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

• News Release
• DOL Final Regulation - Statutory Exemption for Cross-Trading of Securities
• DOL Final Regulation - Statutory Exemption for Cross-Trading of Securities [PDF]

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.

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.

Related Links

• News Release
• Pension Plan Actuarial Information Search
• DFVCP Penalty Calculator and Online Payment

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.

Related Links:

• IRS Notice 2008-69, 2008-34 I.R.B. 419 (August 25, 2008) – for Weighted Average Interest Rates, Yield Curves, and Segment Rates [PDF]
• IRS Notice 2008-69, 2008-34 I.R.B. 419 (August 25, 2008) – for Weighted Average Interest Rates, Yield Curves, and Segment Rates [HTML]
• 2008-34 I.R.B. 419 (August 25, 2008)

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.

Related Links

• News Release
• DOL Web Site Assists Hurricane Victims in Locating Employee Benefit Plan Sponsors
• Verification of Contact Information Form
• Disaster Affected Employer Search

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

• DOL Proposed Regulation – Fiduciary Requirements for Disclosure in Participant-Directed Individual Account Plans (July 23, 2008) – The centerpiece of this regulation is the Model Comparative Chart.
  
• DOL Proposed Regulation - Reasonable Contract or Arrangement Under Section 408(b)(2)--Fee Disclosure (December 13, 2007) – This regulation required disclosure of services and compensation and conflicts of interest, and also discussed ongoing disclosure obligations.
  
• DOL Final Regulation - Annual Reporting and Disclosure (November 16, 2007) – This regulation expanded the information reported on Schedule C.

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.

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

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:

• IRS Notice 2008-62 – Interim Guidance on the Application of § 457(f) to Certain Recurring Part-Year Compensation

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:

• News Release
• DOL Proposed Regulation – Investment Advice – Participants and Beneficiaries [PDF]
• DOL Proposed Class Exemption for the Provision of Investment Advice to Participants and Beneficiaries of Self-Directed Individual Account Plans and IRAs [PDF]
• U.S. Department Of Labor Report To Congress

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

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:

• IRS Revenue Procedure 2008-50, 2008-35 I.R.B. – Closing agreements (September 2, 2008) [HTML]
• IRS Revenue Procedure 2008-50, 2008-35 I.R.B. – Closing agreements (September 2, 2008) [PDF]
• 2008-35 I.R.B. (September 2, 2008)
  
  

• Employee Plans News - Special Edition, August 14, 2008
• Retirement News for Employers - Special Edition, August 14, 2008
• Employee Plans Compliance Resolution System (EPCRS)
• The Self-Correction Program (SCP)
• The Voluntary Correction Program (VCP)

• IRS Issues Corrections Program Update

Prior Regulations and Related Links:

• IRS Revenue Procedure 2006-27, Closing agreements [PDF]
• IRS Revenue Procedure 2003-44, Closing agreements [PDF]

• Diversification Timing Requirements and EPCRS
• Employee Plans Compliance Resolution System (EPCRS)

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

• IRS Revenue Procedure 2008-50 - Closing agreements
  

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:

• Employee Plans News - Special Edition, August 6, 2008
  
• Circular 230
  
• ERPA information page
  

• And the ERPA Contract Goes To……..

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:

• 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)

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

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:

• IRS Notice 2008-65, 2008-26 I.R.B. 1188 (July 28, 2008) – for Weighted Average Interest Rates, Yield Curves, and Segment Rates [PDF]
• IRS Notice 2008-65, 2008-26 I.R.B. 1188 (July 28, 2008) – for Weighted Average Interest Rates, Yield Curves, and Segment Rates [HTML]
• 2008-26 I.R.B. 1188 (July 28, 2008)

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

26 CFR Part 1

[REG–100464–08]

RIN 1545–BH50

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

Proposed regulations under section 411(b)(1) of the Code provide guidance on the application of the accrual rule for defined benefit plans under section 411(b)(1)(B) in cases where plan benefits are determined on the basis of the greatest of two or more separate formulas. A public hearing is scheduled for October 15, 2008.

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]
• Treasury Regulation - [REG–100464–08], 2008-32 I.R.B. 313 (August 11, 2008) – Accrual Rules for Defined Benefit Plans [PDF]
• Treasury Regulation - [REG–100464–08], 2008-32 I.R.B. 313 (August 11, 2008) – Accrual Rules for Defined Benefit Plans [HTML]
• 2008-32 I.R.B. 313 (August 11, 2008)

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

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:

• News Release
• DOL Proposed Regulation – Proposed Fee & Expense Disclosure Regulation [HTML]
• DOL Proposed Regulation – Proposed Fee & Expense Disclosure Regulation [PDF]
• Model Comparative Chart
• Fact Sheet

• Death to the Prospectus Requirement! The New 401(k) Participant Disclosures Rules
• Observations on DOL's Proposed Regulations Governing Disclosure Requirements for Participant-Directed Individual Account Plans
• Labor Department Proposes Dollar-Based 401(k) Fee Disclosure
• U.S. Pushes for Clearer Disclosure of 401(k) Fees
• EBSA Finishes Regulatory Package with Participant Disclosure Proposal
• Another Piece of the Extended Puzzle - Proposed DOL Regulations Reach to General Prudence Rules
• DOL Releases Proposed Fee Disclosure Regulations
• 401(k) proposal would clarify fees

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

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:

1. What is the purpose of this FAQ guidance?
   
2. 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?
   
3. 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?
   
4. 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?
   
5. Are the requirements to report indirect compensation on Schedule C different for participant-selected investments through "open brokerage" windows?
   
6. Are commissions paid to an agent in connection with the sale of an investment, product, or service to a plan reportable indirect compensation?
   
7. 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?
   
8. 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?
   
9. 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?"
   
10. 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?
    
11. Should float income on an account holding the assets of one plan be treated as direct or indirect compensation for Schedule C reporting purposes?
    
12. Will disclosure of float income sufficient to satisfy the guidance in Field Assistance Bulletin 2002-03 meet the requirements of the alternative reporting option?
    
13. What rules govern the determination of the services or providers included in the scope of a bundled arrangement for purposes of Schedule C reporting?
    
14. What is an example of fees that are required to be broken out regardless of whether they are part of a "bundle?"
    
15. 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?
    
16. 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?"
    
17. 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?
    
18. Must the service provider receiving "eligible indirect compensation" be the person who provides the disclosures needed to meet the alternative reporting option?
    
19. If more than one person provides the same required disclosure for eligible indirect compensation, must all persons providing the disclosure be identified?
    
20. When identifying the person who provided the required disclosures for the Schedule C alternative reporting option, must the name of an individual be provided?
    
21. Are insurance contract "wrap fees" considered "eligible indirect compensation" for purposes of the alternative reporting option on Schedule C?
    
22. 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?
    
23. Is the spread earned by a broker on principal transactions involving the plan "eligible indirect compensation?"
    
24. 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?
    
25. 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)?
    
26. 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?
    
27. What guidelines apply where service providers elect to provide an "estimate" of compensation?
    
28. 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?
    
29. 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?
    
30. 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?
    
31. Do the disclosures regarding "eligible indirect compensation" need to be provided at least annually in order for the alternative reporting option to be available?
    
32. Will post-trade confirmation serve as adequate written disclosure of brokerage fees and commissions for purposes of the alternative reporting option?
    
33. 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?
    
34. 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?
    
35. 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?
    
36. 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?
    
37. 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?
    
38. 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?
    
39. 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?"
    
40. 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

• News Release
• FAQs About The 2009 Form 5500 Schedule C

• DOL Issues FAQ Guidance on Revised Form 5500 Schedule C Disclosure Requirements
• DOL Issues Form 5500 Schedule C "FAQs"
• DOL issues reprieve on new 5500 forms
• Now the DOL is FAQuing It - Having Fun with "Funds" on the Form 5500
• DOL's New Thinking on Schedule C

DOL Testifies About Employer-Sponsored IRAs

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

• IRC Section 408(p) – Individual retirement accounts
• JCX-53-08 - Present Law and Analysis Relating to Individual Retirement Arrangements
• GAO-08-590 - Individual Retirement Accounts - Government Actions Could Encourage More Employers to Offer IRAs to Employees
• Subcommittee on Select Revenue Measures - Hearing on Individual Retirement Accounts (IRAs) and their role in our retirement system

• Ways and Means Committee to Discuss IRAs
• Ways and Means Discussess How to Encourage Small Business Owners To Offer Retirement Savings Vehicles

Employee Plans News - Special Edition, July 1, 2008

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