ERISA Rules and Regulations

Employee Plans News - Special Edition, August 6, 2008

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Thu, 07 Aug 2008 13:33:00 +0000

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:

And the ERPA Contract Goes To……..

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

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Wed, 06 Aug 2008 14:46:00 +0000

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

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:

IRS Revenue Ruling 2008-45, 2008-34 I.R.B. – Qualified Pension, Profit-sharing, and Stock Bonus Plans [PDF]
IRS Revenue Ruling 2008-45, 2008-34 I.R.B. – Qualified Pension, Profit-sharing, and Stock Bonus Plans [HTML]
2008-34 I.R.B. (August 25, 2008)
IRC Section 401(a) – Qualified pension, profit-sharing, and stock bonus plans - Requirements for qualification

DOL and SEC Announce Memorandum of Understanding (MOU)

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Sun, 03 Aug 2008 13:41:00 +0000

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

IRS Notice 2008-65 – Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Sun, 27 Jul 2008 15:05:00 +0000

Part III --- Administrative, Miscellaneous, and Procedural

IRS Notice 2008-65 – Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates

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 July 2008, and updates for interest rates for minimum present value determinations under 417(e)(3) of the Code for June 2008.

Related Links:

Treasury Regulation - REG–100464–08 - Accrual Rules for Defined Benefit Plans

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Sun, 27 Jul 2008 14:48:00 +0000

26 CFR Part 1

[REG–100464–08]

RIN 1545–BH50

Treasury Regulation - [REG–100464–08] - Accrual Rules for Defined Benefit Plans

These proposed regulations are applicable/effective for plan years beginning on or after January 1, 2009, and amend the accrued benefit requirements for hybrid defined benefit plans by adding a new paragraph (b)(2)(ii)(G) to section 1.411(b)-1. On your PPA'06 chart, they should be listed under section 701 of PPA'06 and under section 411(b) of the Code with the terms hybrid defined benefit plans and accrual rules.

Related Links:

REG-100464-08. 73 Fed. Reg. 34665 (June 18, 2008) [PDF]

DOL Proposed Regulation – Fiduciary Requirements for Disclosure in Participant-Directed Individual Account Plans

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Tue, 22 Jul 2008 17:43:00 +0000

29 CFR Part 2550

RIN 1210-AB07

DOL Proposed Regulation – Fiduciary Requirements for Disclosure in Participant-Directed Individual Account Plans

The DOL announced proposed regulations to improve disclosure of fees and expenses:

Washington – The U.S. Department of Labor today announced a proposed rule that will make it easier for an estimated 65 million participants covered by 401(k)-type plans to make informed retirement savings decisions. The proposal would provide workers with useful summary information, including fee and expense information, for investment options available under their plans.

"Our proposal is consistent with public consensus that workers need clear and concise information, not dozens of pages of 'legalese,' about the investment options available under their plans, and that they would benefit greatly from having that information in a comparative format," said U.S. Secretary of Labor Elaine L. Chao. "One of the department's top priorities is improved disclosure to workers that will give them the information they need to make informed investment decisions."

The centerpiece of the proposed regulation is a requirement to provide investment-related information in a comparative chart or similar format. As part of the proposal, the department has developed a model chart for complying with this requirement, while giving plan fiduciaries the flexibility to design their own charts or comparative formats. The proposal would also require plan fiduciaries to disclose basic information about the plan and its investment options, such as what options are available under the plan, how to give investment instructions, investment returns and fees and expenses, and how to obtain more detailed information. This information would be given to participants on a regular and periodic basis.

In addition, the department is proposing conforming changes to its regulation under section 404(c) of the Employee Retirement Income Security Act.

"We want to help workers make the most of their 401(k)-type plans by ensuring that they are provided the information they need to make wise investment decisions," said Bradford P. Campbell, assistant secretary for the Labor Department's Employee Benefits Security Administration.

DOL Releases Proposed Fee Disclosure Regulations discusses the proposed regulations:

The DOL states in the regulations that their intention is to establish uniform, basic disclosures for participants and beneficiaries without regard to whether the plan is covered by Code section 404(c). To reach that goal, the DOL has taken a multi-prong approach. Some disclosures are to be made to participants and beneficiaries in the summary plan descriptions (SPDs). Some disclosures are to be made in the quarterly benefit statements which are already required by the Pension Protection Act. And some disclosures are to be made on separate forms. To faciliate disclosure, the DOL has included a model disclosure notice within these regulations.

Related Links:

DOL Issues 40-FAQs About IRS Form 5500 – Schedule C

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Sat, 19 Jul 2008 14:29:00 +0000

The DOL issued guidance on Schedule C reporting for 2009 Form 5500:

Washington – The U.S. Department of Labor's Employee Benefits Security Administration (EBSA) today announced guidance to help plan administrators and service providers comply with the new requirements for reporting service provider fee and compensation information applicable to Form 5500 Annual Returns/Reports filed for plan years beginning on or after January 1, 2009.

EBSA released 40 frequently asked questions (FAQs) developed in response to questions from the employee benefit community on the new Schedule C requirements. The FAQs cover such issues as the alternative reporting option for eligible indirect compensation, electronic disclosure of fee information by service providers, fee reporting for brokerage window options in participant directed plans, and reporting on gifts, entertainment and other non-monetary compensation.

In response to concerns expressed by service providers trying to make changes to their recordkeeping and information management systems in order to provide their employee benefit plan clients with fee and compensation information required for 2009 reports, the department is not requiring plan administrators to report service providers on the Schedule C as failing to provide fee and compensation information if the service provider furnishes the plan administrator with a written statement that (i) the service provider made a good faith effort to make any necessary recordkeeping and information system changes in a timely fashion, and (ii) despite such efforts, the service provider was unable to complete the changes for the 2009 plan year.

The announcement included a link to 40-FAQs About The 2009 Form 5500 Schedule C:

What is the purpose of this FAQ guidance?
Is the Schedule C information on service provider indirect compensation required to be reported based on the plan's year or can the information reported be based on the service provider's fiscal year?
Can the alternative reporting option for "eligible indirect compensation" be used to report compensation paid or received in separately managed investment accounts of a single plan?
Are all the fees and expenses charged against an investment fund and reflected in the value of the plan's investment, such as an investment fund's payments for legal services provided to the fund, fees paid to the fund's accountant, and expenses associated with SEC filing requirements, reportable indirect compensation for Schedule C purposes?
Are the requirements to report indirect compensation on Schedule C different for participant-selected investments through "open brokerage" windows?
Are commissions paid to an agent in connection with the sale of an investment, product, or service to a plan reportable indirect compensation?
Is compensation received in connection with the management and operation of venture capital operating companies (VCOCs), real estate operating companies (REOCs), and other operating companies reportable indirect compensation?
A mutual fund pays eligible indirect compensation to a fund administrator, advisor, or distributor (a "fund agent"). In turn, the fund agent pays fees to the recordkeeper for "compliance services" provided to one or more participating plans, including discrimination testing, QDRO administration, and Form 5500 preparation. The recordkeeper is not an affiliate of the mutual fund or the fund agent. Is the mutual fund payment to the recordkeeper reportable indirect compensation? If it is reportable indirect compensation, is the fee received by the recordkeeper eligible indirect compensation?
A recordkeeper may enter into an "alliance" arrangement with a broker-dealer to provide services offered together as a "package" sold by agents of the broker-dealer. The recordkeeper and broker-dealer are not affiliated to one another and each has a separate contract or arrangement with the plan. In connection with this alliance arrangement, the broker-dealer pays compensation to the recordkeeper. The compensation may be flat per-participant fees or asset-based fees based on the value of plans' investments in mutual funds or other investment vehicles offered to the plans by the broker-dealer. The broker-dealer pays the compensation for plan administration and recordkeeping services the recordkeeper provides to the broker-dealer's plan clients. Is the compensation paid by the broker-dealer to the recordkeeper "eligible indirect compensation?"
A recordkeeper and an unaffiliated insurance company enter into an "alliance" arrangement similar to the alliance arrangement described in Q9. Under this version of an alliance arrangement, an insurance company agent offers the plan investments through a group variable annuity or other insurance products and also introduces the recordkeeper's service offering to prospective plan clients. The plan has a separate contract or arrangement with the insurance company and with the recordkeeper. The insurance company pays from its general assets compensation to the recordkeeper for plan administration and recordkeeping services the recordkeeper provides to plans with investments in insurance contracts issued by the insurance company, which may be flat per participant fees or asset-based fees based on the value of plans' investments in the insurance contracts. Do the amounts paid to the recordkeeper by the insurance company constitute eligible indirect compensation?
Should float income on an account holding the assets of one plan be treated as direct or indirect compensation for Schedule C reporting purposes?
Will disclosure of float income sufficient to satisfy the guidance in Field Assistance Bulletin 2002-03 meet the requirements of the alternative reporting option?
What rules govern the determination of the services or providers included in the scope of a bundled arrangement for purposes of Schedule C reporting?
What is an example of fees that are required to be broken out regardless of whether they are part of a "bundle?"
Where the only compensation received by a service provider is "eligible indirect compensation" and all of the disclosures necessary to satisfy the alternative reporting option have been provided, is it necessary to complete any information on Schedule C regarding that service provider other than identifying the person providing the disclosures on Line 1?
Does Part I, Line 3 of the Schedule C require reporting with respect to sources of indirect compensation if the compensation is "eligible indirect compensation?"
If a service provider receives eligible indirect compensation (for which the disclosures have been made) and either direct compensation or indirect compensation that is not eligible, does Line 2(h) of Part I apply to the portion that is eligible indirect compensation?
Must the service provider receiving "eligible indirect compensation" be the person who provides the disclosures needed to meet the alternative reporting option?
If more than one person provides the same required disclosure for eligible indirect compensation, must all persons providing the disclosure be identified?
When identifying the person who provided the required disclosures for the Schedule C alternative reporting option, must the name of an individual be provided?
Are insurance contract "wrap fees" considered "eligible indirect compensation" for purposes of the alternative reporting option on Schedule C?
Some insurance companies provide a "net rate" investment product where an investment contract is combined with plan recordkeeping, trusteeship, and similar services. Instead of charging fees for those services, the insurer credits the plan's investment in a stable value option with interest at a crediting rate that is "net" of the insurer's expenses and costs determined based on the overall experience of the insurer's general account. Is the portion of the insurance company's expenses and costs used to reduce the crediting rate reportable indirect compensation even though it is calculated based on the overall experience of the general account? If so, can these amounts be treated as eligible indirect compensation?
Is the spread earned by a broker on principal transactions involving the plan "eligible indirect compensation?"
May a plan administrator use a formula for reporting indirect compensation on the Schedule C that is required to be specifically reported on Line 2?
If a service provider discloses a formula used to determine its indirect compensation, is the plan administrator required to calculate or estimate dollar amounts from the formula for purposes of Schedule C reporting (to the extent that compensation described by a formula is not eligible indirect compensation)?
Plan administrators are not required to report on Schedule C information with respect to service providers receiving less than $5000 in total compensation (direct and indirect) from the plan. Schedule C, Part I, Line 2 states that service providers should be reported in descending order of compensation. Are plan administrators required to estimate a service provider's compensation for purposes of determining whether to include information about a service provider on Form 5500, or for purposes of reporting service providers in descending order of compensation on Part I, Line 2?
What guidelines apply where service providers elect to provide an "estimate" of compensation?
If a service provider provided the plan administrator with an estimate of its indirect compensation or a formula used to calculate its indirect compensation, but later determines a dollar amount for the compensation it received, does the plan administrator need to obtain an updated disclosure of the dollar amount in order to be able to rely on the Schedule C alternative reporting option?
Can a recordkeeper satisfy the alternative reporting option for eligible indirect compensation by furnishing the plan administrator with prospectuses, brokerage fee schedules, the SEC Form ADV, or other already available documents prepared and provided to the administrator for separate purposes, or must it create its own written disclosure document?
For purposes of satisfying the "written disclosure" requirement for the alternative reporting option, is electronic disclosure such as e-mail or other web-based technology satisfactory?
Do the disclosures regarding "eligible indirect compensation" need to be provided at least annually in order for the alternative reporting option to be available?
Will post-trade confirmation serve as adequate written disclosure of brokerage fees and commissions for purposes of the alternative reporting option?
For Schedule C reporting purposes, where a service provider has received free attendance at a conference or seminar the constitutes reportable indirect compensation, is it adequate to report payments for meals, hotel, transportation costs, and other individual expenses? Must the plan administrator also report that portion of the expenses attributable to every conference attendee for costs such as guest speaker fees and other conference overhead?
If a plan is required to report non-monetary compensation received by a service provider because the amount involved exceeds the Schedule C exclusion for occasional non-monetary compensation of insubstantial value, do gifts of less than $10 need to be included?
If a person providing services to the plan is provided a meal or other entertainment based on a general business relationship that includes both ERISA and non-ERISA business, is it required to be reported on the Schedule C?
If a person receives compensation that is reportable on Schedule A and compensation that is reportable on Schedule C, does the compensation that must be reported on Schedule A also be reported on Schedule C?
If a plan sponsor pays a third-party service provider on the plan's behalf and seeks reimbursement from the plan, should the Schedule C reflect a direct payment from the plan to the service provider and not a payment to the employer?
Where a plan service provider is providing non-plan related investment services to participants, and charging reduced fees for plan related services based on the anticipation of receiving fees from participants for non-plan related services, do the fees for non-plan related investment services need to be reported on the Schedule C?
Do both proprietary soft-dollar compensation (e.g., research prepared by the entity providing brokerage services) and non-proprietary soft dollar compensation (e.g., research prepared by independent/third parties) fall within the definition of "eligible indirect compensation?"
Under what circumstances is a service provider expected to be identified on Schedule C for failing to provide information necessary to complete the Schedule C?

Related Links

DOL Testifies About Employer-Sponsored IRAs

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Sat, 19 Jul 2008 14:14:00 +0000

The Department of Labor announced in a June 26 press release that it testified before the House Ways and Means subcommittee about employer-sponsored IRAs:

Washington – Bradford P. Campbell, assistant secretary of labor for the Employee Benefits Security Administration (EBSA), today testified before the House Ways and Means Subcommittee on Select Revenue Measures about the department's programs to protect and promote retirement security for employer-sponsored individual retirement arrangements (IRAs).

In his testimony, Campbell discussed the department's regulatory, enforcement, compliance assistance and outreach activities carried out for employer-sponsor IRAs governed by Title I of the Employee Retirement Income Security Act. These plans were created by Congress to give small employers an affordable and easy retirement plan option for their employees, including Savings Incentive Match Plan for Employees (SIMPLE) IRA and Simplified Employee Pensions (SEPs).

He noted that the Labor Department's oversight role employs a comprehensive approach of compliance assistance, interpretive guidance, prohibited transaction exemptions, education and outreach, and enforcement. However, Campbell emphasized that oversight over individual and payroll deduction IRAs is under the jurisdiction of the Internal Revenue Service.

"Employer-sponsored IRAs are important retirement savings vehicles for millions of employees of small businesses nationwide," said Campbell. "In the past three years alone, our oversight of employer-sponsored IRAs has yielded $1.2 million in direct enforcement results and an additional $1 million in results for workers through informal resolution of complaints."

The testimony can be found here: DOL Testifies About Employer-Sponsored IRAs, and contains the following:

Introductory Remarks
Background
- Types of Employer-sponsored IRAs
- Payroll-deduction IRAs
Oversight Of IRAs By the Department Of Labor And the IRS
EBSA Compliance Assistance, Education And Outreach Activities
EBSA's Enforcement Efforts
Conclusion
Footnotes

Related Links

Employee Plans News - Special Edition, July 1, 2008

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Wed, 02 Jul 2008 17:40:00 +0000

The IRS published Employee Plans News - Special Edition, July 1, 2008:

Sample Plan Language under Code §409(p) for the Transfer of an ESOP's S Corporation Shares

Code §409(p) was enacted as part of the Pension Protection Act of 2006. It requires that an ESOP holding S corporation stock cannot have a prohibited allocation during a nonallocation year. That is, no portion of plan assets attributable to employer securities may accrue or be allocated for the benefit of a disqualified person. Code §409(p)(3) provides that a nonallocation year occurs when disqualified persons (as defined in §409(p)(4)) own or are deemed to own 50% of the outstanding stock of the S corporation, taking into consideration synthetic equity as defined in Code §409(p)(6)(C) and Regulations §1.409(p)-1(f). During a nonallocation year, prohibited allocations are deemed to be distributed and excise taxes are imposed on the S corporation pursuant to §4979A. Additional consequences of a nonallocation year relate to plan qualification and the tax status of the corporation.

Regulation §1.409(p)-1(b)(v) provides that a nonallocation year may be prevented by transferring assets from the accounts of disqualified persons to the non-ESOP portion of the plan. Sample plan language to provide for such transfers is posted on our web site: www.irs.gov/ep. Under this plan provision, the Plan Administrator calculates the number of shares that need to be transferred in order to prevent the occurrence of a nonallocation year. The employer needs to provide the Plan Administrator all the information needed to perform this calculation, including information on synthetic equity.

Comments on this language should be sent by August 15, 2008. However, this sample language can be used now pending the comment period.

Related Links:

Sample Plan Language for Section 409(p) Transfers
Final Regulations (2006) – Final Regulations were issued on December 16, 2006 and generally applicable with respect to plan years beginning on or after January 1, 2006.
Proposed and Temporary Regulations (2004) – Proposed and Temporary Regulations were issued December 16, 2004 and are generally effective for plan years beginning on or after January 1, 2005.
Proposed and Temporary Regulations (2003) – Proposed and Temporary Regulations were issued July 21, 2003 and are generally applicable with plan years ending after October 20, 2003.
IRC Section 409(p) - Qualifications for tax credit employee stock ownership plans - Prohibited allocations of securities in an S corporation (2001) – Section 409(p) was added to the code in 2001. For S corporation ESOPs in existence on March 14, 2001, Section 409(p) is effective for plan years beginning after December 31, 2004.
IRS Announcement 2005-80, 2005-2 I.R.B. 967 – Settlement Initiative – Management S Corporation ESOP Transactions (Transactions where the taxpayer has claimed that it is entitled to exclude income of an operating business by asserting, incorrectly, that the taxpayer had established, on or before March 14, 2001, an employee stock ownership plan entitled to an exemption from unrelated business income and an S corporation that is a management corporation, and whatever actions that were taken to attempt to establish an employee stock ownership plan and a management S corporation were taken on or before March 14, 2001
IRS Revenue Ruling 2004-4, 2004-6 I.R.B. 414 – Prohibited Allocations of Securities in an S Corporation – Transactions that involve segregating the business profits of an employee stock ownership plan (ESOP)-owned S corporation in a qualified subchapter S subsidiary, so that rank-and-file employees do not benefit from participation in the ESOP
IRS Revenue Ruling 2003-6, 2003-3 I.R.B. 286 – Prohibited Allocations of Securities in an S Corporation – Certain arrangements involving the transfer of ESOPs that hold stock in an S corporation for the purpose of claiming eligibility for the delayed effective date of § 409(p)
IRC Section 409(p) Anti-Abuse Testing, History of Regulations, and Private Letter Ruling (PLR) 200804023
Missouri Building LLC v. Clark (In re Seferyn), B.A.P. 10th Cir., No. KS-07-094 (May 15, 2008)
California's Franchise Tax Board (FTB) Notice 2008-4 – Resolution of Certain ESOP Transactions

IRS Notice 2008-53 – Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Mon, 30 Jun 2008 15:04:00 +0000

Part III --- Administrative, Miscellaneous, and Procedural

IRS Notice 2008-53 – Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates

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 June 2008, and updates for interest rates for minimum present value determinations under 417(e)(3) of the Code for May 2008.

Related Links:

Employee Plans News - Summer 2008 Edition

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Sat, 28 Jun 2008 15:14:00 +0000

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

Steven T. Miller, TE/GE Commissioner, Speaks at Mid-Atlantic Benefits Conference;
Form 5307 Has Been Revised; We're Glad You Asked!;
The Corner of Forms & Pubs;
Critical Priorities...With Monika Templeman;
Maintaining Electronic Records for Employee Plans Team Audit (EPTA) Plans;
Form 5500 Filing Tips - Are You a Multiemployer Plan?;
Things to Remember - 2007 Forms 5500/5500EZ;
Web Spins;
Highlights of the Retirement News for Employers;
Employee Plans Published Guidance;
We Want You...to complete our Survey;
DOL Corner;
PBGC Insights;
Calendar of EP Benefits Conferences

The DOL Announces Disaster Relief after Severe Weather Hits

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Mon, 23 Jun 2008 23:52:00 +0000

The DOL announced an extension of the Form 5500 and Form 5500 EZ annual report/returns deadline after severe weather hits Colorado, Georgia, Mississippi, Missouri, Iowa, Indiana, Wisconsin, Maine, Arkansas, and Oklahoma:

DOL extends annual reports deadline after severe weather hits Colorado
DOL extends annual reports deadline after severe weather hits Georgia and Mississippi
DOL extends annual reports deadline after severe weather hits Missouri and Iowa
DOL extends annual reports deadline after severe weather hits Indiana and Wisconsin
DOL extends annual reports deadline after severe weather hits Maine
DOL extends annual reports deadline after severe weather hits Arkansas and Oklahoma

IRS Announcement 2008-56 – Change in Reporting Section 404(k) Dividends

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Tue, 10 Jun 2008 20:46:00 +0000

Part IV. – Items of General Interest

IRS Announcement 2008-56 – Change in Reporting Section 404(k) Dividends

Employee stock ownership plans; dividends; section 404(k); reporting. This announcement provides for a change in the reporting of dividends on employer securities that are distributed from an employee stock ownership plan under section 404(k) of the Code. Announcement 85-168 revoked.

Announcement 2008-56 states that beginning with distributions in 2009, the reporting of dividends on employer securities that are distributed from an employee stock ownership plan under section 404(k) of the Code must be on a Form 1099-R that does not report any other distributions.

New Reporting

Distributions from a plan that are made in 2009 or later years and that are § 404(k) dividends must be reported on a Form 1099-R that does not report any other distributions, in accordance with the instructions to the form. Accordingly, if there are other distributions from the plan in such years that are not § 404(k) dividends, they must be reported on a separate Form 1099-R. It is anticipated that the instructions will require a special code in box 7 of the form to indicate the special tax treatment and rollover restrictions applicable to § 404(k) dividends. Payments of § 404(k) dividends made directly from the corporation to the plan participants or their beneficiaries are reported on Form 1099-DIV in accordance with the instructions to that form.

Effect on Other Documents

Announcement 85-168 is revoked.

Related Links:

IRS Notice 2008-50 – Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Tue, 27 May 2008 15:00:00 +0000

Part III --- Administrative, Miscellaneous, and Procedural

IRS Notice 2008-50 – Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates

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 May 2008, and updates for interest rates for minimum present value determinations under 417(e)(3) of the Code for April 2008.

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Retirement News for Employers - Spring 2008 Edition

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Fri, 23 May 2008 19:54:00 +0000

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

EP Connections: Interview with Joyce Kahn - New Law...Help for the Small Employer
Desk Side Chat with Monika Templeman - What Do I Do if My Plan is Selected for an Examination?
New on the Web; We're Glad You Asked!
ERPA is Picking Up Speed
Product Profile - 401(k) Fix-It Guide - Online Resource
Written Plan Requirement for 403(b) Plans
This Way to the Forums
Recent Guidance
DOL News
Fixing Common Plan Mistakes - Hardship Distributions in a 401(k) Plan
Mark Your Calendar
Timing is Everything Flyer.

IRS Announcement 2008-44 – Relief for Recipients of Certain Direct Deposits of 2008 Economic Stimulus Payments

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Mon, 19 May 2008 18:25:00 +0000

Part IV. – Items of General Interest

IRS Announcement 2008-44 – Relief for Recipients of Certain Direct Deposits of 2008 Economic Stimulus Payments

Economic stimulus payment; direct deposit; tax favored account. This announcement provides that individuals who have payments made by direct deposit under the Economic Stimulus Act of 2008 to their IRAs or certain other accounts afforded special tax benefits under the Code may remove the payments without incurring any adverse tax consequences.

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IRS allows tax-free withdrawal of “Economic Stimulus Payments” from IRAs

Governmental Plans Roundtable (April 22, 2008)

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Fri, 09 May 2008 22:42:00 +0000

The IRS released Employee Plans News - Special Edition, May 2008 which discussed the Governmental Plans Roundtable held on April 22, 2008:

IRS Employee Plans hosted a Governmental Plans Roundtable on April 22, 2008 for members of the governmental plans community to begin a dialogue on how to best ensure that these plans satisfy the applicable qualification requirements while also identifying and addressing those unique issues that raise special challenges for governmental plans. See March 2008 Special Edition of the Employee Plans News announcing the Roundtable and the Spring 2008 Edition of the Employee Plans News for comments from the TE/GE Division Commissioner on the Roundtable.

The following sessions were presented at the Roundtable:

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Governmental Plans web page

Report Of The Working Group On Participant Benefit Statements

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Wed, 07 May 2008 13:09:00 +0000

The DOL released the Report Of The Working Group On Participant Benefit Statements. The report was produced by the ERISA Advisory Council’s Working Group on Participant Benefits Statements and included the following primary recommendations to the Secretary of Labor for consideration:

Recommendation 1: The Department should provide longer due dates for defined benefit plan benefit statements, dates that recognize the time it takes to accumulate details of participant data necessary to calculate all participants' accrued benefits, and that recognize differences in accumulating data. Further, the Department should provide a means for obtaining relief from the due dates for those defined contribution plans with non-participant directed assets that cause delays in obtaining complete data because of the timing of determination of plan assets, such as contributions and asset valuation, participant compensation, and other matters inherent in the plan.

Recommendation 2: The Department should convene a Task Force of benefit statement stakeholders to develop the content of a model statement. The view of the Working Group is that the content should be minimized, including only that required by the statute. The model statement should be crafted in a way to inspire sponsors to add information and education. In that regard, the Working Group recommends including the application of IB 96-1 to the benefit statement to clearly communicate the boundaries of the information and education that could be included in benefit statements without crossing the "advice" threshold.

Recommendation 3: The Department of Labor should promulgate regulations that preserve the multi-document option for the benefit statement. Further, the Department of Labor should update its regulations regarding electronic communication to a "reasonable access" standard as in the Department of Treasury safe harbor regulation in recognition of the continued advancement in web-based communication and the increase in its use by participants.

The Report included the following sections:

Executive Summary
Introduction
Prior Law and Regulations, New Law, and Initial Guidance
Scope of the Working Group's Paper and Questions Distributed to Potential Witnesses
Concerns of the Department of Labor, Participants, Plan Sponsors and Service Providers
Working Group's Observations, Discussions and Recommendations
Summaries of the Speakers and Written Testimony
Additional Information Sources

History of New Rules and Regulations

Prior to the PPA, Prior law under ERISA §105 required the plan administrator to provide, only upon request, benefit statements to participants and beneficiaries; no more than one statement was required during a 12-month period. The information required to be furnished included the total accrued benefits and the total vested accrued benefits (or the earliest date on which benefits would become vested). Under ERISA §209, participants who terminated service with the employer or incurred a one-year break-in-service were required to receive a benefit statement. Prior law made no distinction as to the benefit statement requirements between defined benefit and defined contribution plans.

Under the new rules (as provided by the PPA), effective for plan years beginning in 2007 (with a delayed effective date for collectively bargained plans), automatic benefit statements are now required. The time period and the information furnished on the statements vary depending on the type of plan, including tri-annually for defined benefit plans (except that defined benefit plans may elect an alternative notice provision and continue to make statements available annually upon request), annually for non-participant directed defined contribution plans, and quarterly for participant directed defined contribution plans.

Pension Protection Act of 2006 (PPA) (Public Law 109–280—Aug. 17, 2006) - charges the DOL with designing model notices for plan sponsors, and authorizes the DOL to issue interim guidance prior to the model notices.
DOL FAB 2006-03 Periodic Pension Benefit Statements - PPA (Dec 20, 2006) - In December 2006, the DOL issued Field Assistance Bulletin No. 2006-03, providing guidance on good faith compliance with the new rules, which included establishing a 45-day day time period for furnishing the required statements.
DOL FAB 2007-03 Periodic Pension Benefit Statements for Non-Participant Directed Individual Account Plans - In Field Assistance Bulletin No. 2007-03, the DOL relaxed the 45-day time period for individual account plans that are not individually directed and provided that the timing for benefit statements for such plans be coordinated with the filing for the plan's Form 5500.

It is expected that the DOL through regulations will specify which plans are covered; the required content for the participant benefit statements; frequency of disclosure, as well as required due dates for compliance and periods of coverage; form of furnishing statements; and mode of delivery.

The Working Group Report was also discussed in DOL Working Group Ideas for Benefit Statements.

IRS Form 5500 Filing Update Web Cast

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Sat, 03 May 2008 02:13:00 +0000

The DOL announced that they are hosting a Web Cast on the IRS Form 5500 reporting requirements on May 8:

Washington – The U.S. Department of Labor's Employee Benefits Security Administration (EBSA) will host a free web cast May 8 to help employers and plan administrators understand and comply with the Form 5500 Series reporting requirements under the Employee Retirement Income Security Act (ERISA).

This second in a series of web casts will help employers and plan administrators meet their obligations under ERISA to file timely and accurate financial reports on the operations of pension, health and other benefit plans. The web cast will address ways to avoid common filing errors, how to select the accountant best qualified to audit your plan, what to be aware of when reporting alternative investments, and rules on "blackout notices." It will also provide important information to 403(b) plan sponsors to help them prepare for expanded filing requirements, and preparing for an audit of the plan. The Internal Revenue Service will participate in the event to discuss its late and stop-filer program.

The series is being offered as part of EBSA's compliance assistance program – Getting It Right - Know Your Fiduciary Responsibilities – to help employers and plan administrators meet their fiduciary responsibilities and avoid potential civil penalties under the law.

This event is open to news media.

What: Web cast on Form 5500 reporting requirements
Who: Employers and plan administrators
When: May 8, 2008, Noon to 2 p.m. EST
Where: Live over the Internet at the URL below
How: Registration is required and available on a first-come, first-served basis. Visit EBSA's Web site at www.dol.gov/ebsa and click "Plan Filing Update Web cast" under "Compliance Assistance Seminars."
More Information: Call 202.693.8660

Here is a link to the Plan Filing Update Web Cast, the second in the series of webcasts. The first web cast, Know Your Fiduciary Responsibilities – An Update on Pension Protection Act and Related Guidance for Practitioners, is online and archived from the December 6, 2007 webcast.

Treasury Regulation REG-104946-07 – Hybrid Retirement Plans; Correction

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Fri, 02 May 2008 20:40:00 +0000

26 CFR Part 1

[REG-104946-07]

RIN 1545-BG36

Treasury Regulation REG-104946-07 – Hybrid Retirement Plans; Correction

IRS Issues a Correction to the Proposed Cash Balance Regs

The IRS issued a correction to the Proposed Regulations on Hybrid Retirement Plans, commonly known as the proposed cash balance plan regulations, which the Service issued on December 27, 2007. Besides correcting a few grammatical errors, the IRS has made a significant change in Proposed Treas. Reg. section 1.411(a)(13)-1.

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