ERISA News

The IRS has issued Revenue Ruling 2022-17, which contains the applicable federal rates (AFR) for September 2022. These rates are used for such purposes as calculating distributions from retirement savings arrangements that meet the requirements for substantially equal periodic payments (a 10 percent early distribution penalty tax exception), also referred to as “72(t) payments.”

Representatives David Schwikert (R-AZ) and Byron Donalds (R-FL) have introduced H.R. 8579, the Retirement Protection Act. The bill proposes modification of the saver’s credit by replacing the three-tier formula with a single 50 percent credit percentage on contributions up to $2,000, with phase outs beginning at certain AGI thresholds. The proposal also provides for a one year $4,000 temporary increase in retirement contribution limits.

The IRS has announced the postponement of certain tax-related deadlines for victims of severe storms and flooding in Missouri. The tax relief postpones various tax filing deadlines that began July 25, 2022. Affected individuals and households who reside or have a business in the Independent City of St. Louis, Montgomery, St. Charles and St. Louis counties, as well as taxpayers with records located in the covered area that are needed to meet covered deadlines, qualify for relief.

Representatives Bill Huizenga (R-MI) and Blaine Luetkemeyer (R-MO) have introduced HR 8521, the Investor Democracy is Expected (INDEX) Act. The bill mirrors S. 4241, which was introduced and announced in May. The bill would require investment advisors of passively managed funds to vote proxies in accordance with the fund investors’ instructions—not at the adviser’s discretion. The adviser would be responsible for passing through the proxies, collecting the instructions, and voting according to the investors’ wishes. Except for routine matters, the investment adviser could not vote on the proportion of shares for which voting instructions were not received. The proposal provides for a safe harbor whereby investment advisers would not be in violation of duties by choosing not to solicit voting instructions or voting the particular proxy.

The IRS issued Notice 2022-33 which extends the deadline for amendments to retirement plans and Individual Retirement Arrangements (IRAs) to adopt provisions enacted under the SECURE Act, the Miners Act, and some provisions under the CARES Act. The Notice provides that qualified plans, IRAs, and non-governmental 403(b) plans must be amended to adopt applicable provisions of each act no later than December 31, 2025. The previous deadline for such amendments under Notice 2020-68 and Notice 2020-86 was December 31, 2022.

Senators Debbie Stabenow (D-MI), and John Boozman (R-AR), along with Senators Cory Booker (D-NJ) and John Thune (R-SD), have introduced the “Digital Commodities Consumer Protection Act.” According to a press release, the proposal would give the Commodity Futures Trading Commission (CFTC) new tools and authorities to regulate “digital commodities”—which would include Bitcoin and Ether. The bill sponsors serve on the Senate Committee on Agriculture, Nutrition & Forestry, which has oversight of the CFTC which regulates commodities markets.

A previous proposal by Senators Cynthia Lummis (R-WY) and Kirsten Gillibrand (D-NY) was announced in June.

The IRS has announced the postponement of certain tax-related deadlines for victims of a water shortage and health impact from unprecedented sargassum seagrass influx on the island of St. Croix, U.S. Virgin Islands. The tax relief postpones various tax-filing deadlines that began July 15, 2022. Affected individuals and households who reside or have a business on the Island of St. Croix, as well as taxpayers with records located in the covered area that are needed to meet covered deadlines, qualify for relief.

The Departments of Labor, Health and Human Services and Treasury issued a joint FAQ related to the coverage of contraceptive products as preventive services by group health plans or issuers. The FAQ provides the following:

• Group health plans and issuers are required to cover items or services that are integral to the furnishing of a recommended preventive service. The FAQ clarifies that coverage of anesthesia for a tubal litigation procedure or pregnancy tests required prior to the provision of an intrauterine device would be considered preventive services.

Senator Mike Braun (R-IN) and seven republican co-sponsors have introduced S. 4613, the Maximize Americans’ Retirement Security Act. The bill would amend ERISA as follows:

• Require plan fiduciaries to select investments solely on pecuniary factors
• Require participant notification of an explanation of why pecuniary factors were not sufficient to select the investment and how non-pecuniary factors are consistent with the interests of participants if a fiduciary cannot distinguish between investments on pecuniary factors alone
• Define pecuniary factors as any factors that a fiduciary prudently determines is expected to have a material effect on the risk of return of an investment

Department of Labor guidance regarding what is “pecuniary” and the extent to which non-pecuniary factors can be considered when selecting investments has changed throughout the years. The proposal was referred to the Senate Committee on Health, Education, Labor, and Pensions.

Effective July 27, 2022, the Federal prime interest rate increased from 4.75 percent to 5.50 percent. The prime interest rate is largely determined by the federal funds rate, as set by the Federal Reserve’s Federal Open Market Committee (FOMC). As Department of Labor regulations require a retirement plan loan interest rate to be comparable to interest rates charged by entities that are in the business of lending money in similar circumstances, plan sponsors typically use a benchmark such as the prime rate to set the interest rate on plan loans. The next FOMC meeting is scheduled for September 20 and 21, 2022.