Thursday, December 18, 2008

Retirement News for Employers - Special Edition, December 2008

The IRS published Retirement News for Employers - Special Edition, December 2008:

This Special Edition discusses the release of Notice 2009-3 which extends the deadline for 403(b) plan sponsors to adopt new written plans or amend their existing written plans from January 1, 2009, to December 31, 2009.

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Employee Plans News - Winter 2009 Edition

The IRS released Employee Plans News - Winter 2009 Edition. It contains the following articles:

  • Adopting a Pre-Approved Plan? No Need for a Determination Letter Application
  • Under Consideration: Determination Letters without Amendment Dates
  • Form 8905 - Certification of Intent to Adopt a Pre-Approved Plan
  • Has Your Client's Plan Merged with Another Plan? Keep All Plan Documents!
  • New Address for EP Determination Applications
  • Common Plan Language Errors
  • Tips for Quick Processing of Employee Plans Determination Letter Applications
  • Sound Off about the Self-Correction Program - A Message from Joyce Kahn
  • Extension of Year-End Deadline for 403(b) Plan Sponsors
  • Cycle C Deadline
  • Saver's Credit - Another Good Reason to Start Saving for Retirement
  • Revenue Procedure 2008-8 - User Fee Frequently Asked Questions
  • 2008 Form 5500 – Schedules SB & MB
  • Changes in Funding Methods in 2009
  • Critical Priorities…With Monika Templeman - Today's Discussion: Employee Plans Compliance Unit (EPCU)
  • Highlights of the Retirement News for Employers
  • Web Spins - The Retirement Plans Site
  • PBGC Insights
  • DOL Corner
  • Employee Plans Published Guidance
  • Calendar of EP Benefits Conferences.

Wednesday, December 17, 2008

IRS Notice 2008-115 – Reporting and Wage Withholding Under Internal Revenue Code § 409A

Part III --- Administrative, Miscellaneous, and Procedural

IRS Notice 2008-115 – Reporting and Wage Withholding Under Internal Revenue Code § 409A

Notice 2008-115 provides guidance to employers and payers on their reporting and wage withholding requirements for calendar year 2008 with respect to deferrals of compensation and amounts includible in gross income under section 409A of the Internal Revenue Code. In addition, this notice provides guidance to service providers on their income tax reporting and tax payment requirements with respect to amounts includible in gross income under section 409A.

Notice 2008-115 will appear in IRB 2008-52, dated December 29, 2008.

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IRS Notice 2008-113 – Relief and Guidance on Corrections of Certain Failures of a Nonqualified Deferred Compensation Plan to Comply with § 409A(a) in Operation

Part III --- Administrative, Miscellaneous, and Procedural

IRS Notice 2008-113 – Relief and Guidance on Corrections of Certain Failures of a Nonqualified Deferred Compensation Plan to Comply with § 409A(a) in Operation

Notice 2008-113 gives taxpayers the ability to correct certain operational failures to comply with section 409A of the Internal Revenue Code,, or to limit the amount of additional taxes due to the failure to comply with section 409A. Section 409A provides rules governing the taxation of nonqualified deferred compensation plans. The notice expands upon and clarifies the program announced last year in Notice 2007-100, 2007-52 IRB 1243.

Notice 2008-113 will appear in IRB 2008-51, dated December 22, 2008

TABLE OF CONTENTS

I. Purpose

II. Background

III. Eligibility Requirements

A. In General

B. Avoidance of Recurrence of Operational Failures

C. Relief not Available to Service Providers Under Examination

D. Additional Eligibility Requirements

E. Required Repayments by the Service Provider

F. Eligibility for Relief for a Taxable Year in which the Service Recipient Experiences a Financial Downturn or Other Financial Issue

G. Definition of Insider

H. Determining Certain Periods of Days

I. Adjustments for Earnings and Losses

J. References to the Internal Revenue Code

IV. Corrections of Certain Operational Failures in the Same Taxable Year as the Failure Occurs

A. Failure to Defer Amount or Incorrect Payment of Amount Payable in a Subsequent Taxable Year Corrected in the Same Taxable Year as the Failure

B. Incorrect Payment of Amount Payable in Same Taxable Year or Incorrect Failure to Defer Amount or Incorrect Payment of Amount Payable in a Subsequent Taxable Year Corrected in the Taxable Year Immediately Following the Failure

C. Incorrect Payment of Amount Payable in Same Taxable Year or Incorrect Payment in Violation of § 409A(a)(2)(B)(i) Corrected During Subsequent Taxable Year

D. Excess Deferred Amount Corrected in the Taxable Year Immediately Following the Year of the Failure

E. Correction of Exercise Price of Otherwise Excluded Stock Rights

VI. Relief for Certain Operational Failures Involving Limited Amounts

A. In General

B. Failure to Defer Limited Amount not Corrected in the Same Taxable Year and Certain Erroneous Payments of Limited Amounts

C. Limited Excess Deferred Amount not Corrected in the Same Taxable Year

VII. Relief for Certain Other Operational Failures

A. General Requirements

B. Failure to Defer Amount not Corrected in the Same Taxable Year and Certain Erroneous Payments

C. Incorrect Payment of Amount Payable in Same Taxable Year or Incorrect Payment in Violation of § 409A(a)(2)(B)(i) not Corrected in the Same Taxable Year as the Failure

D. Excess Deferred Amount not Corrected in the Same Taxable Year

VIII. Special Transition Rule for Non-Insiders

IX. Information and Reporting Requirements

A. Information Required with Respect to Correction of an Operational Failure in the Same Taxable Year as the Failure Occurs

B. Information Required with Respect to Relief for Certain Operational Failures

X. Effect on Other Documents

XI. Request for Comments

XII. Paperwork Reduction Act

XIII. Drafting Information

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Saturday, December 13, 2008

Field Assistance Bulletin No. 2008-04 – EBSA issues guidance on fidelity bonding for employee benefit plans

The DOL recently issued guidance on fidelity bonding:

Washington – The U.S. Department of Labor's Employee Benefits Security Administration (EBSA) today released Field Assistance Bulletin (FAB) 2008-04, which provides guidance to the agency's national and regional offices on the fidelity bonding requirements under section 412 of the Employee Retirement Income Security Act (ERISA).

Section 412 of ERISA requires all persons, including fiduciaries, who handle funds or other property of an employee benefit plan (otherwise referred to as plan officials) to be bonded in accordance with section 412 and the department's regulations unless they are covered by an exemption. Each plan official is required to be bonded for at least 10% of the amount he or she handles, but in no event less than $1,000. The maximum bond amount required under section 412 with regard to any one plan is $500,000 per plan official, or $1 million per plan official in the case of a plan that holds employer securities.

EBSA investigators frequently confront fidelity bonding questions during their examinations of ERISA plans. FAB 2008-04 was developed to address these issues and is presented in a question-and-answer format consisting of 42 frequently asked questions (FAQs). The guidance in the FAB covers a variety of issues related to compliance with ERISA's fidelity bonding requirements, including, among other things: whether a bond may use an omnibus clause to name insured plans; how to calculate the bond amount when multiple plans are covered under a single bond; whether the $1 million bond maximum applies in the case of plans that hold employer securities solely as a result of investments in pooled investment funds; and whether third party service providers are subject to the bonding requirements if they handle plan funds.

FAB 2008-04

Background

ERISA section 412 and related regulations (29 C.F.R. § 2550.412-1 and 29 C.F.R. Part 2580) generally require that every fiduciary of an employee benefit plan and every person who handles funds or other property of such a plan shall be bonded. ERISA's bonding requirements are intended to protect employee benefit plans from risk of loss due to fraud or dishonesty on the part of persons who "handle" plan funds or other property. ERISA refers to persons who handle funds or other property of an employee benefit plan as "plan officials." A plan official must be bonded for at least 10% of the amount of funds he or she handles, subject to a minimum bond amount of $1,000 per plan with respect to which the plan official has handling functions. In most instances, the maximum bond amount that can be required under ERISA with respect to any one plan official is $500,000 per plan. Effective for plan years beginning on or after January 1, 2007, however, the maximum required bond amount is $1,000,000 for plan officials of plans that hold employer securities.(1)

Since enactment of ERISA, the Agency has provided various forms of guidance concerning the application of ERISA's bonding requirements. Over the past several years, however, a number of questions have been raised by our Regional Offices and others concerning the bonding rules. In addition, amendments to section 412 that were enacted in the Pension Protection Act of 2006 (PPA) have presented questions concerning the application of those changes to plan fiduciaries and other persons handling plan funds or other property. This Bulletin provides guidance, in a question and answer format, for our Regional Offices concerning the application of ERISA's bonding requirements and the PPA changes thereto. This Bulletin is not intended to address any civil or criminal liability that may result from losses to a plan caused by acts of fraud or dishonesty or violations of ERISA's fiduciary provisions.

Questions And Answers

ERISA Fidelity Bonds

Q-1: What losses must an ERISA bond cover?
Q-2: Is an ERISA fidelity bond the same thing as fiduciary liability insurance?
Q-3: Who are the parties to an ERISA fidelity bond?
Q-4: Can I get an ERISA bond from any bonding or insurance company?
Q-5: Who must be bonded?
Q-6: Who is responsible for making sure that plan officials are properly bonded?
Q-7: Must all fiduciaries be bonded?
Q-8: Must service providers to the plan be bonded?
Q-9: Must a person who renders investment advice to a plan be bonded solely by reason of rendering such investment advice?
Q-10: If a service provider is required to be bonded, must the plan purchase the bond?
Q-11: If the plan purchases a bond to meet section 412's requirements, may the plan pay for the bond out of plan assets?

Exemptions From The Bonding Requirements

Q-12: Do ERISA's bonding requirements apply to all employee benefit plans?
Q-13: What plans are considered "unfunded" so as to be exempt from ERISA's bonding requirements?
Q-14: Are fully-insured plans "unfunded" for purposes of ERISA's bonding requirements?
Q-15: Are there any other exemptions from ERISA's bonding provisions for persons who handle funds or other property of employee benefit plans?
Q-16: Are SEPs and SIMPLE IRAs subject to ERISA's bonding requirements?

Funds Or Other Property

Q-17: What constitutes "funds or other property" of the plan?

Handling Funds Or Other Property

Q-18: What does it mean to "handle" funds or other property of an employee benefit plan so as to require bonding under section 412?
Q-19: If the plan provides that a plan committee has the authority to direct a corporate trustee, who has custody of plan funds, to pay benefits to plan participants, are the committee members "handling" plan funds or property?
Q-20: If the committee makes investment decisions for the plan, are the committee members "handling" plan funds or other property?
Q-21: Are the committee members considered to be "handling" funds if the committee only recommends investments?

Form And Scope Of Bond

Q-22: Do the regulations require that a bond take a particular form?
Q-23: Can a bond insure more than one plan?
Q-24: If the bond insures more than one plan, can a claim by one plan reduce the amount of coverage available to other plans insured on the bond?
Q-25: Can a plan or service provider obtain bonds from more than one bonding company covering the same plan or plans?

Bond Terms And Provisions

Q-26: Can a bond provide that the one-year "discovery period" required under section 412 will terminate upon the effective date of a replacement bond?
Q-27: Can a bond exclude coverage for situations where an employer or plan sponsor "knew or should have known" that a theft was likely?
Q-28: My plan cannot obtain a bond covering a certain plan official who allegedly committed an act of fraud or dishonesty in the past. What should the plan do?
Q-29: If an employee benefit plan is added as a named insured to a company's existing crime bond, which covers employees but specifically excludes the company owner, does the plan's coverage under the crime bond satisfy the requirements of section 412?
Q-30: Can the bond have a deductible?
Q-31: Must the plan be named as an insured on the bond for the bond to satisfy ERISA's requirements?
Q-32: Can bonds use an "omnibus clause" to name plans as insureds?
Q-33: May a bond be written for a period longer than one year?
Q-34: If a bond is issued for more than one year, is it acceptable to use an ERISA "inflation guard" provision with regard to the amount of the bond?

Amount Of Bond

Q-35: How much coverage must the bond provide?
Q-36: Can a bond be for an amount greater than $500,000, or $1,000,000 for plans that hold employer securities?
Q-37: If a person handles only $5,000 in one plan, so that 10% of the funds he handles is only $500, can the bond be in the amount of $500?
Q-38: Is every plan whose investments include employer securities subject to the increased maximum bond amount of $1,000,000?
Q-39: Must a bond state a specific dollar amount of coverage?
Q-40: My company's plan has funds totaling $1,000,000, and nine employees of the plan sponsor each handle all of those funds. If all nine employees are covered under the same bond, for what amount must the bond be written?
Q-41: What happens if the amount of funds handled increases during the plan year after the bond is purchased—must the bond be updated during the plan year to reflect the increase?
Q-42: How can the plan set the bond amount if there is no preceding plan year from which to measure the amount of funds each person handled?

Additional Notes and Links

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Thursday, November 20, 2008

Retirement News for Employers - Fall 2008 Edition

The IRS released Retirement News for Employers - Fall 2008 Edition. It contains the following articles:

  • Help Your Employees Weather the Storm: Hardship Withdrawals and Loans from Retirement Plans;
  • New on the Web;
  • Recent Guidance;
  • Do the Right Thing Even When Times are Tough!;
  • Desk Side Chat with Monika Templeman - Is My Plan the Right Plan?;
  • Required Minimum Distribution Reminder;
  • RNE Survey;
  • Fixing Common Plan Mistakes: Failure to Provide a Safe Harbor 401(k) Plan Notice;
  • We're Glad You Asked!;
  • 2009 Retirement Plan Limits Announced;
  • DOL News;
  • Mark Your Calendar;
  • Timing Is Everything Flyer.

Wednesday, November 5, 2008

Employee Plans News - Special Edition, November 5, 2008

The IRS published Employee Plans News - Special Edition, November 5, 2008:

This Special Edition discusses the IRS modifying the filing cycle for governmental plans under the staggered remedial amendment program. In addition, this edition talks about the initial guidelines released on Rollovers as Business Startups (ROBS). Some other items of interest included in this edition are 2009 Retirement Plans Limits Announced; List of Recent Guidance that May Require Interim or Discretionary Amendments; and 403(b) Phone Forum - December 4, 2008.

Thursday, October 9, 2008

DOL Final Regulation - Amendments to Safe Harbor for Distributions From Terminated Individual Account Plans and Termination of Abandoned Individual Ac

The DOL announced final rules on the distribution of benefits for missing nonspouse beneficiaries in terminated plans, the selection of annuity providers, and cross trading:

WASHINGTON — The U.S. Department of Labor has announced final rules pertaining to the requirements of the Pension Protection Act of 2006 (PPA). The new rules relate to distribution of 401(k) benefits for missing nonspouse beneficiaries in terminated plans, selection of annuity providers and cross trading of securities by plans governed by the Employee Retirement Income Security Act (ERISA).

The PPA amended the Internal Revenue Code to allow the rollover of certain retirement benefits of a deceased participant into a tax-favored inherited individual retirement account (IRA) created on behalf of a nonspouse beneficiary. The new rule (and a related class exemption) conforms to the PPA by amending existing distribution requirements for terminated defined contribution plans, including abandoned plans, to require rollovers into inherited IRAs for missing nonspouse beneficiaries.

In the annuity area, the department is issuing two final rules on selection of annuity providers. One rule limits the application of the "safest available" standard of Interpretive Bulletin 95-1 to defined benefit plans. The other is a final regulation providing guidance, in the form of a safe harbor, for the selection of annuity providers by fiduciaries for benefit distributions from individual account plans.

The final rule on cross trading addresses the content of the policies and procedures which must be adopted by an investment manager before engaging in cross trades of securities between clients, including employee benefit plans. The written policies and procedures must be fair and equitable to all account participants and must provide for appointment of a compliance officer who is responsible for periodically reviewing purchases and sales of securities made pursuant to the exemption to ensure compliance with the written policies and procedures.

Related Links

DOL Final Regulation - Amendments to Interpretive Bulletin 95-1

The DOL announced final rules on the distribution of benefits for missing nonspouse beneficiaries in terminated plans, the selection of annuity providers, and cross trading:

WASHINGTON — The U.S. Department of Labor has announced final rules pertaining to the requirements of the Pension Protection Act of 2006 (PPA). The new rules relate to distribution of 401(k) benefits for missing nonspouse beneficiaries in terminated plans, selection of annuity providers and cross trading of securities by plans governed by the Employee Retirement Income Security Act (ERISA).

The PPA amended the Internal Revenue Code to allow the rollover of certain retirement benefits of a deceased participant into a tax-favored inherited individual retirement account (IRA) created on behalf of a nonspouse beneficiary. The new rule (and a related class exemption) conforms to the PPA by amending existing distribution requirements for terminated defined contribution plans, including abandoned plans, to require rollovers into inherited IRAs for missing nonspouse beneficiaries.

In the annuity area, the department is issuing two final rules on selection of annuity providers. One rule limits the application of the "safest available" standard of Interpretive Bulletin 95-1 to defined benefit plans. The other is a final regulation providing guidance, in the form of a safe harbor, for the selection of annuity providers by fiduciaries for benefit distributions from individual account plans.

The final rule on cross trading addresses the content of the policies and procedures which must be adopted by an investment manager before engaging in cross trades of securities between clients, including employee benefit plans. The written policies and procedures must be fair and equitable to all account participants and must provide for appointment of a compliance officer who is responsible for periodically reviewing purchases and sales of securities made pursuant to the exemption to ensure compliance with the written policies and procedures.

Related Links

DOL Final Regulation - Selection of Annuity Providers - Safe Harbor for Individual Account Plans

The DOL announced final rules on the distribution of benefits for missing nonspouse beneficiaries in terminated plans, the selection of annuity providers, and cross trading:

WASHINGTON — The U.S. Department of Labor has announced final rules pertaining to the requirements of the Pension Protection Act of 2006 (PPA). The new rules relate to distribution of 401(k) benefits for missing nonspouse beneficiaries in terminated plans, selection of annuity providers and cross trading of securities by plans governed by the Employee Retirement Income Security Act (ERISA).

The PPA amended the Internal Revenue Code to allow the rollover of certain retirement benefits of a deceased participant into a tax-favored inherited individual retirement account (IRA) created on behalf of a nonspouse beneficiary. The new rule (and a related class exemption) conforms to the PPA by amending existing distribution requirements for terminated defined contribution plans, including abandoned plans, to require rollovers into inherited IRAs for missing nonspouse beneficiaries.

In the annuity area, the department is issuing two final rules on selection of annuity providers. One rule limits the application of the "safest available" standard of Interpretive Bulletin 95-1 to defined benefit plans. The other is a final regulation providing guidance, in the form of a safe harbor, for the selection of annuity providers by fiduciaries for benefit distributions from individual account plans.

The final rule on cross trading addresses the content of the policies and procedures which must be adopted by an investment manager before engaging in cross trades of securities between clients, including employee benefit plans. The written policies and procedures must be fair and equitable to all account participants and must provide for appointment of a compliance officer who is responsible for periodically reviewing purchases and sales of securities made pursuant to the exemption to ensure compliance with the written policies and procedures.

Related Links

DOL Final Regulation - Statutory Exemption for Cross-Trading of Securities

The DOL announced final rules on the distribution of benefits for missing nonspouse beneficiaries in terminated plans, the selection of annuity providers, and cross trading:

WASHINGTON — The U.S. Department of Labor has announced final rules pertaining to the requirements of the Pension Protection Act of 2006 (PPA). The new rules relate to distribution of 401(k) benefits for missing nonspouse beneficiaries in terminated plans, selection of annuity providers and cross trading of securities by plans governed by the Employee Retirement Income Security Act (ERISA).

The PPA amended the Internal Revenue Code to allow the rollover of certain retirement benefits of a deceased participant into a tax-favored inherited individual retirement account (IRA) created on behalf of a nonspouse beneficiary. The new rule (and a related class exemption) conforms to the PPA by amending existing distribution requirements for terminated defined contribution plans, including abandoned plans, to require rollovers into inherited IRAs for missing nonspouse beneficiaries.

In the annuity area, the department is issuing two final rules on selection of annuity providers. One rule limits the application of the "safest available" standard of Interpretive Bulletin 95-1 to defined benefit plans. The other is a final regulation providing guidance, in the form of a safe harbor, for the selection of annuity providers by fiduciaries for benefit distributions from individual account plans.

The final rule on cross trading addresses the content of the policies and procedures which must be adopted by an investment manager before engaging in cross trades of securities between clients, including employee benefit plans. The written policies and procedures must be fair and equitable to all account participants and must provide for appointment of a compliance officer who is responsible for periodically reviewing purchases and sales of securities made pursuant to the exemption to ensure compliance with the written policies and procedures.

Related Links

Employee Plans News – Fall 2008 Edition

The IRS released Employee Plans News - Fall 2008 Edition. It contains the following articles:

  • Weathering the Storm: Advising Clients about Loans and Hardship Withdrawals from Retirement Plans
  • Web Spins
  • Update on Pre-Approved Plan Program for 403(b) Plans
  • Take Our Survey: Help Us Expand and Improve Our
    Self-Correction Program!
  • Relief for Hurricane Victims
  • Critical Priorities...With Monika Templeman
  • Remind Your Clients to Do the Right Thing Even When Times are Tough!
  • Spotlight on ERPA
  • We're Glad You Asked!
  • Highlights of the Retirement News for Employers
  • Employee Plans Completes Another Successful IRS Nationwide Tax Forum Season
  • Employee Plans Published Guidance
  • Ordering the Form 5500, Schedules, and Instructions
  • VCP Applications – Appendix F
  • DOL Corner
  • PBGC Insights
  • Calendar of EP Benefits Conferences.

Wednesday, September 24, 2008

DFVCP Penalty Calculator and Online Payment/Actuarial Information Search

The DOL announced new online tools for plan administrators and participants:

Washington – The U.S. Department of Labor's Employee Benefits Security Administration (EBSA) today announced new online tools to give workers access to financial information and an improved calculator that makes it easier for employers and plan administrators to pay online civil penalties for delinquent filings of annual reports under the agency's Delinquent Filer Voluntary Compliance Program (DFVCP).

The Pension Protection Act of 2006 required the department to post on its Web site actuarial information of pension plans filed with the Form 5500 annual reports. The site, located at http://www.dol.gov/ebsa/actuarialsearch.html, provides user friendly ways for workers and plan officials to search for plan information by such categories as plan name, employer identification number or date.

The DFVCP encourages plan administrators to file already overdue annual reports required under the Employee Retirement Income Security Act. Delinquent filers can avoid potentially higher civil penalty assessments by satisfying the program's requirements and voluntarily paying a reduced penalty amount.

Employers and plan administrators can access the new feature that allows them to electronically pay civil penalties at http://www.dol.gov/ebsa/calculator/dfvcpmain.html. The calculator uses the Department of the Treasury's pay.gov financial management system. Users now can accurately and simply calculate the amount of civil penalties and pay those penalties online with a credit or debit card as an alternative to paying by check.

This new tool is part of EBSA's compliance assistance program and is available nationwide. For more information on the Delinquent Filer Voluntary Compliance Program, contact EBSA at 202.693.8360 or visit the agency's Web site at www.dol.gov/ebsa/Newsroom/0302fact_sheet.html.

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Sunday, September 21, 2008

IRS Notice 2008-69 – Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates

Part III --- Administrative, Miscellaneous, and Procedural

IRS Notice 2008-69 – Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates

Weighted average interest rate update; corporate bond indices; 30-year Treasury securities; segment rates. This notice contains updates for the corporate bond weighted average interest rate for plan years beginning in August 2008; the 24-month average segment rates; the funding transitional segment rates applicable for August 2008; and the minimum present value transitional rates for July 2008.

This notice contains updates for interest rates for funding requirements under sections 412(b)(5)(B) and 430(h)(2) of the Code applicable for August 2008, and updates for interest rates for minimum present value determinations under 417(e)(3) of the Code for July 2008.

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DOL Website Provides Updated Contact Information for Hurricane Victims

The DOL announced that it has updated its website to give plan sponsors a way to provide updated contact information for hurricane victims:

WASHINGTON — The U.S. Department of Labor's Employee Benefits Security Administration (EBSA) today updated its Web site to give sponsors of retirement, health and other benefit plans a way to update their contact information following the disruption of operations due to Hurricanes Gustav and Ike. This information will allow employees, plan participants and their families, as well as the many support organizations that assist victims of the hurricanes, to reach plan administrators with questions and information related to their benefits.

Employers are encouraged to update their contact information with the department if it has changed. The Web site includes a searchable database that lists pre-hurricane contact information taken from the Form 5500 Annual Reports filed previously by all employee benefit plans located in the affected disaster areas. The Web site allows employers to verify existing information or provide updated contact information — including post-hurricane addresses and phone numbers — that will be entered into this database for public use.

Employers/plan sponsors that wish to update or correct their contact information included on this site may do so by calling 866-444-EBSA (3272) toll-free or by submitting a Verification of Contact Information Form found on the Web site.

Employees/plan participants who need to locate their employer/plan sponsor may search the database at www.dol.gov/ebsa or contact a benefits advisor for assistance at 866-444-EBSA (3272). EBSA benefits advisors can retrieve information for those who do not have access to a computer and are available to answer questions related to benefits issues.

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DOL Official Testifies on Fee Disclosures

The DOL announced that an official testified before the Senate Committee on Health, Education, Labor and Pensions on fee disclosures:

WASHINGTON — Bradford P. Campbell, assistant secretary of labor for the U.S. Department of Labor's Employee Benefits Security Administration (EBSA), today testified before the Senate Committee on Health, Education, Labor and Pensions on initiatives to expand disclosure of fees and expenses in 401(k)-type plans to an estimated 65 million workers, employee benefit plan fiduciaries and the government. Campbell's testimony focused on three regulatory initiatives to improve fee disclosure and transparency in a manner that is appropriate and cost-effective for workers and plan fiduciaries.

"Together these rules will ensure that millions of American workers and plan officials get the information they need to make informed decisions about plan services and investments. Our ultimate goal is to ensure that plans and workers pay only fair, competitive and transparent prices for services to their plans," Campbell said.

In his testimony, Campbell discussed key elements of EBSA's regulatory initiatives to improve plan fee disclosure. These include:

  • A proposed rule that will make it easier for workers covered by 401(k)-type plans to make informed retirement saving decisions by providing them with useful summary information, including fee and expense information, for investment options available under their plans. The centerpiece of the July 23, 2008, proposal is a model chart that can be used to provide investment-related information to workers in an easy to-read, comparative format. The chart is available at http://www.dol.gov/ebsa/modelcomparativechart.doc.
  • A regulation proposed for plan fiduciaries on Dec. 13, 2007, that would require service providers to disclose specific and detailed fee and conflict of interest information when they enter into contracts with plans. The proposal requires service providers to disclose in writing the services they will provide to the plan and all compensation, direct and indirect, they will receive for providing those services. This information will assist plan fiduciaries in deciding whether the compensation to be received by the service provider is reasonable and whether any conflicts of interest exist that may affect the performance of plan services.
  • Changes to the Form 5500, finalized on Nov. 16, 2007, that expanded the information reported on the Schedule C relating to indirect compensation received by service providers to assist plan fiduciaries in monitoring the reasonableness of compensation paid to providers and any potential conflicts of interest.

The Three Regulatory Initiatives

Thursday, September 18, 2008

Employee Plans News - Special Edition, September, 2008

The IRS published Employee Plans News - Special Edition, September, 2008:

This Special Edition discusses relief to help meet September 30 deadline for AFTAP actuarial certification for defined benefit plans.

Friday, August 29, 2008

Tuesday, August 26, 2008

Employee Plans News - Special Edition, August 25, 2008

The IRS published Employee Plans News - Special Edition, August 25, 2008:

This Special Edition announces the release of Notice 2008-62 in advance of the forthcoming Code §457(f) proposed regulations to provide relief to schools as they begin their 2008/2009 school year.

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Friday, August 22, 2008

DOL Proposed Regulation – Investment Advice – Participants and Beneficiaries

29 CFR Part 2550

RIN 1210-AB13

DOL Proposed Regulation – Investment Advice – Participants and Beneficiaries

The DOL announced proposed regulations to make investment advice more accessible for 401(k) plans and IRAs:

Washington – The U.S. Department of Labor today announced publication of two proposed rules under the Pension Protection Act (PPA) to make investment advice more accessible for millions of Americans in 401(k) type plans and individual retirement accounts (IRAs). The proposed regulation and class exemption are to be published in the August 22, 2008 Federal Register.

"These proposals would give workers greater access to investment advice so that they are better equipped to manage and monitor their 401(k) plans and Individual Retirement Accounts," said U.S. Secretary of Labor Elaine L. Chao.

The PPA amended the Employee Retirement Income Security Act (ERISA) by adding a new prohibited transaction exemption that allows greater flexibility for participants of 401(k) plans and IRAs to obtain investment advice. One of the ways in which investment advice may be given under the exemption is through the use of a computer model certified as unbiased, the other is through an adviser compensated on a "level-fee" basis. Several other requirements also must be satisfied, including disclosure of fees the adviser is to receive.

In December 2006, the department solicited public comments to determine what expertise and procedures may be needed to certify a computer model under the exemption, and to assist in developing a model form for the exemption's disclosure of adviser fees.

The proposed regulation provides general guidance on the exemption's requirements, including computer model certification, and includes a non-mandatory model form that advisers may use to satisfy the exemption's fee disclosure requirement. In addition, to further the availability of quality, professional investment advice, the department is proposing a class exemption that permits advisors to provide individualized advice to a worker after giving advice generated by use of a computer model.

Separately, the department also released its determination relating to the feasibility of using computer models for providing investment advice to participants of IRAs.

Related Links:

Retirement News for Employers - Summer 2008 Edition

The IRS released Retirement News for Employers - Summer 2008 Edition. It contains the following articles:

  • New Resource Helps Keep Your SEP Plan Compliant
  • Desk Side Chat with Monika Templeman - Responsibilities to Employees
  • Form 5307 Has Been Revised
  • We're Glad You Asked!
  • SARSEP Plans Examination Trends
  • Have a HEART for Our Heroes
  • Things to Remember - 2007 Forms 5500/5500-EZ
  • ERPA Contract Awarded - Testing to Begin January 2009
  • Recent Guidance
  • DOL News
  • Fixing Common Plans Mistakes
  • Participant Loans in 401(k) Plans
  • Mark Your Calendar
  • Timing is Everything Flyer

Saturday, August 16, 2008

IRS Revenue Procedure 2008-50 - Closing agreements

Part III. Administrative, Procedural, and Miscellaneous

26 CFR 601.202: Closing agreements.

IRS Revenue Procedure 2008-50 - Closing agreements

This procedure updates the comprehensive system of correction programs for sponsors of retirement plans that are intended to satisfy the requirements of sections 401(a), 403(a), 403(b), 408(k), or 408(p) of the Code, but that have not met these requirements for a period of time. This system, the Employee Plans Compliance Resolution System (EPCRS), permits Plan Sponsors to correct these failures and thereby continue to provide their employees with retirement benefits on a tax-favored basis. The components of EPCRS are the Self-Correction Program (SCP), the Voluntary Correction Program (VCP), and the Audit Closing Agreement Program (Audit CAP). Rev. Proc. 2006-27 modified and superseded. Rev. Proc. 2007-49, section 3, modified and superseded.

IRS Revises Voluntary Correction Program for Retirement Plans

IR-2008-96, Aug. 14, 2008

WASHINGTON –– The Internal Revenue Service today issued updated guidance on the voluntary correction program for employee retirement plans – the Employee Plans Compliance Resolution System (EPCRS).

"Employers and plan administrators want to comply with the tax laws and regulations to protect plan participants," said Michael Julianelle, director of the IRS's Employee Plans division. "EPCRS helps employers and plan administrators take a proactive role in identifying and fixing mistakes. It also encourages implementation of practices and procedures that ensure retirement plans comply with laws and regulations."

Under EPCRS, plan sponsors and plan professionals can correct certain errors in employee retirement plans, in some cases without having to notify the IRS. Correcting plans in this way allows participants to continue receiving tax-favored retirement benefits and protects the retirement benefits of employees and retirees.

There are three levels of correction programs in EPCRS:

  • The Self-Correction Program (SCP) permits a plan sponsor to correct insignificant operational failures in plans such as qualified plans, 403(b) plans, SEPs or SIMPLE IRA plans without having to notify the IRS and without paying any fee or sanction. In many instances, a plan sponsor may correct significant operational failures without notifying the IRS and without paying a fee or sanction.
  • The Voluntary Correction Program (VCP) allows a plan sponsor, at any time before an audit, to pay a limited fee and receive the IRS's approval for a correction of a qualified plan, a 403(b) plan, SEP or SIMPLE IRA plan.
  • The Audit Closing Agreement Program (Audit CAP) allows a sponsor to correct a failure or an error that has been identified on audit and pay a sanction based on the nature, extent and severity of the failure being corrected.

In revising the EPCRS revenue procedure, the IRS incorporated comments from the retirement plans community by adding flexibility and increasing correction methods. The new guidance, which is a revenue procedure, makes the following improvements:

  • Expands the availability of SCP in situations where operational mistakes have been partially corrected when the plan comes under examination. Also, new examples relating to the exclusion of employees from 401(k) plans have been added to the standardized corrections. The new examples will benefit those who use SCP to correct the failures described in those examples.
  • Establishes streamlined application procedures under VCP for numerous issues, including failure to amend plans for law changes, loan problems, failure to make minimum distributions to participants, excess elective deferrals made by participants to 401(k) plans and plans established by ineligible employers. In addition, streamlined application procedures have been developed for SEPs, SARSEPs and SIMPLE IRAs.
  • Includes a sample application format that may be used for all other VCP applications. "These revised application procedures should make the correction programs more accessible to small business employers," said Joyce Kahn, who directs the voluntary compliance program. "Also, we anticipate that the new procedures will facilitate an expedited review of a significant number of VCP applications."
  • Makes it easier to correct loan failures under VCP. Loans that violate section 72(p) of the Internal Revenue Code may still be corrected even if the loans do not violate the terms of the plan. Also, in many cases, the fee under VCP for correcting loan failures will be reduced by 50 percent.

"The improved correction for participant loans should enable many more participants to bring delinquent loans from retirement plans back into compliance without incurring the tax consequences resulting from those loans being treated as taxable distributions under section 72(p)", Kahn said.

There has been a significant expansion of streamlined application procedures under VCP. "We encourage the public to send comments on how to further improve the program and make it easier for business owners to operate their retirement plans," Kahn added.

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Prior Regulations and Related Links:

Thursday, August 14, 2008

Retirement News for Employers - Special Edition, August 14, 2008

The IRS published Retirement News for Employers - Special Edition, August 14, 2008:

It's Here! Revenue Procedure 2008-50 Updates IRS's Employee Plans Compliance Resolution System; How Does the Self-Correction Program Work for You? Let Us Hear from You!

Employee Plans News - Special Edition, August 14, 2008

The IRS published Employee Plans News - Special Edition, August 14, 2008:

It's Here! Revenue Procedure 2008-50 Updates IRS's Employee Plans Compliance Resolution System (EPCRS); How Does the Self-Correction Program Work for You? Let Us Hear From You!

Related Link

Thursday, August 7, 2008

Employee Plans News - Special Edition, August 6, 2008

The IRS announced a contract with the American Institute of Retirement Education (AIRE), a partnership formed by the American Society of Pension Professionals & Actuaries (ASPPA) and the National Institute of Pension Administrators (NIPA), to facilitate examinations for the Enrolled Retirement Plan Agent (EPRA) program:

This Special Edition announces that IRS has contracted with AIRE to conduct the examinations for the Enrolled Retirement Plan Agent (ERPA) program. Testing to begin January 2009 but registration is open on October 23, 2008. Basic questions and answers about the ERPA program are now available on our web site.

More details were published in Employee Plans News - Special Edition, August 6, 2008:

On August 1, 2008, the Internal Revenue Service (IRS) awarded through a competitive bid process, the American Institute of Retirement Education, LLC (AIRE), the contract to conduct the examinations for the Enrolled Retirement Plan Agent (ERPA) program. ERPA tests are slated to begin in January 2009. ERPA candidates may apply to take the ERPA test beginning October 23, 2008.

Generally, a person becomes an ERPA by passing a comprehensive ERPA Special Enrollment Examination relating to retirement plan matters. See www.erpaexam.org for further information on the testing process. After passing the ERPA Special Enrollment Examination, the ERPA candidate must apply for enrollment with the Service and follow renewal and continuing education procedures. ERPAs will be required to demonstrate competency and be held to professional and ethical standards of conduct.

An ERPA is an individual who has earned the privilege of representing clients with respect to issues involving the following programs: the Employee Plans Determination Letter program; the Employee Plans Compliance Resolution System; and the Employee Plans Master and Prototype and Volume Submitter programs. In addition, ERPA's may represent clients with respect to 5500 and 5300 series forms, but not with respect to actuarial forms or schedules.

In 2005, the Advisory Committee on Tax Exempt and Government Entities (ACT) recommended that the IRS develop the ERPA program in order to offer ERPA status to individuals who service retirement plans but are not authorized to practice before the IRS. The ACT estimates that in the first five years as many as 3,000 to 6,000 practitioners could avail themselves of this new enrollment opportunity.

AIRE LLC, the contracted ERPA exam administrator, is a partnership formed by the American Society of Pension Professionals & Actuaries (ASPPA) and the National Institute of Pension Administrators (NIPA). AIRE is working with Prometric and the University of Michigan to help administer the ERPA examination.

Enrolled Retirement Plan Agent (ERPA)

The IRS defines an ERPA as “an individual who has been approved by the IRS to practice before the IRS on certain retirement plan issues” as provided for in Circular 230. The IRS ERPA information page answers the following questions:

  • What is an Enrolled Retirement Plan Agent ("ERPA")?
  • What does an ERPA do?
  • What does an ERPA need to know?
  • How do I become an ERPA?
  • How do I apply to become an ERPA?
  • When can I take the test?
  • After I become an ERPA, what are the requirements for renewal and Continuing Professional Education?
  • Where can I find out more information on the ERPA Program?

Related Links:

Wednesday, August 6, 2008

IRS Revenue Ruling 2008-45 – Qualified Pension, Profit-sharing, and Stock Bonus Plans

Part I – Rulings and Decisions Under the Internal Revenue Code of 1986

Section 401. -– Qualified Pension, Profit-sharing, and Stock Bonus Plans

26 CFR 1.401-1: Qualified pension, profit-sharing, and stock bonus plans. (Also, § 414.)

IRS Revenue Ruling 2008-45 – Qualified Pension, Profit-sharing, and Stock Bonus Plans

Exclusive benefit rule; transfer of plan sponsorship; controlled groups. This ruling provides that the exclusive benefit rule of section 401(a) of the Code is violated if the sponsorship of a qualified retirement plan is transferred from an employer to an unrelated taxpayer and the transfer is not in connection with a transfer of business assets or operations from the employer to the unrelated taxpayer.

Revenue Ruling 2008-45 considers whether the exclusive benefit rule of § 401(a) of the Internal Revenue Code ("Code") is violated if the sponsorship of a qualified retirement plan is transferred from an employer to an unrelated taxpayer and the transfer of the sponsorship of the plan is not in connection with a transfer of business assets, operations, or employees from the employer to the unrelated taxpayer.

ISSUE
Is the exclusive benefit rule of § 401(a) of the Internal Revenue Code ("Code") violated if the sponsorship of a qualified retirement plan is transferred from an employer to an unrelated taxpayer and the transfer of the sponsorship of the plan is not in connection with a transfer of business assets, operations, or employees from the employer to the unrelated taxpayer?

HOLDING
The exclusive benefit rule of § 401(a) is violated if the sponsorship of a qualified retirement plan is transferred from an employer to an unrelated taxpayer and the transfer of the sponsorship of the plan is not in connection with a transfer of business assets, operations, or employees from the employer to the unrelated taxpayer.

This ruling does not address any federal income tax consequences other than those specifically addressed herein.

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Sunday, August 3, 2008

DOL and SEC Announce Memorandum of Understanding (MOU)

The DOL and the SEC announced that they have signed a Memorandum of Understanding (MOU) Concerning Cooperation between the U.S. Securities and Exchange Commission (SEC) and the U.S. Department of Labor (DOL):

WASHINGTON — Elaine L. Chao, U.S. secretary of labor, and Christopher Cox, chairman of the U.S. Securities and Exchange Commission (SEC), today agreed to make permanent their agencies' longstanding relationship of sharing information on retirement and investments to protect the $5.8 trillion in retirement assets of American workers, retirees and their families held in employee benefit plans by signing a Memorandum of Understanding (MOU).

The increasing intersection of regulatory responsibilities in today's financial world presents new challenges in protecting the retirement assets of investors nationwide. The MOU between the two agencies will formalize and strengthen cooperation to share information relating to retirement and investments, and provide investors, benefit plan participants, and plan administrators with better access to more understandable information that they can use to make informed investment decisions.

"This Memorandum of Understanding with the Securities and Exchange Commission will better protect the 117 million Americans who depend on private sector retirement plans," said Secretary Chao. "This further boosts the department's record-setting enforcement program that has won $11 billion in monetary results and more than 800 criminal indictments since 2001 on behalf of protecting workers' retirement savings."

Chairman Cox said, "With a growing number of seniors focused on managing their own 401(k) plans, it's important to improve disclosure to give them the information they need and in a form they can use. To accomplish this, the Department of Labor and the SEC are committed to coordinating closely on their behalf. This enhanced coordination of the SEC's investor protection efforts and the Department of Labor's regulatory responsibility for pensions and 401(k)s will greatly benefit the millions of hardworking Americans who are saving and investing for their retirement as well as those who have already retired."

The MOU establishes a process for the department's Employee Benefits Security Administration and SEC staffs to share information and meet regularly to discuss matters of mutual interest. These include examination findings and trends, enforcement cases and regulatory requirements that impact the missions of both agencies. The department has oversight over 401(k) and other retirement plans as well as plan participants, while the SEC oversees, among other areas, brokerages, investment advisers and mutual funds.

Both agencies will designate points of contact in their regional offices to facilitate communications among staff on enforcement and examination matters. The agreement also will expedite the sharing of non-public information regarding investment advisers and other subjects of mutual interest between the two agencies. Additionally, the Labor Department and SEC will cross-train staff under the agreement with the goal of enhancing each agency's understanding of the other's mission and investigative jurisdiction.

The memorandum discussed ten items:

1. Regular Meetings

2. Points of Contact

3. Training

4. DOL Access to Non-Public SEC Examination Information

  • DOL Assurances of Confidentiality
  • Right to Financial Privacy Act of 1978 ( "RFPA")

5. SEC and DOL Access to Non-Public SEC and DOL Enforcement Information

  • SEC and DOL Assurances of Conjidentiality

6. Privileges and Confidentiality of Information Maintained

7. Effect of Agreement

8. Effective Date; Termination

9. Survival of Terms

10. Authority