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Trump’s budget cuts DOL funding by 21%, requests $15 billion in IRS funding

Fri, 03/09/2018 - 18:12

On February 12, 2018, the White House released President Trump’s proposed budget for fiscal year 2019, entitled “Efficient, Effective, Accountable An American Budget,” which seeks a 21% reduction in funding at the Department of Labor from the Agency’s 2017-enacted level. Trump’s 2019 request for the DOL is $9.4 billion, $2.6 billion less than the 2017-enacted level. Among the reforms and changes, the proposed budget targets the Pension Benefit Guaranty Corporation’s (PBGC’s) multiemployer plan program.
The PBGC’s multiemployer program, which insures the pension benefits of ten million workers, is at risk of insolvency by 2025. The budget would add new premiums to the multiemployer program, raising about $16 billion in premiums over the ten-year window. At this level of premium receipts, the program is more likely than not to remain solvent over the next 20 years, helping to ensure that there is a safety net available to workers whose multiemployer plans fail, according to the proposed budget.

IRS funding

The Administration’s budget proposal calls for $15 billion in IRS funding. “By investing in the modernization of Internal Revenue Service (IRS) systems, the Budget would help make the implementation of tax reform successful and support the President’s vision of making tax filing simpler for hardworking Americans,” the proposal reads.
Note that presidential budget requests are not binding; rather, the requests offer a legislative proposal for congressional lawmakers.

Source: “Efficient, Effective, Accountable An American Budget.”
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Spencer’s Benefits NetNews – March 9, 2018

Fri, 03/09/2018 - 18:10
About this Newsletter

The Spencer’s Benefits Reports is a summary of the week’s news items posted
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Featured This Week

New Reports

  • Analysis: GINA, 2/18 (402.3.-1)

    (Read Intelliconnect) »

  • Analysis: Temporary disability benefits, 2/18 (323.-5)

    (Read Intelliconnect) »

  • Analysis: IRA-based SIMPLE plan, 2/18 (105.3.-1)

    (Read Intelliconnect) »

  • Analysis: PBGC limitations, 2/18 (618.2.-1)

    (Read Intelliconnect) »

  • News

    Male sterilization or male contraceptives not allowable preventive care under HDHP rules

    In Notice 2018-12, the IRS has clarified that a health plan providing benefits for male sterilization or male contraceptives without a deductible, or with a deductible below the minimum deductible for a high deductible health plan (HDHP), is not an HDHP. The Notice provides transition relief before 2020 to individuals with plans that provided coverage for male sterilization or male contraceptives without a deductible (March 9, 2018).

            (Read Intelliconnect) »

    Best-performing companies achieve significant health care cost savings

    A group of best-performing companies has achieved a $2,251 per employee per year (PEPY) health care cost advantage over the national average in 2017 ($9,950 compared with $12,201), according to global advisory, broking and solutions company Willis Towers Watson’s 22nd annual Best Practices in Health Care Employer Survey (March 8, 2018).

            (Read Intelliconnect) »

    IRS modifies some benefits-related 2018 inflation adjustment amounts

    The IRS has modified certain previously released inflation-adjusted amounts. Generally, these new inflation-adjusted figures apply to tax years beginning in 2018 or transactions or events occurring in calendar year 2018. The benefits-related modified items include the adoption credit, employee health insurance expense of small employers, medical savings accounts (MSA), and health savings accounts (HSA) (March 7, 2018).

            (Read Intelliconnect) »

    Bill to improve HSAs would permit pre-deductible coverage of preventive care

    The Bipartisan HSA Improvement Act will make HSAs more useful and effective for employers, according to the American Benefits Council. The bill was introduced recently by Representatives Mike Kelly (R-PA), Earl Blumenauer (D-OR), Erik Paulsen (R-MN) and Ron Kind (D-WI) (March 7, 2018).

            (Read Intelliconnect) »

    Nearly 45 percent of employees want HSAs for future retirement expenses

    Nearly 45 percent of employees enrolled in a health savings account (HSA) as a savings vehicle for future health care needs, over more immediate benefits like tax savings and lower premiums, according to recent research from ConnectYourCare (CYC). In fact, more than two-thirds (68.7 percent) of employees identified health care expenses in retirement as a great concern than lifestyle or other retirement expenses (March 5, 2018).

            (Read Intelliconnect) »

    IRS proposal to remove 298 unnecessary, obsolete regs affects retirement plan regs

    The IRS has proposed removing 298 regulations, which are considered unnecessary, duplicative or obsolete. In addition, the Treasury proposes to amend another 79 regulations to reflect the proposed removal of the regulations. The regulations affected by this proposed rulemaking include retirement plan regulations (February 27, 2018).

            (Read Intelliconnect) »

    City of Austin mandates paid sick leave for employees

    Fri, 03/09/2018 - 18:07

    The City of Austin recently became what is said to be the first city in Texas, and perhaps in the whole of the southern United States, to guarantee paid sick leave to employees working within the city. After a long meeting marked by generous public participation, the City Council approved an ordinance under which employers must give earned sick time to those who perform 80 hours or more of work within the city during a calendar year. Independent contractors and unpaid interns are expressly excluded. The ordinance also does not apply to federal and state or local governments and agencies that cannot be regulated by city ordinance.

    Earned sick time.

    Under the new law, employers with more than 15 employees (excluding family members) will be required to provide employees with 8 days (64 hours) of earned sick time each calendar year. Employers with 15 or fewer employees (excluding family members) will be required to provide employees with 6 days (48 hours) of earned sick time. Employees will accrue earned sick time at the rate of one hour for every 30 hours worked.

    Sick time purposes.

    Employees may request earned sick time for the following purposes:

    • the employee’s physical or mental illness or injury, preventative medical or health care, or health condition; or
    • the employee’s need to care for a family member’s physical or mental illness, preventative medical or health care, injury, or health condition; or
    • the employee’s need to seek medical attention, seek relocation, obtain services of a victim services organization, or to participate in legal or court-ordered action related to an incident of victimization from domestic abuse, sexual assault, or stalking involving the employee or employee’s family member.
    Effective dates.

    The earned sick time requirements are effective October 1, 2018. However, employers with five or fewer employees will have until October 1, 2020, to meet those requirements.

    Visit our News Library to read more news stories.

    HSA growth has stalled since 2014: EBRI

    Thu, 03/08/2018 - 18:41

    In a recent analysis of several industry surveys, the Employee Benefit Research Institute (EBRI) tried to determine the number of individuals enrolled in health savings account (HSA) plans. Depending on the survey and the sample size, estimates vary from as low as 21.4 million individuals to as high as 33.7 million. However, the one consistent finding across all the surveys is that there has been very little growth in HSA plan enrollment since 2014.

    EBRI analyzed data from the EBRI/Greenwald & Associates Consumer Engagement in Health Care Survey, America’s Health Insurance Plans, Kaiser Family Foundation, Mercer, and the National Center for Health Statistics. EBRI noted that several factors may be holding back enrollment into HSA-eligible health plans, such as:

    • The looming Cadillac tax should have accelerated enrollment growth into HSA-eligible health plans, but there is no evidence of that.
    • Recent low health insurance premium increases combined with low unemployment may have caused employers to hold off on plans to move to HSA-eligible health plans.
    • The findings of new research relating to the some of the impacts of HSA-eligible health plans may be holding back growth. Recent research has found that HSA-eligible health plans may be associated with a reduction in appropriate preventive care and medication adherence. These findings may cause employers to hold back from adopting HSA-eligible health plans. They may also cause employers that offer HSA-eligible health plans as a choice to hold back from moving to only offering HSA-eligible health plans.
    • Growth in HSA-eligible health plans may be held back because what constitutes an HSA-eligible health plan does not provide employers their desired level of flexibility around the design of the health plan.

    SOURCE: www.ebri.org
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    SIFL rates issued for the first half of 2018

    Wed, 03/07/2018 - 19:06

    The Department of Transportation has released the applicable terminal charge and standard industry fare level (SIFL) mileage rates for January 1, 2018 through June 30, 2018. These rates will be used by the IRS to determine the value of noncommercial flights on employer-provided aircraft.
    The terminal charge is $41.71. The SIFL rates are $.2282 per mile for the first 500 miles; $.1740 per mile for 501 miles through 1,500 miles; and $.1673 per mile for miles over 1,500.

    SOURCE: U.S. Department of Transportation, Attachment B, February 8, 2018.
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    Pension & Benefits NetNews – March 6, 2018

    Tue, 03/06/2018 - 18:25

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    court decisions, rulings and government reports.

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    Featured This Week

    Employee Benefits Management News

    • Sixth Circuit can’t create ambiguity in CBA to find vested lifetime healthcare benefits, High Court says
    • SIFL rates issued for the first half of 2018
    • City of Austin mandates paid sick leave for employees
    • 20 states seek repeal of entire ‘unconstitutional and irrational’ ACA

    Pension Plan Guide News

    • Yard-Man inferences can’t create ambiguity in CBA to find lifetime vesting for retiree health benefits, Supreme Court says
    • IRS proposal to remove 298 unnecessary, obsolete regs affects retirement plan regs
    • DOL settlement agreement with fiduciary companies and anticipated future payments from pending case expected to give $16M back to retirement plans for losses from fraudulent loan investments

    Employee Benefits Management News

    Sixth Circuit can’t create ambiguity in CBA to find vested lifetime healthcare benefits, High Court says

    The Supreme Court has reversed and remanded a decision in which the Sixth Circuit held that the same “Yard-Man” inferences it once used to presume lifetime vesting could be used “to render a collective bargaining agreement ambiguous as a matter of law, thus allowing courts to consult extrinsic evidence about lifetime vesting.” For more information, see ¶2113O.

            (Read Intelliconnect) »

    SIFL rates issued for the first half of 2018

    The Department of Transportation has released the applicable terminal charge and standard industry fare level (SIFL) mileage rates for January 1, 2018 through June 30, 2018. These rates will be used by the IRS to determine the value of noncommercial flights on employer-provided aircraft. For the rates, see ¶2113Q.

            (Read Intelliconnect) »

    City of Austin mandates paid sick leave for employees

    The City of Austin recently became what is said to be the first city in Texas, and perhaps in the whole of the southern United States, to guarantee paid sick leave to employees working within the city. For more information, see ¶2113R.

            (Read Intelliconnect) »

    20 states seek repeal of entire ‘unconstitutional and irrational’ ACA

    Twenty states filed a lawsuit against the federal government challenging the constitutionality of what remains of the Patient Protection and Affordable Care Act (ACA) after the Tax Cuts and Jobs Act of 2017 (P.L. 115-97) eliminated the individual mandate’s tax penalty only. With no remaining legitimate basis for the ACA, said the states in their complaint, the remainder of the law, which “forces an unconstitutional and irrational regime” on the states and their citizens, must also fall. For more information see ¶2113T.

            (Read Intelliconnect) »

    Pension Plan Guide News

    Yard-Man inferences can’t create ambiguity in CBA to find lifetime vesting for retiree health benefits, Supreme Court says

    In a per curiam decision concerning vested rights to lifetime health care benefits for retirees, the Supreme Court reversed and remanded a Sixth Circuit decision that had held that the same Yard-Man inferences it once used to presume lifetime vesting could be used “to render a collective bargaining agreement ambiguous as a matter of law, thus allowing courts to consult extrinsic evidence about lifetime vesting.” That approach was inconsistent with the High Court’s decision in M&G Polymers USA, LLC v. Tackett, which required ordinary principles of contract law to be applied to collective bargaining agreements (CBAs). Because Yard-Man inferences from International Union, United Auto, Aerospace, & Agricultural Implement Workers of Am. v. Yard-Man, Inc. (Yard-Man), CA-6 (1983), 716 F2d 1476 are not “ordinary principles of contract law,” stressed the Court in an unsigned opinion, they cannot be used to support more than one “reasonable interpretation” of a contract to create an ambiguity and bring in extrinsic evidence. For more information, see ¶156a.

            (Read Intelliconnect) »

    IRS proposal to remove 298 unnecessary, obsolete regs affects retirement plan regs

    The IRS has proposed removing 298 regulations, which are considered unnecessary, duplicative or obsolete. In addition, the Treasury proposes to amend another 79 regulations to reflect the proposed removal of the regulations. The regulations affected by this proposed rulemaking include retirement plan regulations. For more information, see ¶20264s.

            (Read Intelliconnect) »

    DOL settlement agreement with fiduciary companies and anticipated future payments from pending case expected to give $16M back to retirement plans for losses from fraudulent loan investments

    The Labor Department has entered into a settlement agreement with U.S. Fiduciary Services and three of its subsidiaries that provides for payment of more than $7 million to 42 retirement plans that suffered losses as a result of investments in fictitious loans made by Florida-based First Farmers Financial LLC (FFF). The agreement and anticipated future payments from a pending Receivership Estate case involving FFF are expected to compensate the retirement plans fully for approximately $16 million in losses. For more information, see ¶155v.

            (Read Intelliconnect) »

    For more information, visit http://www.wolterskluwerlb.com/rbcs.

    IRS releases final health insurance provider fee regulations

    Tue, 03/06/2018 - 17:57

    The IRS has issued final regulations that provide rules for the definition of a covered entity for purposes of the fee imposed by Act Sec. 9010 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), as amended. The final regulations supersede and adopt the text of temporary regulations that provide rules for the definition of a covered entity. They affect persons engaged in the business of providing health insurance for United States health risks, and are effective February 22, 2018.

    Background.

    The ACA imposes an annual fee on covered entities that provide health insurance for United States health risks. On November 27, 2013, the Treasury Department and the IRS issued final regulations relating to the health insurance providers fee. In February 2015, the Treasury Department and the IRS issued temporary regulations relating to the health insurance providers fee. A notice of proposed rulemaking cross-referencing the temporary regulations was also issued. The temporary regulations provided further guidance on the definition of a covered entity for the 2015 fee year and subsequent fee years.

    Note:

    The Treasury Department and the IRS received two written comments with respect to the notice of proposed rulemaking. Both commentators agreed with the approach described in the proposed and temporary regulations. No public hearing was requested or held. After considering the public written comments, the final regulations have adopted the proposed regulations without change and the temporary regulations are removed.

    Explanation of provisions.

    The temporary regulations provided that, for the 2015 fee year and each subsequent fee year, an entity qualified for an exclusion under section 9010(c)(2) if it qualified for an exclusion either for the entire data year ending on the prior December 31st or for the entire fee year beginning on January 1st. The temporary regulations also generally imposed a consistency requirement that bound an entity to its original selection of either the data year or the fee year (its test year) to determine whether it qualified for an exclusion under section 9010(c)(2) for the 2015 fee year and each subsequent fee year.

    The temporary regulations also imposed a special rule for any entity that uses the fee year as its test year. Finally, the temporary regulations provided that a controlled group must report net premiums written only for each person who is a controlled group member at the end of the day on December 31st of the data year and that would qualify as a covered entity in the fee year if it were a single-person covered entity (not a member of a controlled group).

    SOURCE: 83 FR 8173, February 26, 2018.
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    Sixth Circuit can’t create ambiguity in CBA to find vested lifetime healthcare benefits, High Court says

    Mon, 03/05/2018 - 17:38

    The Supreme Court has reversed and remanded a decision in which the Sixth Circuit held that the same “Yard-Man” inferences it once used to presume lifetime vesting could be used “to render a collective bargaining agreement ambiguous as a matter of law, thus allowing courts to consult extrinsic evidence about lifetime vesting.” That approach was inconsistent with the High Court’s decision in M∓G Polymers USA, LLC v. Tackett, which required ordinary principles of contract law to be applied to CBAs. Because Yard-Man inferences are not “ordinary principles of contract law,” stressed the Court in an unsigned opinion, they can’t be used to support more than one “reasonable interpretation” of a contract to create an ambiguity and bring in extrinsic evidence.

    Talking Tackett.

    In its ruling, the Supreme Court discussed the series of Yard-Man inferences that the Sixth Circuit, and no other circuit, applied to CBAs to favor a finding that retirement benefits had vested for life. Among other things, the Yard-Man inferences incorrectly inferred lifetime vesting whenever “a contract is silent as to the duration of retiree benefits.” The Court’s 2015 Tackett decision had explained instead that the “traditional principle” is that “‘contractual obligations will cease, in the ordinary course, upon termination of the bargaining agreement.'” As for tying retiree benefits to pensioner status, Tackett had rejected this Yard-Man inference as “contrary to Congress’ determination” in ERISA.

    1998 CBA.

    Like Tackett, the case before the Court was a dispute between retirees and their former employer CNH about whether an expired CBA created a vested right to lifetime health care benefits. The operative CBA was from 1998 and provided health care benefits under a group benefit plan to certain “employees who retire under the… Pension Plan,” but it said that “all other coverages,” such as life insurance, ceased upon retirement. The group benefit plan was made part of the CBA and ran concurrently with it. The 1998 CBA said it disposed of all bargaining issues, whether or not they were presented during the agreement, and it contained a general durational clause that it would terminate in May 2004.

    Found ambiguous?

    When the 1998 agreement expired in 2004, a class of retirees and surviving spouses filed suit, seeking a declaration that their health care benefits vested for life and an injunction preventing CNH from changing them. Tackett was decided while their lawsuit was pending. First granting summary judgment to CNH, after reconsideration the district court awarded summary judgment to the retirees. The Sixth Circuit affirmed, reasoning that while it considered features of the CBA it previously had used to “infer vesting” under Yard-Man, nothing in Tackett precluded its analysis: “There is surely a difference between finding ambiguity from silence and finding vesting from silence.”

    Inferences already rejected in Tackett.

    Hold on, said the Supreme Court: A contract is not ambiguous unless, after applying established rules of interpretation, it remains reasonably susceptible to at least two reasonable but conflicting meanings. The 1998 CBA was not ambiguous unless it could reasonably be read as vesting health care benefits for life, reasoned the Court, and the Sixth Circuit interpreted it that way only by employing inferences that the Supreme Court rejected in Tackett. There were no explicit terms, implied terms, or industry practice suggesting that the 1998 CBA vested health care benefits for life. Instead, to find ambiguity, the Sixth Circuit applied several Yard-Man inferences: It declined to apply the general durational clause to the health care benefits, and then it inferred vesting from the presence of specific termination provisions for other benefits and the tying of health care benefits to pensioner status.
    But Tackett rejected those inferences precisely because they are not “established rules of interpretation”-not because of the consequences that the Sixth Circuit attached to them (presuming vesting versus finding ambiguity). “They cannot be used to create a reasonable interpretation any more than they can be used to create a presumptive one,” stressed the Court. And no other court of appeals would find ambiguity in these circumstances. When a CBA is merely silent on the question of vesting, other courts would conclude that it does not vest benefits for life; when a CBA does not specify a duration for health care benefits, other courts would simply apply the general durational clause; and other courts would not find ambiguity from the tying of retiree benefits to pensioner status, concluded the Court.

    No Yard-Man, no ambiguity, no lifetime vesting.

    Without those Yard-Man inferences, the case was straightforward. The 1998 CBA contained a general durational clause that applied to all benefits unless the agreement specified otherwise, and there was no provision subjecting health care benefits to a different durational clause. Plus, the CBA said that the health benefits plan “ran concurrently” with the CBA, thus tying the health care benefits to the duration of the rest of the agreement. Had the parties “meant to vest health care benefits for life, they easily could have said so in the text. But they did not.” Because the only reasonable interpretation of the 1998 CBA was that the health care benefits expired when the CBA expired in May 2004, the Court reversed and remanded.

    SOURCE: CNH Industrial, N.V. v. Reese, (SCt), No. No. 17-515, February 20, 2018.
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    Democratic staff of Joint Economic Committee warns Americans’ retirement security is headed for disaster

    Fri, 03/02/2018 - 17:08

    Americans’ retirement future is shaky and Congress must immediately enact policies to secure it, according to a February 2018 report from the Democratic staff of the Joint Economic Committee. Challenges to planning and saving for retirement include inadequate savings, stagnant wages, and limited access to low-cost and high return accounts, according to the recently-released “Retirement Security in Peril.”

    Fewer DB plans.

    One cause of the lack of retirement security, says the committee, is the shift from employer-provided defined benefit (DB) plans, such as traditional pension plans guaranteeing lifetime income during retirement, to defined contribution (DC) plans, such as 401(k) plans and individual retirement accounts (IRAs). For those close to retirement, a financial crisis or economic downturn can profoundly diminish savings in DC plans, so that workers assume investment risks that, under DB plans, would have been borne by their employers.
    DB plans now also often have a down side for employees, says the committee, since local and state pension plans, representing a majority of DB plans, have recently experienced benefit cuts, partly in response to the decline of state and local pension fund assets following the market crash of 2008. In addition, the committee estimates that there are about a million participants in underfunded multiemployer DB plans.

    Gig economy.

    Many Americans have no access to an employer-provided plan and the committee partly blames the gig economy for this, with its accompanying increase in remote location independent contractors. The number of independent contractor workers is up over 50% since 2005, according to the report, and independent contractors now make up approximately 16% of the American labor force. These so-called contingent workers are two-thirds less likely to have access to employer-provided retirement plans than their traditional employee counterparts. By comparison, however, well over 30% of even full-time private sector workers lack access to either a DB or DC plan through their employers.
    The report cites 2013 statistics from the Economic Policy Institute which show that retirement savings accounts for families at the bottom 50% of the earning scale have declined by 17% since 1998. A median family’s retirement account in 2013 had only $5,000.
    Another contributing factor to the increasing lack of retirement security, says the committee, is the rising cost of education. Older Americans, many of whom are parents who financed their Millennial children’s education, have an estimated $247 billion in outstanding student loan debt. Many DC plans do not allow participants to withdraw savings penalty-free in order to supplement a child’s tuition, and participants with student loan debt are more likely to have low retirement account balances and to neglect important health needs. Those who default on their loans often have to surrender about 15% of their Social Security benefits.

    Recommendations.

    The committee points to various policy proposals that it says could help address the retirement crisis. First is a proposal that Congress modernize Social Security by raising the current payroll tax cap of $128,400. This would ensure, the committee says, that a larger share of wealthier Americans’ earnings would go into the Social Security trust fund.
    The committee is also recommending that workers be given better access to employer-based retirement plans, perhaps by establishing “startup” tax credits for small businesses that offer retirement plans for the first time, or allowing businesses to pool their DC plans.
    Coming up with a long-term solution to ensure the stability of the PBGC is also critical, says the committee, and it pointed to both the Joint Select Committee to Solve the Multiemployer Pension Crisis and the Butch Lewis Act of 2017 as ways to strengthen multiemployer plans. Numerous underfunded plans and the decreasing number of DB plans are putting the PBGC financial future at risk, according to the report.

    SOURCE: Joint Economic Committee “Retirement Security in Peril,” February 2018.
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    National health expenditure growth expected to average 5.5 percent annually from 2017-2026

    Thu, 03/01/2018 - 17:48

    National health expenditure growth is expected to average 5.5 percent annually over 2017-2026, according to a report from the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS). Growth in national health spending is projected to be faster than projected growth in gross domestic product (GDP) by 1.0 percentage point over 2017-2026. As a result, the report projects the health share of GDP to rise from 17.9 percent in 2016 to 19.7 percent by 2026.
    The outlook for national health spending and enrollment over the next decade is expected to be driven primarily by fundamental economic and demographic factors: trends in disposable personal income, increases in prices for medical goods and services, and shifts in enrollment from private health insurance to Medicare that result from the continued aging of the baby-boom generation into Medicare eligibility.
    In 2018, total health spending is projected to grow by 5.3 percent, driven partly by growth in personal health care prices. Growth in personal health care prices is projected to rise to 2.2 percent in 2018 from 1.4 percent in 2017.
    Among the major sectors of health care, spending growth is projected to be fastest for prescription drugs, averaging 6.3 percent for 2017-2026. This is due in part to faster projected drug price growth, particularly by the end of the period, influenced by trends in relatively costlier specialty drugs.
    “Today’s report from the independent CMS Office of the Actuary shows that health care spending is expected to continue growing more quickly than the rest of the economy,” said CMS Administrator Seema Verma. “This is yet another call to action for CMS to increase market competition and consumer choice within our programs to help control costs and ensure that our programs are available for future generations.”

    SOURCE: www.cms.gov
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    DOL investigation results in sentencing of former Connecticut resident for theft of benefit checks

    Wed, 02/28/2018 - 18:06

    After an investigation by the DOL’s EBSA and Office of Inspector General (OIG), Yolanda Silverio, a former eligibility coordinator for a Connecticut company that administers trust funds for public and private sector health benefit plans, has been sentenced by the U.S. District Court for the District of Connecticut to 10 months of imprisonment followed by three years of supervised release. The court has also ordered Silverio to pay $35,461.34 in restitution, perform 150 hours of community service, and notify any future employers in writing of her two prior fraud convictions.

    Silverio, a former Meriden resident, received checks from individual participants in health plans as payment toward their union-related health benefits. Such plans are covered under the Employee Retirement Income Security Act.

    The Department found that Silverio diverted 49 of these checks totaling $35,461.34 into her own bank accounts between May 2013 and July 2014. In 2004, she was convicted in federal court for embezzling more than $105,000 from two Connecticut businesses.

    “Diverting benefit payments for one’s own use violates the law, and undermines the hard-earned benefits of American employees and their families,” said Carol S. Hamilton, EBSA Acting Regional Director in Boston. “The U.S. Department of Labor is committed to fighting fraud and abuse of employee benefit plans and pursues legal action against those who abuse their position of trust.”

    “Yolanda Silverio abused her position of trust by diverting the hard-earned health benefits of American workers to her own personal use. We will continue to work with EBSA and law enforcement partners to vigorously pursue those who defraud employee benefit plans,” said Peter Nozka, Acting Special Agent-in-Charge, New York Region, U.S. Department of Labor Office of Inspector General.

    SOURCE: www.dol.gov/ebsa
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    Survey finds organizations mixed about sharing tax benefits with employees

    Tue, 02/27/2018 - 19:00

    Organizations are almost evenly split about whether or not they have or may increase pay and benefits for employees in reaction to the new tax reform law, according to a new survey from executive compensation consultancy Pearl Meyer. More companies are still considering changes compared to those that have already taken action.
    Less than sixty days after the Tax Cuts and Jobs Act became law, nearly 20 percent of responding organizations have provided some enhanced benefits and approximately 35 percent are considering new or additional changes.
    Key findings of the survey include:

    • 12 percent have already made changes;
    • 7 percent have already made changes and are considering additional changes;
    • 29 percent are considering changes; and
    • 52 percent of respondents are not planning to make any changes to their broad-based employee reward system.

    “The respondents who don’t plan to take any action cite multiple reasons, including the fact that they don’t anticipate their company will recognize any benefits from the new tax structure or they already offer programs like profit sharing, which are directly correlated to the profitability of the organization,” said Dan Wetzel, managing director at Pearl Meyer. “Because there is such a public focus on the companies who are taking actions such as a one-time bonus, we suggest that those who are not making changes be prepared to answer employee questions by developing a solid communications plan to explain their rationale.”
    Of companies that have already made changes, 65 percent awarded a one-time cash bonus, most commonly $1000 (54 percent) or less (27 percent). Close to half (46 percent) increased their minimum (or hourly) wage. Additionally 42 percent of the companies made other structural changes to pay and benefits (e.g., merit pool increases, enhanced benefit programs, increased retirement contributions, etc.) Of the companies considering action, 47 percent are planning or considering a cash bonus, 34 percent are considering an increase to their minimum (or hourly) wage, and 58 percent are considering making other structure changes to pay and benefits.
    The top reasons for making changes were sharing the benefits of tax reform (70 percent), rewarding/recognizing employee importance to success of the business (67 percent), and staying competitive (32 percent). Respondent reasons for contemplating future actions generally mirror the rationale for those that have already taken action, although these companies cite considering the competitive environment more often and fewer anticipate improved expectations for their business.
    The number of companies considering capital investments (23 percent) outweighs those who already have announced taking that step (5 percent). Just 4 percent have plans to increase hiring and 7 percent are considering a larger workforce.

    SOURCE: Pearl Meyer.
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    PBGC announces OMB approval of new forms for missing participant programs

    Tue, 02/27/2018 - 18:43

    The Pension Benefit Guaranty Corporation (PBGC) has announced that the Office of Management and Budget (OMB) has approved a new collection of information consisting of new forms and instructions for its missing participant programs.
    In December 2017, the PBGC issued final regulations that expand its existing missing participants program to cover terminated 401(k) and most other defined contribution (DC) plans, multiemployer defined benefit (DB) plans, and certain DB plans that are not currently covered by the program. The regulations were effective January 22, 2018, and generally applicable for plans that terminate on or after January 1, 2018.
    The PBGC also created new forms for the various types of plans and submitted the new collection of information to the OMB for review. The OMB approved the new collection of information through January 31, 2021. There are four types of plans that have their own forms and instructions-PBGC-insured DB single-employer plans (Form MP-100, Schedules A and B, and instructions); DC plans (Form MP-200, Schedules A and B, and instructions); small professional DB plans that are not insured by the PBGC (Form MP-300, Schedules A and B, and instructions); and PBGC-insured multiemployer plans (Form MP-400, Schedules A and B, and instructions).

    Source: 83 FR 5146, February 5, 2018.
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    Proposed rule would allow short-term, limited-duration health insurance for longer periods

    Mon, 02/26/2018 - 17:35

    The Departments of Health and Human Services (HHS), Labor, and the Treasury (the Departments) have issued a proposed rule that would amend the definition of short-term, limited-duration insurance to lengthen the maximum period of such insurance. Consumers would be allowed to buy plans providing coverage for any period of less than 12 months, rather than the current maximum period of less than three months.

    Executive Order.

    The proposed rule is in response to President Trump’s Executive Order 13813, issued on October 12, 2017, which directed the Departments to consider proposing regulations or revising guidance to expand the availability of short-term, limited-duration insurance. The order stated the Departments should consider allowing such insurance to cover longer periods and be renewed by the consumer.

    Exempt from market requirements.

    Short-term, limited-duration insurance is a type of health insurance coverage that was designed to fill temporary gaps in coverage that may occur when an individual is transitioning from one plan or coverage to another plan or coverage. Although short-term, limited-duration insurance is not an excepted benefit, it is exempt from the Public Health Service Act’s (PHSA) individual-market requirements because it is not individual health insurance coverage. PHSA Sec. 2791(b)(5 provides “[t]he term ‘individual health insurance coverage’ means health insurance coverage offered to individuals in the individual market, but does not include short-term limited duration insurance.”

    Definition changed.

    The PHSA does not define short-term, limited-duration insurance. Under regulations implementing HIPAA, and that continued to apply through 2016, short-term, limited-duration insurance was defined as “health insurance coverage provided pursuant to a contract with an issuer that has an expiration date specified in the contract (taking into account any extensions that may be elected by the policyholder without the issuer’s consent) that is less than 12 months after the original effective date of the contract.”
    A final rule issued in October 2016, changed the definition of short-term, limited-duration insurance that had been in place for nearly 20 years by revising the definition to specify that short-term, limited-duration insurance could not provide coverage for 3 months or longer (including any renewal period(s)).

    Proposed definition.

    In light of Executive Order 13813, as well as continued feedback from stakeholders expressing concerns about the October 2016 final rule, the Departments propose to amend the definition of short-term, limited-duration insurance so that it may offer a maximum coverage period of less than 12 months after the original effective date of the contract, consistent with the original definition in the 1997 HIPAA rule. The proposed rule would expand the potential maximum coverage period by 9 months. In addition, the proposed rule would revise the required notice that must appear in the contract and any application materials for short-term, limited-duration insurance.

    Comments requested.

    The Departments seek comments on all aspects of this proposed rule, including whether the length of short-term, limited-duration insurance should be some other duration. The Departments seek comments on any regulations or other guidance or policy that limits issuers’ flexibility in designing short-term, limited-duration insurance or poses barriers to entry into the short-term, limited-duration insurance market.
    Comments must be submitted by April 23, 2018. Electronic comments may be submitted to https://www.regulations.gov. Via regular mail send comments to: Centers for Medicare & Medicaid Services, Department of Health and Human Services, Attention: CMS-9924-P, P.O. Box 8010, Baltimore, MD 21244-8010.

    SOURCE: Fact Sheet: Short-Term, Limited-Duration Insurance Proposed Rule, February 20, 2018.
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    Retirement plan dollar limitations not changed by Tax Cut and Jobs Act of 2017, IRS says

    Mon, 02/26/2018 - 17:16

    The IRS has announced that the Tax Cut and Jobs Act of 2017 (P.L. 115-97) does not affect the 2018 cost-of-living adjustments (COLAs) for retirement plan dollar limitations. According to the IRS, the Tax Cut and Jobs Act of 2017 made no changes to the section of the tax law that limits benefits and contributions to retirement plans. Thus, the 2018 amounts released earlier (see IR-2017-1777) did not change after considering the new rules.
    The IRS also discussed the effect of the new tax law on the COLAs for IRA contribution limits and the income thresholds related to IRAs and the saver’s credit. The IRS explained that the new tax law did make changes to how these COLAs are made, but after taking the applicable rounding rules into account, the COLA amounts for 2018 released earlier remain the same.

    Source: IRS News Release IR-2018-19, February 6, 2018.
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    FMLA leave noted as basis for low performance rating, sending retaliation claim to jury

    Fri, 02/23/2018 - 18:12

    The fact that a branch manager’s “considerable time off” in 2014 to take FMLA leave was noted as a factor justifying her lowered performance rating, and her lowered rating in turn was a cited reason for a bank not to consider her for an assistant manager position when her job was eliminated in a restructuring, was enough for a federal district court in Maryland to deny summary judgment on her FMLA retaliation claim. The branch manager’s age discrimination claim also avoided summary judgment, largely on the strength of evidence suggesting the bank’s performance goals were unrealistic and the bank knew it, as well as emails after she was fired suggesting to the court “a poorly justified decision” and “a post hoc effort to sustain that decision.” But her FMLA interference claim failed.

    Position elimination.

    After a former bank branch manager’s position was eliminated in a restructuring that consolidated two branches, the 67-year-old former manager was not even considered for the assistant manager position, which was given to a 35-year-old. The bank claimed poor performance; new ownership had made annual goals more ambitious, but she and at least some of her coworkers asserted that an “anemic customer base,” resulting from the growth of online banking and the poor financial position of many in the community, was the reason the bank failed to meet performance goals.
    The employee also believed the bank held the FMLA leave she had taken in 2014 against her; the senior VP allegedly spoke of his doubts that her leave was “justified,” and her 2014 performance review—used to support the refusal to consider her for the assistant manager position—noted her “considerable amount of time” off as a factor in her lower performance rating. She sued the bank and the senior VP individually for age discrimination and FMLA interference and retaliation.

    Age discrimination.

    Denying summary judgment on the age discrimination claim, the court noted that while the branch manager conceded that she had failed to meet the bank’s expectations, she disputed the legitimacy of those expectations and her resulting performance review. She argued that the bank set unrealistic goals for a branch whose clientele was suffering economically, converting to online banking, and eschewing new loans, and that the senior VP and the regional president “recognized as much” (as did her coworkers). Plus she had evidence that in other years, her branch’s failure to meet performance goals had not affected her performance reviews.
    To the court, “this inconsistency casts the Bank’s performance benchmarks as little more than aspirational goals, and, if expectations, ones for which the Bank provided allowances based on the difficulties facing [her] branch.” Then there was the fact that her review blamed her poor performance on her FMLA leave, which the court found was directly related to what a reasonable juror might determine were not legitimate expectations, and so the court found she had stated a prima facie case.

    Pretext.

    Because the bank’s decision not to consider the branch manager for the assistant manager position was based on her poor performance review, she had to provide evidence questioning the validity of this explanation. She submitted evidence of a series of e-mails between the senior VP and HR representatives—after she was fired—suggested to the court “a poorly justified decision” and “a post hoc effort to sustain that decision with legitimate justifications.” This was enough, combined with the selection of substantial younger candidate, to avoid summary judgment.

    FMLA retaliation.

    The bank argued there was no causal connection between the branch manager’s 2014 FMLA leave and her dismissal without being considered for the assistant branch manager position because the regional president did not know she had taken leave. He testified that he only reviewed her performance review score, not the attached comments, in her 2014 review. That argument did not convince the court, which pointed out that it was undisputed that her negative performance review contributed to the bank’s failure to consider her for the position and that her use of FMLA leave affected her score. The bank’s insistence that the decision to not consider her was motivated by its overall review of her performance necessarily reflected the senior VP’s negative treatment of her use of leave. There was also record evidence suggesting that the senior VP may have told the regional president about her FMLA leave; thus the decision to not consider her for assistant manager may have been either indirectly or directly influenced by her FMLA leave. This was enough, reasoned the court, to suggest both causation and pretext sufficient to avoid summary judgment on her FMLA retaliation claim.

    No FMLA interference.

    But there was not enough evidence to genuinely dispute the bank’s argument that it did not interfere with the branch manager’s FMLA rights in 2015. She alleged she knew that the senior VP had complained to coworkers about her 2014 leave and noted it in her performance review, so when she needed more time off for knee surgery in 2015, she did not immediately reveal why “for fear of professional consequences,” although she eventually did tell her supervisors. She claimed she would have taken more leave but for the bank’s interference. But, stressed the court, it didn’t matter whether the branch manager requested FMLA leave in March or April of 2015, or how much she would have requested, because the bank had already decided to eliminate her position. Given that timeline, a reasonable juror could not decide that the bank interfered with her FMLA leave by deciding to fire her because, when it decided to fire her, the employer had no idea she was going to seek FMLA leave in 2015.

    SOURCE: Ward v. The Columbia Bank, (D. Md.), No. CCB-16-3606, February 2, 2018.
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    Spencer’s Benefits NetNews – February 23, 2018

    Fri, 02/23/2018 - 18:09
      About this Newsletter

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    February 23, 2018

     

    Sixth Circuit can’t create ambiguity in CBA to find vested lifetime healthcare benefits, High Court says

    The Supreme Court has reversed and remanded a decision in which the Sixth Circuit held that the same “Yard-Man” inferences it once used to presume lifetime vesting could be used “to render a collective bargaining agreement ambiguous as a matter of law, thus allowing courts to consult extrinsic evidence about lifetime vesting.” That approach was inconsistent with the High Court’s decision in M&G Polymers USA, LLC v. Tackett, which required ordinary principles of contract law to be applied to CBAs. Because Yard-Man inferences are not “ordinary principles of contract law,” stressed the Court in an unsigned opinion, they can’t be used to support more than one “reasonable interpretation” of a contract to create an ambiguity and bring in extrinsic evidence….

            (Read Intelliconnect) »

    National health expenditure growth expected to average 5.5 percent annually from 2017-2026

    National health expenditure growth is expected to average 5.5 percent annually over 2017-2026, according to a report from the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS). Growth in national health spending is projected to be faster than projected growth in gross domestic product (GDP) by 1.0 percentage point over 2017-2026. As a result, the report projects the health share of GDP to rise from 17.9 percent in 2016 to 19.7 percent by 2026….

            (Read Intelliconnect) »

    February 22, 2018

     

    DOL investigation results in sentencing of former Connecticut resident for theft of benefit checks

    After an investigation by the DOL’s EBSA and Office of Inspector General (OIG), Yolanda Silverio, a former eligibility coordinator for a Connecticut company that administers trust funds for public and private sector health benefit plans, has been sentenced by the U.S. District Court for the District of Connecticut to 10 months of imprisonment followed by three years of supervised release. The court has also ordered Silverio to pay $35,461.34 in restitution, perform 150 hours of community service, and notify any future employers in writing of her two prior fraud convictions….

            (Read Intelliconnect) »

    IRS issues March 2018 AFRs

    The March 2018 short-term, mid-term, and long-term applicable federal interest rates (AFRs) have been issued by the IRS. The March mid-term 175 percent AFR (Annual) rate, used to calculate interest charged to the funding standard account for underpayments of quarterly contributions under Code Sec. 412(m), is 4.51 percent….

            (Read Intelliconnect) »

    PBGC announces OMB approval of new forms for missing participant programs

    The Pension Benefit Guaranty Corporation (PBGC) has announced that the Office of Management and Budget (OMB) has approved a new collection of information consisting of new forms and instructions for the PBGC’s missing participant programs….

            (Read Intelliconnect) »

    February 21, 2018

     

    Proposed rule would allow short-term, limited-duration health insurance for longer periods

    The Departments of Health and Human Services (HHS), Labor, and the Treasury (the Departments) have issued a proposed rule that would amend the definition of short-term, limited-duration insurance to lengthen the maximum period of such insurance. Consumers would be allowed to buy plans providing coverage for any period of less than 12 months, rather than the current maximum period of less than three months….

            (Read Intelliconnect) »

    Federal budget agreement includes a number of retirement-related provisions

    President Trump on February 9, 2018, signed the Bipartisan Budget Act (P.L. 115-123) into law after a brief government shutdown occurred overnight. The House approved the legislation, which contains a continuing resolution to fund the government and federal agencies through March 23, 2018, in the early morning hours of February 9, by a 240- to-186 vote. The Senate approved the bipartisan measure just before by a 71- to-28 vote. Among the retirement provisions in the new law are items relating to hardship withdrawals, disaster relief, and improper levies on retirement plans. Another provision creates a bipartisan Joint Select Committee to attempt to deal with multiemployer plan solvency issues. Many of the retirement provisions included in the budget deal had previously been included in the Tax Cuts and Jobs Act (P.L. 115-97) enacted late in 2017, but were dropped before final passage of that 2017 legislation….

            (Read Intelliconnect) »

    February 20, 2018

     

    Democratic staff of Joint Economic Committee warns Americans’ retirement security is headed for disaster

    Americans’ retirement future is shaky and Congress must immediately enact policies to secure it, according to a February 2018 report from the Democratic staff of the Joint Economic Committee. Challenges to planning and saving for retirement include inadequate savings, stagnant wages, and limited access to low-cost and high return accounts, according to the recently-released “Retirement Security in Peril….”

            (Read Intelliconnect) »

    Employee participation in defined contribution plans increases: PSCA

    More defined contribution (DC) and 401k plan participants (84.9 percent) made contributions in 2016 than in previous years, according to a recent survey from the Plan Sponsor Council of America (PSCA). The PSCA’s 60th Annual Survey reflects the 2016 plan-year experience of 590 defined contribution (DC) plan sponsors, and found that Roth availability has doubled in the last decade and the use of automatic enrollment and auto-escalation have shown consistent, significant increases as well….

            (Read Intelliconnect) »

    PBGC issues March 2018 interest rates for valuing terminating pension plans

    For single-employer pension plans terminating January through March 2018, and for multiemployer plans involved in a mass withdrawal, the interest rate established by the PBGC for calculating immediate annuities is 2.39 percent, up from the 2.34 percent rate that applied in October through December 2017. The interest rate for calculating immediate lump sums in March 2018 is .75 percent, the same rate that applied in February 2018….

            (Read Intelliconnect) »

    EBSA highlights results of enforcement and compliance activity in FY 2017

    Fri, 02/23/2018 - 17:58

    The Employee Benefits Security Administration (EBSA) has issued the results of its enforcement and compliance activity for employee benefit plans and participants in fiscal year (FY) 2017. EBSA’s oversight authority extends to nearly 681,000 retirement plans, approximately 2.3 million health plans, and a similar number of other welfare benefit plans, such as those providing life or disability insurance. As of October 2, 2015, these plans covered about 143 million workers and their dependents and included assets of over $8.7 trillion.
    In fiscal year (FY) 2017, EBSA recovered $1.1 billion for direct payment to plans, participants, and beneficiaries. These recoveries resulted from enforcement actions and voluntary fiduciary corrections, as well as amounts recovered through the abandoned plan program and informal complaint resolution. The largest recoveries came from enforcement actions and informal complaint resolutions-$682.3 million and $418.7 million, respectively.

    Civil investigations

    In FY 2017, EBSA closed 1,707 civil investigations with 1,114 of those cases (65.3%) resulting in monetary returns for plans or other corrective action, which EBSA claims exhibits its ability to effectively target ERISA violators in the employee benefit plan universe. Of the $682.3 million recovered in its investigations, EBSA helped vested participants in defined benefit plans collect benefits of $326.7 million due to them. Also, 134 cases were referred for litigation, and nationwide in FY 2017, the Department of Labor filed suit in 50 civil cases.

    Criminal investigations

    In addition, EBSA closed 307 criminal investigations in FY 2017. EBSA’s criminal investigations, as well as its participation in criminal investigations with other law enforcement agencies, led to the indictment of 113 individuals – including plan officials, corporate officers, and service providers – for offenses related to employee benefit plans. The number of criminal cases closed with guilty pleas or convictions was 79.

    Workers’ informal requests for assistance

    Demonstrating how effective EBSA is in resolving workers’ problems with their employee benefit plans, EBSA’s benefits advisors closed more than 174,000 inquiries and recovered $418.7 million in benefits on behalf of workers and their families through informal resolution of individual complaints in FY 2017. These inquiries are also a major source of enforcement leads. In FY 2017, 617 new investigations were opened as a result of referrals from the benefits advisors.

    Abandoned plans and compliance programs

    During FY 2017, EBSA received 1,004 applications from Qualified Termination Administrators and closed 584 applications with terminations approved, with 586 plans making distributions of $27.9 million directly to participants pursuant to the terminations.

    Compliance assistance programs

    In FY 2017, EBSA received 1,303 applications for the Voluntary Fiduciary Correction Program and 22,139 annual reports (and $14.4 million) were received through Delinquent Filer Voluntary Compliance Program.

    Education and outreach events

    EBSA reported that it conducted over 1,800 education and outreach events for workers, employers, plan officials and members of Congress in FY 2017. Of the 1,815 total events, 735 were dislocated worker rapid response sessions, 234 were Congressional briefings, 364 were compliance assistance activities, and 482 were other participant assistance and public awareness activites.

    Source: EBSA Fact Sheet for FY 2017 enforcement and compliance activities.
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    Provider to pay $3.5M for leaving the door unlocked on ePHI

    Thu, 02/22/2018 - 18:13

    Fresenius Medical Care North America (FMCNA) agreed to adopt a corrective action plan (CAP) and pay $3.5 million to settle allegations with the HHS Office of Civil Rights (OCR) of potential violations of HIPAA’s Privacy and Security Rules.

    Breach.

    In 2013, FMCNA filed five breach reports regarding electronic protected health information (ePHI) from five FMCNA covered entities. A resulting OCR investigation revealed that FMCNA failed to conduct an accurate and thorough risk analysis of ePHI vulnerabilities. The impermissible disclosures stemmed from the fact that FMCNA provided unauthorized access to individual’s ePHI for purposes not permitted under HIPAA.
    Among the specific breaches were failures to implement policies and procedures:

    • To address security incidents;
    • To govern the receipt and removal of hardware and electronic media that contain ePHI;
    • To safeguard facilities and equipment therein from unauthorized access, tampering, and theft, when it was reasonable and appropriate to do so under the circumstances; and
    • To encrypt and decrypt ePHI, when it was reasonable and appropriate to do so under the circumstances.
    CAP.

    The CAP requires FMCNA to conduct a risk analysis, develop a risk management plan, revise device management and control policies, develop an encryption report, and educate FMCNA workforce on the new policies and procedures.

    SOURCE: www.hhs.gov
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    IRS provides guidance on 2018 withholding rules, issues withholding tables for 2018

    Thu, 02/22/2018 - 17:50

    The IRS has issued guidance on the federal income tax withholding rules in response to recent changes made by the Tax Cuts and Jobs Act (P.L. 115-97). The IRS also has released IRS Publication 15 (Circular E), Employer’s Tax Guide for 2018, which includes the withholding guidance and tables.

    Background

    The Act made significant changes to federal income tax rates, deductions, and credits that affect income tax withholding. These include changes in available itemized deductions, increases in the child tax credit, a new dependent credit, and the repeal of dependent exemptions. To minimize the burden on employees and employers, the IRS has designed the 2018 withholding tables to work with the Form W-4 (Employee’s Withholding Allowance Certificate) that employees have already furnished their employers.
    The IRS is currently revising Form W-4 to reflect the changes made by the Act, but the 2018 Form W-4 might not be available until after February 15, 2018. Until then, employees and employers should continue to use the 2017 Form W-4.

    Exemption from withholding

    The IRS has extended the effective period of Forms W-4 that employees furnish to their employer to claim exemption from income tax withholding for 2017 to February 28, 2018. The exemption was originally supposed to expire on February 15, 2018. Further, employees claiming exemption from withholding for 2018 can temporarily use the 2017 Form W-4 until 30 days after the 2018 Form W-4 is released, under the revised rules set forth in the guidance. Employees who claimed exemption for 2017 and are renewing exemption claims for 2018 must furnish their Forms W-4 by February 28, 2018, under the revised rules.

    Changes in status

    If a change in status occurs that reduces the number of withholding allowances to which an employee is entitled, the IRS has determined that the employee does not need to furnish the new withholding allowance certificate to the employer until 30 days after the 2018 Form W-4 is released (normally, the employee must furnish a new Form W-4 to the employer within ten days of the change in status). Further, if the withholding allowances reduction is due solely to the changes made by the Act, the employee does not need to furnish the employer with a new withholding allowance certificate during 2018.

    Withholding on supplemental wages

    The Act has changed the income tax rate tables for 2018 through 2025 by adding Code Sec. 1(j). This change has lowered the optional flat rate that employers may use to withhold income tax on supplemental wage payments during this period from 25% to 22%. Under the guidance, employers and other entities paying supplemental wages should implement the 22% optional flat rate as soon as possible, but not later than February 15, 2018. Employers using a higher withholding rate can, but are not required to, correct that withholding on supplemental wages paid on or after January 1, 2018, and before February 15, 2018.

    Withholding on pension, annuity payments

    The payor of certain periodic payments for pensions, annuities, and other deferred income generally must withhold from the payments as if they were wages, unless the individual payee elects not to have withholding apply. Plan administrators figure withholding by using the recipient’s Form W-4P and the federal income tax withholding tables.
    If a withholding certificate has not been furnished to the payor, the withholding rate has normally been determined by treating the payee as a married individual claiming three withholding exemptions. The Act amended this rule so that the withholding rate “shall be determined under rules prescribed by the Secretary.” The IRS has determined that, for 2018, withholding on periodic payments when no withholding certificate is in effect continues to be based on treating the payee as a married individual claiming three withholding allowances.

    Source: IRS Notice 2018-14.
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