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New Fiduciary Regulations Require Retirement Investment Advisers to Act in Clients' Best Interests

On April 14, 2015, the U.S. Department of Labor (DOL) issued new proposed regulations that changed the definition of “fiduciary investment advice” as currently found in DOL Regulation 2510.3-21(c). These proposed rules also formally withdraw the prior proposed regulations issued in 2010. According to the DOL, these latest proposed rules will improve the protections provided for persons saving for retirement by ensuring that fiduciaries provide advice that is in their clients’ best interests.

Department of Labor Issues Sweeping Fiduciary Rule Proposal

On April 14, 2015, the Department of Labor (DOL) released a proposal to re-define who is rendered a "fiduciary" of an employee benefit plan under the Employee Retirement Income Security Act (ERISA) by providing investment advice to a plan or its participants or beneficiaries. In a press release, Labor Secretary Thomas Perez described the sweeping proposal as follows: "This boils down to a very simple concept: if someone is paid to give you retirement investment advice, that person should be working in your best interest." Yet, the more than 120-page proposed rule is far from simple. Its requirements and impact on access to advice about retirement savings accounts are far from certain.

IRS Traded in Your Chevy for a "Cadillac (ac-ac-ac-ac-ac) Tax": Agency Issues First Guidance on the Implementation Code Section 4980I

On February 23, 2015, the Internal Revenue Service (IRS) issued the first piece of guidance that discusses the excise tax, better known as the “Cadillac Tax,” imposed by Section 4980I of the Internal Revenue Code of 1986, as amended, on employers that offer high-cost health coverage.

IRS Releases Final Regulations Clarifying Requirements under Section 162(m)

Section 162(m) of the Internal Revenue Code (IRC) and the regulations thereunder (Section 162(m)) subjects publicly held corporations to an annual $1 million deduction limit for compensation paid to certain covered employees. This deduction limit, however, does not apply to compensation that qualifies as performance-based compensation under Section 162(m) or that is paid following a corporation’s initial public offering (IPO) in accordance with the transition exception under Section 162(m).

Labor Department Proposes Fiduciary Conflict of Interest Rules — Again

On April 14, 2015, the U.S. Department of Labor (DOL) reissued the long-awaited re-proposal of its regulation expanding the definition of "fiduciary" under the Employee Retirement Security Act of 1974, as amended (ERISA), and prescribing stricter conflict-of-interest rules that will apply to relationships between such fiduciaries and their customers (mainly retirement plans and IRAs). Along with the proposed regulation, the DOL proposed two related Prohibited Transaction Class Exemptions (PTCE) and amendments to six existing PTCEs that will also apply to relationships between fiduciaries and their retirement plan customers (the proposed regulation and the PTCE's together, the "Proposal").

EBSA Issues Much-Anticipated Proposed Fiduciary Rule

On April 14, 2015 the Employee Benefits Security Administration unveiled its proposal to re-define who is rendered a "fiduciary" of an employee benefit plan under ERISA by providing investment advice to a plan or its participants or beneficiaries. According to the proposal's preamble, the revised regulations would treat those who provide investment advice or recommendations to an employee benefit plan, plan fiduciary, plan participant or beneficiary, IRA, or IRA owner as fiduciaries under ERISA "in a wider array of advice relationships than the existing ERISA and [Internal Revenue] Code regulations, which would be replaced."

Two-Year Preapproved Defined Contribution Plan Window is Still Open

Retirement plan vendors sponsoring defined contribution plan documents approved by the Internal Revenue Service (IRS) have begun issuing packages containing the new IRS-approved version of those documents—reflecting the Pension Protection Act and other required regulatory updates—to employers that use them. The packages generally include (1) the new basic plan document, (2) a corresponding adoption agreement, (3) the IRS opinion or advisory letter, (4) a new administrative service agreement, and (5) an administrative services manual (i.e., plan administration manual, plan operational manual, or set of plan procedures) that highlights how the recordkeeping firm or third-party administrator will operate the plan

Plan Sponsors Must Maintain Documentations for Hardship Distributions and Loans

In a recent “Employee Plan News” issued by the Internal Revenue Service (“IRS”), the IRS emphasized that plan sponsors are ultimately responsible for proper administration of their retirement plan and thus, must maintain documentation of hardship distributions and plan loans even if a third party administrator (“TPA”) handles these transactions. The IRS stated that a failure to provide these records during an IRS examination is a qualification failure that should be corrected using the Employee Plans Correction Resolution System (“EPCRS”).

Monthly Benefits Alert

Under the IRS’s Employee Plans Compliance Resolution System (EPCRS), retirement plan sponsors may voluntarily request that the IRS approve certain corrections to a variety of plan administration errors before those errors are discovered in an IRS audit. The IRS issued the most recent version of EPCRS in 2013 which sets forth a number of specific corrections and principles that plan sponsors may use when correcting for errors in plan form or operation. Recently, the IRS issued two revenue procedures containing modifications to its EPCRS program that will change a number of the correction principles that exist in its current program.

IRS Modifies Provisions of the Employee Plans Compliance Resolution System

With Revenue Procedure 2015-27, the IRS has made several modifications to the most recent restatement of The Employee Plans Compliance Resolution System (“EPCRS”) (found in Rev. Proc. 2013-12, 2013-4 I.R.B. 313). In general, the EPCRS sets forth a system of correction programs for sponsors of retirement plans that are intended to satisfy certain Internal Revenue Code (“Code”) sections, but have failed to meet those requirements for some period of time. EPCRS includes the Self-Correction Program (“SCP”), the Voluntary Correction Program (“VCP”) and the Audit Closing Agreement Program (“Audit CAP”).