Posted by Robert Davis, Christine Drager, and Maria Moliterno on December 20, 2019.
Here’s a quick roundup of recent legislative and regulatory developments relating to employee benefits and compensation:
- “Cadillac” Tax Repeal, other benefits provisions in end-of-year tax and spending bill: As we go to press, a House-passed year-end tax and spending bill that would repeal the Affordable Care Act’s “Cadillac” tax on high-value health plans, among other benefit-related provisions, appears poised to be passed by the Senate and signed into law by President Trump. In addition to repealing the “Cadillac” tax, the bill also would repeal the ACA’s medical device tax and health insurer fee. On the retirement side, the bill includes a package of reforms based on the Setting Every Community Up for Retirement Enhancement (SECURE) Act, which the House passed earlier this year with broad bipartisan support. Some notable provisions include permanent non-discrimination testing relief for certain closed pension plans, as well as new rules for multiemployer retirement plans. We will have more details and analysis in the January Washington Bulletin!
- PBGC 2019 Annual Report is released: The PBGC 2019 Annual Report was released in November 2019. The report details that the multiemployer insurance program reached a record deficit of $65.2 billion up from $53.9 billion last year driven by a decrease in interest rates. The multiemployer program is projected to become insolvent during fiscal year 2025. The single employer program has a surplus of $8.7 billion, an increase in funded status of $6.2 billion from last year. The PBGC took responsibility for 47 terminated underfunded single employer plans in fiscal year 2019, which is down from 74 plans in fiscal year 2018. See the full report here: https://www.pbgc.gov/sites/default/files/pbgc-fy-2019-annual-report.pdf
- Required Minimum Distribution Reminders: Retirees born prior to July 1, 1949 generally must take payments (“Required Minimum Distributions”) from their retirement plans by December 31st. Anyone that turned 70 ½ during 2019 is allowed to wait until April 1, 2020 to receive their first required minimum distribution but in all subsequent years, the distributions must be made by December 31st. The distribution rules apply to 1) traditional Individual Retirement Arrangements (IRA’s); 2) Simplified Employee Pension IRA’s; 3) Savings and Incentive Match Plans IRA’s; and 4) various employer sponsored plans including 401(k), 403(b), and 457(b) plans. When the original owner is alive, Roth IRA’s do not require minimum distributions. The amount of the required distribution is based on the account balance and taxpayer’s life expectancy. Find more information on RMDs, including answers to frequently asked questions, on IRS.gov
- Updated Mortality Improvement Rates and Static Mortality Tables for Defined Benefit Pension Plans for 2021 release by the IRS: IRS Notice 2019-67 provides updated mortality improvement rates and static mortality tables for use by defined benefit pension plans under Internal Revenue Code Section 430(h)(3)(A). These improvement rates and static tables are applicable for determining the funding target and other valuation items during calendar year 2021. In addition, the Notice provides updated unisex version of the mortality used in determining minimum present values (i.e.-lump sum distributions) under Internal Revenue Code Section 417(e)(3) for distributions with annuity starting that occur during stability periods beginning in calendar year 2021. The mortality improvement rates are based on the Retirement Plans Experience Committee (RPEC) Mortality Improvement Scale MP-2019. Lastly the Notice includes a request for comments on the recently released Pri-2012 Private Retirement Plans Mortality Table Report related to future incorporation by the IRS into the mandated mortality tables under Internal Revenue Code Section 430. For more information and the 2021 tables, refer to https://www.irs.gov/pub/irs-drop/n-19-67.pdf.
Robert Davis 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.
Christine Drager is a specialist leader in the Human Capital practice of Deloitte Consulting LLP focusing on pension actuarial consulting and assisting employers with the design, valuation, and financial management of pension and other postretirement benefit plans.
Maria Moliterno is a manager in the Human Capital practice of Deloitte Consulting LLP and specializes in actuarial consulting for pensions and other employee benefits.