Human Resources
Aon Washington Report - 7/10/2017

Aon Washington Report

July 10, 2017

Legislative

Congress Returns to the Hill

Congress returns this week to the Hill after its week-long July recess. The chambers are scheduled to remain in session for the rest of July and are expected to adjourn again at the end of July for the August recess.

Retirement

IRS Restructures Pre-Approved Plan Program and Expands Plan Designs Eligible for Pre-Approved Status

On June 30, 2017, the Internal Revenue Service (IRS) issued Revenue Procedure 2017-41, making substantial changes to its opinion and advisory letter programs for pre-approved plans. The IRS said that its intention in making the changes is to expand the provider market and to encourage employers that currently maintain individually designed plans to convert to the pre-approved plan format. The new Opinion Letter program (combining the opinion and advisory letter programs) will provide a determination (as to form) regarding the qualification of the plan as adopted by a particular employer. The changes include:

  • Simplifying the pre-approved letter program by combining the master and prototype and volume submitter programs into a single new Opinion Letter program involving two types of plans: standardized and nonstandardized;
  • Liberalizing the program by increasing the types of plans that are eligible for pre-approved status; and
  • Revising the program to allow greater flexibility in the design of pre-approved plans.

Under the revised program, among other things, plan sponsors will be able to combine a money purchase plan with a 401(k) or a profit-sharing plan in the same pre-approved plan document. In addition, a nonstandardized plan that contains an employee stock ownership plan will be able to include a 401(k) feature, and a nonstandardized plan that contains a cash balance formula will be allowed to use interest credit rates that are based on actual returns on plan assets. The revised program also eliminates the prohibition against submitting an Opinion Letter application for a non-electing church plan.

Of particular interest to plan sponsors is whether they will be able to retain legacy plan formulas with pre-approved plan documents. (The IRS and Treasury Department have requested comments as to the possible implications to a plan’s Opinion Letter if legacy plan formulas are appended to a pre-approved plan.)

The revenue procedure will be effective on October 2, 2017, and will apply to Opinion Letter applications submitted for a plan’s third and subsequent six-year remedial amendment cycles. Public comments are invited.

Revenue Procedure 2017-41 is available here.

IRS Issues 2017 Cumulative List of Changes for Pre-Approved Defined Contribution Plans

On June 30, 2017, the IRS issued the cumulative list of changes in plan qualification requirements for pre-approved defined contribution plans for 2017 (Notice 2017-37). The list identifies changes in the qualification requirements under the Internal Revenue Code that must be taken into account in a pre-approved plan document submitted under the IRS’s pre-approved plan program and that will be considered by the IRS for purposes of issuing opinion letters.

Notice 2017-37 is available here.

EBSA Requests Additional Comments on Fiduciary Rule

On July 5, 2017, the Employee Benefits Security Administration (EBSA) of the Department of Labor issued an additional request for comments on the fiduciary rule. While the agency is still in the process of reviewing comments received earlier, it is asking for additional public input on possible revisions to the fiduciary rule, applicability dates, exemptions, and other related matters. In the request for information, EBSA identified 18 issues that it would like to be addressed in comments, including whether health savings accounts merit a special exclusion.

Comments are due either on July 21, 2017, or August 7, 2017, depending on which issues they address.

EBSA’s request for information is available here.

Aon Publications

CBO Releases Analysis of Senate GOP “Better Care Reconciliation Act”

On June 26, 2017, The Congressional Budget Office (CBO) released a cost estimate of the Senate GOP proposed “Better Care Reconciliation Act” (BCRA), which projects that, if passed in its current form, the BCRA would over the next 10 years:

  • Reduce the cumulative federal deficit by $321 billion, almost three times as much as the House-passed American Health Care Act (AHCA);
  • Increase the number of uninsured individuals by 22 million, slightly less than projected under the AHCA; and
  • Increase premiums by an average of about 20% in 2018 and 10% in 2019 before falling by an average of 30% in 2020, compared to current law. By 2026, the CBO projects that premiums for benchmark plans for single individuals in most of the nation under the BCRA would be about 20% lower than under current law.

The Aon bulletin, which provides highlights of the CBO cost estimate, is available here.

Church Plan Status Decision

In its June 5, 2017, Advocate Health Care Network v. Stapleton decision, the U.S. Supreme Court ruled that a pension plan sponsored by a church-affiliated health care organization could be an ERISA-exempt church plan even if the plan was not established by the affiliated church. However, the ruling did not conclude that all retirement plans maintained by church-affiliated hospitals are church plans. In light of the Court’s decision, church-affiliated health care organizations should review the requirements for retaining (or gaining) the desired church plan status for their retirement plans.

The Aon bulletin, which summarizes the Supreme Court decision, the impact of the ruling, and the issues that remain, is available here.