Total Articles: 25
Imagine $34.3 Billion Contributed Into 401(k) Plans...
Yesterday's top story at CNNMoney was about how Americans will give up some $34.3 billion this year in vacation benefits, as they are not able to take advantage of the paid time off that their employers give them.
IRS Announces Adjusted Plan Limits for 2012
The Internal Revenue Service has announced the 2012 limits that affect the operation of tax-qualified retirement plans, including 401(k) plans, and certain other types of employee benefit plans, including deferred compensation plans that may be subject to Internal Revenue Code §409A. The amount by which the limits are adjusted each year is based on a cost of living index. Please see the accompanying table for the limits that are effective January 1, 2012.
DOL Finalizes Investment Advice Regulations
The Department of Labor’s Employee Benefits Security Administration (“EBSA”) recently issued final investment advice regulations (pdf) that are intended to make fiduciary investment advice more accessible for Americans who participate in 401(k)s and/or individual retirement arrangements (IRAs).
The Second Circuit's Adoption of the Moench Presumption of Prudence Provides "Accomodation" for Employers Facing Stock Drop Suits
A recent opinion from the United States Court of Appeals for the Second Circuit should reassure employers worried about employee lawsuits alleging the imprudence of investing in company stock through company retirement plans during unstable economic times. In recent years, the federal courts have heard an increasing number of these so-called “stock drop” cases (including many that have arisen as a result of the crash of the subprime mortgage market). Until now, the Second Circuit remained silent as to the decisive standard of review applicable to such claims.
Department of Labor Interim Guidance on Electronic Disclosure of Fee Information
In 2012, plan fi duciaries must provide 401(k) (and other defi ned contribution) plan participants more
detailed information regarding plan investments and the fees that affect their accounts. For calendar year
plans, the basic fee and investment related information (“Investment Information”) needs to be distributed
by May 31, 2012, and additional plan-related information (“Plan Information”) by August 14, 2012.
It’s Electric – DOL Issues Guidance on Electronic Disclosure Under Participant Fee Disclosure Regulations
Plan administrators can satisfy fiduciary requirements for disclosures concerning participant-directed individual account plans (the most common example being 401(k) plans) through the use of electronic media in certain circumstances, as described in a Technical Release issued by the U.S. Department of Labor (DOL) on September 13, 2011. Technical Release 2011-03 provides guidance on using electronic media for plan information disclosures in two situations: 1) when the information disclosed is included in a pension benefits statement; and 2) when the information is disclosed separately from a pension benefits statement. Plan administrators who make the required disclosures in accordance with the Technical Release will not be subject to enforcement action by the DOL. Notwithstanding this guidance, employers should watch out for future guidance as this is merely interim relief and final regulatory guidance is expected in the future.
What if Your 401(k) Plan Failed the ADP and ACP Tests?
Beware the IRS Ides of March.
401(k) Fee-Transparency and Disclosure Rule Published
The Department of Labor (DOL) has published a final rule setting forth the responsibilities of plan administrators to disclose certain information, including information regarding fees and expenses, to participants and beneficiaries in participant-directed individual account plans, including most 401(k) plans. The final rule was published in the October 20, 2010 Federal Register. Although the rule takes effect December 20, 2010, it is not applicable to a plan until its first plan year beginning on or after November 1, 2011. For calendar year plans, that would be January 1, 2012.
IRS Requires Certain 401(k) Plan Sponsors to Complete Compliance Questionnaire.
The Internal Revenue Service ("IRS") recently has begun sending out compliance check questionnaires to 1,200 randomly selected 401(k) plan sponsors. The questionnaire is intended to assist the IRS in identifying compliance areas where additional education, guidance and enforcement are needed.
IRS Creates 401(k) Compliance Questionnaire.
With a new compliance initiative, the Internal Revenue Service (IRS) has added another tool to assist the government in discovering non-compliant 401(k) plans. The IRS has created an electronic plan compliance questionnaire composed of nearly 70 questions that cover a broad range of compliance issues, such as the method of plan administration, participation rates, and nondiscrimination compliance. Recently, the IRS randomly selected 1,200 sponsors of 401(k) plans to complete the questionnaire.
IRS 401(k) Compliance Check Are You Ready?
Approximately 1,200 randomly selected 401(k) plan sponsors received letters, sent during the week of May 17, from the IRS Employee Plans Compliance Unit asking them to complete a 401(k) Compliance Check Questionnaire.
IRS Asking Employers To Answer 401(k) Questionnaire.
The IRS announced last week that it will be looking at 1,200 401(k) plans by way of a plan compliance questionnaire. Letters from the IRS are expected to go out at the end of May. An employer receiving a letter will be assigned a personal identification number (PIN) to use when filling out the questionnaire online. The employer has 90 days to complete the form, but can get an extension. Answering the questionnaire is "technically voluntary," but an IRS spokesperson made it clear that they want the information.
IRS Issues Proposed Relief for Safe Harbor.
On May 18, 2009, the IRS issued proposed regulations that would permit employers incurring a substantial business hardship to reduce or suspend required Safe Harbor Nonelective Contributions without losing their plans qualified status.
When a Safe Harbor becomes Unsafe.
The Internal Revenue Service this week issued proposed regulations that would permit the reduction or suspension of safe harbor nonelective contributions (SHC's) by an employer that sponsors a "safe harbor" 401(k) plan if the employer incurs a "substantial business hardship" (as described in the proposed regulations). This gives an employer an alternative to terminating its safe harbor plan just because it cannot afford to make a contribution. The proposed regulations would allow for the reduction or suspension of safe harbor nonelective contributions and safe harbor matching contributions under substantially identical rules.
Plan Amendments Done Right.
Employers wishing to reduce labor costs during these rough economic times may be considering eliminating matching contributions or other employer contributions to their tax qualified profit sharing and 401(k) plans. While its perfectly legal to make such changes, make sure that the plan documentation is properly and timely amended. Plan documentation includes the actual plan document, which can include both an adoption agreement and master plan document for prototype arrangements, and the Summary Plan Description.
Plan Loans under Truth-In-Lending Act.
The federal Truth in Lending Act ("TILA"), and the Federal Reserve Board's Regulation Z implementing TILA, are applicable to most employee benefit plans that have plan loan provisions, such as a "typical" 401(k) plan or 403(b) plan.
Labor Department Proposes New Disclosures of Fees and Expenses.
After much discussion, the Department of Labor (DOL) has proposed regulations that would require participant-directed plans, including most 401(k) plans, to provide participants with basic disclosures concerning the fees and expenses charged in connection with available investment alternatives, and in connection with administration of the plan. The DOLs concern is that plan participants often do not have access to complete information needed to make informed investment decisions. Specifically, the DOL has found that information on fees and expenses charged by fund managers and others is either not readily available or not easy to understand.
Youve Gotta Have Heart.
Last month President Bush signed into law the Heroes Earnings and Assistance and Relief Act of 2008 (HEART or the Heroes Act). The Act's provisions impact benefits under 401(k) plans. In addition, Health FSAs, group health plans, and cafeteria plans may also be impacted by some Heroes Act changes.
DOL Issues Guidance On Qualified Default Investment Alternatives.
Employers that have adopted a qualified default investment alternative (QDIA) for their 401(k) plans now have a new resource to help work through potential problems, including issues related to investments that predate the QDIA rules, the coordination of QDIA and other plan-related notices, grandfathered stable value funds, and so-called "round trip" restrictions.
Supreme Court Ruling Allows Individuals to Recover Individual 401(k) Account Losses.
Today, the U.S. Supreme issued its ruling in LaRue v. DeWolff, Boberg & Associates, Inc. The high court disagreed with the Fourth Circuit Court of Appeals' decision that a participant in a 401(k) plan is prohibited from using Section 502(a)(2) of the Employee Retirement Income Security Act (ERISA) to recover losses allegedly caused by his employer's failure to carry out his investment instructions. "Although [Section] 502(a)(2) does not provide a remedy for individual injuries distinct from plan injuries," the majority wrote, "that provision does authorize recovery for fiduciary breaches that impair the value of plan assets in a participant's individual account."
DOL Issues Final Regs On QDIA's.
Participant-directed accounts have become the norm in most 401(k) plans. But with the increase in the number of plans utilizing automatic enrollment features, plan fiduciaries should select a default investment for participants who fail to make an election.
New Automatic Enrollment Arrangement For 401(k) Plans.
If you are considering adding automatic enrollment for employees who have not signed up for the 401(k) plan, a new kind of automatic enrollment is available next year. Beginning January 1, 2008, a 401(k) plan can offer a "Qualified Automatic Contribution Arrangement" (QACA) which requires minimum levels of 401(k) deferrals and exempts the 401(k) plan from nondiscrimination and top heavy testing.
IRS Releases Sample Amendments For Roth 401(k) Plans (pdf).
Since January 1, 2006, employers who sponsor a
401(k) plan have had the option of including a
Roth contribution feature in the plan.
ERISA Compliance Alert: After-Tax Roth 401(k) Accounts Available in 2006 (pdf).
Beginning January 1, 2006, employers who sponsor 401(k) plans or 403(b) plans
will have another optional feature to consider adding to their plans: the Roth 401(k)
contribution.
Updated 401(k) Plan Regulations Finalized (pdf).
Updated final regulations were recently issued covering
401(k) plans. Pre-tax contributions made by 401(k) plan
participants are tested for discrimination each year under
the actual deferral percentage (ADP) test under
Section 401(k) of the Internal Revenue Code of 1986, as
amended (the "Code").
