ERISA News

Effective September 21, 2022, the Federal prime interest rate increased from 5.50 percent to 6.25 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).

The IRS has announced the postponement of certain tax-related deadlines for victims of hurricane Fiona in Puerto Rico. The tax relief postpones various tax filing deadlines that began September 17, 2022. Affected individuals and households who reside or have a business in in all 78 municipalities in Puerto Rico, as well as taxpayers with records located in the covered area that are needed to meet covered deadlines, qualify for relief.

Representative Kurt Schrader (D-OR) has introduced H.R. 8791, the Medicare Enrollment Protection Act of 2022 (the Act). The Act would amend the Social Security Act (SSA) to provide for a special enrollment period under Medicare, Part A (medical insurance) for individuals enrolled in COBRA continuation coverage. The Act would also prevent the increase of premiums in Medicare, Part A, and prevent a group health plan from considering an individual’s eligibility in Medicare, Part B to reduce or eliminate COBRA continuation coverage. In addition, if enacted, the Act would require the Departments of Labor and Health and Human Services to update COBRA continuation notices to include an explanation of Medicare secondary payer rules. 

The IRS has issued Notice 2022-40, which contains updated guidance on factors used in certain defined benefit (DB) pension plan minimum funding and present value calculations. Updates include the corporate bond monthly yield curve, the corresponding spot segment rates for September used under Internal Revenue Code Section (IRC Sec.) 417(e)(3), and the 24-month average segment rates under IRC Sec. 430(h)(2). IRC Sec. 417 contains definitions and special rules for minimum survivor annuity requirements in DB plans. IRC Sec. 430 addresses minimum funding standards for single-employer DB plans.

The IRS has posted a draft 2023 Form W-4R, Withholding Certificate for Nonperiodic Payments and Eligible Rollover Distributions. New Form W-4R is to be used for nonperiodic and rollover distributions. Nonperiodic distributions are subject to a 10 percent withholding rate unless a different rate is elected. Eligible rollover distributions are subject to a mandatory 20 percent withholding rate on the taxable amount of the distribution unless a higher rate is elected. As previously announced, the IRS has postponed requirements to begin using these forms until January 1, 2023. Form W-4P can continue to be used until that time.

The Pension Benefit Guaranty Corporation (PBGC) has issued updated interest rate assumptions for benefit payments in terminating single-employer defined benefit (DB) pension plans. Specifically, these interest assumptions are for benefit payments with valuation dates in the fourth quarter of 2022 and apply to plans insured by PBGC.

The IRS has issued Revenue Ruling 2022-18, which contains the applicable federal rates (AFR) for October 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.”

The IRS has released a draft 2022 Form 8606, Nondeductible IRAs. Form 8606 is filed by taxpayers who have made nondeductible Traditional IRA contributions for 2022, and by taxpayers who have made nondeductible Traditional IRA contributions in previous years and have taken distributions from a Traditional, SEP, or SIMPLE IRA in 2022 or converted part of their Traditional, SEP, or SIMPLE IRAs to Roth IRAs in 2022.

Senators Ron Wyden (D-OR) and Mike Crapo (R-ID), Senate Finance Committee Chair and Ranking Member, have introduced S.4808, the Enhancing American Retirement Now (EARN) Act. As previously announced, the Senate Finance Committee unanimously approved the bill in June based upon an outline released at that time.

Changes in the legislative text from the June outline include:

• Individuals age 60 or older could start making higher catch-up contributions in 2025 (versus 2024).
• Employees with wages below $100,000 could make catch-up contributions on a pretax or Roth basis. Employees with wages exceeding $100,000 would still be required to be make catch-up contributions on a Roth basis.
• The option to treat employer contributions as Roth contributions would be available starting in 2023 (versus 2024).

While it is unclear whether the bill will be brought to a stand-alone vote with the Senate’s limited number of sessions for the remainder of the year, congressional observers anticipate that the EARN Act will be consolidated with the Senate Health, Education, Labor and Pensions (HELP) committee’s RISE & SHINE Act and the Securing a Strong Retirement Act of 2022, which was passed by the House of Representatives. It appears that a final bill will likely receive a vote this year after the November mid-term elections.

The IRS has announced the postponement of certain tax-related deadlines for victims of severe storms in Arizona. The tax relief postpones various tax filing deadlines that began July 17, 2022. Affected individuals and households who reside or have a business in the Salt River Pima-Maricopa Indian Community, as well as taxpayers with records located in the covered area that are needed to meet covered deadlines, qualify for relief.

In addition to extending certain tax filing and tax payment deadlines, the relief includes completion of many time-sensitive, tax-related acts described in IRS Revenue Procedure 2018-58 and Treasury Regulation 301.7508A-1(c)(1). Affected taxpayers with a covered deadline on or after July 17, 2022, and before November 15, 2022, will have until November 15, 2022, to complete the acts. This includes filing Form 5500 series returns that are required to be filed on or after July 17, 2022, and before November 15, 2022.

“Affected taxpayer” automatically includes any individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Those who reside or have a business located outside the covered disaster area, but have been affected by the disaster, may contact the IRS to request relief.