March 31, 2015
- Council Letter Supports SEAL Act, Commends Sponsors for Addressing Retirement Leakage
- Council Comments on Proposed Certification for Access to Death Master File
- Treasury/IRS Issues Guidance on Expatriate Plans under PPACA
- IRS Updates EPCRS Correction Program
Council Letter Supports SEAL Act, Commends Sponsors for Addressing Retirement Leakage
In a letter dated March 30, the Council expressed support for the Shrinking Emergency Account Losses (SEAL) Act (S. 324), introduced in the U.S. Senate by Senators Michael Enzi (R-WY) and Bill Nelson (D-FL). The letter describes the measure as a “constructive solution” to retirement plan “leakage” – the drawdown of retirement plan assets prior to retirement age, usually through hardship distributions or 401(k) plan loans that are not repaid.
As we have previously reported, the SEAL Act would (1) extend the period of time for participants to make a rollover contribution for plan loan offset amounts, allowing employees to contribute the amount outstanding on their loan to an IRA by the time they file their taxes for that year; and (2) direct the U.S. Treasury Department to adjust its regulations to allow 401(k) participants to continue to make elective contributions during the six months following a hardship withdrawal.
The SEAL Act was previously introduced twice before by Enzi and Nelson, in May 2011 and March 2013 The Council also issued a letter of support for the measure in April 2013 (See the April 4, 2013, Benefits Byte).
The March 30 Council letter notes, “Workers who have a financial emergency should not be discouraged from continuing to save for retirement and the SEAL Act corrects that. Employer-sponsored retirement savings programs offer critical support to workers and are highly successful in helping Americans meet their retirement income needs. These plans are enormously popular with American workers. The SEAL Act will make the programs even more effective for employees.”
The measure has been referred to the Senate Finance Committee. Although there are no immediate plans to consider the legislation, introduction of the measure suggests bipartisan interest in ensuring that retirement assets remain in retirement plans. The Council hopes that the legislative conditions in the current Congress will be favorable to achieve serious consideration and passage of the measure and we look forward to working with the sponsors if they will be actively advocating for passage of the legislation.
No House companion bill to S. 324 has yet been introduced. For more information, contact Diann Howland, vice president, legislative affairs, or Lynn Dudley, senior vice president, global retirement & compensation policy, at (202) 289-6700.
Council Comments on Proposed Certification for Access to Death Master File
In March 30 written comments to the National Technical Information Service (NTIS) of the U.S. Department of Commerce, the Council, along with the SPARK Institute, expressed concerns with the proposed regulations on a proposed certification program to provide access to the Death Master File (DMF). The letter suggested clarifications and changes that would continue to protect confidential DMF information from abuse while ensuring that retirement plan administrators are able to access DMF information for legitimate fraud prevention and business purposes.
The DMF is a list of deceased individuals maintained by the Social Security Administration and distributed through the U.S. Department of Commerce. 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.
Under the Bipartisan Budget Act enacted in December 2013, however (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.
In March 2014, the National Technical Information Service (NTIS), a division of the Commerce Department, issued an Interim Final Rule (IFR) establishing a temporary certification program for continued access to the DMF. At that time, the Council suggested refinements and clarifications to the IFR in April 2014 written comments to NTIS (see the April 25, 2014 Benefits Byte).
In December 2014, NTIS published a proposed rule and request for comments on a proposed permanent certification program to provide access to the DMF. The 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 (see the January 15 Benefits Byte).
The Council’s newest letter expresses concerns that the proposed rule “fails to address the critical need for a DMF certification program that will allow parties to exchange recent death information in circumstances where there is no opportunity for abuse” and that the proposed requirement for an individual seeking certification submit a written attestation from an Accredited Certification Body (ACB) is not feasible due to the lack of ACBs prepared to conduct such work. The letter makes the following requests to allow for the use of a Limited Access DMF by retirement plan administrators while ensuring that the DMF is not subjected to greater risks of fraud:
- Create a new safe harbor allowing Certified Persons under certain circumstances to disclose a participant’s date of death to other parties involved in the administration of a plan without regard to whether those other parties meet the requirements for certification. This would ensure that plan sponsors and non-DMF service providers may continue to rely on Certified Persons to provide information on the date of a participant’s death without themselves having to prove to the Certified Person’s satisfaction that they meet the certification requirements.
- Allow third parties to self-accredit that they are qualified to evaluate a person’s information safeguards, provide the required attestations, and conduct audits. Otherwise, provide for a very substantial period for ACBs to accommodate the new market for their services relating to DMF certification and retirement plan administration. The letter notes that there is currently not an ACB market that could accommodate this service and that the time it would take to create such a market could result in a great number of retirement plan administrators losing access to the DMF.
- Provide a transition period of at least 18 months (depending on final ACB requirements) for Persons certified under the IFR to become certified under the new rules to avoid temporary loss of access to the DMF. This would ensure that those with current access under the IFR do not temporarily lose access to the DMF as they work to meet the requirements of the final certification program.
For more information, contact Jan Jacobson, senior counsel, retirement policy, at (202) 289-6700.
Treasury/IRS Issues Guidance on Expatriate Plans under PPACA
The U.S. Treasury Department and Internal Revenue Service (IRS) have released new guidance addressing the application of the health insurance provider fee to expatriate plans.
Section 9010 of the Patient Protection and Affordable Care Act (PPACA) imposes a fee, to be paid by September 30 of each year, on “covered entities engaged in the business of providing health insurance.” The statute’s definition of “covered” entities excludes self-insured employer plans, though we have speculated that the cost of the fee could be passed through to enrollees and plan sponsors of insured plans (including large group plans) in the form of increased premiums.
Expatriate health plans were included within the group of covered entities until Congress passed legislation at the end of 2014 (as part of the Consolidated and Further Continuing Appropriations Act) exempting expatriate plans from the health insurance fee (see the December 18, 2014, Benefits Byte for details). Generally, the legislation provided that, for calendar years after 2015, a qualified expatriate (and any spouse, dependent, or any other individual enrolled in the plan) enrolled in an expatriate health plan is not considered a United States health risk. These rules are generally effective for expatriate health plans issued or renewed on or after July 1, 2015.
According to IRS Notice 2015-29, issued on March 30, “Treasury and the IRS have determined that the MLR final rule definition of expatriate policies … is broad enough to cover all potential expatriate health plans” described in the 2014 legislation. “Therefore, because guidance is urgently needed to implement this special rule, this notice uses the MLR final rule definition to define expatriate health plan solely for this limited purpose.” This notice is effective March 30, 2015 and applies only to fee years 2014 and 2015.
IRS Updates EPCRS Correction Program
On March 27, the Internal Revenue Service (IRS) issued Revenue Procedure 2015-27, modifying the Employee Plans Compliance Resolution System (EPCRS) – a voluntary correction program through which retirement plan sponsors can fix inadvertent errors without any loss of qualified plan status.
Rev. Proc. 2015-27 updates and clarifies certain changes made to the EPCRS issued through Revenue Procedure 2013-12 in December 2012 (see the January 2, 2013, Benefits Byte). Notable changes to the program include clarification to the correction rules on overpayment failures and reduced Voluntary Correction Program fees for failing to meet the requirements for participant loans.
The Council’s latest public policy strategic plan, A 2020 Vision, included a recommendation to improve existing correction procedures. The Council advocates allowing plan sponsors far greater ability to self-correct inadvertent administrative errors without overly complex procedures or severe penalties, if the employer can and does self-correct the error in a reasonable manner that makes participants whole. Eliminating the punitive nature of correction rules would enhance compliance and coverage.
Rev. Proc. 2015-27 is generally effective July 1. Comments must be submitted by July 20. For more information, contact Jan Jacobson, senior counsel, retirement policy, at (202) 289-6700.