Legislative updates

The Department of Treasury has issued a final rule amending the affordability determination used to determine a family’s eligibility for the premium tax credit. The final rule provides that employer-sponsored health coverage is affordable based on the cost of coverage for the employee and related individuals, not just on the cost of coverage of the employee. In addition, the final rule requires the plan to provide a minimum value coverage for related individuals of 60 percent, similar to the existing rule for employees. An employer plan that provides minimum value to an employee also provides minimum value to related individuals if the scope of benefits and cost sharing under the plan are the same for employees and family members.

The final rule does not require employers to compute minimum value separately for employee and related individuals. The final rule also does not

• affect reporting required under Code section 6055 and 6056 (i.e.,1094 and 1095),
• affect affordability calculations for individual coverage health reimbursement arrangements or qualified small employer health reimbursement arrangements, or
• affect affordability calculations for employees offered multiple offers of coverage.

Finally, employers that offer coverage through a cafeteria plan may permit an employee to disenroll from coverage to enroll in Exchange coverage beginning January 1, 2023. Coincident with this final rule, the IRS has issued Notice 2022-41, which allows a non-calendar year cafeteria plan to permit an employee to revoke an election of family coverage to enroll in Exchange coverage under two conditions.

• the individual qualifies for a special enrollment period and
• the revocation corresponds with the intent to enroll in Exchange coverage no later than the day immediately following the last day employer coverage is revoked.

An employer choosing to amend the cafeteria plan may amend the plan retroactively to the first day of the plan year and must adopt the amendment before the last day of the plan year that begins in 2024. The final rule becomes effective on December 12, 2022.      

The Pension Benefit Guaranty Corporation (PBGC) is proposing to provide interest rate assumptions that may be used by a plan actuary in determining a withdrawing employer’s liability under a multiemployer plan. Under ERISA, an employer that withdraws from a multiemployer plan may be liable to the plan for withdrawal liability, which generally represents the employer’s share of any unfunded vested benefits that the plan may have at the end of the plan year immediately preceding the plan year in which the employer withdraws. The plan actuary determines the present value of the plan’s nonforfeitable benefits using actuarial assumptions and methods.

The proposed rule clarifies that it is reasonable to base the interest assumption used to calculate an employer’s withdrawal liability on the market price of purchasing annuities from private insurers, such as by use of settlement interest rates prescribed by PBGC under Section 4044 of ERISA (4044 rates). The proposed rule would specifically permit the use of 4044 rates either as a standalone assumption or combined with funding interest rate assumptions, to determine withdrawal liability.

PBGC indicates the rule will be published in the Federal Register on October 14, 2022, and comments may be submitted by November 14, 2022.

The IRS has announced the postponement of certain tax-related deadlines for victims of Hurricane Ian in South Carolina. The tax relief postpones various tax filing deadlines that began on September 25, 2022. Affected individuals and households who reside or have a business anywhere in the state of South Carolina, as well as taxpayers with records located in the covered area that are needed to meet covered deadlines, qualify for relief.

In addition to extending certain tax filing and tax payment deadlines, the relief includes completion of many time-sensitive, tax-related acts described in IRS Revenue Procedure 2018-58 and Treasury Regulation 301.7508A-1(c)(1). Affected taxpayers with a covered deadline on or after September 25, 2022, and before February 15, 2023, will have until February 15, 2023, to complete the acts. This includes filing Form 5500 series returns that are required to be filed on or after September 15, 2022, and before February 15, 2023.

“Affected taxpayer” automatically includes any individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Those who reside or have a business located outside the covered disaster area, but have been affected by the disaster, may contact the IRS to request relief.

The Senate has confirmed Lisa Gomez as Assistant Secretary of Labor for the Employee Benefits Security Administration by a 49 to 36 vote. Ms. Gomez was nominated by President Biden in July 2021, and an initial attempt at confirmation in June failed by a 49-51 vote.

Senators Tim Scott (R-SC), and Pat Toomey (R-PA), along with Representative Peter Meijer (R-MI), have introduced the Retirement Savings Modernization Act in the Senate and House respectively. According to a press release, the legislation would enhance retirement savings through access to a wide range of alternative assets and reflect the demands of the modern workforce. The proposal would amend Section 404(a) of ERISA to provide that a fiduciary shall not be liable for a breach of duty solely for recommending, selecting, or monitoring any ‘covered investment’ option for a plan. A list of covered investments is defined as, but is not limited to the following

Representative Kurt Schrader (D-OR) has introduced H.R. 8791, the Medicare Enrollment Protection Act of 2022 (the Act). The Act would amend the Social Security Act (SSA) to provide for a special enrollment period under Medicare, Part A (medical insurance) for individuals enrolled in COBRA continuation coverage. The Act would also prevent the increase of premiums in Medicare, Part A, and prevent a group health plan from considering an individual’s eligibility in Medicare, Part B to reduce or eliminate COBRA continuation coverage. In addition, if enacted, the Act would require the Departments of Labor and Health and Human Services to update COBRA continuation notices to include an explanation of Medicare secondary payer rules. 

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 fourth quarter of 2022 and apply to plans insured by PBGC.

Senators Ron Wyden (D-OR) and Mike Crapo (R-ID), Senate Finance Committee Chair and Ranking Member, have introduced S.4808, the Enhancing American Retirement Now (EARN) Act. As previously announced, the Senate Finance Committee unanimously approved the bill in June based upon an outline released at that time.

Changes in the legislative text from the June outline include:

• Individuals age 60 or older could start making higher catch-up contributions in 2025 (versus 2024).
• Employees with wages below $100,000 could make catch-up contributions on a pretax or Roth basis. Employees with wages exceeding $100,000 would still be required to be make catch-up contributions on a Roth basis.
• The option to treat employer contributions as Roth contributions would be available starting in 2023 (versus 2024).

While it is unclear whether the bill will be brought to a stand-alone vote with the Senate’s limited number of sessions for the remainder of the year, congressional observers anticipate that the EARN Act will be consolidated with the Senate Health, Education, Labor and Pensions (HELP) committee’s RISE & SHINE Act and the Securing a Strong Retirement Act of 2022, which was passed by the House of Representatives. It appears that a final bill will likely receive a vote this year after the November mid-term elections.

The Department of Labor (DOL) is extending the comment period for receiving written comments related to prohibited transaction class exemption 84-14 (the Proposed QPAM Amendment) to October 11, 2022. The DOL also intends to hold a public hearing on November 17, 2022, at which time a supplementary comment period will begin, and close approximately 14 days after the hearing transcript is posted on the EBSA’s web page.

Details of the proposed amendment were previously announced.

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.