Friday, February 29, 2008

DOL Proposed Regulation – Amendment of Regulation Relating to Definition of ‘‘Plan Assets’’ Participant Contributions

29 CFR Part 2510

RIN 1210–AB02

DOL Proposed Regulation – Amendment of Regulation Relating to Definition of ''Plan Assets'' Participant Contributions

  • Who would this affect? This would affect the “sponsors and fiduciaries of contributory group welfare and pension plans covered by ERISA, including 401(k) plans, as well as the participants and beneficiaries covered by such plans and recordkeepers, and other service providers to such plans.”
  • Who is eligible for the safe harbor? All small employee benefit plans, defined as participants with fewer than 100 participants at the beginning of the plan year, are eligible. The large plan/small plan designation and 80-120 participant rule for IRS Form 5500 filing purposes does not apply.
  • What is the safe harbor? The safe harbor will consider deposits made within the 7-business day period as if they were made on “the earliest date on which such contributions can reasonably be segregated from the employer's general assets.”
  • Are loan repayments included? This proposed regulation would also apply to loan repayments (“amounts paid by a participant or beneficiary or withheld by an employer from a participant's wages for purposes of repaying a participant's loan (regardless of plan size)”). This is a change position from DOL Advisory Opinion 2002-02A (May 17, 2002).
  • When is the safe harbor effective? The DOL "will not assert a violation of ERISA" if a plan satisfies the requirements before the effective date.
  • What if plan deposits are considered late? There would be a prohibited transaction, as the plan funds would be commingled with employer funds. The plan would be required to be made whole, including the lost earnings. IRS Form 5330 would be required to be filed and an excise tax would be paid. Appropriate disclosures would be required to be made on IRS Form 5500. When are comments due? They are due on or before April 29, 2008.

The DOL announced a proposed regulation providing a safe harbor rule for employee contributions to small plans:

Washington – The U.S. Department of Labor today announced a proposed rule to provide greater protection for employee contributions deposited to pension and welfare benefit plans with fewer than 100 participants by proposing a safe harbor period of seven business days following receipt or withholding by employers.

"Our proposal will protect workers by encouraging employers to deposit participant contributions to small pension and welfare plans in a timely manner," said Assistant Secretary of Labor for the Employee Benefits Security Administration Bradford P. Campbell. "It also will provide employers with a higher degree of compliance certainty."

Under the, employers of all sizes current rules must transmit employee contributions to pension plans as soon as they can reasonably be segregated from the general assets of the employer, but no later than the 15th business day of the month following the month in which contributions are received or withheld by the employer. The latest date for forwarding participant contributions to health plans is 90 days from the date on which such amounts are received or withheld by the employer.

The proposed rule would amend the participant contribution rules by creating a safe harbor period under which participant contributions to a small plan will be deemed to be made in compliance with the law if those amounts are deposited with the plan within seven business days of receipt or withholding.

Before the effective date of the final regulation, the department will not assert a violation of the Employee Retirement Income Security Act regarding participant contributions where such contributions are deposited with small plans within the seven business day safe harbor period.

In addition, the department requests information and data regarding a possible safe harbor for plans with 100 or more participants to enable it to evaluate the current contribution practices of these large employers.

The public may submit comments on the proposed rule electronically through www.regulations.gov or via e-mail to e-ORI@dol.gov. Comments on paper should be sent to the Office of Regulations and Interpretations, Employee Benefits Security Administration, Room N-5655, 200 Constitution Avenue, N.W., Washington, D.C. 20210, Attention: Participant Contribution Regulation Safe Harbor. The proposal is to be published in the February 29 edition of the Federal Register.

Contribution Timing and Collection Responsibility, a Q&A

  1. What are the current Department of Labor (DOL) rules regarding an employer depositing employee 401k deferrals?
  2. I heard there is some sort of 15-day rule. What's this about?
  3. What is the DOL trying to accomplish now?
  4. What will be the rule going forward?
  5. You said it is "not the rule yet." What does that mean?
  6. Was there anything else in this proposed amendment besides the timing of employee contributions?
  7. What about plans that have more than 100 participants-does this safe harbor apply to them?
  8. Is there an economic benefit to this proposed seven business-day safe harbor?
  9. What's happening with collection responsibility?
  10. When are contributions late?
  11. What does it mean when contributions are late?
  12. What must a plan sponsor do to fulfill its responsibility?
  13. What if the fiduciary has not assigned responsibility?
  14. What about plans such as a SIMPLE IRA or SEP IRA that have no trustee?
  15. What happens when one trustee, who has no direct responsibility for collecting contributions, knows that contributions are delinquent?
  16. So what's the bottom line?

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Posted by Aaron Juckett, ESOP Consultant at 1:28 PM 0 comments
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Wednesday, February 27, 2008

DOL Proposed Regulation - Hearing on Reasonable Contracts or Arrangements Under Section 408(b)(2)--Fee Disclosure

29 CFR Part 2550

DOL Proposed Regulation - Hearing on Reasonable Contracts or Arrangements Under Section 408(b)(2)--Fee Disclosure

The DOL announced plans to hold a hearing on DOL Proposed Regulation - Reasonable Contract or Arrangement Under Section 408(b)(2)--Fee Disclosure:

Washington — The U.S. Department of Labor's Employee Benefits Security Administration (EBSA) will hold a public hearing March 20-21, to hear testimony about its regulatory proposal on the disclosure of service provider compensation and conflicts of interest information to employers. The hearing will take place at the department in Room S-4215 A-C, 200 Constitution Avenue, NW in Washington, DC.

The proposal, published in the December 13, 2007 Federal Register, would amend the department's regulation dealing with the provision of services to employee benefit plans. Specifically, the proposed regulation provides that contracts between plans and certain service providers must include detailed written disclosures about direct and indirect compensation that will be received by the service provider and conflicts of interest. The department also published a proposed class exemption to provide relief for employers when service providers fail to comply with the regulation's disclosure requirements.

In view of the importance of these proposals to workers and plans, the department decided to hold a public hearing. Persons wishing to testify at the hearing should submit an outline of topics to be discussed by March 10, 2008 online to e-ORI@dol.gov. Information on the hearing agenda will be posted on the EBSA's Web site at www.dol.gov/ebsa.

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Posted by Aaron Juckett, ESOP Consultant at 7:55 PM 0 comments
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Friday, February 8, 2008

IRS Notice 2008-24 - Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates

Part III --- Administrative, Miscellaneous, and Procedural

IRS Notice 2008-24 - Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates

Notice 2008-24 provides guidance as to the corporate bond weighted average interest rate and the permissible range of interest rates specified under § 412(b)(5)(B)(ii)(II) of the Internal Revenue Code. It also provides guidance on the corporate bond monthly yield curve (and the corresponding spot segment rates), the 24-month average segment rates, and the funding transitional segment rates under § 430(h)(2). In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under § 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008, and the minimum present value segment rates under § 417(e)(3)(D) as in effect for plan years beginning after 2007.

Notice 2008-24 will be published in Internal Revenue Bulletin 2008-8, dated Feb. 25, 2008."

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Posted by Aaron Juckett, ESOP Consultant at 4:04 PM 0 comments
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Saturday, February 2, 2008

IRS Notice 2008-21 – Transition Guidance for New Funding Rules and Funding-Related Benefit Limitations under PPA ‘06

Part III – Administrative, Procedural and Miscellaneous

IRS Notice 2008-21 – Transition Guidance for New Funding Rules and Funding-Related Benefit Limitations under PPA '06

"This notice extends the effective date of certain proposed regulations and establishes a 2008 transitional rule for small defined benefit plans with end-of the-year valuations."

"Notice 2008-21 alerts taxpayers of a uniform effective date of certain proposed funding regulations under sections 430 and 436 of the Internal Revenue Code. This notice also provides a transitional rule for 2008 for small plans with end-of-the-year valuations. Notice 2008-21 will appear in Internal Revenue Bulletin 2008-7 on February 19, 2008."

The IRS and the Treasury Department announced guidance on PPA Funding Rules:

"Washington, D.C.-- The Treasury Department and the Internal Revenue Service today issued guidance that relates to new pension funding rules that were included in the Pension Protection Act of 2006.

Notice 2008-21 announces that none of the proposed funding regulations will be effective before the first plan year beginning on or after January 1, 2009, although employers may rely on these regulations during 2008. For plan years beginning before January 1, 2009, the notice provides that employers may generally rely on a reasonable interpretation of the funding rules in the statute and may rely on the proposed regulations for this purpose.

The notice also provides transitional relief to small plans for purposes of applying
the applicable benefit restrictions for underfunded pension plans for 2008."

Funding; effective date; proposed regulations under sections 430 and 436. This notice alerts taxpayers of a uniform effective date of certain proposed regulations under sections 430 and 436 of the Code. In addition, this notice provides 2008 transitional guidance under section 436 for small plans with end of the plan year valuation dates.

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Posted by Aaron Juckett, ESOP Consultant at 11:14 AM 0 comments
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IRS Revenue Ruling 2008-07 - Minimum Vesting Standards

Part I

Section 411. – Minimum Vesting Standards

26 CFR 1.411(b)-1: Accrued benefit requirements.

(Also, § 7805; § 301.7805-1.)

IRS Revenue Ruling 2008-07 - Minimum Vesting Standards

The Treasury Department and the Internal Revenue Service (IRS) issued this revenue ruling to address "the application of the accrual rules for pension plans under section 411(b)(1) of the Internal Revenue Code (commonly referred to as “backloading” rules)."

Does the defined benefit plan described below that was converted from a traditional benefit formula to a lump sum-based benefit formula satisfy the accrual rules of § 411(b)(1)(A), (B), and (C) of the Internal Revenue Code for the 2002 plan year?

Accrued benefits; cash balance defined benefit pension plans; section 411 of the Code. This ruling, which pertains to a traditional defined benefit pension plan that is amended in 2001 for the 2002 plan year into a cash balance defined benefit pension plan containing an accrued benefit formula that is a lump sum-based benefit, describes the application of the accrual rules of sections 411(b)(1)(A), (B), and (C) of the Code to the fact pattern.

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Posted by Aaron Juckett, ESOP Consultant at 11:09 AM 0 comments
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Friday, February 1, 2008

Field Assistance Bulletin No. 2008-01 – Fiduciary Responsibility for Collection of Delinquent Contributions

Field Assistance Bulletin No. 2008-01 – Fiduciary Responsibility for Collection of Delinquent Contributions

The DOL's Employee Benefits Security Administration (EBSA) released a Field Assistance Bulletin on the collection of delinquent contributions:

"Washington – The U.S. Department of Labor's Employee Benefits Security Administration (EBSA) today released Field Assistance Bulletin (FAB) 2008-01 that provides guidance to field investigators on the responsibilities of plan fiduciaries and trustees with respect to monitoring and collecting delinquent employer and employee contributions owed to employee benefit plans governed by the Employee Retirement Income Security Act (ERISA).

The FAB was developed in response to a number of EBSA pension plan investigations that uncovered arrangements that purported to relieve all of a plan's fiduciaries and trustees of any responsibility to monitor and collect delinquent contributions."

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Posted by Aaron Juckett, ESOP Consultant at 2:39 PM 0 comments
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