IRS Increases 2020 HSA Limits

On May 28, 2019, the Internal Revenue Service (IRS) announced increases to health savings account (HSA) limits for 2020. The annual limit on deductible contributions will increase by $50 to $3,550 for individuals with self-only coverage.  For all other coverage levels, the limit will increase by $100 to $7,100.

HSAs may be used only in conjunction with a high-deductible health plan (HDHP).  For 2020, the minimum deductible to qualify as a HDHP will also increase by $50 for individuals with self-only coverage and $100 for all other coverage levels to $1,400 and $2,800, respectively.  HSAs allow participants to make pre-tax contributions, reducing their taxable income for the year.  These contributions can be invested and grow tax-free.  HSAs are then used for out-of-pocket qualified medical expenses tax-free. 

Annual out-of-pocket expense limits will increase as well.  The limit for individual coverage will increase to $6,900 (from $6,750 in 2019) and family coverage limit will increase to $13,800 (from $13,500 in 2019).

For more information, please refer to the IRS Bulletin at

PBGC Issues Final Rules for Terminated and Insolvent Multiemployer Plans

The Pension Benefit Guaranty Corporation (PBGC) has issued final rules that apply to multiemployer pension plans that were terminated by mass withdrawal and insolvent multiemployer pension plans.  These rules go into effect on July 1, 2019.

For plans terminated by mass withdrawal, the following rules apply:

  • For a terminated plan with no more than $50 million in vested benefit liabilities, an actuarial valuation is required every five years.  Otherwise, an actuarial valuation must be done annually (due date is 150 days following the end of each plan year)
  • Annual plan solvency determinations must be performed
  • If a plan is determined to be insolvent for the current or succeeding plan year, certain notices are required to be sent to the PBGC, plan participants, and beneficiaries:
    • A notice of Insolvency will be due by the later of (A) 90 days before the beginning of the insolvency year or (B) 30 days after the date that plan insolvency has been determined
    • A notice of insolvency benefit level showing the benefits that are payable to plan participants and beneficiaries during insolvency; such notices will no longer be required annually but will be required if there are any changes to a participant’s benefit level
  • An initial application for financial assistance from the PBGC must be filed at the same time that a notice of insolvency benefit level is filed, but no later than 90 days prior to the first day of the month for which plan assets will not be sufficient to cover the plan’s benefit payment obligations

For insolvent plans receiving financial assistance from the PBGC, the following rules apply:

  • For an insolvent plan receiving financial assistance from the PBGC and with no more than $50 million in vested benefit liabilities, an actuarial valuation is required every five years
  • Otherwise, an actuarial valuation must be done annually (due date is 180 days following the end of each plan year)
  • Alternative information, as defined on PBGC’s website, may be submitted by an insolvent plan receiving financial assistance from the PBGC and with no more than $50 million in vested benefit liabilities. This option is not available to insolvent plans with more than $50 million in vested benefit liabilities

Certain withdrawal liability information must be reported annually by both plans terminated by mass withdrawal and insolvent plans, starting with plan years ending after July 1, 2019:

  • Withdrawal liability assessed to employers (in the aggregate and by individual employer)
  • For each employer not yet assessed withdrawal liability, the PBGC must be notified of the employer’s name, contribution owed to the plan in the year before withdrawal, and the reasons that the employer has not been assessed withdrawal liability

The above information is due 180 days after the close of each plan year.

The PBGC’s website will provide instructions for electronic filing and content requirements for the notices and information outlined above.

New Standard of Practice for Actuaries

By: Emily Feeny, ASA

ASOP 51:  Assessment and Disclosure of Risk Associated with Measuring Pension Obligations and Determining Pension Plan Contributions

Risk has always been present and discussed in actuarial work.  Now pension actuaries must disclose that risk in actuarial publications.  The Actuarial Standard of Practice #51 (“ASOP 51”) was adopted by the Actuarial Standards Board (“ASB”) in September of 2017 for actuarial work products with a measurement date on or after November 1, 2018.   ASOP 51 has three main components as it relates to actuarial valuations: Assessment of Risk, Disclosure of Maturity Measures and Disclosure of Historical Information.

ASOP 51 defines risk as “the potential of actual future measurements deviating from expected future measurements resulting from actual future experience deviating from actuarially assumed experience.”  Actuaries should assess and disclose relevant risk in valuations.  Two examples of risks are investment risk (the potential that investment returns will differ from expected) and longevity risk (the potential that mortality experience will be different from expected). 

Actuaries should also list maturity measures in valuations, such as the ratio of retired actuarial liability to total actuarial liability.  As a plan matures, the percentage of the liability associated with inactive participants grows and the plan becomes more dependent on investment return than on contributions for asset growth.  Other maturity measures include the ratio of market value of assets to active participant payroll and the ratio of benefit payments to contributions. 

Finally, ASOP 51 calls for disclosure of historical actuarial measurements such as funded status, normal cost and plan participant count.  This historical information can be helpful in identifying trends so that corrective action can be taken where necessary.

The McKeogh Company and ASOP 51

The McKeogh Company’s valuations with measurement dates of November 1, 2018 or later will include a section entitled “Risk Assessment and Disclosure”.  This section will first list risks that a plan faces with respect to the actuarial assumptions and illustrate how deviations from expectations could affect assets and liabilities. Next, there will be a discussion of plan maturity measures to help illustrate risks associated with a maturing plan.  The McKeogh Company valuations have always included historical actuarial measurements but will now use this new section to summarize the variance of such historical values and cite the sections in which more information can be found within the report.

The ASB and The McKeogh Company recognize the difficulty that Defined Benefit Pension Plans face during uncertain times.  Plan sponsors will be better prepared for the future if they are more aware of the risks, maturity measurements and historical trends associated with their plans.

Navigating a Benefit Suspension Application Under MPRA

Applying for a suspension under the Multiemployer Pension Reform Act (MPRA) is a lengthy and complicated process. This article describes the steps one pension fund went through to apply for benefit suspensions.

Michael Reilly, ASA, published this article in the May 2019 issue of Benefits Magazine.

TMC Update – The McKeogh Company Employees Present on MPRA and Rehab Plans

Boris Vaynblat presented at the Annual Conference of Consulting Actuaries Meeting in October 2018 in Colorado Springs.  He led a session on the Multiemployer Pension Act of 2014 (MPRA).  Boris related his experiences obtaining approval from the US Treasury Department for benefit suspensions for a Pension Fund heading for insolvency, thereby giving the Fund a chance to survive for future generations.

Both Jim McKeogh, president of The McKeogh Company, and Michael Reilly presented at the International Foundation of Employee Benefit Plans (IFEBP) in New Orleans in October. Michael  co-lead a discussion entitled “How to Make Your Client’s MPRA Applications Successful”. His presentation focused on the application process including assumptions and common pitfalls.  Jim sat on a panel of industry experts in the “Ask the Professionals” session as the multiemployer plan expert.

Mandy Notaristefano traveled to Aruba to speak at the Contractors Association of Eastern PA’s 2019 Winter Conference in February 2019.  Mandy’s talk focused on Rehabilitation Plans.  She ran a simulation of a plan that had newly entered critical status and walked the attendees through the development and monitoring of a rehabilitation plan.

Proposed Legislation – Multiemployer Pension Relief

On January 9, 2019, Rep. Richard Neal (D-MA) introduced the Rehabilitation for Multiemployer Pensions Act into Congress.

This bill seeks to help ailing multiemployer pension plans by establishing a new agency within the Treasury Department called the Pension Rehabilitation Administration (PRA).   This agency would be authorized to issue bonds in order to raise capital.  The capital would then be used to issue loans to critical and declining status plans and some already-insolvent plans that are currently receiving financial assistance from the Pension Benefit Guaranty Corporation (PBGC).

The loan would be interest-only for 30 years with principal due at end of 30th year and in an amount needed to fund pensions for current retirees only.  The pension fund would be required to purchase a commercial annuity contract with the loan proceeds, or set the funds aside in a separate pool and invest in a bond portfolio which has cash flows that mimic the expected pension payouts.  In certain situations, a loan could be combined with financial assistance from the PBGC in order to prevent plan insolvency.

Loan applications would need to demonstrate that the loan will enable the plan to avoid insolvency during the 30-year period and that plan would be reasonably expected to pay the loan back with interest.  The plan would not be allowed to reduce benefits during the loan term and could not accept a CBA with lower contribution rates.

2017 US Mortality Study Released

US Life Expectancy Dropped Again in 2017 – Deaths from Unintentional Injuries Largest Increase

The Center for Disease Control (CDC) released its 2017 Mortality in the United States study. The average US life expectancy dropped again in 2017 (for the third consecutive year) from 78.7 years from birth to 78.6.  Death rates increased significantly for those in age groups 25-34, 35-44 and 85 and over from 2016-2017. However, the death rate for those between ages 45 and 54 dropped significantly.  

The top three causes of death continue to be heart disease, cancer and unintentional injuries.  While seven of the top ten leading causes of death had increases from 2016 to 2017, deaths from unintentional injuries made up the largest increase.  Deaths from drug overdoses fall in this category.  Using data from the National Vital Statistics System (NVSS), the CDC found that adults age 25-54 had higher rates of drug overdose deaths than those aged 15-24 and 55 and over.  West Virginia, Ohio, Pennsylvania and Washington DC had the highest age-adjusted drug overdose deaths in 2017.  Deaths from drug overdoses has climbed from 6.1 per 100,000 standard population in 1999 to 21.7 in 2017.

Annual Reporting Deadlines Extended

The Internal Revenue Service (IRS) published Notice 2018-06 which provides an extension of the deadlines for 2017 ACA annual reporting requirements. The deadline for providing individuals with Forms 1095-B and 1095-C has been extended from January 31, 2018 to March 2, 2018. The deadline to file Forms 1094-B, 1094-C, 1095-B and 1095-C with the IRS remains unchanged and is February 28, 2018 for paper filings and April 2, 2018 for electronic filings.

These extensions are automatic and replace any extension requests that have been submitted. There will be no further extensions available. The IRS has continued the interim good faith compliance standard. Therefore, no penalties will be assessed for incomplete or inaccurate information on the forms filed provided the filer can show it completed the forms in good faith. This relief is only available if the forms were filed on time.