IRS Issues First Required Amendments List for Qualified Plans

In a previous blog, we discussed the IRS’ elimination of its five year staggered determination letter cycle for individually designed plans.  The IRS recently provided guidance to help sponsors of individually designed plans keep their plans in compliance with applicable law.  Notice 2016-80 contains the first Required Amendments List (the “RA List”) for individually designed qualified retirement plans.  In general, the RA List is a list of changes in the plan qualification requirements for changes that became effective in 2016.  The list is divided into two parts—(A) changes in qualification requirements that would generally require an amendment to most plans  or to most plans of the type affected by the change and (B) changes that the IRS and Treasury anticipate will not require an amendment in most plans, but might require an amendment due to an unusual provision in a particular plan.  Read More ›

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Making a List, Checking it Twice

It’s that time of year when boys and girls start making their lists for the holidays, but we in the employee benefits world make a very different kind of list.  In the rapidly changing world of employee benefits and executive compensation law, a checklist can be particularly helpful to make sure important issues do not fall through the cracks.  Each year we publish an executive compensation checklist, a health and welfare plan checklist, and a qualified retirement plan checklist to help individuals stay apprised of changes in the law, changes that they might need to make to their employee benefits plans, and various notice requirements.  Read More ›

Posted in Employee Benefits, Executive Compensation, Health & Welfare Plans, Health Care Reform, Qualified Retirement Plans | Tagged , , , , , , ,

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IRS Announces 2017 Retirement Plan Dollar Limits

The IRS recently announced cost-of-living adjustments for 2017 in Notice 2016-62. The key dollar limits, along with last year’s limits, are noted below.

Maximum Qualified Retirement Plan Dollar Limits

  2016 2017
Limit on Section 401(k) deferrals (Section 402(g)) $18,000 $18,000
Dollar limitation for catch-up contributions (Section 414(v)(2)(B)(i)) $6,000 $6,000
Limit on deferrals for government and tax-exempt organization deferred compensation plans (Section 457(e)(15)) $18,000 $18,000
Annual benefit limitation for a defined benefit plan (Section 415(b)(1)(A)) $210,000 $215,000
Limitation on annual contributions to a defined contribution plan (Section 415(c)(1)(A)) $53,000 $54,000
Limitation on compensation that may be considered by qualified retirement plans (Section 401(a)(17)) $265,000 $270,000
Dollar amount for the definition of highly compensated employee (Section 414(q)(1)(B)) $120,000 $120,000
Dollar amount for the definition of a key employee in a top-heavy plan (Section 416(i)(1)(A)(i)) $170,000 $175,000
Dollar amount for determining the maximum account balance in an ESOP subject to a five-year distribution period (Section 409(o)(1)(C)(ii)) $1,070,000 $1,080,000
SIMPLE retirement account limitation (Section 408(p)(2)(E)) $12,500 $12,500
Social Security Taxable Wage Base $118,500 $127,500

  Read More ›

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Now You Can Have Your Cake and Eat It Too: New Pension Distribution Rules Allow More Flexibility

If you are one of the lucky few employees who participate in an employer’s defined benefit retirement plan, you previously had to choose between receiving your benefits in a lump sum or in annuity payments. However, in the final rule adopted by the Treasury Department, defined benefit plans are allowed to offer participants the choice of taking a portion of their benefit in a lump sum and the remainder in annuity payments.

These new rules are designed to increase a participant’s flexibility in designing his or her retirement income. As Treasury explained, on the one hand, for plans that permitted a distribution of either lump sum or annuity payments, many participants were reluctant to take the annuity payments and instead chose a lump sum to maximize their flexibility.  Read More ›

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IRS Makes Late Rollovers Easier

Generally, distributions from a qualified retirement plan that are eligible for rollover must be rolled over within 60 days of the date on which the distribution occurs.  If a taxpayer did not complete the rollover within 60 days, the taxpayer previously had to request a private letter ruling from the IRS to receive additional time to complete the rollover.  In Revenue Procedure 2016-47, the IRS makes it easier for a taxpayer to rollover a qualified retirement plan distribution if the taxpayer misses the 60-day rollover window.

Under the new guidance, instead of applying for a private letter ruling, a taxpayer may complete a self-certification and provide it to the plan administrator or IRA trustee if the rollover was not completed due to one of reasons listed in the guidance.  Read More ›

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IRS Finalizes Regulations Simplifying 83(b) Filing Requirements

On July 23rd of last year, I blogged on a set of proposed regulations eliminating the requirement that a taxpayer attach a copy of his or her Section 83(b) election to their individual tax return.  This July, the IRS made the proposed rule final and the final regulations eliminate the requirement that a taxpayer attach a copy of their Section 83(b) election to their tax return for the year in which the restricted property was transferred. This change should be welcomed by taxpayers who file electronic federal tax returns because commercial software does not consistently allow taxpayers to attach a copy of the Section 83(b) election to an electronically filed return. Read More ›

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IRS Issues Additional Guidance on Determination Letter Program

As was previously announced in 2015, effective as of January 1, 2017, the Internal Revenue Service (“IRS”) is eliminating its five year staggered determination letter cycle for individually designed retirement plans. Plans in the current cycle (Cycle A) still may submit their plans for determination letters on or before January 31, 2017.  Pursuant to Revenue Procedure 2016-37, going forward, individually designed plans will only be permitted to submit a determination letter application on initial plan qualification, plan termination and in certain other circumstances as announced by the IRS.

The IRS did not provide much guidance on the other circumstances in which existing plans would be permitted to seek determination letters in the future, other than to provide that it will give consideration to significant changes in the law, new approaches to plan design and the IRS’ current case load and resources. Read More ›

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Five Lawsuits Filed Against DOL’s Fiduciary Rule (so far)

As we previously discussed in our May 19, 2016 SW Benefits Update, the Department of Labor (“DOL”) recently issued final regulations on fiduciary conflicts of interest in retirement programs.  Since 2010 when the DOL first proposed regulations addressing self-interested advice to retirement plan and IRA participants, the rule has been widely criticized by some in the financial services industry as being overly broad.

Both Congress and industry and trade groups have been unhappy with the DOL’s rulemaking in this area and have threatened further action since the rule was first proposed. On May 24, the Senate passed a resolution to block the fiduciary rule, which President Obama vetoed on June 8. Read More ›

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Ninth Circuit Rules that Stock Rights Plan is Not Subject to ERISA

In a case of first impression in the Ninth Circuit, the Court held that the Booz Allen Hamilton, Inc. Stock Rights Plan (“SRP”) was not subject to ERISA because its primary purpose was not to provide deferred compensation or other retirement benefits.  As background, ERISA applies to “employee welfare benefit plans” and “employee pension benefit plans.”  For an “employee pension benefit plan” to be subject to ERISA, it must provide retirement income to employees or result in the deferral of income by employees for periods extending to termination of covered employment or beyond.  Being subject to ERISA, subjects a benefit plan to a number of requirements including, without limitation, a Form 5500 filing requirement, fiduciary requirements, vesting rules, and participation rules. Read More ›

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IRS: Don’t Answer All the 5500 Questions!

The 2015 Form 5500 added some new optional compliance questions for the 2015 Forms 5500 and 5500-SF. In December 2015, the IRS issued frequently asked questions on the new compliance questions and strongly encouraged plan sponsors to answer the questions.

On February 18, the IRS changed course and announced that plan sponsors should not complete the compliance questions on the 2015 Form 5500 and Form 5500-SF and related schedules because the questions were not approved by the Office of Management and Budget before the forms were published.

For additional information including a list of the questions that may be skipped on the Forms 5500 and 5500-SF, please go to https://www.irs.gov/Retirement-Plans/IRS-Compliance-Questions-on-the-2015-Form-5500-Series-Returns. Read More ›

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