IRS Guidance

The IRS has issued Notice 2023-5, 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 December 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 IRS has issued Revenue Ruling 2023-1, which contains the applicable federal rates (AFR) for January 2023. 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 final regulations granting a permanent, automatic extension of time to comply with the Affordable Care Act (ACA) reporting requirements. Employers, health insurance issuers, and governmental plans have additional time—not to exceed 30 days after January 31— in which to provide Forms 1095-B or 1095-C to individuals. If the extended due date falls on a weekend or legal holiday, statements are due on the next business day. The extended deadline is effective for calendar years beginning after December 31, 2021. 

In addition, the regulations provide guidance on the following.

Medicaid Coverage Limited to COVID Services.  Medicaid coverage that is limited to COVID testing and diagnostic services is not minimum essential coverage under a government-sponsored program. Individuals covered under this type of plan may still qualify for premium tax credits. This provision is effective September 28, 2020.

Additional Extensions Not Available. Reporting entities are not permitted to request an additional extension to provide Forms 1095-B or 1095-C beyond the automatic 30-day extension. A reporting entity may seek to qualify for penalty relief by showing a failure to file was due to reasonable cause and not willful neglect.

Elimination of Transitional Good Faith Relief. For calendar years 2015 through 2020, the IRS did not impose penalties on reporting entities if they could show that they made good faith efforts to comply with the ACA reporting requirements. The final regulations reiterate that transitional good faith relief is not applicable to the 2021 calendar year and will not be available in the future. 

Filings Submitted to the IRS.  Reporting entities are also required to submit an information return and transmittal form to the IRS on or before February 28 for paper submissions (March 31 if filed electronically) of the year following the calendar year. This deadline has not been extended.

These final regulations provide welcome news to reporting entities who are in the beginning stages of preparing to comply with the 2022 reporting requirements.

Click here to download the PDF.

Earlier this year, the IRS released proposed regulations to update the mortality tables that are used to calculate minimum required contributions for single-employer defined benefit (DB) pension plans, as we previously announced. These regulations were proposed to be effective for plan years beginning in 2023 and provided guidance on the use of updated generational and static mortality tables. The IRS also issued Notice 2022-22, which provided mortality tables applicable for valuation dates occurring in 2023 under existing regulations.

The Department of Labor’s Employee Benefits Security Administration (EBSA), the IRS, and the Pension Benefit Guaranty Corporation (PBGC) jointly released the 2022 Form 5500, Annual Return/Report of Employee Benefit Plan, and the 2022 Form 5500-SF, Short Form Annual Return/Report of Small Employee Benefit Plan, and their respective instructions and schedules.

In an accompanying news release, EBSA reminds filers that these are informational copies of the Form 5500 series and cannot be used for filing. The news release and accompanying instructions highlight the following changes for 2022:

• For multiple-employer plans, new plan characteristic codes have been added to identify pooled employer plans, association retirement plans, PEO multiple-employer plans, and other multiple-employer plans.
• Updated instructions to reflect the cost-of-living adjustment increase of the civil filing penalty from $2,259 to $2,400.
• Revised the instructions for Schedule MB relating to multiemployer defined benefit plans and certain money purchase plan actuarial information.
• Revised Schedule R to require plans to report identifying information about any participating employer who either contributed more than five percent of the plan’s total contributions or was one of the top-ten highest contributors.
• Revised Schedule SB for single employer defined benefit plan actuarial information to require an attachment of a projection of expected benefit payments and require filers to indicate the first plan year that the extended amortization rule was applied under the American Rescue Plan Act of 2021.

The news release further explains EBSA is “modernizing” the EFAST2 website and that the existing EFAST2 user ID and password log-in process is being phased out. Beginning January 1, 2023, EFAST2 will begin using the unified Login.gov single sign-on process for U.S. government websites. Existing EFAST2 users will have until September 1, 2023, to transition their log-in.

The IRS has announced the postponement of certain tax-related deadlines for victims of severe winter storm and snowstorm in New York. The tax relief postpones various tax filing deadlines that began on November 18, 2022. Affected individuals and households who reside or have a business in Cattaraugus, Chautauqua, Erie, Genesee, Jefferson, Lewis, Niagara, Oneida, Oswego, St. Lawrence, and Wyoming counties, 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 November 18, 2022, and before March 15, 2023, will have until March 15, 2023, to complete the acts. This includes filing Form 5500 series returns that are required to be filed on or after November 18, 2022, and before March 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.

Earlier this year (and announced), the IRS issued Notice 2022-27, further extending temporary relief from the physical presence requirements for certain elections that are made by participants and beneficiaries in qualified retirement plans and other tax favored arrangements. This included signatures of those making an election ordinarily needing to be witnessed in the physical presence of a plan representative or notary public, including spousal consent and certain forms of distribution from retirement plans.

Barring further guidance from the IRS in the next few weeks, this relief ends after December 31, 2022. Participant elections, including spousal consents, after this time that are required to be witnessed by a plan representative or a notary public under Treasury Regulation § 1.401(a)-21(d)(6) will no longer be available for relief from these requirements.

The IRS has announced the postponement of certain tax-related deadlines for victims of severe storm and flooding in Illinois. The tax relief postpones various tax filing deadlines that began on July 25, 2022. Affected individuals and households who reside or have a business in St. Clair County, 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 July 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 July 25, 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 IRS has issued Revenue Ruling 2022-22, which contains the applicable federal rates (AFR) for December 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."