Industry & Regulatory News

Industry & Regulatory News
Proposed RMD Regulations Initial Highlights

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.

March 01 2022
Industry & Regulatory News
IRS Issues User Fee Guidance for EAs and ERPAs

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.

March 01 2022
Industry & Regulatory News
Legislation Proposed to Expand Qualified Medical Expenses to Include Infant Diapers

Senator Joni Ernst (R-IA) has introduced the Diaper Inclusion in Accounts for Parental Expense Reduction (DIAPER) Act. The bipartisan bill would allow the use of flexible spending accounts (FSAs) and health savings accounts (HSAs) to be used to purchase disposable infant diapers as qualified medical expenses. Any progress of the bill through Congress will be monitored, and details provided as they become available.

February 28 2022
Industry & Regulatory News
IRS Priority Guidance Plan Includes Retirement Items

The IRS has issued its 2021-2022 2nd 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.
February 28 2022
Industry & Regulatory News
Legislation Proposed to Promote Retirement Plan Lifetime Income Options

Legislation to promote retirement plan lifetime income options has been reintroduced by Representatives Donald Norcross (D-NJ) and Tim Walberg (R-MI). The Lifetime Income For Employees (LIFE) Act of 2022 would modify the qualified default investment arrangement rules under ERISA to allow annuity investments as part of a default in employer-provided 401(k) plans. The proposal is intended to provide employees with a steady guaranteed income during retirement and allow greater peace of mind that their income will last throughout retirement.

February 25 2022
Industry & Regulatory News
COVID-19 Relief Extended for Another Year

In March 2020, the President declared a national emergency effective March 1, 2020, due to the COVID-19 outbreak. The national emergency was extended for one year until February 28, 2022. On February 18, 2022, the President once again extended the national emergency until February 28, 2023.

The extended national emergency provides relief to health and welfare plans related to the following.

  • COBRA notices (i.e., employer and employee), payment, and election
  • HIPAA special enrollment requests
  • Claims and appeals request and claims perfection

As clarified in Notice 2021-01, the Department of Labor, the Internal Revenue Service, and the Department of Treasury explained the disregarded period applies on a person-by person basis and cannot exceed one year, as follows:

  • one year from the date an individual was first eligible for relief, or
  • 60 days after the announced end of the National Emergency.

Employers should continue to monitor deadlines pursuant to prior guidance.

February 25 2022
Industry & Regulatory News
IRS Issues Proposed Regulations for Required Minimum Distributions

The Internal Revenue Service (IRS) has released proposed regulations relating to required minimum distributions from qualified plans, section 403(b) annuity contracts and custodial accounts, individual retirement accounts and annuities (IRAs), and eligible deferred compensation plans under Internal Revenue Code Section 457.

The proposed regulations are being updated in part to accommodate changes made by the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act). Comments on the proposal can be made up to 90 days after publication in the Federal Register.

February 23 2022
Industry & Regulatory News
PBGC Updates Selection Criteria for Standard Termination Audits

The Pension Benefit Guarantee Corporation (PBGC) has updated the “What’s New for Employers & Practitioners” page of its website to indicate that the audit selection methodology has been revised. The PBGC’s Standard Terminations Q&A states that plans with a participant count of more than 1,050 are selected for audit. Plans with less than 1,050 participants may be randomly selected for audit. Further, plans may be selected for audit if the PBGC has reason to believe that there is a problem or if all plan assets were distributed without filing a Standard Termination Notice (PBGC Form 500) in accordance with the standard termination regulations.

February 17 2022
Industry & Regulatory News
DOL Requests Comments on Actions Needed to Protect Retirement Savings from Climate Change Risks

The Department of Labor has published a Request for Information (RFI) seeking what actions, if any, the department should take to protect retirement savings from risks associated with climate change. According to a DOL news release, the RFI follows President Biden’s Executive Order on Climate-Related Financial Risk, which directs the department to identify actions it can take under ERISA and other relevant laws to safeguard the life savings and pensions of U.S. workers and families from threats of climate-related financial risk. The DOL previously issued a proposed rule “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights”, however the RFI deals with a broader set of questions than the proposed rule and is a different initiative. The RFI’s comment period will run for 90 days after publication in the Federal Register.

February 14 2022
Industry & Regulatory News
SEC Proposes Requirements to Mitigate Cybersecurity Threats

The Securities and Exchange Commission (SEC) has released a proposed rule “Cybersecurity Risk Management for Investment Advisers, Registered Investment Companies, and Business Development Companies”. According to the press release, the proposed rule would require advisers and investment companies to implement written cybersecurity policies and procedures designed to 1) address cybersecurity risks that could harm advisory clients and fund investors, and 2) publicly disclose significant risks and incidents. The proposed rule would also implement new recordkeeping requirements for advisers and funds to improve the availability of cybersecurity-related information and to help facilitate the SEC’s enforcement capabilities.

The SEC will accept public comments for the longer of 1) 60 days following the release of the proposed rule on the SEC’s website, or 2) 30 days following the publication of the proposed rule in the Federal Register.

February 09 2022