New Lifetime Income Disclosure Requirement for Pension Benefit Statements

The DOL issued an interim final rule on August 18, 2020 that gives plan administrators the opportunity to limit their liability with respect to the lifetime income illustrations that will be required soon for pension benefit statements for defined contribution plans. The rule provides a set of assumptions to use in preparing the lifetime income illustrations, as well as model language that may be used for benefit statements.

Background

The SECURE Act amended the pension benefit statement requirements under section 105 of the Employee Retirement Income Security Act of 1974 (ERISA) to require that a participant’s accrued benefits be included on his or her pension benefit statement as both (1) a current account balance and (2) an estimated lifetime stream of payments. The SECURE Act required that the estimated lifetime stream of payments be shown as both a single life annuity (SLA) and a qualified joint and survivor annuity (QJSA), at least annually.

Actuarial Assumptions & Model Language

The interim final rule prescribes the following assumptions for calculating the lifetime stream of payments:

+ Assumed Commencement Date: Plan administrators must calculate monthly payment illustrations as if the payments begin on the last day of the benefit statement period.

+ Assumed Age: Plan administrators must assume that, on the assumed commencement, a participant is the older of age 67 or the participant’s actual age.

+ QJSA Assumptions: Plan administrators must assume that all participants have a spouse of equal age. Plan administrators must also use a  Qualified Joint and 100% Survivor Annuity.

+ Assumed Interest Rate: Plan administrators must use the 10-year constant maturity Treasury rate (10-year CMT) as of the first business day of the last month of the statement period to calculate the monthly payments.

The interim final rule requires that plan administrators provide various explanations about the estimated lifetime income payments to participants. The rule provides model language that may be used for each of the required explanations, and the model language may be integrated into a plan’s pension benefit statements or attached to the statements as an addendum. See pages 93 through 98 of the IFR for the model language.

Limitation on Liability

In accordance with the SECURE Act, the interim final rule provides that no plan fiduciary, plan sponsor, or other person will be liable under ERISA for providing a lifetime income illustration that (1) uses the published assumptions to calculate the lifetime income equivalents, and (2) uses the DOL’s model language, or language substantially similar to the model language, in participants’ benefit statements. This relief from liability addresses the concern of many plan fiduciaries that participants might sue them if actual monthly payments in retirement fall short of illustrations provided prior to retirement.

Effective Date & Comment Period

The interim final rule will be effective 12 months after the date of its publication in the Federal Register. The interim final rule includes a 60-day comment period.

For more information, please see the Interim Final Rule, the DOL Fact Sheet, and the DOL News Release.

DOL and IRS Extend Certain Timeframes for Employee Benefit Plans, Participants, and Beneficiaries Affected by the COVID-19 Outbreak

On May 4, 2020, the Employee Benefits Security Administration (EBSA, which is part of the U.S. Department of Labor) and the Internal Revenue Service (IRS) issued joint guidance extending certain timeframes otherwise applicable to group health plans, disability and other welfare plans, pension plans, and their participants and beneficiaries under ERISA and the Code.

This guidance will require Plan Sponsors to temporarily revise their administrative practices and their form notices used in connection with COBRA, HIPAA’s Special Enrollment rights, and ERISA Claim Procedures.

I. Background

HIPAA requires group health plans to provide special enrollment rights for certain people upon the loss of eligibility for other coverage, or upon the addition of a dependents due to birth, adoption, etc. Generally, group health plans must allow such individuals to enroll in the group health plan if they are otherwise eligible and if enrollment is requested within 30 days of the occurrence of the event.

COBRA permits qualified beneficiaries who lose coverage under a group health plan to elect continuation health coverage. COBRA generally provides a qualified beneficiary a period of at least 60 days to elect COBRA continuation coverage under a group health plan. Plans are required to allow payment of premiums in monthly installments, and plans cannot require payment of premiums before 45 days after the day of the initial COBRA election. COBRA continuation coverage may be terminated for failure to pay premiums timely.

Under the COBRA rules, a premium is considered paid timely if it is made not later than 30 days after the first day of the period for which payment is being made. Notice requirements prescribe time periods for employers to notify the plan of certain qualifying events and for individuals to notify the plan of certain qualifying events or a determination of disability. Notice requirements also prescribe a time period for plans to notify qualified beneficiaries of their rights to elect COBRA continuation coverage.

ERISA requires plans to establish and maintain reasonable claims procedures and imposes additional rights and obligations with respect to internal claims and appeals and external review for non-grandfathered group health plans.

II. Temporary Extensions Under the Guidance

All of the foregoing provisions include timing requirements for certain acts in connection with employee benefit plans, some of which have been temporarily modified by the new guidance. These changes, and the implications for Plan Sponsors, are summarized below.

A. Relief for Plan Participants, Beneficiaries, Qualified Beneficiaries, and Claimants

Subject to a one year statutory duration limitation, all group health plans, disability and other employee welfare benefit plans, and employee pension benefit plans subject to ERISA or the Code must disregard the period from March 1, 2020 until sixty (60) days after the announced end of the National Emergency (the “Outbreak Period”) for all plan participants, beneficiaries, qualified beneficiaries, or claimants wherever located in determining the following periods and dates—

(1) The 30-day period (or 60-day period, if applicable) to request special enrollment under ERISA section 701(f) and Code section 9801(f)

Implications for employers:

  • Work with your third-party administrator and insurance carriers to ensure the extended special enrollment period is implemented for the duration of the Outbreak Period, which could require retroactive coverage as far back as March 1.
  • Determine whether and how to communicate the extension to employees.

(2) The 60-day election period for COBRA continuation coverage under ERISA section 605 and Code section 4980B(f)(5)

(3) The date for making COBRA premium payments pursuant to ERISA section 602(2)(C) and (3) and Code section 4980B(f)(2)(B)(iii) and (C)

(4) The date for individuals to notify the plan of a qualifying event or determination of disability under ERISA section 606(a)(3) and Code section 4980B(f)(6)(C)

Implications for Employers:

  • This exacerbates the adverse selection issue inherent in COBRA because Plans may have to provide retroactive coverage for many months.
  • The problem is made worse by the fact that, even though qualified beneficiaries theoretically have to pay for the retroactive coverage, if they elect COBRA right after the qualifying event, they do not have to pay until after the Outbreak Period ends. This means a qualified beneficiary could elect COBRA and receive the coverage) and then subsequently decide not to pay for it. Plan Sponsors and insurers will then have the option of retroactively terminating the coverage and trying to adjust the claims already paid.
  • Work with your third-party administrator and insurance carriers to ensure they have implemented the extended COBRA periods.
  • Either temporarily revise your COBRA notices and forms or ensure a temporary cover is added to all COBRA communications as necessary to inform employees and qualified beneficiaries of the extended timeframes.

(5) The date within which individuals may file a benefit claim under the plan’s claims procedure pursuant to 29 CFR 2560.503-1

(6) The date within which claimants may file an appeal of an adverse benefit determination under the plan’s claims procedure pursuant to 29 CFR 2560.503-1(h)

Implications for Employers:

  • Work with your third-party administrator and insurance carriers to ensure they have implemented the extended claims periods.
  • Either temporarily revise your claims notices and forms or ensure a temporary cover is added to all claims communications as necessary to inform employees and qualified beneficiaries of the extended timeframes.
  • This will impact health flexible spending accounts (“FSAs”) and health reimbursement arrangements (“HRAs”) that have run-out periods that extended beyond March 1, 2020. Because the Outbreak Period began on March 1, 2020, any health FSAs and HRAs that have March or April deadlines for submitting prior-year expenses for reimbursement, will need to extend the deadline until 60 days after the Outbreak Period ends to submit expenses for reimbursement for the 2019 plan year.

(7) The date within which claimants may file a request for an external review after receipt of an adverse benefit determination or final internal adverse benefit determination pursuant to 29 CFR 2590.715-2719(d)(2)(i) and 26 CFR 54.9815-2719(d)(2)(i), and

(8) The date within which a claimant may file information to perfect a request for external review upon a finding that the request was not complete pursuant to 29 CFR 2590.715-2719(d)(2)(ii) and 26 CFR 54.9815-2719(d)(2)(ii)

Implications for employers:

  • Work with your third-party administrator and insurance carriers to ensure they have implemented the extended claim review periods.
  • Either temporarily revise your claims notices and forms or ensure a temporary cover is added to all claims communications as necessary to inform employees and qualified beneficiaries of the extended timeframes.

B. Relief for Group Health Plans

With respect to group health plans, and their sponsors and administrators, the Outbreak Period shall be disregarded when determining the date for providing a COBRA election notice under ERISA section 606(c) and Code section 4980B(f)(6)(D).

Implication for Employers:

  • Plan administrators are not required to provide the COBRA election notice during the Outbreak Period. As a practical matter, however, plan administrators likely will want to timely provide election notices to encourage qualified beneficiaries to timely elect and pay for COBRA coverage.

IRS Announces COLA Adjusted Retirement Plan Limitations for 2020

The Internal Revenue Service today released Notice 2019-59 announcing cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2020.

Highlights Affecting Plan Sponsors of Qualified Plans for 2020

  • 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  $19,000 to $19,500.
  • 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 is increased from $6,000 to $6,500.
  • The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts is increased from $13,000 to $13,500.
  • The limit on annual contributions to an IRA remains unchanged at $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 $225,000 to $230,000.
  • The limitation for defined contribution plans under Section 415(c)(1)(A) is increased in 2019 from $56,000 to $57,000.
  • The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $280,000 to $285,000.
  • The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan is increased from $180,000 to $185,000.
  • 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 $1,130,000 to $1,150,000, while the dollar amount used to determine the lengthening of the five year distribution period is increased from $225,000 to $230,000.
  • The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) is increased from $125,000 to $130,000.

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

The following chart summarizes various significant benefit Plan limits for 2018 through 2020:

Type of Limitation202020192018
415 Defined Benefit Plans$230,000$225,000$220,000
415 Defined Contribution Plans$57,000$56,000$55,000
Defined Contribution Elective Deferrals$19,500$19,000$18,500
Defined Contribution Catch-Up Deferrals$6,500$6,000$6,000
SIMPLE Employee Deferrals$13,500$13,000$12,500
SIMPLE Catch-Up Deferrals$3,000$3,000$3,000
Annual Compensation Limit$285,000$280,000$275,000
SEP Minimum Compensation$600$600$600
SEP Annual Compensation Limit$285,000$280,000$275,000
Highly Compensated$130,000$125,000$120,000
Key Employee (Officer)$185,000$180,000$175,000
Income Subject To Social Security Tax  (FICA)$137,700$132,900$128,400
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-Employed12.40%12.40%12.40%
SECA (Med. HI Portion) For Self-Employed2.9%2.9%2.9%
IRA Contribution$6,000$6,000$5,500
IRA Catch-Up Contribution$1,000$1,000$1,000
HSA Max. Contributions Single/Family Coverage$3,550/ $7,100$3,500/ $7,00$3,450/ $6,900
HSA Catchup Contributions$1,000$1,000$1,000
HSA Min. Annual Deductible Single/Family$1,400/ $2,800$1,350/ $2,700$1,350/ $2,700
HSA Max. Out Of Pocket Single/Family$6,900/ $13,800$6,750/ $13,500$6,650/ $13,300

Final Regulations Require Electronic Submission of “Top Hat” Statements

The Department of Labor Employee Benefits Security Administration has published final regulations that revise the procedures for filing “top hat” plan statements under § 2520.104-23 with the Secretary of Labor, to require electronic submission of these statements through EBSA’s website in accordance with instructions published by the Department. The final rule does not change the current content requirements in the regulations . The final rule will be effective August 16, 2019.

Background

Part 1 of Title I of the Employee Retirement Income Security Act of 1974, as amended (ERISA), contains reporting and disclosure requirements applicable to plans covered by ERISA. For instance, sections 103 and 104 of ERISA establish requirements for the publication and filing of annual reports, while sections 102 and 104 of ERISA require plan administrators to furnish summary plan descriptions and summaries of material modifications or changes to participants and beneficiaries.

Section 110(a) of ERISA permits the Secretary to specify an alternative form of compliance with the reporting and disclosure obligations of Part 1 of Title I for any pension plan or class of pension plans subject to ERISA if certain findings are made. Under the authority of section 110(a), in 1975 the Department issued 29 CFR 2520.104-23 to provide an alternative method of compliance with the reporting and disclosure requirements of Part 1 of Title I for unfunded or insured pension plans established for a select group of management or highly compensated employees (“top hat” plans).

Under the alternative method of compliance, the administrator of a top hat plan satisfies the requirements for the reporting and disclosure provisions of Part 1 of Title I by filing a statement with the Secretary by mail or personal delivery to the address specified in the regulation, and by providing plan documents, if any, to the Secretary upon request. The statement must include the information listed in the regulation.

Originally, top hat statements had to be filed in paper form. On September 30, 2014, the Department published a proposed rule to revise the procedures for filing top hat plan statements under § 2520.104-23 to require electronic submission of these statements. On the same date, the Department also made available a new web based filing system. Use of this web based filing system was voluntary until the adoption of this final rule. Approximately 54% of the top hat plan statements have been filed electronically since then.

Going forward, EBSA’s web based filing system will be the exclusive method for filing these notices and statements; filings by mail or personal delivery will no longer be accepted. Upon submission of a completed filing, the new web based filing system sends an electronic confirmation of receipt to the administrator. This confirmation is not available through the existing paper-based filing system.

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 Limitation201920182017
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-Employed12.40%12.40%12.40%
SECA (Med. HI Portion) For Self-Employed2.9%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

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 Limitation201820172016
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-Employed12.40%12.40%12.40%
SECA (Med. HI Portion) For Self-Employed2.9%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.

President Orders Review of Fiduciary Duty Rule

On February 3, 2017, the President issued a Presidential Memorandum on the Fiduciary Duty Rule, ordering the Department of Labor (DOL) to “examine the Fiduciary Duty Rule to determine whether it may adversely affect the ability of Americans to gain access to retirement information and financial advice”.

DOL Review

The memorandum directs the DOL to “prepare an updated economic and legal analysis concerning the impact of the Fiduciary Duty Rule”, considering whether the rule:

  • has harmed or is likely to harm investors due to a reduction in access to certain retirement savings offerings, retirement product structures, retirement savings information, or related financial advice;
  • has resulted in dislocations or disruptions within the retirement services industry that may adversely affect investors or retirees; or
  • is likely to cause an increase in litigation, and an increase in the prices that investors and retirees must pay to gain access to retirement services.

Possible Revision or Rescission

The memorandum also instructs the DOL to rescind or revise the rule if it makes an affirmative determination as to any of the above considerations, or if it concludes for any other reason after appropriate review that the Fiduciary Duty Rule is inconsistent with the Administration’s stated priority “to empower Americans to make their own financial decisions, to facilitate their ability to save for retirement and build the individual wealth necessary to afford typical lifetime expenses, such as buying a home and paying for college, and to withstand unexpected financial emergencies”.

Possible Delay

While the Memorandum does not directly delay the rule, the acting U.S. Secretary of Labor, Ed Hugler, responded to the President’s direction through a News Release stating that “The Department of Labor will now consider its legal options to delay the applicability date as we comply with the President’s memorandum.”

While it is still unclear whether the DOL will delay the rule, it is entirely possible, likely even, that the DOL will delay the rule within the next few weeks. It is also a good bet that the DOL will ultimately make some revisions to the rule, even if they do not rescind it entirely. In the meantime, financial advisors and others subject to the Rule will need to evaluate their compliance efforts so that they remain as nimble as possible in the face of he constantly shifting regulatory sands.

Plan Sponsors and Plan Administrators should note that neither the Fiduciary Duty Rule, nor the potential impending changes to the rule, directly impact their responsibilities as plan fiduciaries, other than how the rule impacts those providing financial advice to Plan Sponsors and Administrators.

More:

DOL Conflict of Interest Final Rule Page

ERISA Benefits Law Receives Recognition as a Top Tier Law firm in 2017 U.S. News – Best Lawyers® “Best Law Firms” Rankings

Just eight months after opening its doors as a niche ERISA and employee benefits law firm focused on providing the highest quality legal services at the most affordable rates anywhere, ERISA Benefits Law has been recognized as a top tier law firm in the 2017 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.

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.

IRS Announces 2017 COLA Adjusted Limits for Retirement Plans

The IRS has released Notice 2016-62 announcing cost‑of‑living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2017.

Highlights Affecting Plan Sponsors of Qualified Plans for 2017

  • The contribution limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan remains unchanged at $18,000.
  • 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 limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) is increased from $210,000 to $215,000.
  • The limitation for defined contribution plans under Section 415(c)(1)(A) is increased in 2017 from $53,000 to $54,000.
  • The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $265,000 to $270,000.
  • The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan is increased from $170,000 to $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 $1,070,000 to $1,080,000, while the dollar amount used to determine the lengthening of the 5‑year distribution period is increased from $210,000 to $215,000.
  • 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 2017. See our post here.

The following chart summarizes various significant benefit Plan limits for 2015 through 2017:

Type of Limitation201720162015
415 Defined Benefit Plans$215,000$210,000$210,000
415 Defined Contribution Plans$54,000$53,000$53,000
401(k) Elective Deferrals, 457(b) and 457(c)(1)$18,000$18,000$18,000
401(k) 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$270,000$265,000$265,000
SEP Minimum Compensation$600$600$600
SEP Annual Compensation Limit$270,000$265,000$265,000
Highly Compensated$120,000$120,000$120,000
Key Employee (Officer)$175,000$170,000$170,000
Income Subject To Social Security Tax  (FICA)$127,200$118,500$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-Employed12.40%12.40%12.40%
SECA (Med. HI Portion) For Self-Employed2.9%2.9%2.90%
IRA Contribution$5,500$5,500$5,500
IRA catch-up Contribution$1,000$1,000$1,000
HSA Max Single/Family$3,400/6,750$3,350/6,750$3,350/6,650
HSA Catchup$1,000$1,000$1,000
HSA Min. Annual Deductible Single/Family$1,300/2,600$1,300/2,600$1,300/2,600