ERISA Rules and Regulations

Treasury Regulation [REG–115699–09] – Suspension or Reduction of Safe Harbor Nonelective Contributions

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Mon, 18 May 2009 14:04:00 +0000

26 CFR Part 1

[REG–115699–09]

RIN:1545–BI64

Treasury Regulation [REG–115699–09] – Suspension or Reduction of Safe Harbor Nonelective Contributions

SUMMARY: This document contains proposed amendments to the regulations relating to certain cash or deferred arrangements and matching contributions under section 401(k) plans and section 403(b) plans. These regulations affect administrators of, employers maintaining, participants in, and beneficiaries of certain section 401(k) plans and section 403(b) plans.

DATES: Written or electronic comments must be received by August 17, 2009. Outlines of the topics to be discussed at the public hearing scheduled for Wednesday, September 23, 2009, at 10 a.m. must be received by August 19, 2009.

Related Links:

IRS Proposes Rules Allowing Employers to Suspend or Reduce Safe Harbor Nonelective Contributions

Related Blog Posts:

IRS Notice 2009-31 – Election and Notice Procedures for Multiemployer Plans Under Sections 204 and 205 of WRERA

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Thu, 23 Apr 2009 15:15:00 +0000

Part III --- Administrative, Miscellaneous, and Procedural

IRS Notice 2009-31 – Election and Notice Procedures for Multiemployer Plans Under Sections 204 and 205 of WRERA

Election and notice procedures for multiemployer plans under sections 204 and 205 of WRERA. This notice provides guidance for sponsors of multiemployer defined benefit plans relating to the elections described in sections 204 and 205 of the Worker, Retiree, and Employer Recovery Act of 2008, P.L. 110-458 (WRERA), and on the notice required to be provided if a plan sponsor makes an election under section 204.

Related Links:

IRS Notice 2009-27 – Premium Assistance for COBRA Benefits

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Thu, 23 Apr 2009 15:12:00 +0000

Part III --- Administrative, Miscellaneous, and Procedural

IRS Notice 2009-27 – Premium Assistance for COBRA Benefits

This notice provides guidance under section 3001 of the American Recovery and Reinvestment Act of 2009 relating to the premium reduction for individuals who were involuntarily terminated and are electing COBRA continuation coverage under the group health plan of their former employer.

Related Links:

IRS Notice 2009-22 – Asset Valuation under Section 430(g)(3)(B) as amended by WRERA

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Thu, 23 Apr 2009 15:08:00 +0000

Part III --- Administrative, Miscellaneous, and Procedural

IRS Notice 2009-22 – Asset Valuation under Section 430(g)(3)(B) as amended by WRERA

Asset valuation under section 430(g)(3)(B) as amended by WRERA. This notice provides interim rules regarding asset valuation methods that are permitted to be used by single employer defined benefit pension plans for minimum funding purposes pursuant to changes made by the Worker, Retiree, and Employer Recovery Act of 2008, Public Law 110-458 (WRERA). This notice also provides automatic approval for a change in asset valuation method for plan years beginning during 2009 to adopt any permissible asset valuation method.

Related Links:

IRS Notice 2009-20 – Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Thu, 23 Apr 2009 15:07:00 +0000

Part III --- Administrative, Miscellaneous, and Procedural

IRS Notice 2009-20 – Update for Weighted Average 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 March 2009; the 24-month average segment rates; the funding transitional segment rates applicable for March 2009; and the minimum present value transitional rates for February 2009.

Related Links:

Employee Plans News - Special Edition, March 2009

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Tue, 31 Mar 2009 13:49:00 +0000

The IRS published Employee Plans News - Special Edition, March 2009:

This Special Edition states that defined benefit plans may use a reasonable interpretation in selecting a yield curve for determining a plan's liabilities for funding purposes.

Employee Plans News - Spring 2009 Edition

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Wed, 25 Mar 2009 13:24:00 +0000

The IRS released Employee Plans News - Spring 2009 Edition. It contains the following articles:

Know a Nonamender? Here's what you need to know NOW...
Final Regulations Issued for Automatic Contribution Arrangements
Sample Plan Language - Transfer of an ESOP's S Corporation Shares to Prevent a Nonallocation Year
The EPCU Insider -The Multiemployer Actuarial Certification Project – Defined Benefit Plan Actuarial Certification Errors
ERPA - CPE Sponsor Program
Web Spins - The Retirement Plans Site
Employee Plans Published Guidance
Critical Priorities…With Monika Templeman - Today's Discussion: Update on the Enrolled Retirement Plan Agent Program
Attention All 2009 Form 1099-R Issuers
Highlights of the Retirement News for Employers
The Corner of Forms & Pubs
We're Glad You Asked!
403(b) Phone Forum
DOL Corner
PBGC Insights
Calendar of EP Benefits Conferences

Treasury Regulation – [TD 9447] – Automatic Contribution Arrangements

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Wed, 25 Feb 2009 18:08:00 +0000

26 CFR Parts 1 and 54

[TD 9447]

RIN 1545-BG80

Treasury Regulation – [TD 9447] – Automatic Contribution Arrangements

TD 9447 contains final regulations relating to automatic contribution arrangements. These regulations affect administrators of, employers maintaining, participants in, and beneficiaries of section 401(k) plans and other eligible plans that include an automatic contribution arrangement.

SUMMARY: This document contains final regulations relating to automatic contribution arrangements. These regulations affect administrators of, employers maintaining, participants in, and beneficiaries of section 401(k) plans and other eligible plans that include an automatic contribution arrangement.

DATES: Effective date: These regulations are effective on February 24, 2009.   Applicability date: Except as provided in Sec. Sec.  1.401(k)-3(j)(1)(i) and 1.401(m)-2(a)(6)(ii), the final regulations relating to qualified automatic contribution arrangements (Sec. Sec.  1.401(k)-2, 1.401(k)-3, 1.401(m)-2, and 1.401(m)-3) apply to plan years beginning

on or after January 1, 2008. The regulations relating to eligible automatic contribution arrangements (Sec. Sec.  1.402(c)-2, 1.411(a)-4, 1.414(w)-1, and 54.4979-1) apply for plan years beginning on or after January 1, 2010.

Final regulations under section 401 and other sections of the Code provide guidance relating to certain automatic contribution arrangements, eligible rollover distributions, forfeitures, and excise tax on certain excess contributions and excess aggregate contributions.

Related Links:

IRS Notice 2009-16 – Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Tue, 24 Feb 2009 18:32:00 +0000

Part III --- Administrative, Miscellaneous, and Procedural

IRS Notice 2009-16 – Update for Weighted Average 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 February 2009; the 24-month average segment rates; the funding transitional segment rates applicable for February 2009; and the minimum present value transitional rates for January 2009.

Related Links:

IRS Notice 2009-16, 2009-08 I.R.B. 572 (February 23, 2009) – Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates [PDF]
IRS Notice 2009-16, 2009-08 I.R.B. 572 (February 23, 2009) – Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates [HTML]
2009-08 I.R.B. 572 (February 23, 2009)

Retirement News for Employers – Winter 2009 Edition

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Wed, 18 Feb 2009 02:12:00 +0000

The IRS released Retirement News for Employers – Winter 2009 Edition. It contains the following articles:

Did You Amend Your SIMPLE IRA Plan for EGTRRA?
New Law Waives Required Minimum Distributions for 2009
We're Glad You Asked!
New on the Web
Automatic Enrollment 401(k) Plans for Small Businesses
Fixing Common Plan Mistakes: Failure to Limit Contributions for a Participant
Recent Guidance
New Form 990 Requirements
The Filing Cabinet
Desk Side Chat With Monika Templeman - The Biggest Mistake
DOL News
Mark Your Calendar
Timing Is Everything Flyer.

Field Assistance Bulletin No. 2009-01 - Defined Benefit Plan Annual Funding Notice - Pension Protection Act of 2006

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Sat, 14 Feb 2009 19:17:00 +0000

The DOL announced the release of a Field Assistance Bulletin (FAB) concerning new disclosure requirements mandated by the PPA.

Washington - The U.S. Department of Labor's Employee Benefits Security Administration (EBSA) today released Field Assistance Bulletin (FAB) 2009-01 concerning new disclosure requirements mandated by the Pension Protection Act of 2006 (PPA).

The PPA amended the Employee Retirement Income Security Act of 1974 (ERISA) to require plan administrators of defined benefit pension plans to provide participants and others with information annually about the funding status of their plans. An estimated 1,500 multiemployer plans covering approximately 10 million participants and beneficiaries plus 29,000 single-employer plans covering approximately 33.8 million participants and beneficiaries are subject to the new disclosure requirements. Many of these plans must furnish their first annual funding notice under the new law no later than April 30, 2009.

The FAB addresses a need for interim guidance pending the adoption of regulations or other guidance under section 101(f) of ERISA by announcing a "good faith" enforcement policy. The FAB also includes technical assistance in the form of questions and answers and model annual funding notices.

The FAB provides some background information:

Section 101(f) of the Employee Retirement Income Security Act (ERISA) sets forth requirements applicable to furnishing annual funding notices. Before the Pension Protection Act of 2006 (PPA), section 101(f) applied only to multiemployer defined benefit plans. Section 501(a) of the PPA amended section 101(f) of ERISA, making significant changes to the annual funding notice requirements. These amendments require administrators of all defined benefit plans that are subject to title IV of ERISA, not only multiemployer plans, to provide an annual funding notice to the Pension Benefit Guaranty Corporation (PBGC), to each plan participant and beneficiary, to each labor organization representing such participants or beneficiaries, and, in the case of a multiemployer plan, to each employer that has an obligation to contribute to the plan. An annual funding notice must include, among other things, the plan's funding percentage, a statement of the value of the plan's assets and liabilities and a description of how the plan's assets are invested as of specific dates, and a description of the benefits under the plan that are eligible to be guaranteed by the PBGC.

The PPA amendments to section 101(f) apply to plan years beginning after December 31, 2007, with special rules for disclosing "funding target attainment percentage" or "funded percentage" with respect to any plan year beginning before January 1, 2008. Section 501(c) of the PPA requires the Department to develop a model annual funding notice within one year of the date of enactment of the PPA.

Recently, concerns have been expressed about the imminent compliance date of the new annual funding notice requirements, the absence of regulatory guidance from the Department, and the cost and burdens attendant to annual funding notice compliance efforts prior to the adoption of annual funding notice regulations and the issuance of a model annual funding notice by the Department. In recognition of the foregoing, this memorandum provides guidance to the Employee Benefits Security Administration's national and regional offices concerning good faith compliance with the new annual funding notice requirements.

It provides for good faith compliance and a model annual funding notice for single-employer and multiemployer defined benefit plans. It also contains 17-Q&As:

When must plans first comply with the new annual funding notice requirements?
What is the benefit to plan administrators of using the model notices?
May the plan administrator of a multiemployer plan use the model in the Appendix to 29 C.F.R. 2520.101-4 for purposes of compliance with section 101(f) for plan years beginning on or after January 1, 2008?
Must a plan administrator furnish an annual funding notice to the Pension Benefit Guaranty Corporation?
Are all ERISA-covered defined benefit pension plans subject to the new annual funding notice requirement?
Section 101(f)(2)(B)(i)(I) of ERISA states that an annual funding notice must include, "in the case of a single-employer plan, a statement as to whether the plan's funding target attainment percentage (as defined in section 303(d)(2)) for the plan year to which the notice relates, and for the 2 preceding plan years, is at least 100 percent (and, if not, the actual percentages)[.]" How should plan administrators calculate this percentage for the model?
Section 101(f)(2)(B)(ii)(I)(bb) of ERISA states that an annual funding notice must include, in the case of a single-employer plan, "the value of the plan's assets and liabilities for the plan year to which the notice relates as of the last day of the plan year to which the notice relates determined using the asset valuation under sub clause (II) of section 4006(a)(3)(E)(iii) and the interest rate under section 4006(a)(3)(E)(iv)[.]" How should plan administrators calculate year-end assets and liabilities for the model?
Section 101(f)(2)(B)(i)(II) of ERISA states that an annual funding notice must include, "in the case of a multiemployer plan, a statement as to whether the plan's funded percentage (as defined in section 305(i)) for the plan year to which the notice relates, and for the 2 preceding plan years, is at least 100 percent (and, if not, the actual percentages)[.]" How should plan administrators calculate this percentage for the model?
Section 101(f)(2)(B)(ii)(II) of ERISA, as amended by the Worker, Retiree, and Employer Recovery Act of 2008, Pub. L. No. 110-458, states that an annual funding notice must include, "in the case of a multiemployer plan, a statement, for the plan year to which the notice relates and the preceding 2 plan years, of the value of the plan assets (determined both in the same manner as under section 304 and under the rules of sub clause (I)(bb)) and the value of the plan liabilities (determined in the same manner as under section 304 except that the method specified in section 305(i)(8) shall be used)[.]" How should plan administrators calculate these assets and liabilities for the model?
Section 101(f)(2)(B)(iii) of ERISA states that an annual funding notice must include "a statement of the number of participants who are (I) retired or separated from service and are receiving benefits, (II) retired or separated participants entitled to future benefits, and (III) active participants under the plan[.]" What is the meaning of the terms "active" and "retired or separated" for purposes of section 101(f)(2)(B)(iii) of ERISA? On what day of the plan year must the administrator focus when counting participants for purposes of this statement?
Section 101(f)(2)(B)(iv) of ERISA states that an annual funding notice must include "a statement setting forth the funding policy of the plan and the asset allocation of investments under the plan (expressed as percentages of total assets) as of the end of the plan year to which the notice relates[.]" How should a plan administrator state the asset allocation on the model?
Section 101(f)(2)(B)(vi) states that an annual funding notice must include, "in the case of any plan amendment, scheduled benefit increase or reduction, or other known event taking effect in the current plan year and having a material effect on plan liabilities or assets for the year (as defined in regulations by the Secretary), an explanation of the amendment, scheduled increase or reduction, or event, and a projection to the end of such plan year of the effect of the amendment, scheduled increase or reduction, or event on plan liabilities." When does an amendment, scheduled increase, or other known event have a "material effect" on plan liabilities or assets for purposes of section 101(f)(2)(B)(vi)?
May plan administrators add additional or explanatory information to a model?
May the annual funding notice be furnished to recipients electronically?
For multiemployer plans, how is "each employer that has an obligation to contribute to the plan" defined for purposes of furnishing a model notice?
Section 101(f) of ERISA requires the disclosure of plan funding information not only for the plan year to which the notice relates, but also for the two plan years preceding that year. Thus, for example, an annual funding notice for the 2008 plan year must include PPA funding information pertaining to the 2007 and 2006 plan years (both pre-PPA years). What funding information for these pre-PPA years should the plan administrator include in its model?
Do the new annual funding notice requirements apply to plans for which the effective date of the PPA funding rules is delayed in accordance with sections 104 through 106 of PPA, or that are subject to special funding rules in accordance with section 402 of the PPA? May such plans use the model notice in Appendix A?

Related Links:

Free Webcast: Getting Ready for the 2009 Form 5500 and Electronic Filing

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Sat, 14 Feb 2009 19:02:00 +0000

The DOL announced a free February 19 webcast, Getting Ready for the 2009 Form 5500 and Electronic Filing:

Washington – The U.S. Department of Labor's Employee Benefits Security Administration (EBSA) will host its first of a series of free webcasts on February 19 from noon to 2 p.m. EST to help employers and service providers prepare for changes in the requirements of the 2009 Form 5500 reports and a preview of the new electronic filing Web site.

This webcast will cover the new simplified annual reporting form for small plans with easy to value investments; expanded reporting by large plans of compensation received by plan service providers; realignment of the reporting rules for Internal Revenue Code section 403(b) pension plans subject to Title I of the Employee Retirement Income Security Act (ERISA) to make them on par with 401(k) plans; and annual reporting changes required by the Pension Protection Act or defined benefit pension plans and multiemployer plans.

The modernized version of the ERISA Filing Acceptance System – known as EFAST2 – will receive only electronic filing submissions, provide quick responses in the event there are errors in a filing and publicly disclose filed Form 5500 reports through the EFAST Web site. The seminars are part of EBSA's fiduciary education campaign to help workers and employers, especially small businesses, understand their rights and obligations under employee benefit laws.

Additional webcasts and educational material will be made available throughout the year.

News media are encouraged to cover this event.

Who: Employers, plan fiduciaries and providers of plan services
What: Webcast on Form 5500 and electronic filing
When: February 19, Noon to 2 p.m. EST
How: Online registration is first-come, first-served, by visiting www.dol.gov/ebsa and clicking the appropriate link under "Compliance Assistance Workshops, Seminars and Webcasts." For more information, wecontact Patricia Humphlett at 202.693.8660

Here is more information about the free webcast:

To help plan sponsors and plan service providers prepare for the changes to the Form 5500 and the electronic filing requirement that begin with the 2009 plan year filings, the Department of Labor will be providing webcasts and other educational outreach throughout the year. This first webcast will help you get started preparing for the changes and will include a preview of the new EFAST2 electronic filing website.

Among the changes to the Form 5500 are a new simplified annual reporting form for small plans with easy to value investments; expanded reporting by large plans of compensation received by plan service providers; realignment of the reporting rules for Internal Revenue Code section 403(b) pension plans subject to Title I of ERISA to make them on par with 401(k) plans; and annual reporting changes required by the Pension Protection Act (PPA) for defined benefit pension plans and multiemployer plans.

Along with the form changes, the ERISA Filing Acceptance System (EFAST) is being modernized. The new filing system, EFAST2, will receive only electronic filing submissions and will quickly indicate if there are errors in a filing. EFAST2 also will publicly disclose the filed Form 5500 reports through the EFAST website.

Duties of Fiduciaries in Light of Recent Events Regarding Bernard L. Madoff Investment Securities LLC

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Sat, 14 Feb 2009 18:50:00 +0000

The DOL announced guidance on fiduciary duties in response to the alleged abuses involving the Madoff investment firm:

Washington – The U.S. Department of Labor's Employee Benefits Security Administration (EBSA), today announced guidance on the duties of employee benefit plan fiduciaries in light of alleged abuses involving Bernard L. Madoff Investment Securities LLC.

The department is providing guidance to fiduciaries, investment managers and other investment service providers to plans who believe they may have exposure to losses on investments with entities related to the Madoff firm. The guidance also provides steps that can be taken to assess and protect the interests of plans, participants and beneficiaries under the Employee Retirement Income Security Act (ERISA).

Here is the one-page guidance:

Recent events regarding Bernard L. Madoff Investment Securities LLC have resulted in fiduciaries, investment managers and other investment service providers asking the Department of Labor about steps they should be taking in connection with employee benefit plans they believe may have exposure to losses as a result of plan assets being invested with Madoff entities. Fiduciaries of employee benefit plans covered by the Employee Retirement Income Security Act of 1974 (ERISA) should address these events in a manner consistent with their fiduciary duties of prudence and loyalty to the plan's participants and beneficiaries.

Where plan fiduciaries determine that plan assets were invested with Madoff entities and material losses are likely, appropriate steps should be taken to assess and protect the interests of the plan and its participants and beneficiaries. Such steps may include (1) requesting disclosures from investment managers, fund managers, and other investment intermediaries regarding the plan's potential exposure to Madoff-related losses, (2) seeking advice regarding the likelihood of losses due to investments that may be at risk; (3) making appropriate disclosures to other plan fiduciaries and plan participants and beneficiaries; and (4) considering whether the plan has claims that are reasonably likely to lead to recovery of Madoff-related losses that should be asserted against responsible fiduciaries or other intermediaries who placed plan assets with Madoff entities, as well as claims against the Madoff bankruptcy estate. Fiduciaries must ensure that claims are filed in accordance with applicable filing deadlines such as those applicable to bankruptcy claims and for coverage by the Securities Investor Protection Corporation (SIPC).

The web site of the court-appointed trustee for the liquidation of Bernard L. Madoff Investment Securities LLC is www.madofftrustee.com. This web site contains the liquidation notice, claim forms and related claims information, and deadlines for the filing of claims with the trustee.

Related Links

Memorandum Concerning Regulatory Review

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Mon, 26 Jan 2009 01:57:00 +0000

On January 20, 2009, the White House issues a memorandum concerning Regulatory Review. In response, the Office of Management and Budget (OMB) has issued a memorandum concerning Implementation of Memorandum Concerning Regulatory Review. Obama Administration to Make Regulatory Review (aka Freeze on Regulations by Obama Administration) discusses how public objections from Congressman George Miller (House Education and Labor Committee Chairman) and Congressman Rob Andrews (D-New Jersey) make it likely that changes that will be made to DOL Final Regulation – Investment Advice – Participants and Beneficiaries. It also suggests the following regulations may be reviewed:

DOL Final Regulation - Civil Penalties Under ERISA Section 502(c)(4)
IRS Notice 2008-113 – Relief and Guidance on Corrections of Certain Failures of a Nonqualified Deferred Compensation Plan to Comply with § 409A(a) in Operation
"PBGC final regulations on allocation of unfunded vested benefits to withdrawing employers from a multiemployer pension plan, published 12/30/08"

Related Links:

IRS Notice 2009-08 – Interim Guidance Under Section 457A

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Mon, 26 Jan 2009 00:53:00 +0000

Part III --- Administrative, Miscellaneous, and Procedural

IRS Notice 2009-08 – Interim Guidance Under Section 457A

This notice provides interim guidance on recently enacted section 457A of the Code which became effective January 1, 2009. Section 457A generally provides that compensation deferred under a nonqualified deferred compensation plan of a nonqualified entity is includible in gross income when there is no substantial risk of forfeiture of the right to such compensation. For this purpose, the term nonqualified deferred compensation plan has the meaning provided under section 409A(d),

subject to some modifications, and the term nonqualified entity means (a) any foreign corporation unless substantially all of its income is (i) effectively connected with the conduct of a trade or business in the U.S., or (ii) subject to a comprehensive foreign income tax, and (b) any partnership unless substantially all of its income is allocated to persons other than (i) foreign persons with respect to whom such income is not subject to a comprehensive foreign income tax, and (ii) tax-exempt organizations.

Related Links:

IRS Notice 2009-08, 2009-04 I.R.B. 347 (January 26, 2009) – Interim Guidance Under Section 457A [PDF]
IRS Notice 2009-08, 2009-04 I.R.B. 347 (January 26, 2009) – Interim Guidance Under Section 457A [HTML]
2009-04 I.R.B. 347 (January 26, 2009)

IRS Notice 2009-02 – Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Mon, 26 Jan 2009 00:48:00 +0000

Part III --- Administrative, Miscellaneous, and Procedural

IRS Notice 2009-02 – Update for Weighted Average 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 January 2009; the 24-month average segment rates; the funding transitional segment rates applicable for January 2009; and the minimum present value transitional rates for December 2008.

Related Links:

IRS Notice 2009-02, 2009-04 I.R.B. 344 (January 26, 2009) – Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates [PDF]
IRS Notice 2009-02, 2009-04 I.R.B. 344 (January 26, 2009) – Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates [HTML]
2009-04 I.R.B. 344 (January 26, 2009)

DOL Final Regulation – Investment Advice – Participants and Beneficiaries

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Mon, 19 Jan 2009 19:47:00 +0000

UPDATE: Memorandum Concerning Regulatory Review discusses how public objections from Congressman George Miller (House Education and Labor Committee Chairman) and Congressman Rob Andrews (D-New Jersey) make it likely that changes will be made to this DOL Final Regulation

The DOL announced publication of the final rule on investment advice for 401(k) plans and IRAs:

WASHINGTON — The U.S. Department of Labor today announced publication of a final rule to make investment advice more accessible for millions of Americans in 401(k) type plans and individual retirement accounts (IRAs). The final rule will be published in the Jan. 21, 2009, edition of the Federal Register. The rule includes a regulation that implements the new statutory exemption for investment advice added to the Employee Retirement Income Security Act (ERISA) by the Pension Protection Act (PPA) and a related class exemption.

"Access to professional investment advice is particularly important now for workers as they manage their 401(k) plans and IRAs in changing and volatile financial markets," said Secretary of Labor Elaine L. Chao.

The final rule provides general guidance on the exemption's requirements, including computer model certification and disclosures by fiduciaries. The regulation also includes a model form to assist advisers in satisfying the exemption's fee disclosure requirement. In addition, the final rule includes a class exemption expanding the availability of investment advice.

The PPA amended ERISA by adding a new prohibited transaction exemption that allows greater flexibility for participants of 401(k) plans and IRAs to obtain investment advice. One of the ways in which investment advice may be given under the exemption is through the use of a computer model certified as unbiased. The other way is through an adviser compensated on a "level-fee" basis. Several other requirements also must be satisfied, including disclosure of fees the adviser is to receive.

"Millions of American workers are responsible for managing their 401(k) and IRA accounts. The department took extraordinary steps to engage a broad spectrum of participants, employers, plan fiduciaries and others throughout the rulemaking process," said Bradford P. Campbell, assistant secretary of the Labor Department's Employee Benefits Security Administration. "The final rule expands access to investment advice without compromising the critical protections for plan participants and beneficiaries. "

The department published a Request for Information in December 2006, published a proposed regulation in August 2008 and held a public hearing on the proposals on Oct. 21, 2008.

OMB Approves DC Advice Rule provides some analysis:

The DOL's investment advice rule is controversial because it would open the door for mutual funds and other investment companies to offer investment advice directly to participants in DC plans. Mutual fund companies long have been effectively barred from offering direct advice to participants because of fears that the advisers might steer participants to their companies' own investment options.

But under the DOL's rule, mutual fund employees would be able to offer one-on-one advice directly, as long as the employee's compensation doesn't depend on the investment options selected by the participant, and the advice meets other key conditions.

Related Links:

Retirement News for Employers - Special Edition, January 2009

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Sat, 17 Jan 2009 15:14:00 +0000

The IRS released Retirement News for Employers - Special Edition, January 2009 and Employee Plans News - Special Edition, January 2009:

This Special Edition discusses the Worker, Retiree, and Employer Recovery Act of 2008 and the waiver of any required minimum distribution (RMD) for 2009 from retirement plans that hold each participant's benefit in an individual account, such as 401(k) plans and 403(b) plans, and certain 457(b) plans.

In addition, please help us to better serve you! Complete our SURVEY on Employee Plans' newsletter for small business owners, Retirement News for Employers.

The Newsletter discusses the following Required Minimum Distribution (RMD) issues:

Worker, Retiree, and Employer Recovery Act of 2008 (WRERA) was signed into law on December 23, 2008.
WRERA waives RMDs for 2009: Section 201 of the Act waives any required minimum distribution (RMD) for 2009 from retirement plans that hold each participant's benefit in an individual account, such as 401(k) plans and 403(b) plans, and certain 457(b) plans. The Act also waives any RMDs for 2009 from an Individual Retirement Arrangement (IRA). This means that most participants and beneficiaries otherwise required to take minimum distributions from these types of accounts are not required to withdraw any amount in 2009. If they do make a withdrawal in 2009 (that is not a RMD for 2008), they might be able to roll over the withdrawn amount into other eligible retirement plans.
It does not waive 2008 RMDs, even if they delayed it until April 1, 2009: The Act does not waive any 2008 RMDs, even for individuals who were eligible and chose to delay taking their 2008 RMD until April 1, 2009 (e.g., retired employees and IRA owners who turned 70½ in 2008). These individuals must still take their full 2008 RMD by April 1, 2009, or they might face a 50% excise tax on the amount not withdrawn. The 2009 RMD waiver under the Act does apply to individuals who may be eligible to postpone taking their 2009 RMD until April 1, 2010 (generally, retired employees and IRA owners who attain age 70½ in 2009). However, the Act does not waive any RMDs for 2010.
Beneficiaries receiving distributions over a 5-year period can waive their 2009 distribution: If a beneficiary is receiving distributions over a 5-year period, he or she can now waive the distribution for 2009, effectively taking distributions over a 6-year rather than a 5-year period.
IRS Notice 2009-09 – Required Minimum Distributions for 2009 provides information for issuers of IRS Form 5498 - IRA Contribution Information, but notes that an incorrect check in box 11 (RMD for 2009) will not be considered incorrectly issued if the financial institution notifies the recipient by March 31, 2009 that an RMD is not required: The IRS issued Notice 2009-9 on January 9, 2009, which states that issuers of the 2008, IRA Contribution Information, Form 5498 should not put a check in Box 11. However, in recognition of the short amount of time to make programming changes, if a financial institution issues a 2008 Form 5498 with a check in Box 11, the IRS will not consider such form issued incorrectly solely because of the check in Box 11, as long as the financial institution notifies the recipient by March 31, 2009 that no RMD is required for 2009.
Required RMD information under IRS Notice 2002-27, 2002-18 I.R.B. 814 - Reporting Required Minimum Distributions from IRAs does not need to be sent to IRA owners for 2009: In addition, the RMD information required under Notice 2002-27, 2002-18 I.R.B. 814 does not need to be sent to IRA owners for 2009. If a financial institution sends a separate RMD statement to an IRA owner, either initially or in response to the owner's request for the financial institution to calculate the RMD for 2009, the financial institution may show the RMD for 2009 as zero (0). Alternatively, the financial institution may send the IRA owner a statement showing the RMD that would have been required but for the waiver of RMDs for 2009, along with an explanation of the waiver for 2009 RMDs.

Related links:

IRS Notice 2009-09 – Required Minimum Distributions for 2009

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Sat, 17 Jan 2009 14:50:00 +0000

Part III --- Administrative, Miscellaneous, and Procedural

IRS Notice 2009-09 – Required Minimum Distributions for 2009

Notice 2009-09 provides guidance to financial institutions on the reporting rules applicable to required minimum distributions ("RMDs") for 2009 in light of the enactment of the Worker, Retiree, and Employer Recovery Act of 2008, P.L. 110-458 (the Act). Section 201 of the Act waives any RMDs for 2009 from individual retirement arrangements (IRAs) and retirement plans that hold participant benefits in individual accounts. This notice modifies the reporting requirements applicable to RMDs from IRAs to reflect the waiver of the RMD rules for 2009.

Retirement News for Employers - Special Edition, January 2009 and Employee Plans News - Special Edition, January 2009 provide more analysis:

WRERA waives RMDs for 2009.
It does not waive 2008 RMDs, even if the RMDS were delayed until April 1, 2009.
Beneficiaries receiving distributions over a 5-year period can waive their 2009 distribution, effectively creating a 6-year period.
IRS Notice 2009-09 – Required Minimum Distributions for 2009 provides information for issuers of IRS Form 5498 - IRA Contribution Information, but notes that an incorrect check in box 11 (RMD for 2009) will not be considered incorrectly issued if the financial institution notifies the recipient by March 31, 2009 that an RMD is not required.
Required RMD information under IRS Notice 2002-27, 2002-18 I.R.B. 814 - Reporting Required Minimum Distributions from IRAs does not need to be sent to IRA owners for 2009.

Rapid Fire Required Minimum Distribution Guidance for 2008 and 2009

provides further analysis and notes the date to adopt an amendment to adopt the RMD waiver:

The date to adopt an amendment to reflect this RMD waiver for 2009 is on or before the last day of the first plan year beginning on or after January 1, 2011 as provided for in Section 201(c)(2)(B) of WRERA. For governmental plans, the date to adopt an amendment is on or before the last day of the first plan year beginning on or after January 1, 2012.

Q&A: 2009 Required Minimum Distribution Rule Changes answers the following questions:

What is the new law change affecting RMDs for 2009?
To what types of plans does the WRERA 2009 RMD waiver apply?
What is the purpose of the new law?
How do RMDs affect eligible rollover distributions (ERDs) in general?
If a plan makes a 2009-ERD, must the plan apply the rules that apply to an ERD?
If an individual receives a 2009 distribution from a plan that has been distributing RMDs to the individual, may the individual roll over the distribution?
If an individual receives a 2009-ERD, and decides to roll over the distribution, how long does the individual have to complete the rollover?
If a plan suspends a participant’s RMD for 2009, does the suspension affect the way the plan calculates the participant’s 2010 RMD?
Must a plan that is making RMDs to an individual notify the individual, in advance of the distribution, of the 2009 waiver provision, and give the individual an opportunity to elect not to take a 2009 distribution that, but for WRERA, would be an RMD?
How should a plan, during 2009, treat distributions that are affected by the RMD
i. Make distributions in accordance with previous elections, notwithstanding the RMD waiver.
ii. Suspend all RMDs for 2009.
iii. Let the participant choose whether to take a distribution of the 2009 RMD amount.
Must a financial institution that is an IRA trustee send to IRA owners subject to the RMD requirements the annual notice due by January 31 regarding RMDs?
Does the 2009 waiver apply to a death beneficiary who is receiving distributions from the account of a deceased participant?
If an individual (whether an IRA owner or a participant who has separated from employment with the employer maintaining the plan) attained age 70½ in 2008, and did not take his/her first RMD in 2008, does the RMD waiver permit the individual not to take the first RMD in 2009?
With respect to an individual who attains age 70½ during 2009, and has his or her initial RMD obligation for that year, must the individual still take his or her first RMD by April 1, 2010, since that date is after 2009, the year of the waiver?
When must an employer amend its plan to add language reflecting the 2009 RMD waiver?

2009 RMD Rule Changes: A Follow-Up contains additions discussions about the 2009 RMD rules, including a problem created by the statutory change:

The statutory change seems to pave the way for (and apparently was intended by Congress to permit) the rollover of a 2009 RMD, thereby enabling the recipient to defer a taxable distribution in favor of letting the RMD amount continue to grow (and hopefully recover market losses) on a tax-deferred basis. The problem, as explained in Q&A-4, Example 3 of our RMD Tech-1, is that notwithstanding the 2009 RMD waiver, if a participant has elected (or the plan mandates) a series of substantially equal lifetime installments, the Code provides that the installments are not ERDs.(See IRC §402(c)(4)(A).) As a result, if the plan actually distributes the 2009 installment, the apparent ameliorative benefit of the WRERA law change is non-existent. The distribution is taxable and is not eligible for rollover. In contrast, if the same plan decides to suspend 2009 RMDs (or the participant, under the plan’s procedures, elects not to take the distribution), the participant avoids taxation and enjoys the relief that Congress intended. However, there does not seem to be any policy justification for this disparate treatment, which is beyond the control of the participant, and is dependent on how the plan sponsor chooses to comply with the new law. So the question arises whether it would be reasonable for a participant to treat a 2009 distribution, which is an installment payment of only RMD minimums (as in Example 3), as an ERD by reason of the WRERA 2009 waiver provision, even though the distribution technically appears not to be an ERD. In the absence of guidance from the IRS, a conservative answer would be no.

It also discusses an informal conversation with an IRS official, current guidance under IRS Notice 2009-9, 3 administrative approaches (continue to make distributions that would be RMDs, suspend distributions, give the participant the option), and provides a recommendation:

In absence of additional guidance, a conservative interpretation of the new law appears prudent. This means practitioners should assume that an RMD that is one of “substantially equal payments” for life, life expectancy, or for a period of 10 years or more is not an ERD, whether the plan makes the distribution pursuant to a participant’s election or pursuant to a plan provision. If the plan’s priority is to offer the most favorable options to participants, the plan should consider either suspending RMDs (subject to the participant’s option to elect to take the distribution), or offering participants a choice, subject to the plan’s “default” either to distribute or to suspend distributions.

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Automatic Enrollment 401(k) Plans for Small Businesses

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Sat, 17 Jan 2009 14:45:00 +0000

The DOL and IRS announced the release of a new publication to help small employers understand 401(k) automatic enrollment:

Washington – The U.S. Department of Labor and the Internal Revenue Service (IRS) today released a new publication to help small employers understand automatic enrollment for 401(k) plans offered to their employees. Automatic Enrollment 401(k) Plans for Small Businesses provides a comprehensive overview of the advantages of starting and operating this type of 401(k) arrangement.

With 401(k) plans serving as the primary source of retirement income for millions of Americans, automatic enrollment will play an important role in helping them save and invest for their retired years. This publication describes an automatic enrollment 401(k) plan, how to set up the plan, management of the plan, fiduciary responsibilities and a checklist to ensure compliance with the law.

"Today, there are many retirement plan options available to small employers. The automatic enrollment 401(k) plan offers small business owners a way to help more of their employees save for retirement," said Bradford P. Campbell, assistant secretary of labor for the Labor Department's Employee Benefits Security Administration (EBSA).

This publication is part of the agency's ongoing education campaign to educate employers, particularly small businesses, and help workers and their families to save for a financially secure retirement.

Related Links

IRS Notice 2009-03 – Relief From Immediate Compliance With 2009 § 403(b) Written Plan Requirement

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Mon, 12 Jan 2009 13:54:00 +0000

Part III --- Administrative, Miscellaneous, and Procedural

IRS Notice 2009-03 – Relief From Immediate Compliance With 2009 § 403(b) Written Plan Requirement

This notice provides relief during 2009 for sponsors of section 403(b) plans with respect to the requirement to have a written section 403(b) plan in place by January 1, 2009. This notice also briefly describes other programs the Service intends to establish relating to section 403(b) plans. Rev. Proc. 2007-71 modified.

Related Links:

IRS Revenue Ruling 2009-02 – Permitted disparity in employer-provided contributions or benefits Plans

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Mon, 12 Jan 2009 13:46:00 +0000

Part I

Section 401. -- Qualified Pension, Profit-Sharing, and Stock Bonus Plans

26 CFR 1.401(l)-1: Permitted disparity in employer-provided contributions or benefits

IRS Revenue Ruling 2009-02 – Permitted disparity in employer-provided contributions or benefits

2009 covered compensation tables; permitted disparity. The covered compensation tables under section 401 of the Code for the year 2009 are provided for use in determining contributions to defined benefit plans and permitted disparity.

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DOL Final Regulation - Civil Penalties Under ERISA Section 502(c)(4)

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Mon, 12 Jan 2009 12:54:00 +0000

[Federal Register Correction: In rule document Z8-31188 beginning on page 17 in the issue of Friday, January 2, 2009 make the following correction: On page 17, in the second column, in the DATES heading, March 3, 2008 should read March 3, 2009.]

The DOL announced a final regulation implementing civil penalty rules under the Pension Protection Act:

Washington —The U.S. Department of Labor today announced a final regulation implementing the department's authority to assess civil penalties against plan administrators who fail to disclose certain documents to participants, beneficiaries and others as required by the Employee Retirement Income Security Act, as amended by the Pension Protection Act (PPA).

The PPA established new disclosure provisions relating to: funding-based limits on benefit accruals and certain forms of benefit distributions; plan actuarial and financial reports; withdrawal liability of contributing employers; and participants' rights and obligations under automatic contribution arrangements. The PPA gave the department authority to assess civil monetary penalties of up to $1,000 per day per violation against plan administrators for violations of the new disclosure requirements. The final regulation sets forth the administrative procedures for assessing and contesting such penalties and does not address the substantive provisions of the new disclosure requirements.

This final regulation is to be published in the January 2, 2009 Federal Register.

The regulations describe how the DOL will assess and compute the notice penalty. They also discuss the process to dispute an assessment and request an administrative hearing.

The final regulations do not have any reference to providing the notice before a participant becomes eligible and whether the notice requirements are for all automatic contribution arrangements or only for those covered under 29 CFR § 2550.404c-5.

Final Regulations Adopted on ERISA Civil Penalties for PPA Disclosure Violations provides additional anaylsis:

Under the final regulations, DOL is authorized to assess civil penalties not to exceed $1,000 per day for violations of each of the following:

Notice of funding-based limits.– Effective for plan years beginning on or after January 1, 2008.
Notice requirements for automatic contribution arrangements. – Effective August 17, 2006.
Furnishing of plan documents. – Effective for plan years beginning on or after January 1, 2008.
Notice of potential withdrawal liability. – Effective for plan years beginning on or after January 1, 2008.

Related Links

IRS Revenue Procedure 2009-08 - Rulings and determination letters

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Mon, 12 Jan 2009 12:34:00 +0000

26 CFR 601.201: Rulings and determination letters.

IRS Revenue Procedure 2009-08 - Rulings and determination letters

User fees for employee plans and exempt organizations. Up-to-date guidance for complying with the user fee program of the Service as it pertains to requests for letter rulings, determination letters, etc., on matters under the jurisdiction of the Office of the Division Commissioner, Tax Exempt and Government Entities Division, is provided. Rev. Proc. 2008-8 superseded.

Related Links:

IRS Revenue Procedure 2009-06 - Rulings and determination letters

ajuckett@esopinsourcing.com (Employee Stock Ownership Plan (ESOP) Consultant) — Mon, 12 Jan 2009 12:31:00 +0000

26 CFR 601.201: Rulings and determination letters.

IRS Revenue Procedure 2009-06 - Rulings and determination letters

Employee plans determination letters. Revised procedures are provided for issuing determination letters on the qualified status of employee plans under sections 401(a), 403(a), 409, and 4975 of the Code. Rev. Proc. 2008-6 superseded.

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