January 15, 2015
- Senate Finance Committee to Establish Bipartisan Tax Reform Working Groups
- DOL Updates Pension Plan Notice Requirements Under HATFA; IRS Releases Segment Rates
- NTIS Proposed Certification Program for Access to Death Master File
Senate Finance Committee to Establish Bipartisan Tax Reform Working Groups
On January 15, U.S. Senate Finance Committee Chairman Orrin Hatch (R-UT) and Ranking Member Ron Wyden (D-OR) announced the launch of five bipartisan tax working groups within the committee in an effort to facilitate congressional comprehensive tax reform in the 114th Congress.
According to the announcement, “The groups will analyze current tax law and examine policy trade-offs and available reform options within the group’s designated topic areas” and “will work directly with the Joint Committee on Taxation (JCT) to produce an in-depth analysis of options and potential legislative solutions.”
The stated goal is to have a single comprehensive report featuring recommendations from each of the five categories completed by the end of May. The report recommendations will then serve as a foundation for the development of bipartisan tax reform legislation.
The groups will be co-chaired by Republican and Democrat members. (One of the groups will have two Republican and one Democratic co-chairs.) Policy focus areas for the working groups and their respective co-chairs are listed below:
- Savings & Investment, chaired by Senator Mike Crapo (R-ID) and Sen. Sherrod Brown (D-OH). This is the group that will examine retirement tax policy.
- Individual Income Tax, chaired by Senator Chuck Grassley (R-IA), Sen. Mike Enzi (R-WY) and Sen. Debbie Stabenow (D-MI).
- Business Income Tax, chaired by Sen. John Thune (R-SD) and Sen. Ben Cardin (D-MD).
- International Tax, chaired by Sen. Rob Portman (R-OH) and Sen. Chuck Schumer (D-NY).
- Community Development & Infrastructure, chaired by Sen. Dean Heller (R-NV) and Sen. Michael Bennet (D-CO).
As the Senate committee with jurisdiction over the tax code, the Finance Committee has been active in examining comprehensive tax reform, especially with regard to the current tax incentives for employer-sponsored benefit plans. Hatch recently released an analysis, Comprehensive Tax Reform for 2015 and Beyond, outlining various issues likely to come up in the effort to reform the tax code, including employer-sponsored benefits (see the December 12, 2014 Benefits Byte).
It is currently unclear which, if any, working group will examine health benefits tax policy. It may possibly be shared by the Individual Income Tax and Business Income Tax groups.
The House of Representatives Ways and Means Committee initiated a similar process in 2013, designating 11 tax reform working groups to evaluate ideas for comprehensive tax reform. That committee specifically did not establish a health policy working group given the very partisan disagreements about the Patient Protection and Affordable Care Act. It is possible the Senate Finance Committee has chosen not to establish a health group for the same reason.
As part of the House Ways and Means Committee effort, the Council contributed a formal statement to the Pensions/Retirement Tax Reform Working Group emphasizing the successes of the employer-sponsored retirement system and warning against tax reform measures that would undermine or disrupt employee savings. The resulting 568-page document issued by the JCT was the basis for former Ways and Means Chairman Dave Camp’s Tax Reform Act proposal.
The Council will continue to emphasize the value of employer sponsored plans as the Senate Finance Committee and other congressional committees consider benefits measures on a stand-alone basis or as part of more comprehensive legislation. For more information, contact Diann Howland, vice president, legislative affairs, at (202) 289-6700.
DOL Updates Pension Plan Notice Requirements Under HATFA; IRS Releases Segment Rates
The U.S. Department of Labor (DOL) issued Field Assistance Bulletin (FAB) 2015-1 on January 14 updating the annual funding notice requirements for single-employer defined benefit plans.
These updates reflect changes pursuant to the Highway and Transportation Funding Act of 2014 (HATFA), which included a five-year extension of defined benefit pension plan funding stabilization (or “smoothing”) rules originally passed as part of the previous transportation bill, the Moving Ahead for Progress in the 21st Century (MAP-21) Act of 2012. Details of this provision, including an interest rate corridor chart, are available in the August 1 Benefits Byte story.
FAB 2015-1 provides guidance to the DOL Employee Benefits Security Administration’s national and regional offices on compliance by plan administrators of single-employer defined benefit plans with the annual funding notice requirements of ERISA Section 101(f), which sets forth the requirements for annual funding notices to plan participants and beneficiaries.
The guidance also includes a modified supplement to the model annual funding notice that plan administrators may use to comply with the law.
As a matter of good faith compliance, the DOL will treat a plan administrator of a single-employer defined benefit plan as satisfying the Section 101(f) requirements if the plan administrator complies with the guidance in FAB 2013-01 and FAB 2015-01.
In a related matter, the Internal Revenue Service (IRS) issued Notice 2015-5, providing guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used for defined benefit plan funding purposes. The notice also provides guidance as to the interest rate on 30-year Treasury securities in effect for plan years beginning before 2008 and the 30-year Treasury weighted average rate.
NTIS Proposed Certification Program for Access to Death Master File
On December 30, 2014, the National Technical Information Service (NTIS), a division of the U.S. Department of Commerce, published a proposed rule and request for comments on a proposed certification program to provide access to the Death Master File (DMF).
The DMF is a list of deceased individuals maintained by the Social Security Administration and distributed through the Commerce Department. These records, updated weekly, contain the full name, Social Security number, date of birth and date of death for listed decedents. Defined benefit and defined contribution plans commonly use these files for administrative purposes, such as determining when benefits to a deceased participant should be terminated or when a payment should be made to a surviving beneficiary.
However, under the Bipartisan Budget Act enacted in December 2013 (and effective as of March 26, 2014), the Secretary of Commerce must restrict access to the information in each individual’s DMF for a three-year period beginning on the date of the individual’s death, except to persons who are certified under a program to be established by the Secretary of Commerce. Only parties that have “a fraud prevention interest or other legitimate need for the information and agree to maintain the information under safeguards similar to those required of federal agencies that receive return information” may apply for certification.
On March 25, 2014, the NTIS issued an Interim Final Rule (IFR) establishing a temporary certification program for continued access to the DMF. The Council suggested refinements and clarifications to the IFR in April 23 written comments (see the April 25, 2014 Benefits Byte) to NTIS.
The new proposed rule would create a permanent certification program to (1) provide immediate access to a “Limited Access DMF” to those users who demonstrate a legitimate fraud prevention interest or a legitimate business purpose for the information and (2) otherwise delay the release of the DMF to all other users to reduce opportunities for identity theft and restrict information sources used to file fraudulent tax returns. The rule outlines the following aspects of the program:
- Sets requirements to have certified access to the DMF.
- Establishes a process for third party attestation and auditing of the “information safeguarding” requirement for certification.
- Provides that certified persons will be subject to periodic scheduled and unscheduled audits.
- Sets out penalties for persons who disclose or use DMF information in a manner not in accordance with the Act.
- Establishes the process for appealing denials or revocations of certification, the imposition of penalties and a fee program.
The IFR will continue to be in effect until a final regulation is published. Persons previously certified under the Interim Final Rule will need to become certified in accordance with the requirements of the final rule when it becomes effective.
In its prior comments on the IFR, the Council recommended that, in connection with administering retirement plans, a certified entity should be permitted to disclose the fact that a participant has died and the date of death without regard to whether the recipient of that information meets the certification requirements. The Council also suggested that a certified entity should be able to confirm whether a Social Security number provided by a plan, non-DMF service provider, or other person contacted by the certified entity (such as a family member) is the Social Security number of the deceased without regard to whether the plan, non-DMF service provider, or other person can meet the certification requirements.
Although the proposed rule did not entirely address these concerns, it does add language clarifying that “an individual element of information (name, social security number, date of birth, or date of death) in the possession of a Person, whether or not certified, but obtained by such Person through a source independent of the Limited Access DMF, will not be considered ‘‘DMF information’’ for the purposes of the rule.” Thus, information that the certified person already had before receiving the DMF information, or information obtained from another source in addition to the DMF, can be disclosed to non-certified persons. However, we understand it is unlikely that the certified person would have received the date of death from a source other than the DMF and the date of death can be very important in plan administration (for example, cutting off pension payments or commencing them to a survivor) and is often shared between service providers or with the plan sponsor.
The NTIS is requesting comment on the updated definition, as well as the specificity with which a person should be required to provide the basis for certifying its fraud prevention interest or business purpose under the proposed rule. Comments on the proposal are due on January 29 and the Council will likely file a comment letter and is seeking input. For more information or to provide input, contact Jan Jacobson, senior counsel, retirement policy, at (202) 289-6700.