ERISA News

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 IRS has announced the postponement of certain tax-related deadlines for victims of severe storms in Arizona. The tax relief postpones various tax filing deadlines that began July 17, 2022. Affected individuals and households who reside or have a business in the Salt River Pima-Maricopa Indian Community, 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 17, 2022, and before November 15, 2022, will have until November 15, 2022, to complete the acts. This includes filing Form 5500 series returns that are required to be filed on or after July 17, 2022, and before November 15, 2022.

“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 (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 IRS has provided additional guidance related to federal income tax withholding requirements for retirement plan and IRA payments. As previously shared, new Form W-4R, Withholding Certificate for Nonperiodic Payments and Eligible Rollover Distributions, may be used in 2022 and must be used starting in 2023 for any nonperiodic distributions. Updated Form W-4P, Withholding Certificate for Periodic Pension or Annuity Payments, is now to be used only for periodic pension or annuity payments. The IRS has attempted to answer some of the outstanding questions regarding use of the new forms.

With regard to the use of electronic substitutes to paper Forms W-4P and W-4R, the IRS references Publications 15-A, Employer’s Supplemental Tax Guide, and 15-T, Federal Income Tax Withholding Methods, for general guidelines but does provide a few clarifications

• Payers that electronically store payee personal information and accept withholding elections through an account tied to the payee are not required to have the payee submit the information again when completing an electronic substitute to Forms W-4P and W-4R
• References to page numbers, when not applicable to the substitute form, should be replaced by appropriate references
• An electronic substitute to Form W-4R can provide a link to a web page containing marginal tax rate tables as long as certain text and instructions are provided

The IRS also indicates that when providing paper substitute forms for Forms W-4P and W-4R, payers should generally follow the same guidelines that apply for electronic substitutes, with the exception that the substitute form must include applicable instructions and worksheets rather than providing a web address.

The IRS confirms that telephonic substitutes for Forms W-4P and W-4R are permitted and intends to issue additional guidance. In the meantime, brief scripting specific to three Form W-4R scenarios are provided, and the IRS specifies the Form W-4P content that should be scripted as well.

And finally, the IRS clarifies that for payers using electronic or paper substitutes for Forms W-4P and W-4R, compliance with the updated forms must occur by the later of January 1, 2023, or 30 days after the IRS releases the final versions of the 2023 Forms W-4P and W-4R.

The Department of Labor (DOL) has released Interpretive Bulletin 2022-01 (IB) relating to independence requirements for accountants who audit employee benefit plans. Under ERISA, plan administrators of benefit plans requiring an audit are required to retain an “independent qualified public accountant” to conduct an examination of the plan’s financial statements and render an opinion as to whether the financial statements and required schedules are presented fairly in accordance with generally accepted accounting principles (GAAP).

The IRS has announced the postponement of certain tax-related deadlines for victims of a water crisis in Mississippi. The tax relief postpones various tax filing deadlines that began August 30, 2022. Affected individuals and households who reside or have a business in Hinds County, as well as taxpayers with records located in the covered area that are needed to meet covered deadlines, qualify for relief.

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.

The Office of Management and Budget has received a proposed rule from the Department of Labor (DOL) titled “Adoption of Amended and Restated Voluntary Fiduciary Correction Program”. The Voluntary Fiduciary Correction Program (VFCP) is a voluntary enforcement program that allows plan officials to identify and correct certain transactions, such as delinquent participant contributions, sales and exchanges, improper loans, and improper plan expenses. The VFCP was last updated in 2006.

The IRS has issued Notice 2022-35, 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 August 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 Department of Labor (DOL) has announced a public hearing scheduled for September 15, 2022, (and September 16, 2022, if necessary) regarding its proposal to supersede existing procedures for seeking exemptions from the prohibited transaction provisions of the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code. The DOL will also reopen the comment period beginning on the hearing date until approximately 14 days after the DOL publishes the hearing transcript on the Employee Benefits Security Administration’s (EBSA) web page.  

Details of the release of the proposed rule were previously announced.