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IRS Updates Procedures For 403(b) Opinions & Approvals

February 26, 2015

The Internal Revenue Service (IRS) is revising the application procedures for pre-approved 403(b) opinions and advisory letters. Revenue Procedure 2015-22 modifies Revenue Procedure 2013-22, 2013-18 I.R.B. 985, as modified by Revenue Procedure 2014-28, 2014-16 I.R.B. 944, and Revenue Procedure 2015-8, 2015-1 I.R.B. 235 to:

Update the addresses to which applications for opinion and advisory letters for § 403(b) pre-approved plans should be submitted; and

To insert a user fee that was omitted from Rev. Proc. 2015-8. Revenue Procedure 2015-22 will be officially published in Internal Revenue Bulletin 2015-11 dated March 16, 2015.

For Advice, Training & Other Resources

If you need assistance with plan design or qualification, monitoring and responding to these and other regulatory policy, enforcement, litigation or other developments, or to review or respond to these or other workforce, benefits and compensation, performance and risk management, compliance, enforcement or management concerns, the author of this update, attorney Cynthia Marcotte Stamer may be able to help.

Board Certified in Labor & Employment Law, Past Chair of the ABA RPTE Employee Benefit & Other Compensation Arrangements Group, Co-Chair and Past Chair of the ABA RPTE Welfare Plan Committee, Vice Chair of the ABA TIPS Employee Benefit Plans Committee, an ABA Joint Committee On Employee Benefits Council representative, Past Chair of the ABA Health Law Section Managed Care & Insurance Section, a Fellow in the American College of Employee Benefit Counsel, ABA, and State Bar of Texas, Ms. Stamer has more than 25 years’ experience advising health plan and employee benefit, insurance, financial services, employer and health industry clients about these and other matters. Ms. Stamer has extensive experience advising and assisting health plans and insurers about ACA, and a wide range of other plan design, administration, data security and privacy and other compliance risk management policies. Ms. Stamer also regularly represents clients and works with Congress and state legislatures, EBSA, IRS, EEOC, OCR and other HHS agencies, state insurance and other regulators, and others. She also publishes and speaks extensively on health and other employee benefit plan and insurance, staffing and human resources, compensation and benefits, technology, public policy, privacy, regulatory and public policy and other operations and risk management concerns. Her publications and insights appear in the Health Care Compliance Association, Atlantic Information Service, Bureau of National Affairs, World At Work, The Wall Street Journal, Business Insurance, the Dallas Morning News, Modern Health Care, Managed Healthcare, Health Leaders, and a many other national and local publications.

You can review other recent human resources, employee benefits and internal controls publications and resources and additional information about the employment, employee benefits and other experience of the Cynthia Marcotte Stamer, PC here. If you or someone else you know would like to receive future updates about developments on these and other concerns, please be sure that we have your current contact information – including your preferred e-mail – by creating or updating your profile www.cynthiastamer.com or by registering to participate in the distribution of these and other updates on our HR & Employee Benefits Update distributions here including:

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NOTE: This article is provided for educational purposes. It is does not establish any attorney-client relationship nor provide or serve as a substitute for legal advice to any individual or organization. Readers must engage properly qualified legal counsel to secure legal advice about the rules discussed in light of specific circumstances.

The following disclaimer is included to ensure that we comply with U.S. Treasury Department Regulations. The Regulations now require that either we (1) include the following disclaimer in most written Federal tax correspondence or (2) undertake significant due diligence that we have not performed (but can perform on request).

ANY STATEMENTS CONTAINED HEREIN ARE NOT INTENDED OR WRITTEN BY THE WRITER TO BE USED, AND NOTHING CONTAINED HEREIN CAN BE USED BY YOU OR ANY OTHER PERSON, FOR THE PURPOSE OF (1) AVOIDING PENALTIES THAT MAY BE IMPOSED UNDER FEDERAL TAX LAW, or (2) PROMOTING, MARKETING OR RECOMMENDING TO ANOTHER PARTY ANY TAX-RELATED TRANSACTION OR MATTER ADDRESSED HEREIN.

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Posted by Cynthia Marcotte Stamer

Newly-Medicare Eligible Not Driving Medicare Advantage Enrollment Increases

January 5, 2015

Findings of a just-released Kaiser Family Foundation study, At Least Half of New Medicare Advantage Enrollees Had Switched from Traditional Medicare During 2006-11, disputes the popular misperception that Baby Boomers’ overwhelmingly choice of private plans accounts for the steady rise in Medicare Advantage enrollment. Instead, Study reports that seniors switching from traditional Medicare account for the majority of new enrollees in Medicare Advantage each year.

According to the study published January 5, 2015 in the journal Health Affairs, fewer than one-quarter of people newly-eligible for Medicare enrolled in Medicare Advantage from the outset, and these newly-Medicare eligible comprised less than half of all new Medicare Advantage enrollees each year between 2006 and 2011. However the study also reports that the share of seniors who switch between traditional Medicare and Medicare Advantage is relatively small, reinforcing the notion that most Medicare beneficiaries make a coverage choice and stick with it.

Other findings reported in the study include:

The share of people newly eligible for Medicare that elected Medicare Advantage plan coverage instead of traditional Medicare at initial enrollment rose slightly from 15 percent in 2006 to 22 percent in 2011;

In each year between 2006 and 2011, the majority of new Medicare Advantage enrollees were people who had switched from traditional Medicare; seniors in their first few years on Medicare (in their late sixties) switched from traditional Medicare to Medicare Advantage at higher than average rates;

In each year between 2006 and 2011, fewer than 5 percent of traditional Medicare beneficiaries switched to Medicare Advantage, and a similar percentage of Medicare Advantage enrollees switched to traditional Medicare, suggesting that initial coverage decisions made by Medicare beneficiaries have long-lasting effects;

People dually eligible for Medicare and Medicaid (“dual eligibles”) and Medicare beneficiaries under age 65 and disabled disenrolled from Medicare Advantage at higher than average rates.

Understanding Medicare Advantage enrollment preferences and trends is of growing importance to Congress as well as private insurers and plan sponsors as the Obama Administration – long hostile to Medicare Advantage plans – is expected to continue to try to curb the growth of Medicare Advantage enrollment, cut Medicare Advantage expenditures and tighten regulations and enforcement against these private sector alternatives to traditional Medicare implemented as part of Republican-lead health care reforms during the Bush Administration.

For Advice, Training & Other Resources

If you need assistance resolving past Form 5500 or other filing exposures, or monitoring and responding to these and other regulatory policy, enforcement, litigation or other developments, or to review or respond to these or other workforce, benefits and compensation, performance and risk management, compliance, enforcement or management concerns, the author of this update, attorney Cynthia Marcotte Stamer may be able to help.

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Posted by Cynthia Marcotte Stamer

Advance Copies Of 2014 Form 5500s Reminder To Avoid Penalties By Confirming Compliance

December 16, 2014

Employers and other sponsors, plan administrators, third party administrators, and other service providers of employee benefit plans will want to check out the relevant advance informational copies of the 2014 Form 5500 and 5500-SF and final copy of the 2014 Form M-1 annual returns released by the U.S. Departments of Employee Benefits Security Administration, the Internal Revenue Service, and the Pension Benefit Guaranty Corporation December 15, 2015.

Subject to certain exceptions, federal law generally requires that the plan administrator of a pension as well as health and welfare benefit plan electronically file the appropriate annual return/report about the employee benefit plan’s financial conditions, investments and operations along with any required attachments satisfy annual reporting requirements under Title I and Title IV of the Employee Benefit Security Act (ERISA) and under the Internal Revenue Code (Code). Late or non-filing a required Form 5500 can be an expensive mistake. ERISA subjects the plan administrator of an employee benefit plan that fails to file required Form 5500s on time to penalties of up to $1,100 per day. Meanwhile, violations of the Code’s Form 5500 requirements by late filing or non-filing of a Form 5500 also carries its own penalties. In addition to DOL penalties, the IRS may impose a penalty of:

$1 for each participant for whom the plan fails to file a Form 8955-SSA statement for each day the failure continues, up to $5,000 for any plan year
$1 for each day for not filing a notification of change of status, up to $1,000
$1,000 for each failure to file an actuarial report by the required deadline and
$25 each day the Form 5500-series return is not filed, up to a maximum of $15,000.Copies of the current Form 5500 Forms and associated schedules are available here.
A quick review of the advance copies of the 2014 Form 5500s that plan administrators will be required to file for 2014 plan years reveals various changes compared to the 2013 Form 5500s. “The Changes to Note” discussion in the Instructions to the 2014 instructions to the Forms highlights these changes, which include:
In light of these penalties, plan administrators need to ensure that all required Form 5500s and other annual returns are appropriately completed and filed on a timely basis. To the extent that any previously required Form 5500s were not filed or were filed late, the plan administrator also will want to correct this deficiency promptly using the Voluntary Compliance Resolution Programs currently offered by the Internal Revenue Service and Department of Labor. See Labor Department Delinquent Filer Voluntary Compliance Program; IRS Notice 2014-35.

The MEWA Form M-1 compliance information that was filed as an attachment for 2013 now appears as three new questions on the Form 5500.
The Form 5500 and Form 5500-SF instructions for “Signature and Date” have been updated to caution filers to check the Filing Status. If the filing status is “Processing Stopped” or “Unprocessable,” the submission may not have had a valid electronic signature, and depending on the error, may be considered not to have been filed.
Filers are now required to provide the total number of active participants at the beginning of the plan year and at the end of the plan year on both forms.
Form 5500-SF filers now must provide the number of participants that terminated employment during the plan year with accrued benefits that were not fully vested.
Multiple-Employer Plan Information. In accordance with the Cooperative and Small Employer Charity Pension Flexibility Act, the Form 5500 and Form 5500-SF now require multiple-employer pension plans and multiple-employer welfare plans to include an attachment that generally identifies each participating employer, and includes a good faith estimate of each employer’s percentage of the total contributions during the year.
The instructions for line 1c(13) have been enhanced to set out what is an investment company registered under the Investment Company Act of 1940.
New Line 4f requires plans in critical status to indicate the plan year in which a plan is projected to emerge from critical status or, if the rehabilitation plan is based on forestalling possible insolvency, the plan year in which insolvency is expected.
Schedule SB, line 3 has been modified so that the funding target is reported separately for each type of participant (active, retired, or terminated vested). Schedule SB, Line 11b has been split into two parts: the calculation based on the prior year’s effective interest rate, and the calculation based on the prior year’s actual return. Modifications to Form 5500 and Form 5500-SF, and their schedules and instructions for plan year 2014 are described under “Changes to Note” in the 2014 instructions. Examples of these changes include:
DOL Form M-1 Compliance Information. The MEWA Form M-1 compliance information that was filed as an attachment for 2013 now appears as three new questions on the Form 5500.
Signature and Date. The Form 5500 and Form 5500-SF instructions for “Signature and Date” have been updated to caution filers to check the Filing Status. If the filing status is “Processing Stopped” or “Unprocessable,” the submission may not have had a valid electronic signature, and depending on the error, may be considered not to have been filed.
Active Participant Information. Filers are now required to provide the total number of active participants at the beginning of the plan year and at the end of the plan year on both forms.
Terminated Participant Vesting Information. Form 5500-SF filers now must provide the number of participants that terminated employment during the plan year with accrued benefits that were not fully vested.
Multiple-Employer Plan Information. In accordance with the Cooperative and Small Employer Charity Pension Flexibility Act, the Form 5500 and Form 5500-SF now require multiple-employer pension plans and multiple-employer welfare plans to include an attachment that generally identifies each participating employer, and includes a good faith estimate of each employer’s percentage of the total contributions during the year.
Schedule H. The instructions for line 1c(13) have been enhanced to set out what is an investment company registered under the Investment Company Act of 1940.
Schedule MB. New Line 4f requires plans in critical status to indicate the plan year in which a plan is projected to emerge from critical status or, if the rehabilitation plan is based on forestalling possible insolvency, the plan year in which insolvency is expected.
In Schedule SB, line 3 has been modified so that the funding target is reported separately for each type of participant (active, retired, or terminated vested); line 11b has been split into two parts: the calculation based on the prior year’s effective interest rate, and the calculation based on the prior year’s actual return; line 15 instructions have been expanded to address situations in which the AFTAP was not certified for the plan year; and line 27 and related instructions have been modified to reflect funding changes under the CSEC Act for defined benefit pension plans impacted by the act.
Line 15 instructions have been expanded to address situations in which the AFTAP was not certified for the plan year. Line 27 and related instructions have been modified to reflect funding changes under the CSEC Act for defined benefit pension plans impacted by the act.

The Form 5500 annual filing requirements are only one of a growing series of informational returns and reports that employee benefit plan sponsors or administrators are likely to be required to file concerning their employee benefit plans annually or in response to other specified events depending on the nature of the plan and the circumstances. In the case of health plans, for instance, the health care reforms of the Patient Protection & Affordable Care Act have resulted in a proliferation of new reporting requirements. Underfunding, plan termination or a series of other events also can trigger special reporting requirements for defined benefit pension plans. Other special rules also may apply for profit-sharing defined contribution pension plans, as well as other types of employee benefit plans. As proper understanding and timely fulfillment of these requirements is key to avoiding potentially significant liabilities, plan administrators, plan fiduciaries, employers or other plan sponsors and their service providers should consult with qualified experienced legal counsel to confirm they understand these requirements, conduct documented due diligence to confirm timely fulfillment of past filing requirements, take prompt action to correct any past deficiencies, and plan ahead and prepare for the upcoming 2014 filing deadlines by scheduling preparations and arranging to collect the necessary data to timely meet these deadlines now.

For Advice, Training & Other Resources

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Posted by Cynthia Marcotte Stamer

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