Regulatory Update: Confusion, Conflict, Intransigence

By John Iekel • October 19, 2015 • 0 Comments

Current regulatory issues facing the retirement industry, its professionals and participants were highlighted in a lively Oct. 19 general session at the 2015 ASPPA Annual Conference.

American Retirement Association General Counsel Craig Hoffman, who headlined the session, noted at the outset the likelihood that the 2016 retirement plan and compensation limits will be “déjà vu all over again” and would be unchanged from the rates the IRS set for 2015

Turning to the Department of Labor’s (DOL) proposed fiduciary rule, Hoffman remarked: “We certainly do have to have some clarity on what those rules really mean.” Fred Reish, partner in Drinker, Biddle and Reath’s Employee Benefits and Executive Compensation Practice Group and Chair of its Financial Services ERISA Team and Retirement Income Team, and Bruce Ashton, also a partner in Drinker, Biddle and Reath’s Employee Benefits and Executive Compensation Practice Group, illustrated the varying viewpoints on the proposed rule in a point-counterpoint role play discussion. 

“Conflicts are everywhere in investment advice,” Reish argued, adding that “advisors have to act in plans’ and participants’ best interest. Ashton countered that the regulation will cut people off from the help they need and will disrupt the industry.

Reish further argued that disclosures under current rules are ineffective and that fees are excessive. Ashton responded that the industry is already highly regulated and believed the proposed rule to “killing a spider with a sledgehammer.”

The session also addressed the changes the IRS plans for the Form 5500 SUP. Hoffman noted that the America Retirement Association and ASPPA have “led the charge against this” and outlined the many letters they have sent to the IRS and the meetings they have had with federal officials. Hoffman said “we’re still saying our prayers, crossing our fingers” that the carefully prepared comments ASPPA and ARA have submitted will be considered. “It is a story that has yet to be resolved,” he added.

But that is far from all that is taking place on the Form 5500 front. The DOL’s modernization initiative is another development the session identified, with the caveat that it is not expected to be in place for at least four years. Yet another is the extension of the deadline for submission of the IRS portion of the Form 5500 for calendar year plans in for 2016 reporting. “The fact of the matter,” Hoffman said, is that the Form 5500 SUP proposals and other changes have “caused a great deal of anxiety.”

IRS silence at best, intransigence at worst, regarding restrictions on mid-year amendments to safe harbor 401(k) plans was an additional matter the session touched on. Robert M. Kaplan, Vice President, National Training Consultant at Voya Financial, reminded attendees that in accordance with the invitation in IRS Announcement 2007-59, ASPPA repeatedly submitted comment letters on the matter to the IRS, on the need for further guidance, to no avail. “What really frosts us a practitioners is that we are not sure what to tell our clients,” said Kaplan. He went on to point out the absurdity of not being able to make a mid-year change in a plan’s name. “Names change! Why can’t we just change a name?” he asked. 

McKay Hochman Company Managing Director Richard Hochman outlined changes to the IRS   determination letter program, including the elimination of the five-year cycle for restatement on individually designed plans and the fact that the IRS will no longer be accepting off-cycle determination applications.

Realignment by the IRS of its technical work also was featured in the session, including the shift of the responsibility for issuing guidance for qualified plans from the IRS Tax Exempt and Government Entities (TEGE) Office to the Office of the TE/GE Counsel, and the fact that since Oct. 1, 2015 the IRS has stopped answering questions by email and would no longer forward questions sent to IRS Customer Account Services. 

You'll find our other coverage of the 2015 ASPPA Annual Conference in the Conferences "station" on ASPPA Net.