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Qualified Retirement Plans

Additional Action Required by Late Filers of Form 5500 (Even Those That Have Already Filed)

Plan administrators who fail to timely file Form 5500 annual reports for their retirement plans may be subject to penalties under both ERISA and the Tax Code. Under previous guidance from the IRS, correcting such a late filing under the Department of Labor’s Delinquent Filer Voluntary Compliance (“DFVC”) Program could relieve the filer from penalties assessed by both the Department of Labor (“DOL”) and the Internal Revenue Service (“IRS”). However, under new guidance from the IRS, relief from its penalties now depends on a separate filing. Moreover, this new IRS requirement will apply retroactively to DFVC Program filings made since 2009.

IRS Issues Same-Sex Guidance: Many Qualified Plans Must Amend By Year-End

The IRS has issued additional guidance regarding how the Supreme Court’s 2013 decision in Windsor v. United States (regarding same-sex marriage) applies to qualified plans and Section 403(b) arrangements. Notice 2014-19 provides that plans must operationally comply with the Windsor decision as of June 26, 2013, although certain same-sex marriages are not required to be recognized until September 16, 2013. Plans with language that is inconsistent with the Windsor decision must generally be amended by December 31, 2014 (although certain plans may have additional time to amend). The related FAQs provide that Section 403(b) plans are also subject to the same operational effective dates, but are not required to be amended at this time.   Plan sponsors should consult with counsel to determine whether their qualified plans must be amended to comply with Windsor and to discuss correction of any operational failures that may have occurred since June 26, 2013.

IRS Guidance Answers Key Questions About In-Plan Roth Conversions

The IRS has resolved key questions about in-plan Roth conversions.  Notice 2013-74 addresses both old concerns (raised when Congress first authorized in-plan Roth conversions in 2010) and new ones (raised when Congress expanded the scope of Roth conversions in 2013).  With the added certainty this guidance offers to employers, administrators, and recordkeepers, plan sponsors who decided against adding an in-plan conversion feature may wish to reconsider.  Sponsors who already offer in-plan conversions may now wish to take advantage of the new options.

IRS Now Accepting “Cycle D” Determination Letter Applications

The IRS is now accepting applications for updated determination letters on behalf of individually designed retirement plans falling within “Cycle D” of the determination letter program.  These include plans sponsored by employers having either a “4” or “9” as the last digit of their employer identification number, as well as all multiemployer plans.

IRS Grants Temporary Nondiscrimination Relief to Closed DB Plans

In Notice 2014-5, the IRS has granted temporary relief to sponsors of “closed” defined benefit plans.  This will allow such a plan (which has been “soft frozen” to new entrants) to be aggregated with a defined contribution plan sponsored by the same employer when testing the plans for compliance with the Tax Code’s minimum coverage and nondiscrimination requirements.  This relief only modestly expands the circumstances under which such aggregation is already allowed, and it applies only for plan years beginning before January 1, 2016.

Same-Sex Marriages Recognized for Federal Tax Purposes Regardless of Where Taxpayers Live

The Internal Revenue Service has issued guidance (in the form of a revenue ruling and two sets of Frequently Asked Questions) clarifying that same-sex couples that are legally married will be treated as married for purposes of federal income, gift and estate taxes, regardless of whether the couple lives in a state that recognizes same-sex marriage or a state that does not.  However, couples in domestic partnerships or civil unions will not be treated as “married” for federal tax purposes.  The ruling, which is effective as of September 16, 2013, generally applies prospectively, although individual taxpayers will have the opportunity to file amended tax returns (and claim refunds for taxes paid) for “open” tax years.   The IRS intends to issue additional guidance regarding the extent, if any, that the ruling applies to retirement plans and other tax-favored arrangements for periods prior to the effective date of the ruling.

IRS Now Accepting “Cycle C” Determination Letter Applications

The IRS is now accepting applications for updated determination letters on behalf of individually designed retirement plans falling within “Cycle C” of the determination letter program.  These include plans sponsored by employers having either a “3” or an “8” as the last digit of their employer identification number, as well as any governmental plan that does not elect to defer their application to Cycle E.


For the first time since 2008, the IRS has updated the Employee Plans Compliance Resolution System (“EPCRS”). This article summarizes the most significant changes in Revenue Procedure 2013-12 that apply to qualified retirement plans.

Fiscal Cliff Legislation Includes Expansion of In-Plan Roth Conversions

The American Taxpayer Relief Act of 2012 (i.e., the fiscal cliff legislation) includes an amendment to the Tax Code that expands the availability of “in-plan Roth conversions.” Since 2010, 401(k) plans, 403(b) plans, and governmental 457(b) plans have had the option of allowing participants to convert certain pre-tax amounts held in the plan to after-tax Roth amounts (in a taxable “in-plan” rollover transaction). However, such “in-plan Roth conversions” were limited to amounts that were otherwise distributable under the tax laws. The new legislation removes the requirement that amounts must be “distributable” before they can be converted. As a result, plans that include a Roth contribution feature may (but are not required to) allow participants to convert any pre-tax amounts held under the plan (whether attributable to employee deferrals, employer contributions or rollover contributions) to after-tax Roth amounts in a taxable “in-plan” Roth conversion, regardless of whether the participant has attained age 59½.

IRS Further Extends Deadline for Defined Benefit Plan Amendments

In what has become something of a ritual, the IRS is once again extending the deadline by which single-employer defined benefit plans must be amended to implement the regime of funding-based benefit restrictions imposed by the Pension Protection Act of 2006 (“PPA”). Notice 2012-70, issued last week, pushes the general deadline back one more year, to the end of the 2013 plan year. As explained below, this most recent postponement seems to originate in confusion generated by the IRS itself.

2013 Inflation Adjustments

Following recent announcements by both the IRS and the Social Security Administration, we now know most of the dollar amounts that employers will need to administer their benefit plans for 2013.

Critical Amendment Deadline Approaching for Defined Benefit Plans

Sponsors of single-employer defined benefit pension plans will need to amend those plans by the end of the 2012 plan year to comply with a new regime of distribution restrictions imposed by the Pension Protection Act of 2006 (the “PPA”). As explained more fully in this article, meeting this deadline is crucial because the IRS has conditioned anti-cutback relief on a timely amendment. If the cutbacks required under the PPA are implemented without a timely amendment, the plan risks disqualification, and the plan sponsor may be liable to participants and beneficiaries.

ERISA Section 408(b)(2) Disclosures: Now What?

Now that most retirement plan fiduciaries have received ERISA Section 408(b)(2) fee disclosure notices from their plans’ service providers, they must actually do something with those notices.  This should start with a careful review.  If a notice is incomplete or confusing, questions need to be asked.  Eventually, however, fiduciaries should document the basis for any decision that a vendor’s fees are reasonable in relation to the services provided.  This formal process should help to shield the fiduciaries from any claim that they allowed the plan to engage in a prohibited transaction with one or more service providers.

As Fee Disclosure Deadlines Approach, DOL Issues Additional Guidance

After more than four years of regulatory starts and stops, plus the threat of a legislative solution, two separate sets of fee disclosure regulations issued by the Department of Labor (“DOL”) will finally become effective this summer.  Covered service providers must provide certain compensation and fee information to plan fiduciaries by July 1, and fiduciaries of participant-directed plans must provide participants with certain plan expense and investment fee information by August 30.  As those deadlines approach, the DOL has just issued additional guidance (in the form of Field Assistance Bulletin 2012-02) on the participant fee disclosure rules, and has indicated that it plans to issue similar guidance regarding the service provider fee disclosure requirements in the very near future.