the public employee pension transparency act - ncpers.org roda final ppt.pdf · the issue may 2007...

January 2013

Williams & Jensen, PLLC

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


Definition of Governmental Plan

Normal Retirement Age

Employer Pick Ups

Definition of Municipal Advisor

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


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


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

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


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

“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


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


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)


Municipal Advisor

NRA 414 (d)

Medicare Opt-in PEPTA

Tax Reform


Pick Up

Regulatory Legislative

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.”


Magic Date

March 31, 1986 State/local government employees hired

after this date are covered under Medicare HI payroll tax


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


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


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


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

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


Tension

Retirement Security Revenue


Tony Roda Partner Williams & Jensen, PLLC

701 8th Street, NW Suite 500 Washington, DC 20001 (202) 659-8201 [email protected]


the public employee pension transparency act - ncpers.org roda final ppt.pdf · the issue may 2007...

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