Washington Update Webcast Looks at PBGC, EBSA, More
The Feb. 8 ASPPA Washington Update
for the first quarter of 2018 offered a look at a variety of current issues, including the Pension Benefit Guaranty Corporation’s (PBGC) Missing Participant Program, the naming of a new Assistant Secretary of Labor for the Employee Benefits Security Administration (EBSA), the Tax Cuts and Jobs Act (TJCA) and the IRS’ recent update of the Voluntary Correction Program (VCP) fees. American Retirement Association Director of Technical Education Robert Kaplan presented the update.
The PBGC issued final rules
for its Missing Participants Program
in the waning days of 2017. The ARA Government Affairs Committee filed a comment letter
on the proposal to expand the program the PBGC issued on Sept. 20, 2016, Kaplan noted.
The final rule, which was published in the Dec. 22 Federal Register, expands the program to cover terminated defined contribution plans, multiemployer pension plans and small professional service defined benefit plans with 25 or fewer participants. A big advantage to the revised program is that it will create a searchable database, Kaplan said, which he cited as a compelling reason a plan sponsor might consider participating in the program.
An especially important aspect of the revised program, said Kaplan, is that it does not allow “cherry picking” — all terminating employees of a terminated DC plan must be transferred. “It’s going to be all or nothing,” said Kaplan. He noted that “this is very important to the PBGC” and that it “was not very flexible” in response to comments on the matter during the comment period when the rule was in proposed form.
And, Kaplan said, it is “very important” that an employer follow the DOL’s required search steps before an employee can be considered missing:
- check related plan and employer records;
- check with plan-designated beneficiaries; and
- use free electronic search tools.
Kaplan stressed that an employer should document in its files that it went through those steps. In addition, he suggested, “it may be prudent to take some extra steps,” such as using search tools that require some expenditures, but “that’s an individual determination.”
Kaplan cautioned attendees that they may not see changes as a result of the final rule immediately. “You may not hear about successes under the plan right away,” Kaplan said, because it applies to plan terminations that take place after Dec. 31, 2017.
Regarding EBSA, Kaplan noted that Preston Rutledge has been named
Assistant Secretary of Labor for EBSA. It is possible, Kaplan said, that some issues “may be reopened,” including:
- projected benefits listed on statements;
- safe harbor annuity provider selection; and
- multiple employer plans (MEPs).
As for the Tax Cuts and Jobs Act, Kaplan discussed the TCJA provisions addressing rollover of loan amounts, the elimination of recharacterization of Roth conversions and hardship withdrawals.
Kaplan also discussed the TCJA’s effect on the tax impact of overpayments. He reminded attendees that plan sponsors are responsible for securing return of overpayments, but that participants are taxed in the year of payment and there is no future deduction. Kaplan said that he has “a strong feeling” that the effects the TCJA had on treatment of overpayments “was not intended” and that it was possible that this would be addressed in a technical correction bill. “Keep your eyes open for that,” he told attendees.
Finally, Kaplan outlined the new IRS VCP user fees and their basis in plan asset size, and the exceptions to asset-based fees.