Employee Benefits Update - July 2012

SELECT COMPLIANCE DEADLINES AND REMINDERS

Plan Fiduciaries Should Have Received Service Provider Fee Disclosures by July 1, 2012

Plan fiduciaries should have received initial service provider fee disclosures from their retirement plans' covered service providers by July 1, 2012. Upon receipt of disclosures, plan fiduciaries should review the disclosures and determine whether the contract or arrangement with the service provider remains reasonable. If plan fiduciaries have not received a disclosure from a covered service provider, we recommend contacting plan counsel to discuss the specific steps a plan fiduciary must take to avoid involvement in a prohibited transaction.

New Participant Fee Disclosures Due August 30, 2012

Plan administrators of defined contribution plans that permit participant direction of investments must provide a new fee disclosure to plan participants by August 30, 2012. These disclosures will provide participants with detailed plan expense and investment information. For more information on these disclosure requirements, see our articles on the final regulations and recent FAQs in the November 2010 and June 2012 Employee Benefits Updates.

New Summary of Benefits and Coverage Required for Open Enrollment

Beginning with a group health plan's first open enrollment period after September 23, 2012, plan sponsors are required to issue a new summary of benefits and coverage (SBC) to participants or beneficiaries covered under the plan. For more information on this new requirement, see our article below under Health and Welfare Plan Developments describing the calculator that plan sponsors can use in completing the coverage examples for the SBC. Group health plan sponsors should also review open enrollment materials to confirm that they have been updated for any other legal or design changes.

RETIREMENT PLAN DEVELOPMENTS

IRS Eliminates Signature for Extending the Form 8955-SSA Filing Deadline

The Internal Revenue Service (IRS) issued proposed reliance regulations to add the Form 8955-SSA (Annual Registration Statement Identifying Separated Participants With Deferred Vested Benefits) to the list of forms qualifying for an automatic 2-1/2 month filing extension and to eliminate the signature requirement for Form 5558. The changes extend the same rules to the Form 8955-SSA that apply to request an extension to file the Form 5500 series and can be relied on by taxpayers pending issuance of final regulations.

The Form 8955-SSA replaces the Schedule SSA that plan sponsors previously filed with the Form 5500 and is due on the same date as the Form 5500 (July 31, 2012 for calendar year plans). Before the IRS issued the proposed regulations, plan administrators could file Form 5558 to apply for a 2-1/2 month extension for both the Form 5500 and the Form 8955-SSA, but the extension relating to the Form 8955-SSA required a signature. Several commentators questioned the need for the signature requirement and contended that it complicated the extension request process and was burdensome to both filers and the IRS. In response to these comments, the IRS issued the proposed rule to amend the regulations and eliminate the signature requirement.

Highway Act Includes PBGC Premium Increases and Pension Liability Stabilization Provisions

On July 6, 2012, President Obama signed into law the Moving Ahead for Progress in the 21st Century Act (MAP-21). MAP-21 includes provisions to stabilize pension liabilities, increase Pension Benefit Guaranty Corporation (PBGC) premiums, change PBGC governance and permit transfers of excess pension assets to fund retiree health accounts or life insurance.

Pension Stabilization. Beginning in 2012, MAP-21 adjusts the segment rates used to determine a plan's funding target or target normal cost if the segment rate is outside a specified range of average rates for the preceding 25-year period. (The segment rates are currently calculated using a 24-month window.) For 2012, the specified range is 90% to 110% of the 25-year average. The range increases each year until 2016, when the range is 70% to 130% of the 25-year average. Although generally effective for plan years beginning in 2012, a plan sponsor may elect to postpone application of these changes until 2013. Under MAP-21, if the segment rate determined for an applicable month under the regular rules for a plan year beginning in 2012 is less than 90% of the average segment rates for the 25-year period ending September 30, 2011, the segment rate would be adjusted to 90% of the average rate. Experts expect that these...