April 3, 2014
- Senate Finance Committee Approves Tax 'Extenders' Bill
- IRS Issues New Guidance to Facilitate Retirement Plan Rollovers
- One-Year 'Doc Fix' Legislation Enacted into Law
Senate Finance Committee Approves Tax 'Extenders' Bill
In an April 2 mark-up session, the U.S. Senate Finance Committee approved by voice vote the Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act, which provides a two-year extension of several tax provisions expiring in 2013 and 2014. A description of the base bill and the filed amendments, as well as an initial Joint Committee on Taxation revenue estimate, are now available.
So-called “tax extenders” renew expiring tax provisions for individuals, and employers. In his opening statement, Chairman Ron Wyden (D-OR) emphasized the need for a more permanent solution. “I want to be straightforward on one point — this will be the last tax extenders bill the committee takes up as long as I’m chairman. That’s why the bill is called the EXPIRE Act. It is meant to expire.”
Specifically, Wyden added language to the bill indicating the “Sense of the Committee to express support for comprehensive tax reform … making permanent those provisions that merit such treatment and allowing others to expire.” Other members of the Committee echoed Wyden’s remarks and also voiced support for the passage of comprehensive tax reform.
Wyden also called for further bipartisan work to address a number of pressing issues, including retirement policy. He stated that the committee will “need to take a hard look at the issues surrounding multi-employer pension plans in order to protect Americans’ benefits.” The EXPIRE Act includes an extension of the multiemployer pension funding provisions of the Pension Protection Act of 2006 (PPA), which are scheduled to expire after 2014. As we have previously reported, a substantial minority of multiemployer plans are reportedly in so-called "critical" condition. According to the Pension Benefit Guaranty Corporation (PBGC), which insures multiemployer and single-employer defined benefit pensions, the multiemployer insurance fund is projected to be exhausted by 2023, which could lead to more stringent rules or higher insurance premiums for single-employer plans.
Specifically, the EXPIRE Act would extend for one year PPA provisions relating to automatic extensions of amortization, deemed approval of a multiemployer plan’s adoption, use, or cessation of use of the shortfall funding method, and rules relating to so-called “endangered” and “critical” status. The provision also provides that if a plan is operating under a funding improvement or rehabilitation plan for its last plan year (i.e., beginning before January 1, 2016), the plan must continue operating under the funding improvement or rehabilitation plan and comply with Internal Revenue Code and ERISA provisions.
Wyden’s “Chairman’s Mark” of the EXPIRE Act includes several other provisions affecting employer-sponsored benefits:
- Mass transit benefit parity: the American Taxpayer Relief Act of 2012 provided for an increase in the pre-tax allowance for mass transit expenses, making it equal to the benefit provided for parking ($245 per month) through the end of 2013. The EXPIRE Act extends this parity for another two years. The committee also passed an amendment, offered by Senator Charles Schumer (D-NY), to add expenses associated with the use of a bike sharing program to the list of qualifying transportation expenses.
- Tuition assistance: tuition assistance under Internal Revenue Code Section 222 provides for tax deductibility of tuition and related expenses for individuals. The EXPIRE Act extends the above-the-line deduction for qualified college tuition payments (as distinct from Section 127, which relates to employer-provided tuition assistance).
- Distributions from Individual Retirement Plans for Charitable Contributions: the EXPIRE Act extends an expiring provision that allows taxpayers age 70.5 and older to make a tax-free distribution from an IRA of up to $100,000 to a 501(c)(3) organization and simultaneously satisfy the minimum required distribution rules.
In addition, the committee passed an amendment, sponsored by six senators, to extend the health coverage tax credit (HCTC) to individuals dislocated from their work due to trade competition as well as retirees who receive pension payments through the PBGC.
Other amendments to the EXPIRE Act were filed, but not ultimately included in the final legislation:
- Senator John Cornyn (R-TX) filed an amendment to prohibit the enforcement of the Patient Protection and Affordable Care Act (PPACA).
- Schumer filed an amendment to remove the prohibition for IRA rollover gifts to donor-advised funds and supporting organizations.
- Senator Pat Roberts (R-KS) proposed three amendments during discussion – one to restore the ability of plan participants to use the funds in a health flexible spending account to purchase over-the-counter medications, and two to repeal or delay the PPACA (Sec. 9010(b)) annual fee on health insurance providers – but ultimately withdrew these amendments.
Enactment of a tax extenders package is uncertain in the near term, but consideration of such a measure could be possible later in 2014. For more information, contact Diann Howland, vice president, legislative affairs, at 202-289-6700.
IRS Issues New Guidance to Facilitate Retirement Plan Rollovers
In Revenue Ruling 2014-9, issued April 3, the Internal Revenue Service (IRS) provided new guidance that it says “simplifies the rollover process by introducing an easy way for a receiving plan to confirm the sending plan's tax-qualified status.”
Specifically, the guidance provides two new simplified safe harbor due diligence procedures a plan administrator may use in order to be deemed to have reasonably concluded that an amount was a valid rollover contribution. In the absence of evidence to the contrary, following these procedures will give rise to the presumption that the administrator of the receiving plan reasonably concluded that a rollover was valid.
The revenue ruling describes two examples of situations in which an employer may handle qualified plan rollovers. The guidance then provides its interpretation of the law and explains how the safe harbor procedures can be used to ensure proper tax treatment.
According to an IRS news release, the guidance is “designed to help individuals accumulate and consolidate retirement savings by facilitating the transfer of savings from one retirement plan to another.”
For more information, contact Jan Jacobson, senior counsel, retirement policy, at 202-289-6700.
One-Year 'Doc Fix' Legislation Enacted into Law
President Obama has signed into law a measure providing for a one-year “patch” of the Sustainable Growth Rate (SGR) affecting payments to Medicare providers (commonly referred to as the “doc fix”). The Protecting Access to Medicare Act (H.R. 4302), approved by the U.S. Senate and House of Representatives in late March, will extend current payment levels to providers (delaying substantial cuts) through March 31, 2015.
A more permanent ten-year fix had been discussed among members of Congress but the estimated cost (roughly $116 billion over ten years) and other matters stymied negotiations. It had been previously suggested that defined benefit pension plan funding stabilization (as currently included in the long-term unemployment insurance extension bill; see the March 25 Benefits Byte for details) could appear as a revenue offset to a long- or short-term doc fix measure, but S. 4302 contains no such provision.
The bill also contains a number of assorted Medicare program extensions and other health provisions, most of which will have little impact on large employer health plan sponsors. Perhaps most notable is the repeal of the limitation on deductibles in employer sponsored health plans in the small group market under Section 1302(c)(2) of the Patient Protection and Affordable Care Act. These limits had been set at $2,000 for single coverage and $4,000 for family coverage.
For more information, contact Diann Howland, vice president, legislative affairs, at 202-289-6700.