Archive

Posts Tagged ‘IRS’

Regulatory roundup

June 23rd, 2015 No comments

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

IRS releases temporary and proposed regulations on suspension of MPRA benefits
The Internal Revenue Service (IRS) has released temporary regulations on suspension of benefits under the Multiemployer Pension Reform Act (MPRA). These temporary regulations affect multiemployer pension plans that are projected to have insufficient funds, at some point in the future, to pay the full benefits to which individuals will be entitled under the plans (referred to as plans in “critical and declining status”).

To read the temporary regulations, click here.
To read the proposed regulations, click here.

IRS releases procedures for an multiemployer pension plans in critical and declining status
The IRS has released Revenue Procedure 2015-34 which describes procedures for a multiemployer defined benefit plan in critical and declining status to apply for approval of a proposed suspension of benefits under § 432(e)(9).

The revenue procedure provides that the Treasury Department will accept applications beginning June 19, 2015. The revenue procedure is being issued in conjunction with temporary and proposed regulations providing guidance on benefit suspensions. Section 432(e)(9) was amended by section 201 of the Multiemployer Pension Reform Act of 2014, Division O of the Consolidated and Further Continuing Appropriations Act, 2015, Public Law 113-235 (128 Stat. 2130 (2014)).

To read Revenue Procedure 2015-34, click here.

PBGC releases interim final rule on partitions of eligible multiemployer plans
The Pension Benefit Guaranty Corporation (PBGC) has issued an interim final rule prescribing the application process and notice requirements for partitions of eligible multiemployer plans under title IV of the Employee Retirement Income Security Act of 1974 (ERISA), as amended by the Multiemployer Pension Reform Act of 2014 (MPRA).

The interim final rule is published pursuant to section 122 of MPRA in order to carry out the provisions of section 4233 of ERISA. PBGC is soliciting public comments on the interim final regulation.

To learn more about the interim final rule, click here.

FASB issues technical corrections and improvements
The Financial Accounting Standards Board (FASB) released Accounting Standards Update No. 2015-10, Technical Corrections and Improvements. The amendments contained in this ASU include items raised to the Board through the Codification’s feedback mechanism.

Regarding employee benefits, the ASU contains:

• Amendments to Subtopic 715-30, Compensation— Retirement Benefits—Defined Benefit Plans—Pension. (p. 25)
• Amendments to Subtopic 715-80, Compensation— Retirement Benefits—Multiemployer Plans Disclosure (p.26)
• Amendments to Subtopic 718-40, Compensation—Stock Compensation—Employee Stock Ownership Plans (p. 27-33)

To read the entire ASU, click here.

IASB proposed narrow-scope amendments to pension accounting standards
The International Accounting Standards Board (IASB) proposed narrow-scope amendments to pension accounting standards. The proposed changes are included in an exposure draft entitled “Remeasurement on a plan amendment, curtailment or settlement/availability of a refund from a defined benefit plan.”

When a defined benefit plan is amended, curtailed or settled during a reporting period, the entity needs to update the assumptions about its obligation and fair value of its plan assets to calculate costs related to these changes. The proposed amendments to IAS 19 Employee Benefits specify that the entity is required to use the updated information to determine current service cost and net interest for the period followed by these changes.

To read the entire exposure draft, click here.

IRS guidance on favorable determination letters for individually designed plans expected this summer

June 19th, 2015 No comments

Smith-SuzanneEvery summer we look forward to nice weather, vacations, picnics, and barbecue. And Internal Revenue Service (IRS) guidance.

Yes, this summer we are expecting IRS guidance relating to changes in the determination letter program. The IRS has informally communicated a possible halt, beginning in 2016, to the issuance of IRS determination letters for individually designed retirement plans except for new plans or terminating plans. A formal announcement with details and an opportunity for comment is expected this summer.

Initially, this may sound like a beneficial change for employers because it eliminates a burdensome and costly process that individually designed retirement plans must generally undertake every five years.

But the potential negative impact of such a change is very concerning. While there is no federally regulated requirement to have a favorable determination letter for each of your retirement plans, there are many good reasons for employers to seek them:

Reliance on audit: By having a current determination letter, an employer has assurance that its plan language is tax-qualified. If a plan is audited, the employer can rely on the determination letter to prove the plan’s tax-qualified status.
Approval of amendments to plan: Most plans are amended from time to time to incorporate new laws and optional plan provisions. A determination letter is important to demonstrate that the amended plan language meets the tax-qualified rules.
Due diligence for corporate restructuring transactions: When corporate restructuring transactions such as mergers, acquisitions, or divestitures occur, it is prudent to obtain current determination letters to review the tax qualification of the plans involved in the transaction.

Without the ability to secure a current determination letter, plan sponsors would not be able to confirm the tax-qualified status of their plans, thereby leaving them unprotected in the event the IRS finds the plan language to be noncompliant during a future audit. Such a finding could result in severe penalties.

Two types of plans that have been considered individually designed and for which an employer would generally seek a favorable determination letter are employee stock ownership plans (ESOPs) and cash balance plans.

Perhaps recognizing that it will be limiting the availability of determination letters for individually designed plans, the IRS has recently released guidance that would expand the pre-approved plan document program to include ESOPs and cash balance plans. If an employer uses pre-approved language without modifications, an employer would have reliance on the IRS opinion/advisory letter without the need for a favorable determination letter. Thus, employers with individually designed ESOPs and cash balance plans may want to consider converting their plans to a pre-approved plan document in the future.

So, as we kick off summer, we are anxiously awaiting IRS guidance on the future of the determination letter program as well as watermelon, fireworks, and pool parties.

Regulatory roundup

June 15th, 2015 No comments

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

IRS issues guidance expanding pre-approved determination letter program
The IRS has issued Revenue Procedure 2015-36, which expands the scope of the pre-approved program to include defined benefit plans containing cash balance features and defined contribution plans containing employee stock ownership plan (ESOP) features and extends the deadline for submitting on-cycle applications for opinion and advisory letters for pre-approved defined benefit plans to October 30, 2015.

In addition, this revenue procedure updates Rev. Proc. 2011-49 to reflect changes made to the determination letter program in 2012. Rev. Proc. 2011-49 is superseded.

Revenue Procedure 2015-36 will appear in IRB 2015-25 dated June 22, 2015.

To read the entire Revenue Procedure, click here.

SSA issues final rule on 60-month period of employment requirement for government pension offset exemption
The Social Security Administration (SSA) has issued a final rule which adopts, with clarifying changes, the proposed rule previously published in the Federal Register on August 3, 2007. This final rule revises the SSA’s Government Pension Offset (GPO) regulations to reflect changes to the Social Security Act (“Act”) made by section 9007 of the Omnibus Budget Reconciliation Act of 1987 (OBRA 1987) and section 418 of the Social Security Protection Act of 2004 (SSPA). These regulations explain how and when the SSA will reduce the Social Security spouse’s benefit for some people who receive federal, state, or local government pensions if Social Security did not cover their government work.

To read the entire final rule, click here.

IRS updates listing of required modifications for chase balance and employee stock ownership plans
The IRS has published a collection of information packages designed to assist sponsors who are drafting or re-drafting plans to conform with applicable law and regulations related to cash balance and employee stock ownership plans.

ERISA Form 8955-SSA, 2-D Barcode Standards
This document covers only the 2D barcode on ERISA Form 8955-SSA – valid for Plan Years 2009-2011. The 2D barcode is intended to represent the information on the paper form. Barcodes for this form are generated from two sources:

  • The IRS Form 8955-SSA Fill-able PDF produces a barcode after printing the form in Adobe.
  • The approved software vendors for Form 8955-SSA produce a barcode when printing their forms from their software packages.

To read the entire document, click here.

IRS explanation, worksheet (alert guidelines), and deficiency check sheets
The IRS has issued three explanations, worksheets (alert guidelines), and deficiency check sheets:

IRS posts nonqualified deferred compensation audit techniques guide
The IRS has posted a guide on nonqualified deferred compensation audit techniques. The guide provides:

  • An overview
  • Audit potential
  • Compliance focus
  • General audit steps

To access the guide, click here.

IRS issues latest employee plans newsletter
The IRS has issued the June 10, 2015, edition of Employee Plans News. The latest edition contains the following content:

  • Pre-approved plan program expanded to include cash balance plans and ESOPs
  • Sample plan language (listings of required modifications) for ESOPs, cash balance and 403(b) plans
  • Guidance for permanent program for late 5500EZ filers
  • IRS Nationwide Tax Forums begin in July
  • Changes to Forms 5500 for 2014
  • IRS names seven new members to ACT advisory panel
  • Updated Voluntary Correction Program fee chart

To read the newsletter, click here.

IRS updates 403(b) fix-it guide
The IRS has updated its 403(b) Fix-It Guide. The document contains charts and explanations that address potential issues in plan administration. It includes how to find, fix, and avoid common plan errors, with hypertext links to online forms and guidance.

To access the fix-it guide, click here.

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 Internal Revenue Service (IRS) newsletter, Employee Plans News, provides information on changes to the employee plans (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.

Categories: Benefit News Tags: , , ,

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: ,