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New 2022 Health and Welfare Benefits Limits: In Time for Open Enrollment?

The IRS published increased limits for 2022 for various health and welfare benefits, including: Health flexible spending account limit increased to $2,850 (from $2,750); Qualified transportation fringe benefit limit for parking and transit each increased to $280 (from $270); Adoption assistance program limit increased to $14,890 (from $14,400); and Qualified Small Employer Health Reimbursement Arrangement limit increased to $5,450 for individual coverage and $11,050 for family coverage (from $5,300 and $10,700, respectively). An employer that wants to incorporate these increased limits into its plans should determine whether the plans are drafted to automatically reflect the increased limits or whether amendments would be required. If a plan (including a health flexible spending account) is drafted to automatically incorporate any increased limits, the plan sponsor should communicate the increased limits to participants to permit changes during open enrollment for the upcoming plan year. The list of 2022 plan limits can be found in… Continue Reading

IRS Announces 2022 Qualified Retirement Plan Limits

The IRS recently announced cost-of-living adjustments for 2022. Below is a list of some of the key annual limits that will apply to qualified retirement plans in 2022: Compensation limit used in calculating a participant’s benefit accruals: increased to $305,000. Elective deferrals to 401(k) and 403(b) plans: increased to $20,500. Annual additions to a defined contribution plan: increased to $61,000. Catch-up contributions for employees aged 50 and over to 401(k) and 403(b) plans: remains unchanged at $6,500. Annual benefit limit for a defined benefit plan: increased to $245,000. Compensation dollar limit for defining a “key employee” in a top heavy plan: increased to $200,000. Compensation dollar limit for defining a “highly compensated employee”: increased to $135,000. The full list of 2022 plan limits included in Notice 2021-61 is available here.

IRS Releases FAQs on Rehiring Retirees and Retaining Employees After Retirement Age

As employers around the country struggle with labor shortages, many are turning to former employees who retired to fill in the gaps. The IRS recently released two FAQs on plan distributions related to concerns with the rehiring of retirees and the retention of employees who have reached their retirement age. Generally, for plans that do not permit in-service distributions, benefit distributions to an individual may only commence when the individual has a bona fide retirement. The FAQs state that rehiring an individual who already experienced a bona fide retirement will not cause such retirement to no longer be considered “bona fide” if the rehiring was due to unforeseen circumstances that do not reflect any prearrangement to rehire. Thus, if a plan’s terms permit, benefit distributions can continue after the rehire. The FAQs also state that plans may generally permit in-service distributions for employees who have reached age 59½ or the… Continue Reading

Agencies Issue FAQs Clarifying Wellness Program and Other Health Plan Requirements Related to COVID-19 Vaccines

The DOL, Treasury Department, and HHS have jointly issued a set of FAQs that provide helpful clarifications regarding certain requirements under the CARES Act, the HIPAA nondiscrimination rules (the “Nondiscrimination Rules”), and the Affordable Care Act (the “ACA”) related to COVID-19 vaccines (“Vaccines”).  Wellness Programs under the Nondiscrimination Rules Among other items, the FAQs provide guidance under the Nondiscrimination Rules regarding an employer’s imposition of a premium discount under a wellness program for an individual’s receipt of a Vaccine. If the wellness program is itself, or is part of, a group health plan that is not otherwise exempt from the Nondiscrimination Rules, the FAQs confirm that a premium discount would constitute a “health-contingent, activity-only” wellness program that must, among other requirements, offer a “reasonable alternative standard” to qualify for the discount for individuals for whom it is unreasonably difficult due to a medical condition, or medically inadvisable, to receive the… Continue Reading

IRS Provides Further Clarification Regarding COBRA Deadline Extensions

Last year, the DOL and IRS issued joint guidance providing that certain plan related deadlines, including the 60-day deadline to elect COBRA continuation coverage and the 45-day deadline to make COBRA premium payments, would be suspended during the “COVID-19 outbreak period” (i.e., the time period from March 1, 2020 until 60 days after the end of the national emergency or other date announced by the government) for up to one year. The DOL released other guidance earlier this year clarifying that the one-year deadline suspension is applied on an individual basis (see our prior blog post on that guidance here). Recently, the IRS issued Notice 2021-58 (the “Notice”), which clarifies that the extended timeframes for an individual to (i) elect COBRA continuation coverage, and (ii) make initial and subsequent COBRA premium payments, generally run concurrently. The Notice provides that if an individual elects COBRA coverage after the 60-day election period… Continue Reading

Recent IRS Snapshot Regarding Deemed Distributions for Participant Loans Reminds Employers of Risk of Plan Loan Errors

The IRS recently released an Issue Snapshot (the “Snapshot”) focusing on participant loans from retirement plans and when certain compliance errors could trigger deemed distributions with respect to such loans. Specifically, the Snapshot lists the following requirements, which if not satisfied, will cause a participant loan to be treated as a deemed distribution: Enforceable agreement requirement, which generally requires a participant loan to be a legally enforceable agreement (which may include more than one document) and the terms of the agreement demonstrate compliance with the applicable requirements of the Code. Maximum loan amount limit requirement, which generally limits the maximum amount of a participant loan to the amount specified under the Code. The Snapshot also noted the CARES Act allowed modifications to the loan limit for certain loans to “qualified individuals.” Repayment period requirement, which generally requires the repayment period of a loan be limited to five years, unless the loan… Continue Reading

Filing a Form 5558 for Retroactively Adopted Plans Does Not Establish a 2020 Form 5500 Filing Requirement

In August 2021, the IRS issued guidance clarifying that certain plans retroactively adopted after the end of the plan year would not have to file a 2020 Form 5500 series return, which we previously discussed in our blog post here. Recently, the IRS further clarified that if a plan sponsor already submitted a Form 5558 (Application for Extension of Time to File Certain Employee Plan Returns) for a retroactively adopted plan, the submission of such Form 5558 would not require such plan to file a 2020 Form 5500. The IRS stated that the filing of the Form 5558 will not result in an IRS delinquency notice if no 2020 Form 5500 is ever filed for the plan specified in the Form 5558. The delinquency notices are based on when the Form 5500 is filed and not the filing of aForm 5558.   IRS newsletters are available here.

Federal Agencies Issue Proposed Revisions to Form 5500 Return/Report

The DOL, PBGC, and IRS (the “Agencies”) recently issued a Notice of Proposed Revision (the “Notice”) to update the Form 5500 Annual Return/Report filed for employee pension and welfare benefit plans. The DOL simultaneously issued a Notice of Proposed Rulemaking to implement the revisions proposed in the Notice. These proposed revisions primarily relate to certain statutory amendments to ERISA and the Code enacted as part of the SECURE Act and include other changes intended to improve Form 5500 reporting. Specifically, the Notice describes the following proposed revisions to the Form 5500 Annual Return/Report:  Consolidation of the Form 5500 reporting requirement for defined contribution retirement plan groups by (i) adding a new type of direct filing entity called a “defined contribution group” reporting arrangement, and (ii) establishing a new reporting schedule for such arrangement; Modifications to reflect pooled employer plans as a type of multiple employer pension plan (“MEP”) and implement… Continue Reading

New IRS Guidance on Excess COVID Related Employment Tax Credits

The IRS recently released proposed regulations related to excess employment tax credits claimed by employers under the American Rescue Plan Act of 2021. Specifically, the proposed regulations clarify that any paid sick and family leave credits or employee retention tax credits that were refunded or credited to an employer in excess of the credits the employer was actually entitled to claim will be treated as an underpayment of the applicable employment taxes that will be collected by the IRS in accordance with its customary assessment and collection procedures. For additional information on the requirements and limitations related to these employment tax credits, please see our prior blog posts here, here, and here.  The proposed regulations are available here.

Benefit Compliance Tip: Be Sure to Sign on the Dotted Line

Benefit plan administration can be complicated and challenging, but sometimes it is not the complex issues that cause the biggest problems; it’s the simplest, such as remembering to ensure plan documents and amendments are actually signed. Far too often, when new plans or plan amendments are adopted, the board or a plan committee will adopt resolutions approving the new plan or amendment, but the actual documents are never signed. Unfortunately, this area of non-compliance may go unnoticed until an IRS or DOL audit or the sale of the plan sponsor, where signed documents are requested but the plan sponsor cannot find them. To avoid being caught with unsigned plan documents, plans sponsors should: Adopt procedures so that immediately after new plans or amendments are adopted, the documents are signed and dated by an authorized signer; After documents are signed, maintain the executed documents in an easy to find location, and… Continue Reading

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