ERISA News

The IRS has released Revenue Ruling 2022-13 on the applicability of Internal Revenue Code (IRC) Section 432(b)(7) following a merger involving a multiemployer defined benefit (DB) plan that has received special financial assistance (SFA). IRC Sec. 432(b)(7) provides for deemed critical status for eligible multiemployer plans receiving SFA. If a multiemployer DB plan that has received SFA is merged into a multiemployer DB plan that has not received SFA, and the designated plan ongoing is the one that has not received SFA, is the ongoing plan deemed to be in Sec. 432(b)(7) critical status? The IRS holds that, in this case, when the ongoing plan after a merger was not the one that had received SFA prior to the merger, it is not deemed to be in Sec. 432(b)(7) critical status solely as a result of the merger.

A plaintiff in a 401(k) plan sponsored by Colgate-Palmolive Co. has filed a lawsuit against several parties after an unknown individual defrauded the plan of her entire $750,000 account. The plaintiff has named the plan sponsor, the recordkeeper Alight Solutions, and the plan trustee Mellon Bank, as defendants in the lawsuit. The plaintiff alleges the parties breached their fiduciary duty by failing to safeguard her assets.

The Pension Benefit Guaranty Corporation (PBGC) has released a final rule outlining terms for underfunded multiemployer plans seeking special financial assistance (SFA) under the American Rescue Plan (ARP) Act of 2021. ARP allows certain financially troubled multiemployer plans to apply for special financial assistance in accordance with rules developed by PBGC. The rule is scheduled to be published on July 8, 2022.

The IRS has released the latest version of Publication 1179 (Revenue Procedure 2022-25), General Rules and Specifications for Substitute Forms 1096, 1098, 1099, 5498, and Certain Other Information Returns.

Some organizations, such as IRA trustees or custodians, may prefer to draft and use substitute forms rather than IRS-provided information return forms. In addition to specifications for properly creating substitute forms, the guidance addresses such issues as inclusion of logos, slogans, and advertisements, as well as penalties for information return filing failures, and delivery requirements.

Congressman Patrick McHenry (R-NC) has released a discussion draft of legislation to modernize financial privacy laws and give consumers more control over how their personal information is collected and utilized. A press release provides the following highlights of the proposal

• Modernizes the Gramm-Leach-Bliley Act to align consumer protections with financial system innovation
• Empowers consumers to understand how personal information is being collected and used by a service provider when they agree to a service provider’s privacy policy, and ensures consumers have the right to terminate collection of their data or request deletion of their data
• Directs entities to disclose to consumers why they are collecting certain data along with the ability to opt out of the data collection—and to use data only for its stated purpose
• Improves transparency by requiring privacy terms and conditions in consumer disclosures to be easily understandable
• Provides a national standard that would preempt state privacy laws to provide consistency across the nation with respect to collection and use of personal information

Congressman Lloyd Smucker (R-PA) has introduced H.R. 8128, a bill to expand the allowable education expenses available for use from 529 education savings accounts. The bill would allow industry recognized apprenticeship programs registered and certified by an eligible Standards Recognition Entity as qualified education expenses. These programs would be in addition to existing apprenticeship programs registered and certified with the Secretary of Labor that qualify as higher education expenses.

The definition of qualified education expense would also be further expanded to include expenses related to a “career and technical education program” (as defined by the Carl D. Perkins Career and Technical Education Act of 2006) or a “career pathway” (as defined by the Workforce Innovation and Opportunity Act).

The IRS has made available a draft 2022 Form 945 Annual Return of Withheld Federal Income Tax. This form is used to report withheld federal income tax from nonpayroll payments such as distributions from tax-favored retirement plans. The form will be reviewed and additional details provided as warranted.

The Enhancing American Retirement Now (EARN) Act, which cleared the Senate Finance Committee and heads to the full Senate for consideration, includes a proposal by Senator Bob Casey (D-PA) to modify the “eligible individual” definition for purposes of a qualified ABLE program. Under the proposal, an individual may be an eligible individual if entitled to benefits based on blindness or disability, and such blindness or disability occurred before the date on which the individual attains the age of 46 (the current age is 26). It is estimated that the change in age would allow over 6 million additional people with disabilities to save with ABLE accounts.

The IRS has issued Notice 2022-29, 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 May 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 has posted online its upcoming guidance priorities. A number of the guidance items deal with retirement savings arrangements, including the following.

• Two items in the “prerule” stage include improving the effectiveness of retirement plan disclosures and guidance on pooled employer plans
• A former initiative to modernize the Form 5500 appears in the proposed rule stage
• A rulemaking to amend the definition of fiduciary to include persons who render investment advice for a fee to employee benefit plans and IRAs
• Revised procedures for granting prohibited transaction exemptions
• A final rule regarding pension benefit statement lifetime income illustrations as required under the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019
• Updates to the Voluntary Fiduciary Correction Program
• A third final rule concerning Form 5500 changes related to the SECURE Act
• A final rule regarding prudence and loyalty in selecting plan investments and exercising shareholder rights
• Amendments to the abandoned plan program