The Department of Labor issued a final regulation relating to the provision of investment advice to participants and beneficiaries in individual account plans, such as 401(k) plans and individual retirement accounts. Under the prohibited transaction rules of ERISA, fiduciary investment advisers generally are prevented from giving investment advice regarding plan investment options if the adviser or any affiliate receives additional fees from the investment providers. The final regulation implements an exemption to these rules, allowing investment advisers to provide advice to participants and beneficiaries provided that certain safeguards and conditions are satisfied. These rules will apply to transactions occurring on or after December 27, 2011. The final regulation can be found here.
Finance Act 2011 includes legislation designed to tax ?Ç£disguised remuneration?Ç¥ effective for the 2011-2012 tax year. The legislation targets tax avoidance arrangements in the form of (1) arrangements that involve third parties (including trusts or other vehicles used to reward employees) and seek to avoid or defer the payment of income tax and (2) unregistered pension schemes. While there are a number of detailed exclusions, if the legislation applies, it deems an amount to be subject to taxation as employment income even if the employee has not yet actually received such income and may never receive such income. Draft guidance can be found here.
IRS Announces Cost-of-Living Adjustments Applicable to Defined Contribution Plans and Defined Benefit Plans
The IRS announced cost-of-living adjustments applicable to the 2012 tax year that impact defined contribution and defined benefit plan limits. The limitation on elective deferrals was increased from $16,500 to $17,000. However, the limitation for catch-up contributions by participants who are age 50 or older remains at $5,500. The Code Section 415 limit applicable to defined contribution plans increased from $49,000 to $50,000, and the annual compensation limit under Code Section 401(a)(17) increased from $245,000 to $250,000. The limitations used to determine key employees was increased from $160,000 to $165,000, and the highly compensated employee limit was increased from $110,000 to $115,000. The annual benefit limit for defined benefit plans was increased from $195,000 to $200,000. Information on these (and other adjustments) can be found here.
For 2012, the Internal Revenue Service has adjusted the monthly limit on the value of qualified transportation fringe benefits that an employer can provide its employees without being included in taxable income ?Çô from $230 to $240 for qualified parking and from $230 to $125 for transportation in a commuter highway vehicle and transit pass (the reduction is due to?áthe?áexpiration of the temporary enhancements enacted by the American Recovery and Reinvestment Act). In addition, the adoption credit (and corresponding amount excluded from an employee?ÇÖs gross income for the adoption of a child) was adjusted from $13,360 to $12,650 (the reduction is due to the expiration of temporary enhancements). The limits on high deductible health plans were also adjusted for 2012 ?Çô the HDHP minimum deductible amount is $2,100 for self-coverage and $4,200 for family coverage, and the maximum out -of-pocket amount is $4,200 for self-coverage and $7,650 for family coverage.… Continue Reading
On October 3, the Department of Health and Human Services issued operational guidance regarding how plan sponsors participating in the Early Retiree Reinsurance Program (ERRP) under health care reform could submit a request for appeal of an adverse reimbursement determination. The ERRP reimburses plan sponsors for a portion of the costs of health benefits for early retirees and their spouses or surviving spouses until the earlier of January 1, 2014 or the depletion of available funds. The guidance includes information regarding determinations that are appealable, the deadlines for submitting appeals, the information required in appeals, and the appeals process in general. Plan sponsors must appeal an adverse reimbursement determination within 15 calendar days after receiving such determination. A decision by the HHS Departmental Appeals Board is generally final and binding. A copy of the guidance can be found here.
The Internal Revenue Service released an updated version of Form 8928 (Return of Certain Excise Taxes under Chapter 43 of the Internal Revenue Code) and its accompanying instructions. Since January 1, 2010, plan sponsors have been required to report any failure to comply with COBRA, HIPAA, GINA and other group health plan mandates on Form 8928. The updated Form 8928 also requires employers to report any failure to comply with the mandates of healthcare reform, such as the removal of lifetime limits, the extension of health coverage to dependents under the age of 26, the prohibition on rescission, and the new appeals process. The updated form is available here. The updated instructions are available here.
President Obama recently sent to Congress proposed legislative language and analyses of his proposed deficit-reduction plan. Among the proposed legislative changes is a change to the formula used for calculating the cap on the amount that the federal government will reimburse federal contractors for executive compensation. Currently the cap is determined by the median amount of annual compensation for the five most highly compensated management employees at publicly-owned companies with annual sales of more than $50 million. The proposed change would cap executive compensation at the pay rate for positions at Level I of the Executive Schedule. Level I includes, among others, cabinet level positions. Since January 1, 2010, the annual rate of pay for Level I has been $199,700. The analysis accompanying the proposed legislative change states that ?Ç£[T]his provision would?Çªbring greater parity between what the federal government pays its own executives and the amount it reimburses contractors for… Continue Reading
Each year, prior to the Medicare annual enrollment period, employers with prescription drug plans must notify covered individuals as to whether such plans provide creditable coverage. Previously, the annual enrollment period ran from November 15 through December 31. Due to changes made by the health care reform law, the annual enrollment period for this year is October 15 through December 7. Accordingly, employers should send out their Medicare Part D notices by October 15, 2011. The Centers for Medicare and Medicaid Services (CMS) has posted a model notice that can be used this year. This model notice is available here.