United States: Benefits Counselor December 2016

Retirement Plan Developments

District Courts Uphold Fiduciary Rule

District courts in Washington D.C. and Kansas recently rejected challenges to the Department of Labor's ("DOL") fiduciary rule.

On November 4, the U.S. District Court for the District of Columbia, in National Association for Fixed Annuities v. Perez, denied the National Association for Fixed Annuities' ("NAFA") request for an injunction blocking enforcement of the fiduciary rule. The court rejected each of the three particular arguments made by NAFA: (1) that the DOL's decision to include fixed indexed annuities within the rule was arbitrary and capricious; (2) that the DOL unlawfully created a private right of action; and (3) that the regulation is "void for vagueness" because the Best Interest Contract Exemption (the "BICE") limits compensation to a "reasonable" level.

On November 28, the U.S. District Court for the District of Kansas rejected a challenge to the DOL's fiduciary rule in Market Synergy v. DOL. The plaintiff in that case alleged, similar to NAFA, that the DOL unlawfully excluded fixed income annuity sales from the BICE and, specifically, that the DOL gave no notice that it might exclude fixed income annuities from the BICE. The court found that although the DOL did not specifically request comments regarding exclusion of fixed income annuities from the BICE, the notice of proposed rulemaking was sufficiently broad to put the public on notice of this possibility.

Two additional lawsuits challenging the fiduciary rule are pending at the district court level, one in Dallas, Texas, and another in St. Paul, Minnesota. NAFA has appealed the D.C. District's decision, but it is doubtful that a decision is imminent.

Treasury Department Denies Two More Multiemployer Plan Applications to Reduce Benefits

The Treasury Department ("Treasury") denied separate petitions to reduce benefits by the Iron Workers Local 16 and the Teamsters Local 469 multiemployer plans.

In the case of the Iron Workers petition, Treasury noted that the plan's assumptions regarding mortality and mortality improvement were not reasonable because, among other factors, they did not account for relevant historical and current demographic data. Treasury also determined that the plan's assumptions regarding hours of service were not reasonable because it assumed contribution base units would remain constant for the next 30 years and disregarded the decrease in contribution base units in the preceding 10 years.

Treasury made a similar determination in the Teamsters' case, noting that the plan's assumptions regarding investment forecast data were inappropriate. For example, Treasury found it unreasonable that the petition assumed a 7.25% annual investment rate of return for the plan's entire 45-year period, which Treasury believed to be overly optimistic.

Implicit Interest PEPs not Eligible for Transition Relief

Recent IRS guidance clarified that Pension Equity Plans ("PEPs") that use a deferred annuity factor (i.e., implicit interest) to calculate a participant's benefit do not need to comply with IRS regulations providing that PEPs may not credit more than a market rate of return.

Certain plan sponsors amended implicit interest PEPs to comply with the final regulations permitting plans to reduce the interest crediting rate without violating the anti-cutback rules under Code section 411(d)(6). IRS Notice 2016-67 clarifies that implicit interest PEPs are not subject to the market rate of return requirement. Accordingly, implicit interest PEPs cannot rely on the transition relief provided under the final regulations and the accompanying exception to the anti-cutback rules.

Health and Welfare Plan Developments

Adjusted PCORI Fee Announced

The IRS announced that the Patient-Centered Outcomes Research Institute ("PCORI") fee for plan years that end on or after October 1, 2016 and before October 1, 2017 will be $2.26 per covered life. The prior PCORI fee was $2.17 per covered life.

Arizona and Washington State Require Paid Sick Leave

Voters in Arizona and Washington approved ballot measures requiring employers in those states to provide paid sick leave to certain employees.

Effective July 1, 2017, employers in Arizona with 15 or more employees must provide workers with up to 40 hours of paid sick leave per year. Smaller employers (with fewer than 15 employees) must provide 24 hours of paid sick leave per year. In each case, leave will accrue at one hour per 30 hours worked until the cap is reached. Employers may require a 90 day waiting period after an employee begins employment before the employee may use paid sick leave, but the employee is entitled to accrue leave during the waiting period.

Washington's paid sick leave act takes effect on January 1, 2018 and applies to all employees who are covered under the state's Minimum Wage Act. Employees will earn an hour of paid sick leave for every 40 hours worked. Similar to the Arizona law, employers may impose a 90-day waiting period on employees. Notably, because certain cities in Washington impose paid sick time requirements, employers in Washington are now subject to both the statewide law and, if applicable, city laws requiring paid sick leave (i.e., the new state law does not invalidate the city requirements).

IRS Extends ACA Reporting Deadlines

The IRS extended the deadline for employers to distribute Forms 1095-B and 1095-C to individuals for the 2016 calendar year until March 2, 2017.

The Affordable Care Act ("ACA") requires applicable large employers to file with the IRS, and distribute to employees, forms containing information relating to employees' health coverage. Generally, employers are required to distribute the required forms to employees by January 31 of each year and to file the forms with the IRS by February 28, if filing on paper, or March 31, if filing electronically.

The IRS extended the deadline to distribute Forms 1095-B and 1095-C to employees by 30 days, until March 2, 2017. There is no extension to file Forms 1094-B, 1095-B, 1094-C or 1095-C with the IRS. However, employers may still obtain an automatic 30-day extension to file the forms by submitting Form 8809 (Application for Extension of Time to File Information Returns) by the due date. (An additional 30-day extension is also available, but employers must provide a reason for needing this additional extension.)

In addition to the extension of the distribution deadline, the good faith compliance standard continues to apply for forms filed with the IRS. Under this standard, the IRS will not penalize an employer for incomplete or incorrect information so long as the employer demonstrates that it made a good faith effort to comply with the reporting requirements.

Upcoming Compliance Deadlines and Reminders

Upcoming Health Plan Compliance Deadlines and Reminders

  1. Summary Annual Report for Calendar Year Group Health Plans.  Summary Annual Report for Calendar Year Group Health Plans. For calendar year plans that obtained an extension to file their annual report (Form 5500), the Summary Annual Report must be distributed to participants and beneficiaries no later than December 15, 2016 (two months after the close of the extension period).
  2. Health Plan Open Enrollment Requirements. a. SBCs. Plan sponsors of group health plans must issue a new summary of benefits and coverage ("SBC") to participants and beneficiaries covered under the plan with each open enrollment. Group health plans without open enrollment must issue the SBC 30 days in advance of the plan year (December 2, 2016 for calendar year plans). b. HRA Opt Out. Plan sponsors of health reimbursement arrangements ("HRA") must offer participants an annual opportunity to opt out of and waive all future reimbursements from their HRA. This opt out notice can be provided with the open enrollment materials.

Upcoming Retirement Plan Compliance Deadlines and Reminders

  1. Discretionary Amendments.  All discretionary amendments to qualified retirement plans must be adopted no later than the end of the plan year in which they are effective.  A discretionary amendment generally includes any change to the terms of a plan that is not required for plan qualification.  Plan sponsors of calendar year plans must ensure discretionary amendments effective in 2016 are adopted no later than December 31, 2016.
  2. Form 1099-R.  IRS Form 1099 R—Distributions From Pensions, Annuities, Retirement or Profit Sharing Plans, IRAs, Insurance Contracts, etc.—must be sent to recipients of retirement plan distributions during the prior plan year by January 31, 2017.
  3. Partial Annuity Payments. Administrative compliance with the IRS's recent guidance regarding partial annuity payments is required immediately.   The IRS expects to issue further guidance on the deadline to adopt required plan amendments.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

In association with
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.