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IRS Extends Nondiscrimination Relief for Closed Defined Benefit Plans through 2018

In Notice 2017-45, the IRS extended the temporary nondiscrimination relief that it provided in Notice 2014-5 for plan years beginning before 2019. Notice 2014-5 permits certain employers that sponsor a ?Ç£closed?Ç¥ defined benefit plan and a defined contribution plan to demonstrate that the aggregated plans comply with the nondiscrimination requirements of Section 401(a)(4) of the Internal Revenue Code on the basis of equivalent benefits, even if the aggregated plans do not satisfy the current conditions for testing on that basis. A ?Ç£closed?Ç¥ defined benefit plan for purposes of these Notices provides ongoing accruals but was amended before December 13, 2013, to limit those accruals to some or all of the employees who participated in the plan as of a certain date (i.e., is frozen to new participants). View IRS Notice 2017-45. View IRS Notice 2014-5.

New IRS Guidance on Participant Loan Cure Periods

In a recent Chief Counsel Advise Memorandum, the IRS analyzed two factual scenarios in which a 401(k) plan participant missed certain loan payments. In the first scenario, the participant missed two consecutive installment payments, which were due in separate calendar quarters. Payments made subsequent to the missed payments were deemed to ?Ç£cure?Ç¥ the prior missed payments, which resulted in a rolling cure period that would extend to the end of the calendar quarter following the quarter in which the last installment payment was made. Ultimately, the participant made a payment to the plan that included an amount for the two prior missed payments as well as the payment then due. Because all missed payments were cured within the applicable cure period, the IRS concluded that no deemed distribution of the loan proceeds had occurred. In the second scenario, the participant missed three consecutive payments, which were all due in the… Continue Reading

IRS Provides Tax Relief for Certain Employer-Sponsored Leave-Based Donation Programs

In response to the extreme need for charitable assistance for victims of Hurricane Harvey and Tropical Storm Harvey (collectively, ?Ç£Harvey?Ç¥), the IRS recently issued Notice 2017-48, which provides special tax relief for certain employer-sponsored leave-based donation programs designed to aid Harvey victims (the ?Ç£Notice?Ç¥). Under such programs, employees may elect to forgo vacation, sick, or personal leave in exchange for cash payments that the employer makes to a charitable organization described in Section 170(c) of the Internal Revenue Code (?Ç£Qualified Charity?Ç¥). Ordinarily, such leave-based donations would result in taxable income to the donating employees. However, the Notice provides that the IRS will not assert that the leave-based donations constitute gross income or wages of the donating employees if the payments are: (1) made to a Qualified Charity for the relief of victims of Harvey; and (2) paid to the Qualified Charity before January 1, 2019. In addition, the IRS will… Continue Reading

IRS Issues Guidance on Changes to Opinion Letter Program for Pre-Approved Plans

In Revenue Procedure 2017-41, the IRS modified requirements for pre-approved plans to receive continuing favorable opinion letters on periodic submission cycles. Importantly, the programs for ?Ç£master and prototype?Ç¥ plans and ?Ç£volume submitter?Ç¥ plans are combined and replaced with a single program involving standardized and nonstandardized plans. This new program expands the type of plans that can receive an opinion letter. Some of the major changes include allowing employee stock ownership plans (ESOPs) to have 401(k) features and allowing cash balance plans with an interest rate based on the actual return on plan assets (but not on the actual return on a subset of plan assets). In addition, the beginning and ending submission dates for the third cycle for defined contribution plans are modified to begin on October 2, 2017, and end on October 1, 2018. View?áRevenue Procedure 2017-41.

IRS Announces Enforcement Relief from Fiduciary Rule

Previously, the DOL, in Field Assistance Bulletin 2017-01, announced its temporary enforcement policy for the new fiduciary duty rule and related exemptions (the ?Ç£Fiduciary Rule?Ç¥). The IRS recently published Announcement 2017-4, stating excise taxes will not be assessed for violations of the Fiduciary Rule for the periods for which the DOL announced enforcement relief in Field Assistance Bulletin 2017-01. Excise taxes will not be assessed during the following periods: (i) if the DOL issues a final rule after April 10 delaying the effective date of the Fiduciary Rule, excise taxes won?ÇÖt be assessed for non-compliance with the rule during the ?Ç£gap?Ç¥ period between April 10 and the date a delay is implemented, and (ii) if the DOL decides not to delay the effective date of the rule, excise taxes won?ÇÖt be assessed for non-compliance occurring between April 10 and a ?Ç£reasonable?Ç¥ period after publication of the DOL?ÇÖs decision. View Announcement… Continue Reading

IRS Releases Memo Addressing Hardship Withdrawal Substantiation Requirements for 403(b) Plans

The IRS recently released a memorandum (the “403(b) Memo“) directed to its Employee Plan Examinations agents regarding the documentation they should obtain from plan administrators in order to determine whether distributions from 403(b) plans were made on account of an immediate and heavy financial need. The 403(b) Memo follows a similar memorandum that was recently released by the IRS that related to hardship substantiation requirements for 401(k) plans (the “401(k) Memo“). The 403(b) Memo states that since hardship distributions from a 403(b) plan are subject to the same rules that apply to such distributions from a 401(k) plan, 403(b) plan administrators and recordkeepers should follow the same steps as outlined in the 401(k) Memo to substantiate a participant’s claimed hardship, namely the plan administrator or recordkeeper should, prior to making the distribution, (1) obtain source documents from the employee substantiating the hardship or (2) obtain a summary of the information… Continue Reading

IRS Publishes First Operational Compliance Checklist

The IRS recently published the first Operational Compliance Checklist (the ?Ç£Checklist?Ç¥), which lists changes in qualification requirements that became effective during the 2016 and 2017 calendar years. Examples of items listed on the Checklist include, among others: mid-year changes to safe harbor 401(k) plans; proposed regulations regarding QNECs and QMACs in defined contribution plans; final regulations regarding cash balance/hybrid plans; and the extension of temporary nondiscrimination relief for closed defined benefit plans. The Checklist is only available online and will be updated periodically to reflect new legislation and IRS guidance. The Checklist does not, however, include routine, periodic changes such as cost-of-living increases, spot segment rates, and applicable mortality tables, which can instead be found on the IRS?ÇÖs Recently Published Guidance webpage. View the Checklist

IRS Publishes First Required Amendments List

In Notice 2016-80, the IRS published the first Required Amendments List, which lists statutory and administrative changes in plan qualification requirements that (i) are first effective in the plan year in which the list is published and (ii) may require a plan amendment. This year?ÇÖs list included just one item, which related to restrictions on accelerated distributions from underfunded single-employer, collectively-bargained defined benefit plans due to an employer?ÇÖs bankruptcy. The deadline for adopting any required amendments described in this year?ÇÖs Required Amendments List is December 31, 2018. View Notice 2016- 80.

IRS Announces 2017 Qualified Retirement Plan Limits

The IRS recently announced cost-of-living adjustments for 2017. Below is a list of some of the key annual limits that will apply to qualified retirement plans in 2017: Compensation limit in calculating a participant?ÇÖs benefit accruals: increased to $270,000. Elective deferrals to 401(k) and 403(b) plans: remains unchanged at $18,000. Annual additions to a defined contribution plan: increased to $54,000. Catch-up contributions for employees aged 50 and over to 401(k) and 403(b) plans: remains unchanged at $6,000. Annual benefit limit for a defined benefit plan: increased to $215,000. Compensation dollar limit for defining a ?Ç£key employee?Ç¥ in a top heavy plan: increased to $175,000. Compensation dollar limit for defining a ?Ç£highly compensated employee?Ç¥: remains unchanged at $120,000. The full list of 2017 plan limits can be found in IRS Notice 2016-62.

IRS Releases Final Instructions for Forms 1094-B/1095-B and 1094-C/1095-C

IRS Releases Final Instructions for Forms 1094-B/1095-B and 1094-C/1095-C

The IRS recently released final instructions for the 2016 Forms 1094 and 1095.?á Highlights of the changes and clarifications included in the final instructions are provided below. While a of the few items are ?Ç£neutral?Ç¥ and merely reflect pre-programmed changes under the Affordable Care Act that were already known and set to occur, many of the changes and clarifications are welcome news. Form 1094-B Highlights There are no substantive changes for 2016. View the 2016 Form 1094-B here. Form 1095-B Highlights The statement, ?Ç£Do not attach to your tax return. Keep for your records.?Ç¥ was inserted underneath the main heading, suggesting that the form will continue to not be required for direct substantiation purposes as part of a personal income tax filing in the future. Part I, Lines #2 and #3 and Part IV, columns (b) and (c) have been updated to reflect that TINs may be substituted for SSNs.… Continue Reading

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