August 13, 2015
- DOL hears Council Testimony on Fiduciary Liability Definition Concerns During Proposed Rule Hearing
- IRS Regulations Eliminate 30-Day Automatic Filing Extension for Selected Information Reporting Forms Beginning with 2017 Plan Year
DOL hears Council Testimony on Fiduciary Liability Definition Concerns During Proposed Rule Hearing
In testimony on August 13 at a Department of Labor (DOL) hearing regarding the proposed conflict of interest rule governing employee benefit plans and their sponsors, the Council’s Lynn Dudley outlined how the DOL’s redefinition of who assumes fiduciary responsibilities under ERISA seems at odds with employer efforts to facilitate employee engagement. Highlighting employer concerns that the new conflict of interest and fiduciary definition rules will generate uncertainty, cost and potential liability, she stated that without changes, employers may have to pull back on the educational tools they currently offer to plan participants.
DOL officials heard witnesses over a four-day period in consideration of its proposed regulation concerning an updated fiduciary definition and related proposed prohibited transaction exemptions. This proposal broadly updates the definition of “investment advice” by extending fiduciary status to a wider array of advice relationships than is done under existing rules. The Council filed a comment letter on July 21 and more information about the regulations is available in the July 22 Benefits Byte. During the hearing, several DOL representatives indicated they intend to clarify that the new fiduciary rule does not apply to health, disability and life insurance contracts that do not include an investment component. On July 10, the Council submitted a letter requesting the rules not apply to health and welfare benefit plans where plan assets are not held in trust. The regulators made clear in the hearing their intent to cover funded welfare plans where the assets of the plan are invested.
Dudley testified that the proposed rules, as written, will impact employee assistance and benefits education programs, particularly benefit call centers, on-site benefits briefings, the availability of human resources personnel to answer some basic questions asked by employees, investment education and external investment advisory programs. She emphasized that the proposed standard for fiduciary advice is too easy to trigger and the generic information permitted as “education” in the regulation may not be directly responsive or provide sufficient context to be useful to plan participants.
A fiduciary relationship should not be treated as “existing”, she urged, unless both the parties mutually understand and acknowledge that the individualized recommendations provided in connection with an employer-sponsored plan will play a significant role in the recipient’s financial decision-making and reflects the considered judgment of the advisor.
Dudley advocated for other safe harbor provisions which could be included in the regulation that would assist plan participants and sponsors. One would cover a plan sponsor from co-fiduciary liability for the acts of any employee or service provider if that employer establishes, communicates and reasonably follows a clear written policy. A similar safe-harbor would also allow the plan sponsor’s employees to not be considered fiduciaries if they unintentionally violate the policy or do so less than a minimum number of times.
She also requested that the definition of “education” continue to allow specific investment funds in the plan to be identified and linked to illustrative models available to participants. The regulators were urged to minimize disruption and provide a substantial transition period to allow for many of the uncertainties to be resolved before the new rules are implemented.
The Department representatives posed a number of questions about how best to refine the terminology used in the regulations. At the beginning of the hearings, the DOL announced the comment period for this proposed regulation has been reopened and is expected to remain open until two weeks after the hearing transcript is made available. The Council will be submitting additional comments.
For more information or to share your questions or comments about this guidance, contact Lynn Dudley, senior vice president, global retirement and compensation policy, or Jan Jacobson, senior counsel, retirement policy, at (202) 289-6700.
IRS Regulations Eliminate 30-Day Automatic Filing Extension for Selected Information Reporting Forms Beginning with 2017 Plan Year
On August 12, the Internal Revenue Service (IRS) released two sets of regulations regarding the filing of a number of employer information reporting forms for the 2017 plan year.
No changes in the rules applied to the 2016 filing period for plan information. Currently, employers may use an automatic 30-day extension beyond their stated deadline to file information returns for Forms W-2, 1095 series, 1098 series, 1099 series, 5498 series, and Forms 1042-S and 8027. An additional 30-day non-automatic extension of time to file those forms beyond that initial period may be applied for using Form 8809.
Under a combined set of final and temporary regulations, effective as of July 1, 2016, employers submitting 2017 Forms W-2 (except Form W-2G) will no longer be eligible for an automatic 30-day filing extension. Instead, a single 30-day non-automatic extension may be applied for using Form 8809. This set of rules also included some additional forms subject to current extension procedure, including Form 1094-C, and clarified that the requirements for requesting an extension to file applies to Forms 1095-B and 1095-C, but not 1095-A.
A separate set of proposed regulations phases out the automatic 30-day filing extension for all the forms identified in the temporary regulations effective as of January 1 of the calendar year immediately following publication of a final rule, but no earlier than January 1, 2018. IRS is seeking comments by early November 2015 on the appropriate timing of removal of the automatic 30-day extension for these other forms.
The IRS is terminating the automatic extensions to encourage earlier filing and allow for more time to identify and stop fraudulent claims. A significant burden will have to be met, according to the rules, in order to receive the non-automatic extension after the regulations go into effect. In these cases, the filer must verify the existence of "extraordinary circumstances or catastrophe, such as a natural disaster or fire destroying the books and records a filer needs for filing the information returns."