Industry & Regulatory News

The IRS has provided additional guidance related to federal income tax withholding requirements for retirement plan and IRA payments. As previously shared, new Form W-4R, Withholding Certificate for Nonperiodic Payments and Eligible Rollover Distributions, may be used in 2022 and must be used starting in 2023 for any nonperiodic distributions. Updated Form W-4P, Withholding Certificate for Periodic Pension or Annuity Payments, is now to be used only for periodic pension or annuity payments. The IRS has attempted to answer some of the outstanding questions regarding use of the new forms.

With regard to the use of electronic substitutes to paper Forms W-4P and W-4R, the IRS references Publications 15-A, Employer’s Supplemental Tax Guide, and 15-T, Federal Income Tax Withholding Methods, for general guidelines but does provide a few clarifications

• Payers that electronically store payee personal information and accept withholding elections through an account tied to the payee are not required to have the payee submit the information again when completing an electronic substitute to Forms W-4P and W-4R
• References to page numbers, when not applicable to the substitute form, should be replaced by appropriate references
• An electronic substitute to Form W-4R can provide a link to a web page containing marginal tax rate tables as long as certain text and instructions are provided

The IRS also indicates that when providing paper substitute forms for Forms W-4P and W-4R, payers should generally follow the same guidelines that apply for electronic substitutes, with the exception that the substitute form must include applicable instructions and worksheets rather than providing a web address.

The IRS confirms that telephonic substitutes for Forms W-4P and W-4R are permitted and intends to issue additional guidance. In the meantime, brief scripting specific to three Form W-4R scenarios are provided, and the IRS specifies the Form W-4P content that should be scripted as well.

And finally, the IRS clarifies that for payers using electronic or paper substitutes for Forms W-4P and W-4R, compliance with the updated forms must occur by the later of January 1, 2023, or 30 days after the IRS releases the final versions of the 2023 Forms W-4P and W-4R.

The Department of Labor (DOL) has released Interpretive Bulletin 2022-01 (IB) relating to independence requirements for accountants who audit employee benefit plans. Under ERISA, plan administrators of benefit plans requiring an audit are required to retain an “independent qualified public accountant” to conduct an examination of the plan’s financial statements and render an opinion as to whether the financial statements and required schedules are presented fairly in accordance with generally accepted accounting principles (GAAP).

The IRS has announced the postponement of certain tax-related deadlines for victims of a water crisis in Mississippi. The tax relief postpones various tax filing deadlines that began August 30, 2022. Affected individuals and households who reside or have a business in Hinds County, as well as taxpayers with records located in the covered area that are needed to meet covered deadlines, qualify for relief.

The Pension Benefit Guaranty Corporation is proposing modifications to reporting information it asks for on supporting schedules related to annual Form 5500 series returns. The proposal modifies line 19a and correlating instructions of the 2023 Schedule R, Retirement Plan Information, by updating the categories of assets used in identifying investments held by the plan and requiring the breakdown to be reported as of the end of the plan year rather than beginning of the plan year. Additionally, the proposal would modify line 19b and eliminate line 19c. With regard to the Schedule SB, Single-Employer Defined Benefit Plan Actuarial Information, the proposal modifies line 6 (Target Normal Cost) and correlating instructions to address an unlikely reporting inconsistency where a plan requires mandatory employee contributions and the mandatory contributions for the plan year exceed the present value of benefits accruing during the plan year. In addition, PBGC is proposing a change to line 26b attachment instructions to clarify that where a plan assumes benefits are paid in a lump sum but uses the annuity substitution rule to determine the funding target, the attachment may show projected benefits payable in the annuity form instead of the form assumed for valuation purposes.

The Office of Management and Budget has received a proposed rule from the Department of Labor (DOL) titled “Adoption of Amended and Restated Voluntary Fiduciary Correction Program”. The Voluntary Fiduciary Correction Program (VFCP) is a voluntary enforcement program that allows plan officials to identify and correct certain transactions, such as delinquent participant contributions, sales and exchanges, improper loans, and improper plan expenses. The VFCP was last updated in 2006.

The IRS has issued Notice 2022-35, which contains updated guidance on factors used in certain defined benefit (DB) pension plan minimum funding and present value calculations. Updates include the corporate bond monthly yield curve, the corresponding spot segment rates for August used under Internal Revenue Code Section (IRC Sec.) 417(e)(3), and the 24-month average segment rates under IRC Sec. 430(h)(2). IRC Sec. 417 contains definitions and special rules for minimum survivor annuity requirements in DB plans. IRC Sec. 430 addresses minimum funding standards for single-employer DB plans.

The Department of Labor (DOL) has announced a public hearing scheduled for September 15, 2022, (and September 16, 2022, if necessary) regarding its proposal to supersede existing procedures for seeking exemptions from the prohibited transaction provisions of the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code. The DOL will also reopen the comment period beginning on the hearing date until approximately 14 days after the DOL publishes the hearing transcript on the Employee Benefits Security Administration’s (EBSA) web page.  

Details of the release of the proposed rule were previously announced.

Senator Bob Casey (D-PA), Chairman of the Senate Special Committee on Aging, conducted a hearing titled “Saving with ABLE: Financial Security for Pennsylvanians with Disabilities.” The Achieving a Better Life Experience (ABLE) Act was passed into law in 2014, creating tax-free savings accounts for individuals with disabilities to cover qualified disability-related expenses. Senator Casey highlighted how ABLE savings accounts have helped hundreds of thousands of Americans with disabilities improve their quality of life through use of these accounts, and several witnesses shared testimony on the ease of establishing accounts without impacting means testing for other benefits.

The Office of Management and Budget has received a final rule from the IRS titled “Electronically Filed Returns”.

The IRS released a proposed rule in July 2021 regarding electronic filing requirements for certain information returns, pursuant to the Taxpayer First Act of 2019. The proposed regulations reduce the threshold by which filers must electronically file from 250 to 100 returns for the 2022 calendar year. For filings required after calendar year 2022, the threshold will be further reduced to 10 returns.

The IRS has issued Revenue Ruling 2022-17, which contains the applicable federal rates (AFR) for September 2022. These rates are used for such purposes as calculating distributions from retirement savings arrangements that meet the requirements for substantially equal periodic payments (a 10 percent early distribution penalty tax exception), also referred to as “72(t) payments.”