Compliance April 26, 2017

DOL Aims For A More Advanced Research Effort

The DOL's Employee Benefit Security Administration hopes a new initiative will help it “overcome the limitations seen in existing data collection activities.”
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The Department of Labor (DOL) has submitted for review by the Office of Management and Budget an information collection request titled, “On the Road to Retirement Surveys.”

Public comments on the request are invited, DOL notes, and the underlying initiative will be piloted by the Employee Benefit Security Administration (EBSA).

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As the DOL explains, “the EBSA seeks to undertake a long-term research study that will track U.S. households over several years in order to collect data and answer important research questions on how retirement planning strategies and decisions evolve over time.”

The collection “will gather data about how people make planning and financial decisions before and during retirement, especially with regard to the information that they receive and how they respond to it.”

DOL and EBSA say the data collection effort is “designed to overcome the limitations seen in existing data collection activities.” Further, gaining additional insight into Americans’ decisionmaking processes and experiences will “provide policymakers and the research community with valuable information that can be used to guide future policy and research.”

The information collection request at hand seeks approval for “pre-test surveys, a screening survey, an initial participant survey, an advice interaction survey, and an annual participant survey.” Household reports on behavior and outcomes will be combined with survey responses on planning methods, strategies and financial information received to perform a cross-sectional analysis, conditional on other respondent attributes.

“The EBSA intends to use data drawn from multiple waves of various surveys to analyze how behavior evolves over time,” DOL adds, noting that the Employee Retirement Income Security Act Section 513(a) authorizes the information collection. 

Compliance April 26, 2017

IRS Suggests Two Ways for Determining Loan Amounts Available to Participants

The agency offers two examples for determining the highest outstanding loan balance in the past year and says, "the law does not clearly preclude either computation."
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In a memorandum to Employee Plans (EP) examination employees, the Internal Revenue Service (IRS) has clarified there are two ways an employer can determine the highest outstanding loan balance in the past year when calculating the amount of an additional loan a participant can take from her defined contribution (DC) plan.

The IRS notes that in general, Internal Revenue Code (IRC) § 72(p)(1) provides that a loan from a plan is a distribution to the participant. IRC § 72(p)(2)(A) excepts a loan that does not exceed the lesser of:

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  • $50,000, reduced by any excess of  the highest outstanding balance of loans during the 1-year period ending on the day before the date on which such loan was made, over the outstanding balance of loans on the date on which such loan was made; or
  • the greater of half of the present value of the vested accrued benefit, or $10,000.

Under IRC § 72(p)(2)(A)(i), if the initial loan is less than $50,000, the participant generally may borrow another loan (if the plan allows) within a year if the aggregate amount does not exceed $50,000. The $50,000 is reduced by the highest outstanding balance of loans during the one-year period ending the day before the second loan, in turn reduced by the outstanding balance on the date of the second loan. 

The agency gives an example: A participant borrowed $30,000 in February which was fully repaid in April, and $20,000 in May which was fully repaid in July, before applying for a third loan in December. The plan may determine that no further loan would be available, since $30,000 + $20,000 = $50,000. Alternatively, the plan may identify “the highest outstanding balance” as $30,000, and permit the third loan in the amount of $20,000. This assumes that to meet other IRC § 72(p)(2) requirements, the participant has a vested accrued benefit of more than $100,000, and the loan is repayable in five years and requires substantially level amortization. 

“At this time, the law does not clearly preclude either computation of the highest outstanding loan balance in the above example,” the IRS says.

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