Periodically, the IRS will release guidance that highlights compliance issues that are either common issues found on audits or current concerns of the IRS. The IRS recently issued the following Issue Snapshots highlighting certain compliance issues for retirement and deferred compensation plans: IRC Section 457(b) Eligible Deferred Compensation Plan – Written Plan Requirements, Application of IRC Section 415(c) When a 403(b) Plan is Aggregated with a Section 401(a) Defined Contribution Plan, Church Plans, Automatic Contribution Arrangements, and the Consolidated Appropriations Act, 2016, and Preventing the Occurrence of a Nonallocation Year under Section 409(p). If your company currently sponsors an employee benefit plan that could be impacted by the issues highlighted in these snapshots, these snapshots are a good reminder to make sure your plan is in compliance. The Issue Snapshots are available here.
Employee benefits rarely drive corporate transactions, but if the benefits of a target company are not reviewed carefully, they can sometimes derail the transaction. Even some of the most routine facets of benefit plan administration can result in significant potential financial exposure (e.g., additional employer contributions, taxes, penalties, and fees as well as fees associated with the preparation and filing of IRS and DOL correction program applications) that could negatively affect the overall value of the target company. By identifying issues early in the transaction, the seller can prevent costly purchase price reductions and identify issues that need correction, while the buyer can avoid overpaying for a target and ensure that representation and warranty insurance will be available to cover potential claims. Some of those routine compliance issues include, but are not limited to, the following: Failing to timely file an annual Form 5500. The DOL can assess a penalty… Continue Reading
The Paycheck Protection Program and Health Care Enhancement Act (the ?Ç£PPP/HCE Act?Ç¥), signed into law on April 24, 2020, clarified how the affiliation rules apply to businesses that sponsor employee stock ownership plans (?Ç£ESOPs?Ç¥). According to the PPP/HCE Act, for purposes of the Paycheck Protection Program, a business?ÇÖs participation in an ESOP will not result in an affiliation between the business and the ESOP (or with the participants in the ESOP). A copy of the PPE/HCE Act can be found here.