Here’s a quick roundup of recent legislative and regulatory developments relating to employee benefits and compensation.
- IRS offers limited expansion of determination letter program for cash balance and merged plans: The IRS released Revenue Procedure 2019-20 (https://www.irs.gov/pub/irs-drop/rp-19-20.pdf_) earlier this year, which provides a limited expansion for the acceptance of determination letter filings for individually designed statutory hybrid plans (i.e., cash balance and pension equity plans) and individually designed Merged Plans. Beginning September 1, 2019, Merged Plans may request a determination letter on an ongoing basis while individually designed statutory plans have only a 12-month period (September 1, 2019, through August 31, 2020) in which to submit the determination letter application. Under the Revenue Procedure, a Merged Plan is defined to be an individually designed plan that results from the merger or consolidation of two or more plans maintained by previously Unrelated Entities and occurring in connection with a corporate merger, acquisition or other similar business transaction. The determination letter request for a Merged Plan must be submitted in a period beginning on the Date of the Plan Merger and ending on the last day of the first plan year of the Merged Plan that begins on the date after the Plan Merger. A statutory hybrid plan is a defined benefit plan under which the accrued benefit (or any part of the accrued benefit) is determined as the balance of a hypothetical account maintained for the participant or as an accumulated percentage of the participant’s final average compensation. Sponsors of these types of plans are able to submit determination letter filings only during the period from September 1, 2019 through August 31, 2020.
- Proposed rule from Pension Benefit Guaranty Corporation (PBGC) offers miscellaneous corrections, clarifications, and improvements: A proposed rule issued by the PBGC in June 2019 with a comment period through August 2, 2019 offers several items intended to improve the effectiveness and clarity of its rules.
- Reportable events—additional examples of active participant reduction, liquidation, and change in controlled group events would be provided to help eliminate duplicative reporting of active participant reductions and to clarify when a liquidation event occurs.
- Annual financial and actuarial reporting—new waivers would be added along with the elimination of the current requirement to submit information for every controlled group member and additional guidance on assumptions for cash balance plans.
- For terminating single employer plans, a lengthened time period to submit PBGC Form 501 in standard termination situations.
- Clarification that a plan does not qualify for a variable rate premium exemption for the year in which it completes a standard termination if there is also a non-de minimis spinoff in the same year.
Stay tuned for further updates on the status of the proposed updates.
- IRS expands definition of preventive services for High-Deductible Health Plans (HDHPs): Health Savings Account (HSA)-compatible HDHPs generally may not provide any benefits below the deductible, subject to certain exceptions including one for specific preventive services. The IRS’s position traditionally has been that services or prescription drugs for existing illnesses—including chronic conditions—could not be preventive services for this purpose. However, in Notice 2019-45 the IRS expands the definition of preventive services to include certain items and services—including prescription drugs—for certain chronic conditions. Examples include blood pressure monitors for people with high blood pressure, and statins for individuals with heart disease and/or diabetes. The complete list is published in Notice 2019-45, which is available at: https://www.irs.gov/pub/irs-drop/n-19-45.pdf. The changes are effective as of July 17, 2019.
- IRS extends temporary nondiscrimination testing relief for closed defined benefit plans: The IRS released Notice 2019-49 (https://www.irs.gov/pub/irs-drop/n-19-49.pdf_) recently, which extends by a year (through 2020) current nondiscrimination testing relief available to certain defined benefit plans closed to new entrants. Many sponsors of these defined benefit plans have implemented defined contribution plans for new employees, which can result in challenges passing the nondiscrimination requirements that the current relief addresses (see Notice 2014-5 for further details). Permanent relief has been proposed but not yet enacted.
is a managing director in Deloitte Consulting LLP and leads the Washington Rewards Policy Center of Excellence, dedicated to informing practitioners and clients about legislative and regulatory developments relating to employer-sponsored rewards programs.