the public employee pension transparency act - ncpers.org roda final ppt.pdf · the issue may 2007...
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January 2013
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Fiscal cliff legislation, P.L. 112-240, allows monies in 403(b) and 457(b) plans to be converted to Roth accounts (even if not currently distributable)
Raises $12.2 B. over 10 years
Plans must specifically allow the conversions
See IRC §402A(c)(4) and T Notice 2010 - 84
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Definition of Governmental Plan
Normal Retirement Age
Employer Pick Ups
Definition of Municipal Advisor
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The Issue January 2011, SEC
proposes new definition of municipal advisor
Appointed, but not ex officio, members of a governing body of a municipal entity
Effective September 30, 2013
The Approach Multiple comment
letters from plans and national groups
Congressional letters, including 12/19/11 letter by 32 House Members
H.R. 2827, (112th Congress), § 5, exemption clause
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The Issue May 2007 Treasury
Regulations – 1.401(a)-1(b) NRA = Age = A number YOS or combination YOS
and age not in compliance Effective date now 1/1/15
Three Questions 1) For QPSEs, NRA = YOS 2) Additional categories for
YOS 3) Overall retirement patterns
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Treasury Notice 2012-29 Governmental plans that do not provide in-service
distributions prior to age 62 ≠ NRA definition QPSE safe harbor of age 50 applies even where
QPSEs are subgroup of larger plan
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ANPRM published on Nov. 8, 2011 – 76 Fed. Reg. 69,172
In progress since 2005
Issued by IRS in consultation with DOL and PBGC
Numerous comments received
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Established and Maintained by:
1) Government of a State
2) Political subdivision of a State
3) Agency or instrumentality of a State or political subdivision
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“Agency or Instrumentality” of a State or of a Political Subdivision
Major Factors Control of Governing Board or Body
Board Members are Publicly Nominated and Elected
Entity’s Employees Treated the Same as State or Political Subdivision, Except for Benefits
State or Political Subdivision has Responsibility for Debts/Liabilities
Delegated Sovereign Powers
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Minor and Additional Factors Specific Enabling Statute
Funding of Entity
Federal Tax Treatment
Control of Operations
Treatment under State Law
Judicial Determinations
Ownership Interest
Governmental Purpose
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The Issue Interpretation of Revenue Ruling
2006-43 on IRC §414(h)(2) pick ups
PLR requests to allow existing employees to elect between current and new DB tier
Would allow “cash or deferred arrangement” = choice to get more take home pay
RR 2006-43 plugs into 1.401(k)-1(a)(1) – no CODAs in pick up situation
Tension Promoting retention of
DB plans through flexibility
Clear path to erode underlying DB benefits
Two Approaches Regulatory
Legislative (H.R. 205)
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Municipal Advisor
NRA 414 (d)
Medicare Opt-in PEPTA
Tax Reform
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Pick Up
Regulatory Legislative
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Amendment to IRC § 414(h)(2): “(B) TREATMENT OF ELECTIONS BETWEEN
ALTERNATIVE BENEFIT FORMULAS.— “(i) IN GENERAL.—For purposes of
subparagraph (A), a contribution shall not fail to be treated as picked up by an employing unit merely because the employee may make an irrevocable election between the application of two alternative benefit formulas involving the same or different levels of employee contributions.”
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Magic Date
March 31, 1986 State/local government employees hired
after this date are covered under Medicare HI payroll tax
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July 2, 1991– extended to those state/local employees not covered by a retirement plan
Section 218 agreements/referenda
However, approximately 700,000 state/local workers are still not covered by Medicare payroll tax
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40 credit quarters (10 years) generally qualifies for premium free Medicare Part A (Hospital Insurance) coverage
30 - 39 credit quarters (7 ½ years +) qualifies for reduced Part A monthly premium
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Irrevocable election
Individual pays both employee and employer shares (total 2.9%)
Individual eligible for 50% deduction
Same requirements as existing law for required credit quarters
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State and Local Reporting to Federal Government for the First Time
Responsibility of Plan Sponsor
Failure to Comply = No Federally Tax-Exempt Bonds Williams & Jensen, PLLC
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Annual Reports Two Sets of Numbers:
1) Report based on current assumed rate of return
2) Supplemental report based on U.S. Treasury obligation yield curve
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Tension
Retirement Security Revenue
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Tony Roda Partner Williams & Jensen, PLLC
701 8th Street, NW Suite 500 Washington, DC 20001 (202) 659-8201 [email protected]
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