In this BenefitsPro article, Lisa Tavares and Carol Calhoun discuss starter 401(k) plans under the SECURE 2.0 Act.
New Article: Starter 401(k) plans under SECURE 2.0: Helping small employers fast-track a retirement plan
New chart: Pre-approved Plan Eligibility Checklist
(Posted on December 27, 2023 by Carol V. Calhoun)
The IRS maintains pre-approved plan programs (1) for retirement plans described in I.R.C. § 401(a) (qualified plans), and (2) for annuity contracts or custodial accounts described in I.R.C. § 403(b) (403(b) plans). A new chart shows what types of plans are and are not eligible to use the pre-approved plan program.
New article: Executive Compensation Arrangements for Tax-Exempt Organizations
(Posted on December 6, 2023 by Carol V. Calhoun)
Tax-exempt organizations face special legal challenges in developing compensation packages for their executives. A new article, Executive Compensation Arrangements for Tax-Exempt Organizations, published in the Lexis Practice Advisor provides practical guidance on developing benefits for executives of nonprofits.
This article is divided into the following main topics:
- Executive compensation considerations for tax-exempt entities
- Excise Tax on Excess Executive Compensation
- Deferred compensation rules
- Severance pay
- Vacation and sick leave plans
- Performance bonuses and other nonfixed payments
- Fringe benefits
New article: 403(b) Plan Design and Compliance
(Posted on December 6, 2023 by Carol V. Calhoun)
A new article, Section 403(b) Plan Design and Compliance, discusses the rules that apply when eligible tax-exempt organizations establish tax-sheltered annuities, custodial accounts, or retirement income accounts, as described in Section 403(b) of the Internal Revenue Code (403(b) plans).
This article addresses the following topics:
- 403(b) Plan Overview
- Eligible Employers and Employee>
- ERISA Coverage of 403(b) Plans
- Qualification Requirements
- 403(b) Plan Contributions
- 403(b) Plan Distributions
- Implementation and Operation
- Correcting 403(b) Plan Errors
- Terminating 403(b) Plans
- EP Subcommittee Report: 403(b) Plan Issues and Recommendations
- Advantages and Disadvantages of 403(b) Plans
New Article: Pre-Approved 403(b) Plans
(Posted on December 6, 2023 by Carol V. Calhoun)
On November 21, 2023, the IRS issued Rev. Proc. 2023-37, substantially updating its guidance on preapproved retirement programs described in Internal Revenue Code (I.R.C.) § 403(b) (403(b) plans). A new article, Pre-Approved 403(b) Plans, discusses preapproved 403(b) plans, including their advantages, legal pitfalls, and other issues that an eligible employer may consider when determining whether to convert its existing 403(b) plan into a preapproved plan.
The major topics are:
- What Is a 403(b) Plan?
- What Are the Advantages of a Preapproved 403(b) Plan?
- What Are the Legal Pitfalls of a Preapproved 403(b) Plan?
- What Operational Issues Can Arise for a Preapproved Plan?
- What Practical Issues Can Arise for a Preapproved Plan?
- When Should an Employer Adopt a Preapproved 403(b) Plan?
- Can the Employer Cure Past Plan Issues by Adopting a Preapproved 403(b) Plan?
- What Should an Employer Do If It Did Not Comply with the Written Plan Document Requirement in the Past?
New article: Pre-approved Plan Design and Compliance
(Posted on December 5, 2023 by Carol V. Calhoun)
With the IRS cutting back on determination letters for individually designed plans, more and more employers are switching to pre-approved plans. An article recently published in the Lexis Practice Advisor, Pre-Approved Plan Design and Compliance, discusses practical considerations involved with such plans. Topics include:
- Pre-approved Plan Designs and Favored Regulatory Status
- General Advantages and Disadvantages of Pre-approved Plans
- Types and Requirements of Pre-Approved Plans
- Limitations on Plans That May Be Pre-approved
- Pre-approved Plan Providers
- Implementing Pre-Approved Plans
- Obtaining IRS Opinion Letters
New Article: Substantial Risk of Forfeiture Under the IRC
(Posted on December 4, 2023 by Carol V. Calhoun)
An article recently published in the Lexis Practice Advisor, Substantial Risk of Forfeiture Under the IRC, discusses the concept of substantial risk of forfeiture (SRF) under sections 83, 409A, 457(f), 457A, and
Topics covered are:
- Significance of SRF under the Various I.R.C. Sections
- Definition of SRF
- Conditions that Generally Support the Existence of a SRF and Related Requirements
- Conditions that Generally Do Not Support the Existence of a SRF
- Other rules relating to SRF
It is accompanied by a Substantial Risk of Forfeiture Comparison Chart, which summarizes the rules.
New Article: Nonqualified Deferred Compensation Rules for Tax-Indifferent Entities (Section 457A)
(Posted on December 4, 2023 by Carol V. Calhoun)
A new article, Nonqualified Deferred Compensation Rules for Tax-Indifferent Entities (Section 457A), discusses the rules that apply to deferred compensation plans maintained by certain corporations located in tax haven jurisdictions and partnerships owned by such corporations and/or by tax-exempt organizations. Topics covered include:
- Purpose of Section 457A
- Application of Section 457A
- Substantial Risk of Forfeiture
- Nonqualified Entities
- Service Providers
- Nonqualified Deferred Compensation Plans
- Tax Effect of Section 457A
- Relationship between Section 457A and FICA Taxes
- Relationship between Sections 457A and 409A
- Effective Date and Transitional Rule
IRS Announces 415 and Other Limits for 2024
(Posted on November 20, 2023 by Carol V. Calhoun)
The Internal Revenue Service has issued IRS Notice 2023-75, 2023–47 IRB 1256, setting out the limits on benefits and contributions for 2024. As expected, the limits rose, but not as steeply as last year. Maximum deferrals under a 401(k) or 403(b) plan rose from $22,500 to $23,000, while maximum benefits under a defined benefit plan rose from $265,000 to $275,000.
A chart showing details, and limits from 1996 to 2024, can be found at this link.
2024 Social Security Wage Base and Projected IRS Benefits & Contributions Limits
(Posted on October 12, 2023 by Carol V. Calhoun)
The Social Security Administration today issued a News Release announcing that the Social Security wage base will rise from $160,200 in 2023 to $168,600 in 2024. In addition, based on the issuance of the CPI-U for September 2023 we have been able to project section 415 and several other IRS limits for 2024.
A chart showing details, and limits from 1996 to 2024, can be found at this link.