DB Regulatory Update: 'Please Hold on to the Bar'
That’s a bit of wisdom more apropos for retirement plan professionals than they might have imagined even two months ago. Sudden events and rapid-fire regulatory guidance and adjustments have made recent months a challenge indeed, noted an expert panel at an Oct. 23 session at the 2017 ASPPA Annual Conference.
Panelists included PBGC Senior Advisor Kristina Archeval, CBIZ Benefits & Insurance Services Vice President Thomas Finnegan and Cheiron, Inc. Chief Research Actuary James Holland.
Flash Flood of Relief
One wouldn’t think that a cluster of thunderstorms far out to sea would result in usually quick action by not one, not two but three federal agencies relevant to retirement plans. But twice those thunderstorms quickly blossomed into nature’s mightiest behemoths. So powerful and destructive were Hurricanes Harvey and Irma that the IRS, Department of Labor (DOL) and Pension Benefit Guaranty Corporation (PBGC) had mercy on storm victims whose timely compliance became a sodden impossibility.
Holland outlined the relief the agencies granted; he noted, however, that unlike the storms’ widespread destruction, the relief the agencies offered was not general at all; rather, it was tailored to specific individuals.
The relief from the IRS, contained in Announcement 2017-11 and Revenue Procedures 2007-56 and 2017-49, was based on where the eligible individuals were located. “It was not something given to everybody,” said Holland. Similarly, the PBGC relief was targeted to specific individuals; in their case, those responsible for meeting PBGC deadlines, eligible for IRS relief, or who cannot obtain the information or assistance they need in order to be in compliance. However, unlike the IRS, eligibility for the PBGC relief can be more subjective and is not so geographically based. The DOL relief was the most limited of all — available only to those responsible for filing the Form 5500.
Even though the relief is limited, and a least in part based on where one is located, Holland observed that in an important sense that does not matter. Even if a service provider is not in those locations, one may have a client that is — so it’s still necessary to pay attention to those forms of relief, regardless of where the provider is based.
Mortality and More
Among the IRS’ recent actions, Holland pointed out, was the release of new mortality tables. In future years, the projection scale will be adjusted annually. Finnegan noted that relief is available if the new tables and approach cause costs to increase for a business. “Watch your fiscal year plans carefully,” advised Holland.
Plan termination options and funding method changes were also among the areas the IRS has recently addressed, Holland and Finnegan added.
And the PBGC has been far from static, reported Archeval. She offered her insights on her agency’s approach to reportable events. “It is tremendously important to us” to hear as early as possible when problems arise, she said, as early intervention can be very helpful.
Archeval outlined what those reportable events include:
· insolvency or a similar settlement;
· liquidation under the bankruptcy code;
· loan defaults of $10 million or more;
· distributions to substantial owners;
· failure to make required contributions;
· applications for a minimum funding waiver; and
inability to pay benefits when they are due.
“We are often notified way too late,” Archeval said. “The earlier you or the sponsor tells us, the better.”