ERISA News

April 29, 2022 - The IRS has issued a revised 2021 Publication 590-B, Distributions from Individual Retirement Arrangements (IRAs). The updated publication appears to correct several errors in the life expectancy tables found in Appendix B. The 2021 tax year publication reflects new life expectancy and distribution period tables that are applicable to distribution calendar years beginning on or after January 1, 2022.

Senators Patty Murray (D-WA), Tina Smith (D-MN), and Tammy Baldwin (D-WI) reintroduced the Information Needed for Financial Options Risk Mitigation (INFORM) Act of 2022. The proposal would require pension plan sponsors to provide retirees and participants with certain information when being offered a lump-sum buyout from their defined benefit plan.

The Department of Labor (DOL) has kicked off what is to be a series of roundtable discussions on how to improve retirement security for workers. Labor Secretary Marty Walsh and Kathleen Kennedy Townsend, the Secretary’s representative for pensions and retirement, joined several state officials, trade group representatives, educators, and others in New York City to review current retirement security policies.

In the coming months, Kennedy Townsend will host similar discussions around the country to promote retirement security reform and open a dialogue between various stakeholders. Topics of focus will include encouraging automatic enrollment, improving portability of benefits as workers move from job to job, and leveraging affordable lifetime income options.

Effective April 1, 2022, the maximum aggregate bankruptcy exemption amount for IRAs increased from $1,362,800 to $1,512,350. This exemption amount is subject to cost-of-living adjustments (COLAs), having risen from an initial exemption limit of $1,000,000 as enacted within the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, Public Law 109-8. The limitation is reviewed every three years and increased if COLA measures warrant. There is no maximum exemption for assets accumulated in employer-sponsored retirement plans.

The IRS has released a revised Section 403(b) Pre-Approved Plans Listing of Required Modifications and Information Package (April 2022), which includes sample plan provisions to assist drafters of 403(b) pre-approved plan documents in satisfying the requirements of Internal Revenue Code Section 403(b) and associated regulations. This revised information package consists of five sections with sample provisions related to 1) all 403(b) plans and elective deferral only arrangements, 2) contributions other than elective deferrals, 3) standardized plan provisions, 4) nonstandardized plan provisions, and 5) retirement income accounts. This guidance has been updated to accommodate the 2022 Cumulative List of Changes in Section 403(b) Requirements for Section 403(b) Pre-approved Plans in Notice 2022-8, which was previously announced.

The IRS has issued Revenue Ruling 2022-9, which contains the applicable federal rates (AFR) for May 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.”

The IRS has issued Notice 2022-16, 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 April 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.

Representatives Ami Bera (D-CA) and Jason Smith (R-MO) have reintroduced the “Health Savings for Seniors Act” (H.R. 3796) to permit those enrolled in Medicare to contribute to a health savings account (HSA). Pursuant to the Internal Revenue Code (the Code), an individual is eligible to contribute to an HSA if, among other things, the individual is not a participant in Medicare. The Act would amend the Code to remove this restriction if the individual is enrolled in a Medicare plan that has an annual deductible of $1,000 for self-only coverage and $2,000 for family coverage and the annual deductible plus the annual out-of-pocket expenses does not exceed $5,000 for self-only coverage and $10,000 for family coverage. The Act would also amend the Code to prohibit use of HSA funds to pay for Medicare premiums and any Medicare enrollee would be allowed to spend HSA funds only on medical expenses. Currently, individuals with an HSA account are able to spend the HSA contributions for any purpose, including medical expenses, once the individual turns 65, regardless of Medicare enrollment.

Senators Catherine Cortez Masto (D-NV) and John Cornyn (R-TX) have introduced the Savings Access for Escaping and Rebuilding Act of 2022 (SAFER Act). The bill would provide for penalty-free distributions up to the lesser of $10,000 or 50 percent of the nonforfeitable account balance from tax-exempt retirement plans for survivors of domestic abuse. Eligible distributions can be made within a one-year period of the domestic abuse and can be self-certified by the plan participant. The withdrawn funds could be replaced over a three-year period from the date the distribution was received.

The U.S. House of Representatives passed the Securing a Strong Retirement Act of 2022 (SSRA) by a 414-5 vote on March 29, 2022. H.R. 2954 (also commonly referred to as “SECURE 2.0”) contains over 50 retirement plan provisions—nearly double the number as the original Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019. The U.S. Senate is expected to take up a similar bipartisan bill later this year, which could result in the need for a conference committee to reconcile differences between the two bills.