Compliance August 21, 2017

Non-Profit and Governmental Plan Sponsors Wanted for IRS Committee

The Internal Revenue Service is seeking applications for vacancies on the Advisory Committee on Tax Exempt and Government Entities. 

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The Internal Revenue Service has commenced the application process for a limited number of open positions on the Advisory Committee on Tax Exempt and Government Entities, which “provides a venue for public input on relevant areas of tax administration.” 

Of particular interest to 403(b) and 457 plan sponsors will be the two vacancies in the “Employee Plans” division of the committee. IRS says it is seeking candidates with “experience in federal, state and local governments” to help improve its understanding and management of the tax-exempt retirement plan marketplace, among other broader goals related to tax administration. 

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Members are appointed by the Department of the Treasury and serve three-year terms, beginning in June 2018. Applications will be accepted through September 18, 2017.

The committee is further described as “an organized public forum for the IRS and representatives who deal with employee plans, exempt organizations, tax-exempt bonds, and federal, state, local and Indian tribal governments.” The committee “allows the IRS to receive regular input on administrative policy and procedures of the Tax Exempt and Government Entities Division (TE/GE).”

Applications can be made by completing the ACT Application Form (Form 12399-C). Applications should reflect the proposed member’s qualifications, IRS explains. Members of the ACT may not be federally registered lobbyists. A notice published in the Federal Register, dated August 17, 2017, contains more details about the ACT and the application process. Incomplete applications will not be processed.

As the IRS explains, members of this committee are in a unique position to “provide observations about current or proposed IRS policies, programs and procedures, and suggest improvements through a yearly final report.”

Data and Research August 21, 2017

Most Multiemployer Pension Plans in Green Zone

They are funded on average 87%.
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Segal Consulting’s survey of more than 200 multiemployer pension plans with calendar year plans found that 65% are in the green zone, in terms of their funding status. On average, the plans are funded 87%. However, in 2008, just before the financial crisis, plans had an average funding status of 97%. Since then, multiemployer pension plans have done a good job of improving their funding status, Segal says.

“The headlines that focus on financially troubled multiemployer pension plans miss the point that the majority are healthy,” says Diane Gleave, senior vice president and an actuary with Segal. “However, this should not obscure the fact that about a quarter of participants in the survey are in critical and declining plans, and nearly one-third are in critical plans. Among the actions trustees of plans are taking to improve their funded status are plan design changes, recommending changes in contribution rates, revising investment policies, and, in a number of cases, seeking relief under the Multiemployer Pension Reform Act.”

The Multiemployer Pension Reform Act defines plans that are in critical or declining status as those where the actuary projects the assets will be depleted within 20 years. The Act defines plans that are critical where the actuary determines it will have a funding or liquidity problem within four to five years.

Segal learned that more than 500,000 participants, or 22% of the 2.3 million participants in the survey, are in critical or declining plans and are at risk of facing reduced benefits if their plans become insolvent.

The survey also found that 87% of participants in critical or declining status plans are inactive, versus 63% of all other plans. Additionally, since the financial crisis of 2008, the average funding status has remained stable, wavering between 85% and 89%.

Between 2016 and 2017, five calendar year plans improved their zone status, and six experienced a decline in their zone status.

Segal also found that industries with more active participants have better funding percentages. For example, plans in the manufacturing industry have an average of 5.8 inactive participants for each active participant, resulting in an average funding status of 79%, well below the overall 87% average. Conversely, plans in the entertainment industry have fewer than one inactive participant for each active participant, and an average funding percentage of 92%, the highest among all types of industries.

The second-highest funded industry is the service industry (90%), followed by construction (89%) and retail trade and food (84%).

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