Posts Tagged ‘IRS’

IRS issues retirement plan guidance under the Supreme Court’s same-sex marriage decision

April 15th, 2014 No comments

Retirement plans must recognize the rights of an employee’s same-sex spouse as of the U.S. Supreme Court’s ruling of June 26, 2013, and are permitted to do so prior to that date, under IRS Notice 2014-19. The IRS’s April 4 guidance includes information on the deadline for plan sponsors to amend their plans. The IRS also separately issued a frequently asked questions (FAQ) document that includes related information and a discussion of specific concerns for 403(b) and multiemployer plans.

The guidance applies to tax-qualified retirement plans such as defined benefit (DB) pension plans and 401(k) plans that include survivor benefits, spousal consent, minimum required distributions, qualified domestic relations orders (QDROs), and other spousal rights and features.

The IRS’s newly released Notice 2014-19 for tax-qualified retirement plans provides the following:
• Plans must be operationally compliant as of June 26, 2013, and the IRS will not raise qualification issues for plans that fail to treat same-sex spouses as spouses before then. The IRS also will treat a plan as qualified if, from June 26, 2013, through September 15, 2013, the plan treated a same-sex spouse as a spouse only if the participant lived in a state that recognized same-sex marriages (i.e., under the “state of domicile” rule).
• Plans are permitted to recognize same-sex marriages retroactively to a date before June 26, 2013, and may apply the recognition for limited purposes, e.g., for qualified joint and survivor annuity (QJSA) and qualified preretirement survivor annuity (QPSA) requirements. Doing so, however, will require that the plan amendment complies with the tax code’s qualification requirements.
• Plan documents will have to be amended if current language defines “spouse” as a person of the opposite sex or if recognition of same-sex spouses will be applied prior to June 26, 2013.
• Plans must be amended, in general, by December 31, 2014, for calendar-year plans (or, if later, the tax filing deadline for the year the change is effective). Special deadlines apply to governmental plans and single-employer defined benefit plans that are restricted from increasing benefits because of funding-based limits (under tax code section 436[c]) that choose to recognize same-sex spouses before June 26, 2013.

The IRS’s related FAQ discusses: beneficiary designations for profit-sharing or stock bonus plans if a participant dies on or after June 26, 2013; using the Employee Plans Compliance Resolution System (EPCRS) to apply the same-sex marriage definition retroactively; amending the plan for additional rights; compliance by, and amendment deadlines for, 403(b) plans; and multiemployer plans in “endangered” or “critical” status (i.e., subject to the additional funding rules under tax code section 432).

For additional information about the IRS’s guidance and for assistance with plan amendments, please contact your Milliman consultant.

Regulatory roundup

April 14th, 2014 No comments

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

President signs cooperative and small employer charity pension funding bill
On April 7, the president signed the Cooperative and Small Employer Charity Pension Flexibility Act (H.R.4275), which establishes special funding rules for defined benefit (DB) retirement plans sponsored by nonprofit cooperative associations and small charitable organizations.

The bill applies to “cooperative and small employer charity” pension plans that were affected by certain provisions of the 2006 Pension Protection Act (PPA) or that were maintained—as of January 1, 2013—by more than one employer, all of which were tax-exempt charitable organizations. The bill calls for an effective date of years beginning after December 31, 2013. The bill is now P.L.113-97.

To read the entire bill, click here.

IRS posts chart of rollover-eligible retirement plans and IRA combinations
The Internal Revenue Service (IRS) posted a one-page summary, in the form of a table, listing the eight kinds of plans and individual retirement accounts (IRAs) that can make rollover-eligible distributions, and the corresponding eight kinds of plans and IRAs into which those distributions can, or cannot, be rolled over.

To view the entire chart, click here.

IRS issues guidance on applying Windsor decision to qualified retirement plans
In addition to releasing Notice 2014-19, the IRS issued a related frequently asked questions (FAQs) document, providing answers related to qualified retirement plans. The FAQs document is available here.

Regulatory roundup

March 24th, 2014 No comments

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

IRS discuss current issues EP compliance unit is reviewing
The Internal Revenue Service (IRS) has posted a discussion with Monika Templeman, director of Employee Plans Examinations, regarding current issues that the Employee Plans Compliance Unit (EPCU) is reviewing. Topics discussed include:

• Confirming higher educational organizations’ compliance with the universal availability rule, which is one of the main errors found in 403(b) plan examinations.
• Form 5500 series returns that show no plan participants, yet the plan received employer contributions.
• Terminated plans that have assets remaining. This could be a violation of Revenue Ruling 89-87, which requires plan assets be distributed as soon as administratively feasible after the stated plan termination date.
• Form 5310 returns that had over a 20% drop in participants from one year to the next to determine if a partial termination occurred and, if so, whether affected plan participants were 100% vested. Because of this project, over 250 participants were 100% vested as required by Revenue Ruling 2007-43.
• Form 5500 Non-Filer Project. Plan sponsors are contacted if their latest Form 5500 returns were not marked ‘final’ and they have not filed a subsequent return. EPCU began by selecting returns that were due for the plan year ending January 31, 2010 (originally due August 31 if no extension was filed) and that have still not filed by February 2011.
• Qualifying Employer Securities Project contacted plan sponsors who reported over 10% of their plans’ net assets were invested in employer securities.
• Two projects focusing on improving international compliance.

To read the entire discussion, click here.

PBGC requests extension of collection of multiemployer plan information
The Pension Benefit Guaranty Corporation (PBGC) issued a notice asking the Office of Management and Budget (OMB) to extend approval of a collection of information under its regulations on multiemployer plans that expires March 31, 2014, April 30, 2014, or July 31, 2014. The collection of information for which PBGC is requesting approval includes various reporting requirements related to:

• Termination of multiemployer plans
• Extension of special withdrawal liability rules
• Variances for sale of assets
• Reduction or waiver of complete withdrawal liability
• Reduction or waiver of partial withdrawal liability
• Allocating unfunded vested benefits to withdrawing employers
• Notice, collection, and redetermination of withdrawal liability
• Procedures for PBGC approval of plan amendments
• Notice of insolvency

Comments should be submitted no later than 30 days after publication in the Federal Register. The notice was published on March 19, 2014. To read the entire notice, click here.

IRS posts guidance on withdrawal of Cycle C cash balance applications; provides FAQs on Cycle C
Cycle C determination letter applicants who intend to adopt a preapproved cash balance plan may withdraw their applications for individually designed cash balance plans by May 31, 2014, if they sign Form 8905, Certification of Intent to Adopt a Pre-approved Plan, by March 31, 2014.

Announcement 2014-4 extended the submission period for preapproved defined benefit (DB) pension plans from January 31, 2014, to February 2, 2015, to allow time for the IRS to expand the preapproved program to permit plans with cash balance features. The announcement also allowed Cycle C plan sponsors who want to adopt a preapproved cash balance plan to complete Form 8905 by March 31, 2014, instead of submitting determination letter applications for individually designed plans by the Cycle C deadline of January 31, 2014.

For more information, click here.

IRS updates posting on checking the status of determination, opinion, and advisory letters
The IRS has updated its posting titled “Determination, opinion, and advisory letter for retirement plans – check the status of your letter.” The posting provides a chart with information regarding receipt of an application and important links.

To view the updated posting, click here.

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Regulatory roundup

March 17th, 2014 No comments

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

Senate strikes bipartisan deal on unemployment benefits; pensions affected
Senators Jack Reed (R-RI) and Dean Heller (R-Nev) have penned a bipartisan proposal that would extend federal unemployment benefits for five months and allow for retroactive payments to December 28, 2013. The program expired on December 28, 2013.

The deal, which was crafted from both Republican and Democratic proposals, would pay for the $10 billion cost by including the pension offset provisions from the 2012 highway bill (MAP-21), which were set to be phased-out this year. The proposal also would:

• Allow single-employer defined benefit pension plans to prepay their flat rate premiums to the Pension Benefit Guaranty Corporation (PBGC).
• Extend customs user fees through 2024.
• End federal unemployment insurance (UI) payments to any individual whose adjusted gross income in the preceding year was $1 million or more.
• Strengthen reemployment and eligibility assessment (REA) and ReEmployment Services (RES) programs. In an effort to help get job seekers back into the workforce, individuals receiving emergency unemployment compensation will be eligible for enhanced, personalized assessments and referrals to reemployment services when they begin their 27th week of UI (Tier I) and 55th week of UI (Tier III).

DOL issues proposed rule that would require service providers to furnish disclosure guide to pension plans
The Employee Benefit Security Administration of the U.S. Department of Labor (DOL) has issued a proposed rule that would require certain retirement plan service providers to disclose information about the service providers’ compensation and potential conflicts of interest. The proposed rule would amend the DOL’s final rule on fee disclosures to require covered service providers to furnish a guide along with the initial disclosures to help fiduciaries if the disclosures contain multiple or lengthy documents.

To read the entire proposed rule, click here.
The DOL has also released a fact sheet to accompany the proposed rule.

PBGC issues final rule on premium rates, payment of premiums
The PBGC has issued a final rule making its premium rules more effective and less burdensome. Based on its regulatory review under Executive Order 13563, PBGC proposed to simplify due dates, coordinate due dates for terminating plans with the termination process, make conforming and clarifying changes to the variable-rate premium rules, give small plans time to value benefits, provide relief from penalties, and make other changes.

On January 3, 2014, PBGC published a final rule moving the flat-rate premium due date for large single employer and multiemployer plans (500 or more participants) to the variable-rate premium due date for single-employer plans, starting with the 2014 plan year. This final rule finalizes the rest of the proposal.

PBGC has now completed the process of simplifying the due-date rules by making small plans’ premiums due at the same time as large and mid-size plans’ premiums. However, because of a transition rule that gives small plans more time to adjust to the new provisions, the due dates will not be completely uniform until 2015.

To read the entire final rule, click here.

Read more…

Regulatory roundup

March 10th, 2014 No comments

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

President releases FY2015 budget proposal
The president has released his fiscal year 2015 budget proposal, outlining the administration’s policy priorities.

Key areas included in the proposal for employment-based benefits and compensation are:

• Pension Benefit Guaranty Corporation (PBGC) board authority to adjust single-employer and multiemployer premiums, taking into account the risks of sponsors and working with Congress to develop a comprehensive solution to address the multiemployer insurance program
• Creation of automatic individual retirement accounts (IRAs) for employees who do not have access to an employer-sponsored plan
• An increase in the federal minimum wage
• Support for agencies that protect workers’ wages and overtime pay, benefits, health, and safety, and investing in preventing and detecting the misclassification of employees as independent contractors
• Funding assistance for states to launch paid leave programs for workers
• Expansion of the earned income tax credit for low-income, childless workers

The proposal also contains continued funding for Patient Protection and Affordable Care Act (ACA) implementation; it does not contain a provision included in prior years’ budgets for “chained CPI” to adjust Social Security and other federal benefits for older Americans.

To read the entire budget document, click here.
For a copy of the “Green Book” from the Department of Treasury, click here.

IRS updates web posting with information on the new Form 5300
The Internal Revenue Service (IRS) has updated its web posting that discusses the new Form 5300 and instructions, the retired Form 5300 (Schedule Q), and all the revisions for Form 5300. Links for comments on the new forms are also provided.

To read the updated information, click here.

IRS updates Form 990 filing tips: Reporting executive compensation
The IRS has updated its tips and frequently asked questions (FAQs) related to core form Part VII and Schedule J executive compensation reporting.

To read the updated information, click here.

IRS updates 401(k) resource guide for plan sponsors: What if you are audited?
Authority and responsibilities of the IRS and the U.S. Department of Labor (DOL): ERISA, as amended, provides the legal basis for the IRS employee plans (EP) compliance program. The jurisdiction over the rules for 401(k) plans is divided between the IRS and the DOL.

• The IRS has primary jurisdiction over the qualified status of 401(k) plans, which includes examining plans and processing requests for determination letters
• The DOL has primary jurisdiction over the fiduciary standards, reporting and disclosure of requirements, and other rules that do not affect the qualified status of 401(k) plans.

The IRS’s EP examination program is the enforcement arm for the statutory and regulatory compliance requirements that apply to qualified 401(k) plans. The overriding objective of the EP examination program is to develop and integrate appropriate compliance and enforcement programs that will have the greatest positive impact on the retirement system. The EP examination program has a high stake in maintaining a successful private retirement system.

For more information, click here.

Regulatory roundup

February 25th, 2014 No comments

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

PBGC issues notice for OMB review of information collection with modifications of Form 5500 schedule MB and SB
The Pension Benefit Guaranty Corporation (PBGC) issued a notice of intention to request extension of Office of Management and Budget (OMB) approval, with modifications, to the schedule MB (multiemployer defined benefit [DB] plan actuarial information) and the schedule SB (single-employer DB plan actuarial information) and related instructions.

The proposed modifications to the schedule MB would require plan administrators of multiemployer DB plans to specify the documentation required regarding progress under the applicable funding improvement or rehabilitation plan. Plan administrators of multiemployer plans in critical status would be required to provide information about the plan year in which the plan is projected to emerge from critical status and, if the rehabilitation plan is based on forestalling possible insolvency, the plan year in which insolvency is expected. The proposed modifications to the schedule SB would require plan administrators of single-employer DB plans to report the funding target (vested and total) for each type of participant (active, retired, terminated vested).

To read the entire PBGC notice, click here.

IRS employee plans updates publication on DB plans Section 436 limitations
The Employee Plans Division of the Internal Revenue Service (IRS) has updated examination worksheet number 14 to identify major problems with respect to the limitations under Section 436. The worksheet applies to single-employer defined benefit plans (including multiple employer plans) that are subject to the minimum funding requirements of Section 412. The worksheet does not apply to governmental plans and non-electing church plans.

To read the entire examination worksheet, click here.

IRS updates instruction manual on 401(k) ADP/ACP correction methods
The IRS has updated, under the Employee Plans Continuing Professional Education (CPE) Technical Instruction Program, its chapter on section 401(k) and (m), average deferral percentage (ADP)/average contribution percentage (ACP) test correction methods.

The chapter covers 401(k) and (m) correction methods under the Employee Plans Compliance Resolution System (EPCRS). It also covers correction methods for ADP/ACP failures, section 402(g) failures, improperly excluding employees, improperly excluding employees’ catch-up and matching contributions, failure to implement employees’ elections, and coordination with correction of other failures.

To view the updated chapter, click here.

IRS continuing education: Post-PPA legislation, plan terminations, and DB plan schedule SB and related schedules
The IRS has posted three chapters of continuing education material for employee plans personnel: post-Pension Protection Act (PPA) pension legislation, plan terminations, and defined benefit plans schedule SB (Form 5500) and related schedules.

Read more…

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Regulatory roundup

February 18th, 2014 No comments

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

IRS updates article on employer “pick-up” contributions to benefit plans
Retirement plans that feature a salary reduction or cash-deferred arrangement allow employees to choose to defer some income from tax by electing to place it in a trust account for retirement. By making such an election, the amount deferred is not subject to income tax at the time it was placed in the trust. The deferred amounts are subject to Social Security and Medicare (FICA) tax.

However, other employer retirement plans are funded either through employer contributions only, or by mandatory employee contributions, with no elections to defer salary. These plans can raise questions about whether the contributions are considered paid by the employer or by the employee, and thus whether these amounts are subject to income tax and FICA withholding.

The Internal Revenue Service (IRS) has updated am article intended to address recent guidance on these questions. To read the entire article, click here.

IRS updates its examination process guide on multiemployer plans
The IRS has updated its examination process guide on multiemployer plans and identified the 10 top errors found during audits. The 10 issues are:

1. Errors made in benefit calculations, crediting service, reduction factors, or general administration.
2. Internal Revenue Code Section 412 violations—funding deficiencies.
3. Plans did not make required actuarial adjustments for benefit payments beginning after normal retirement date.
4. Deficient plan language and/or conflict between plan document and other agreements (e.g., collectively bargained, joinder, or participation).
5. Internal Revenue Code Section 401(a)(9) violations (required minimum distributions).
6. Plans fail to follow or do not have participation agreements for each participating employers.
7. Accruals/service credits are dependent on employer contributions being made.
8. Internal Revenue Code Section 411 violations including cash out/forfeitures from lost participants, wrong vesting schedule used, and errors in vesting percentages.
9. Delinquent/late contributions.
10. Misuses/diversions of pension funds.

For more information, click here.

IRS issues quick reference guide for public employees
The IRS has issued “Quick Reference Guide for Public Employees” (Publication 5138 (2-2014). The guide is produced annually by the IRS office of Federal, State, and Local Governments (FSLG). It is intended to provide a brief introduction to basic federal employment tax and reporting information issues for governmental employers.

For more detailed information in these areas, see IRS Publication 963, “Federal/State Reference Guide.” For a general discussion of employment tax responsibilities that apply to all employers, see Publication 15, “Employer’s Tax Guide.” These publications discuss the general rules for reporting wages on Form W-2, Wage and Tax Statement, and on Form 941, Employer’s Quarterly Employment Tax Return. They also address requirements for withholding and depositing of taxes.

This guide is intended to focus on the key points facing public employers and to point to sources for further information. To read the entire guide, click here.

President signs executive order hiking minimum wage for federal contractors
The president has signed an executive order that raises the minimum wage to $10.10/hour for federal contract workers, effective for new and renewed contracts beginning January 1, 2015.

The order also raises the tipped minimum wage, from the current minimum base wage of $2.13/hour to $4.90/hour for new contracts and replacements put out for bid after January 1, 2015. The base amount increases by $0.95 annually until it reaches 70% of the regular minimum wage; if a worker’s tips do not add up to at least $10.10/hour, the employer must pay the difference.

In addition, the order covers individuals with disabilities. (Currently, specialized certificate programs allow workers whose productivity is affected because of their disabilities to be paid less than the others performing the same jobs.)

Regulatory roundup

February 10th, 2014 No comments

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

CBO projects PBGC’s multiemployer revolving fund to be exhausted by 2021
The U.S. Congressional Budget Office (CBO) has issued a table providing projections for the Pension Benefit Guaranty Corporation (PBGC). The CBO projects that the multiemployer revolving fund will be exhausted in 2021. The CBO expects that after the fund is exhausted, the PBGC will reduce financial assistance to a level that could be supported with premium increases.

To view the table providing PBGC projections, click here.

IRS issues sample article for organizations and employers on Roth accounts
The Internal Revenue Service (IRS) has issued a sample article providing a one-page overview of Roth accounts in 401(k), 403(b), and 457(b) plans, including links to relevant IRS publications and web pages.

For more information, click here.

IRS issues proposed rule on UBTI calculation for exempt organizations including VEBAs
The IRS issued proposed rules on the calculation of unrelated business taxable income (UBTI) for certain exempt organizations. The document contains proposed income tax regulations (26 CFR part 1) under section 512(a) of the Code.

Organizations that are tax exempt under section 501(a) are subject to tax on UBTI. Section 512(a) generally defines UBTI of exempt organizations and provides special rules for calculating UBTI for organizations such as social and recreational clubs, voluntary employees’ beneficiary associations (VEBAs), supplemental unemployment benefit trusts (SUBs), and group legal services organizations (GLSOs).

The proposed regulation contains some changes to improve clarity and respond to comments received in 1986, but otherwise has the same effect as the 1986 proposal.

Issues addressed in the explanation of provisions:

• Covered entity
• Limitation on amounts set aside for exempt purposes
• Special rules relating to Sections 419A(f)(5) and 419A(f)(6), collectively bargained plans and collectively bargained welfare plans

To read the entire proposed rule, click here.

SEC issues investor bulletin: Variable annuities – An introduction
The Office of Investor Education and Advocacy of the U.S. Securities and Exchange Commission (SEC) has issued an investor bulletin “Variable annuities – An introduction” which provides some basic facts about variable annuities and how they work. Variable annuities are complex products, and this Investor Bulletin focuses solely on the basics.

For more information, click here.

IRS updates web posting with chart providing submission procedures for individually designed plans
The IRS has updated its chart providing submission procedures for individually designed plans, initial five-year cycle (EGTRRA).

To view the updated web page, click here.

Regulatory roundup

January 27th, 2014 No comments

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

IRS extends deadline to submit on-cycle applications for preapproved DB plans’ opinion and advisory letters
The Internal Revenue Service (IRS) has issued Announcement 2014-4 extending to February 2, 2015, the deadline to submit on-cycle applications for opinion and advisory letters for preapproved defined benefit (DB) plans for the plans’ second six-year remedial amendment cycles. The submission period for these applications was scheduled to expire on January 31, 2014. This extension applies to DB mass submitter lead and specimen plans, word-for-word identical plans, master and prototype minor modifier placeholder applications, and non-mass submitter DB plans.

To read the entire announcement, click here.

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Regulatory roundup

January 20th, 2014 No comments

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

IRS updates posting on preapproved and individually designed plan program FAQs (including Form 8905)
The Internal Revenue Service (IRS) has provided frequently asked questions (FAQs) related to the use of Form 8905, Certification of Intent to Adopt a Pre-approved Plan.

An employer’s plan is treated as a preapproved plan and is eligible for the six-year remedial amendment cycle if the employer (maintaining an individually designed plan), along with a master and prototype (M&P) sponsor or a volume submitter (VS) practitioner who maintains the preapproved plan, execute Form 8905 as an “intended adopter” before the end of the employer’s five-year remedial amendment cycle (Section 17.04 of Revenue Procedure 2007-44). Thus, Form 8905 is used to shift from the five-year remedial amendment cycle used for individually designed plans to the six-year remedial amendment cycle applicable to preapproved plans.

To visit the FAQs web page, click here.

IRS issues newsletter indicating prior Forms 5300 and 5310 are usable
The IRS has issued a new edition of Employee Plan News indicating the prior versions of the Forms 5300 and 5310 are fine to use through June 30, 2014. It also discusses new user fees that apply to certain applications starting February 1, 2014—including the new fee even though the user fee form hasn’t been updated yet to reflect it.

To read the entire newsletter, click here.

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