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Tax Relief for Hurricane Fiona Victims in Puerto Rico

The IRS released Announcement 2022-161 on September 20, 2022 (available here), providing relief to victims of Hurricane Fiona in any area designated by FEMA. Those individuals and businesses that reside in the Commonwealth of Puerto Rico qualify for tax relief, postponing various tax filing and payment deadlines that occurred starting on September 17, 2022. Those individuals and businesses will now have until February 15, 2023 to file various federal individual and business tax returns and make tax payments that were originally due during that period. The February 15, 2023 extended deadline also applies to quarterly estimated income tax payments otherwise due on January 17, 2023 and the quarterly payroll and excise tax returns normally due on October 31, 2022 and January 31, 2023. Additionally, the Puerto Rico Treasury Department issued Internal Revenue Circular No. 22-13 (available here) allowing for special disaster distributions from Puerto Rico qualified plans and Puerto Rico… Continue Reading

IRS Extends Deadline for Amending Eligible Retirement Plans Under the CARES Act and Taxpayer Certainty and Disaster Relief Act

As we previously reported here, in August 2022, the IRS issued Notice 2022-33 (available here), which provided for an extension to the deadline for amendments for certain provisions of the CARES Act; however, that extension did not apply to coronavirus-related distributions and loan relief. The IRS recently issued Notice 2022-45 (available here) providing for an extension to the deadline to amend an eligible retirement plan to reflect the coronavirus-related distributions and loan relief provisions of Section 2202 of the CARES Act and Section 302 of Title III of the Taxpayer Certainty and Disaster Relief Act of 2020 (the “Relief Act”). Pursuant to Notice 2022-45, non-governmental qualified retirement plans and Section 403(b) plans will now have until December 31, 2025 to be amended to reflect the provisions of Section 2202 of the CARES Act and Section 302 of Title III of the Relief Act. Despite the fact that the amendment deadline… Continue Reading

IRS Introduces Pre-Examination Compliance Pilot Program

Starting this month, when the IRS selects a tax-qualified retirement plan for examination, it will notify the plan sponsor by letter and provide the sponsor a 90-day window to review the plan document and operations for compliance with all plan qualification requirements.   If the sponsor’s review reveals any operational or documentary failures that would otherwise qualify for self-correction under the IRS’s Employee Plan Compliance Resolution System (“EPCRS”), the sponsor will have the opportunity to self-correct those mistakes. If the plan sponsor’s review reveals any operational or documentary failures that, absent the examination, would require correction under the voluntary correction program (“VCP”) component of EPCRS, the sponsor can request a closing agreement, and the IRS will use the VCP fee structure to determine the sanction amount the sponsor will pay under the closing agreement.  The sponsor must notify the IRS of the errors discovered and the correction within the 90-day window. The… Continue Reading

IRS Provides Additional Extension of Temporary Relief from Physical Presence Requirement for Certain Retirement Plan Consents

In June 2020, we reported here regarding the temporary relief from the physical presence requirements for certain participant and beneficiary elections under qualified retirement plans provided in IRS Notice 2020-42 (the “Prior Notice”). As we also discussed in our prior blog posts here and here, the IRS provided two extensions of the temporary relief provided in the Prior Notice during the COVID-19 pandemic. In light of the continuing COVID-19 pandemic, the IRS recently issued Notice 2022-27 (the “2022 Notice”) to provide an additional extension of this temporary relief for six months, through December 31, 2022. The 2022 Notice extends temporary relief, under terms identical to those provided in the Prior Notice, from the “physical presence” requirement for any participant election required to be witnessed either by (i) a notary public of a state that permits remote electronic notarization, or (ii) a plan representative. Importantly, the 2022 Notice states that the extension… Continue Reading

Proposed Required Minimum Distribution Regulations Clarify Application of Ten-Year Rule for Designated Beneficiaries

The IRS recently issued proposed regulations interpreting the changes in the required minimum distribution requirements resulting from enactment of the SECURE Act. Under the ten-year rule, a distribution of the participant’s entire interest must be made to a designated beneficiary who is not an eligible designated beneficiary within ten years after the death of the participant, regardless of whether the owner died before reaching his or her required beginning date. Among the proposed regulations, the IRS clarified that if a participant dies following his or her required beginning date, in addition to satisfying the ten-year rule, the participant’s benefit must also continue to be distributed to the beneficiary at least as rapidly as it was being distributed when the participant died.  The IRS Proposed Regulations are available here.

New Proposed Regulations May Signal Administration Shift in Focus to Benefit Plans

Whenever a new president from a different political party is elected, it’s not unusual for plan sponsors to expect changes in policy resulting in new laws and regulations impacting benefit plans. Though President Biden’s administration primarily focused on the pandemic and other areas of foreign and domestic policy in its first year, it recently has turned its attention to benefit plans with the issuance of two new proposed regulations, as described below.   Proposed Regulations on Required Minimum Distributions – On February 24, 2022, the IRS released proposed regulations that update the required minimum distribution requirements to reflect changes made by the SECURE Act and contain additional guidance regarding required minimum distribution requirements. The IRS is currently taking comments on the proposed regulations until May 25, 2022.  Proposed Regulations on Prohibited Transaction Exemption Filing Procedures – The DOL recently announced proposed amendments to the procedures governing the filing and processing of… Continue Reading

DOL Responds to Texas Court Invalidating Portions of the No Surprises Act Regulations

The United States District Court for the Eastern District of Texas recently invalidated portions of an interim final rule (the “Rule”) issued by the Departments of Health and Human Services, Labor, and the Treasury (the “Departments”) relating to aspects of the federal independent dispute resolution process under the No Surprises Act (the “Act”). Generally, the court vacated the portion of the Rule that creates a rebuttable presumption that the amount closest to the qualifying payment amount (generally, the average contracted rate) is the proper payment amount. The court found those portions of the Rule conflicted with the Act. In response, the DOL issued a memorandum emphasizing that all other rulemaking by the Departments under the Act has not been affected and thus all such other rulemaking is still in force. Only guidance documents that are based on, or refer to, the portions of the Rule that were invalidated were withdrawn… Continue Reading

Reminder to Check Your Form 1094-C Before It’s Filed with IRS

Applicable large employers have until February 28th (March 31st if filed electronically) to submit their Forms 1094-C and 1095-C to the IRS for compliance with the ACA. The Form 1094-C is used, in part, to report to the IRS whether the employer has offered health coverage to at least 95% of its full-time employees. In our experience, most employers intend to meet this 95% threshold in order to avoid the extremely large penalty that otherwise is imposed under the ACA. However, some employers are reporting they did NOT meet this 95% threshold on their Forms 1094-C, even though they did, usually as a result of an error made by a service provider completing the form. This results in the IRS sending a notice of a proposed assessment of the employer shared responsibility penalty under the ACA. If an employer does not timely respond to the notice, the IRS will send… Continue Reading

Small Perquisites Can Cause Big Trouble

Employers often provide employees with special rewards or prizes as a means to boost morale, recognize achievements, acknowledge long-term service, and retain employees. These special perquisites can take on many forms – anything from holiday turkeys to gift cards to allowing employees to take home the employer’s products for free or at a discount. While these small additional benefits may seem like “gifts” from the employer to the employee, what employers sometimes fail to realize is that there are no “gifts” in the employment context, regardless of the employer’s intent. Generally, anything provided to an employee by an employer is includable in the employee’s taxable income unless specifically excluded under the Code.   Common exclusions for perquisites to employees include: no-additional-cost services, qualified employee discounts, working condition fringes, and de minimis fringes. All of these exclusions have specific requirements and rules to qualify for the exclusion. For example, for a benefit… Continue Reading

IRS Issues Updated Guidance Regarding Substantially Equal Periodic Payments

The IRS recently issued Notice 2022-6 (the “Notice”), which provides guidance regarding how to determine whether a series of payments from a qualified retirement plan is considered a series of substantially equal periodic payments and is thus exempt from the 10% excise tax under Code Section 72(t). Payments are exempt from that excise tax if they are made in accordance with one of the following methods: (i) the required minimum distribution method, (ii) the fixed amortization method, or (iii) the fixed annuitization method. The Notice provides an updated life expectancy table that can be used to determine distribution periods for the required minimum distribution method and the fixed amortization method. In addition, the Notice modifies the existing minimum interest rate that may be used to apply the fixed amortization method and the fixed annuitization method (which is 120% of the federal mid-term rate) to add a 5% floor. The guidance… Continue Reading

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