IRS: Retirement Plan Distributions are Taxable Even if a Participant Refuses to Cash a Distribution Check
In Revenue Ruling 2019-19, the IRS clarified that a plan participant’s refusal to cash a distribution check after she received it does not (i) permit her to exclude the amount of the distribution from her taxable income, (ii) alter her employer’s duty to withhold all applicable taxes from the distribution, or (iii) alter her employer’s duty to report the taxable income on a Form 1099-R. While this Revenue Ruling addresses the treatment of plan distributions when a participant receives, but refuses to cash, a distribution check, the ruling does not address other situations in which a distribution check is not cashed, such as in the case of missing participants. The ruling states that the IRS and Treasury are continuing to analyze such issues and may publish related guidance in the future. Revenue Ruling 2019-19 is available here.
DOL Publishes FAQs on Employer Retirement Plan Obligations to Reemployed Service Members Under USERRA
The DOL recently published a series of frequently asked questions (“FAQs”) on its website that provide general guidance to employers on their retirement plan obligations to reemployed service members under the Uniformed Services Employment and Reemployment Rights Act of 1994 (“USERRA”). Among other things, the FAQs address (i) what military service must be credited for purposes of determining retirement benefits, (ii) an employer’s obligation to make retirement plan contributions while an employee is on a qualifying military leave of absence, and (iii) an employee’s right to make up missed contributions when he or she is reemployed following a qualifying military leave of absence. The FAQs are available here.
The DOL has updated the model notice that employers providing group health coverage may use to notify eligible employees about Medicaid or the Children’s Health Insurance Program (“CHIP”) premium assistance programs available in their home states. Employers must provide this notice before the start of the plan year. The updated model CHIP notice is available here.
Generally, the Affordable Care Act (“ACA”) requires group health plan coverage sponsored by large employers to be “affordable” in order to avoid certain penalties. “Affordability” is based on whether the premium for employee-only coverage is less than a certain percentage of an employee’s household income or an applicable safe harbor amount. In Notice 2019-29, the IRS announced that the affordability percentage for 2020 would decrease to 9.78% from 9.86% in 2019. Employers should note this change as they set premiums for 2020. Notice 2019-29 is available here.