2019 was a busy year for benefit professionals, as new legislation and lawsuits created changes in benefit plans and their administration. While you’ve probably been keeping up with the changes relevant to your business and the plans you operate, here’s an overview some of the major changes that occurred this year as a result of guidance from the IRS, DOL, legislature, and others.
Guidance on Retirement Plans
Over the course of 2019, both the IRS and the Department of Labor (DOL) have issued new regulations and guidance that impact retirement plans.
- Employee Plans Compliance Resolution System (EPCRS): A revenue procedure released in April outlines how to handle a variety of retirement plan failures including problems with plan documents, operations, and other failures that can be voluntarily addressed and corrected by plan sponsors. It also expanded self-correction to a handful of plan loan failures. While this expansion only impacts certain types of operational compliance errors, it provides a more practical approach for plan sponsors faced with a number of very common issues.
- IRS Determination Letter: A new revenue procedure released in May limited the expansion of the determination letter program. The IRS will only accept determination letter applications for individually designed statutory hybrid pension plans during a certain window and individually designed merged plans. If the IRS identifies a document failure upon review of the plan, it will issue a “special sanction” that is equal to the user fee for the failure under EPCRS.
- Hardship Distributions: The Bipartisan Budget Act of 2018 led to several changes in safe harbor requirements and hardship distributions from retirement plans. Among these changes are the removal of the requirement that an employee take out a plan loan before taking a hardship distribution and the prohibition of employee elective deferrals for six months after taking a hardship distribution. The sources of funding for hardship distributions were expanded, as was the list of safe harbor expenses and losses that result in immediate and heavy financial need.
- Amendment for 403(b) Plans: In September, new revenue procedures created a system for recurring remedial amendment periods where 403(b) plan sponsors can correct for defects in both individually designed and pre-approved plans. Procedures provide for a limited extension to the initial remedial amendment period for form defects.
- Multiple Employer Retirement Plans (MEPs): New final regulations for MEPs were issued in July that expand how small and medium-sized businesses can sponsor or adopt a MEP for their employees. The new regulations focus on defining a bona fide group or association that can sponsor a MEP for its members. The organization must have a formal structure, be controlled by the employer-members, and have a substantial business purpose other than offering benefits. Additionally, participants must be limited to employees and former employees of the association members.
- MEP Transition Relief: The DOL released the Field Assistance Bulletin in June, which provided temporary relief for MEP retirement plans that failed to comply with Form 550 reporting requirements. AMEP is required to submit an annual report that contains an accurate list of participating employers. Failure to do so can result in a DOL enforcement action.
Guidance on Health and Welfare Benefits
While litigation on the lawfulness of the Affordable Care Act is still pending, government agencies have announced they will continue to enforce the law while appeals are heard. Once there is a final decision on the Affordable Care Act, the agencies will respond accordingly. In the meantime, the agencies remain busy in the area of updates to health and welfare benefits legal compliance:
- Classification of California Workers: Legislation in the state of California set forth a new test for determining whether an individual was an employee or an independent contractor. Businesses with employees in California must ensure workers are properly classified. While health and welfare plans governed by ERISA have their own tests for a worker’s status, a change in a worker’s status to comply with California law may impact their eligibility for ERISA-governed benefits.
- Preventive Care for Chronic Conditions: An IRS notice released in July allows high-deductible health plans to offer free preventive care for certain chronic conditions including diabetes, asthma, and heart disease. This allows services and medication to be provided to individuals before they meet their deductible.
- New Health Reimbursement Arrangement (HRA) Options: Two new options are set to go into effect next year that businesses may offer to employees, Individual Coverage HRAs (ICHRAs) and Excepted Benefit HRAs (EBHRAs). ICHRAs can be used to reimburse employees for their costs of premiums for Medicare, dental plans, vision plans, and certain medical expenses.
The Hall Benefits Law team works with plan sponsors to make required changes to plans, documentation, and procedures to avoid future problems. To learn more about our expertise and the services we offer, call 678-439-6236, or visit the Hall Benefits Law website.
