New chart: Pre-approved Plan Eligibility Checklist
(Posted on January 5, 2018 by )


Lexis Practice AdvisorThe 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.

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New article: Executive Compensation Arrangements for Tax-Exempt Organizations
(Posted on January 2, 2018 by )


Lexis Practice AdvisorTax-exempt organizations face special legal challenges in developing compensation packages for their executives. A new article published in the Lexis Practice Advisor provides practical guidance on developing benefits for executives of nonprofits.

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Navigating Pension and Annuity Payments: General Rule and Taxation Guidelines
(Posted on December 18, 2017 by )


Lorman Distinguished Faculty MemberA 76-page PowerPoint presentation from a live Lorman Telecom webinar, “Navigating Pension and Annuity Payments: General Rule and Taxation Guidelines,” is now available by clicking here.

The webinar covered distributions from qualified plans (pension, profit sharing, stock bonus, and 401(k), including Roth accounts), IRAs (regular and Roth), and commercial annuities. Topics covered:

  • Sources of distributions (employer contributions, employee deferrals, Roths, after-tax contributions, and rollovers);
  • Restrictions on how early and how late distributions can be taken;
  • Penalties on early withdrawals;
  • Taxation of lump sum distributions;
  • Taxation of withdrawals and partial distributions;
  • Taxation of annuities and other periodic payments;
  • Plan withholding and reporting; and
  • Participant reporting.

A download of the program and other information can be found at this link, which also contains a 50% discount code.

Understanding Pre-Approval of 403(b) Plans
(Posted on September 19, 2017 by )


Internal Revenue ServiceIn March 2017, the Internal Revenue Service (IRS) began issuing advisory and opinion letters to the first preapproved retirement programs described in Internal Revenue Code (I.R.C.) § 403(b) (403(b) plans). A new article 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:

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Seventh Edition of the 457 Answer Book Published
(Posted on September 4, 2017 by )


The Seventh Edition of the 457 Answer Book was published on September 4, 2017. 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.

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IRS Issues Self-Assessment Forms for Federal, State, and Local Government Employers
(Posted on July 10, 2017 by )


Internal Revenue ServiceThe IRS has now issued a series of forms to enable federal, state, and local governments to assess their compliance with federal tax statutes, and has set forth some common errors found in examining such employers. Several of the forms relate to employee benefits issues, and may be of assistance to governments trying to ensure that they comply with all legal requirements.

The forms are as follows:

For use by Federal, State and Local Government Entities

For use by State and Local Government Entities Only

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Two New Articles: 403(b) Plans and Substantial Risk of Forfeiture
(Posted on April 21, 2017 by )


Lexis Practice AdvisorTwo articles recently published in the Lexis Practice Advisor are now available on this site:

  • Section 403(b) Plan Design and Operation 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).
  • Substantial Risk of Forfeiture discusses the concept of substantial risk of forfeiture (SRF) under sections 83, 409A, 457(f), 457A, and 3121(v)(2) of the Internal Revenue Code and the different consequences of the failure to achieve a SRF under each such section. It is accompanied by a Substantial Risk of Forfeiture Comparison Chart, which summarizes the rules.

Employers Need to Adopt Pre-Approved 403(b) Plans by March 31, 2020
(Posted on January 30, 2017 by )


Internal Revenue ServiceWith the IRS no longer issuing rulings or determination letters on individually designed qualified plans or § 403(b) plans under most circumstances, the importance of pre-approved plans (master, prototype, and volume submitter plans) has been vastly increased. Adoption of a pre-approved plan is now the sole method for an employer to have assurance that its plan meets IRS requirements. While § 403(b) plans cannot take the form of master plans, they can be structured as prototype or volume submitter plans.

Reflecting this, Revenue Procedure 2013-22 established a program for issuing opinion and advisory letters for § 403(b) pre-approved plans. Starting June 28, 2013, sponsors of plans intended to qualify as pre-approved § 403(b) plans were permitted to apply for such letters. The first letters have not been issued under that program yet, but the expectation is that they will be issued soon.

The IRS has now announced in Rev. Proc. 2017-18, 2017-5 I.R.B. 743, that the last day of the remedial amendment period for employers to adopt pre-approved § 403(b) plans will be March 31, 2020. After that date, adoption of a pre-approved § 403(b) plan will no longer give an employer retroactive relief for qualification defects which arose since 2010. Revenue Ruling 2013-22 indicated that a six-year cycle would apply to pre-approved § 403(b) plans. While it is not clear whether the second cycle would also end on exactly March 31, there will likely not be another opportunity to adopt a pre-approved plan to fix past errors until about 2025 or 2026. And even then, adoption of a pre-approved plan would likely not provide retroactive relief for periods before 2020.

Obtaining an IRS advisory or opinion letter is not legally required, so long as a plan (in form and operation) complies with § 403(b). However, as a practical matter, an employer will typically want to adopt a pre-approved § 403(b) plan with an IRS letter verifying its status, since one of the major advantages of a pre-approved plan is the opportunity to get IRS blessing on the plan.

What’s Happening with the Affordable Care Act?
(Posted on January 25, 2017 by )


Affordable Care ActThe recent flurry of activity around the Affordable Care Act (ACA) has many people confused about where it stands, and what the employer’s obligations are. The following summarizes the activity so far:

Legislative Repeal Activity

A popular meme suggests that the Senate voted to eliminate virtually all of the provisions of the ACA, including the ability to obtain insurance in spite of pre-existing conditions, the requirement to cover adult children up to the age of 26, etc. This is not the case.

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