by Lyn Domenick
The IRS has announced the 2024 cost of living adjustments to qualified plan limits. Below are the highlights, and our full historical chart can be found here for easy reference. Read more
I have heard from a couple of clients recently who have received a penalty notice from the IRS for purportedly filing a late or incomplete 2022 Form 8955-SSA (the IRS form that plan sponsors use to report terminated participants with vested benefits), despite having timely filed Form 8955-SSA earlier this summer. While initially causing some concern, the IRS recently announced that due to a programming error, the IRS’s system automatically sent out Form 8955-SSA penalty notices to those plan sponsors who had already timely filed their 2022 Form 8955-SSA. Read more
You don’t have to be a connoisseur of 1980s pop (we see you, Hall & Oates fans!) to appreciate the relief the IRS granted the retirement industry. In Notice 2023-62, the IRS announced a two-year delay on the Roth catch-up requirements for those earning more than $145,000. All eligible participants – regardless of income – may make catch-up contributions on a pre-tax basis (or Roth basis, at participant election but not required) until January 1, 2026. Read more
by Lyn Domenick
Many retirement plan errors are inadvertent and involve small dollar amounts. However, the work involved in correcting such errors can be time consuming and burdensome. Fortunately, SECURE 2.0 provides that for certain overpayment errors a responsible plan fiduciary can now decide not to seek repayment. While plan fiduciaries are entitled to seek recoupment of overpayments, subject to some limitations, many plan sponsors will welcome this guidance since it allows them to forego seeking recoupment of overpayment errors.
For example, if a 401(k) plan incorrectly included PTO payouts upon termination in eligible compensation, and thus, applied plan contributions to such ineligible portion, the affected participants would probably not notice and in fact might not reasonably be expected to know whether or not the PTO payout should have been included in eligible compensation in their final paycheck. The dollar amounts of the overpayments would in many cases be small and also would include the participants’ own deferrals. In such a case, the plan fiduciary might reasonably choose to not seek recoupment, while correcting the payroll error going forward. Read more
by Becky Achten
Bruno Mars may be crooning “Count on me,” but make sure you don’t overcount your retirement plan participants! New rules may allow you to leave some employees out of the count, which could save you the expense of the annual audit.
If your retirement plan is considered “large” – generally 100 or more participants – you’re probably in the middle of the Department of Labor required annual independent audit of the financial statements that must accompany the Form 5500. There are a few exceptions to the audit requirement – plans that have less than 100 participants at the beginning of the year and those with between 80 and 120 who filed as a small plan in the prior year. If your plan is just over that 100-participant level, there may be relief on the horizon from the required audit and another reason to keep track of those separated participants. Read more
by Lyn Domenick
If you remember that title song then you might remember a time before RMDs. Required minimum distributions (RMDs) have been a fixture of retirement plan operations ever since passage of the Tax Reform Act of 1986. One of the provisions in that law was the implementation of the RMD age starting with age 70-1/2; this partially offset lost revenue from the tax cuts in the bill. Many years later SECURE 1.0 increased the RMD age to 72 effective January 1, 2020. SECURE 2.0 increased the RMD age yet again and enacted other RMD-related changes that impact plan operations as described below. Read more
By Kevin Selzer
We have now had a couple of months to review and digest SECURE 2.0 (and its roughly 90 provisions impacting retirement plans). If plan sponsors haven’t done so already, it is time to roll up their sleeves and put a triage list together on these law changes. Below are some suggestions on where to start: Read more
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
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 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