Should I Pay Or Should I No(t) Now: Which Expenses Can be Paid with Plan Assets?

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by Brenda Berg

One question that often comes up is whether an expense related to an ERISA plan can be paid with plan assets. The decision of whether to use ERISA plan assets to pay an expense is an ERISA fiduciary decision. With the recent IRS guidance clarifying the timing of use of forfeitures, this question may come up even more.[1] Using plan assets inappropriately is a fiduciary breach and subject to possible DOL and IRS penalties. It is important to have a fiduciary process in place for reviewing expenses and determining whether a payment is proper. Read more

One Way or Another … Forfeitures Will Have to Be Administered Under Your Retirement Plan, and the IRS Just Proposed New Regulations That Provide Simplified Guidance

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by Becky Achten

On February 27, 2023, the Treasury issued proposed regulations intended to simplify and clarify the rules relating to forfeitures within qualified retirement plans.

Defined Benefit Plans

Similar to defined contribution plans, defined benefit plans may use forfeitures to pay eligible plan expenses. However, unlike defined contribution plans, defined benefit plans are prohibited from using forfeitures to reduce required employer contributions. In addition, forfeitures must be used as soon as possible. The proposed regulations eliminate this timing requirement because it conflicts with the minimum funding requirements. Instead, reasonable actuarial assumptions are to be used to determine how expected forfeitures will affect the present value of plan liabilities. The difference between expected and actual forfeitures will then increase or decrease the plan’s minimum funding requirement in future years. Read more

It Doesn’t Have To Be That Way: Negotiating Good Service Provider Agreements Is More Important than Ever

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by Bret F. Busacker

It may be an understatement to say that compliance with benefit plan laws and regulations is becoming increasingly more complicated. In my experience, the COVID era has brought about some of the widest-sweeping changes on the burden of administering benefit plans in some time.

There has been major evolution around service provider fee disclosure, DOL reporting and disclosure on mental health parity and disclosure of plan costs, new claims procedure rights, expanded expectations around Cyber Security protections, and expansion of the use of ESG and crypto currency (and on-again, off-again regulatory efforts). Read more

You’re So Far Away From Me … But You Can Still Sign This Retirement Plan Distribution Form

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by Elizabeth Nedrow

During the pandemic, the IRS on multiple occasions provided relief from the requirement that a person be physically present for certain paperwork associated with retirement plan distributions. (See our blog posts of June 4, 2020 and January 25, 2021, and also IRS Notices 2020-42, 2021-3, 2021-40 and 2022-27.) Apparently acknowledging that the new remote procedures are sufficiently reliable, the IRS is proposing to make them permanent. Read more

It’s All About the Benjamins…2023 IRS Limits Announced

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by Lyn Domenick

The IRS has announced the 2023 cost of living adjustments to qualified plan limits. As expected, many of the limits increased substantially compared with prior years. Below are the highlights, and our full historical chart can be found here for easy reference.

2023 2022 2021
Annual Compensation 330,000 305,000 290,000
Elective Deferrals 22,500 20,500 19,500
Catch-up Contributions 7,500 6,500 6,500
Defined Contribution Limit 66,000 61,000 58,000
ESOP Distribution Limits 1,330,000
265,000		 1,230,000
245,000		 1,165,000
230,000
Defined Benefit Limit 265,000 245,000 230,000
HCE Threshold 150,000 135,000 130,000
Key Employee 215,000 200,000 185,000
457 Elective Deferrals 22,500 20,500 19,500
Taxable Wage Base 160,200 147,000 142,800

You Spin Me QPAM Baby QPAM: DOL’s Proposed QPAM Rule May Mean Changes to Collective Trust Agreements for Plan Sponsors

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by Bret F. Busacker

The DOL published on July 27, 2022 a proposed change to the QPAM Exemption (“Proposed QPAM Amendment”) that may require retirement plan sponsors to update their collective trust agreements in order to satisfy the new DOL requirements.  Collective trusts have become an increasingly common way for qualified retirement plan committees/plan sponsors to achieve lower investment expenses for some of the investment options in their plans.

These collective trusts are managed by investment managers who often engage other financial institutions to execute trades involving the pension assets held by the collective trust. These trades involving retirement plan assets may at times be executed by a financial institution that is also providing services (such as recordkeeping services) to the same retirement plan.  Absent an exemption, these sorts of related party transactions may violate the ERISA prohibited transaction rules.   Read more

Time Is On My Side: Some Retirement Plan Amendment Deadlines Pushed Back

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by Brenda Berg

The IRS has given plan sponsors more time to adopt some – but apparently not all – retirement plan amendments reflecting law changes in the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), the Bipartisan Miners Act of 2019 (Miners Act), and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Notice 2022-23, issued August 3, 2022, generally provides that the deadline to adopt these amendments is extended to December 31, 2025. This is the deadline for qualified plans regardless of the plan year, and this deadline also applies to 403(b) plans and collectively bargained plans. Governmental plans generally have until 90 days after the third regular legislative session of the body with the authority to amend the plan that begins after December 31, 2023. Read more

Old MacDonald Had a Farm…EIN Confusion?

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by Becky Achten

The trusts maintained to hold assets of ERISA plans are separate tax entities from the employers sponsoring the plans. Therefore, each is required to have its own federal tax ID number. Knowing when and where to use whose EIN can be confusing. Here are a few tidbits of information on that topic. This information applies to single employer plans. Multi- and multiple-employer plans may have different rules. Read more

We Just Need Your Compliance…IRS Announces Pilot Pre-Examination Program for Qualified Plans

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by Lyn Domenick

IRS Employee Plans has just announced a pilot program for pre-examination compliance checks of qualified retirement plans, beginning this month. If your plan is targeted, you will receive a letter from the IRS notifying you that your retirement plan has been selected for an upcoming IRS examination. What’s new under the pilot program is that the IRS will give you 90 days to perform your own self-compliance check and determine if the plan is in compliance with current IRS guidance, with the enticement that this self-review may avoid an IRS examination.

During the 90 days, you would complete a compliance review of your plan and, if you do not find any errors, you would assert to the IRS that the plan meets current tax law requirements. Or, if you discover some matters that need correction, you may correct mistakes using the self-correction principles or the voluntary compliance program (VCP) under the IRS correction program, EPCRS. If the errors are eligible for self-correction under EPCRS, it appears that no penalty will apply. If the errors are eligible for VCP but not self-correction, the IRS may issue a closing agreement and assess a fee based on the VCP fee that would otherwise have been charged if the plan had filed a VCP application under EPCRS before this process had begun. If the IRS disagrees with the correction–or if you fail to respond to the IRS within the 90-day period–the IRS will likely schedule a limited or full-scope examination. Read more

Can’t Touch This … DOL Discourages Plans From Investing in Cryptocurrency

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by Becky Achten

Among the many phrases of ERISA, one that is familiar to investment fiduciaries is the requirement to choose investments with the care, skill, prudence, and diligence that a prudent person who is familiar with such matters would use. Recently the Department of Labor (DOL) issued guidance on how this prudence standard applies to fiduciaries who offer cryptocurrency investment alternatives to participants.

In Compliance Assistance Release 2022-01, the DOL reminds fiduciaries of their important role in selecting investments for participant direction. Plan fiduciaries must evaluate each investment option made available to participants to ensure they are prudent. Failure to remove an imprudent investment is a breach of duty. Read more