Here is a quick roundup of recent legislative and regulatory developments relating to employee benefits and compensation.
Bipartisan Retirement Legislation: On May 23, 2019, the House of Representatives passed the Setting Every Community Up for Retirement Act (SECURE Act) in a vote of 417-3. As passed by the House, the SECURE Act would make the following changes to employer-sponsored retirement plans and individual retirement accounts (IRAs):
- Provide nondiscrimination testing relief for certain frozen defined benefit pension plans
- Create a fiduciary safe harbor for defined contribution plans to use when selecting an annuity provider
- Require defined contribution plans to provide an estimated monthly annuity value of participants’ account balances
- Raise the minimum age for required minimum distributions from 70.5 to 72
- Increase the cap on the default contribution rate for employers with automatic enrollment plans to 15%
- Eliminate the provision that requires employers to share a common industry to form a multiple employer plan
- Eliminate the provision that disqualifies multiple employer plans in which one employer fails to meet requirements
- Require 401(k) plans to permit participation by certain long-service part-time workers
- Allow the withdrawal of up to $5,000 without penalty from an employer-sponsored plan or IRA
You can read the full text of the House-passed bill here.
PBGC’s Single-Employer Guarantee Outcomes: Upon failure of a single-employer plan, the PBGC assumes responsibility of the benefit payments to plan participants, subject to the terms of the plan and limited by restrictions under ERISA and the PBGC. In May 2019, the PBGC released the results of the benefits paid by the PBGC for 500 single employer plans trusteed by the PBGC between 1988 and 2012. The 500 plans covered 1,142,700 participants. The major findings included the following:
- 84% of participants received their full vested benefits they had earned under their plans
- Of the 16% of participants who received a reduced benefit:
- The average reduction in benefit was 24%
- Average reduction in benefit for retirees was 19%
- 89% of the reductions were concentrated in 10 plans
You can read the full report here.
Society of Actuaries Releases Pri-2012 Private Retirement Plans Mortality Tables-Exposure Draft: The Society of Actuaries Retirement Plans Experience Committee (RPEC) has recently released an exposure draft of the Pri-2012 Mortality tables for private sector US retirement plans. The tables are based on data collected for 2010-2014 (with a central year of 2012) and are intended to be used with appropriate projection scales for years other than 2012. These tables are an update to the RP-2006 tables, which were based on data from 2004-2008. RPEC highlights the following observations in their exposure draft report:
- For most plans, only a small change (plus or minus 1%) is anticipated when updating from RP-2006 to Pri-2012;
- Collar type (white or blue) and income level were shown to be significant indicators of mortality;
- The mortality of participants in multiemployer plans was not found to be significantly different than participants in single employer plans so distinct tables for these groups were not produced;
- As compared to RP-2006, the 2019 life expectancy for an age 65 female remained constant at 87.4 years and for males declined from 85 to 84.7 years.
The comment period on the exposure draft is open through July 31, 2019 and the full report can be found here.
Inflation-Adjusted HSA Limits for 2020: The IRS has released Rev. Proc. 2019-25 to provide inflation-adjusted health savings account (HSA) limits for the 2020 tax year. Specifically, the maximum deduction for individuals with self-only coverage will be $3,550, and for individuals with family coverage the maximum deduction will be $7,100. With respect to high-deductible health plans (HDHPs), the minimum deductible for self-only coverage will be $1,400 and for family coverage will be $2,800. The out-of-pocket maximum for self-only coverage will be $6,900, and for family coverage will be $13,800. The full text of Rev. Proc. 2019-25 is available at here.