Tag Archives: IRS

Regulatory roundup

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

DOL issues ERISA fiduciary advisor
The Department of Labor’s (DOL) Employee Benefits Security Administration (EBSA) has published the ERISA Fiduciary Advisor. The ERISA Fiduciary Advisor provides information and answers to a variety of questions about who is a fiduciary and their responsibilities under the Employee Retirement Income Security Act (ERISA). This Advisor was developed by the EBSA in its continuing effort to increase awareness and understanding about basic fiduciary responsibilities when operating a retirement plan.

For more information, click here.

IRS issues draft Instructions for Forms 1094-C and 1095-C
The IRS released draft Instructions for 2016 Form 1094-C and 1095-C with new revisions. On Form 1094-C, line 22, box B is designated “Reserved.” The Qualifying Offer Method Transition Relief is not applicable for 2016. In Part III, column (b), “Section 4980H” was inserted before “Full-Time Employee Count for ALE Member” to remind filers that the section 4980H definition of “full-time employee” applies for purposes of this column, not any other definition that an ALE Member may use for other purposes. On Form 1095-C, the language “Do not attach to your tax return. Keep for your records.” was inserted under the title of the form to inform the recipient that Form 1095-C should not be submitted with the return.

To download the draft instructions, click here.

IRS issues draft Instructions for Forms 1094-B and 1095-B
The IRS released draft Instructions for 2016 Form 1094-B and 1095-B with new revisions. The language “Do not attach to your tax return. Keep for your records.” was inserted on the Form 1095-B under the title of the form. Form 1095-B, Part I, lines 2 and 3, and Part IV, columns (b) and (c) were updated to reflect the rule that a taxpayer identification number (TIN) may be entered. Form 1095-B, line 9 is now reserved. The heading to Part II was revised to read “Information about Certain Employer-Sponsored Coverage” to clarify that Part II will be blank or some individuals with employer-sponsored coverage. Other minor clarifying changes were made to Form 1095-B.

To download the draft instructions, click here.

IRS revises Form 8717
The Internal Revenue Service revised 2016 Form 8717 (Determination Letter Request User Fee) and Form 8717-A (Opinion or Advisory Letter Request User Fee). The new form has been revised so that it does not contain specific user fee amounts. One must now enter the appropriate user fee when completing line 5 of the Form and the IRS has indicated that the amounts and number of forms submitted on line 5 of Form 8717 revised in August 2014) should not be used. One should now use the following fee schedule to determine the user fee for employee plan determination letter requests mailed to the IRS on or after February 1, 2016.

Revenue Procedure 2016-8 changed the fee schedule shown on lines 5a and 5b of Form 8717-A. Do not use the applications and fee schedule shown on lines 5a and 5b of Form 8717-A (Rev. August 2014) to determine the appropriate user fee. Instead, use the following updated schedule to determine the user fee for Form 8717-A mailed to the IRS on or after February 1, 2016.

For more information, click here.

IRS proposes deferred compensation rule for governmental and tax-exempt entities

The IRS has issued a long-awaited proposed rule on nonqualified deferred compensation plans (NDCPs) maintained by tax-exempt organizations (other than churches and certain church-controlled entities) and state and local governments. The proposed rule provides guidance for plan sponsors in determining when amounts are includible in employees’ incomes, the amounts that are includible, and the types of arrangements that are not subject to the requirements of tax code section 457. The proposed rule, which plan sponsors may rely upon immediately, also aligns the requirements for 457(f) plans with section 409A NDCPs. However, this Client Action Bulletin focuses on what many plan sponsors and participants may consider the most significant portion of the proposed rule: the expanded definition of a “substantial risk of forfeiture” (SROF) in 457(f) plans.

IRS proposes additional guidance for nonqualified deferred compensation under 409A

Concluding that clarifications and modifications could help taxpayers comply with the requirements applicable to nonqualified deferred compensation plans (NDCPs) under tax code section 409A, the Internal Revenue Service (IRS) issued additional guidance in the form of a proposed rule. Compliance with the 409A requirements enables individuals covered by and employers sponsoring NDCPs to avoid adverse tax treatment of the amounts payable under these arrangements. The proposed rule, which taxpayers may rely upon immediately, is lengthy and complex, covering a diverse range of topics, most of which are beyond the scope of this Client Action Bulletin, which focuses on four key areas that may have the broadest application to NDCP sponsors.

Regulatory roundup

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

New process for DB plan determination letter applications
The Internal Revenue Service (IRS) published a post on its website highlighting the new process for defined benefit plan determination letter applications.

To read the entire post, click here.

IRS releases draft Form 5300
The IRS issued a draft of the revision for Form 5300, Application for Determination for Employee Benefit Plan. Form 5300 is used to request a favorable determination letter (DL) from the IRS on the qualified status of these plans and the exempt status of any related trust.

Form 5300 has undergone major revisions in format and information required. Many of the revisions reflect the changes affecting individually designed plans described in Announcement 2015-19, and Revenue Procedure 2016-37. The revised form significantly simplifies the information that plan sponsors must provide and is expected to reduce the taxpayer burden in filling out the form.

The IRS expects the final version of Form 5300 to be available by December 2016. If you wish, you can submit comments about the draft Form 5300.

Federal agencies release proposed revisions to improve Form 5500
The Employee Benefits Security Administration (EBSA) of the Department of Labor (DOL), the IRS, and the Pension Benefit Guaranty Corporation (PBGC) are seeking public comments on proposed revisions to modernize and improve the Form 5500 Annual Return/Report filed by private-sector employee benefit plans. The EBSA also published a related notice of proposed changes to its annual reporting regulations under Title I of ERISA.

Form 5500 is the primary source of information about the operations, funding, and investments of private-sector, employment-based pension and welfare benefit plans in the United States.

To read the proposed rule, click here.

 

Regulatory roundup

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

Technical corrections to best of interest rule; class exemption for principal transaction in certain assets
The Department of Labor (DOL) filed technical corrections to the Best Interest Contract Exemption, which was published on April 8, 2016. The Best Interest Contract Exemption allows certain persons that are fiduciaries under ERISA, or the Internal Revenue Code (the Code), or both, by reason of providing investment advice, to receive compensation that may otherwise be prohibited.

The corrections in this document fix typographical errors, make minor clarifications to provisions that might otherwise be confusing, and confirm insurers’ broad eligibility to rely on the exemption, consistent with the exemption’s clearly intended scope and the analysis and data relied upon in the DOL’s final regulatory impact analysis (RIA).

For more information, click here.

Office of Chief Counsel memo regarding testing otherwise excludable employees
The Office of Chief Counsel of the Internal Revenue Service (IRS) released Memorandum 201615013 concerning testing otherwise excludable employees. The taxpayer asked whether certain positions related to the definition of “otherwise excludable employees,” used for purposes of coverage testing under § 410(b)(4)(B) and computing the actual deferral percentage (ADP) under § 401(k)(3), are supportable.

To read the entire memo, click here.

Regulatory roundup

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

IRS guidance on determination letter program and the six-year remedial amendment cycle
The Internal Revenue Service (IRS) released Revenue Procedure 2016-37, providing modifications to the Determination Letter Program for tax-qualified individually designed plans and to the six-year remedial amendment cycle system for preapproved retirement plans. Under the changes, sponsors of individually designed qualified retirement plans can request a determination letter only upon initial qualification or plan termination. The guidance also extends the remedial amendment period for individually designed plans until August 1, 2017, and makes changes to the remedial amendment cycle for preapproved plans.

To read the entire Rev. Procedure, click here.

Census Bureau releases 2016 first quarter data on public pensions
The U.S. Census Bureau released its Quarterly Survey of Public Pensions, covering the first quarter of 2016. The survey provides national summary data on the revenues, expenditures, and composition of assets of 100 of the largest defined benefit public employee pension systems for state and local governments, comprising 88.4% of financial activity among such entities, based on the 2012 Census of Governments.

To read the survey, click here.

Regulatory roundup

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

IRS’s ACT submits analysis and recommendations on changes to the Determination Letter Program
The Advisory Committee on Tax Exempt and Government Entities (ACT) of the Internal Revenue Service (IRS) held a public meeting and submitted its annual report and recommendations to the IRS. The ACT includes external stakeholders and representatives who deal with employee retirement plans; tax-exempt organizations; tax-exempt bonds; and federal, state, local, and Indian tribal governments. They advise the IRS on operational policy and procedural improvements.

To learn more, click here.

Multiemployer compliance trends and tips
The IRS has posted multiemployer plan compliance tips and trends collected by the Employee Plans Team Audit (EPTA) program. Multiemployer plans have unique characteristics that impact daily plan operation. EPTA audits have focused on issues in connection with participation agreements, conflicts among plan documents, participation by non-collectively bargained employees, and actuarial adjustments.

To learn more, click here.

IRS guidance on recovery of investment in contract from payments received from qualified DB plan during phased retirement
The IRS has released Notice 2016-39 and Revenue Procedure 2016-36. Notice 2016-39 provides guidance as to whether payments received by an employee from a qualified defined benefit (DB) retirement plan during phased retirement are amounts received as an annuity under section 72 of the Internal Revenue Code.

Revenue Procedure 2016-36 provides that Notice 2016-39, regarding recovery of investment in the contract from payments received from a retirement plan by an employee during phased retirement, does not apply to amounts that are received from a non-qualified contract. The revenue procedure concludes that in applying the § 72 regulations cited in the Notice to a non-qualified contract, the possibility of further contributions to the contract or a subsequent election under the contract to receive the benefit payable under the contract in a different manner generally will not affect the determination of whether distributions are amounts received as an annuity.

To read Notice 2016-39, click here.
To read Rev. Proc. 2016-36, click here.

Regulatory roundup

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

IRS posts checklists for retirement plan documents
The Internal Revenue Service (IRS) published checklists for retirement plan documents categorized into subject matter packages that employee plans specialists use when reviewing retirement plan documents. Plan sponsors can also use these packages as a review tool before submitting a determination letter application to the IRS.

For more information, click here.

New guidelines for pension equity plan determination letters
The IRS recently improved its processing of determination letter applications for pension equity plans (PEPs) by training a specialized cadre in “EP Determinations.” It has issued the following procedural guidelines for IRS employees:

• PEP Determinations Worksheet
• Explanation of PEP Plan Issues (corresponds to the Worksheet)
• Memorandum to the EP Determinations PEP Cadre on the PEP accrued benefit (PEP Memorandum)

For more information, click here.

 

Regulatory roundup

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

DOL releases final overtime rule
The Department of Labor (DOL) issued its final overtime rule. The rule focuses primarily on updating the salary and compensation levels needed for executive, administrative, and professional workers to be exempt. Specifically, the final rule:

1. Sets the standard salary level at the 40th percentile of earnings of full-time salaried workers in the lowest-wage census region, currently the South ($913 per week; $47,476 annually for a full-year worker).

2. Sets the total annual compensation requirement for highly compensated employees (HCE) subject to a minimal duties test to the annual equivalent of the 90th percentile of full-time salaried workers nationally ($134,004).

3. Establishes a mechanism for automatically updating the salary and compensation levels every three years to maintain the levels at the above percentiles and to ensure that they continue to provide useful and effective tests for exemption.

Additionally, the rule amends the salary basis test to allow employers to use nondiscretionary bonuses and incentive payments, including commissions, to satisfy up to 10% of the new standard salary level.

To read the entire rule, click here.

IRS publishes final rule related to Roth accounts
The Internal Revenue Service (IRS) released a final rule eliminating the requirement that each disbursement from a designated Roth account that is directly rolled over to an eligible retirement plan be treated as a separate distribution from any amount paid directly to the employee, and therefore, separately subject to the rule in section 72(e)(2) of the Internal Revenue Code (the Code) allocating pretax and after-tax amounts to each distribution.

As a result of this change, if disbursements are made from a taxpayer’s designated Roth account to the taxpayer and also to the taxpayer’s Roth IRA or designated Roth account in a direct rollover, then pretax amounts will be allocated first to the direct rollover, rather than being allocated pro rata to each destination.

To read the entire final rule, click here.

Regulatory roundup

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

Treasury Department denies Central States Pension Plan application
The Department of the Treasury issued its long awaited letter to the Central States, Southeast and Southwest Areas (Central States) Pension Plan. The letter denies the Central States plan its application to reduce benefits under Multiemployer Pension Reform Act (MPRA).

To read the entire letter, click here.

Final rule on additional limitation on suspension of benefits applicable to multiemployer plans
The Internal Revenue Service (IRS) released a final rule that provides guidance relating to a limitation that governs the application of a suspension of benefits under any plan that includes benefits directly attributable to a participant’s service with any employer that has withdrawn from the plan in a complete withdrawal, paid its full withdrawal liability, and, pursuant to a collective bargaining agreement, assumed liability for providing benefits to participants and beneficiaries equal to any benefits for such participants and beneficiaries reduced as a result of the financial status of the plan.

The final rule affects active, retired, and deferred vested participants and beneficiaries under any such multiemployer plan in critical and declining status as well as employers contributing to, and sponsors and administrators of, those plans. These regulations were effective on May 5, 2016.

For more information, click here.

GAO publishes retirement security report
The Government Accountability Office (GAO) released “Retirement security: Low defined contribution savings may pose challenges” (GAO-16-408). The report focuses on recent trends in defined contribution (DC) plan participation and account savings, and how much households could potentially save in DC plans over their careers. In addition, the report explores how key individual and employer decisions affect plan saving.

To download the entire report, click here.