DC plan that chooses to participate in the missing participants program and elects to be a transferring plan must transfer the benefits of all its missing participants into the missing participants program. PBGC explains that this is to prevent the possibility of “cherry-picking”—that is, selective use of the missing participants program—by transferring plans.

PBGC will charge a one-time $35 fee per missing distributee, payable when benefit transfer amounts are paid to PBGC. There will be no charge for amounts transferred to PBGC of $250 or less. There will be no charge for plans that only send to PBGC information about where benefits are held (such as in an IRA or under an annuity contract). Fees will be set forth in the program’s forms and instructions.

The program definition of “missing” for DC plans follows Department of Labor regulations, which treat DC plan distributees who cannot be found following a diligent search similar to distributees whose whereabouts are known but who do not elect a form of distribution.

A distributee is treated as missing if, upon close-out, the distributee does not accept a lump sum distribution made in accordance with the terms of the plan and, if applicable, any election made by the distributee. For example, if a check issued pursuant to a distributee’s election of a lump sum remains uncashed after the last date prescribed on the check or an accompanying notice (e.g., by the bank or the plan) for cashing it (the “cash-by” date), the distributee is considered not to have accepted the lump sum.

A DC plan must search for each missing distributee whose location the plan does not know with reasonable certainty. The plan must search in accordance with regulations and other applicable guidance issued by the Secretary of Labor under section 404 of ERISA. See the DOL’s FAB 2014-01 for guidance on search steps. Compliance with that guidance satisfies PBGC’s “diligent search” standard for DC plans.

Some other major features of the new program include:

  • A unified unclaimed pension database of information about missing participants and their benefits from terminated DB and DC plans.
  •  A centralized, reliable, easy-to-use directory through which persons who may be owed retirement benefits from DB or DC plans could find out whether benefits are being held for them.
  • Periodic active searches by PBGC for missing participants.
  • Fewer benefit categories and fewer sets of actuarial assumptions for DB plans determining the amount to transfer to PBGC and a free on-line calculator to do certain actuarial calculations.

Visit the PBGC’s Missing Participant site for more information, including an  explanation of the plans covered by the program and the forms and instructions to use with the program.

Our prior post on the proposed regulations is here

9th Circuit Clarifies Service Provider’s Fiduciary Duties When Negotiating Fees and When Withdrawing Fees from Plan Assets

The Ninth Circuit Court of Appeals has issued an opinion in Santomenno v. Transamerica LLC, clarifying the circumstances under which a retirement plan investment service provider  breaches (and does not breach) its fiduciary duties when negotiating its fees and when collecting the agreed fees from plan accounts.

The Case

The trial court in this case held that the plan investment service provider breached its fiduciary duties to plan beneficiaries first when negotiating with the employer about providing services to the plan and later when withdrawing predetermined fees from plan funds.

The 9th Circuit held that a plan administrator is not an ERISA fiduciary when negotiating its compensation with a prospective customer. The employer/plan sponsor doing the hiring is acting under a fiduciary duty when it negotiates these fees. Therefore, the prospective service provider did not breach its duties in negotiating for the fees it wanted to receive.

The Court also held that the service provider was not a fiduciary with respect to its receipt of revenue sharing payments from investment managers after it became a service provider to the Plan because the payments were fully disclosed before the provider agreements were signed and did not come from plan assets.

Finally, and most significantly, the Court held that the service provider also did not breach its fiduciary duty with respect to its withdrawal of the preset fees from plan funds. The Court concluded that when a service provider’s definitively calculable and nondiscretionary compensation is clearly set forth in a contract with the fiduciary-employer, collection of those fees out of plan funds in strict adherence to that contractual term is not a breach of the provider’s fiduciary duty. The withdrawal of its fees in such circumstances is a ministerial act that does not give rise to fiduciary liability.

The Take-Aways

This case highlights the importance of the fiduciary role played by the plan sponsor and administrator when hiring service providers to the Plan. Hiring and retention decisions are fiduciary acts on the part of the employer/plan sponsor, but are not fiduciary acts on the part of the service provider being hired.

In addition, while this case illustrates that it is not always a fiduciary act for a service provider to withdraw its fees directly from plan assets, that is not true in every case. For example, if the Plan sponsor or administrator disputed a charge before the service provider withdrew its fees, or if the fees withdrawn by the service provider were based on hours worked or some other non-ministerial measure of the service provided, the withdrawal may not be ministerial. This case therefore does not give service providers free reign to withdraw fees from plan assets without consideration of their fiduciary duties.

Santomenno v. Transamerica LLC

Updated Disability Claims Procedures Go Into Effect April 2, 2018

The Department of Labor’s final rules updating the procedures for disability claims goes into effect on April 2, 2018. This post summarizes the new rules; which plans are affected by the new rules; and the next steps affected plans should take.

Affected Plans

The Claims Procedure Regulations at C.F.R. §2560.503-1 affect all ERISA Plans, including pension plans such as defined benefit and 401(k) plans, welfare benefit plans like medical and disability insurance plans. As a practical matter, the changes to the rules for disability claims only impacts plans that actually make disability determinations. Therefore, if your pension or 401(k) Plan relies on disability determinations made by a third party, like the Social Security Administration, you should not need to make any changes to your plan documents or your claims procedures as a result of the new rules.

Next Steps

Affected plans have until December 31, 2018 to adopt the necessary plan amendments, but the amendment will need  to be effective, and Plans will need to comply with the revised rules, as of April 2, 2018. Affected Plans will also need to update their Summary Plan Descriptions to reflect the new rules.

Summary of the Changes

The new rules amend the claims procedure regulation at 29 C.F.R. §2560.503-1 for disability benefits to require that plans, plan fiduciaries, and insurance providers comply with additional procedural protections when dealing with disability benefit claimants. Specifically, the final rule includes the following changes in the requirements for the processing of claims and appeals for disability benefits:

  • Basic Disclosure Requirements. Benefit denial notices must contain a more complete discussion of why the plan denied a claim and the standards used in making the decision. For example, the notices must include a discussion of the basis for disagreeing with a disability determination made by the Social Security Administration if presented by the claimant in support of his or her claim.
  • Right to Claim File and Internal Protocols. Benefit denial notices must include a statement that the claimant is entitled to receive, upon request, the entire claim file and other relevant documents. Previously, this statement was required only in notices denying benefits on appeal. Benefit denial notices also have to include the internal rules, guidelines, protocols, standards or other similar criteria of the plan that were used in denying a claim or a statement that none were used. Previously, instead of including these internal rules and protocols, benefit denial notices have the option of including a statement that such rules and protocols were used in denying the claim and that a copy will be provided to the claimant upon request.
  • Right to Review and Respond to New Information Before Final Decision. The new rule prohibits plans from denying benefits on appeal based on new or additional evidence or rationales that were not included when the benefit was denied at the claims stage, unless the claimant is given notice and a fair opportunity to respond.
  • Avoiding Conflicts of Interest. Plans must ensure that disability benefit claims and appeals are adjudicated in a manner designed to ensure the independence and impartiality of the persons involved in making the decision. For example, a claims adjudicator or medical or vocational expert could not be hired, promoted, terminated or compensated based on the likelihood of the person denying benefit claims.
  • Deemed Exhaustion of Claims and Appeal Processes. If plans do not adhere to all claims processing rules, the claimant is deemed to have exhausted the administrative remedies available under the plan, unless the violation was the result of a minor error and other specified conditions are met. If the claimant is deemed to have exhausted the administrative remedies available under the plan, the claim or appeal is deemed denied on review without the exercise of discretion by a fiduciary and the claimant may immediately pursue his or her claim in court. The revised rule also provides that the plan must treat a claim as re-filed on appeal upon the plan’s receipt of a court’s decision rejecting the claimant’s request for review.
  • Certain Coverage Rescissions are Adverse Benefit Determinations Subject to the Claims Procedure Protections. Rescissions of coverage, including retroactive terminations due to alleged misrepresentation of fact (e.g. errors in the application for coverage) must be treated as adverse benefit determinations, thereby triggering the plan’s appeals procedures. Rescissions for non-payment of premiums are not covered by this provision.
  • Notices Written in a Culturally and Linguistically Appropriate Manner. The final rule requires that benefit denial notices have to be provided in a culturally and linguistically appropriate manner in certain situations.

Budget Act Relaxes Hardship Distribution Rules

The Bipartisan Budget Act of 2018, which was signed into law on Friday, February 9, 2018, changes the rules related to hardship distributions from qualified defined contribution plans, effective for Plan Years starting after December 31, 2018, in three significant ways:

  • The Act removes the requirement that Participants exhaust the ability to take any available loans under the plan before taking a hardship distribution.
  • The Act allows Participants to take a hardship distribution from their elective deferral contribution accounts, qualified nonelective contributions (“QNECs”), and qualified matching contributions (“QMACs”), as well as from earnings on those contributions. Previously, hardship distributions could only be taken from elective deferral contributions only, and not from any earnings on deferrals.
  • The Act repeals the rule prohibiting participants from making elective deferrals and other employee contributions for six months after taking a hardship distribution.

Employers that want to implement any or all of the above relaxations in the hardship distribution rules will almost certainly need to amend their plans. While I am generally not a fan of permitting hardship distributions in qualified plans, because they undermine the purpose of retirement savings and add administrative complexity, if your plan provides for hardship distributions you will probably want to incorporate these changes because they will simplify and streamline plan administration.

IRS Issues 2017 “Required Amendments List”

The IRS has issued the 2017 “Required Amendments List” for qualified plans. This is the second list issued since the IRS eliminated the five-year remedial amendment cycle and significantly curtailed the favorable determination letter program for individually designed plans. The IRS will issue a new List each year.

This new List, set forth in Notice 2017-72 contains amendments that are required as a result of changes in qualification requirements that become effective on or after January 1, 2017. The plan amendment deadline for a disqualifying provision arising as a result of a change in qualification requirements that appears on the 2017 List must be adopted by December 31, 2019.

The Required Amendments List is divided into two parts:

Part A lists the changes that would require an amendment to most plans or to most plans of the type affected by the particular change. Part A of the 2017 List contains two changes applicable to most plans of the type affected by the changes:

Final regulations regarding cash balance/hybrid plans. Cash balance/hybrid plans must be amended to the extent necessary to comply with those portions of the regulations regarding market rate of return and other requirements that first become applicable to the plan for the plan year beginning in 2017. (This requirement does not apply to those collectively bargained plans that do not become subject to these portions of the regulations until 2018 or 2019 under the extended applicability dates provided in § 1.411(b)(5)-1(f)(2)(B)(3).)

Note: The relief from the anti-cutback requirements of § 411(d)(6) provided in § 1.411(b)(5)-1(e)(3)(vi) applies only to plan amendments that are adopted before the effective date of these regulations.

Note: See also Notice 2016-67, which addresses the applicability of the market rate of return rules to implicit interest pension equity plans.

• Benefit restrictions for certain defined benefit plans that are eligible cooperative plans or eligible charity plans described in section 104 of the Pension Protection Act of 2006, as amended (“PPA”)). An eligible cooperative plan or eligible charity plan that was not subject to the benefit restrictions of § 436 for the 2016 plan year under § 104 of PPA ordinarily becomes subject to those restrictions for plan years beginning on or after January 1, 2017. However, a plan that fits within the definition of a “CSEC plan” (as defined in § 414(y)) continues not to be subject to those rules unless the plan sponsor has made an election for the plan not to be treated as a CSEC plan.

Part B lists changes that the Treasury Department and IRS do not anticipate will require amendments in most plans, but might require an amendment because of an unusual plan provision in a particular plan. Part B of the 2017 List contains a single change that may apply to certain defined benefit plans as follows:

Final regulations regarding partial annuity distribution options for defined benefit pension plans (81 Fed. Reg.  62359). Defined benefit plans that permit benefits to be paid partly in the form of an annuity and partly as a single sum (or other accelerated form) must do so in a manner that complies with the § 417(e) regulations. Section 1.417(e)-1(d)(7) provides rules under which the minimum present value rules of § 417(e)(3) apply to the distribution of only a portion of a participant’s accrued benefit.

Section 1.417(e)-1(d)(7) applies to distributions with annuity starting dates in plan years beginning on or after January 1, 2017, but taxpayers may elect to apply § 1.417(e)-1(d)(7) with respect to any earlier period.

Note: The regulations provide relief from the anti-cutback rules of § 411(d)(6) for certain amendments adopted on or before December 31, 2017.

Note: Model  amendments that a sponsor of a qualified defined benefit plan may use to amend its plan to offer bifurcated benefit  distribution options in accordance with these final regulations are provided in Notice 2017-44.

Additional Background

In Rev. Proc. 2016-37, the IRS eliminated, effective January 1, 2017, the five-year remedial amendment/determination letter cycle for individually-designed qualified plans. After January 1, 2017, individually-designed plans will only be able to apply for a determination letter upon initial qualification, upon termination, and in certain other circumstances that the IRS may announce from time to time. See Announcement 2015-19.

To provide individually designed plans with guidance on what amendments must be adopted and when, the IRS announced that it would publish annually a Required Amendments List. The Required Amendments List generally applies to changes in qualification requirements that become effective on or after January 1, 2016. The List also establishes the date that the remedial amendment period expires for changes in qualification requirements contained on the list. Generally, an item will be included on a Required Amendments List only after guidance (including any model amendment) has been issued.

Where a required amendment appears on the List, then for an individually-designed non-governmental plan, the deadline to adopt the amendment is extended to the end of the second calendar year that begins after the issuance of the Required Amendments List in which the change in qualification requirements appear (i.e. until December 31, 2018 for items on the 2016 List; and until December 31, 2019 for items on the 2017 List.)

See our prior post regarding the 2016 Required Amendment List Here.

Updated Form 5500s Released for 2017

The U.S. Department of Labor’s Employee Benefits Security Administration, the IRS, and the Pension Benefit Guaranty Corporation (PBGC) have releasedadvance informational copies of the 2017 Form 5500 annual return/report and related instructions. The “Changes to Note” section of the 2017 instructions highlight important modifications to the Form 5500 and Form 5500-SF and their schedules and instructions.

Modifications are as follows:

  • IRS-Only Questions. IRS-only questions that filers were not required to complete on the 2016 Form 5500 have been removed from the Form 5500, Form 5500-SF and Schedules, including preparer information, trust information, Schedules H and I, lines 4o, and Schedule R, Part VII, regarding the IRS Compliance questions (Part IX of the 2016 Form 5500-SF).
  • Authorized Service Provider Signatures. The instructions for authorized service provider signatures have been updated to reflect the ability for service providers to sign electronic filings on the plan sponsor and Direct Filing Entity (DFE) lines, where applicable, in addition to signing on behalf of plan administrators.
  • Administrative Penalties. The instructions have been updated to reflect an increase in the maximum civil penalty amount under ERISA Section 502(c)(2), as required by the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015. Department regulations published on Jan. 18, 2017, increased the maximum penalty to $2,097 a day for a plan administrator who fails or refuses to file a complete or accurate Form 5500 report. The increased penalty under section 502(c)(2) is applicable for civil penalties assessed after Jan. 13, 2017, whose associated violation(s) occurred after Nov. 2, 2015 – the date of enactment of the 2015 Inflation Adjustment Act.
  • Form 5500/5500-SF-Plan Name Change. Line 4 of the Form 5500 and Form 5500-SF have been changed to provide a field for filers to indicate the name of the plan has changed. The instructions for line 4 have been updated to reflect the change. The instructions for line 1a have also been updated to advise filers that if the plan changed its name from the prior year filing(s), complete line 4 to indicate that the plan was previously identified by a different name.
  • Schedule MB. The instructions for line 6c have been updated to add mortality codes for several variants of the RP-2014 mortality table and to add a description of the mortality projection technique and scale to the Schedule MB, line 6 – Statement of Actuarial Assumptions/Methods.
    Form 5500-SF-Line 6c. Line 6c has been modified to add a new question for defined benefit plans that answer “Yes” to the existing question about whether the plan is covered under the PBGC insurance program. The new question asks PBGC-covered plans to enter the confirmation number – generated in the “My Plan Administration Account system” – for the PBGC premium filing for the plan year to which the 5500-SF applies. For example, the confirmation number for the 2017 premium filing is reported on the 2017 Form 5500-SF.

Information copies of the forms, schedules and instructions are available online

IRS Announces 2018 COLA Adjusted Limits for Retirement Plans

The IRS has released Notice 2017-64 announcing cost‑of‑living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2018.

Highlights Affecting Plan Sponsors of Qualified Plans for 2018

  • The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from  $18,000 to $18,500.
  • The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $6,000.
  • The limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) is increased from $215,000 to $220,000.
  • The limitation for defined contribution plans under Section 415(c)(1)(A) is increased in 2017 from $54,000 to $55,000.
  • The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $270,000 to $275,000.
  • The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan remains unchanged at $175,000.
  • The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) remains unchanged at $120,000.
  • The dollar amount under Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a 5‑year distribution period is increased from $1,080,000 to $1,105,000, while the dollar amount used to determine the lengthening of the 5‑year distribution period is increased from $215,000 to $220,000.
  • The compensation amount under Section 408(k)(2)(C) regarding simplified employee pensions (SEPs) remains unchanged at $600.
  • The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts remains unchanged at $12,500.

The IRS previously Updated Health Savings Account limits for 2018. See our post here.

The following chart summarizes various significant benefit Plan limits for 2016 through 2018:

Type of Limitation 2018 2017 2016
415 Defined Benefit Plans $220,000 $215,000 $210,000
415 Defined Contribution Plans $55,000 $54,000 $53,000
Defined Contribution Elective Deferrals $18,500 $18,000 $18,000
Defined Contribution Catch-Up Deferrals $6,000 $6,000 $6,000
SIMPLE Employee Deferrals $12,500 $12,500 $12,500
SIMPLE Catch-Up Deferrals $3,000 $3,000 $3,000
Annual Compensation Limit $275,000 $270,000 $265,000
SEP Minimum Compensation $600 $600 $600
SEP Annual Compensation Limit $275,000 $270,000 $265,000
Highly Compensated $120,000 $120,000 $120,000
Key Employee (Officer) $175,000 $175,000 $170,000
Income Subject To Social Security Tax  (FICA) $128,400 $127,200 $118,500
Social Security (FICA) Tax For ER & EE (each pays) 6.20% 6.20% 6.20%
Social Security (Med. HI) Tax For ERs & EEs (each pays) 1.45% 1.45% 1.45%
SECA (FICA Portion) for Self-Employed 12.40% 12.40% 12.40%
SECA (Med. HI Portion) For Self-Employed 2.9% 2.9% 2.90%
IRA Contribution $5,500 $5,500 $5,500
IRA Catch-Ip Contribution $1,000 $1,000 $1,000
HSA Max. Contributions Single/Family Coverage $3,450/ $6,850 $3,400/ $6,750 $3,350/ $6,750
HSA Catchup Contributions $1,000 $1,000 $1,000
HSA Min. Annual Deductible Single/Family $1,350/ $2,700 $1,300/ $2,600 $1,300/ $2,600
HSA Max. Out Of Pocket Single/Family $6,650/ $13,300 $6,550/ $13,100 $6,550/ $13,100

DOL Issues Additional Fiduciary Rule Enforcement Relief and FAQ Guidance

The DOL has issued temporary enforcement relief and FAQ guidance addressing the implementation of the DOL’s final fiduciary rule on investment advice conflicts and related prohibited transaction exemptions (PTEs) during the transition period beginning June 9, 2017 and ending January 1, 2018.

As background, the fiduciary rule and PTEs were effective June 7, 2016, with an initial applicability date of April 10, 2017. The applicability date was delayed 60 days to June 9, 2017. See our prior article here. In connection with the delay, the DOL amended the Best Interest Contract (BIC) exemption and the PTEs to provide transition relief that only requires adherence to the impartial conduct standards (including the best interest standard) through January 1, 2018.The standards specifically require advisers and financial institutions to:

(1) Give advice that is in the “best interest” of the retirement investor. This best interest standard has two chief components: prudence and loyalty:

  • Under the prudence standard, the advice must meet a professional standard of care as specified in the text of the exemption;
  • Under the loyalty standard, the advice must be based on the interests of the customer, rather than the competing financial interest of the adviser or firm;

(2) Charge no more than reasonable compensation; and

(3) Make no misleading statements about investment transactions, compensation, and conflicts of interest.

Highlights of the most recent transition guidance:

Temporary Enforcement Policy on Fiduciary Duty Rule (FAB 2017-02). The DOL announced on May 22, 2017 that it will not pursue claims during the transition period against fiduciaries who are “working diligently and in good faith” to comply with the new fiduciary rule and the related exemptions. The DOL also states that IRS confirms that FAB 2017-02 constitutes “other subsequent related enforcement guidance” for purposes of IRS Announcement 2017-4, which means that the IRS will not impose prohibited transaction excise taxes or related reporting obligations on any transactions or agreements during the transition period that would be subject to the DOL’s nonenforcement policy.

DOL FAQ Guidance on the Transition Period. The DOL also issued FAQs, which review the DOL’s “phased implementation approach”, and confirm that on June 9, 2017, firms and advisers who are fiduciaries need to alter their compensation practices to avoid PTEs or satisfy the transition period requirements under the BIC or another exemption. During the transition, firms should adopt policies and procedures they “reasonably conclude” are necessary to ensure that advisers comply with the impartial conduct standards. However, there is no requirement to give investors any warranty of their adoption, and those standards will not necessarily be failed if certain conflicts of interest continue during the transition period. Other highlights include a clarification that level-fee providers can rely on the BIC exemption during the transition period, and examples of participant communications and non-client-specific investment models that do not provide fiduciary advice. The guidance also indicates that the President’s mandated review (see our prior article here) has not been completed, but when it is, additional changes might be made to the rule or the PTEs.