GEORGE JOHNSON & COMPANY
Dear Clients and Friends,
Welcome to the spring issue of the GJC Advisor. The GJC team is focused on providing sound financial guidance, value and knowledge to our clients and professional connections to help them manage and grow their businesses. This newsletter is an extension of those goals. This issue offers insight on employee benefit plan topics that will help keep your financial house in order and build profitability. We also have shared stories about our dedication to the community. We hope you enjoy this edition of the GJC Advisor.
Is Your Health Plan Ready for a HIPAA Audit?
The U.S. Department of Health & Human Services (HHS) has begun the next phase of audits in conjunction with its review of policies and procedures implemented by covered entities (and those entities’ business associates) to meet the Health Insurance Portability and Accountability Act (HIPAA) Privacy, Security and Breach Notification rules.
In 2009, the Health Information Technology for Economic and Clinical Health Act (HITECH) mandated that HHS conduct periodic audits of both covered entities and business associates to ensure that covered entities and business associates are complying with the HIPAA Privacy, Security and Breach Notification Rules. A company’s health plan is classified as a covered entity.
There are three distinct components to these rules:
• The Privacy Rule addresses protected health information (PHI).
• The Security Rule addresses electronic protected health information (ePHI).
• The Breach Notification Rule addresses providing notification following a breach of unsecured PHI.
Changes to the Determination Letter Program
Effective January 1, 2017, plan amendment requirements as well as the determination letter program for individually designed plans will undergo some significant changes. The Internal Revenue Service (IRS) provided much-anticipated guidance on these changes with the release of Revenue Procedure (Rev. Proc.) 2016-37 in June 2016.
Under the new system, the accustomed 5-year remedial amendment cycle for individually designed plans (Rev. Proc. 2007-44) will cease to exist once Cycle A concludes under the current model on January 31, 2017. Going forward under the new system, a Required Amendment List (RA List) will be published on an annual basis, which will contain all the necessary regulatory amendments a plan must adopt in order to maintain its qualified status. All amendments on the list must be adopted by the end of the second calendar year following the date the list is published (list is expected to be made available shortly after October 1s t of each year). With Rev. Proc. 2016-37, individually designed plans may only apply for a determination letter for initial plan qualification and plan termination, as detailed further below:
• Initial Qualification – If a plan has never received a favorable determination letter then an application can be submitted in association with Form 5300.
• Plan Termination – An application for a favorable determination letter may be submitted with Form 5310 when a plan is being terminated. The filing must be received no later than the later of one year of the effective date of the plan termination or one year from the date on which the action terminating the plan is taken. The application to the IRS must not be filed any later than 12 months after the distribution of all plan assets.
The IRS is still considering whether applications will be accepted for other reasons than the two previously mentioned (in particular, future law changes or plans that may not be able to adopt pre-approved documents). While Rev. Proc. 2016-37 brings changes to the requirement that a plan operate under the appropriate compliance standards, any plan-specific operational plan amendments are still required by the end of the plan year the amendment is put into effect.
An Operational Compliance List identifying compliance issues will be issued by the IRS to assist sponsors.
Additional guidance in Rev. Proc. 2016-51 modifies the Employee Plans Compliance Resolution System (EPCRS) correction program for these changes to the determination letter program. Opinion and advisory letter for pre-approved plans will still maintain the current six-year cycle.
Significant Proposed Form 5500 Changes
In July 2016, the government agencies that administer the Form 5500 Annual Return/Report of Employee Benefit Plan (Form 5500) announced proposed changes to the Form 5500 which are expected to significantly impact the degree of plan details reported as well as the amount of time and effort to properly complete the form. Changes are effective for the 2020 Form 5500 for plan years beginning on or after January 1, 2019, with certain changes potentially required sooner including new compliance questions. The Department of Labor (DOL) has indicated that the purpose of the changes is to modernize the financial statement and investment information filed about employee benefit plans, update service provider and fee information, require Form 5500 reporting by all group health plans, and provide greater DOL and IRS agency collaboration through new compliance questions. The proposed revisions were open for comment, with an extended deadline of December 5, 2016.
Updates for Defined Benefit Plans
• In October 2016, the Society of Actuaries (SOA) released the Mortality Improvement Scale MP-2016 (MP-2016 Scale). The MP-2016 Scale includes three additional years of historical U.S. population mortality data and incorporates data now through 2014. The MP-2016 Scale rates continue the trend of decreasing rates as they are generally lower than MP-2015 Scale rates (which were, in turn, also lower than the MP-2014 Scale rates). The SOA anticipates that most 2016 pension obligations calculated using the MP-2016 Scale will be approximately 1.5 – 2.0 percent lower than the obligations calculated using the MP-2015 Scale.
• The PGBC has released the 2017 Premium Rates. Premium rates will increase for singleemployers, including the flat rate and the variable rate premiums and the flat rate premium for multiemployers. For further details refer to http://www.pbgc.gov/prac/prem/premium-rates.html.
Contributed by Joanne Szupka
George Johnson to the left of Mrs. Ida Austin (seated), along with board members of WSU School of Business
George Johnson delivers Keynote Address at the Richard H. Austin
Lecture Series for Accounting Excellence at the
“Making A Difference” Luncheon
The Richard H. Austin Fund for Accounting Excellence was established at Wayne State University in 1989. The purpose is to increase significantly the number of African Americans who achieve excellence in the accounting profession. The primary objective of the fund is to identify meritorious students in need of financial support to continue their studies.
George is actively involved in the Wayne State University Richard H. Scholarship Fund. In his address at the luncheon in February, George spoke of his history with Richard H. Austin. In 1971, George established his own firm, George Johnson & Company, formed by the merger of two local firms including that of then Michigan Secretary of State, Richard H. Austin: Austin, Washington, and Davenport.
Although financial need is a consideration for the fund, students who exhibit attributes symbolized by Richard H. Austin, are given preference. He was a figure of integrity, commitment, leadership,
community involvement, concern for other people, personal drive and academic achievement.
George Johnson established GJC 45 years ago in the City of Detroit. Since the firm’s inception, commitment to the community has been a central component of our mission. We consistently identify and fulfill avenues to help fellow Metro Detroiters. From our team volunteering in soup kitchens to celebrating Martin Luther King, Jr. Day as an opportunity to serve, we will continue to seek outlets to lend our collective time and talents to enhancing our community.
In January of this year, to honor Martin Luther King, Jr., our team spent the day volunteering at Gleaners Community Food Bank. Alongside serving with several other companies in the Detroit Metropolitan area, 3,406 pounds of food were managed! With the support of the community, Gleaners Food Bank distributes more than 45 million pounds of food to our hungry neighbors in southeastern Michigan, including the 40% of recipients who are children.
The GJC team stops for a photo while working at Gleaners Community Food Bank
We hope that the contents of this issue of the GJC Advisor will provide you with valuable information. As always, if you have any questions or comments, please do not hesitate to share them with our team members.
This general information should not be acted upon without first determining its application to your specific situation. For further details on any article, please contact us.