On June 12, ACOPA representatives, along with other ARA representatives, met with about 15 folks from IRS and Treasury to discuss current issues of concern to our membership. (Another 8-12 IRS and Treasury people joined by phone.) Later that afternoon, ACOPA reps met with PBGC. We were represented by ACOPA President Kurt Piper, President-elect Bill Karbon, Executive VP John Markley, ACOPA Government Affairs Committee (GAC) Chair Tom Finnegan and me. These meetings were part of ARA GAC meetings that started on Saturday, June 10. Presidents and Presidents-elect stayed on for Hill visits on Tuesday, but Tom, John and I returned home after the Monday meeting with PBGC.
The first 6 of the 13 items on the IRS/Treasury agenda were ACOPA concerns. These included the proposed 417(e) modification that provides for pre-retirement mortality adjustment regardless of a plan’s death benefit provisions for 417(e) minimum present value determinations. ACOPA had filed a comment letter on this proposed change expressing concern that this change could cause problems with the most valuable benefit rules for plans using no pre-retirement mortality for lump sum calculations. Though IRS could not provide any specific assurances, the sense I got was that our concerns are understood and that this was not an intended consequence. We also discussed SSLI options, and our position that bifurcation of the temporary and lifetime benefits should be permitted. I didn’t feel as good about our discussion on that point as on the most valuable issue, but we won’t really know how we fare on either concern until we see final regs.
Other items on the IRS/Treasury agenda included the status of additional automatic approvals of changes in funding method, final revised mortality regs, nondiscrimination relief for closed plans, projection of interest crediting rates of cash balance plans with market-based interest credits and, of course, guidance allowing for 412(d)(2) elections after the end of the year, but within 2½ months. We didn’t get anything definitive on any of these items, but got the sense that they still hope to get final mortality regs out in the next couple of months, and that an updated automatic approval Rev. Proc. could be the next thing we see (though we have heard that for a while now).
The meeting with PBGC was very positive. When we had last met with PBGC, we had discussed concerns about coverage determinations for entities that appear to provide professional services, but are not listed in ERISA. At that time, PBGC had indicated there is no clear cut rule – each case is reviewed on its own merits. After that meeting, I wrote that anyone with doubts should apply to PBGC for a determination. That hasn’t changed. However, PBGC has taken our concerns seriously, and they are working on a web page to get the word out on this matter. In this context, we also discussed community property states and sole props. The lack of attribution of ownership for sole props for PBGC coverage purposed makes whether ownership is 50/50 or both spouses are considered to own 100% critical. PBGC reps were very knowledgeable on this issue, but did not state a firm position. Again, when in doubt, ask for a coverage determination.
Final guidance on PBGC’s Missing Participant Program for both DC plans and DB plans not otherwise covered by PBGC is in the final clearance process, and PBGC still has a Jan. 1, 2018 target date for making the program operational. They do not expect final regs to be out before the ASPPA Annual Conference, so expect the guidance in November or December. That means it should be out before the L.A. Advanced Pension Conference, Jan. 25-26, 2018.
Other items on the PBGC agenda included updated mortality and interest assumptions for distress terminations (they are leaning toward a yield curve instead of select and ultimate rates), the availability of deferred annuities for plans that offer lump sum options (if possible, look in the early part of the year before quotas have been met), and the impact of President Trump’s “two-for-one” regulatory directive. With regard to that directive, when PBGC makes life easier for plan sponsors and practitioners, such as with the missing participant program, they can essentially bank credits toward a future effort that does not ease any burden.
PBGC also wanted us to remind all of you that the waiver of a reportable event filing for missed quarterly contributions for small plans is only for quarterlies. A reportable events filing is due when there is a failure to make the minimum required contribution within 8½ months of the end of the year (unless it is made within 30 days). They are still seeing a substantial number of plans that are required to file fail to do so.
Both the IRS/Treasury and PBGC meetings felt valuable. Remember – Mike Spaid from the IRS will be joining me for the Regulatory Update at the ACOPA Actuarial Symposium Aug. 18-19. Mike will also be participating on the Ask the Experts panel at this year’s Symposium, so if you haven’t already done so, register now.
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