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PSCA Executive Reports

October 31, 2017

IRS Guidance Priorities for 2017-18

For many years now, IRS and Treasury have jointly developed a list of areas in which they intend to release guidance – such as regulations, revenue rulings, notices and other published official authority – during the coming year.  IRS and Treasury typically have succeeded in issuing guidance on many items on these “guidance priority” lists, though their recent track record has declined somewhat.  In any case, experience has shown that few things that are not on the list get done – although the list does not cover IRS exam guidelines, field directives, etc. – and intervening legislation or court decisions often throw a monkey-wrench into the best-laid plans.     

The July 2017 – June 2018 “guidance priorities” plan (“Plan”) was announced on October 20 – later than ever.  Most of the project descriptions are quite general so it is hard to tell exactly what guidance will be forthcoming.  As always, employee benefits is one of the longer lists with 40 projects – but considerably fewer than last year’s list.     

In light of the Trump Administration’s emphasis on reducing regulatory burdens – reflected in at least three executive orders – this year’s list includes a new section entitled “Near-term Burden Reduction,” listing 19 projects.  Only two projects fall in the benefits area:  relief for certain closed defined benefit plans (which was recently extended) and withholding guidance on distributions outside the US, including to military and diplomatic payees.     

The vast majority of the 23 pension-related projects are carryovers from prior guidance plan lists.  Two important pension projects listed for the first time are guidance on missing participants and on church plans.     

Several carryover pension projects relating to changes made by the Pension Protection Act of 2006 (“PPA”) were dropped from this year’s list, including funding changes for single employer defined benefit plans, and initial guidance on the combined “DB/K” plan created in the PPA.  Also absent are any projects relating to the now more limited IRS determination letter program.     

Beyond the PPA, the Plan continues to list pension projects involving governmental plans, lifetime income options under defined contribution plans, IRAs, ESOPs and refinements of the IRS voluntary compliance program (“EPCRS”).     

Nonqualified Plans – The Plan continues to carry over several important projects related to the deferred compensation provisions of Code section 409A, including:

  • final rules for the calculation of income inclusion for 409A violations,
  • an update of prior IRS guidance on self-correction under Section 409A, and
  • the final version of proposed rules on “ineligible plans” under Code section 457(f).Recent speeches by Treasury officials indicate they intend to pursue these three interrelated projects in earnest.     

Buried deep in the 2017-2018 Priority Guidance Plan, in Part 4, under the heading of General Guidance, Employee Benefits, in Section B. Executive Compensation, Health Care and Other Benefits, and Employment Taxes, item # 15 states:  “…  Regulations under §4980I regarding the excise tax on high cost employer-provided coverage.”  During the regulatory process, PSCA anticipates we will have an opportunity to show how the statute justifies excluding employee pre-tax contributions to Health Savings Accounts when determining cost for Cadillac Tax purposes.

A Final Comment – The fact that the new guidance priority list is quite a bit shorter than past lists is consistent with the Administration’s overall goal of less regulation.  Nevertheless, many of these benefits projects would provide helpful, updated guidance that does not conflict with that overall policy goal.

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