News

Final regulations entitled, Implement SECURE Act and Related Revisions to Employee Benefit Plan Annual Reporting on the Form 5500, issued by the Department of Labor’s Employee Benefits Security Administration (EBSA), have been received by the federal Office of Management and Budget (OMB). The OMB’s Office of Information and Regulatory Affairs (OIRA) provides final review of regulatory guidance before its official release.

The Setting Every Community Up for Retirement Enhancement (SECURE) Act included a provision that would allow employers sponsoring defined contribution plans that have the same trustee, administrator, fiduciaries, plan year, and investment options, to file one common Form 5500 beginning in 2022. Proposed guidance was issued last fall under a larger guidance package, with details shared in a Washington Pulse.

The Pension Benefit Guaranty Corporation (PBGC) has issued updated interest rate assumptions for benefit payments in terminating single-employer defined benefit (DB) pension plans. Specifically, these interest assumptions are for benefit payments with valuation dates in the second quarter of 2022, and apply to plans insured by PBGC.

The Department of Labor’s (DOL’s) Wage and Hour Division has released a proposed rule Updating the Davis-Bacon and Related Acts Regulations. The DOL indicates that the proposal is the most comprehensive review of the Davis-Bacon Act regulations in 40 years.

The Davis-Bacon Act generally requires payment of locally prevailing wages under direct federal contracts and for covered contractors and their subcontractors. The employer’s obligation can be met by paying the applicable prevailing wage entirely as cash wages or by a combination of cash wages and employer-provided bona fide fringe benefits—including pension and health benefits.

All comments must be received within 60 days of the rule being posted in the Federal Register. While the Wage and Hour Division solicits comments from across the construction industry, it encourages all stakeholders to participate in the process.

The House of Representatives on Wednesday passed a substantial $1.5 Trillion omnibus spending package to fund the government. Included in the bill is a provision that would temporarily allow expenses for telehealth and other remote care services to continue be paid from a health savings account (HSA) without first meeting the deductible under the high deductible health plan (HDHP). The provision would allow the deductible to be disregarded for the period April 1, 2022, through December 31, 2022.

Previously, the Coronavirus Aid, Relief, and Economic Security (CARES) Act amended the same provision to temporarily cover telehealth and remote care services without meeting the deductible for the period after January 1, 2020, for plan years beginning on or before December 31, 2021.

While the provision, if enacted, would allow additional temporary flexibility for HSA owners to cover telehealth expenses from their accounts before meeting deductibles, it is important to note that due to the timing of the expiration of the CARES relief and the extension proposed in the legislation, telehealth services for the period January 1, 2022, through March 31, 2022, would be subject to the HDHP deductible requirements before they would be considered a qualified medical expense for HSA purposes.

The bill now heads to the Senate, where a vote is expected by a Friday funding deadline. However, House lawmakers also passed a stopgap measure by voice vote that lasts until Tuesday to ensure that the Senate has enough time to clear the omnibus package without risking a government shutdown.

The Department of Labor (DOL) has issued Compliance Assistance Release 2022-01 pertaining to the use of cryptocurrencies as plan investments in 401(k) plans. In it, the DOL cautions fiduciaries to exercise extreme care before considering the addition of cryptocurrency options in a plan’s investment menu and elaborates that the failure to remove an imprudent investment option from a menu of options is a breach of fiduciary duty.

The DOL expresses concerns about significant risks and challenges related to fraud, theft, and loss due the following factors

• Speculative and volatile investments due to early stage of development
• Ability for participants to make informed investment decisions due to the unique nature of cryptocurrencies and lack of investor knowledge
• Custodial and recordkeeping concerns related to the asset not being held in a trust or custodial account but rather, stored as “lines of computer code in a digital wallet”
• Valuation concerns with reliability and accuracy, citing disagreements by experts
• Evolving regulatory environment that could result in unlawful transactions or inadequate disclosures

The DOL intends to conduct an investigative program aimed at plans that offer participant investments in cryptocurrencies and related products—including those within brokerage windows and take “appropriate action” to protect the interests of plan participants and beneficiaries.

After a two year wait, we have guidance regarding certain changes brought about by the SECURE Act. On February 23, 2022, the IRS released proposed regulations that revise the existing required minimum distribution (RMD) regulations and other related regulations.

Bill text has been made available for legislation introduced by Senator Tim Kaine (D-VA) intending to improve participation in employer-sponsored retirement plans. The Auto Reenroll Act of 2022 would require qualified automatic contribution arrangements and eligible automatic contribution arrangements that take effect after December 31, 2024, to re-enroll at least every three years, eligible participants that chose not to defer. Representative Kathy Manning (D-NC) has also introduced a companion bill in the House of Representatives.

The IRS has issued a proposed rule to increase the renewal fee for Enrolled Agents (EA) and Enrolled Retirement Plan Agents (ERPA) from $67 to $140. Public comments will be accepted within 71 days of publication in the federal register.

Additionally, final regulations increase user fees related to the special enrollment examination for enrolled agents (EA SEE). That fee has been increased from $81 (plus an amount payable to a third-party contractor), to $99 (plus an amount payable to a third-party contractor). The final regulations removed the user fee for the special enrollment examination for enrolled retirement plan agents (ERPA SEE), because the IRS no longer offers the ERPA SEE or new enrollment as an enrolled retirement plan agent.

The new fees are to be effective 30 days after publication of the final rule(s) in the federal register.

As announced on February 23, 2022, the Internal Revenue Service (IRS) has released proposed regulations related to required minimum distributions (RMDs). The IRS released the proposed regulations due in large part to changes made by the SECURE Act, including increasing the RMD age from age 70½ to age 72 and eliminating the life expectancy options for many beneficiaries. While review of these substantial regulations is ongoing and additional details will be provided, a few initial highlights are worth noting.

• If an account owner dies after the required beginning date, the proposal would require that the 10-year rule include annual payments. Although the SECURE Act is silent regarding the applicability of annual distributions under the 10-year rule, the IRS is contending that the old “at least as rapidly” rule applies in conjunction with the new 10-year rule.
• Spousal beneficiaries would need to elect to treat a decedent’s IRA as their own by the later of December 31 in the year following the year of the account owner’s death, or age 72.
• The proposed regulations clarify that the age of majority for minor eligible designated beneficiaries is age 21.
• An exception has been added that allows an automatic waiver of the 50 percent excess accumulation penalty tax if a year-of-death RMD was missed and the beneficiary removes the required amount by his tax return due date, plus extensions for the year that the RMD should have been taken.
• If an account owner has multiple beneficiaries and one or more of the beneficiaries is not an eligible designated beneficiary, then the account owner is generally treated as having no eligible designated beneficiaries. Exceptions apply to children of the account owner and to multi-beneficiary trusts.

The regulations are proposed to become effective in 2022 for 2022 calendar distribution years. But because written comments are being accepted until May 25, 2022, and a public hearing is scheduled for June 15, 2022, the anticipated timing of the final rule is likely to be late summer or fall—at the earliest. For 2021, the existing regulations must be applied, along with a good faith application of the increased RMD age and the change in beneficiary options. Application of the proposed regulations for 2021 will result in compliance with the good faith requirement.

The IRS has issued its 2021-2022 2^nd Quarter guidance plan update, in which it describes guidance projects in the current fiscal year. Many items in the plan have appeared in prior years’ Priority Guidance Plans. A number of the guidance items deal with retirement savings arrangements, including the following.

• Regulations and guidance relating to the 10 percent early distribution tax
• Comprehensive IRA regulations
• Regulations and guidance updating electronic delivery rules for providing applicable notices and making participant elections
• Regulations relating to SECURE Act modifications to certain rules governing 401(k) plans
• Guidance on student loan payments and their interplay with qualified retirement plans and 403(b) plans
• Regulations on the exception to the unified plan rule for Internal Revenue Code Section 413(e) multiple employer plans (proposed regulations issued in July 2019)
• Regulations on the definition of "governmental plan"
• Final regulations updating minimum-present-value requirements for defined benefit pension plans (proposed regulations issued in November 2016)
• Regulations on mortality tables to determine present value for single-employer defined benefit pension plans
• Final regulations for withholding on distributions when payments are made to a non-U.S. address (proposed regulations issued in May 2019)
• Regulations relating to the Section 6057 reporting requirements (proposed regulations issued in June 2012)
• Guidance updating electronic filing requirements for employee plans to reflect changes made by the Taxpayer First Act.