'Big Bangs' and More

By John Iekel • October 24, 2016 • 0 Comments

The last year featured some big bangs — and so will the year to come, for that matter. Not to mention other developments that concern the retirement plan industry and that will take some preparation and adjustment. And even thank-you’s. The popular Current Events Update at this year’s ASPPA Annual Conference included a light-hearted look at current events. 

Notice 2016-16

One big bang: Notice 2016-16, which provides guidance on mid-year changes to safe harbor 401(k) plans. A team comprised by Kelly Marie Hurd of DWC ERISA Consultants, Kelsey Mayo of Poyner Spruill, LLC, Sheldon Smith of Bryan Cave, LLP and Sal Tripodi of TRI Pension Services outlined the rules. They noted that the rules address:

  • changes of plan year;
  • suspension or reduction of the safe harbor;
  • adding a safe harbor 401(k) during a plan year; and
  • changes in required notice content.

In addition, there are mid-year changes that are not allowed. It is impermissible to:

  • change the type of safe harbor plan to a qualified automatic contribution arrangement (QACA);
  • increase the number of years required to fully vest in QACA safe harbor contributions; and
  • narrow eligibility for receiving safe harbor contributions.

They also pointed out that it is impermissible to add a discretionary match, or to increase the amount of a match; however, it is possible to make a retroactive increase in a match under certain conditions.

Revenue Procedure 2016-37

FIS Relius Vice President Robert Richter in a “Columbo”-like questioning discussed the changes to the IRS Determination Letter Program contained in Revenue Procedure 2016-37, which eliminates, as of Jan. 1, 2017, the five-year remedial amendment cycle system for individually designed plans. And he added that if one is using a pre-approved plan, reliance on the “one and done” rule is not the same as having a determination letter. 

Looking Ahead

American Retirement Association General Counsel Craig Hoffman, in full Johnny Carson mode, discussed some of the proposals that could affect retirement plan professionals and those they serve in the coming year. For instance: 

Proposed nondiscrimination regs. Hoffman noted that the IRS issued them on Jan. 29, and on April 14 announced that it was withdrawing the proposed changes concerning the reasonable clarification test. He cited that as a big victory for the ASPPA Government Affairs Committee (GAC). But he added that the proposal could be back, remarking, “there’s still some interest in Treasury.” And he pledged that “we will stay vigilant.” 

Guidance on substantiation of hardship distributions. Hoffman said there is a “great deal of consternation” on the prospect for such guidance, and said that he understands that the guidance may “be going a step further” and that the IRS may be using procedures it already has in place in conjunction with guidance on the degree of documentation needed to prove that a hardship exists. 

Hoffman reported that the IRS is inviting industry representatives to comment on such guidance; ASPPA is one of them, and it is preparing a comment letter. 

Other projects the IRS may pursue in the next year, Hoffman said, include interpretation of regulations on forfeitures that don’t match statutory provisions and regulations on eligible combined plans under Internal Revenue Code Section 414(x).

Department of Labor (DOL) guidance. Hoffman said that the DOL may issue guidance on:

  • the Voluntary Fiduciary Correction program;
  • 408(b)(2) disclosures;
  • Form 5500 modernization;
  • abandoned plans; and
  • disclosures for target date funds and qualified default investment alternatives.

Pension Benefit Guaranty Corporation. Hoffman said that the PBGC may propose a rule that would expand coverage under its missing participant program for DC plans.  

Standard of Practice (SOP) rules. ASPPA 2016 President Joe Nichols discussed the SOP rules, and said that the actuarial industry is one of the few that still follows such rules. He added that if changes to the SOP are adopted, that would increase pension liability disclosures. 

Fiduciary Rule. Incoming ASPPA President Rich Hochman remarked that the DOL fiduciary rule is “going to affect the way our members do business,” the way they think about it and the way they do their work. And just because a new administration will be in office beginning in January, to change the rule does not mean that it would be easy and quick to scrap the rule or even alter it. He noted that in order to change the rule, the whole process would have to be redone, even with the start of a new administration. 

Thank You's

But all was not foreboding and cautionary. Channeling Jimmy Fallon’s “thank you” letter feature, the session offered a tongue-in-cheek enumeration of things for which the retirement plan industry can be thankful. Thank you to: 

  • the IRS, for eliminating the ERPA Special Enrollment Examination and the determination letter program in the same year; 
  • the DOL, for thousands of pages of fiduciary regulations;
  • institutions of higher learning, for initiating litigation concerning retirement plans; 
  • the circuit courts of appeals, for split approaches in their decisions in church plan litigation; 
  • the IRS for the new guidance it issued on the Employee Plans Compliance Resolution System; and 
  • the DOL for thousands of pages concerning the Form 5500.

But two thank you’s were genuine: expressions of gratitude to the ASPPA GAC members and staff for responding to federal initiatives and reminding everyone that advocacy is a group effort, and to ASPPA for 50 years of advocating for the workplace retirement system and for being such a strong organization.