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Posts Tagged ‘IRS’

Regulatory roundup

August 10th, 2015 No comments

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

DOL posts agenda for public hearing on proposed conflict-of-interest rule
The Department of Labor’s (DOL) Employee Benefits Security Administration (EBSA) will hold a public hearing from August 10-13, if necessary, to consider issues attendant to adopting a regulation concerning its proposed conflict of interest rule and related proposed prohibited transaction exemptions.

For more information, click here.

IRS issues corrections to suspension of benefits under the Multiemployer Pension Reform Act
The Internal Revenue Service (IRS) has issued two corrections to the temporary regulations and a correction to the proposed regulation that were published in the Federal Register on Friday, June 19, 2015. The temporary regulations relate to 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”).

The first correction affects Section 1.432(e)(9)-1T. To view the correction to the temporary regulation, click here.

The second correction affects the pages 35207, 35210, and 35215 of the temporary regulations. To view the correction to the temporary regulation, click here.

The third document corrects the notice of proposed rulemaking, notice of proposed rulemaking by cross-reference to temporary regulations. Numerous pages are corrected. To view the correction to proposed rule, click here.

 

Categories: Benefit News Tags: , ,

IRS’s employee plans unit announces program changes

August 6th, 2015 No comments

The IRS has announced two changes to services under the agency’s Employee Plans Compliance Unit that oversees tax-qualified retirement plan issues:

Determination Letters for Individually Designed Plans
Beginning in 2017, the IRS will accept determination letter applications only for new plans, plan terminations, or other limited circumstances yet to be determined. Announcement 2015-19 states that the current, staggered five-year cycles under which sponsors of individually designed retirement plans may request an approval of the plans’ qualified status will be eliminated. Furthermore, effective as of July 21, 2015, the IRS stopped accepting off-cycle determination letter applications other than for new or terminating plans.

A transition period applies for sponsors that are or will be in the midst of determination letter filings, until January 31, 2017. Plan sponsors in Cycle E (those with employer identification numbers ending in 5 or 0) or Cycle A (EIN ending in 1 or 6) will be able to obtain rulings from the Employee Plans unit before the IRS eliminates the program because they fall in the February 1-January 31 application deadline period of 2016 and 2017, respectively.

The changed policy is due “to more efficiently direct limited resources” of the IRS. It will place a significant responsibility on plan sponsors to consider an annual review of plan documents for necessary amendments with their professional advisers or to consider shifting to a preapproved plan document.

Technical Questions through Email or via Customer Account Services
Beginning October 1, 2015, the Employee Plans unit no longer will accept technical questions, including questions forwarded from the unit’s Customer Account Services, through email, according to a July 31, 2015, Employee Plans News newsletter and web posting. The agency suggests that plan sponsors apply for a private letter ruling for answers to legal questions.

Customer Account Services employees will continue to respond to questions about a plan sponsor’s account, basic information about forms used in Employee Plans, and the status of pending applications.

The announcement states that change is due to a realignment of legal work and personnel resulting from fewer resources.

For additional information about the IRS’s announcements about the changes to the determination letter program or the closing of the avenues to obtain answers to technical questions, please contact your Milliman consultant.

New IRS form requests supplemental information from plan sponsors

August 5th, 2015 No comments

Smith-SuzanneIf you sponsor a calendar year retirement plan, you are likely in the process of completing your Form 5500 for the 2014 plan year. Thus, it seems like a good time to let you know that, unfortunately, new information may be required next year on your Form 5500.

The Internal Revenue Service (IRS) has proposed a new Form 5500-SUP for the 2015 plan year. SUP stands for Supplemental Information. Essentially, the IRS is adding some new questions to the annual filing to gather certain plan compliance information.

Each year, the Department of Labor (DOL) uses the information on Form 5500 to identify plans for further questioning and auditing. With the addition of these new questions proposed by the IRS, the IRS will have a similar ability to use the Form 5500 responses to target plans for IRS examination or perhaps a compliance questionnaire. As a result, it’s crucial to answer all Form 5500 questions, including these new questions, with care.

Some of the new information that may be required is pretty basic, such as the name of the trust, the trust identification number, and the name and telephone number of the trustee or custodian.

But other items will require more effort to answer. These items include:

• How does the plan satisfy nondiscrimination testing and coverage testing?
• Which testing method is used for the ADP/ACP test?
• Has the plan been amended in time for all tax law changes?
• What is the date of the last amendment/restatement?
• What is the date of the IRS opinion or advisory letter (for pre-approved plans) or favorable determination letter (for individually designed plans)?
• Is the plan maintained in a U.S. territory?
• Did the plan trust incur unrelated business taxable income?
• Were in-service distributions made during the plan year and, if so, what was the amount?

Most employers will be able to answer these new IRS questions electronically on Form 5500 and 5500-SF. Plan sponsors who do not file electronically will need to use the paper Form 5500-SUP.

Although these questions are still in proposed form, as you administer your retirement plan through the 2015 plan year, you will want to keep in mind that you may need to be prepared to answer these new questions next year.

Regulatory roundup

July 28th, 2015 No comments

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

IRS announces changes to determination letter program for qualified retirement plans
The Internal Revenue Service (IRS) has issued Announcement 2015-19, describing important changes to the determination letter program for qualified retirement plans.

The changes outlined will eliminate the staggered five-year determination letter remedial amendment cycles for individually designed plans and will limit the scope of the determination letter program for individually designed plans to initial plan qualification and qualification upon plan termination. The announcement also provides a transition rule with respect to the remedial amendment period for certain plans currently on the five-year cycle.

The IRS is requesting comments on specific issues relating to the implementation of these changes to the determination letter program.

To read the entire announcement, click here.

PBGC issues proposed rule to amend annual financial-actuarial information reporting
The Pension Benefit Guaranty Corporation (PBGC) is proposing to amend its regulation on annual financial and actuarial information reporting to codify provisions of the Moving Ahead for Progress in the 21st Century Act (MAP-21) and the Highway Transportation and Funding Act of 2014 (HATFA-14) and related guidance that affect reporting under ERISA section 4010.

The PBGC is proposing to limit the reporting waiver under the current regulation tied to aggregate plan underfunding of $15 million or less to smaller plans and to add reporting waivers for plans that must file solely on the basis of either a statutory lien resulting from missed contributions over $1 million or outstanding minimum funding waivers exceeding the same amount (provided the missed contributions or funding waivers were previously reported to the PBGC). The proposed rule also makes some technical changes.

To read the entire proposed rule, click here.

IRS updates guidance and FAQs for preapproved retirement plan
The IRS has updated its guidance and frequently asked questions (FAQs) for employers adopting preapproved retirement plans. The guidance and FAQs were updated after the IRS issued:

• Rev. Proc. 2015–36, which sets forth the procedures for issuing opinion and advisory letters regarding the acceptability under §§ 401, 403(a), and 4975(e)(7) of the Internal Revenue Code (Code) of the form of preapproved plans (that is, master and prototype and volume submitter plans)

• Announcement 2015-16, on the issuance of opinion and advisory letters for preapproved defined contribution plans for the second six-year cycle, deadline for employer adoption, and opening of determination letter program for preapproved plan adopters

To read the FAQs, click here.

The guidance is available at the following links:

Types of preapproved retirement plans

Deadline extended for preapproved defined benefit plans

Preapproved plan submission procedures

DOL web page houses comment letters related to conflicts of interest rule
The U.S. Department of Labor (DOL) has a web page containing submitted comment letters on the fiduciary definition, conflicts of interest rule, which was re-proposed on April 14, 2015. The comment period closed on July 21, 2015.

To read the comment, click here.

Categories: Benefit News Tags: , , ,

Paying a lump sum to retirees in a lump-sum window? “Not so fast my friend”

July 23rd, 2015 No comments

Herman-TimOn July 9, 2015, the Internal Revenue Service (IRS) announced that the U.S. Department of the Treasury and the IRS intend to amend regulations to prohibit qualified defined benefit plans from paying lump sums to retirees and beneficiaries in a lump-sum window. In Notice 2015-49, the IRS reported that its intent is to have the amendments to regulations apply as of July 9, 2015, except in certain situations described below.

What does this mean?
Many pension plan sponsors have provided a lump-sum window offer to deferred vested participants, and some of these sponsors have included retirees and beneficiaries in the window. After July 9, 2015, plan sponsors will not be permitted to offer lump sums to retirees or beneficiaries in a lump-sum window unless the amendment satisfies one of the exceptions below. However, there is nothing included in the IRS Notice that would preclude offering a lump sums to deferred vested participants.

Exceptions
The amendments to the regulations are intended by the IRS to apply as of July 9, 2015. However, the amendments will not apply to a plan amendment for a lump-sum window in one of the following four situations:

1. If the amendment is adopted or authorized prior to July 9, 2015.
2. An amendment where a private letter ruling or determination letter was issued by the IRS prior to July 9, 2015.
3. Where written communication to participants stating an “explicit and definite intent” to implement a lump-sum window was received by participants prior to July 9, 2015.
4. Adopted pursuant to a collective bargaining agreement between the plan sponsor and a union prior to July 9, 2015.

If the amendment satisfies one of these four exceptions, then a lump-sum payment in lieu of future annuity benefits for retirees and beneficiaries appears to be allowed.

Plan termination
It is not clear whether or not the IRS intends to prohibit defined benefit plans from paying lump sums to retirees and beneficiaries when a pension plan is terminated. This issue will need to be clarified when the amended regulations are published by the IRS.

Observations on regulatory action
Earlier this year, the U.S. Government Accountability Office (GAO) issued a report entitled “Participants need better information when offered lump sums that replace their lifetime benefits,” and the Pension Benefit Guaranty Corporation (PBGC) announced its plans to begin collecting data on pension plan de-risking measures. In a surprising move, IRS Notice 2015-49 was issued on July 9, 2015, with an intended effective date of July 9, 2015. There was little or no indication of pending guidance from the IRS or any indication that the IRS is open to feedback on the notice. This is unlikely to be the last step in the regulation of lump-sum windows.

Please contact a Milliman consultant to discuss how this notice might impact your intentions to offer a lump-sum window.

Regulatory roundup

July 20th, 2015 No comments

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

IRS releases Revenue Procedure concerning preapproved plans
The Internal Revenue Service (IRS) published Revenue Procedure 2015-36, providing IRS procedures for issuing opinion and advisory letters regarding the acceptability under §§ 401, 403(a), and 4975(e)(7) of the Internal Revenue Code (Code) of the form of preapproved plans, i.e., master and prototype (M&P) and volume submitter (VS) plans.

To read the IRS’s official statement, click here.

DOL releases Field Assistance Bulletin related to defined contribution plans
The U.S. Department of Labor (DOL) has issued Field Assistance Bulletin (FAB) 2015-02, “Selection and Monitoring under the Annuity Selection Safe Harbor Regulation for Defined Contribution Plans.” The FAB provides clarification of plan sponsors’ fiduciary obligations concerning annuity product selections for defined contribution (DC) plans.

The purpose of the FAB is to provide guidance regarding these issues, including the application of ERISA’s statute of limitations to claims relating to annuity selection, and to assist the Employee Benefits Security Administration’s national and regional offices in responding to questions from employers and other interested parties.

To read the entire FAB, click here.

JCT issues present law and background information on federal excise taxes
The U.S. Joint Committee on Taxation (JCT) released the report “Present law and background information on federal excise taxes” (JCT Report JCX-99-15). The document provides a description of present-law federal excise taxes and, when applicable, background information on trust funds financed with excise tax revenues.

The document contains information on excise taxes relating to employee pension and benefit plans and excise taxes related to healthcare.

To entire report can be downloaded here.

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 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 U.S. Department of the Treasury 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 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 (ASU) 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 favorable determination letters for each retirement plan, 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 qualifications 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 preapproved plan document program to include ESOPs and cash balance plans. If an employer uses preapproved 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 preapproved plan documents 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 preapproved determination letter program
The Internal Revenue Service (IRS) has issued Revenue Procedure 2015-36, which expands the scope of the preapproved 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 preapproved 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 that 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 cash balance and employee stock ownership plans
The IRS has published a collection of information packages designed to assist sponsors who are drafting or redrafting plans to conform with applicable law and regulations related to cash balance and employee stock ownership plans.

Document release: 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 to 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 News
The IRS has issued the June 10, 2015, edition of its newsletter Employee Plans News. The latest edition contains the following content:

  • Preapproved plan program expanded to include cash balance plans and ESOPs
  • Sample plan language (listings of required modifications) for ESOPs, and 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 Advisory Committee on Tax Exempt and Government Entities (ACT) 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) Plan 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.

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