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

Read more.

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.

Read more.

Webinar – Phased Retirement Programs: Exploring the Issues
(Posted on December 5, 2016 by )


Lorman Distinguished Faculty MemberPhased retirement has become increasingly popular among two groups of employees: those who would like to begin easing away from work at a younger age, and those who need to continue working at older ages but require a less demanding schedule. We recently conducted a webinar to help employers identify the situations in which phased retirement may be beneficial, and structure phased retirement arrangements in such a way as to avoid the practical and legal pitfalls.

The PowerPoint presentation for the webinar is now available at this link.

A Trump Presidency: What Does It Mean for Employee Benefits?
(Posted on November 29, 2016 by )


White HouseBased on both campaign promises and Donald Trump’s plans for his first 100 days, a Trump presidency is likely to make major changes in employee benefits law. The most significant ones are likely to be:

  1. Major changes in the Affordable Care Act (although the timing and extent of such changes are unclear), combined with expansion of health savings accounts.
  2. Postponement or elimination of the recently issued Department of Labor fiduciary regulations.
  3. Loosening of executive compensation rules.
  4. Further cutbacks in IRS guidance and audit activity.
  5. Increased hostility to consideration of noneconomic factors in selecting retirement plan investments.
  6. Diminished enforcement of protections for LGBT employees.
  7. Increased activity at the state level, including establishment of state-sponsored retirement plans for private employers.

These issues, and others of less general concern, are discussed below. Read more.

Carol V. Calhoun Quoted in BNA Article, “IRS Rules Keep Status Quo for Many Governmental Plans”
(Posted on February 15, 2016 by )


Bloomberg BNAThe article, dealing with the proposed IRS regulations dealing with the definition of normal retirement age for governmental plans, is subscription only. However, in relevant part, it said:

The proposed rules generally were favorable, allowing plans to maintain the status quo in most cases, Carol V. Calhoun, president of the Bethesda, Md.-based Calhoun Law Group, [now Counsel at Venable LLP, Washington, DC] told Bloomberg BNA on Feb. 4.

“They say a governmental plan does not have to define normal retirement age, that it will be at whatever point you can receive a normal retirement benefit under the plan that is not reduced actuarially,” Calhoun said. For instance, the rules said that if a governmental plan says that normal retirement age is 25 years of service, then that will be considered the normal retirement age, she said.

Qualified Government Plan

A qualified governmental plan is one that is established and maintained for its employees by the federal government, a state government or political subdivision thereof, or by any agency or instrumentality of the federal or state government. The proposed rules “basically took all of the normal retirement ages that any state-wide plan has and they said all of those were going to be acceptable,” Calhoun said.

More discussion of the proposed rules can be found at this link.

Proposed Regulations: Normal Retirement Age for Governmental Plans
(Posted on January 27, 2016 by )


irsOn January 27, 2016, the IRS issued proposed regulations governing the extent to which governmental pension plans must comply with the rules governing normal retirement ages. In general, the rules are a positive step from the perspective of governmental plan sponsors, but they contain a few potential pitfalls.

Background

The qualification rules of the Internal Revenue Code (“Code”) provide for several rules that are based on a plan’s normal retirement age. For example, a pension plan cannot pay in-service benefits before the earlier of age 62 or normal retirement age. Benefits must be fully vested at normal retirement age. Benefits under the plan must be definitely determinable (i.e., subject to calculation, rather than at an employer’s discretion) as of normal retirement age. Read more.