ncpers legislative agenda for 114th congress second session

NCPERSLegislativeConference

January2016

Williams&Jensen,PLLC

Itgetslateearlyouthere

“Itgetslateearlyouthere.”

Williams & Jensen, PLLC

ChronologicalApproach

• 2015– Theyearthatwas

• 2016– Theyearthatis

• 2017‐18– Thegreatbeyond


TheYearThatWas(2015)

Newtaxlawsaffectingpublicsafety

Fundingofteacherpensions

ACAexcisetax

IRSdeterminationletterprogram


PublicSafetyLegislation

Federaltaxtreatmentof

• Survivorbenefits

• Retirementbenefits


SurvivorBenefits

• PublicLaw114‐14(May22,2015)

• Clarifiesthatstateandfederal‐basedsurvivorbenefitsofpublicsafetyofficersaretax‐exemptifinthelineofduty(directandproximatecause)


RetirementBenefits• PublicLaw114‐26(June29,2015)

• ExpansionofIRCsection72(t)(10)exemption

• Adds(1)federalpublicsafetyofficers;(2)distributionsfromDCplans;and(3)relieffromrecapturetaxpenaltyifstreamofpaymentsismodified

• Effectivefordistributionsafter12/31/15


FundingofTeacherPensions

• HouseflooramendmenttoH.R.5,ESEA

• Rep.RobertDold(R‐IL)

• LimituseofTitle1moniesto“normalcost”

• Normalcost≠accruedunfundedliabilities


ACAExciseTax• Two Treasury notices with comment periods

• Two‐year delay (from 2018 to 2020)

• Strong likelihood that it will be revisited

• Further delay, major changes or full repeal


DeterminationLetterProgram

• IRS Announcement 2015‐19 (July 2015)• Treasury Notice 2016‐03 (January 2016)

• Effective January 1, 2017, five‐year, staggered determination letter cycles will be eliminated for individually‐designed plans

• Limited to initial plan qualification and termination


TheYearThatIs(2016)PEPTA

Annuityaccumulationplan

Normalretirementage

Definitionofgovernmentalplan

PickupWilliams&Jensen,PLLC

PublicEmployeePensionTransparencyAct(PEPTA)

• S.2381,PuertoRicoAssistanceAct

• SenateFinanceCommitteeChairmanOrrinHatch(R‐UT)

• Stateandlocalreportingtothefederalgovernmentforthefirsttime


PEPTA,cont.

• AnnualreportstoU.S.TreasuryDepartment

• Twosetsofcalculations:

1) Currentassumedrateofreturn

2)SupplementalreportbasedonU.S.Treasuryobligationyieldcurve


AnnuityAccumulationPlan

• S.2381,PuertoRicoAssistanceAct

• Sponsor“may”establishannuityaccumulationretirementplans

• PositionedasreplacementforDBplans


AnnuityBill,cont.

• Competitivebidprocessatleasteveryfiveyears

• Onlyemployer contributionsallowed

• Aspirationalceilingsof30%forpublicsafety;20%forothers);higherlimitsforcertainages


AnnuityBill,cont.

Concerns:• Replacementincome(inconsistentcontributions)

• Survivoranddisabilitybenefits(publicsafety)• Newcosts:(1)aggregationcosts(outsideproviderorsponsor/fund);(2)transitioncosts(similartoDBtoDC);and(3)newdeterminationletter


NormalRetirementAgeMay2007Regulations Qualificationissue,1.401(a)‐1(b) NRA=Age=Anumber YOSorcombinationYOSandage≠compliance

TreasuryNotice2012‐29 Governmentalplansthatdonotprovidein‐servicedistributionspriortoage62≠NRAdefinition

QPSEsafeharborofage50appliesevenwhereQPSEsaresubgroupoflargerplan


DefinitionofGovernmentalPlanIRCSection414(d)2011ANPRM• IssuedbyIRS‐TreasuryinconsultationwithDOLandPBGC

• 2300commentsreceived

• 2000oncharterschools

DefineKeyTerms:1) Establishedand

maintained2) Agencyor

instrumentalityofastateorpoliticalsubdivision


DefinitionofGovernmentalPlan,cont.MajorFactors ‐‐ Agencyorinstrumentalityofastateorpoliticalsubdivision• Controlofgoverningboardorbody• Boardmembersarepubliclynominatedandelected• Entity’semployeestreatedthesameasastateorpoliticalsubdivision,exceptforbenefits

• Stateorpoliticalsubdivisionhasresponsibilityfordebts/liabilities

• Delegatedsovereignpowers


DefinitionofGovernmentalPlan,cont.MinorandAdditionalFactors• Specificenablingstatute• Fundingofentity• Federaltaxtreatment• Controlofoperations• Treatmentunderstatelaw• Judicialdeterminations• Ownershipinterest• Governmentalpurpose


TreasuryNotice2015‐7

Publiccharterschools

• ReleasedJanuary2015• AppliestoDB,DC,403(b)and457(b)plans• 5‐parttest(a‐e)forapubliccharterschool• Controliskeyfactor


EmployerPickUpTheIssue• Noregulations,§414(h)(2) • RevenueRuling2006‐43• NoCODAsinpickupsituation

• Cashordeferredarrangement=affectstakehomepay

• PLR requests to allow existing employees to elect between legacy/new DB plans/tiers

Tension

• PromotingretentionofDBplansthroughflexibility

• ClearpathtoerodeunderlyingDBbenefits

TwoApproaches

• Regulatory• Legislative(H.R.205,113thCongress)


H.R.205(113th Congress)

AmendmenttoIRC section 414(h)(2):

…acontributionshallnotfailtobetreatedaspickedupbyanemployingunitmerelybecausetheemployeemaymakeanirrevocableelectionbetweentheapplicationoftwoalternativebenefitformulasinvolvingthesameordifferentlevelsofemployeecontributions.


H.R.205,cont.

(ii)APPLICATIONTOEXISTINGEMPLOYEES.–

…shallbeappliedwithoutregardtowhethertheemployeeisalreadycoveredbyoneofthebenefitformulasreferredtotherein.

IntroducedbyRep.LorettaSanchez(D‐CA)


TheGreatBeyond(2017‐18)

TaxReform

Theultimatecatch‐alllegislation


ContactInformation

TonyRoda,PartnerWilliams&Jensen,PLLC

7018th Street,NW,Suite500Washington,DC20001

(202)659‐8201ajroda@wms‐jen.com


ncpers legislative agenda for 114th congress second session

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