Compliance March 12, 2018

IRS Expands Audit Guidance for RMDs to 403(b) Plans

A memo says examiners should not challenge a 403(b) plan for violation of the RMD standards for the failure to commence or make a distribution to a participant or beneficiary to whom a payment is due, if the plan sponsor has taken certain steps.

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In a February 23 memorandum to Employee Plans (EP) examinations employees, the Internal Revenue Service (IRS) issued guidance about handling 403(b) plan efforts to issue required minimum distributions (RMDs) to missing participants.

Similar to a memo issued last year, the current memo regarding 403(b) plans states that EP examiners shall not challenge a 403(b) contract for violation of the RMD standards for the failure to commence or make a distribution to a participant or beneficiary to whom a payment is due, if the plan has taken the following steps:

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  • Searched plan and related plan, sponsor, and publicly available records or directories for alternative contact information;
  • Used a commercial locator service; a credit reporting agency; or a proprietary internet search tool for locating individuals; and
  • Attempted contact via United States Postal Service (USPS) certified mail to the last known mailing address and through appropriate means for any address or contact information (including email addresses and telephone numbers).
If a 403(b) plan has not completed the steps above, EP examiners may challenge a 403(b) plan for violation of the RMD standards.
Benefits March 12, 2018

Decline in Self-Insured Health Plan Enrollment Masks Growth Among Small Companies

The decrease in self-insured plan enrollment is due to a decrease in self-insurance for large employers.

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Between 2015 and 2016, the percentage of enrollees in self-insured health plans fell from 60% to 57.8%, according to an analysis from the Employee Benefit Research Institute (EBRI), using data from the Medical Expenditure Panel Survey Insurance Component (MEPS-IC).

However, the percentage of all private-sector establishments offering health plans at least one of which is self-insured has continued a growth trend that started in 2000, EBRI notes. In 2016, 40.7% of private-sector establishments reported that they self-insured at least one of their health plans, up from 39% in 2015.

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The increase has been ongoing among small and mid-sized employers. The analysis shows that between 2013 and 2016, for small establishments, the percentage increased from 13.3% to 17.4% (a 31% increase), with most of the increase occurring in 2016. For mid-sized establishments, the percentage increased from 25.3% to 29.2% (a 15.4% increase).

In 2016, EBRI found the largest increases in self-insured plan coverage among covered workers occurred in establishments with 25 to 99 employees and with 100 to 999 employees. Passage of the Affordable Care Act (ACA) sparked a movement to self-insurance.

EBRI notes that the decrease in self-insured plan enrollment is due to a decrease in self-insurance for large employers. “Because many more employees work for large establishments, the increase in self-insurance among small establishments (and their workers) was not large enough to offset the decline among large establishments (and their workers),” the institute said in an Issue Brief.

Between 2013 and 2016, the self-insurance trend for large establishments fell from 83.9% to 78.5%.

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