2013 brought many changes to employee benefit plans, and several more are coming in 2014.
What has recently changed or will change in the near future?
- Required Individually Designed Plan Restatements: If you have an individually designed retirement plan (including Employee Stock Ownership Plans (ESOPs)), you are required to restate the plan on the corresponding remedial amendment cycle. Currently plans that fall under Cycle C (employers with EIN’s which end with either 3 or 8) are required to restate and submit their individually designed plan document to the IRS by January 31, 2014.
- In-Plan Roth Transfers: If you sponsored a 401(k) plan and allowed participants to elect in-plan Roth transfers, an amendment is required to be adopted by the last day of the plan year in which you first allowed the transfers. A good-faith interim amendment should be adopted before December 31st for Plans that allowed this option.
- Code §436 Amendment: If you sponsor a defined benefit plan, a good-faith amendment is required to be adopted by the last day of the 2013 plan year (unless already completed) incorporating new language in regard to Code section 436. Code Section 436 pertains to benefit restrictions that were imposed by the 2006 Pension Protection Act (“PPA”).
- Discretionary Plan Amendments: If you adopted discretionary, operational changes to your retirement in 2013, you must formally adopt these changes by the last day of the 2013 plan year (December 31 for calendar year plans).
- DOMA: With the conclusion to the United States v. Windsor case by the Supreme Court of the United States this summer, Section 3 of the Defense against Marriage Act (DOMA) was held unconstitutional. Subsequent to this ruling, the IRS issued a Revenue Ruling confirming that for federal tax purposes an employee and same-sex spouse are considered married if their marriage occurred in a state that recognizes same-sex marriages. The Department of Labor also followed this approach for retirement plans. What this means for your retirement plan is that all federal statutory benefits (tax benefits, spousal consent requirements, etc.) must be offered to same-sex spouses under your retirement plan benefits.
- EPCRS: The IRS released updated rules to the Employee Plans Compliance Resolution System to allow qualified plans to correct errors and problems within the plans to maintain the plan’s tax-qualified status. This guidance included additional correction procedures and expanded coverage for certain qualified plans. If your plan or a client’s plan has fallen out of qualification status, make sure the new rules are reviewed prior to implementing previously utilized procedures as new correction procedures have been adopted.
Health and Welfare Plans
- PPACA: While the large employer mandate (requiring employers with 50 or more full time employees to over health coverage to qualifying employees) was delayed until 2015, the IRS strongly encourages employees to begin providing coverage and the requisite information reporting to make sure procedures are in place for when the mandate will take effect. The mandate will begin in 2015, with first information reporting due in 2016.
Other changes under PPACA that will take effect in 2014 include the following:
- Waiting Periods. Beginning in 2014, employers may not have a waiting period for eligibility in the employer’s health plan that exceeds 90 days. All plan documents should be amended prior to this to make sure the health plan is in compliance.
- No annual dollar limits on “essential health benefits”. The current annual limit on essential health benefits is $2 million. For plan years beginning on or after January 1, 2014, plans will no longer be able to impose any annual dollar limits on essential health benefits.
- No pre-existing condition exclusions. Group health plans may not impose any pre-existing conditions exclusions regardless of age. Pre-existing condition exclusions for enrollees under 19 already were eliminated for plan years on or after September 23, 2010.
- Dependent coverage to age 26. Group health plans now will have to extend eligibility to all children until age 26, even if the child is eligible for other employer-sponsored coverage.
- Limits on cost-sharing. Non-grandfathered health plans are subject to limits on cost-sharing or out-of-pocket costs, currently defined as the limits applicable to coverage for HSAs. For 2014, these limits are $6,350 for individual coverage, $12,700 for family coverage, and may be applied to medical and pharmacy benefits separately. These maximum limits apply to all in-network claims and include member deductibles, coinsurance and copays.
- Coverage for clinical trial participants. Non-grandfathered group health plans must cover certain clinical trial costs, may not limit, deny or require additional conditions on coverage of routine patient costs for services and items furnished in connection with the trial, and may not discriminate against individuals who participate in qualified clinical trials.
- Notice of Health Insurance Marketplaces. You likely provided this Notice to all your employees during your open enrollment period for 2014. However, did you know that this Notice must be provided to all new employees not later than 14 days after the employee’s start date? Do not forget to distribute to new employees.
- FSAs: The IRS announced in Notice 2013-71 an exception to the traditional “use it or lose it” rule for Flexible Spending Accounts. Now an employer may elect to all employees to rollover up to $500 from the current plan year to be used to pay for qualifying medical expenses in the next plan year. This rollover is not allowed for plans which utilize a “grace period” and an amendment must be adopted to allow for this change by the end of 2014.
- HRAs: In 2014, pre-tax account based plans, such as health reimbursement accounts cannot be integrated with individual coverage. HRAs will be limited only to employees who are enrolled in group health coverage.
What is coming up in 2014?
- DOMA: It still remains to be seen what effect the rescission of Section 3 of DOMA will have on Health and Welfare Plans. Further court rulings are anticipated which should determine if and when coverage for same-sex spouses must be provided under employer sponsored health plans. Employers who choose at this time to expand coverage should amend their plan documents accordingly.
- 2014 Plan Limits: The IRS released limits that are applicable for qualified plans in 2014. These limits are as follows:
2012 2013 2014 Annual compensation for plan purposes
(for plan years beginning in calendar year) 401(a)(17)
$250,000 $255,000 $260,000 Defined benefit plan, basic limit
(for limitation years ending in calendar year) 415(b)
$200,000 $205,000 $210,000 Defined contribution plan, basic limit
(for limitation years ending in calendar year) 415(c)
$50,000 $51,000 $52,000 401(k) / 403(b) plan, elective deferrals
(for taxable years beginning in calendar year) 402(g)
$17,000 $17,500 $17,500 457 plan, elective deferrals
(for taxable years beginning in calendar year)
$17,000 $17,500 $17,500 401(k) / 403(b) /457, catch-up deferrals
(for taxable years beginning in calendar year) (Age 50+) 414(v)
$5,500 $5,500 $5,500 SIMPLE plan, elective deferrals
(for calendar years) 408(p)
$11,500 $12,000 $12,000 SIMPLE plan, catch-up deferrals
(for taxable years beginning in calendar year) (Age 50+) 408(p)
$2,500 $2,500 $2,500 IRA contribution limit
$5,000 $5,500 $5,500 IRA catch-up contribution
$1,000 $1,000 $1,000 Highly Compensated Employee
$115,000 $115,000 $115,000 SEP Coverage 408(p)
$550 $550 $550 Key Employee $165,000 $165,000 $170,000 ESOP 5-Year Distribution period
$1,015,000 $1,035,000 $1,050,000