November 26, 2014
Executive Branch Agencies Release Regulatory Agendas; IRS Issues Priority Guidance Plan
Key regulatory agencies with jurisdiction over U.S. employee benefits policy recently updated their semiannual agendas with topics that are expected to be the subject of formal guidance during the next year. These agencies include:
- U.S. Treasury Department (Treasury) and Internal Revenue Service (IRS)
- U.S. Department of Labor (DOL) and Employee Benefit Security Administration (EBSA)
- Health and Human Services Department (HHS) and Centers for Medicare and Medicaid Services (CMS)
- Equal Employment Opportunity Commission (EEOC)
- Pension Benefit Guaranty Corporation (PBGC)
- Securities and Exchange Commission (SEC)
Of particular note, on the health side, the EEOC intends to issue regulations in early 2015 addressing wellness programs under the Americans with Disabilities Act (ADA) and the Genetic Information Nondiscrimination Act of 2008 (GINA). On the retirement side, included in a packed slate of proposed and final regulatory projects is the DOL’s ongoing effort to re-define “fiduciary” in the context of providing individualized investment advice – with the SEC proceeding on a similar project on a separate track.
While agencies are not bound by their agendas or the deadlines set, their publication does provide insight regarding the administration's priorities and the amount of activity expected within the next year. As indicated below, the Council has been actively engaged with respect to almost all of the regulatory projects that have direct applicability to employer plan sponsors. This engagement involves formal written comments, testifying at regulatory agency hearings and other informal communications. In many cases – particularly with respect to PPACA regulations – the Council has also hosted webinars with additional information and analysis.
The list categorizes regulatory projects according to whether they are in the proposed rule stage or the final rule stage. Generally, those items slated for "long-term action" do not have a specific timetable for proposal. While the description of each project includes a projected timetable for the issuance of rules or guidance, these timelines are estimates and frequently slip.
Below, we highlight the significant items for employer plan sponsors and service providers.
The following health care policy items are listed on the Treasury/IRS agenda:
- Minimum value of employer sponsored coverage [final rule stage, final action scheduled for December 2014]
- Guidance on employer contributions to health savings accounts (HSAs) and the interaction between the section 4980G comparability rules and section 125 nondiscrimination rules in instances where not all of the employer's employees contribute to an HSA through a cafeteria plan. [proposed rule stage, proposed regulations scheduled for June 2015.
- Cafeteria plan rules (including employee welfare benefit plans allowing employees to choose between taxable benefits and nontaxable benefits) [final rule stage, final action scheduled for December 2014]
- Proposed regulations were issued in August 2007.
- Additional permitted election changes for cafeteria plans [proposed rule stage, proposed regulations scheduled for December 2014]
- Guidance under tax code Section 125 regarding the use of contributions or benefits under a health flexible spending account in a subsequent plan year or period of coverage [proposed rule stage, proposed regulations scheduled for December 2014]
- Enhancements to existing HIPAA portability regulations (tolling the running of certain time periods in certain circumstances, clarifying the procedures for requesting special enrollment, addressing how the HIPAA portability requirements apply to individuals taking leave under the Family and Medical Leave Act and prescribing how to count the number of employees an employer has) [final rule stage, final action scheduled for December 2014]
- Proposed regulations were issued in December 2004.
- Health insurance premium tax credit additional issues to provide additional guidance to taxpayers who enroll in qualified health plans and claim the premium tax credit [proposed rule stage, proposed regulations scheduled for December 2014]
- Coverage of certain preventive services under the Patient Protection and Affordable Care Act (PPACA) implementing section 2713 of the Public Health Service Act (PHS) by providing an alternative process that an eligible organization may use for notification of religious objections related to the provision of contraceptive coverage [final rule stage, final action scheduled for December 2014] and further coverage of certain preventive services under the PPACAproposing changes to the definition of eligible organizations in light of the Supreme Court decision in Burwell v. Hobby Lobby Stores, Inc., as well as proposing additional steps for the Government to take concerning coverage of contraceptives [proposed rule stage, agency currently analyzing comments]
- Minimum essential coverage and other rules regarding the shared responsibility payment for individuals [final rule stage, final action scheduled for December 2014]
The following retirement and compensation policy items are listed on the Treasury/IRS agenda:
- Removal of rollover allocation rule from designated Roth regulations, possibly addressing the divided distribution issue raised by the safe harbor notice under tax code Section 402(f) [proposed rule stage, agency currently collecting comments]
- The Council has communicated with Treasury and IRS extensively, requesting clarification on the interaction of rollovers divided between more than one Individual Retirement Account (IRA) under tax code Section 402(c)(2) and the 402(f) notice requirements. This rulemaking project may be an attempt to provide such clarity.
- Transition rules relating to the market rate of return requirements for statutory hybrid plans, permitting a defined benefit plan with an interest crediting rate that is not permitted under the final hybrid plan regulations to change to an allowable rate that does not violate the anti-cutback rules of tax code Section 411(d)(6) [proposed rule stage, agency currently collecting comments]
- Reporting and notice requirements for deferred vested benefits under tax code Section 6057, formally designating the Form 8955-SSA as the form used to satisfy the relevant reporting requirements of the former "Schedule SSA" [final rule stage, final action scheduled for December 2014] and further reporting and notice requirements for deferred vested benefits under section 6057 provide guidance on the requirement for plan administrators or employers to furnish an individual statement to participants who separate from service with a deferred vested benefit [proposed rule stage, proposed regulations scheduled for December 2014]
- Modifications to minimum present value requirements for defined benefit plan distributions, allowing defined benefit plans to simplify the treatment of certain optional forms of benefit that are paid partly in the form of an annuity and partly in a more accelerated form [final rule stage, final action scheduled for December 2014]
- Additional rules regarding the determination of plan assets and benefit liabilities for purposes of pension plan funding and benefit restrictions for certain underfunded defined benefit pension plans [proposed rule stage, proposed regulations scheduled for July 2015]
- Accrual rules for defined benefit plans in cases where plan benefits are determined on the basis of the greater of two or more separate formulas [final rule stage, final action scheduled for June 2015]
- The Council communicated with Treasury/IRS numerous times before the issuance of proposed regulations in June 2008.
- Update to minimum present value requirements for defined benefit plan distributions [proposed rule stage, proposed regulations scheduled for December 2014]
- Application of tax code Section 409A to nonqualified deferred compensation plans [proposed rule stage, proposed regulations scheduled for December 2014] and further guidance on the application of tax code Section 409A to nonqualified deferred compensation plans [final rule stage, final action scheduled for December 2014]
- The Council has worked extensively on this issue and prepared numerous comment letters to supplement our conversations with agency officials.
- Notice to participants of consequences of failing to defer receipt of qualified retirement plan distributions and expansions of applicable election period and period for notices [final rule stage, final action planned for March 2015]
- Certain employee remuneration in excess of $1,000,000 under tax code Section 162(m) [final rule stage, final action scheduled for December 2014]
- Proposed regulations were issued in June 2011.
- Compensation deferred under eligible deferred compensation plans, specifically relating to the definitions of a bona fide severance pay plan [proposed rule stage, proposed regulations scheduled for December 2014]
- Contributions of an employer under a plan that does not meet the requirements of section 401(a) and application of tax code Section 404(a)(5) [proposed rule stage, proposed regulations scheduled for March 2015]
- Guidance relating to “eligible combined plans” under tax code Section 414(x) [proposed rule stage, proposed regulations scheduled for December 2014]
- Guidance on the determination of minimum required contributions for purposes of the funding requirements applicable to single-employer-defined benefit pension plans [final rule stage, final action scheduled for December 2014]
- Proposed regulations were issued in April 2008.
- Temporary guidance on FATCA coordination [final rule stage, interim final rule scheduled for December 2014] and permanent guidance with respect to FATCA coordination [proposed rule stage, proposed regulations scheduled for December 2014]
- Guidance on spousal IRAs, SEPs and IRA technical changes [proposed rule stage, proposed regulations scheduled for December 2014]
- Requirements for employee stock ownership plans to prescribe rules under Code sections relating to employee stock ownership plans, including sections 401(a)(28), 404(k), 409, 4975(d)(3) and 4975(e)(7) and also to update existing regulations relating to ESOPs: section 54.4975-7 and section 54.4975-11 [proposed rule stage, proposed regulations scheduled for June 2015]
In addition to the Fall 2014 regulatory agenda, on November 7 the IRS updated its First Quarter 2014-2015 Priority Guidance Plan, which describes the 317 regulatory projects that the agency “intends to work on actively” during the twelve-month period from July 2014 through June 2015. The guidance plan does not place any deadline on completion of projects.
The plan includes 42 items addressing retirement benefits (Pages 5-8 of the document) and 23 items addressing executive compensation, health care and other benefits, including items related to implementation of the PPACA (Pages 8-10). A number of these items have already been completed, as indicated in the priority plan.
The most notable item in the priority guidance plan that does not appear in the semiannual regulatory agenda is a planned notice under Section 4980I of the tax code, addressing the 40 percent excise tax on high-cost employer-provided coverage, as added by PPACA. It is not clear whether IRS intends to issue guidance by June 2015 or if they will simply be gathering and analyzing data.
Other issues addressed elsewhere in the priority guidance plan include consolidated returns; corporations and their shareholders; excise taxes; exempt organizations; financial institutions and products; gifts, estates and trusts; insurance companies and products; international issues; partnerships; subchapter S corporations; tax accounting; tax administration; tax-exempt bonds and other general tax issues. An appendix also lists additional routine guidance that is published each year.
The following health care policy items are listed on the DOL/EBSA agenda:
- Updating of model notices associated with COBRA continuation coverage [proposed rule stage, agency currently analyzing comments]
- Proposed regulations were issued on May 7, 2014.
The following health care policy items are considered long term actions and are not anticipated in 2015: automatic enrollment in health plans under Section 18A of the Fair Labor Standards Act, as added by PPACA, under which employers with more than 200 full-time employees and who offer enrollment in one or more health benefits plans must automatically enroll new full-time employees in one of the plans offered and to continue enrollment of current employees, fee disclosure for welfare plans, setting forth the standards under ERISA Section 408(b)(2) designed to ensure that plan fiduciaries of welfare plans have the information necessary to determine whether an arrangement for services is “reasonable,” and amendments to the claims procedures under Section 503 of ERISA, designed to strengthen, improve and update the current minimum requirements for internal claims and appeals processes.
The following retirement and compensation policy items are listed on the DOL/EBSA agenda. Most notably, the agency’s ongoing project “to more broadly define as fiduciaries, employee benefits plans, and IRAs those persons who render investment advice to plans and IRAs for a fee” has been given an expected release date of January 2015. This is significant because it suggests the possibility of expedited review by the Office of Management and Budget (OMB), which typically takes at least 90 days.
- Conflict of interest rule-investment advice addressing "fiduciary" definition [proposed rule stage, new proposed regulations scheduled for January 2015]
- DOL/EBSA originally issued proposed regulations in October 2010 intended to protect recipients of investment advice from conflicts of interest and self-dealing by clarifying ERISA's fiduciary standards with respect to the providers of such advice. The proposal would have greatly expanded the definition of a fiduciary (see the October 21, 2010, Benefits Byte). However, in the face of bipartisan congressional criticism and concerns expressed by the Council and other plan sponsor groups, DOL subsequently announced that EBSA would withdraw and re-propose the regulations, including a more vigorous cost analysis, amendments to existing prohibited transaction exemptions (PTEs), one new PTE and an update of DOL Interpretive Bulletin 96-1 (which distinguishes investment education from investment advice). The Council has been in frequent contact with DOL and EBSA officials on this matter with regard to implications for plan sponsors, including written comments on the proposed rules in February 2011. The SEC currently has a related long-term project underway.
- Pension benefit statements, addressing Pension Protection Act (PPA) benefit statement requirements as well as whether and how the individual benefit statement should present a participant's accrued benefits in a defined contribution plan as a lifetime income stream of payments as well as in the form of an individual account balance [proposed rule stage, proposed regulations scheduled for July 2015]
- Guide or similar requirement for section 408(b)(2) disclosures [final rule stage, final action scheduled for September 2015]
- Annual pension plan funding notice, as required under ERISA, as amended by PPA and the Worker, Retiree, and Employer Recovery Act of 2008 (WRERA) [final rule stage, final action scheduled for December 2014]
- Proposed regulations were issued in November 2010.
- Selection of annuity providers – safe harbor for individual account plans [long-term action stage, proposed regulations scheduled for November 2015]
- Target date disclosure [long-term action stage, final action scheduled for November 2015]
- The Council filed written comments in January 2011 on the proposed regulations and testified at a joint DOL/SEC hearing on target date funds in June 2009. This project was previously listed as being in the final rule stage but the DOL has elected to gather additional comments on the proposed regulations, likely in conjunction with the SEC which also reopened for comments on a rulemaking project regarding target date funds (see below), which has been delayed.
- Standards for brokerage windows in participant-directed individual account retirement plans [pre-rule stage, formal request for information comment period closed]
- This project follows on DOL's 2012 issuance of Field Assistance Bulletin (FAB) 2012-02R, revised guidance on issues related to participant- and fiduciary-level retirement plan fee disclosure. The FAB resolved a number of concerns expressed by the Council with regard to DOL's original position on the treatment of brokerage window investments as "designated investment alternatives" (DIAs) (known as the "Q&A 30" issue, corresponding to the original issuance). At that time, the Council had met with senior lawmakers and officials from the Office of Management and Budget (OMB) and provided written comments to DOL and a letter to Phyllis Borzi, Assistant Secretary of Labor for EBSA, advocating for immediate withdrawal of the original FAB.
- Amendment of the abandoned plan program, designed to facilitate the termination of, and distribution of benefits from, individual account pension plans that have been abandoned by their sponsoring employers [final rule stage, final regulations scheduled for July 2015]
- Proposed regulations were issued in December 2012. At least one focus of the amendments will be consideration of expanding the scope of individuals who can be “qualified termination administrators,” the only entities authorized to implement the activities necessary to terminate an abandoned plan.
- Adoption of an amended and restated Voluntary Fiduciary Correction Program (VFCP), intended to expand the scope of some transactions currently eligible for correction under VFCP and streamline correction procedures for certain other transactions [final rule stage, interim final regulations scheduled for March 2015]
- Modernization of the Form 5500 Annual Return/Report of Employee Benefit Plan to “[make] the investment and other information on the Form 5500 more data mineable” [proposed rule stage, proposed regulations scheduled for July 2015] and revisions to Form 5500 Annual Return/Report of Multiple Employer Plans, as required by the Cooperative and Small Employer Charity Pension Flexibility Act (CSEC Act), which created the exemption from the PPA funding rules [final rule stage, agency currently analyzing interim final rule comments]
- Fiduciary requirements for disclosure in participant-directed individual account plans – timing of annual disclosure amending 29 CFR section 2550.404a-5 by providing plan administrators with flexibility as to when they must furnish annual disclosures to participants and beneficiaries [proposed rule stage, proposed regulations scheduled for December 2014]
The following health care policy items are listed on the HHS/CMS agenda:
- Calendar-year 2016 notice of benefit and payment parameters, addressing cost-sharing reductions, advance premium tax credit, reinsurance, and risk adjustment programs (including the transitional reinsurance program fee) under PPACA [proposed rule stage, proposed regulations scheduled for November 2014]
- Proposed regulations were issued in November 2014.
- Guidance relating to Medicare payments to providers of services and suppliers participating in Accountable Care Organizations (ACOs) under the Medicare Shared Savings Program [proposed rule stage, proposed regulations scheduled for November 2014]
- Certification of compliance for health plans under HIPAA [final rule stage, final action scheduled for July 2015]