Last year when the IRS announced that the initial remedial amendment period for 403(b) plans will end March 31, 2020, the natural reaction to this very important (but rather remote) deadline was to immediately put it on the to-do list, somewhere near the bottom, where it has been languishing ever since.  If this describes your reaction, you are certainly not alone.

We think it is a good time to move this to the front burner and take some action.  As you may recall, 403(b) plan sponsors were required to adopt a written plan document for existing 403(b) plans on or before December 31, 2009.  At the time, there were no pre-approved 403(b) plans and no determination letter program was available for 403(b) plan sponsors to gain assurance that the document satisfied the requirements of section 403(b) and applicable regulations.  In order to provide a system of reliance

On December 22, President Trump signed “An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018” (“Bill”) into law. The Bill was previously named the much-shorter “Tax Cuts and Jobs Act,” but was changed after a senator pointed out that the name violated an obscure Senate rule.

The new employee benefit and executive compensation provisions in the Bill affect both individuals and employers. The good news for colleges and universities is that the harshest employee benefit provisions directed at colleges and universities were not included in the final Bill. The bad news is that the executive compensation and fringe benefit changes directed at tax-exempt organizations are unfavorable to institutions of higher education.

THE GOOD: CHANGES EXCLUDED FROM THE FINAL BILL

The House passed a version of the Bill that would have repealed the exclusion from income for

The Affordable Care Act (ACA) introduced a “pay or play” scheme, effective January 1, 2015, in which Applicable Large Employers (ALEs) must offer affordable qualifying healthcare to their full-time employees (and their dependent children) or pay a penalty. Despite President Trump’s first Executive Order (discussed here) directing a rollback of the Affordable Care Act (ACA) and instructing the Secretary of Health and Human Services to minimize the “unwarranted economic and regulatory burden of the act,” the Internal Revenue Service (IRS) quietly updated its Questions and Answers on Employer Shared Responsibility Provisions Under the ACA to include the first official guidance detailing the process for enforcement of the penalty. Notably, this update coincided with an IRS announcement that penalties for the 2015 calendar year will be assessed late this year.

The ALE penalty process starts with Letter 226J, which the IRS will send to ALEs it believes owe a penalty based on

Late on Monday, House Republicans revealed, in two parts (here and here, with summaries here and here) the American Health Care Act (“AHCA”) that is designed to meet the Republicans’ promise to “repeal and replace” the ACA.  In many respects, the AHCA is less “repeal and replace” and more “retool and repurpose,” but there are some significant changes that could affect employers, if this bill becomes law as-is.  Below is a brief summary of the most important points:

• Employer Mandate, We Hardly Knew You. The ACA employer play or pay mandate is repealed retroactive to January 1, 2016, so if you didn’t offer coverage to your full-time employees, then this is the equivalent of the Monopoly “Get out of Jail Free” card.
• OTC Reimbursements Allowed from HSAs and FSAs, Without a Prescription. This goes back to the old rules that allowed these reimbursements.
  

On January 20, 2017, President Trump signed an executive order entitled “Regulatory Freeze Pending Review” (the “Freeze Memo“).  The Freeze Memo was anticipated, and mirrors similar memos issued by Presidents Barack Obama and George W. Bush during their first few days in office.  In light of the Freeze Memo, we have reviewed some of our recent posts discussing new regulations to determine the extent to which the Freeze Memo might affect such regulations.

The Regulatory Freeze

The two-page Freeze Memo requires that:

The IRS extended the 2017 due date for employers and coverage providers to furnish information statements to individuals. The due dates to file those returns with the IRS are not extended. This chart can help you understand the upcoming deadlines.

Action 2017 Reporting Due Dates for… Applicable Large Employers – Including Those That Are Self-Insured Self-insured Employers That Are Not Applicable Large Employers Coverage Providers  – other than Self-Insured Applicable Large Employers*  Provide 1095-B to responsible individuals

  Not Applicable** Mar. 2 Mar. 2 File 1094-B and  1095-B with the IRS Not Applicable** Paper: Feb. 28E-file: Mar. 31* Paper: Feb. 28E-file: Mar. 31* Provide 1095-C to full-time employees Mar. 2 Not Applicable Not Applicable File 1095-C and 1094-C with the IRS Paper: Feb. 28E-file: Mar. 31* Not Applicable Not Applicable

* If you file 250 or more Forms 1095-B or Forms 1095-C, you must electronically file them with the IRS. Electronically

The IRS recently released updated limits for retirement plans.  Our summary of those limits (along with the limits from the last few years) is below.

Type of Limitation 2017 2016 2015 2014 Elective Deferrals (401(k), 403(b), 457(b)(2) and 457(c)(1)) $18,000 $18,000 $18,000 $17,500 Section 414(v) Catch-Up Deferrals to 401(k), 403(b), 457(b), or SARSEP Plans (457(b)(3) and 402(g) provide separate catch-up rules to be considered as appropriate) $6,000 $6,000 $6,000 $5,500 SIMPLE 401(k) or regular SIMPLE plans, Catch-Up Deferrals $3,000 $3,000 $3,000 $2,500 415 limit for Defined Benefit Plans $215,000 $210,000 $210,000 $210,000 415 limit for Defined Contribution Plans $54,000 $53,000 $53,000 $52,000 Annual Compensation Limit $270,000 $265,000 $265,000 $260,000 Annual Compensation Limit for Grandfathered Participants in Governmental Plans Which Followed 401(a)(17) Limits (With Indexing) on July 1, 1993 $400,000 $395,000 $395,000 $385,000 Highly Compensated Employee 414(q)(1)(B) $120,000 $120,000 $120,000 $115,000 Key employee in top heavy plan (officer) $175,000 $170,000 $170,000

With the looming end of the determination letter program as we know it, the IRS has issued an updated Revenue Procedure for the Employee Plans Compliance Resolutions System (EPCRS). Released on September 29, 2016, Rev. Proc. 2016-51 updates theEPCRS procedures, replaces Rev. Proc. 2013-12 and integrates the changes provided in Rev. Proc. 2015-27 and Rev. Proc. 2015-28. The updated revenue procedure is effective January 1, 2017 and its provisions cannot be used until that date. Rev. Proc. 2013-12, as modified by Rev. Proc. 2015-27 and Rev. Proc. 2015-28, should be used for any corrections under the EPCRS for the remainder of 2016. Highlights from the new revenue procedure are outlined below.

Changes

• Determination Letter Applications. Determination letter applications are no longer required to be submitted as part of corrections that include plan amendments. The new revenue procedure also clarifies that any compliance statement for a correction through plan amendment
  

After more than nine years of deliberations, the IRS has finally released proposed regulations governing all types of deferred compensation plans maintained by non-profit organizations and governmental entities.

In issuing these regulations, the IRS reiterates its long-standing theme that these regulations are intended to work in harmony with, and be supplemental to, the 409A regulations. However, the IRS provides little guidance on how these regulations interact with each other.  The following discussion focuses on 3 key aspects of the new guidance: the severance exemption, the substantial risk of forfeiture requirement, and leave programs.

As with the 409A regulations, the 457 regulations exempt severance pay plans from the rules and taxes applicable to deferred compensation. The 457 regulations apply similar criteria with one notable exception: they do not apply the 401(a)(17) compensation limit in determining the “two times” dollar cap on amounts that can be paid pursuant to an exempt severance

Self-insured employers, applicable large employers and health coverage providers are reminded that the June 30 deadline to electronically file information returns with the IRS is approaching.

The deadline to provide information returns to employees or responsible individuals was March 31. While the deadline to file paper information returns with the IRS was May 31, electronic filers have more time. This chart provides a reminder about the upcoming filing requirement and the June 30, 2016, deadline.

Action

Electronic Filing Due Dates in 2016 for…

Applicable Large Employers – Including Those That Are Self-Insured

Self-insured Employers That Are Not Applicable Large Employers

Coverage Providers –       Other Than Self-Insured Applicable Large Employers*

Electronically File 1094-B and 1095-B with the IRS

Not Applicable **

June 30*

June 30*

Electronically File 1094-C and 1095-C with the IRS

June