Just last month, the IRS Employee Plans Compliance Unit (EPCU) notified 1,200 employers who sponsor 401(k) plans that they will need to complete a 401(k) Compliance Check Questionnaire. The IRS will use the content of the answers to the questionnaire, administered through a secure website, to collect responses on topics including demographics, participation, employer and employee contributions, top-heavy and non-discrimination testing, distribution and plan loans, as well as other important topics. All plan sponsors will have the same questionnaire; however some questions may only apply to plans with particular features.
The EPCU developed the questionnaire to address problems that 401(k) plans might face with compliance issues. How did the IRS select its employers to survey? It used recent Form 5500 filings. Employers who have received a questionnaire must complete it within 90 days. It is likely that an employer will need assistance and coordination from its plan’s third-party administrators, attorneys and accountants. Employers who fail to respond will likely trigger further IRS action or examination of the plan.
For those employers that did not receive a questionnaire, they might want to consider using the questionnaire to review their own 401(k) plans and to see if they are in compliance with the issues addressed.
For more information on the EPCU’s 401(k) Questionnaire, please visit the IRS’s Guide To Completion of the 401(k) Compliance Check Questionnaire.
Filed under: Announcements, Court Cases | Tags: FICA, Payroll, Refund, Taxes
I’m not sure if this affects your company and operations, but if so. . . you might be able to obtain a large tax recovery of payroll taxes, plus interest, for your company. Read on:
So many companies had to downsize in the last several years, because of the troubling economy and financial worry.
Did your company pay any severance in 2006? If you paid severance under a plan that covered involuntary terminations resulting from a RIF (reduction in force), plant closing, or similar conditions, then you might wnat to consider filing a protective claim for refund of any social security tax paid for FICA (Federal Insurance Contributions Act) paid on severance amounts.
Employers with plan documents and agreements that fail to comply with certain documentary requirements of Code § 409A have the opportunity to correct the deficiencies under a relief program. On January 5, 2010, the IRS issued Notice 2010-6, which establishes a program for the voluntarily correction of certain Code § 409A documentary failures with regard to nonqualified deferred compensation plans. Employers that make corrections under the program may be able to reduce or avoid the adverse tax consequences imposed under Code § 409A (i.e., an accelerated income inclusion, a 20% additional tax, and penalties).
Filed under: Announcements | Tags: ADP/ACP Testing, Internal Revenue Service, IRS, LESE
The Internal Revenue Service (the “IRS”) implemented the Learn, Educate, Self-Correct and Enforce (“LESE”) compliance initiative in 2007 to test and assess the compliance levels of qualified retirement plans. The IRS defines the acronym LESE as follows:
- Learn – Discover all the IRS can about the compliance issues using small examination case samples.
- Educate – Let the targeted groups know what it learned and what it expects them to do to correct.
- Self-Correct – Give those groups the chance to correct using EPCRS.
- Enforce – Re-examine the groups, taking a firm position on those who have not corrected.
Since the implementation of LESE, the IRS has completed and released two LESE projects. The findings of those projects reveal common compliance issues among qualified retirement plans, which will each be discussed in detail below.
Filed under: Announcements | Tags: Executive Compensation, SEC, Securities and Exchange Commission
On December 16, 2009, the Securities and Exchange Commission (“SEC”) approved rule amendments to the compensation-related disclosure requirements under Regulation S-K, Items 402 and 407. These amendments enhance companies’ disclosure obligations in proxy solicitations relating to executive compensation. The SEC approved the amendments for the purpose of significantly improving the information companies provide to shareholders, thereby enabling shareholders to make more informed voting and investing decisions. The effective date of the amendments is February 28, 2010.
Filed under: Announcements | Tags: Employee Retirement Income Security Act, ERISA, Fiduciary Bond Insurance, Fiduciary Liability Insurance, Internal Revenue Service, IRS
The audit program put in place by the Internal Revenue Service (IRS) has revealed common errors amongst employee benefit plans subject to the Employee Retirement Income Security Act (ERISA). The number one issue the IRS spotted during its audit program was a failure of plans to carry a sufficient amount of fiduciary bond insurance.
Pursuant to section 412 of ERISA, plans are generally required to carry fiduciary bond insurance equal to at least 10% of the dollar value of their plan’s assets, but at no time less than $1,000. Additionally, the fiduciary bond limit cannot exceed $500,000, unless the plan holds employer securities, in which case the maximum insurance amount is increased to $1,000,000.
Filed under: Announcements | Tags: Employee Plans Team Audit, EPTA, Internal Revenue Service, IRS
An Employee Plans Team Audit (“EPTA”) is an examination by the Internal Revenue Service (the “IRS”) of an employee benefit plan with 2,500 plan participants or more, as reported on an employer’s Form 5500. Each year, the EPTA identifies and selects employee benefit plans for examination.
Published guidance from the EPTA grants employers valuable insight into the IRS’s audit process. The EPTA’s Internal Control Questionnaire highlights four key areas of targeted compliance:
Filed under: Announcements | Tags: 401(k) Plans, 403(b) Plans, Loan Repayments
Late 401(k) and 403(b) Deferrals:
A failure to correct for ERISA (Employee Retirement Income Security Act) violations can result in extraordinary penalties, countless hours of corrections, and strained employee relations. However, employers can avoid the aforementioned inconveniences through proper administration and oversight, combined with the appropriate use of the Internal Revenue Service (the “IRS”) and Department of Labor (the “DOL”) correction programs when necessary.
The IRS lists late deposits of deferrals as the number one item of operational violation that 401(k) plans encounter. Coincidentally, the DOL lists that same violation as a “national priority” for 2010. As the IRS and DOL prepare to increase compliance measures in this area, it is imperative that employers and administrators plan to assess the competence of those individuals assigned to handle employee deferrals, typically in human resource departments, and the TPA assigned to monitor the plan. A lack of proper oversight and administration in these areas can lead to costly errors.
Many companies will need to quickly amend their employment agreements, awards, and other incentive plans or contracts by December 31, 2009 to ensure compliance with Code Section 162(m). Section 162(m) allows a company to deduct up to $1 million of performance-based compensation paid out to its executive officers. However, Revenue Ruling 2008-13 clarified the provisions of Section 162(m) by stating that compensation paid to an executive is not qualified performance-based compensation if the plan, contract, or agreement provides for payment of compensation to an executive for (1) termination without cause or good reason, or (2) voluntary retirement.
Filed under: Announcements | Tags: The Genetic Information Nondiscrimination Act
The Genetic Information Nondiscrimination Act of 2008 (“GINA”) was designed to prohibit group health plan and insurance issuers from collecting genetic information prior to or in connection with enrollment, or at any time for underwriting purposes. The GINA regulations are effective for plan years beginning after May 21, 2009 (January 1, 2010 for calendar year group health plans).
On October 1, 2009, the Department of Labor, Health and Human Services and the Internal Revenue Service jointly issued interim and final regulations implementing certain provisions of GINA as of December 7, 2009. The new rules will have an immediate impact on the type of information that group health plans can request or require from individuals. Notably, the regulations may severely affect the administration of health risk assessments (“HRAs”) and wellness programs.
