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IRS Provides Relief from Certain Late-Filer Penalties Related to Form 5500

The IRS recently released Notice 2014-35 providing IRS penalty relief for failing to timely file the Form 5500 series.?á These penalties are in addition to those that the DOL could impose under ERISA. Under the Notice, the IRS will not impose penalties for failing to file a required Form 5500, Form 5500-SF, or Form 8955-SSA if (1) the requirements of the DOL?ÇÖs Delinquent Filer Voluntary Compliance Program (?Ç£DFVC?Ç¥) related to a delinquent Form 5500 series return are met and (2) a Form 8955-SSA is filed with the IRS, along with any information required to be filed for the year to which the DFVC filing relates, by the later of 30 calendar days after the DFVC filing is completed or December 1, 2014.?á The Notice can be found?áhere.

IRS Issues 2013 List of Changes in Plan Qualification Requirements

The IRS released Notice 2013-84, which contains the 2013 Cumulative List of Changes in Plan Qualification Requirements to be used by plan sponsors and practitioners filing determination letter applications beginning February 1, 2014. ?áThose using the 2013 cumulative list will primarily be single employer, individually designed defined contribution and defined benefit plans in Cycle D of the IRS?ÇÖs 5-year remedial amendment cycle program and Section 414(f) multiemployer plans.?á An individually designed plan is generally in Cycle D if the last digit of the plan sponsor?ÇÖs EIN is 4 or 9.?á Notice 2013-84 can be found here.

IRS Issues Guidance on In-Plan Roth Rollovers

The IRS recently released Notice 2013-74, which provides guidance related to in-plan Roth rollovers of amounts not otherwise distributable under a retirement plan.?á Notice 2013-74 supplements Notice 2010-84, which provided guidance for in-plan Roth rollovers when the amount was distributable under the plan.?á Plans that elect to permit such in-plan Roth rollovers may, subject to nondiscrimination requirements, choose the types of contributions eligible for an in-plan Roth rollover, including elective deferrals in 401(k) and 403(b) plans, matching contributions, and non-elective contributions. However, such amounts remain subject to the same distribution restrictions that applied before the in-plan rollover.?á Plans wishing to adopt a discretionary amendment permitting such in-plan Roth rollovers have until the later of (i) the last day of the first plan year in which the amendment is effective or (ii) December 31, 2014, so long as the amendment is effective as of the date the plan first operates in… Continue Reading

IRS Announces 2014 Qualified Pension Plan Limits

The IRS recently announced cost-of-living adjustments for 2014.?á The following list describes some of the key limits that will apply to employer qualified retirement plans in 2014. The Internal Revenue Code (the ?Ç£Code?Ç¥) section 402(g) limit on elective deferrals for employees who participate in 401(k) and 403(b) plans will remain unchanged at $17,500. The Code section 415(c) limit for annual additions under defined contribution plans will increase from $51,000 to $52,000. The Code section 414(v) catch-up contribution limit for employees aged 50 and over who participate in 401(k) and 403(b) plans will remain unchanged at $5,500. The Code section 415(b) annual benefit limit under a defined benefit?áplan will increase from $205,000 to $210,000. The Code section 416(i) dollar limit on compensation for defining a key employee in a top heavy plan will increase from $165,000 to $170,000. The Code section 414(q) dollar limit on compensation for defining a highly compensated… Continue Reading

Retirement Plan Year-End Action Items

The following non-exhaustive list describes year-end action items and the annual notices for retirement plans that must be distributed within a reasonable time prior to the start of the plan year.?á For calendar year plans, providing the notices outlined below by December 1 will meet this requirement in most cases. Safe Harbor 401(k) Notice – for 401(k) plans that are designed to comply with the safe harbor requirements of the Internal Revenue Code (the ?Ç£Code?Ç¥). Automatic Enrollment Notice – for any plan that includes automatic enrollment provisions. Qualified Automatic Contribution Arrangement Notice – for plans that are designed to comply with the Code?ÇÖs qualified automatic contribution provisions. Eligible Automatic Contribution Arrangement Notice – for plans that are designed to comply with the Code?ÇÖs eligible automatic contribution provisions. Qualified Default Investment Alternative (?Ç£QDIA?Ç¥) Notice – for plans with participant-directed investments that include a QDIA in which a participant?ÇÖs account will be… Continue Reading

Important Changes Related to Benefits for Same-Sex Spouses Became Effective Monday, September 16, 2013

Effective September 16, 2013, same-sex spouses will be treated the same as opposite-sex spouses for all federal income tax purposes. ?áThis means that employers should no longer impute income to employees for the value of certain benefits provided to their same-sex spouses and that qualified retirement plans, such as 401(k) and defined benefit pension plans, must extend spousal benefits and protections to same-sex spouses.?á For example, as of September 16, 2013, a qualified retirement plan must, among other things, provide same-sex spouses a qualified joint and survivor annuity payment option and treat a same-sex spouse as an employee?ÇÖs default beneficiary, absent the same-sex spouse?ÇÖs written consent to naming another beneficiary. A copy of the relevant IRS guidance can be found here.

Seventh Circuit Holds that ERISA Fiduciary Breach Claims under Defined Contribution Plan May Be Brought as Class Action

Participants in a 401(k) plan filed a class action suit in federal district court claiming that their employer breached its ERISA fiduciary duty to the plan relating to the plan?ÇÖs investments. Ultimately, the U.S. Court of Appeals for the Seventh Circuit held that an action for breach of fiduciary duty under ERISA Section 502(a)(2) may be maintained as a class action. Abbott v. Lockheed Martin Corp., No. 12-3736 (7th Cir. Aug. 7, 2013).

DOL Allows 401(k) Plans to Reschedule Disclosure of Investment Comparative Chart

The Department of Labor (DOL) issued Field Assistance Bulletin 2013-02, which provides temporary enforcement relief with respect to the deadline for plan administrators of participant-directed individual account plans (e.g., 401(k) plans) to distribute the comparative chart of investment options. ?áIn general, the initial disclosure was due no later than August 30, 2012, with succeeding annual disclosures due no later than the one-year anniversary of the initial disclosure. ?áUnder the new guidance, plan administrators may reset the deadline one time, for either the 2013 or 2014 comparative chart, if (i) the plan fiduciary determines that doing so will benefit the plan?ÇÖs participants and beneficiaries, and (ii) no more than 18 months pass before the participants receive their next comparative chart. A copy of the guidance is available here.

Fifth Circuit Dismisses Fiduciary Breach Claims Under Moench/Kirschbaum Standard

The U.S. Court of Appeals for the Fifth Circuit upheld the dismissal of the plaintiff?ÇÖs complaint alleging that the defendants breached their fiduciary duties by, among other things, permitting the plan to continue offering employer stock as an investment option. The Court explained that the ?Ç£Moench presumption of prudence?Ç¥ adopted in Kirschbaum v. Reliant Energy Inc., 526 F.3d 243, 254 (5th Cir. 2008) applied at the motion to dismiss stage and that the plaintiff failed to allege facts showing the fiduciaries were aware that the employer?ÇÖs viability was threatened – the standard to overcome the presumption of prudence. Kopp v. Klein, No. 12-10416 (5th Cir. July 9, 2013).

Ninth Circuit Overturns Presumption of Prudence in Stock Drop Case

Employees of a drug pharmaceutical company participated in the company?ÇÖs two 401(k) plans, each of which included an employer stock fund.?á Over a period of years, the company used improper marketing tactics which concealed the potentially adverse effects of its drugs.?á Once the company?ÇÖs tactics were exposed, the Food and Drug Administration issued a black box warning for off-label use of the drugs, while subcommittees of the U.S. House of Representatives investigated the drugs and voted to restrict their use and to expand warnings related to their use.?á As a result, the employer?ÇÖs stock lost significant value.?á Employees who participated in the 401(k) plans filed a lawsuit claiming several fiduciary violations under ERISA.?á The U.S. federal district court dismissed all of the claims.?á On appeal, the U.S. Court of Appeals for the Ninth Circuit reversed the decision of the district court and remanded. The first ERISA claim was that the… Continue Reading

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