Industry & Regulatory News

The IRS has issued Notice 2022-60, 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 November 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 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 Department of Labor’s Wage and Hour Division has once again released guidance on the definition of “employee.” This October 2022 guidance, in the form of proposed regulations, applies primarily to determinations under the Fair Labor Standards Act (FLSA), but may help in other contexts, such as in determining whether a worker should be covered by a retirement or health plan. Although the new rules are not radically different from previous regulations, there are some important changes.

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."

The IRS has issued Notice 2022-59, providing the adjusted applicable dollar amount to be multiplied by the average number of covered lives for purposes of calculating the fee imposed by Internal Revenue Code Sections 4375 and 4376, for health insurance policy years and plan years that end on or after October 1, 2022, and before October 1, 2023.
 
The Affordable Care Act imposes a fee on issuers of specified health insurance policies and plan sponsors of applicable self-insured health plans, to help fund the Patient-Centered Outcomes Research Institute (PCORI). This fee, also known as the PCORI fee, is calculated using the average number of lives covered under the policy or plan and the applicable dollar amount for that policy year or plan year. Notice 2022-04 provided that the adjusted applicable dollar amount for policy years and plan years that ended on or after October 1, 2021, and before October 1, 2022, is $2.79. Notice 2022-59 provides that the adjusted applicable dollar amount for policy years and plan years that end on or after October 1, 2022, and before October 1, 2023, is $3.00.
 
The PCORI fee is filed using Form 720. Although Form 720 is a quarterly return, PCORI Form 720 is filed annually only, by July 31. Plan sponsors should apply the applicable PCORI fees and file Form 720 corresponding to policy or plan years ending from January 1, 2022, to December 31, 2022, by July 31, 2023.

Participants in a 401(k) plan sponsored by The Massachusetts Mutual Life Insurance Company (MassMutual) have sued the sponsor for breach of fiduciary duty to the plan. The plaintiffs claim that by offering MassMutual’s own proprietary funds for the plan, the sponsor put its own interest ahead of plan participants. They argue that almost no similarly sized plan sponsors offer those funds, and that there were identical investments with cheaper share classes available that the sponsor should have selected instead.

They also argue that the sponsor improperly retained Empower as the recordkeeper. MassMutual had been a recordkeeper and conducted all recordkeeping for the plan in house. It sold its recordkeeping business to Empower effective Jan. 1, 2021.

After the sale, the sponsor elected to hire Empower as the recordkeeper, and kept it in that position until May 2022, when it hired a less expensive recordkeeper. The plaintiffs contend that MassMutual improperly offered Empower the right to serve as recordkeeper of the plan as an inducement to the sale.

Representative Ron Kind (D-WI) and co-sponsor Mike Kelly (R-PA) have introduced HR 9286 to treat certain price protection payments from Employee Stock Ownership Plans (ESOPs) as eligible rollover distributions. Price protection payments are made under a price protection agreement and provide a guaranteed minimum price for shares that may temporarily decline in value as a result of the company loaning money to the ESOP to purchase shares.

The proposal would treat certain price protection payments made after December 12, 2019, for plan years ending before January 1, 2023, as eligible rollover distributions if payments were made pursuant to a price protection agreement for distributions due to separation from service, retirement, death or disability. For plan years beginning after 2022, payments made under a price protection agreement as a result of any separation of service of a plan participant (regardless of the reason for such separation) would be eligible for rollover. Price protection payments must be made within a period not to exceed the lesser of five years or the life of the exempt loan following the purchase of employer securities with such loan.

The White House announced President Joe Biden’s intent to nominate Danny Werfel as the next Commissioner of the Internal Revenue Service (IRS). The Commissioner is appointed by the President, by and with the advice and consent of the Senate, for a five-year term. If confirmed by the Senate, Mr. Werfel will replace Commissioner Charles Rettig, whose term expires November 12, 2022.

The Pension Benefit Guaranty Corporation (PBGC) has released the Comprehensive Premium Filing Instructions for 2023 Plan Years. Annual premium filings and payments are required under ERISA and PBGC regulations for PBGC covered DB plans.

The Pension Benefit Guaranty Corporation (PBGC) is extending the comment period for a proposed rule that would provide interest rate assumptions that may be used by a plan actuary in determining a withdrawing employer’s liability under a multiemployer plan. PBGC published the proposed rule in the Federal Register on October 14, 2022, with a comment period that was scheduled to end on November 14, 2022. After receiving a request to extend the comment period to provide a total of at least 60 days from October 14, 2022, PBGC is extending the comment period through December 13, 2022. Release of the proposed rule was previously announced.