The IRS published Retirement News for Employers - Special Edition, December 2008:
This Special Edition discusses the release of Notice 2009-3 which extends the deadline for 403(b) plan sponsors to adopt new written plans or amend their existing written plans from January 1, 2009, to December 31, 2009.
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The IRS released Employee Plans News - Winter 2009 Edition. It contains the following articles:
Part III --- Administrative, Miscellaneous, and Procedural IRS Notice 2008-115 – Reporting and Wage Withholding Under Internal Revenue Code § 409A Notice 2008-115 provides guidance to employers and payers on their reporting and wage withholding requirements for calendar year 2008 with respect to deferrals of compensation and amounts includible in gross income under section 409A of the Internal Revenue Code. In addition, this notice provides guidance to service providers on their income tax reporting and tax payment requirements with respect to amounts includible in gross income under section 409A. Blog Posts: Related Links:
Notice 2008-115 will appear in IRB 2008-52, dated December 29, 2008.
Part III --- Administrative, Miscellaneous, and Procedural IRS Notice 2008-113 – Relief and Guidance on Corrections of Certain Failures of a Nonqualified Deferred Compensation Plan to Comply with § 409A(a) in Operation Notice 2008-113 gives taxpayers the ability to correct certain operational failures to comply with section 409A of the Internal Revenue Code,, or to limit the amount of additional taxes due to the failure to comply with section 409A. Section 409A provides rules governing the taxation of nonqualified deferred compensation plans. The notice expands upon and clarifies the program announced last year in Notice 2007-100, 2007-52 IRB 1243. TABLE OF CONTENTS I. Purpose II. Background III. Eligibility Requirements A. In General B. Avoidance of Recurrence of Operational Failures C. Relief not Available to Service Providers Under Examination D. Additional Eligibility Requirements E. Required Repayments by the Service Provider F. Eligibility for Relief for a Taxable Year in which the Service Recipient Experiences a Financial Downturn or Other Financial Issue G. Definition of Insider H. Determining Certain Periods of Days I. Adjustments for Earnings and Losses J. References to the Internal Revenue Code IV. Corrections of Certain Operational Failures in the Same Taxable Year as the Failure Occurs A. Failure to Defer Amount or Incorrect Payment of Amount Payable in a Subsequent Taxable Year Corrected in the Same Taxable Year as the Failure B. Incorrect Payment of Amount Payable in Same Taxable Year or Incorrect Failure to Defer Amount or Incorrect Payment of Amount Payable in a Subsequent Taxable Year Corrected in the Taxable Year Immediately Following the Failure C. Incorrect Payment of Amount Payable in Same Taxable Year or Incorrect Payment in Violation of § 409A(a)(2)(B)(i) Corrected During Subsequent Taxable Year D. Excess Deferred Amount Corrected in the Taxable Year Immediately Following the Year of the Failure E. Correction of Exercise Price of Otherwise Excluded Stock Rights VI. Relief for Certain Operational Failures Involving Limited Amounts A. In General B. Failure to Defer Limited Amount not Corrected in the Same Taxable Year and Certain Erroneous Payments of Limited Amounts C. Limited Excess Deferred Amount not Corrected in the Same Taxable Year VII. Relief for Certain Other Operational Failures A. General Requirements B. Failure to Defer Amount not Corrected in the Same Taxable Year and Certain Erroneous Payments C. Incorrect Payment of Amount Payable in Same Taxable Year or Incorrect Payment in Violation of § 409A(a)(2)(B)(i) not Corrected in the Same Taxable Year as the Failure D. Excess Deferred Amount not Corrected in the Same Taxable Year VIII. Special Transition Rule for Non-Insiders IX. Information and Reporting Requirements A. Information Required with Respect to Correction of an Operational Failure in the Same Taxable Year as the Failure Occurs B. Information Required with Respect to Relief for Certain Operational Failures X. Effect on Other Documents XI. Request for Comments XII. Paperwork Reduction Act XIII. Drafting Information Blog Posts: Related Links:
Notice 2008-113 will appear in IRB 2008-51, dated December 22, 2008
The DOL recently issued guidance on fidelity bonding: Washington – The U.S. Department of Labor's Employee Benefits Security Administration (EBSA) today released Field Assistance Bulletin (FAB) 2008-04, which provides guidance to the agency's national and regional offices on the fidelity bonding requirements under section 412 of the Employee Retirement Income Security Act (ERISA). Section 412 of ERISA requires all persons, including fiduciaries, who handle funds or other property of an employee benefit plan (otherwise referred to as plan officials) to be bonded in accordance with section 412 and the department's regulations unless they are covered by an exemption. Each plan official is required to be bonded for at least 10% of the amount he or she handles, but in no event less than $1,000. The maximum bond amount required under section 412 with regard to any one plan is $500,000 per plan official, or $1 million per plan official in the case of a plan that holds employer securities. EBSA investigators frequently confront fidelity bonding questions during their examinations of ERISA plans. FAB 2008-04 was developed to address these issues and is presented in a question-and-answer format consisting of 42 frequently asked questions (FAQs). The guidance in the FAB covers a variety of issues related to compliance with ERISA's fidelity bonding requirements, including, among other things: whether a bond may use an omnibus clause to name insured plans; how to calculate the bond amount when multiple plans are covered under a single bond; whether the $1 million bond maximum applies in the case of plans that hold employer securities solely as a result of investments in pooled investment funds; and whether third party service providers are subject to the bonding requirements if they handle plan funds. FAB 2008-04 Background ERISA section 412 and related regulations (29 C.F.R. § 2550.412-1 and 29 C.F.R. Part 2580) generally require that every fiduciary of an employee benefit plan and every person who handles funds or other property of such a plan shall be bonded. ERISA's bonding requirements are intended to protect employee benefit plans from risk of loss due to fraud or dishonesty on the part of persons who "handle" plan funds or other property. ERISA refers to persons who handle funds or other property of an employee benefit plan as "plan officials." A plan official must be bonded for at least 10% of the amount of funds he or she handles, subject to a minimum bond amount of $1,000 per plan with respect to which the plan official has handling functions. In most instances, the maximum bond amount that can be required under ERISA with respect to any one plan official is $500,000 per plan. Effective for plan years beginning on or after January 1, 2007, however, the maximum required bond amount is $1,000,000 for plan officials of plans that hold employer securities.(1) Since enactment of ERISA, the Agency has provided various forms of guidance concerning the application of ERISA's bonding requirements. Over the past several years, however, a number of questions have been raised by our Regional Offices and others concerning the bonding rules. In addition, amendments to section 412 that were enacted in the Pension Protection Act of 2006 (PPA) have presented questions concerning the application of those changes to plan fiduciaries and other persons handling plan funds or other property. This Bulletin provides guidance, in a question and answer format, for our Regional Offices concerning the application of ERISA's bonding requirements and the PPA changes thereto. This Bulletin is not intended to address any civil or criminal liability that may result from losses to a plan caused by acts of fraud or dishonesty or violations of ERISA's fiduciary provisions. Questions And Answers ERISA Fidelity Bonds Q-1: What losses must an ERISA bond cover? Exemptions From The Bonding Requirements Q-12: Do ERISA's bonding requirements apply to all employee benefit plans? Funds Or Other Property Q-17: What constitutes "funds or other property" of the plan? Handling Funds Or Other Property Q-18: What does it mean to "handle" funds or other property of an employee benefit plan so as to require bonding under section 412? Form And Scope Of Bond Q-22: Do the regulations require that a bond take a particular form? Bond Terms And Provisions Q-26: Can a bond provide that the one-year "discovery period" required under section 412 will terminate upon the effective date of a replacement bond? Amount Of Bond Q-35: How much coverage must the bond provide?
Q-2: Is an ERISA fidelity bond the same thing as fiduciary liability insurance?
Q-3: Who are the parties to an ERISA fidelity bond?
Q-4: Can I get an ERISA bond from any bonding or insurance company?
Q-5: Who must be bonded?
Q-6: Who is responsible for making sure that plan officials are properly bonded?
Q-7: Must all fiduciaries be bonded?
Q-8: Must service providers to the plan be bonded?
Q-9: Must a person who renders investment advice to a plan be bonded solely by reason of rendering such investment advice?
Q-10: If a service provider is required to be bonded, must the plan purchase the bond?
Q-11: If the plan purchases a bond to meet section 412's requirements, may the plan pay for the bond out of plan assets?
Q-13: What plans are considered "unfunded" so as to be exempt from ERISA's bonding requirements?
Q-14: Are fully-insured plans "unfunded" for purposes of ERISA's bonding requirements?
Q-15: Are there any other exemptions from ERISA's bonding provisions for persons who handle funds or other property of employee benefit plans?
Q-16: Are SEPs and SIMPLE IRAs subject to ERISA's bonding requirements?
Q-19: If the plan provides that a plan committee has the authority to direct a corporate trustee, who has custody of plan funds, to pay benefits to plan participants, are the committee members "handling" plan funds or property?
Q-20: If the committee makes investment decisions for the plan, are the committee members "handling" plan funds or other property?
Q-21: Are the committee members considered to be "handling" funds if the committee only recommends investments?
Q-23: Can a bond insure more than one plan?
Q-24: If the bond insures more than one plan, can a claim by one plan reduce the amount of coverage available to other plans insured on the bond?
Q-25: Can a plan or service provider obtain bonds from more than one bonding company covering the same plan or plans?
Q-27: Can a bond exclude coverage for situations where an employer or plan sponsor "knew or should have known" that a theft was likely?
Q-28: My plan cannot obtain a bond covering a certain plan official who allegedly committed an act of fraud or dishonesty in the past. What should the plan do?
Q-29: If an employee benefit plan is added as a named insured to a company's existing crime bond, which covers employees but specifically excludes the company owner, does the plan's coverage under the crime bond satisfy the requirements of section 412?
Q-30: Can the bond have a deductible?
Q-31: Must the plan be named as an insured on the bond for the bond to satisfy ERISA's requirements?
Q-32: Can bonds use an "omnibus clause" to name plans as insureds?
Q-33: May a bond be written for a period longer than one year?
Q-34: If a bond is issued for more than one year, is it acceptable to use an ERISA "inflation guard" provision with regard to the amount of the bond?
Q-36: Can a bond be for an amount greater than $500,000, or $1,000,000 for plans that hold employer securities?
Q-37: If a person handles only $5,000 in one plan, so that 10% of the funds he handles is only $500, can the bond be in the amount of $500?
Q-38: Is every plan whose investments include employer securities subject to the increased maximum bond amount of $1,000,000?
Q-39: Must a bond state a specific dollar amount of coverage?
Q-40: My company's plan has funds totaling $1,000,000, and nine employees of the plan sponsor each handle all of those funds. If all nine employees are covered under the same bond, for what amount must the bond be written?
Q-41: What happens if the amount of funds handled increases during the plan year after the bond is purchased—must the bond be updated during the plan year to reflect the increase?
Q-42: How can the plan set the bond amount if there is no preceding plan year from which to measure the amount of funds each person handled?
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The IRS released Retirement News for Employers - Fall 2008 Edition. It contains the following articles:
The IRS published Employee Plans News - Special Edition, November 5, 2008:
This Special Edition discusses the IRS modifying the filing cycle for governmental plans under the staggered remedial amendment program. In addition, this edition talks about the initial guidelines released on Rollovers as Business Startups (ROBS). Some other items of interest included in this edition are 2009 Retirement Plans Limits Announced; List of Recent Guidance that May Require Interim or Discretionary Amendments; and 403(b) Phone Forum - December 4, 2008.
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
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.
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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
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.
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The IRS released Employee Plans News - Fall 2008 Edition. It contains the following articles:
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
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:
The DOL announced that it has updated its website to give plan sponsors a way to provide updated contact information for hurricane victims:
WASHINGTON — The U.S. Department of Labor's Employee Benefits Security Administration (EBSA) today updated its Web site to give sponsors of retirement, health and other benefit plans a way to update their contact information following the disruption of operations due to Hurricanes Gustav and Ike. This information will allow employees, plan participants and their families, as well as the many support organizations that assist victims of the hurricanes, to reach plan administrators with questions and information related to their benefits.
Employers are encouraged to update their contact information with the department if it has changed. The Web site includes a searchable database that lists pre-hurricane contact information taken from the Form 5500 Annual Reports filed previously by all employee benefit plans located in the affected disaster areas. The Web site allows employers to verify existing information or provide updated contact information — including post-hurricane addresses and phone numbers — that will be entered into this database for public use.
Employers/plan sponsors that wish to update or correct their contact information included on this site may do so by calling 866-444-EBSA (3272) toll-free or by submitting a Verification of Contact Information Form found on the Web site.
Employees/plan participants who need to locate their employer/plan sponsor may search the database at www.dol.gov/ebsa or contact a benefits advisor for assistance at 866-444-EBSA (3272). EBSA benefits advisors can retrieve information for those who do not have access to a computer and are available to answer questions related to benefits issues.
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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: The Three Regulatory Initiatives
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.
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.
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