Total Articles: 21
IRS Announces Pilot Program for Large Companies and Their Retirement Plans
Last week, at a Joint Meeting of the IRS's top officials with ERISA/tax attorneys and accountants from across the country, the IRS announced a pilot program that targets companies with at least 2,500 participants. Colleen Patton, the IRS's Area Manager for the Pacific Coast, says the pilot program has rolled out in her region, and the IRS expects to expand the program across the nation's remaining four geographic areas (Northeast, Mid-Atlantic, Great Lakes, and Gulf Coast).
The IRS Reduces Its Program for Requesting Tax Status Determination Letters
On January 3, 2012, the Internal Revenue Service (IRS) issued Revenue Procedure 2012‑6, which formally changes and eliminates certain features of its determination letter program for qualified retirement plans. According to an earlier announcement of these changes (in IRS Announcement 2011-82), the IRS concluded that the features being eliminated are “of limited utility to plan sponsors in comparison with the burdens they impose.” However, the changes will significantly restrict the determination letter service on which plan sponsors could previously rely for establishing plan qualification.
Qualified Retirement Plan Year-End Reminders
Before year-end, sponsors of tax qualified pension, profit sharing, 401(k) or 403(b) plans should take time to ensure that each plan is compliant with a variety of statutory and regulatory requirements. To determine what, if any, action is needed to maintain compliance, plan sponsors should review, at a minimum, the following checklist:
Think Your Employee's Divorce is a Sham to Get at Retirement Benefits? Don't Out-Think Yourself
On Monday, the Fifth Circuit issued its opinion in Brown v. Continental Airlines, Inc., 2011 WL 2780505 (5th Cir.), a rather unusual case addressing what a plan administrator’s obligations are with respect to a Qualified Domestic Relations Order (QDRO) when the plan administrator thinks the underlying divorce that produced the order was a sham.
The End of the First Five-Year Determination Letter Cycle Is Approaching for Qualified Retirement Plans
Every individually-designed qualified retirement plan has a five-year fixed, regular remedial amendment cycle, which begins in different years for different plans, depending on the last digit of the plan sponsor's employer identification number (EIN). Each plan has a corresponding five-year determination letter cycle (A-E). Plan sponsors have to retroactively amend their plans by the end of the five-year cycle to comply with applicable legislative and regulatory changes. A favorable determination letter is valid only until the end of the plan's five-year determination letter cycle. The chart below shows the remedial amendment cycle schedule for single employer individually designed plans. Plan sponsors should take note that the end of the first five year cycle is six months away (i.e., Jan. 31, 2012) for any plan in Cycle A that has a one or a six as the last digit of their EIN.
Early Retiree Reinsurance Program Closes
The government will no longer be accepting applications for the Early Retiree Reinsurance Program (ERRP) after May 5, 2011. ERRP offers reimbursements to employers that have early retiree healthcare plans. For an employer’s health insurance plan to qualify for the reimbursements available under the Early Retiree Reinsurance Program, the employer’s plan must include provisions that generate (or have the potential to generate) cost savings for participants with chronic and high-cost conditions.
IRS Seizing Retirement Benefits!
IRS seizure of retirement benefits can occur under certain circumstances. The IRS has the authority, generally under Section 6331 of the Internal Revenue Code (Code), to do so in order to satisfy a federal tax lien for taxes due. There is a very limited group of retirement benefits which are exempt from these tax levies, such as for special retirement benefits provided to recipients of military Medals of Honor. See generally Code Section 6334(a)(6). Most retirement plan administrators are accustomed to the idea that pre-distribution retirement plan benefits are generally not subject to the claims of creditors of the plan participants, except in the case of a qualified domestic relations order or perhaps in cases of a participant's theft from plan assets. Although not specifically addressed by many plan documents, there is a further exception allowing the federal government to levy on retirement benefits to satisfy a federal tax lien.
DOL Issues New Fee Disclosure Rules for Retirement Plans.
The Department of Labor has issued interim final rules that require certain types of ERISA retirement plan service providers to disclose specific fee information directly to plans. Covered service providers must comply with the disclosure requirements in these final rules in order for such service providers contracts or arrangements with plans (including the fees paid by plans under these arrangements) to be considered "reasonable" as required under ERISA. More specifically, these rules are intended to provide retirement plan fiduciaries with a more complete picture of service provider fee structures so as to enable plan fiduciaries to prudently select and monitor such service providers.
Early Retiree Reinsurance Program Draft Application, Instructions and FAQs Available; Final Application Expected Late June 2010.
Designed to address the decline in the number of employers providing health coverage to early retirees, the Early Retiree Reinsurance Program reimburses participating employment-based plans for a portion of health benefit costs for early retirees and their spouses, surviving spouses, and dependents. An early retiree is a non-active employee who is at least 55 years old and not yet eligible for Medicare. The program covers self-funded and insured plans, including plans sponsored by private employers, governmental employers, unions, and other employers.
Retiree Reinsurance Program Regulations Issued.
The Patient Protection and Affordable Care Act (PPACA) contained a new retiree reinsurance program for employers providing group health insurance coverage to early retirees. The Department of Health and Human Services has issued interim final rules that go into effect June 1, 2010. Under the program, employers who provide health insurance for early retirees may be reimbursed for 80% of the costs incurred and paid under the group health coverage for health benefits between $15,000 and $90,000 during the plan year. Applications for the program will become available in June, and because claims will be processed in the order in which they are received (and because the amount of funds made available for the program is limited to $5 Billion), employers should act quickly to claim their share of these funds. The program will expire on January 1, 2014, or the date the $5 Billion allocated for the program is depleted, if earlier.
Retiree Reinsurance Regulations Issued: Program Effective June 1, 2010.
On May 4th, the Department of Health and Human
Services (HHS) issued interim final regulations
relating to the retiree reinsurance program (the
Program) that was contained in the Patient
Protection and Affordable Care Act (the Act).
Retirement Plan Dollar Limits Remain Unchanged for 2010
On October 15, 2009, the Internal Revenue Service announced the dollar limits applicable for qualified retirement plans effective January 1, 2010. As you will see, all of the limits remain unchanged from 2009.
IRS Publishes Updated Notices for Retirement Plan Rollover Distributions.
IRS Publishes Updated Notices for Retirement Plan Rollover Distributions.
New Guidance (and Solid Reasoning) from the Courts.
Two recent court decisions, one by the U.S. Supreme Court and the other by the Sixth Circuit Court of Appeals, have provided employers, plan sponsors, and plan administrators with valuable guidance regarding two of the pressing issues in benefits: retiree health care and the distribution of death benefits. Both of these cases point to the need for employers and plan sponsors to take care in the design of their plans and the terms of other documents (i.e., collective bargaining agreements) that may have a substantial impact on the administration of benefit plans.
Congress Provides Seniors With Limited Retirement Account Relief.
Last week, Congress passed the Worker, Retiree and Employer Recovery Act of 2008 (the "Act"), which, when signed by the President (it has not been signed as of the time of this writing), will help reduce part of the financial burden facing seniors who have seen their retirement savings shrink dramatically over the past several months. The Act includes a provision that would allow individuals who have reached age 70-1/2 to avoid "locking in" investment losses by withdrawing funds that they are required by law to withdraw.
Benefits Alert for 2008: New Retiree Health Insurance Help for Employers (pdf).
On December 26, 2007, the Equal Employment Opportunity Commission published a final rule that affords significant flexibility for employers who want to continue their long-standing practice of coordinating benefits with Medicare for the retired workforce.
EEOC Publishes Final Rule Permitting Employers to Coordinate Retiree Health Benefits with Medicare.
The Equal Employment Opportunity Commission (EEOC) has published its final rule permitting employers to coordinate retiree health benefits with eligibility for Medicare or comparable state health benefits programs. See 29 CFR Parts 1625 and 1627. Specifically, the rule creates a narrow exemption from the Age Discrimination in Employment Act (ADEA) for such plans. The rule does not otherwise affect an employer's ability to offer health or other employment benefits to retirees, consistent with the law.
3rd Circuit Decision Greenlights Changes To Retiree Health Plans.
Employers and retirees may have finally gotten the green light to design retiree health plans and early retirement incentive programs to take advantage of the retirees' eligibility for Medicare benefits. On June 4, 2007, the U.S. Court of Appeals for the Third Circuit issued a long awaited ruling holding that EEOC's 2003 proposed regulations allowing employers to design their retiree health plans to coordinate with Medicare, were valid.
Employee Plans Compliance Resolution System Updated (pdf).
A retirement plan that is intended to satisfy
the requirements of Internal Revenue Code
(Code) Section 401(a), may discover that it
has inadvertently failed to meet one or more of those
requirements.
Phased Retirement Regulations Proposed (pdf).
The IRS recently released proposed regulations that will
permit phased retirement programs if certain requirements
are satisfied.
Redefining Retirement in the 21st Century.
This article focuses on pension planning as it relates to employment trends among both younger and older workers.
