ERISA Rules and Regulations

DOL Issues 40-FAQs About IRS Form 5500 – Schedule C

noreply@blogger.com (Employee Stock Ownership Plan (ESOP) Blog) — Sat, 19 Jul 2008 14:29:00 +0000

The DOL issued guidance on Schedule C reporting for 2009 Form 5500:

Washington – The U.S. Department of Labor's Employee Benefits Security Administration (EBSA) today announced guidance to help plan administrators and service providers comply with the new requirements for reporting service provider fee and compensation information applicable to Form 5500 Annual Returns/Reports filed for plan years beginning on or after January 1, 2009.

EBSA released 40 frequently asked questions (FAQs) developed in response to questions from the employee benefit community on the new Schedule C requirements. The FAQs cover such issues as the alternative reporting option for eligible indirect compensation, electronic disclosure of fee information by service providers, fee reporting for brokerage window options in participant directed plans, and reporting on gifts, entertainment and other non-monetary compensation.

In response to concerns expressed by service providers trying to make changes to their recordkeeping and information management systems in order to provide their employee benefit plan clients with fee and compensation information required for 2009 reports, the department is not requiring plan administrators to report service providers on the Schedule C as failing to provide fee and compensation information if the service provider furnishes the plan administrator with a written statement that (i) the service provider made a good faith effort to make any necessary recordkeeping and information system changes in a timely fashion, and (ii) despite such efforts, the service provider was unable to complete the changes for the 2009 plan year.

The announcement included a link to 40-FAQs About The 2009 Form 5500 Schedule C:

What is the purpose of this FAQ guidance?
Is the Schedule C information on service provider indirect compensation required to be reported based on the plan's year or can the information reported be based on the service provider's fiscal year?
Can the alternative reporting option for "eligible indirect compensation" be used to report compensation paid or received in separately managed investment accounts of a single plan?
Are all the fees and expenses charged against an investment fund and reflected in the value of the plan's investment, such as an investment fund's payments for legal services provided to the fund, fees paid to the fund's accountant, and expenses associated with SEC filing requirements, reportable indirect compensation for Schedule C purposes?
Are the requirements to report indirect compensation on Schedule C different for participant-selected investments through "open brokerage" windows?
Are commissions paid to an agent in connection with the sale of an investment, product, or service to a plan reportable indirect compensation?
Is compensation received in connection with the management and operation of venture capital operating companies (VCOCs), real estate operating companies (REOCs), and other operating companies reportable indirect compensation?
A mutual fund pays eligible indirect compensation to a fund administrator, advisor, or distributor (a "fund agent"). In turn, the fund agent pays fees to the recordkeeper for "compliance services" provided to one or more participating plans, including discrimination testing, QDRO administration, and Form 5500 preparation. The recordkeeper is not an affiliate of the mutual fund or the fund agent. Is the mutual fund payment to the recordkeeper reportable indirect compensation? If it is reportable indirect compensation, is the fee received by the recordkeeper eligible indirect compensation?
A recordkeeper may enter into an "alliance" arrangement with a broker-dealer to provide services offered together as a "package" sold by agents of the broker-dealer. The recordkeeper and broker-dealer are not affiliated to one another and each has a separate contract or arrangement with the plan. In connection with this alliance arrangement, the broker-dealer pays compensation to the recordkeeper. The compensation may be flat per-participant fees or asset-based fees based on the value of plans' investments in mutual funds or other investment vehicles offered to the plans by the broker-dealer. The broker-dealer pays the compensation for plan administration and recordkeeping services the recordkeeper provides to the broker-dealer's plan clients. Is the compensation paid by the broker-dealer to the recordkeeper "eligible indirect compensation?"
A recordkeeper and an unaffiliated insurance company enter into an "alliance" arrangement similar to the alliance arrangement described in Q9. Under this version of an alliance arrangement, an insurance company agent offers the plan investments through a group variable annuity or other insurance products and also introduces the recordkeeper's service offering to prospective plan clients. The plan has a separate contract or arrangement with the insurance company and with the recordkeeper. The insurance company pays from its general assets compensation to the recordkeeper for plan administration and recordkeeping services the recordkeeper provides to plans with investments in insurance contracts issued by the insurance company, which may be flat per participant fees or asset-based fees based on the value of plans' investments in the insurance contracts. Do the amounts paid to the recordkeeper by the insurance company constitute eligible indirect compensation?
Should float income on an account holding the assets of one plan be treated as direct or indirect compensation for Schedule C reporting purposes?
Will disclosure of float income sufficient to satisfy the guidance in Field Assistance Bulletin 2002-03 meet the requirements of the alternative reporting option?
What rules govern the determination of the services or providers included in the scope of a bundled arrangement for purposes of Schedule C reporting?
What is an example of fees that are required to be broken out regardless of whether they are part of a "bundle?"
Where the only compensation received by a service provider is "eligible indirect compensation" and all of the disclosures necessary to satisfy the alternative reporting option have been provided, is it necessary to complete any information on Schedule C regarding that service provider other than identifying the person providing the disclosures on Line 1?
Does Part I, Line 3 of the Schedule C require reporting with respect to sources of indirect compensation if the compensation is "eligible indirect compensation?"
If a service provider receives eligible indirect compensation (for which the disclosures have been made) and either direct compensation or indirect compensation that is not eligible, does Line 2(h) of Part I apply to the portion that is eligible indirect compensation?
Must the service provider receiving "eligible indirect compensation" be the person who provides the disclosures needed to meet the alternative reporting option?
If more than one person provides the same required disclosure for eligible indirect compensation, must all persons providing the disclosure be identified?
When identifying the person who provided the required disclosures for the Schedule C alternative reporting option, must the name of an individual be provided?
Are insurance contract "wrap fees" considered "eligible indirect compensation" for purposes of the alternative reporting option on Schedule C?
Some insurance companies provide a "net rate" investment product where an investment contract is combined with plan recordkeeping, trusteeship, and similar services. Instead of charging fees for those services, the insurer credits the plan's investment in a stable value option with interest at a crediting rate that is "net" of the insurer's expenses and costs determined based on the overall experience of the insurer's general account. Is the portion of the insurance company's expenses and costs used to reduce the crediting rate reportable indirect compensation even though it is calculated based on the overall experience of the general account? If so, can these amounts be treated as eligible indirect compensation?
Is the spread earned by a broker on principal transactions involving the plan "eligible indirect compensation?"
May a plan administrator use a formula for reporting indirect compensation on the Schedule C that is required to be specifically reported on Line 2?
If a service provider discloses a formula used to determine its indirect compensation, is the plan administrator required to calculate or estimate dollar amounts from the formula for purposes of Schedule C reporting (to the extent that compensation described by a formula is not eligible indirect compensation)?
Plan administrators are not required to report on Schedule C information with respect to service providers receiving less than $5000 in total compensation (direct and indirect) from the plan. Schedule C, Part I, Line 2 states that service providers should be reported in descending order of compensation. Are plan administrators required to estimate a service provider's compensation for purposes of determining whether to include information about a service provider on Form 5500, or for purposes of reporting service providers in descending order of compensation on Part I, Line 2?
What guidelines apply where service providers elect to provide an "estimate" of compensation?
If a service provider provided the plan administrator with an estimate of its indirect compensation or a formula used to calculate its indirect compensation, but later determines a dollar amount for the compensation it received, does the plan administrator need to obtain an updated disclosure of the dollar amount in order to be able to rely on the Schedule C alternative reporting option?
Can a recordkeeper satisfy the alternative reporting option for eligible indirect compensation by furnishing the plan administrator with prospectuses, brokerage fee schedules, the SEC Form ADV, or other already available documents prepared and provided to the administrator for separate purposes, or must it create its own written disclosure document?
For purposes of satisfying the "written disclosure" requirement for the alternative reporting option, is electronic disclosure such as e-mail or other web-based technology satisfactory?
Do the disclosures regarding "eligible indirect compensation" need to be provided at least annually in order for the alternative reporting option to be available?
Will post-trade confirmation serve as adequate written disclosure of brokerage fees and commissions for purposes of the alternative reporting option?
For Schedule C reporting purposes, where a service provider has received free attendance at a conference or seminar the constitutes reportable indirect compensation, is it adequate to report payments for meals, hotel, transportation costs, and other individual expenses? Must the plan administrator also report that portion of the expenses attributable to every conference attendee for costs such as guest speaker fees and other conference overhead?
If a plan is required to report non-monetary compensation received by a service provider because the amount involved exceeds the Schedule C exclusion for occasional non-monetary compensation of insubstantial value, do gifts of less than $10 need to be included?
If a person providing services to the plan is provided a meal or other entertainment based on a general business relationship that includes both ERISA and non-ERISA business, is it required to be reported on the Schedule C?
If a person receives compensation that is reportable on Schedule A and compensation that is reportable on Schedule C, does the compensation that must be reported on Schedule A also be reported on Schedule C?
If a plan sponsor pays a third-party service provider on the plan's behalf and seeks reimbursement from the plan, should the Schedule C reflect a direct payment from the plan to the service provider and not a payment to the employer?
Where a plan service provider is providing non-plan related investment services to participants, and charging reduced fees for plan related services based on the anticipation of receiving fees from participants for non-plan related services, do the fees for non-plan related investment services need to be reported on the Schedule C?
Do both proprietary soft-dollar compensation (e.g., research prepared by the entity providing brokerage services) and non-proprietary soft dollar compensation (e.g., research prepared by independent/third parties) fall within the definition of "eligible indirect compensation?"
Under what circumstances is a service provider expected to be identified on Schedule C for failing to provide information necessary to complete the Schedule C?

Related Links

FAQs About The 2009 Form 5500 Schedule C

DOL Testifies About Employer-Sponsored IRAs

noreply@blogger.com (Employee Stock Ownership Plan (ESOP) Blog) — Sat, 19 Jul 2008 14:14:00 +0000

The Department of Labor announced in a June 26 press release that it testified before the House Ways and Means subcommittee about employer-sponsored IRAs:

Washington – Bradford P. Campbell, assistant secretary of labor for the Employee Benefits Security Administration (EBSA), today testified before the House Ways and Means Subcommittee on Select Revenue Measures about the department's programs to protect and promote retirement security for employer-sponsored individual retirement arrangements (IRAs).

In his testimony, Campbell discussed the department's regulatory, enforcement, compliance assistance and outreach activities carried out for employer-sponsor IRAs governed by Title I of the Employee Retirement Income Security Act. These plans were created by Congress to give small employers an affordable and easy retirement plan option for their employees, including Savings Incentive Match Plan for Employees (SIMPLE) IRA and Simplified Employee Pensions (SEPs).

He noted that the Labor Department's oversight role employs a comprehensive approach of compliance assistance, interpretive guidance, prohibited transaction exemptions, education and outreach, and enforcement. However, Campbell emphasized that oversight over individual and payroll deduction IRAs is under the jurisdiction of the Internal Revenue Service.

"Employer-sponsored IRAs are important retirement savings vehicles for millions of employees of small businesses nationwide," said Campbell. "In the past three years alone, our oversight of employer-sponsored IRAs has yielded $1.2 million in direct enforcement results and an additional $1 million in results for workers through informal resolution of complaints."

The testimony can be found here: DOL Testifies About Employer-Sponsored IRAs, and contains the following:

Introductory Remarks
Background
- Types of Employer-sponsored IRAs
- Payroll-deduction IRAs
Oversight Of IRAs By the Department Of Labor And the IRS
EBSA Compliance Assistance, Education And Outreach Activities
EBSA's Enforcement Efforts
Conclusion
Footnotes

Related Links

Employee Plans News - Special Edition, July 1, 2008

noreply@blogger.com (Employee Stock Ownership Plan (ESOP) Blog) — Wed, 02 Jul 2008 17:40:00 +0000

The IRS published Employee Plans News - Special Edition, July 1, 2008:

Sample Plan Language under Code §409(p) for the Transfer of an ESOP's S Corporation Shares

Code §409(p) was enacted as part of the Pension Protection Act of 2006. It requires that an ESOP holding S corporation stock cannot have a prohibited allocation during a nonallocation year. That is, no portion of plan assets attributable to employer securities may accrue or be allocated for the benefit of a disqualified person. Code §409(p)(3) provides that a nonallocation year occurs when disqualified persons (as defined in §409(p)(4)) own or are deemed to own 50% of the outstanding stock of the S corporation, taking into consideration synthetic equity as defined in Code §409(p)(6)(C) and Regulations §1.409(p)-1(f). During a nonallocation year, prohibited allocations are deemed to be distributed and excise taxes are imposed on the S corporation pursuant to §4979A. Additional consequences of a nonallocation year relate to plan qualification and the tax status of the corporation.

Regulation §1.409(p)-1(b)(v) provides that a nonallocation year may be prevented by transferring assets from the accounts of disqualified persons to the non-ESOP portion of the plan. Sample plan language to provide for such transfers is posted on our web site: www.irs.gov/ep. Under this plan provision, the Plan Administrator calculates the number of shares that need to be transferred in order to prevent the occurrence of a nonallocation year. The employer needs to provide the Plan Administrator all the information needed to perform this calculation, including information on synthetic equity.

Comments on this language should be sent by August 15, 2008. However, this sample language can be used now pending the comment period.

Related Links:

Sample Plan Language for Section 409(p) Transfers
Final Regulations (2006) – Final Regulations were issued on December 16, 2006 and generally applicable with respect to plan years beginning on or after January 1, 2006.
Proposed and Temporary Regulations (2004) – Proposed and Temporary Regulations were issued December 16, 2004 and are generally effective for plan years beginning on or after January 1, 2005.
Proposed and Temporary Regulations (2003) – Proposed and Temporary Regulations were issued July 21, 2003 and are generally applicable with plan years ending after October 20, 2003.
IRC Section 409(p) - Qualifications for tax credit employee stock ownership plans - Prohibited allocations of securities in an S corporation (2001) – Section 409(p) was added to the code in 2001. For S corporation ESOPs in existence on March 14, 2001, Section 409(p) is effective for plan years beginning after December 31, 2004.
IRS Announcement 2005-80, 2005-2 I.R.B. 967 – Settlement Initiative – Management S Corporation ESOP Transactions (Transactions where the taxpayer has claimed that it is entitled to exclude income of an operating business by asserting, incorrectly, that the taxpayer had established, on or before March 14, 2001, an employee stock ownership plan entitled to an exemption from unrelated business income and an S corporation that is a management corporation, and whatever actions that were taken to attempt to establish an employee stock ownership plan and a management S corporation were taken on or before March 14, 2001
IRS Revenue Ruling 2004-4, 2004-6 I.R.B. 414 – Prohibited Allocations of Securities in an S Corporation – Transactions that involve segregating the business profits of an employee stock ownership plan (ESOP)-owned S corporation in a qualified subchapter S subsidiary, so that rank-and-file employees do not benefit from participation in the ESOP
IRS Revenue Ruling 2003-6, 2003-3 I.R.B. 286 – Prohibited Allocations of Securities in an S Corporation – Certain arrangements involving the transfer of ESOPs that hold stock in an S corporation for the purpose of claiming eligibility for the delayed effective date of § 409(p)
IRC Section 409(p) Anti-Abuse Testing, History of Regulations, and Private Letter Ruling (PLR) 200804023
Missouri Building LLC v. Clark (In re Seferyn), B.A.P. 10th Cir., No. KS-07-094 (May 15, 2008)
California's Franchise Tax Board (FTB) Notice 2008-4 – Resolution of Certain ESOP Transactions

Employee Plans News - Summer 2008 Edition

noreply@blogger.com (Employee Stock Ownership Plan (ESOP) Blog) — Sat, 28 Jun 2008 15:14:00 +0000

The IRS released Employee Plans News - Summer 2008 Edition. It contains the following articles:

Steven T. Miller, TE/GE Commissioner, Speaks at Mid-Atlantic Benefits Conference;
Form 5307 Has Been Revised; We're Glad You Asked!;
The Corner of Forms & Pubs;
Critical Priorities...With Monika Templeman;
Maintaining Electronic Records for Employee Plans Team Audit (EPTA) Plans;
Form 5500 Filing Tips - Are You a Multiemployer Plan?;
Things to Remember - 2007 Forms 5500/5500EZ;
Web Spins;
Highlights of the Retirement News for Employers;
Employee Plans Published Guidance;
We Want You...to complete our Survey;
DOL Corner;
PBGC Insights;
Calendar of EP Benefits Conferences

The DOL Announces Disaster Relief after Severe Weather Hits

noreply@blogger.com (Employee Stock Ownership Plan (ESOP) Blog) — Mon, 23 Jun 2008 23:52:00 +0000

The DOL announced an extension of the Form 5500 and Form 5500 EZ annual report/returns deadline after severe weather hits Colorado, Georgia, Mississippi, Missouri, Iowa, Indiana, Wisconsin, Maine, Arkansas, and Oklahoma:

DOL extends annual reports deadline after severe weather hits Colorado
DOL extends annual reports deadline after severe weather hits Georgia and Mississippi
DOL extends annual reports deadline after severe weather hits Missouri and Iowa
DOL extends annual reports deadline after severe weather hits Indiana and Wisconsin
DOL extends annual reports deadline after severe weather hits Maine
DOL extends annual reports deadline after severe weather hits Arkansas and Oklahoma

IRS Announcement 2008-56 – Change in Reporting Section 404(k) Dividends

noreply@blogger.com (Employee Stock Ownership Plan (ESOP) Blog) — Tue, 10 Jun 2008 20:46:00 +0000

Part IV. – Items of General Interest

IRS Announcement 2008-56 – Change in Reporting Section 404(k) Dividends

Employee stock ownership plans; dividends; section 404(k); reporting. This announcement provides for a change in the reporting of dividends on employer securities that are distributed from an employee stock ownership plan under section 404(k) of the Code. Announcement 85-168 revoked.

Announcement 2008-56 states that beginning with distributions in 2009, the reporting of dividends on employer securities that are distributed from an employee stock ownership plan under section 404(k) of the Code must be on a Form 1099-R that does not report any other distributions.

New Reporting

Distributions from a plan that are made in 2009 or later years and that are § 404(k) dividends must be reported on a Form 1099-R that does not report any other distributions, in accordance with the instructions to the form. Accordingly, if there are other distributions from the plan in such years that are not § 404(k) dividends, they must be reported on a separate Form 1099-R. It is anticipated that the instructions will require a special code in box 7 of the form to indicate the special tax treatment and rollover restrictions applicable to § 404(k) dividends. Payments of § 404(k) dividends made directly from the corporation to the plan participants or their beneficiaries are reported on Form 1099-DIV in accordance with the instructions to that form.

Effect on Other Documents

Announcement 85-168 is revoked.

Related Links:

Retirement News for Employers - Spring 2008 Edition

noreply@blogger.com (Employee Stock Ownership Plan (ESOP) Blog) — Fri, 23 May 2008 19:54:00 +0000

The IRS released Retirement News for Employers - Spring 2008 edition. It contains the following articles:

EP Connections: Interview with Joyce Kahn - New Law...Help for the Small Employer
Desk Side Chat with Monika Templeman - What Do I Do if My Plan is Selected for an Examination?
New on the Web; We're Glad You Asked!
ERPA is Picking Up Speed
Product Profile - 401(k) Fix-It Guide - Online Resource
Written Plan Requirement for 403(b) Plans
This Way to the Forums
Recent Guidance
DOL News
Fixing Common Plan Mistakes - Hardship Distributions in a 401(k) Plan
Mark Your Calendar
Timing is Everything Flyer.

IRS Announcement 2008-44 – Relief for Recipients of Certain Direct Deposits of 2008 Economic Stimulus Payments

noreply@blogger.com (Employee Stock Ownership Plan (ESOP) Blog) — Mon, 19 May 2008 18:25:00 +0000

Part IV. – Items of General Interest

IRS Announcement 2008-44 – Relief for Recipients of Certain Direct Deposits of 2008 Economic Stimulus Payments

Economic stimulus payment; direct deposit; tax favored account. This announcement provides that individuals who have payments made by direct deposit under the Economic Stimulus Act of 2008 to their IRAs or certain other accounts afforded special tax benefits under the Code may remove the payments without incurring any adverse tax consequences.

Related Links:

IRS allows tax-free withdrawal of “Economic Stimulus Payments” from IRAs

Governmental Plans Roundtable (April 22, 2008)

noreply@blogger.com (Employee Stock Ownership Plan (ESOP) Blog) — Fri, 09 May 2008 22:42:00 +0000

The IRS released Employee Plans News - Special Edition, May 2008 which discussed the Governmental Plans Roundtable held on April 22, 2008:

IRS Employee Plans hosted a Governmental Plans Roundtable on April 22, 2008 for members of the governmental plans community to begin a dialogue on how to best ensure that these plans satisfy the applicable qualification requirements while also identifying and addressing those unique issues that raise special challenges for governmental plans. See March 2008 Special Edition of the Employee Plans News announcing the Roundtable and the Spring 2008 Edition of the Employee Plans News for comments from the TE/GE Division Commissioner on the Roundtable.

The following sessions were presented at the Roundtable:

Related Links:

Governmental Plans web page

Report Of The Working Group On Participant Benefit Statements

noreply@blogger.com (Employee Stock Ownership Plan (ESOP) Blog) — Wed, 07 May 2008 13:09:00 +0000

The DOL released the Report Of The Working Group On Participant Benefit Statements. The report was produced by the ERISA Advisory Council’s Working Group on Participant Benefits Statements and included the following primary recommendations to the Secretary of Labor for consideration:

Recommendation 1: The Department should provide longer due dates for defined benefit plan benefit statements, dates that recognize the time it takes to accumulate details of participant data necessary to calculate all participants' accrued benefits, and that recognize differences in accumulating data. Further, the Department should provide a means for obtaining relief from the due dates for those defined contribution plans with non-participant directed assets that cause delays in obtaining complete data because of the timing of determination of plan assets, such as contributions and asset valuation, participant compensation, and other matters inherent in the plan.

Recommendation 2: The Department should convene a Task Force of benefit statement stakeholders to develop the content of a model statement. The view of the Working Group is that the content should be minimized, including only that required by the statute. The model statement should be crafted in a way to inspire sponsors to add information and education. In that regard, the Working Group recommends including the application of IB 96-1 to the benefit statement to clearly communicate the boundaries of the information and education that could be included in benefit statements without crossing the "advice" threshold.

Recommendation 3: The Department of Labor should promulgate regulations that preserve the multi-document option for the benefit statement. Further, the Department of Labor should update its regulations regarding electronic communication to a "reasonable access" standard as in the Department of Treasury safe harbor regulation in recognition of the continued advancement in web-based communication and the increase in its use by participants.

The Report included the following sections:

Executive Summary
Introduction
Prior Law and Regulations, New Law, and Initial Guidance
Scope of the Working Group's Paper and Questions Distributed to Potential Witnesses
Concerns of the Department of Labor, Participants, Plan Sponsors and Service Providers
Working Group's Observations, Discussions and Recommendations
Summaries of the Speakers and Written Testimony
Additional Information Sources

History of New Rules and Regulations

Prior to the PPA, Prior law under ERISA §105 required the plan administrator to provide, only upon request, benefit statements to participants and beneficiaries; no more than one statement was required during a 12-month period. The information required to be furnished included the total accrued benefits and the total vested accrued benefits (or the earliest date on which benefits would become vested). Under ERISA §209, participants who terminated service with the employer or incurred a one-year break-in-service were required to receive a benefit statement. Prior law made no distinction as to the benefit statement requirements between defined benefit and defined contribution plans.

Under the new rules (as provided by the PPA), effective for plan years beginning in 2007 (with a delayed effective date for collectively bargained plans), automatic benefit statements are now required. The time period and the information furnished on the statements vary depending on the type of plan, including tri-annually for defined benefit plans (except that defined benefit plans may elect an alternative notice provision and continue to make statements available annually upon request), annually for non-participant directed defined contribution plans, and quarterly for participant directed defined contribution plans.

Pension Protection Act of 2006 (PPA) (Public Law 109–280—Aug. 17, 2006) - charges the DOL with designing model notices for plan sponsors, and authorizes the DOL to issue interim guidance prior to the model notices.
DOL FAB 2006-03 Periodic Pension Benefit Statements - PPA (Dec 20, 2006) - In December 2006, the DOL issued Field Assistance Bulletin No. 2006-03, providing guidance on good faith compliance with the new rules, which included establishing a 45-day day time period for furnishing the required statements.
DOL FAB 2007-03 Periodic Pension Benefit Statements for Non-Participant Directed Individual Account Plans - In Field Assistance Bulletin No. 2007-03, the DOL relaxed the 45-day time period for individual account plans that are not individually directed and provided that the timing for benefit statements for such plans be coordinated with the filing for the plan's Form 5500.

It is expected that the DOL through regulations will specify which plans are covered; the required content for the participant benefit statements; frequency of disclosure, as well as required due dates for compliance and periods of coverage; form of furnishing statements; and mode of delivery.

The Working Group Report was also discussed in DOL Working Group Ideas for Benefit Statements.

IRS Form 5500 Filing Update Web Cast

noreply@blogger.com (Employee Stock Ownership Plan (ESOP) Blog) — Sat, 03 May 2008 02:13:00 +0000

The DOL announced that they are hosting a Web Cast on the IRS Form 5500 reporting requirements on May 8:

Washington – The U.S. Department of Labor's Employee Benefits Security Administration (EBSA) will host a free web cast May 8 to help employers and plan administrators understand and comply with the Form 5500 Series reporting requirements under the Employee Retirement Income Security Act (ERISA).

This second in a series of web casts will help employers and plan administrators meet their obligations under ERISA to file timely and accurate financial reports on the operations of pension, health and other benefit plans. The web cast will address ways to avoid common filing errors, how to select the accountant best qualified to audit your plan, what to be aware of when reporting alternative investments, and rules on "blackout notices." It will also provide important information to 403(b) plan sponsors to help them prepare for expanded filing requirements, and preparing for an audit of the plan. The Internal Revenue Service will participate in the event to discuss its late and stop-filer program.

The series is being offered as part of EBSA's compliance assistance program – Getting It Right - Know Your Fiduciary Responsibilities – to help employers and plan administrators meet their fiduciary responsibilities and avoid potential civil penalties under the law.

This event is open to news media.

What: Web cast on Form 5500 reporting requirements
Who: Employers and plan administrators
When: May 8, 2008, Noon to 2 p.m. EST
Where: Live over the Internet at the URL below
How: Registration is required and available on a first-come, first-served basis. Visit EBSA's Web site at www.dol.gov/ebsa and click "Plan Filing Update Web cast" under "Compliance Assistance Seminars."
More Information: Call 202.693.8660

Here is a link to the Plan Filing Update Web Cast, the second in the series of webcasts. The first web cast, Know Your Fiduciary Responsibilities – An Update on Pension Protection Act and Related Guidance for Practitioners, is online and archived from the December 6, 2007 webcast.

Treasury Regulation REG-104946-07 – Hybrid Retirement Plans; Correction

noreply@blogger.com (Employee Stock Ownership Plan (ESOP) Blog) — Fri, 02 May 2008 20:40:00 +0000

26 CFR Part 1

[REG-104946-07]

RIN 1545-BG36

Treasury Regulation REG-104946-07 – Hybrid Retirement Plans; Correction

IRS Issues a Correction to the Proposed Cash Balance Regs

The IRS issued a correction to the Proposed Regulations on Hybrid Retirement Plans, commonly known as the proposed cash balance plan regulations, which the Service issued on December 27, 2007. Besides correcting a few grammatical errors, the IRS has made a significant change in Proposed Treas. Reg. section 1.411(a)(13)-1.

Related Links:

IRS Notice 2008-47 – Public Comment Invited on Recommendations for 2008-2009 Guidance Priority List

noreply@blogger.com (Employee Stock Ownership Plan (ESOP) Blog) — Fri, 02 May 2008 19:42:00 +0000

Part III --- Administrative, Miscellaneous, and Procedural

IRS Notice 2008-47 – Public Comment Invited on Recommendations for 2008-2009 Guidance Priority List

The Department of Treasury and the Service invite public comments on recommendations for items that should be included on the 2008–2009 Guidance Priority List. Taxpayers may submit recommendations for guidance at any time during the year. Recommendations submitted by May 31, 2008, will be reviewed for possible inclusion on the original 2008–2009 Guidance Priority List. Recommendations received after May 31, 2008, will be reviewed for inclusion in the next periodic update.

Treasury, IRS Solicit Recommendation for 2008-2009 Guidance Priority List

IR-2008-62, April 18, 2008

WASHINGTON — The Department of Treasury and Internal Revenue Service invite public comment on recommendations for items that should be included on the 2008-2009 Guidance Priority List.

The Treasury Department's Office of Tax Policy and IRS use the Guidance Priority List each year to identify and prioritize the tax issues that should be addressed through regulations, revenue rulings, revenue procedures, notices, and other published administrative guidance. The Guidance Priority List focuses resources on guidance items that are most important to taxpayers and tax administration. Published guidance plays an important role in increasing voluntary compliance by helping to clarify ambiguous areas of the tax law.

The 2008-2009 Guidance Priority List will establish the guidance that the Treasury Department and IRS intend to issue from July 1, 2008, through June 30, 2009.

In reviewing recommendations and selecting projects for inclusion on the 2008-2009 Guidance Priority List, the Treasury Department and the IRS will consider the following:

Whether the recommended guidance resolves significant issues relevant to many taxpayers;
Whether the guidance may be appropriate for enhanced public involvement through the process described in Notice 2007-17, 2007-12 I.R.B. 748;
Whether the recommended guidance promotes sound tax administration;
Whether the recommended guidance can be drafted in a manner that will enable taxpayers to understand and apply the guidance easily;
Whether the IRS can administer the recommended guidance on a uniform basis; and
Whether the recommended guidance reduces controversy and lessens the burden on taxpayers or the IRS.

Please submit recommendations by May 31, 2008, for possible inclusion on the original 2008-2009 Guidance Priority List.

Information on how to submit recommendations can be found in Notice 2008-47. Taxpayers are not required to submit recommendations for guidance in any particular format. Taxpayers should, however, briefly describe the recommended guidance and explain the need for the guidance. In addition, taxpayers may include an analysis of how the issue should be resolved.

All comments will be available for public inspection and copying in their entirety.

Related Links:

IRS Notice 2008-47, 2008-18 I.R.B. 869 (May 5, 2008) – Public Comment Invited on Recommendations for 2008-2009 Guidance Priority List [PDF]
IRS Notice 2008-47, 2008-18 I.R.B. 869 (May 5, 2008) – Public Comment Invited on Recommendations for 2008-2009 Guidance Priority List [HTML]
2008-18 I.R.B. 869 (May 5, 2008)
IRS Notice 2007-17, 2007-12 I.R.B. 748 – Modifications of Commercial Mortgage Loans Held by a REMIC [PDF]

IRS Notice 2008-46 – Supplemental Guidance Under the Preparer Penalty Provisions of the Small Business and Work Opportunity Tax Act of 2007

noreply@blogger.com (Employee Stock Ownership Plan (ESOP) Blog) — Fri, 02 May 2008 19:31:00 +0000

Part III --- Administrative, Miscellaneous, and Procedural

IRS Notice 2008-46 – Supplemental Guidance Under the Preparer Penalty Provisions of the Small Business and Work Opportunity Tax Act of 2007

This notice provides guidance regarding implementation of the tax return preparer penalty provisions under section 6694 of the Code. Notice 2008–13 supplemented.

Related Links:

IRS Notice 2008-46, 2008-18 I.R.B. 868 (May 5, 2008) – Supplemental Guidance Under the Preparer Penalty Provisions of the Small Business and Work Opportunity Tax Act of 2007 [PDF]
IRS Notice 2008-46, 2008-18 I.R.B. 868 (May 5, 2008) – Supplemental Guidance Under the Preparer Penalty Provisions of the Small Business and Work Opportunity Tax Act of 2007 [HTML]
2008-18 I.R.B. 868 (May 5, 2008)
IRS Notice 2008-13 – Guidance Under the Preparer Penalty Provisions of the Small Business and Work Opportunity Tax Act of 2007 [PDF]

Field Assistance Bulletin No. 2008-03 – Guidance Regarding Qualified Default Investment Alternatives (29 CFR § 2550.404c-5)

noreply@blogger.com (Employee Stock Ownership Plan (ESOP) Blog) — Tue, 29 Apr 2008 17:41:00 +0000

Field Assistance Bulletin No. 2008-03 – Guidance Regarding Qualified Default Investment Alternatives (29 CFR § 2550.404c-5)

The DOL issued guidance and technical corrections to the default investment alternatives regulations:

Washington – The U.S. Department of Labor's Employee Benefits Security Administration today announced publication of technical corrections to the final regulation on qualified default investment alternatives along with guidance to clarify the scope and meaning of the final rule.

On October 24, 2007, the department published final rule to implement Pension Protection Act provisions providing a safe harbor from liability for fiduciaries of plans in which the contributions of workers who do not provide investment direction (such as automatically enrolled workers) are invested in "qualified default investment alternatives" or QDIAs. The QDIAs are designed to encourage the investment of employee assets in investment vehicles appropriate for long-term retirement savings.

The technical corrections affect three areas of the final regulation on QDIAs. These include changes clarifying the preamble example on "round-trip restrictions," expanding the scope of who can manage a QDIA to include a committee that is a named fiduciary of the plan, and correcting the "grandfather" relief for stable value funds.

Field Assistance Bulletin 2008-03 provides guidance on a series of frequently asked questions raised by the employee benefit community since publication of the final rule. The questions address issues relating to the scope of the regulation, the notice requirements, the 90-day limitation on fees and restrictions, management and asset allocation of QDIAs, the capital preservation investment option, and the grandfather relief for stable value funds.

An updated fact sheet on the default investment regulation can be found at www.dol.gov/ebsa. The technical corrections are to be published in the April 30 edition of the Federal Register.

FAB 2008-03

Background

On October 24, 2007, the Department of Labor (Department) published a final regulation⁽¹⁾ providing relief from certain fiduciary responsibilities under the Employee Retirement Income Security Act (ERISA) for investments made on behalf of participants or beneficiaries who fail to direct the investment of assets in their individual accounts. See 29 CFR § 2550.404c-5 (hereafter referred to as the "QDIA regulation"). Since publication of the QDIA regulation, a number of issues have been raised concerning the scope and meaning of various provisions of the QDIA regulation. This Bulletin is intended to supplement the QDIA regulation by providing guidance, in a question and answer format, on a number of the most frequently asked questions.

Questions And Answers

Scope Of QDIA Regulation

Q-1. To what extent does the QDIA regulation relieve a plan sponsor from fiduciary liability when the plan sponsor chooses to create and manage a qualified default investment alternative (QDIA) itself using a mix of the plan's available investment alternatives?

Q-2. Is relief available under the QDIA regulation for assets invested in a default investment prior to the effective date of the regulation?

Q-3. Could a fiduciary obtain the relief referred to in Q-2, above, with respect to assets invested in a QDIA on behalf of participants and beneficiaries who elected to invest in a default investment prior to the effective date of the regulation?

Q-4. Is fiduciary relief under the QDIA regulation available if non-elective contributions such as qualified non-elective contributions (QNECs), or the proceeds from litigation or settlements, are invested in a QDIA?

Q-5. Does the QDIA regulation, including the preemption provisions, apply to plans under section 403(b) of the Internal Revenue Code (Code)?

Notice Requirements

Q-6. How much information regarding fees and expenses attendant to a QDIA must be provided in a notice? Can this information be provided by attaching other disclosure documents to the notice?

Q-7. Does the flexibility permitted with respect to use of the Treasury Department's electronic distribution rules apply only to the QDIA notice requirement, or more broadly (i.e. to pass-through of investment materials)?

Q-8. Do plan sponsors have to combine the QDIA notice required by the regulation with a notice required by Code sections 401(k)(13) and 414(w)?

Q-9. Are the timing requirements for the notices required by the Department of Labor's QDIA regulation the same as the timing requirements for the notices required by the Treasury Department's proposed regulations under Code sections 401(k)(13) and 414(w)?

Q-10. Can the QDIA notice be combined with the Code section 401(k)(12) safe harbor notice in the same manner that it can be combined with the Code section 401(k)(13) and 414(w) notices?

90-Day Limitation On Fees And Restrictions

Q-11. Would the payment of a fee or expense (e.g., redemption fee) by a plan sponsor or service provider that would otherwise be assessed to the account of a participant or beneficiary during the initial 90-day period satisfy the requirements of paragraph (c)(5)(ii) of § 2550.404c-5?

Q-12. For purposes of § 2550.404c-5(c)(5)(ii), does the 90-day clock start from the date an investment becomes a QDIA, or does it begin only in reference to a participant who is being newly "defaulted" into a QDIA?

Q-13. Is a QDIA prohibited from including any "round-trip" restriction for the first ninety days?

QDIAs – Management And Asset Allocation

Q-14. Can an investment fund or product with zero fixed income (or, alternatively, zero equity) qualify as one of the permanent, long-term QDIAs described in paragraph (e)(4)(i) through (iii) of the final regulation?

Q-15. The QDIA regulation, at § 2550.404c-5(c)(4), requires that defaulted participants be provided material in accordance with the regulations governing ERISA section 404(c) plans. Is the QDIA regulation intended to require that all of the referenced information be furnished automatically, without regard to whether some of the information for ERISA section 404(c) plans is required to be provided only upon request of a participant or beneficiary?

Q-16. Can a plan sponsor use two different QDIAs, for example, one for its automatic contribution arrangement, but another for rollover contributions?

Q-17. In the case of an individual account plan sponsored by a single employer, can a committee that is established by a plan sponsor and that, pursuant to the documents and instruments governing the plan, is a named fiduciary of the plan be treated as managing a QDIA for purposes of paragraph (e)(3)(i)(C) of § 2550.404c-5?

120-Day Capital Preservation QDIA

Q-18. Is the 120-day capital preservation QDIA, described in paragraph (e)(4)(iv) of § 2550.404c-5, available only for plans that include an EACA?

Q-19. Are plans required to provide a 120-day capital preservation QDIA?

Q-20. Can a plan sponsor manage the 120-day capital preservation QDIA?

Grandfather-Type Relief For Stable Value Funds

Q-21. Must a plan sponsor distribute a notice thirty days before the effective date of the QDIA regulation to obtain relief for prior contributions to a stable value fund or product?

Q-22. What types of stable value products or funds did the Department intend to include as QDIAs for purposes of the "grandfather"-type relief described in paragraph (e)(4)(v) of § 2550.404c-5?

Technical Corrections

29 CFR Part 2550

RIN 1210-AB10

Default Investment Alternatives Under Participant Directed Individual Account Plans

QDIA Guidance: Default Investment Alternatives Under Participant Directed Individual Account Plans

Blog Posts/Updates:

Qualified Default Investment Alternatives (QDIA) – DOL Final Regulations

Related Links

IRS Notice 2008-45 - Update for Weighted Interest Rates, Yield Curves, and Segment Rates

noreply@blogger.com (Employee Stock Ownership Plan (ESOP) Blog) — Tue, 29 Apr 2008 00:10:00 +0000

Part III --- Administrative, Miscellaneous, and Procedural

IRS Notice 2008-45 - Update for Weighted Interest Rates, Yield Curves, and Segment Rates

Weighted average interest rate update; corporate bond indices; 30-year Treasury securities; segment rates. This notice contains updates for the corporate bond weighted average interest rate for plan years beginning in April 2008; the 24-month average segment rates; the funding transitional segment rates applicable for April 2008; and the minimum present value transitional rates for March 2008.

Related Links:

Treasury Regulation - REG–151135–07 - Multiemployer Plan Funding Guidance; Correction

noreply@blogger.com (Employee Stock Ownership Plan (ESOP) Blog) — Sun, 13 Apr 2008 16:00:00 +0000

26 CFR Part 1

[REG–151135–07]

RIN–1545–BH39

Treasury Regulation - REG–151135–07 - Multiemployer Plan Funding Guidance; Correction

SUMMARY:

This document corrects a notice of proposed rulemaking (REG–151135–07) that was published in the Federal Register on Tuesday, March 18, 2008 (73 FR 14417), that provides additional rules for certain multiemployer defined benefit plansthat are in effect on July 16, 2006.

SUPPLEMENTARY INFORMATION:

Background

The notice of proposed rulemaking (REG–151135–07) that is the subject of this correction is under section 432 of the Internal Revenue Code.

Need for Correction

As published, REG–151135–07 contains an error that may prove to be misleading and is in need of clarification.

Correction of Publication

Accordingly, the publication of the notice of proposed rulemaking (REG– 151135–07) that was the subject of FR Doc. 08–1044, is corrected as follows: On page 14420, column 3, in the preamble, under the paragraph title ''§ 1.432(a)–1 General Rules Relating to Section 432'', first paragraph, line 1, the language ''Section 1.432–1 provides general'' is corrected to read ''Section 1.432(a)–1 provides general''.

Treasury Regulation - REG-151135-07 - Multiemployer Plan Funding Guidance; Correction