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Employee Benefits Legal Resource Site
Employee Benefits Legal Resource Site
Comparison of 457(b) Plans, 401(k) Plans, 403(b) Plans, and Deemed IRAs Updated
(Posted on November 24, 2022 by Carol V. Calhoun)
The Comparison of 457(b) Plans, 401(k) Plans, 403(b) Plans, and Deemed IRAs chart has now been updated to reflect recent developments, including:
- 2023 limits on contributions and benefits
- Changes in the Employee Plans Compliance Resolution System (EPCRS)
- Changes in the IRS determination letter program for 401(k) plans
- Addition of an IRS determination letter program for individually designed 403(b) plans
- The IRS opinion letter program for pre-approved 403(b) plans
2023 IRS Benefits & Contributions Limits Announced
(Posted on November 7, 2022 by Carol V. Calhoun)
On November 7, 2022, the IRS issued IRS Notice 2022-55, 2022–45 I.R.B. 443, announcing the changes in pensions and benefits limits for 2023. With inflation higher this year than in prior years, the changes were substantial. The maximum limit on deferrals under 401(k), 403(b), and 457(b) plans rose from $20,500 to $22,500; the maximum annual additions (primarily to defined contribution plans) rose from $61,000 to $66,000; and the annual limit on compensation taken into account rose from $305,000 to $330,000. Most other limits also rose significantly.
A chart showing details, and limits from 1996 to 2023, can be found at this link.
2023 Social Security Wage Base Increase
(Posted on October 13, 2022 by Carol V. Calhoun)
The Social Security Administration today announced that the wage base for 2023 will increase to $160,200 from $147,000. The limits for 1996 through 2023 are shown at this link.
New PowerPoint: New IRS Correction Rules for Retirement Plans
(Posted on October 13, 2021 by Carol V. Calhoun)
A recent CLE webinar provided employee benefits counsel, plan sponsors, and administrators guidance on identifying critical retirement plan issues and correction methods. The panel discussed new IRS self-correction rules and procedures and the primary focus areas of IRS and DOL examinations and audits.
The PowerPoint presentation for the portion of the webinar giving a step by step guide on correcting some common 401(k) plan issues is now available at this link.
New Benefits Guide: Government and Tax-Exempt Organizations
(Posted on December 30, 2020 by Carol V. Calhoun)
Carol V. Calhoun has written a Benefits Guide entitled “Government and Tax-Exempt Organizations” for Bloomberg Law. The Bloomberg Law Benefits Guide is intended to be a resource for non-benefits practitioners that is easy to understand and explains complex topics in a straightforward way. Ms. Calhoun’s guide covers the types of plans maintained by governmental and tax-exempt organizations, determination of whether a plan is governmental, legal requirements and restrictions, and correction methods in case of errors in administration. The Benefits Guide is available to Bloomberg subscribers, or a copy of Ms. Calhoun’s chapter is available at this link.
Fifth Edition of the Governmental Plans Answer Book Published
(Posted on December 11, 2020 by Carol V. Calhoun)
The Fifth Edition of the Governmental Plans Answer Book has now been published. The Governmental Plans Answer Book is the only full-length treatise on the law governing the retirement plans that federal, state, and local governments maintain for their employees. The law has changed a lot since the Fourth Edition was published in 2017, and the new edition has been updated to reflect them.
The Fifth Edition of Governmental Plans Answer Book gives subscribers the most relevant, current, and practice-oriented answers to the issues faced daily by plan administrators, attorneys, actuaries, consultants, accountants, and other pension professionals as they navigate the requirements and procedures involved in administering their plans. It examines the following significant changes and case law in this area:
- Department of Labor regulations that define who is a fiduciary as a result of rendering investment advice to a plan, or to its participants, or beneficiaries (see Chapter 7).
- Elimination of the ability to obtain Internal Revenue Service (IRS) determination letters on individually designed plans, except on their inception or
termination (see Chapter 4). - Recent legislative developments affecting governmental plans (see Chapter 13).
- Expanded coverage of cases in text cross-referenced to Appendix E, Recent Court Decisions of Interest Involving Governmental Plans (see Appendix E).
- Updates on the size of the public pension community: its membership, assets, rate of participation in different types of retirement plans, and the number of participating public employers (see Chapter 2 and Appendix Table A–1).
- New and updated information regarding public pension financial reporting and communications practices (see Chapter 5).
- Expanded and updated descriptions of hybrid retirement plans provided for employees of state and local government (see Chapter 2 and Appendix Tables A–2 through A–5).
- An examination of how the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, as further amended by the Bankruptcy Technical Corrections Act of 2010, impacted certain issues arising under the Bankruptcy Code (see Chapter 14).
- Issues concerning proof of electronically signed or adopted beneficiary designation (see Q 12:5).
- A review of a Supreme Court case that held a Chapter 7 trustee could not contest the validity of a claimed exemption after the objection deadline
expired (see Q 14:32). - New case law discussing the use of the legal fiction of a nunc pro tunc order (see Q 13:33).
- Expanded discussion of pre-approved plans (see Chapter 4).
- Issuance of IRS opinion and advisory letters on pre-approved 403(b) plans (see Chapter 4).
- Inception of annual Required Amendments Lists for individually designed plans (see Chapter 4).
- Guidance on correction procedures if a 403(b) plan erroneously excludes participants from making contributions (see Chapter 4).
- Modifications to the Employee Plans Compliance Resolution System (see Chapter 4).
- Expanded discussion on community property (see Q 12:45).
For more information on this book, written by Carol V. Calhoun, Cynthia L. Moore, and Keith Brainard, you can use the following links:
457 Answer Book, Eighth Edition, Published
(Posted on June 22, 2020 by Carol V. Calhoun)
The Eighth Edition of the 457 Answer Book was published on June 5, 2020. Carol V. Calhoun is the author of Chapter 1, History of 457 Plans, and Chapter 14, Miscellaneous Issues.
The 457 Answer Book is an in-depth resource that provides answers to the questions that tax-exempt organizations, state and local governments, their accountants, tax and legal advisors, 457 administrators, product providers, and investment counselors need to know.
Guiding readers through all aspects of 457 plan administration — from installation through the audit process — the 457 Answer Book describes: the duties and responsibilities of those performing the functions; the required legal, accounting, and administrative tasks; checklists that facilitate control of each administrative process; and suggested forms.
The 457 Answer Book also provides:
- The history and legal origins of the plan
- Design and drafting standards
- Suggested administrative procedures
- Data processing and payroll considerations
- Operations and fund flow mechanics
- Marketing and sales suggestions
- And much more
403(b) and 457(b) Plan Compliance Challenges PowerPoint Now Available
(Posted on August 27, 2019 by Carol V. Calhoun)
Sections 403(b) and 457(b) plan compliance presents significant challenges for employee benefits counsel and plan administrators. Sponsors of 403(b) and 457(b) plans must consider the impact of recent regulatory and litigation developments to ensure strict compliance to avoid potential claims.
As part of a Strafford webinar on “403(b) and 457(b) Plan Compliance Challenges,” Carol V. Calhoun gave a presentation on ways in which new developments create challenges for tax-exempt and governmental organizations which sponsor such plans. A copy of the PowerPoint for her speech can be found at this link.
IRS Permits New Benefits in High Deductible Health Plans
(Posted on July 18, 2019 by Carol V. Calhoun)
The IRS has recently issued Notice 2019-45, which increases the scope of preventive care that can be covered by a high deductible health plan (“HDHP”) without eliminating the covered person’s ability to maintain a health savings account (“HSA”).
As background, since 2003, eligible individuals whose sole health coverage is a HDHP have been able to contribute to HSAs. The contribution to the HSA is not taxed either when it goes into the HSA or when it is used to pay health benefits. It can for example be used to pay deductibles or copays under the HDHP. But it can also be used as a kind of supplemental retirement plan to pay Medicare premiums or other health expenses in retirement, in which case it is more tax-favored than even a regular retirement plan.
As the name suggests, a HDHP must have a deductible that exceeds certain minimums ($1,350 for self-only HDHP coverage and $2,700 for family HDHP coverage for 2019, subject to cost of living changes in future years). However, certain preventive care (for example, annual physicals and many vaccinations) is covered without having to meet the deductible. In general, “preventive care” has been defined as care designed to identify or prevent illness, injury, or a medical condition, as opposed to care designed to treat an existing illness, injury, or condition.
Notice 2019-45 expands the existing definition of preventive care to cover medical expenses which, although they may treat a particular existing chronic condition, will prevent a future secondary condition. For example, untreated diabetes can cause heart disease, blindness, or a need for amputation, among other complications. Under the new guidance, a HDHP will cover insulin, treating it as a preventative for those other conditions as opposed to a treatment for diabetes. Read more.
IRS Revenue Procedure Eases Correction Procedures
(Posted on April 22, 2019 by Carol V. Calhoun)
The IRS has just issued a new revenue procedure, Rev. Proc. 2019-19, which limits the number of plans that have to make IRS filings under the Voluntary Correction Program (“VCP”) in order to correct past errors.
The guidance adds provisions allowing plans to be corrected under the Self-Correction Program (“SCP”), which does not require an IRS filing, in the case of two sorts of errors:
- Plan document failures
- Correction by retroactive plan amendment
The revenue procedure also loosens certain requirements for dealing with plan loan failures.
Read more.