Defined benefit plan

House Tax Bill Would Make Several Changes to IRAs and Retirement Plans

A tax bill has emerged from the House Ways and Means Committee, extending certain expiring tax provisions, addressing provisions of 2017 tax reform legislation and several recent disaster events (hurricanes and California wildfires), and proposing additional provisions that would affect tax-advantaged retirement savings arrangements. H.R. 88, titled the “Retirement, Savings, and Other Tax Relief Act of 2018,” is being reported as having bipartisan support.

How the legislation in its current form will be received in the Senate, if passed by the House, remains to be seen, although it is known that there have previously been negotiations on retirement provisions between leaders of both congressional bodies. Control of the House of Representatives will change with the start of the 116th Congress in January 2019, resulting from the November 2018 midterm elections. Leadership of the House Ways and Means Committee—the source of this bill—will shift from Rep. Kevin Brady (R-CA) to a Democratic House leader, widely expected to be Rep. Richard Neal (D-MA).

The following provisions of this legislation would in some manner impact retirement savings arrangements.

  • Enhance retirement plan options related to distributions and repayments, plan loans, prorated tax treatment of distributions, etc., for several geographic areas recently affected by hurricanes, wildfires, typhoons, and volcanic eruptions
  • Broaden options for employers to participate in multiple employer plans (MEPs) or a similar new design known as “pooled employer plan” (PEP)
  • Extend the period within which a 401(k)-type plan may elect a safe harbor plan design
  • Make Traditional IRA contributions an option for taxpayers of any age who have earned income
  • Exempt $50,000 of aggregate retirement savings from RMD requirement (to be COLA-adjusted)
  • Allow graduate student fellowship and stipend payments to qualify as earned income for IRA purposes
  • Prohibit credit card-enabled retirement plan loan programs
  • Allow retirement plan lifetime income investments to be distributed and rolled over to another accepting retirement arrangement if the plan ceases to offer this investment option
  • Allow a higher cap (15 percent) on deferral rates in certain automatic enrollment 401(k) type plans
  • Increase the maximum tax credit for small employers that establish retirement plans (maximum of $1,500 per year)
  • Provide a tax credit incentive for employers to add automatic enrollment features to their retirement plans
  • Allow 403(b)(7) custodial accounts to retain 403(b) status even if the plan is terminated by the sponsoring employer
  • Permit recipients of military Ready Reserve compensation to make additional retirement plan salary deferrals
  • Allow certain qualified retirement plans to be established through an employer’s tax return deadline, including filing extensions
  • Provide nondiscrimination testing relief to certain defined benefit pension plans that are closed to new participants
  • Enhance the fiduciary safe harbor for employer selection of lifetime income retirement plan investments
  • Require an annual projection of potential lifetime income based on a participant’s retirement plan account balance
  • Modify certain defined benefit pension plan insurance premiums paid to the Pension Benefit Guaranty Corporation (PBGC)
  • Create a birth or adoption exemption to the 10 percent excise tax on early distributions from retirement plans

PBGC Issues Final Regulations on “Guaranteed Benefits” for Owner-Participants in Terminating DB Plans

The Pension Benefit Guaranty Corporation (PBGC) issued final regulations, published in the October 3, 2018, Federal Register, regarding limitations on guaranteed benefits to be paid to owner-participants by this insuring agency. PBGC provides partial benefits in the event that certain defined benefit (DB) pension plans are unable to pay participants their promised benefits. The guaranteed benefits described in these regulations relate to terminating single-employer DB plans. They specifically address a change from prior law with respect to owners of the businesses sponsoring such terminating plans.

The guidance—first issued as proposed regulations on March 7, 2018—implements changes brought about by the Pension Protection Act of 2006 (PPA). Before PPA, as now, there have been limitations on the benefit guarantees—insurance payments—that are provided by this agency when a plan cannot do so. Note, however, that certain DB plans, including owner-only plans and small plans of certain professional organizations, are not insured by PBGC.

The PBGC-insured benefits of certain owners have restrictions that do not apply to rank-and-file employees. Before PPA, there were benefit limitations that applied to substantial owners, these being defined as a person owning the entire interest in an unincorporated trade or business, or more than 10 percent of a partnership or corporation. PPA changed the applicable definition from substantial owner to “majority owner,” now defined as a person owning the entire interest in an unincorporated trade or business, or more than 50 percent of a partnership or corporation.

 


Organization Proposes Calculation Standards for DB Plan Lump Sum Payments

The Pension Committee of the American Academy of Actuaries has released what it describes as an “exposure draft” document, which contains proposed standards of practice for actuaries valuing benefits payable as a lump sum from defined benefit (DB) pension plans.

The document notes the rising frequency of lump sum payments from DB plans, and that the amount of a lump sum calculated may vary based on certain market rates used in the calculation. Included is a discussion not only of traditional DB plan designs, but also cash balance and other hybrid plans.

The exposure draft makes clear that it is “not binding upon any actuary and is not a definitive statement of what constitutes generally accepted practice in the area under discussion,” but is being circulated for comments. Comments are to be received by November 15, 2018 (an e-mail address for submitting comments is provided).

The American Academy of Actuaries is a 19,500-member organization that serves the actuarial community, and as noted in this document, sets qualification, practice, and professionalism standards for actuaries in the United States.


IRS Extends Temporary Nondiscrimination Relief for Closed Defined Benefit Pension Plans

The IRS this week released Notice 2018-69, Extension of Temporary Nondiscrimination Relief for Closed Defined Benefit Plans Through 2019. This guidance extends relief granted to certain defined benefit (DB) pension plans that was set to expire at the end of 2018 plan years.

Certain DB plans that continue to accrue benefits for existing participants, but are closed to the entry of new participants, could otherwise face nondiscrimination failures if not for this relief. The situation commonly involves sponsoring organizations that are enrolling new eligible employees in a defined contribution plan, but allowing existing DB plan participants to continue to accrue those benefits.

The nondiscrimination relief is available for plan years beginning before 2020 if conditions outlined in Notice 2014-5 are satisfied. The IRS notes that this extension is provided in anticipation of the issuance of final amendments to the IRC Section 401(a)(4) regulations.


Ascensus Enters into Agreement to Acquire PenSys

Addition of Highly Respected TPA Increases Firm’s Scale and California Presence

Dresher, PA—Ascensus—whose technology and expertise helps millions of people save for retirement, education, and healthcare—has entered into an agreement to acquire PenSys. The third-party administration (TPA) firm will immediately become part of Ascensus’ TPA Solutions division.

Based in Roseville, California, PenSys is a nationally recognized TPA that specializes in the design, implementation, and administration of defined contribution, defined benefit, and cash balance retirement plans. The firm, which also offers 3(16) fiduciary services, has established a strong reputation for providing creative plan design and high quality service.

“PenSys is one of the most highly respected TPAs in the country due to their focus on designing plans to meet clients’ unique needs and their use of technology to enhance personal service,” says Jerry Bramlett, head of TPA Solutions. “Their addition to Ascensus TPA Solutions goes a long way toward helping us build a national TPA that offers a broad set of services and resources to financial professionals, employers, and employees.”

“Since 1995, we’ve worked hard to make PenSys a partner who understands what service really means to financial professionals, CPAs, and their current and prospective clients,” states Bryan Jacobson, PenSys’ chief executive officer. “We’ll continue to offer the best possible solutions for establishing and maintaining their retirement plans as part of Ascensus.”

“PenSys is a high integrity business with excellence in plan design, actuarial consulting, and 3(16) services complemented by their open-architecture business model,” says Raghav Nandagopal, Ascensus’ executive vice president of corporate development and M&A. “This acquisition not only expands our California footprint significantly, but also adds to our capabilities to service clients nationally. We are delighted to welcome their clients and associates to the Ascensus family.”

About Ascensus

Ascensus is the largest independent recordkeeping services provider, third-party administrator, and government savings facilitator in the United States. The firm delivers technology and expertise to help millions of people save for what matters most—retirement, education, and healthcare. For more information about Ascensus, visit ascensus.com. View career opportunities at careers.ascensus.com.


Dan Kravitz Discusses Tax Advantages of Cash Balance Plans

In a recent ​Accounting Today article​, Dan Kravitz provides insight on how top-earning service professionals can utilize cash balance plans to lower their tax bills. ​The Treasury Department recently proposed new regulations that would prohibit planning techniques such as the “crack and pack” — where business owners split their firms into different entities to lower their tax bills. Kravitz said his firm, a specialist in defined-benefit plans for small businesses, is actively marketing pensions as a way for service professionals to get around the new rules.​


IRS, PBGC Issue Tax-Related Deadline Relief for Victims of Recent Hurricanes

The IRS and the Pension Benefit Guaranty Corporation (PBGC) have issued announcements that expand previously-issued tax-related deadline relief for victims of storms, flooding, landslides, and mudslides in Hawaii.

IRS Relief

Under this relief, certain time-sensitive tax-related acts are eligible to be completed beyond their normal deadlines as provided in Treasury Regulation 301.7508A-1(c)(1). They include completion of rollovers and recharacterizations, correction of certain excess contributions, making plan loan payments, filing Form 5500, and certain other acts under this regulation.

The relief applies specifically to residents of the identified areas, to those whose businesses or records necessary to meet a covered deadline are located there, and to certain relief workers providing assistance following the disaster events. Any individual visiting a covered disaster area who was injured or killed as a result of the events is also entitled to deadline relief. Affected taxpayers who reside or have a business located outside the covered disaster areas are required to call the IRS disaster hotline at 866-562-5227 to request relief.

Under IRS News Release HI-2018-03, covered deadlines that fall on or after April 13, 2017, and on or before August 15, 2018, are extended to August 15, 2018. The relief applies to affected individuals who reside or have a business in the City and County of Honolulu and Kauai County.

PBGC Relief

The PBGC—the agency with primary oversight over defined benefit pension plans—issued Disaster Relief Announcement 18-07 describing special relief the agency is granting to plans and to designated persons (those responsible for meeting a PBGC deadline) affected by storms, flooding, landslides, and mudslides in Hawaii. The disaster area consists of the City and County of Honolulu and Kauai County.

The deadline relief applies to the following actions.

  • Payment of PBGC insurance premiums (single and multi-employer plans)
  • Filing termination notices (single-employer plans)
  • Completing the distribution of plan assets (single-employer plans)
  • Filing post-distribution certification, Form 501 (single-employer plans)
  • Filing for distress termination, Form 601
  • Filing a reportable event notice
  • Filing Form 5500, Annual Return/Report of Employee Benefit Plan

Also, certain plans with underfunding, missed contribution, or funding waivers that must file special actuarial information within 15 days following the filing of their Form 5500 will have until August 15, 2018, for such filing.


Ascensus Acquires INTAC Actuarial Services, Inc.

Leading Service Provider Expands Its TPA Presence While Strengthening Defined Contribution and Defined Benefit Expertise

Dresher, PA— Ascensus, a technology-enabled solutions provider that helps more than 8 million Americans save for the future, has entered into an agreement to acquire INTAC Actuarial Services, Inc. (INTAC). The third-party administration (TPA) firm will immediately become part of Ascensus’ TPA Solutions division.

Based in Ridgewood, New Jersey, INTAC provides complete administration of employer-sponsored retirement plans for about 3,000 small to mid-sized companies, their owners, key executives and employees. The firm understands what employers want and need in a retirement plan and delivers solutions through high quality client service—each retirement plan is designed, created, and proactively refined to meet each client’s goals while maximizing retirement benefits. INTAC also provides ongoing education to their clients and the professionals in the communities they service to ensure that they remain abreast of industry changes and issues.

“Like Ascensus, INTAC is committed to excellence in everything that they do—especially when it comes to making retirement plans work for their clients,” states David Musto, Ascensus’ president. “INTAC has one of the lowest employee turnover rates in the industry and has been ranked as one of the best places to work in New Jersey; we’re pleased to have their associates join us to help Americans save for retirement.”

“As a family-run business, we pride ourselves on creating meaningful client relationships and on creating a culture in which employees feel like they’re part of the family,” says Charles Rosenberg, INTAC’s vice president. “As part of Ascensus, we’ll be able to combine our expertise with their resources to continue to provide a proactive, personalized client experience at every interaction with our firm while also offering exciting growth opportunities to our employees.”

“Geographically speaking, the tri-state and greater Delaware areas are important market expansion opportunities for our TPA Solutions division,” says Raghav Nandagopal, Ascensus’ executive vice president of corporate development and M&A. “With its strong historical growth, successful long-term track record, and associate-focused culture, INTAC is an ideal business to help Ascensus achieve its immediate and long-term growth plans.”

About Ascensus

Ascensus helps more than 8 million Americans save for the future—retirement, education, and healthcare—through technology-enabled solutions. With more than 35 years of experience, the firm offers tailored solutions that meet the needs of asset managers, banks, credit unions, state governments, financial professionals, employers, and individuals. Ascensus supports over 60,000 retirement plans, more than 4 million 529 education savings accounts, and a growing number of ABLE savings accounts. It also administers more than 1.6 million IRAs and health savings accounts. As of March 31, 2018, Ascensus had over $187 billion in total assets under administration. For more information about Ascensus, visit ascensus.com.

View career opportunities at careers.ascensus.com/page/show/tpa and careers.ascensus.com or on LinkedIn at linkedin.com/company/ascensus. For the latest company news, follow @AscensusInc on Twitter.


Jim Racine Discusses Value of TPAs

In a recent article publish by Wealth Management, VP Jim Racine discusses the value of TPAs and how they make employers’ lives easier. He also explains how fast the retirement industry is evolving: “Regional and national TPAs are growing by acquisition, with Ascensus seeing up to five acquisitions reported of each month from as many as four firms doing acquisitions,” adds Racine. ​​


PBGC Follows IRS in Granting Deadline Relief to Indiana Storm Victims

The Pension Benefit Guaranty Corporation (PBGC)—the agency with primary oversight over and providing insurance for defined benefit pension plans—has issued Disaster Relief Announcement 18-04, describing special relief the agency is granting to plans and to designated persons due to storm and flooding events in Indiana. Designated persons generally are those responsible for meeting a PBGC deadline.

This PBGC announcement cites IRS News Release IN-2018-01 in defining the Indiana counties covered and the timeframe for deadline extensions. The Indiana counties included in the relief at this time are Carroll, Clark, Elkhart, Floyd, Harrison, Jefferson, Lake, Marshall, and St. Joseph. Deadlines falling on or after February 14, 2018, and on or before June 29, 2018, are generally postponed to June 29, 2018.

The PBGC deadline relief applies to the following actions.

  • Payment of PBGC insurance premiums (single and multi-employer plans)
  • Filing termination notices (single-employer plans)
  • Completing the distribution of plan assets (single-employer plans)
  • Filing post-distribution certification, Form 501 (single-employer plans)
  • Filing for distress termination, Form 601
  • Filing a “reportable event” notice
  • Filing Form 5500, Annual Return/Report of Employee Benefit Plan
  • Certain plans with underfunding, missed contribution, or funding waivers that must file special actuarial information within 15 days following the filing of their Form 5500, will have an extension of 15 days beyond the disaster extension date.