Employment & Benefits News and Developments

Client Advisory
November 20, 2018

Key 2019 Benefits Related Limits




Taxable wage base



Compensation limit



Section 415(b) limit



Section 415(c) limit



Section 402(g)/401(k) limit



Catch-up contributions



HCE threshold



Officer (top heavy) threshold



Health flexible spending account




Health Savings Accounts



Individual contribution limit



Family contribution limit




2018 Year End Amendments To Retirement and Welfare Plans

After a bit of a lull for the past few years, we want to alert clients that some year-end amendments may be required for their retirement and welfare plan arrangements. 

New Disability Claims Procedures. The U.S. Department of Labor finalized new claims procedures that apply to disability claims filed on or after April 2, 2018. The new rules apply to conventional disability benefits under welfare plans, and may also apply to certain disability related determinations under retirement plans where a disability determination is required by a claims administrator, rather than reliance on a third-party standard (for example, disability determined by the Social Security Administration). Plans are already utilizing the new procedures but we remind employers that formal amendments to claims procedures in plan documents are required by December 31, 2018 in the case of calendar year plans. 

Hardship Withdrawals. We have previously discussed the fact that the Bipartisan Budget Act of 2018 loosened some of the constraints applicable to hardship withdrawals by (1) eliminating the requirement to take a nontaxable loan before receiving a hardship withdrawal, (2) permitting a participant to tap post-1988 earnings on 401(k) deferrals and qualified nonelective contributions (QNECs) and qualified matching contributions (QMACs),[1] and earnings on each, for hardship withdrawals and (3) eliminating the 6-month suspension on 401(k) and other forms of elective contributions (such as elective nonqualified deferred compensation plan deferrals and employee stock purchase plan (ESPP) purchases). All of these changes are effective as of January 1, 2019 (for calendar year plans). Although the deadline for amending plans is much later, many vendors are scrambling to receive clear direction from employers with respect to operations. Clients on prototype and volume submitter plans may have limited operational choices, but clients with individually designed plans will certainly need to coordinate with their vendors to ensure that no foot-fault occurs and that operations remain consistent with plan sponsor intent.

About a week ago, proposed regulations on this topic were issued. The proposed regulations, which can be relied upon immediately, provide that a plan sponsor not only can stop imposing a 6-month suspension for a hardship withdrawal received on or after January 1, 2019, but also can terminate a suspension that is in effect as of January 1, 2019. Employers with participants in a suspension mode should consider notifying participants of the opportunity to resume deferrals if this change is adopted. Surprisingly, the proposed regulations provide that beginning in 2020, a plan will no longer be permitted to impose any suspension. 

The proposed regulations also restored the pre-2018 status quo with respect to the casualty loss safe harbor hardship distribution reason. Effective January 1, 2018, the Internal Revenue Code was amended to limit the personal deduction for casualty losses to losses incurred in connection with a federally declared disaster. Not realizing that the law had changed, some plans may have permitted a casualty loss hardship withdrawal under the old, broader rules. The proposed regulations effectively eliminate any operational violation that resulted from the new law. Other changes involve the expansion of the safe harbor withdrawal reasons to include a new type of federally-declared disaster reason and streamlining certain participant certification requirements. 

Note finally that some, but not all, of these changes may also apply and/or be available with respect to a 403(b) arrangement. 

Expanded Use of Forfeitures. Over the summer, regulations were finalized that allow forfeitures to be treated as QNECs and QMACs upon allocation to participants. As a result, amounts in the forfeiture account can now be used to offset safe harbor 401(k) plan contributions. The change also allows the greater use of forfeitures in correcting retirement plan errors under the Internal Revenue Service’s Employee Plans Compliance Resolution System (EPCRS). EPCRS generally provides that corrective contributions are made in the form of QNECs or QMACs. Certain employer plans may need to be amended to reflect the new regulations. 

Perhaps more importantly, we continue to see Internal Revenue Service challenges to plans that carry forfeiture balances from year to year, which is anathema to the Internal Revenue Service. Clients with forfeiture balances that are not being used to pay appropriate plan expenses or to promptly offset employer contributions should seek advice from their advisors. 

New Massachusetts HIRD Form Filing Requirement

Just when you thought it was safe to offer a group health plan in Massachusetts again . . . the HIRD (Health Insurance Responsibility Disclosure) form filing requirement is back. Unlike the old HIRD form, which was used to assess the now-repealed "fair share employer contribution" requirement, the new HIRD form is designed to collect employer-level information about group health plans in order to assist MassHealth (the Massachusetts version of Medicaid) in identifying those who may be eligible for its premium assistance program. The form requests information about each group health plan, including premium costs, benefits offered and cost sharing details. 

Every employer doing business in Massachusetts with 6 or more employees in any month during the past year must submit the form by November 30, 2018. The HIRD form is administered by the Department of Revenue through the MassTaxConnect (MTC) web portal, and can be filed by the employer or its payroll provider. Each employer that uses a separate Federal tax ID number in the MTC system will need to make a separate filing. Multiple listings may be required if there are multiple group health plans with different benefits or rates. No information (or separate filing) is necessary with respect to a health reimbursement arrangement (HRA), flexible spending account (FSA) or health savings account (HSA). That said, employers of sufficient size that do not offer group health insurance must still submit a HIRD form. 

Employers that knowingly fail to file the form can be subject to a penalty of $1,000 to $5,000 for each violation. 

Training Reminders 

A variety of training requirements apply in the employment and benefits realm. For example, so-called "covered entities," which potentially picks up employer sponsored self-insured health arrangements (such as HRAs or health care flexible spending accounts), are required to provide training with respect to protected health information (PHI) under HIPAA. In addition, other employment and/or benefits training is often encouraged by regulators, or viewed as a best practice, even where not required. In Massachusetts, for example, employers are encouraged to conduct anti-discrimination and sexual harassment training annually. And employees responsible for plans subject to ERISA, such as 401(k) plans, often benefit from fiduciary training and operational compliance reviews. 

If you are interested in arranging training on these or other employment or benefits-related topics, please contact a member of the Employment and Benefits Practice Group.

[1] QNECs and QMACs are employer contributions that are fully vested when contributed to the plan and were previously ineligible for hardship withdrawals.  The contributions to a safe harbor 401(k) plan are QNECS and QMACs.

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