In the Year 2021…IRS Limits Announced Today
by Lyn Domenick
Today the IRS announced the 2021 cost-of-living adjustments to qualified plan limits. Please refer to our chart for easy reference.
Don’t You . . . Forget About Special Tax Notices
/in 401(k) Plans, 403(b) plans, 457(b) plans, Defined Benefit Plans, ESOPs, Governmental Plans, IRS, Retirement PlansThe Internal Revenue Code requires plan administrators of qualified retirement plans (e.g., 401(k) plans, defined benefit plans and ESOPs), 403(b) plans, and eligible 457(b) plans maintained by a governmental employer to provide a written explanation to any recipient of an eligible rollover distribution. This notice is typically referred to as the Special Tax Notice.
Read moreCall to the Post…Cycle 3 Restatement Considerations
/in ESOPs, IRSby Becky Achten
Just as the Kentucky Derby will finally be run this Saturday, the race for plan restatements has also begun….although this race will last longer than “the most exciting two minutes in sports.”
Pre-approved plans – plan documents the have already been submitted for review to and been issued an opinion letter from the IRS – are required to be updated and restated every six years. The IRS announced that the current restatement period (referred to as Cycle 3) would begin on August 1, 2020 and end on July 31, 2022. During that period, all pre-approved defined contribution plans, including 401(k), profit sharing and money purchase plans, must be restated in order to maintain their qualified status. And, for the first time, ESOP and KSOP pre-approved plan documents will be available from many document providers. Once the IRS has issued the opinion letters, document providers will be reaching out to plan sponsors to start the restatement process.
Read moreBack in the Saddle Again … How Rehired Employees Affect Partial Termination Analysis
/in 401(k) Plans, 403(b) plans, 457(b) plans, 457(f) plans, Defined Benefit Plans, ESOPs, Governmental Plans, IRS, Retirement Plansby Beth Nedrow
In June, we wrote about one of the multitude of issues raised by COVID-19 furloughs – the possibility of triggering vesting in the company’s qualified retirement plan under the partial plan termination rules. Recently the IRS issued new guidance that will be relevant to employers who might be rehiring employees before the end of 2020. On its website, the IRS posed this question: “Are employees who participated in a business’s qualified retirement plan, then laid off because of COVID-19 and rehired by the end of 2020, treated as having an employer-initiated severance from employment for purposes of determining whether a partial termination of the plan occurred?” The IRS then answered the question, “Generally, no.” This means that the employer may be able to continue to maintain vesting (and enforce forfeitures) in its retirement plan if enough formerly furloughed employees are brought back before the end of the year. While this answer isn’t earth-shattering or even frankly surprising, it’s welcome clarity in a time of so many uncertainties.
Read moreTake it to the limit one more time…IRS announces cost-of-living adjustments for 2020!
/in 401(k) Plans, Defined Benefit Plans, ESOPs, IRS, Retirement Plansby Becky Achten & Lyn Domenick
The Internal Revenue Code imposes dollar limitations on various compensation, benefit and contribution levels under qualified retirement plans. Today, the Internal Revenue Service announced the 2020 cost-of-living adjustments affecting dollar limitations for qualified retirement plans. Check out our chart for easy reference!
I can’t drive 55 – or classify my workers
/in 401(k) Plans, 403(b) plans, 457(b) plans, 457(f) plans, Benefits Plan Creation, Cafeteria Plans, Defined Benefit Plans, DOL, Employee Stock Purchase Plans (ESPPs), ERISA, ESOPs, Fringe Benefits, Governmental Plans, Health & Welfare Plans, IRS, Litigation, PBGC, Retirement Plans, Severance Plans, State Benefits Lawsby John Ludlum
Making correct classifications between independent contractors and employees is not getting simpler with flexible, geographically-distributed workforces. For those with long memories, a key case in the area of worker classification was issued by the Ninth Circuit in Vizcaino v. Microsoft Corporation, 97F.3d 1187 (CA-9, 1996). Vizcaino v. Microsoft held that certain workers, originally hired as independent contractors, were actually employees who were entitled to benefits under Microsoft’s 401(k) plan and Microsoft’s Employee Stock Purchase Plan. Determinations like this can lead to substantial corrections costs to fix tax-qualified benefit plans as well as to make the contributions required under plan terms to the improperly excluded employees.
Read moreSunshine … on my controlled group makes me happy
/in 401(k) Plans, 403(b) plans, 457(b) plans, 457(f) plans, Benefits Plan Creation, Cafeteria Plans, Defined Benefit Plans, Employee Stock Purchase Plans (ESPPs), ERISA, ESOPs, Fringe Benefits, Governmental Plans, Health & Welfare Plans, Retirement Plansby John Ludlum
The controlled group rules under the IRC are possibly one of the driest and most technical areas in benefits practice, but mistakes in controlled group status can be very expensive and complicated to correct. The problem we are seeing is that in too many cases, it is not clear whether the plan sponsor or the plan’s service providers have responsibility for monitoring which entities are in the plan sponsor’s controlled group.
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