Have a problem with federal employee benefit regulations? Write to the agencies that issue them. That was the message from the Department of Labor, Internal Revenue Service and Employee Benefits Security Administration at an International Foundation of Employee Benefit Plans conference on Wednesday in Washington, D.C.
Andrew E. Zuckerman, rulings and agreements director at the IRS, said that because of federal hiring freezes, his office hasn’t been able to hire the needed hands to keep up with the increasingly complex employee benefits world.
“Our goal is to make sure we’re keeping the interim amendments to a minimum — the idea being that we don’t want to spend time looking at these,” he said. “We want to want to save the practitioner time and aggregation and the employer the need to make amendments as often as they do.” He also noted several compliance issues, one being proper spousal signatures in joint survivor annuities. If a plan hasn’t been paying appropriately, the money will have to be paid from the plan. Also at issue was making sure the terms of collective bargaining agreements be a separate attachment; otherwise, the determination letter will not cover it.
The definition of fiduciary is the top focus for the Department of Labor, with the new rules going into effect July 1.
“This is a real issue for real people when we’re talking benefits. This is a big ticket item and it goes down to your relationships with service providers and the extent you’re running a defined contribution plan. Increasingly you end up with brokers giving financial advice,” said John Canary, chief of the division of coverage, reporting and disclosure in the Office of Regulations and Interpretations at DOL. “The way the regulation was put in place 35 years ago, [service providers] weren’t fiduciaries unless they made the decision. It was more a process where by someone else would accept that recommendation. But [Assistant Secretary] Phyliss Borzi came in and said that’s not the real word anymore; they need to have a higher standard of duty and that their forms of compensation aren’t structured for a conflict of interest.”
DOL is also working on putting out target-date fund guidance. After the last market downturn, many investors lost their money in these funds, which they were unaware could happen. Canary says that guidance will go out to participants and fiduciaries for education purposes.
Another hot topic — multiple-employer welfare arrangements — will come under increasing scrutiny by EBSA because they are less regulated depending on what state they’re operating in.
“We struggle when we think about what’s happening in the real world; it’s easy for us to sit in a conference room in Washington and say, ‘You log in to a website, you update the information.’ We try to balance that with the other lots of things you have to do,” said Kevin Horahan, senior employee benefits law specialist at office of health plan standards and compliance assistance for EBSA.
“We also have to keep in mind fraud and, in particular, MEWAs that can bounce from state to state and some don’t regulate them much at all,” Horahan continued. “We have new authority. We do need to know who the good actors are and the bad actors. We want to give as little of a burden as possible to protect people in legitimate plans and the legitimate plans themselves.”
