The DOL recently released its Spring Regulatory Agenda, and it contains several important retirement and welfare plan initiatives for this year. Below is a summary of some of the material items that plan sponsors should be aware of, along with the DOL’s proposed schedule of rulemaking: Final Pension Benefit Statement Lifetime Illustrations Rule (Final Rule scheduled for August 2022). Note: Under the DOL’s previously issued Interim Final Rule, the inclusion of lifetime illustrations once per year on pension benefit statements became effective in June 2022. Revised procedures for granting prohibited transaction exemptions (the DOL is currently reviewing comments from its Proposed Rule from March 2022). Amendment and restatement of the DOL’s Voluntary Fiduciary Correction Program to expand the scope of eligible transactions and to streamline correction procedures (Interim Final Rule scheduled for July 2022). Amendment of the regulatory definition of the term “fiduciary” under ERISA for those persons who render investment… Continue Reading
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
In Revenue Procedure 2021-30 (“Rev. Proc. 2021-30”), the IRS made certain updates to the Employee Plans Compliance Resolution System (“EPCRS”), including updates to the Self-Correction Program (“SCP”) and the Voluntary Correction Program under EPCRS. Among other updates, Rev. Proc. 2021-30 expands the correction methods for benefit overpayments by adding (i) the “funding exception correction method,” which provides an exception to corrective payments for plans that meet certain funding requirements, and (ii) the “contribution credit correction method,” which prescribes the amount of overpayments required to be repaid to the plan under certain circumstances. Further, Rev. Proc. 2021-30 (i) expands the circumstances under which plan sponsors may correct operational failures under the SCP by plan amendment, and (ii) extends, by one year, the end of the SCP correction period for significant failures. Rev. Proc. 2021-30 is available here.
The IRS recently issued a list of the top errors it finds in Voluntary Correction Program (?Ç£VCP?Ç¥) submissions, which is available here. The errors listed generally relate to issues associated with the submission of files in the correct PDF format, failing to pay the correct user fee, or the incorrect submission of the Form 8950. Filing a VCP application can be a useful method for plan sponsors to correct operational issues that have spanned numerous years or?á other issues for which self-correction is unavailable. Errors in the submission can delay resolution of the application or, in some cases, cause a rejection of the application. In addition to the common errors outlined by the IRS, plan sponsors should also use care to avoid the following additional common issues: Failure to Submit a Comprehensive Filing ?Çô If one operational error is found, plan sponsors should conduct a self-audit prior to filing a… Continue Reading
Previously, IRS Notice 2020-23 extended the due dates for certain tax payments, filings, and other ?Ç£Time-Sensitive Actions?Ç¥ that would ordinarily fall on or after April 1, 2020 through July 14, 2020 to July 15, 2020. See our prior blog post on Notice 2020-23 here. The IRS recently issued Notice 2020-35 to make additional Time-Sensitive Actions eligible for relief. For example, under this new guidance, an employer that receives a compliance statement issued under the voluntary correction program (VCP) component of the Employee Plans Compliance Resolution System (EPCRS) with a 150-day deadline to implement all corrective actions that ends between April 1, 2020 through July 14, 2020 has until July 15, 2020 to implement the corrections. A full list of the Time-Sensitive Actions is included in Section III.B of Notice 2020-35, which is available here.
In light of the COVID-19 pandemic and the fact that most offices are closed, with employees largely working remotely, it may be easy to imagine that the whole world functions online. This is not true. Many governmental agencies, including the IRS and DOL, continue to rely heavily, if not nearly exclusively, on the United States Postal Service for delivering plan-related communications. For this reason, it is important that someone within your organization continues to check your ?Ç£snail?Ç¥ mail during this time of pandemic, particularly if you have a plan that is subject to an ongoing audit or investigation or a pending determination letter or Voluntary Correction Program application. The IRS and DOL frequently request additional information in these contexts, providing a limited time period (normally, fourteen days) to respond. While the agencies are typically generous in granting extensions to respond, such extensions must be requested.
Tax-exempt organizations that sponsor individually-designed 403(b) plans that have not received favorable determination letters and which may contain one or more form defects, and plan sponsors that have not timely adopted amendments to reflect changes in the law or regulations, generally have until March 31, 2020 to cure any defects by either (i) amending and restating their plan on an up-to-date pre-approved plan document or (ii) correcting any form defects retroactively to January 1, 2010 (or the plan?ÇÖs original effective date, if later). After the March 31, 2020 deadline, generally, the only way to cure form defects in a 403(b) plan that arose prior to March 31, 2020 will be through the IRS?ÇÖs voluntary correction program.
IRS Issues Voluntary Correction Program Submission Kit for Plan Sponsors Who Missed the Deadline to Adopt a Pre-Approved Defined Benefit Plan
Employers that maintained pre-approved defined benefit retirement plans generally were required to adopt a new plan document, on or before April 30, 2012, that incorporated changes required by EGTRRA. Employers that failed to meet this deadline may correct this failure by adopting a restated EGTRRA plan document and filing a submission for a Voluntary Correction Program (?Ç£VCP?Ç¥) compliance statement with the IRS in accordance with the submission kit, which guides plan sponsors through the steps in filing a submission for a VCP compliance statement for this adoption failure. If there are other plan failures, a submission using the kit?ÇÖs requirements will not correct the other failures. A copy of the kit can be found?áhere.