Compliance December 19, 2016

ERIC Makes Suggestions Regarding Loss of Determination Letter Program

“It is important that individually designed plans that contain unique provisions reflective of individual company benefit priorities and culture are allowed to continue,” says ERIC’s Will Hansen.
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In June this year, the Internal Revenue Service (IRS) officially ended its determination letter program for tax-qualified individually designed plans and ended the remedial amendment cycle system and replaced it with a new approach to the remedial amendment period.

When the IRS first announced its intent to end the program, there was a question of what plan sponsors, especially those with individually designed plans would do.

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Prior to the IRS’ decision, the Employee Plans Subcommittee (EP Subcommittee) of the Advisory Committee on Tax Exempt and Government Entities (ACT) said all members “strongly concur” the IRS should not eliminate periodic determination letters under the retirement plan determination letter program.

In September, the Treasury and IRS requested comments about ways they can improve compliance with plan qualification requirements by making it easier for plan sponsors to satisfy requirements for qualified plan documents, particularly in light of the changes to the determination letter program.

In response, the ERISA Industry Committee (ERIC) filed comments saying:

  • Plan sponsors should be allowed to incorporate by reference statutory and regulatory provisions that have few, or no, optional features, such that the incorporation would be readily administrable by reference to those provisions. In order to ensure compliance with the definitely determinable benefit requirement, sponsors would be required to explicitly describe in the plan document any optional features that they select.
  • Plan sponsors should be permitted to omit from their governing documents, in the interests of simplicity and clear documentation, provisions that do not apply to their plans due to the status of the plan sponsor or the design of the plan.
  • The IRS should adopt a flexible approach to the existence of form defects discovered on audit, to the extent that (i) the plan sponsor had in place an administrative practice to regularly review its plan document for form compliance, and (ii) no participants or beneficiaries were harmed by the defect.
“The loss of the determination letter program for on-going individually designed plans is immeasurable, but we hope the agencies act on the comments we provided, which will ease the compliance burden on plan sponsors,” says Will Hansen, senior vice president of Retirement Policy at ERIC. “It is important that individually designed plans that contain unique provisions reflective of individual company benefit priorities and culture are allowed to continue. And, that employers are not forced to pick plans ‘off the shelf’ that do not offer the same benefits and investment opportunities that their current plans allow for employees to partake in.”
Benefits December 19, 2016

Employers Focused on Modernizing Health Benefits in 2017

Willis Towers Watson has noted trends aimed at employer-sponsored health and well-being benefits, including shifting from a ‘one-size-fits-all’ mantra to providing options that tailor to employees’ individual needs, and increasing voluntary benefits for younger generations.
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Driven by an increase in Millennials in the workforce and new technologies, Willis Towers Watson sees employers focusing on modernizing their health care and voluntary benefits in 2017.   

The firm notes five trends aimed at employer-sponsored health and well-being benefits, including shifting from a ‘one-size-fits-all’ mantra to providing options that tailor to employees’ individual needs, and increasing voluntary benefits for younger generations.

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Updated benefits for 2017 include extended coverage for autism spectrum disorders; transgender-inclusive medical; and short-term disability, said to cover treatments and procedures necessary for gender identity disorder.

Furthermore, voluntary benefits including identity theft protection, critical illness insurance, student loan repayment programs and pet insurance will be added to cater to Millennials’ needs. As Gen Xers face the emotional toil of caring for aging parents and dependent children, employers will be updating benefits for the age group as well, adding critical illness and hospital indemnity; accident or injury coverage; legal assistance; and financial counseling to the line of benefits.

Another trend for 2017 is the introduction of technologies and tools, including social media usage to select benefits and manage health; and tech-enabled lifestyle coaching and fitness wearables to track exercise and nutrition.

“Another factor driving employers’ efforts to modernize benefits is the availability of a broad range of innovative technologies and tools to help employees select benefits, and build and manage personalized benefit portfolios, which gives employees more control over their benefits and improves the overall experience,” says Frank Giampetro, managing director of group exchanges for Willis Towers Watson.

In addition to physical health, employers aim to expand the definition of wellbeing to include mental, emotional, social and financial health in 2017 and 2018, by adopting more holistic approaches in day-to-day work life and company culture, according to the report.

To deliver all personalized benefits to a large workforce, employers are considering applying private benefit exchanges to accelerate delivery, daily management and to afford an enhanced benefit experience, including greater flexibility and education.

More information regarding the report can be found here.

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