Friday, August 29, 2008

Retirement News for Employers - Special Edition, August 29, 2008

The IRS published Retirement News for Employers - Special Edition, August 29, 2008:

Back to School Guidance

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.

Related Links:

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.

Related Links:

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.

Related Links:

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