American Benefits Council
Benefits Byte


October 23, 2014

The Benefits Byte is the American Benefits Council’s regular e-mail and online newsletter for members only, providing timely reports on legislative, regulatory and judicial developments, along with updates on the Council’s activities in support of employer-sponsored benefit plans.

The Benefits Byte is published by the American Benefits Council, based on staff reports and edited by Jason Hammersla, Council director of communications. Contact information for Council staff related to specific topics can be found at the end of each story.

Click here to read past issues on the Benefits Byte Archive page.

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IRS Announces Changes in Retirement Plan Limits for 2015

Each year, various dollar limits applicable to health and retirement plan contributions and benefits are adjusted for inflation. 

In News Release 2014-99, released October 23, the Internal Revenue Service (IRS) announced a series of retirement plan limits for Tax Year 2015. Section 415 of the Internal Revenue Code provides for dollar limitations on benefits and contributions under qualified retirement plans.

In addition, it was announced that the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $118,500 from $117,000.

In some cases, amounts have not changed from the 2014 levels. This IRS table shows these and other limits updated for 2015. For more information, contact Jan Jacobson, senior counsel, retirement policy, at (202) 289-6700.


Council Comments on Proposed Definition of 'Closely Held, For-Profit Entity' Rules to Accommodate Religious Objections to Contraceptive Coverage under PPACA

In an October 21 letter to the U.S. secretaries of Health and Human Services, Labor and Treasury, the Council provided comment on proposals for defining a qualifying “closely held for-profit entity” for purposes of an accommodation for religious objections with regard to the coverage of contraceptive services as required under the Patient Protection and Affordable Care Act (PPACA).

Under the health care law, certain women’s preventive health services must be covered at no additional cost, including FDA-approved contraception methods and contraceptive counseling. However, on June 30, the U.S. Supreme Court ruled in Hobby Lobby v. Burwell (described in the Council’s June 30 Benefits Byte story) that, under the Religious Freedom Restoration Act of 1993, the requirement to provide contraceptive coverage could not be applied to certain “closely held, for-profit” corporations whose owners held religious objections to such coverage.

As we reported an August 25 Benefits Byte story, the departments subsequently issued proposed regulations setting out two possible approaches for defining a qualifying “closely held for-profit entity” for purposes of obtaining the accommodation for religious objections. Under one approach, the entity could not be publicly traded and ownership of the entity would be limited to a certain number of owners. Under an alternative approach, the entity could not be publicly traded and a minimum percentage of ownership would be concentrated among a certain number of owners. The number and concentration were not specified in the proposed rules.

The Council’s letter supports clarification for determining when a closely held for-profit entity is an “eligible organization” and thus may avail itself of the accommodation for religious objections as permitted under the regulations. “Employers, health insurance carriers and third-party administrators will need clarity as to who can claim an accommodation and for determining related compliance obligations. As a result, we believe that any approach for defining a ‘closely held for-profit entity’ for the purpose of amending the definition of ‘eligible organization’ should be simple and straightforward.”

Specifically, the Council recommended that the definition of “closely held for-profit entity” adopted in any future guidance be one that is commonly understood, such as the definition already included in the Internal Revenue Code. For more information, contact Kathryn Wilber, senior counsel, health policy, at (202) 289-6700.

Senate Committee Leaders Ask Agencies to Examine Pension Plan De-risking Activity

The chairmen of the two Senate committees sharing jurisdiction over pension policy sent a letter to several Obama Administration officials on October 22 expressing concerns about defined benefit plan “de-risking” strategies and requesting guidance that strengthens protections for plan participants.

The letter was sent by Senate Finance Committee Chairman Ron Wyden (D-OR) and Senate Health, Education, Labor and Pensions Committee Chairman Tom Harkin (D-IA) to the departments of Labor (DOL) and Treasury, the Pension Benefit Guaranty Corporation (PBGC) and the Consumer Financial Protection Bureau (CFPB).

A growing number of companies have adopted strategies to reduce the volatility and risk inherent in pension plan funding. Such strategies can include transferring all or a portion of their pension plan's assets and liabilities to an insurance company through an involuntary annuity buyout or directly to plan participants through a voluntary lump-sum distribution. The Council testified on de-risking issues before the U.S. Department of Labor ERISA Advisory Council in June 2013, describing the key motivations behind de-risking activity. The testimony emphasized that the legislative and regulatory environment for pension plans has made sponsorship increasingly difficult over the past few decades by increasing cost, uncertainty and risk.

The Wyden-Harkin letter suggests “the lack of clear and specific rules to protect participants and retirees” in de-risking transactions and proposes that the regulatory departments and agencies consider procedural and clarifying guidance, such as:

  • Requiring advance notice of de-risking action to participants and the government. (On September 23 the PBGC formally requested comments on its intention to modify the premium filing procedures for 2015 to require companies making pension risk-transfer offers to their employees to report such offers to the PBGC after the fact; Wyden and Harkin are suggesting disclosure before the fact.)
  • Establishment of standards for employers choosing an annuity provider.
  • Requiring specific disclosures and other protections when retirees are offered lump sum distributions.
  • Clarification of the circumstances and conditions under which de-risking activity is permissible in the absence of a formal plan termination

Such guidance could impose expanded fiduciary duties on multiple parties to de-risking transactions or necessitate an independent fiduciary. In addition, the guidance could impact prior transactions.

While Harkin has announced his retirement at the end of the year, Wyden has demonstrated a strong interest in retirement policy issues for the next session of Congress. The Finance Committee held a hearing on September 16, Retirement Savings 2.0: Updating Savings Policy for the Modern Economy, to which the Council contributed a written statement.

The Council continues to be in close contact with Senate committee staff as well as agency officials, urging flexibility for pension plan sponsors to reduce risk or transition out of the system if necessary. For more information, contact Lynn Dudley, senior vice president, global retirement and compensation policy, or Jan Jacobson, senior counsel, retirement policy, at (202) 289-6700.

The American Benefits Council is the national trade association for companies concerned about federal legislation and regulations affecting all aspects of the employee benefits system. The Council's members represent the entire spectrum of the private employee benefits community and either sponsor directly or administer retirement and health plans covering more than 100 million Americans.

Notice: the information contained herein is general in nature. It is not, and should not be construed as, accounting, consulting, legal or tax advice or opinion provided by the American Benefits Council or any of its employees. As required by the IRS, we inform you that any information contained herein was not intended or written to be used or referred to, and cannot be used or referred to (i) for the purpose of avoiding penalties under the Internal Revenue Code, or (ii) in promoting, marketing or recommending to another party any transaction or matter addressed herein (and any attachment).