Insight

Instant Insight

Instant Insight gives you the latest benefits-related regulatory news as it breaks. To be included on the mailing list, simply click here to become an Insight subscriber. Below, you will find the Instant Insight alerts we have sent in the past:

March 25, 2008 - Medicare Part D reconciliation deadline extended
Today the Centers for Medicare and Medicaid Services (CMS) extended the deadline for submitting the retiree drug subsidy reconciliation from March 31, 2008 to June 30, 2008, for plan years ending in 2006. Deadlines for plan sponsors with plan years ending in the first quarter of calendar year 2007 have also been extended by three months. This automatic extension provides much needed additional time to accurately calculate the final subsidy amounts for plan years ending in 2006 and first quarter 2007. Complete details on the extension can be found at the site below.

www.rds.cms.hhs.gov/recon_deadline.htm

February 1, 2008 - Guidance on PPA effective dates and benefit restrictions for year-end valuations
The IRS released guidance on January 31, 2008 clarifying that the effective date of proposed regulations relating to pension funding and benefit restriction rules issued over the past year is January 1, 2009, although the proposed regulations will provide a compliance "safe harbor" for 2008. Separately, the guidance allows plans with valuation dates that are the last day of the plan year to use the prior year's funded status for applying benefit restriction rules during 2008, accommodating, for now, a flaw in the statute itself.

Text of the IRS guidance can be found at the site below:

www.irs.gov/pub/irs-drop/n-08-21.pdf

October 17, 2007 - 2008 IRS Benefit Limits, Social Security Increases Now Available
Today the Bureau of Labor Statistics released the September inflation figures (CPI-U and CPI-W) and the Social Security Administration released the 2008 benefit and wage amounts. Click here for a summary of 2008 IRS limits on qualified retirement plan benefits, PBGC maximum guaranteed benefit, and Social Security amounts.

October 10, 2007 - Treasury Releases PPA Interest Rate Guidance
Yesterday, Treasury issued Notice 2007-81, which includes a corporate bond yield curve for the month of August 2007 and historical yield curve segments. These rates can be used to determine 2008 pension liabilities and lump sum benefits under the Pension Protection Act of 2006.

The guidance addresses the methodology for weighting of A, Aa, and Aaa bonds in determining the curve, the weighting of different maturities in determining segment rates, and the phase-in from pre-PPA rates for both liability calculations and lump sum benefits.

We will be providing detailed analysis of the guidance in the coming days.

April 10, 2007 - Treasury Publishes Final Regulations Under Code Section 409A
This morning, the Treasury Department and the IRS published final regulations under Code Section 409A. The regulations become applicable for taxable years beginning on or after January 1, 2008. The final regulations generally adopt the provisions of Notice 2005-1, and the proposed regulations under Section 409A. However, there are some significant changes and clarifications.

Look for a series of Insight articles analyzing these regulations.

December 27, 2006 - SEC Amends Final Proxy Rule
Last Friday, the Securities and Exchange Commission amended its final rule on executive compensation and related party disclosure (proxy rule) with regard to grants of stock options. Effective immediately, the method of calculating compensation related to option grants has been changed. Under the previous rule, the amount to be disclosed was fair value at grant date. Under the revised rule, the FAS 123R compensation expense is to be disclosed.

The Grants of Plan-Based Awards Table is revised to require disclosure of the grant date fair value of each individual equity award, computed in accordance with FAS 123R, and the Director Compensation Table is revised to require footnote disclosure of the same information.

December 22, 2006 - IRS Releases Initial Guidance on Hybrid Plans
Yesterday, the IRS released Notice 2007-6, the first round of post-PPA hybrid plan guidance. Most notably, the IRS is lifting the moratorium on issuing determination letters for prior cash balance conversions. Given the prospective, "no inference" language in PPA, such letters will not address a plan's conversion itself with regard to satisfaction of the age discrimination rules, but, consistent with the IRS's past practice of issuing determination letters on newly-created (i.e., not converted) cash balance plans, accruals subsequent to the conversion will apparently be covered. The IRS expects to address most of its backlog of about 1,200 determination requests by the end of 2007.

The Notice also provides interim guidance indicating that interest crediting rates that are consistent with Notice 96-8, as well as rates based on the "third segment" of the PPA corporate bond yield curve, will satisfy the PPA definition of "market rate of return". The IRS is also requesting input on many issues related to the "market rate of return" concept before issuing final guidance. The Notice also clarifies that plans will be able to amend out any whipsaw language without violating the "anti-cutback" rules of IRC 411(d)(6).

A fuller analysis of the Notice will follow in an upcoming Insight article.

December 11, 2006 - Congress Passes Tax Relief and Health Care Act of 2006
As Congress was shutting down for the year on Saturday, it passed the much-anticipated Tax Relief and Health Care Act of 2006. Key provisions in the legislation include increases to HSA contribution limits, the ability to directly transfer IRA money to HSAs, and the extension of some popular tax breaks.

CCA Strategies will be publishing a more complete analysis of the Act in the days ahead.

December 4, 2006 - IRS Provides Guidance on Diversification out of Company Stock
The IRS issued Notice 2006-107 Thursday, providing transition guidance through March 31, 2007 for complying with new rules for diversification of retirement assets out of company stock under the Pension Protection Act. The notice also includes model language for the required employee communications, and it clarifies the Department of Labor position that plan sponsors need not furnish these communications prior to January 1, 2007.

October 18, 2006 - 2007 IRS Benefit Limits, Social Security Increases Now Available
Today the Bureau of Labor Statistics released the September inflation figures (CPI-U and CPI-W) and the Social Security Administration released the 2007 benefit and wage amounts. Click here for a summary of 2007 IRS limits on qualified retirement plan benefits, PBGC maximum guaranteed benefits, and Social Security amounts.

October 4, 2006 - 409A Relief Extended for Nonqualified Deferred Comp Plans
Today, Treasury issued Notice 2006-79, extending the good-faith compliance period for most provisions (all but certain discounted options with back-dating concerns) under Code Section 409A for an additional year until January 1, 2008. As is currently the case, good faith operational compliance continues to be required.

The transitional relief provided for certain payment elections in linked plans and certain discounted stock rights is also extended until January 1, 2008. Therefore, full compliance with the operational and documentation requirements of the Section 409A is delayed until January 1, 2008.

Treasury indicated that final regulations will be issued later this fall.

September 29, 2006 - FASB Releases New Standard For Pension Accounting
As anticipated, the FASB today released a new standard, SFAS 158, that will require employers to record the actual funded status of pension and OPRB plans on their balance sheets. The standard requires use of the "Projected Benefit Obligation" for pensions and the "Accumulated Postretirement Benefit Obligation" for other post-retirement benefits (OPRBs), as defined under current accounting rules. The new rules are effective for fiscal years ending after December 15, 2006 for employers with publicly-traded stock, and for fiscal years ending after June 15, 2007 for others, although all employers will need to comply with additional disclosure rules this year at a minimum. The new standard also eliminates the use of "early measurement dates" for pension and OPRB accounting, effective for fiscal years ending after December 15, 2008.

With the completion of Phase 1 of its project on pension and OPRB accounting, the FASB now turns its attention to a comprehensive review of pension and OPRB accounting, a project that is expected to take a few years, with the aim of converging with international accounting standards for these plans.

August 7, 2006 - Appeals Court Reverses IBM Decision
The United States Court of Appeals for the Seventh Circuit issued a decision today reversing a district court ruling against IBM's cash balance plan in Cooper v. IBM. The decision represents a major victory for IBM in its long-running dispute over the legality of changes made to its pension plan. While other cases remain outstanding, including Richards v FleetBoston, supporters of cash balance and other hybrid pension plans will regard today's ruling as an important decision in their favor.

August 3, 2006 - Senate Passes Pension Reform Bill
At long last, the Senate passed the Pension Protection Act of 2006 Thursday evening, following House action last weekend. The move caps a grueling 20-month long process that began in January 2005 with the Bush Administration's proposal to reform pension funding rules. The President is expected to sign the measure in the next couple of days.

The mammoth 907-page bill represents a fundamental overhaul of funding rules for private-sector pensions, set to take effect in 2008. It also provides for an extension of current temporary rules for 2006 and 2007, bringing much-needed guidance to many employers related to September 15th funding decisions.

In addition to funding reform, the legislation includes:

Changes to minimum lump sum calculations
New rules for calculating PBGC premiums
New rules for financial disclosures to participants and regulators
Prospective guidance on the design of "hybrid" pension plans
Permanent extension of pay and benefit limits enacted in 2002
Rules related to providing financial advice for 401(k) and other DC plans
Rules related to diversification of DC assets out of company stock

CCA Strategies will be providing in-depth analysis of the bill's provisions in the days ahead.

July 26, 2006 - SEC Adopts Final Rule for Executive Compensation and Related Party Disclosure
Today, the Securities and Exchange Commission adopted a final rule with regard to Executive Compensation and Related Party Disclosure. Significant changes from the proposed rule include:

Stock option grants - Enhanced disclosure in response to the recent issues concerning backdating of grants and enhanced corporate governance
Retirement benefits - Emphasis shifted from annual growth in benefits to the present value of accumulated benefits
Highly paid non-executives - Proposed relaxation of the requirement to disclose compensation for up to three non-executive officers.

The finalized aspects of the rule will be effective for Form 8-K reporting 60 days after being published in the Federal Register, while the reproposed portion with respect to highly paid non-executives will enter another comment period.

June 28, 2006 - Pension Funding and Accounting Reform Update
House Majority Leader Boehner indicated yesterday that he was "doubtful" a pension reform bill would be brought to the floor of either chamber of Congress before the July 4th recess. Boehner cited special relief for airlines among the remaining issues standing in the way of a compromise bill. Congress will be back in session from July 10th until Labor Day. This window now provides the best chance for passing a bill into law.

On the accounting front, we participated yesterday in the FASB's roundtable discussion of proposed pension and OPRB accounting changes. Our sense is that the FASB is resistant, at least for Phase I, to calls from actuaries and plan sponsors to reconsider the liability measures (PBO and APBO) that it wants employers to reflect on their balance sheets at the end of this year. FASB also appeared fairly firm in their plan to curtail the use of early measurement dates for these plans. It did appear, however, that the FASB would consider easing the requirement for retrospective application in an effort to make the year-end implementation less burdensome.

June 8, 2006 - 409A Relief Likely to be Extended
At Tuesday's AICPA National Conference on Executive Compensation, Treasury official Daniel Hogans said that the government would not be able to complete final deferred compensation regulations under Code Section 409A until very late in the summer. Treasury recognizes that employers will have difficulty comprehending and complying with those regulations by the current January 1, 2007 deadline, and hinted at a possible extension of the good faith compliance period.

March 31, 2006 - FASB Releases Exposure Draft on Pension and OPRB Plans
As expected, FASB today released its exposure draft on Phase 1 of its project related to pension and OPRB accounting. This draft would require "fair value" balance sheet accounting for these plans effective for fiscal years ending on or after December 15, 2006, and would reduce shareholders' equity by hundreds of billions of dollars. As anticipated, the draft identifies the Projected Benefit Obligation (PBO), rather than the Accumulated Benefit Obligation (ABO), as the appropriate "fair value" of liabilities for pension plans, and it would eliminate the use of "early measurement dates".

FASB will accept comments on the exposure draft submitted no later than May 31. FASB will host a public roundtable meeting June 27 to hear the views of interested constituents and anticipates releasing a final statement by September. CCA Strategies will produce a detailed analysis of the exposure draft in the days ahead.

February 8, 2006 - $30 PBGC Premium for 2006 Effective as Bush Signs Budget
Today, President Bush signed the federal budget for the current fiscal year, clarifying an increase in the PBGC headcount premium from $19 to $30 for pension plans for 2006. A separate proposal on overhauling pension funding rules still awaits Congressional reconciliation. Congress is expected to take up this measure over the next couple of months.

January 17, 2006 - SEC Votes to Revise Executive Compensation Disclosures
Today, the Securities and Exchange Commission voted unanimously to issue proposed revisions to the executive compensation and related party disclosure rules, including:

A single figure disclosing total compensation for the year
The increase in actuarial present value of all retirement benefits
Grant date fair value of options, and

Publication of proposed revisions is expected by January 27, 2006, followed by a 60 day comment period. Look for our upcoming Insight article describing the proposal in more detail.

December 15, 2005 - House Passes Pension Reform Bill
The US House of Representatives today voted 294-132 to approve pension reform legislation. The bill now needs to be reconciled with a Senate bill passed last month. With Congress looking to adjourn for the year this week, reconciliation is not likely until Congress reconvenes in early 2006. If and when the bills are reconciled, a compromise bill will be sent to the President to sign.

December 8, 2005 - 2005 Reporting Relief Under 409A
The Internal Revenue Service today released Notice 2005-94. Key elements are:

The Notice suspends employers' and payers' reporting and wage withholding requirements (e.g., Forms W-2 and 1099-MISC) for 2005 under Code Section 409A.
Service providers (employees) are still subject to tax on 2005 income under 409A. The IRS understands that calculating those amounts will be difficult for service providers and will therefore not assess penalties with respect to these amounts. However, underpayments will be subject to interest charges.
The IRS expects to release additional guidance in the first half of 2006.

December 7, 2005 - House Stalled on Pension Bill
The move to overhaul pension funding reform suffered a setback this week in the House of Representatives. Acting majority leader Roy Blunt (R-MO) said Tuesday that there was "really no likelihood" the reform bill will be voted on by the full House this year. Even if the House bill is passed this year, it will need to be reconciled with a Senate bill (passed in November) before a law will emerge. At this point, it is unlikely a bill will be signed into law this year, in which case the measure will be taken up again when Congress returns in early 2006.