January 30, 2015
- Legislation to Encourage Workplace Retirement Saving Introduced in Senate, House
- DOL Finalizes Defined Benefit Plan Model Annual Notice Requirements
- PBGC Updates Forms for Standard/Distress Terminations, Missing Participants
Legislation to Encourage Workplace Retirement Saving Introduced in Senate, House
Lawmakers in the U.S. Senate and House of Representatives have introduced legislation to promote employer sponsorship of, and employee participation in, defined contribution plans.
Senators Susan Collins (R-ME), chair of the Senate Special Committee on Aging, and Bill Nelson (D-FL), ranking Democrat on the Aging Committee (and member of the Senate Finance Committee) introduced the Retirement Security Act of 2015 (S. 266) in the Senate, while Representatives Vern Buchanan (R-FL) and Ron Kind (D-WI) introduced an identical bill (H.R. 557) in the House.
Bill text is not yet available, but the measures are reportedly identical to the version introduced in the Senate in the previous Congress.
The legislation contains a number of provisions that the Council has long been championing and are included in the Council’s public policy strategic plan, A 2020 Vision. Prior to introduction, the Council sent letters of support to Collins and Nelson and Buchanan and Kind. A detailed summary, prepared by Kent Mason of Davis & Harman, LLP, is available on the Council website.
Most significantly, the bill includes an alternative safe harbor for automatic enrollment and escalation contributions, effectively raising the level of automatic contributions to defined contribution plans. The Council has promoted this safe harbor for several years as a way to improve retirement savings adequacy in defined contribution plans.
The alternative safe harbor provides for minimum levels of default contributions, specified matching contributions for non-highly compensated employees, a special tax credit for small employers that adopt the safe harbor, exemption from top-heavy testing and nondiscrimination testing (with respect to pre-tax elective contributions, matching contributions, and after-tax employee contributions) and a simplified notice and disclosure regime.
The bill also eases certain restrictions on multiple employer plans (MEPs) and expands the availability of the Saver's Credit.
S. 266 has been referred to the Senate Finance Committee, while H.R. 557 has been referred to the House Education & the Workforce Committee. The Council will continue to be in close contact with both bills' sponsors as they progress through Congress. For more information, contact Lynn Dudley, senior vice president, global retirement and compensation policy, Diann Howland, vice president, legislative affairs, or Jan Jacobson, senior counsel, retirement policy, at (202) 289-6700.
DOL Finalizes Defined Benefit Plan Model Annual Notice Requirements
The U.S. Department of Labor (DOL) Employee Benefit Security Administration (EBSA) released final regulations on January 30 amending the annual funding notice requirement for defined benefit plans under ERISA Section 101(f). DOL also issued a fact sheet on the proposed regulations.
The final regulations become effective on March 4 and are applicable to notices for plan years beginning on or after January 1, 2015.
Section 101(f), as amended by the Pension Protection Act of 2006 (PPA) and the Worker, Retiree, and Employer Recovery Act of 2008 (WRERA), generally requires the administrators of single- and multiemployer defined benefit plans to furnish an annual funding notice to the Pension Benefit Guaranty Corporation (PBGC), participants, beneficiaries, labor organizations representing participants or beneficiaries and, in the case of multiemployer plans, each contributing employer. The final regulations provide guidance regarding compliance with these changes.
Most notably, the PPA extended the notice requirement to single-employer defined benefit plans (in addition to multiemployer plans), shortened the time frame for providing funding notices and enhanced the notice content requirements. A funding notice must include, among other information, the plan's funding target attainment percentage or funded percentage (i.e., how well the plan is funded), as applicable, over a period of time, as well as other information relevant to the plan's funded status. This document also contains proposed conforming amendments to other regulations under ERISA, such as the summary annual report regulation, also required by PPA.
The final regulations are generally similar to the proposed regulations issued in November 2010. According to the DOL fact sheet, some changes were made to simplify the disclosure and reduce cost burdens on plans, including the adoption of narrow exemptions and alternative methods of compliance. The final regulation also reflects changes made to Section 101(f) by the Multiemployer Pension Reform Act of 2014.
These rules work in tandem with DOL Field Assistance Bulletin (FAB) 2015-1, issued on January 14, that updates the annual funding notice requirements for single-employer defined benefit plans under the Highway and Transportation Funding Act of 2014 (HATFA) (See the January 15 Benefits Byte for more information).
PBGC Updates Forms for Standard/Distress Terminations, Missing Participants
The Pension Benefit Guaranty Corporation announced on January 30 that the White House Office of Management and Budget (OMB) has approved revisions to the standard and distress termination forms and instructions.
The new forms and instructions can be found on the Plan Terminations page of PBGC's website. Under the revisions, a plan administrator of a plan terminating in a standard termination (or a distress termination that closes out in the private sector) must submit with the post-distribution certification the most recent plan document and proof of benefit distributions for lump sums paid and annuities purchased.
Plan administrators must provide this information with any post-distribution certification filed on or after March 1, 2015. Filers may contact firstname.lastname@example.org or email@example.com for more information. For additional information on defined benefit plan administration, contact Jan Jacobson, senior counsel, retirement policy, or Lynn Dudley, senior vice president, global retirement and compensation policy, at (202) 289-6700.