Making a List, Checking it Twice – 2017

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, checklists can be particularly helpful to make sure important issues do not fall through the cracks.  Each year we publish health and welfare, cost-of-living, executive compensation, and qualified retirement plan checklists 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.  We just published the last of our annual checklists.  Read More ›

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

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IRS Announces Changes to Determination Letter Process for Individually Designed Retirement Plans

In Announcement 2015-19, the IRS announced the elimination of the five year remedial amendment cycle for individually designed retirement plans effective as of January 1, 2017.  This means that after January 1, 2017, individually designed retirement plans will no longer be eligible to receive favorable determination letters every five years.  The Announcement leaves the current remedial amendment period, Cycle E that ends on January 31, 2016 (which generally includes employers with Employer Identification Numbers ending in 5 or 0), unchanged.  It also leaves the next remedial amendment period (which generally includes employers with Employer Identification Numbers ending in 1 or 6) “Cycle A”, unchanged, meaning that Cycle A plans may submit determination letter applications until January 31, 2017. Read More ›

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Electronic Self-Certification for Hardship Distributions is Not Sufficient

In its April 1, 2015 Employee Plans News, the IRS stated that defined contribution plan sponsors must maintain hardship distribution records and that plan sponsors cannot rely on electronic participant self-certification for hardship distributions.

The IRS indicated that plan sponsors should keep the following:

  • Documentation of the hardship request, review and approval;
  • Financial information that substantiates the employee’s immediate and heavy financial need;
  • Documentation to support the hardship distribution was properly made; and
  • Proof of the actual distribution made and the related Form 1099-R.

In recent years, a number of third party administrators have started offering an electronic self-certification in which participants may certify their own hardships and are required to maintain their own records of the hardship distribution.  Read More ›

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IRS Provides Relief for Correction of Elective Deferral Mistakes in 401(k) Plans

The IRS recently announced changes that make it significantly easier to correct employee deferral mistakes (also known as elective deferrals) in qualified retirement plans.  The changes make modifications to the IRS’ Employee Plans Compliance Resolution System (“EPCRS”), which is the IRS’ comprehensive correction program for qualified retirement plans.

Automatic Enrollment Correction Relief

If a qualified plan has automatic enrollment and it either (1) does not automatically enroll employees in accordance with the terms of the plan’s automatic enrollment feature or (2) does not implement an employee’s affirmative election, the new guidance provides that as long as the employee is enrolled in the plan within 9-1/2 months following the end of the plan year of the failure (or earlier if the employee notifies the employer of the mistake), the employer is not required to make a correction for the missed elective deferrals.  Read More ›

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IRS Announces 2015 Cost-of-Living Adjustments for Retirement Plans

The IRS recently announced cost of living adjustments for 2015.  The key dollar amounts for retirement plans (compared to the 2014 dollar limits) are noted below.

Maximum Qualified Retirement Plan   Dollar Limits



Limit   on Section 401(k) deferrals (Section 402(g))



Dollar   limitation for catch-up contributions (Section 414(v)(2)(B)(i))



Limit   on deferrals for government and tax-exempt organization deferred compensation   plans (Section 457(e)(15))



Annual   benefit limitation for a defined benefit plan (Section 415(b)(1)(A))



Limitation   on annual contributions to a defined contribution plan (Section 415(c)(1)(A))



Limitation   on compensation that may be considered by qualified retirement plans (Section   401(a)(17))



Dollar   amount for the definition of highly compensated employee (Section   414(q)(1)(B))



Dollar   amount for the definition of key employee in a top-heavy plan (Section   416(i)(1)(A)(i))



Dollar   amount for determining the maximum account balance in an ESOP subject to a   five-year distribution period (Section 409(o)(1)(C)(ii))



SIMPLE   retirement account limitation (Section 408(p)(2)(E))



Social   Security Taxable Wage Base



  Read More ›

Posted in Employee Benefits, Qualified Retirement Plans | Tagged , , , ,

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401(k) Plan Fiduciaries – Have you thought about your continued offering of the PIMCO Total Return Fund?

The abrupt departure of Bill Gross from PIMCO leaves many investors pondering their next move.  Should an investor stay the course and see how PIMCO’s new investment team performs?  Should an investor leave and follow Mr. Gross to Janus Funds?  Should an investor rush to find a new bond fund manager?

These questions are particularly important for fiduciaries of 401(k) and other qualified retirement programs that offer PIMCO Total Return Fund as an investment option.  Mr. Gross was the lead manager of the Total Return Fund, which reportedly is the second largest bond fund in existence and is a very common and popular choice for 401(k) and other defined contribution retirement plans. Read More ›

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IRS Issues Guidance on Longevity Annuities

The IRS recently issued guidance on the use of longevity annuities in defined contribution plans and IRAs.  These longevity annuities are known as “qualified longevity annuity contracts” or “QLACs.”

A QLAC is a deferred annuity that begins at a specified age, but not later than age 85.  This type of annuity allows individuals to have a guaranteed stream of payments beginning after the annuity starting date and continuing for the individual’s life.  A QLAC is intended to help individuals hedge against outliving their retirement benefits.

Plans that may offer QLACs

Employer sponsored defined contribution plans including Section 401(k) plans, Section 403(b) plans, government sponsored Section 457(b) plans and IRAs may provide for the purchase of a QLAC in the plan or IRA. Read More ›

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Pre-Approved Plan Sponsors are Starting to Contact Adopting Employers

Many employers adopt defined contribution retirement plans that have been pre-approved by the IRS.  Plan sponsors of pre-approved plans submit the plans to the IRS to obtain approval of whether the form of the plan meets the requirements of Internal Revenue Code Section 401.  These pre-approved plans are often referred to as “volume submitter plans” or “master and prototype plans.”   An adopting employer of a pre-approved plan must then adopt the plan within a two-year period announced by the IRS.  The adoption period for the latest round of pre-approved defined contribution plans is open from May 1, 2014 to April 30, 2016. Read More ›

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Have you updated your Summary Plan Descriptions lately?

A summary plan description, or SPD, is the document that is given to participants and beneficiaries explaining the material terms of an ERISA plan.  Both pension plans and welfare plans are required to provide SPDs to participants.  An SPD generally must be provided when a participant first becomes covered by a plan.  It also must be provided on written request by a participant or beneficiary.

An updated SPD or summary of material modifications (“SMM”) must be provided no later than 210 days after the end of the plan year in which a material change to the plan was made.  For health plans, additional rules apply.  Read More ›

Posted in Employee Benefits, Health & Welfare Plans, Qualified Retirement Plans | Tagged , , , , ,

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Complying with the Windsor Decision: Mid-Year Amendment for Safe-Harbor 401(k) Plans

Previously, the IRS issued guidance on what employers need to do in order to comply with the United States v. Windsor decision. The guidance insturcts employers on how and when to amend a qualified retirement plan if its current terms regarding marriage and the definition of spouse are inconsistent with Windsor.  In short, the employer must adopt an amendment by December 31, 2014 that is consistent with the Windsor decision.  Please see IRS Notice 2014-19, Anne Meyer’s blog post, and Nancy Campbell’s blog post for more information on the Windsor decision and the required amendment.

One question that was left unanswered by the IRS’s prior guidance on Windsor was whether a Section 401(k) or 401(m) safe-harbor plan could adopt a mid-year amendment without risking its safe-harbor status.  Read More ›

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