Posted by Robert Davis, on February 25, 2019.
Here’s a quick roundup of recent legislative and regulatory developments relating to employee benefits and compensation.
- Federal district court rules ACA unconstitutional, but employer mandate remains in effect (for now): A federal district court judge has ruled that the Affordable Care Act (ACA) is unconstitutional. The law remains in effect pending appeal of the district court’s ruling, which could end up before the Supreme Court. Thus, the ruling has no impact on employers or other stakeholders at this time. However, the fate of this latest challenge bears watching.
- Helping employees repay student loans: A recent IRS private letter ruling (PLR 201833012) validates one employer’s attempt to use contributions to its 401(k) plan to help employees save for retirement while repaying student loans. Basically, the employer’s 401(k) plan previously offered a 5% employer matching contribution to any employee making an elective deferral contribution equal to at least 2% of eligible compensation. The employer amended its plan to offer employees who are making student loan repayments equal to at least 2% of compensation a 5% employer non-elective contribution even if the employee is not making any elective deferral contribution to the plan. Other employees can continue to qualify for the 5% employer match under the same terms as before. According to the PLR, the arrangement does not violate the 401(k) “contingent benefit” rule.
- Actuarial Standards of Practice 51 (ASOP 51): Effective for funding valuations with measurement dates on or after November 1, 2018, additional disclosures are required under ASOP 51, which, as stated in that ASOP, “will help the intended users of the actuarial findings gain a better understanding of risks inherent in the measurements of pension obligations and actuarially determined pension plan contributions.” Such risks include but are not limited to investment risk, asset/liability mismatch risk, interest rate risk, demographic risk, and contribution risk. The standard requires the actuary to identify and assess risks that may be anticipated to significantly affect the Plan’s future financial condition and recommend a more detailed assessment if, in the actuary’s professional judgment, such an assessment would be significantly beneficial for the intended user to reasonably understand the risks identified by the actuary. Depending on a Plan’s specific risk profile, Plan sponsors may expect their actuary to recommend scenario testing, sensitivity analysis, stress testing, or other methods for consideration to numerically illustrate certain risks.
- IRS Employee Plan Program Priorities for 2019: The Tax Exempt and Government Entities (TE/GE) Business Operating Division of the IRS has published a Fiscal Year 2019 letter with a look into their focus areas for this year. The priorities outlined include updating the compliance strategy approach to focus on the highest priority areas to protect the tax system, collaboration with IRS business partners on high-profile tax fraud cases, and empowering taxpayers through various programs. In addition, TE/GE has invested in training, supporting, and providing employees with the appropriate skills, resources, and knowledge for use in their roles. There has been significant hiring as well as efforts related to cross-training and enhancements of systems to provide employees with necessary resources to respond to inquiries. For further information see https://www.irs.gov/pub/irs-pdf/p5313.pdf
- 2019 Compliance Update:The following limits are in place for 2019
IRC 401(a)(17) Compensation Limit $280,000 IRC 415(b) Annual Benefit Limit $225,000 Highly Compensated Employee Compensation Limit $125,000
The following is a schedule of deadlines for the first half of 2019 for calendar year pension plans, if applicable:
Adjusted Funding Target Attainment Percentage due for Plan’s under 90% Funded for 2018 (used to determine if benefit restrictions apply) 3/30/2019 First Required Quarterly Contribution for 2019 Plan Year 4/15/2019 PBGC 4010 Filing 4/15/2019 Annual Funding Notice for the 2018 Plan Year 4/30/2019