Retirement plans have come to the forefront of legislative discussions around employment, particularly in light of the rising tide of Baby Boomers entering the Social Security system. A number of major regulatory items were on the table for consideration in 2014, with the potential to impact how small business owners offering retirement benefits for employees – such as 401(k)s – structured these benefits. A number of delays emerged and new issues bubbled to the top of the discussion that have set the stage for an eventful election-year discussion on these issues. Here's an overview of the topics that small business owners should be aware of.
Lifetime Income Reporting
Last year, legislators introduced the concept of adding Lifetime Income Reporting to retirement account statements. These reports (sometimes called illustrations in the media) could include monthly or yearly income projections at retirement based on a variety of factors such as account value, rate of savings, and anticipated interest rates. The Department of Labor released advanced notice of proposed regulations on the issue, which sparked a debate on the best way to report these issues within the investment industry.
It's anticipated that proposed regulations will be released in early 2015, with another round of public comments before they're finalized later in the year. Businesses should be aware that this is coming along, and that they're working with a retirement plan provider that will be rolling out compliant reporting.
A long awaited ruling on fiduciary regulation by the Department of Labor has been delayed until at least January 2015. The proposed regulation will reevaluate the definitions of what constitutes financial advising and could ultimately make it more difficult for small businesses to get investment advice as brokerages and advisors seek to minimize their risk. Significant pushback from the public on the initial proposal has led to the delays and reexaminations of the proposed changes, but it's important for small businesses to be aware of this when making long-term financial plans.
408(b)(2) Fee Disclosure
The Department of Labor has issued a proposed rule that would require service providers such as broker-dealers, investment advisors, and third party administrators to provide small businesses with simpler documentation around plan disclosures. The regulations suggest that service providers may bury the essentials of disclosures, making it hard for plan sponsors to get to the information that they need to make informed decisions about fees and other issues. The proposed regulations would limit the guide to the fee disclosures to a few pages of essential information.
IRS Relief for Late Documentation Filers
There's a significant amount of documentation that needs to be filed by employers to the IRS in connection with retirement plans. Two recent steps have offered some relief to businesses that are behind in filing this information. IRS Notice 2014-35 has changed the terms of how it applies administrative relief to late filers of Form 5500 (full details on who satisfies this notice can be found here). Meanwhile, Revenue Procedure 2014-32 establishes a one-year pilot program to provide relief to plan administrators who fail to timely file Form 5500-EZ.
You don't have to navigate these regulatory changes alone. Paychex offers a wide range of support services to help companies offer and administer retirement plans for their employees. Learn more about how our team can assist you in managing your existing plan and staying in compliance with reporting and regulatory changes.