Regulatory roundup

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

IRS nixes use of safe harbor if lump sum is not equal to cash balance plan hypothetical account balance
The Internal Revenue Service (IRS) released Chief Counsel Memorandum 2016032811224324, which responds to a taxpayer’s question about a cash balance plan’s eligibility for the tax code section 411(b)(1)(H) safe harbor rules that pertain to lump-sum based benefit formulas and indexed benefits.

The memo focuses on cash balance plans that provide that a lump-sum distribution that is not equal to the participant’s hypothetical account balance but instead is determined as the present value of the participant’s accrued benefit using the actuarial assumptions specified in tax code section 417(e)(3). The IRS concludes that because the amount of the single-sum distribution is not equal to the hypothetical account balance, the plan is not eligible for the safe harbor rules.

To read the entire memo, click here.

Recurring plan issues found in determination case review
The IRS posted a number of defects in plan language that would require corrective amendments and delay the issuance of a determination letter.

For more information, click here.

IRS Chief Counsel issues memo on minimum participation standards; testing otherwise excludable employees
The IRS released Chief Counsel Memorandum 201615013, which responds to whether certain positions related to the definition of “otherwise excludable employees,” used for purposes of coverage testing under § 410(b)(4)(B) and for computing the actual deferral percentage (ADP) under § 401(k)(3), are supportable.

To read the entire memo, click here.

IRS webinar related to 401(b) retirement plan
The IRS has scheduled a free webcast entitled “Understanding the universal availability rules in a 403(b) retirement plan” on Thursday, May 19, 2016, at 2 p.m. EST. The webinar will focus on the following:

• Basic universal availability rules
• Treatment of adjunct faculty at universities
• Treatment of part-time, seasonal, and temporary employees
• The 20 hours per week and the 1,000 hours rules
• Controlled group situations and concerns
• Mayo ruling on medical residents and its impact
• The required notice to employees each year
• Ways to find, fix, and avoid universal availability errors

To register for the webinar, click here.