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Posts Tagged ‘IRS’

Regulatory roundup

May 11th, 2015 No comments

More retirement-related regulatory news for plan sponsors, including links to detailed information.

PBGC updates premium payment addresses
The Pension Benefit Guaranty Corporation (PBGC) has updated addresses for pension plan premium payments made by electronic funds transfer outside of the agency’s electronic filing and payment system.

For more information, click here.

FASB releases accounting standards update on fair value measurement
The Financial Accounting Standards Board (FASB) has issued Accounting Standards Update 2015-07 on fair value measurement (Topic 820) disclosures for investments in certain entities that calculate net asset value per share (or its equivalent).

To read the entire FASB update, click here.

IRS new issue of employee plans newsletter
The latest edition of the IRS’s Employee Plans News provides information on changes to the EP determination letter application processing, new revenue procedure updates related to the Employee Plans Compliance Resolution System (EPCRS), and more.

To read the entire newsletter, click here.

Categories: Benefit News Tags: , , ,

Regulatory roundup

May 4th, 2015 No comments

More retirement-related regulatory news for plan sponsors, including links to detailed information.

IRS provides guidance on changes to the EP determination process
The Internal Revenue Service (IRS) has made changes to the determination letter program for retirement plans. The revised procedures generally apply to Form 5300 series determination letter applications received after February 1, 2015. These changes will improve the program’s efficiency and consistency.

For more information, click here.

ERISA to address pension risk transfers and plan sponsor education and lifetime plan participation
The ERISA Advisory Council has issued two statements:

• Statement on model notices and pension risk transfers
The 2015 council will supplement the work of the 2013 council by focusing specifically on the information that participants need to make informed decisions when faced with lump-sum risk transfers and insurance annuity risk transfers, and best practices for plan sponsors in communicating that information. The goal of the 2015 council is to offer the U.S. Department of Labor (DOL) draft model notices and disclosures that can be used by plan sponsors, participants, and the public.

For more information, click here.

• Statement on model notices and plan sponsor education and lifetime plan participation
The council would like to hear recommendations related to the drafting of model notices concerning lifetime participation in ERISA plans. The council would welcome witnesses and others to submit examples of model notices or other communications, including documents that are currently being delivered to participants. The council would like to hear recommendations related to outreach materials the DOL can provide to plan sponsors on the topic of innovative plan features that may encourage lifetime participation. The council requests testimony as it relates to data security issues.

For more information, click here.

IRS issues correction concerning the failure to comply with Section 409A
The IRS’s chief counsel has issued Memorandum 201518013 regarding the correction of a failure to comply with Section 409A. To read the entire memo, click here.

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A major change to correction procedures provides much needed relief for sponsors

April 20th, 2015 No comments

Jakobe-KariOn April 2, the Internal Revenue Service (IRS) rolled out major changes to the correction methods related to failure to implement automatic enrollment or to having missed participant-elected deferral changes.

Previously, the prescribed correction in the Employee Plans Compliance Resolution System (EPCRS) was for the employer to make up 50% of the missed deferrals and 100% of the match, plus earnings on both. This was often a windfall for participants and penalty for sponsors that deterred many from adopting auto-enroll provisions in their plans.

There are now two new safe harbor corrections: one for plans with auto-enroll provisions, another for faulty elective deferrals. The general guideline of the new correction methods are as follows:

For plans with auto-enroll features:
• If the failure is found within nine months of the plan year-end in which the auto-enroll should have begun:
o Start the deferral immediately
o Send a notice of the failure to the participant
o 100% of any missed match is made up and adjusted for earnings

• If the failure is found outside the nine-month window following the plan year-end, the old procedure remains in place.

For other elective deferral changes that are not completed as requested by the participant, if the failure is found within three months:
• Start the deferral immediately
• Send a notice of the failure to the participant
• 100% of any missed match is made up and adjusted for earnings

If found after three months from the date the change was to be effective:
• Start the deferral immediately
• Send a notice of the failure to the participant
• 100% of any missed match is made up and adjusted for earnings and the participant must receive a qualified nonelective contribution (QNEC) in the amount of 25% of the missed deferral, plus earnings

For a more detailed explanation on the new regulations, see the recent Client Action Bulletin published by Milliman.

IRS eases correction methods for common 401(k)/403(b) plan failures

April 14th, 2015 No comments

This Client Action Bulletin discusses recently issued IRS Revenue Procedure 2015-28 that will allow sponsors of 401(k) and 403(b) plans to fix two common administrative errors. The Internal Revenue Service (IRS) released guidance that will allow sponsors of 401(k) and 403(b) plans to easily correct two common administrative errors without first having to obtain approval from the agency. Revenue Procedure 2015-28 modifies and improves the Employee Plans Compliance Resolution System (EPCRS) by providing a new safe harbor relating to automatic contribution features (including automatic enrollment and automatic escalation of elective deferrals) and a separate new special safe harbor correction method for faulty elective deferrals that occur over a period of limited duration.

Regulatory roundup

April 13th, 2015 No comments

More retirement-related regulatory news for plan sponsors, including links to detailed information.

IRS updates determination letter guidance and FAQs
The Internal Revenue Service (IRS) has updated its web guidance on applying for a determination letter as it applies to individually designed plans. The IRS also updated its set of frequently asked questions (FAQs).

To read the updated determination letter guidance, click here.
To read the updated FAQs, click here.

NTIS receives comment letters on the Death Master File
Section 203 of the Bipartisan Budget Act of 2013 requires the U.S. Secretary of Commerce to establish a program to certify persons who may access the Social Security Administration’s Death Master File (DMF). As a result of this action, the National Technical Information Service (NTIS) created regulations that establish the requirements and procedures for access to the DMF. Additionally, this action established a fee structure for the certification program for access to the DMF for any deceased individual, within three years of the individual’s death.

The NTIS issued proposed regulations with a comment period that ended on March 30, 2015. To read the comment letters, click here.

Categories: Benefit News Tags: , ,

Regulatory roundup

April 6th, 2015 No comments

More retirement-related regulatory news for plan sponsors, including links to detailed information.

IRS releases guidance on safe harbor correction methods
The Internal Revenue Service (IRS) has issued Revenue Procedure 2015-28, which contains modifications to Revenue Procedure 2013-12, 2013-4 I.R.B. 313. The modifications reflected in this revenue procedure include new safe harbor Employee Plans Compliance Resolution System (EPCRS) correction methods relating to automatic contribution features, including automatic enrollment and automatic escalation of elective deferrals, in plans described in § 401(k) and § 403(b). The special safe harbor correction methods include plans with automatic contribution features that have failures that are of limited duration involving elective deferrals.

To read the entire guidance, click here.

PBGC issues proposed rule on electronic filing of multiemployer plans
The Pension Benefit Guaranty Corporation (PBGC) is proposing to amend its regulations to require electronic filing of certain multiemployer notices. These changes would make the provision of information to the PBGC more efficient and effective. The proposed rule would require the following notices to be filed electronically with PBGC:

• Notices of termination under part 4041A
• Notices of insolvency and of insolvency benefit level under part 4245
• Notices of insolvency and of insolvency benefit level under part 4281 (following mass withdrawal)
• Applications for financial assistance under part 4281 (following mass withdrawal)

To read the entire proposed rule, click here.

IRS reminds plan sponsors to keep track of loans and hardship distributions
Even if plan sponsors use a third-party administrator (TPA) to handle participant transactions, they are ultimately responsible for the proper administration of their retirement plans. The IRS has published recordkeeping requirements regarding loans and hardship distributions.

For more information, click here.

IRS issues guidance on plan distributions to foreign persons
The IRS has published information for plan sponsors making distributions to foreign individuals. To read the entire guidance, click here.

Categories: Benefit News Tags: , ,

Regulatory roundup

March 30th, 2015 No comments

More retirement-related regulatory news for plan sponsors, including links to detailed information.

IRS issues private letter ruling on VEBA income used to pay benefits
The Internal Revenue Service (IRS) released a private letter ruling on the treatment of income received by a voluntary employees’ beneficiary association (VEBA) to pay plan benefits. The IRS ruled that a VEBA established by an earlier collective bargaining agreement between a union and a liquidating company to provide health insurance for retired union members is maintained pursuant to a collective bargaining agreement for the purposes of Section 419A(f)(5) of the tax code. Also, employer contributions and any income received by the VEBA and set aside to pay plan benefits is exempt function income under Section 512 and therefore won’t constitute unrelated business taxable income within the meaning of that section.

To read the entire private letter ruling, click here.

IRS posts information on multiemployer actuarial certification
The multiemployer defined benefit plan actuary must complete an annual actuarial certification of the plan’s funding status (IRC Section 432[b][3]). This must be submitted to the IRS no later than 90 days after the beginning of the plan year. The determination of endangered and critical status is detailed in Section 432(b).

For more information, click here.

Categories: Benefit News Tags: ,

Regulatory roundup

March 23rd, 2015 No comments

More retirement-related regulatory news for plan sponsors, including links to detailed information.

DOL rules on timing of annual disclosures for participant-directed account plans
The U.S. Department of Labor (DOL) has released a direct final rule and a companion proposed rule on the timing of annual disclosures that affect fiduciary requirements for disclosure in participant-directed account plans. The direct final rule amends the DOL’s participant-level fee disclosure regulation by making a technical adjustment to a timing requirement of the current regulation. It amends the definition of the term “at least annual thereafter” and substitutes the term “14-month period” for the term “12-month period.” The amendment provides plan administrators with flexibility as to when they must furnish annual disclosures.

The accompanying proposed rule would make the technical amendment necessary to implement the direct final rule’s annual timing requirement. If the DOL receives no significant adverse comments during the 90-day comment period, the direct final rule will go into effect without the agency taking further action. But if it receives significant adverse public comment, the direct final rule will be withdrawn.

To read the entire direct final rule, click here.
To read the entire proposed rule, click here.
Also, for a fact sheet, click here.

IRS extends temporary nondiscrimination relief for closed defined benefit plans
The Internal Revenue Service (IRS) recently published Notice 2015-28, extending the temporary nondiscrimination relief provided in Notice 2014-5 for an additional year. The new guidance applies relief to defined benefit plan years beginning before 2017 if the conditions of Notice 2014-5 are satisfied. During the period for which this extension applies, the remaining provisions of the nondiscrimination regulations under § 401(a)(4), including the rules relating to the timing of plan amendments under § 1.401(a)(4)-(5), continue to apply.

To read Notice 2015-28, click here.

Joint Committee on Taxation issues explanation of tax legislation enacted in the 113th Congress
Twelve tax bills passed the 113th Congress and were signed by the president—including several that have an impact on retirement savings—according to a Joint Committee on Taxation report detailing each piece of legislation.

Read the entire report here.

Regulatory roundup

March 16th, 2015 No comments

More retirement-related regulatory news for plan sponsors, including links to detailed information.

OMB approves PBGC 2015 premium filing instructions
The Office of Management and Budget (OMB) has approved 2015 premium filing instructions. The My Plan Administration Account (My PAA) website of the Pension Benefit Guaranty Corporation (PBGC) has been updated and is now ready to accept electronic premium fillings for plan years beginning in 2015.

For more information, click here.

IRS updates 403(b) listing of required modifications package
The Internal Revenue Service (IRS) has updated its Section 403(b) plan listing of required modifications (LRM). Also updated was a marked-up version showing changes to the 403(b) plan LRM from 2013. The package contains sample plan provisions that satisfy certain specific Internal Revenue Code requirements applicable to Internal Revenue Code Section 403(b) plans.

For the 403(b) plan LRM and information package (3-2015), click here. For the marked-up version showing changes to the 403(b) plan LRM (3-2013, revised 3-2015), click here.

Senate finance letter addresses affordable retirement advice
Chairman Lamar Alexander (R-Tenn.) led a group of eight Republicans on the U.S. Senate Labor Committee in a letter recently cautioning OMB Director Shaun Donovan on the potential negative impact of approving the proposed rule of the U.S. Department of Labor (DOL) to redefine and expand the term “fiduciary” if the current proposal has not changed significantly from the proposal the DOL offered in 2010.

To read the entire letter, click here.

PBGC study: Multiemployer guarantee
The PBGC has published a new study entitled “Multiemployer guarantee.” The study found that more than half of the people in terminated multiemployer plans running out of money in the near future face a reduction in benefits under current PBGC guarantees. This compares to 20% of workers and retirees who saw reduced benefits under plans that have already run out of money and are relying on PBGC financial assistance.

To download the entire study, click here.

March 15 alert: Ides of March is a 409A fateful day for employers’ bonus programs

March 11th, 2015 No comments

Pizzano-DominickJust as ignoring the seer’s warning to “Beware the Ides of March” led to Julius Caesar’s demise on that fateful March 15, employers with calendar fiscal years must be wary of this date. Otherwise, when they distribute their bonuses, they may find the payments falling victim to a similarly highly undesirable outcome—becoming subject to Internal Revenue Code Section 409A. It is true that 409A, the now infamous rule that so strictly regulates the time and form of payment of nonqualified deferred compensation, includes a helpful exemption for “short-term deferrals.” However, to qualify for this “get out of 409A free” card, a payment must be made on or prior to the 15th day of the third month (i.e., March 15 for calendar fiscal years) following the end of the employees’ (or, if later, the employer’s) taxable year in which the bonus amount is no longer subject to a “substantial risk of forfeiture” (SROF).

Payment of the bonus is considered subject to a SROF if the employees only earn the right to payment once they have completed a specified number of years of service and/or met certain performance goals. Once such conditions are met, employees are considered to be “vested” in the benefit (i.e., entitled to the payment when it is made regardless of their employment status on the payment date). Employers sometimes add an extra condition by attaching a noncompete restriction under which employees forfeit the bonus if they terminate employment and enter employment with one of the employer’s competitors prior to the payment date. However, the inclusion of such a restriction is not recognized by the 409A rules as sufficient to create a SROF.

The following two examples illustrate how these rules are applied to employers with calendar fiscal years. Under the first scenario, the employer awards annual bonuses based on both the employer’s financials and the employees’ individual performances. Payment of the bonus is scheduled to be made in the first quarter of 2015 as soon as administratively practicable following the determination of the amounts. Participants must actually be employed with the employer on the payment date to receive the bonus. Because of this “active employment on payment date” requirement, the employees never become vested in the benefit until the actual payment date. Therefore, employers with this design need not be concerned about missing the March 15 payment deadline.

In contrast, assume the same facts as the previous example except that in order to receive the bonus payment made in 2015, the employees must be employed on December 31, 2014, and must not violate a noncompete agreement prior to the payment being made. Because 409A does not recognize the noncompete condition, the vesting occurs in 2014. Consequently, in order to avoid 409A coverage, the bonus must be paid by no later than March 15, 2015, unless one of 409A’s limited late payment exceptions applies: (1) an unforeseen administrative delay, (2) the need to retain such funds because their disbursement would jeopardize the employer’s ability to continue as a going concern, or (3) the employer reasonably anticipating that its deduction of the bonus will be subject to the $1 million Internal Revenue Service (IRS) deduction limit (and the employer did not reasonably anticipate the application of Section 162[m] when the bonus award was originally made). Each of these three exemptions will only be considered valid if the employer promptly makes the delayed bonus payment as soon as the applicable cause for the delay no longer exists.

What happens in the case of a bonus plan where the amounts were vested in 2014, the March 15 payment deadline is missed, and none of the three exemptions are available? Does 409A coverage automatically spell doom in the form of noncompliance and the corresponding penalties? The good news is that it’s possible to structure bonus plans so that they comply with the 409A rules. So for any employer that currently has a bonus program that needs to meet the March 15 deadline (i.e., those programs that vest employees in the prior year), it’s crucial to examine their current bonus determinations and delivery processes. Does the employer have any intrinsic procedures (i.e., thereby eliminating the “unforeseen” exemption) that could cause the program to pay bonuses later than March 15 more than just on a one-time accidental basis? If the answer is “yes,” the employer should consult with its employee benefits specialist to review such bonus programs to make sure it is covered by a compliant 409A document so that even if the payment date is missed and the “short-term deferral exemption” blown, the bonus payment does not violate 409A, thereby risking the costly consequences of such noncompliance. One does not need to be a seer to know that to do otherwise would tempt the fates of the Ides of March, which history has shown never to be sound policy whether for emperors or employers.