Governmental Plans Checkup: Mid-Year Compliance Review
As governmental plans consider their compliance reviews for 2014, we recommend that the following items be considered.
Definition of "Spouse" – The Impact of Windsor Decision on Governmental Plans
In United States v. Windsor
, 133 S. Ct. 2675 (2013), the Supreme Court found Section 3 of the Defense of Marriage Act (DOMA) to be unconstitutional because it violated the principles of equal protection. In Revenue Ruling 2013-17, the Internal Revenue Service (IRS) states that for Federal tax purposes, the terms "spouse," "husband," and "wife" include an individual married to a person of the same sex if the individuals are lawfully married under state law. While the IRS promises additional guidance related to the impact of Windsor
on benefit plans, some governmental plans are opting to proactively review and amend their plan's definition of "spouse" to resolve any state and federal law conflicts and changes. These amendments are particularly important with regard to rollovers, required minimum distributions, 415 testing, and hardship or unforeseeable emergency distributions. It is important to note that the Windsor
decision does not impact domestic partnerships and civil unions. Domestic partners and civil union members are not considered "spouses" under federal law.
2013 Cumulative List of Changes
On December 11, 2013, the IRS released Notice 2013-84
(IRB 2013-52), which contains the 2013 Cumulative List of Changes in Plan Qualification Requirements. As set forth in Section 4 of Rev. Proc. 2007-44, the IRS annually publishes a cumulative list, which contains a compilation of statutory, regulatory and guidance changes that must be taken into account by plan sponsors when submitting determination letter applications to the IRS. The 2013 Cumulative List is designed to be used primarily by single employer plans submitting determination, opinion or advisory letter applications under Cycle D (February 1, 2014 through January 31, 2015). Because the 2013 Cumulative List is designed primarily for use by nongovernmental plans, many requirements will not be applicable to governmental plans. However, governmental plans should review the 2013 Cumulative List to evaluate their current compliance position in applicable areas, as well as to consider any necessary changes to their plan based on changes to the federal law.
The 2013 Cumulative List reflects those pension plan qualification requirements listed in the 2009, 2010, 2011, and 2012 cumulative lists, as well as additional 2013 plan qualification requirements, which include the U.S. Troop Readiness, Veterans’ Care, Katrina Recovery and Iraq Accountability Appropriations Act of 2007, Heroes Earnings Assistance and Relief Tax Act of 2008 (HEART Act), the Pension Protection Act (PPA '06), the Moving Ahead for Progress in the 21st
Century Act (MAP-21), the Worker, Retiree, and Employer Recovery Act of 2008 (WRERA), the American Taxpayer Relief Act of 2012 (ATRA) the Small Business Jobs Act of 2010 (SBJA), and the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010 (PRA 2010).
Interim and discretionary governmental plan amendments are considered timely if adopted by the last day of the next regular legislative session beginning after the amendment's effective date in which the governing body with authority to amend the plan can consider a plan amendment under the laws and procedures applicable to the governing body's deliberations.
IRS Releases Revised Form 5300
In addition to the cumulative list, in December 2013, the IRS released a revised Form 5300, Application for Determination for Employee Benefit Plan, and revised Instructions. This revised Form 5300 will be used by governmental plans filing in Cycle E. The revised Form 5300 includes numerous changes to both content as well as format. The revised Form 5300 requires plan sponsors to disclose additional information, including: (i) whether any plan amendments not considered during the prior remedial period contain discretionary provisions; (ii) whether an initial qualification request is for a new or existing plan; (iii) whether a prior determination letter is still pending with the IRS (i.e. application from a prior remedial period); and (iv) whether a voluntary correction program (VCP) submission is pending with the IRS pursuant to Rev. Proc. 2013-12 and the Employee Plans Compliance Resolution System (EPCRS). In addition, plan sponsors must use a new table to report the adoption dates and the type of plan amendments. While this last revision will make it easier for the IRS to identify whether such amendments were adopted timely, it will be more critical for governmental plans to self-monitor their plans to ensure amendments are timely adopted.
If you have any questions or need additional information about your plan's compliance review, please contact Mary Beth Braitman
, Malaika Caldwell
, Rob Gauss
, Lisa Harrison
, Tiffany Sharpley
, or any member of Ice Miller's Employee Benefits Group.
This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader must consult with legal counsel to determine how laws or decisions discussed herein apply to the reader's specific circumstances.