By Greg Daugherty and Victoria Hanohano-Hong on It has been a busy end of 2023 and first quarter of 2024 for the Internal Revenue Service and Department of Labor when it comes to implementing qualified plan regulatory guidance. You may have heard of some or more of these changes, many of which come from the SECURE Act and more recent SECURE 2.0. … Continue Reading
By Greg Daugherty and Porter Wright on The IRS recently issued Notice 2018-95 (the Notice), which clarifies the circumstances under which part-time employees must be given the opportunity to make deferral elections under their employers’ 403(b) plans. In particular, the Notice provides transition relief from the once-in-always-in (OIAI) condition for excluding part-time employees. Tax-exempt and governmental employers who sponsor 403(b) plans will … Continue Reading
By Greg Daugherty on The Internal Revenue Service (IRS) recently published proposed regulations under Internal Revenue Code Section 409A. The proposed regulations clarify 19 policy items addressed in the final regulations published in 2007 and also in proposed income inclusion regulations published in 2008. These clarifications generally are not surprising, and we do not expect that employers will need … Continue Reading
By Greg Daugherty on The Internal Revenue Service (IRS) issued guidance on Jan. 4, 2016, that clarifies certain implications of its previously announced changes to the employee plans determination letter program. These clarifications, announced in Notice 2016-03 (Notice) are necessary to cover open issues raised from prior guidance that in effect shuts down the determination letter program for most … Continue Reading
By Greg Daugherty on The Office of Chief Counsel of the Internal Revenue Service (the “IRS”) recently confirmed that violations of Section 409A of the Internal Revenue Code (the “Code”) could be corrected without penalty in any taxable year before the taxable year in which an arrangement became vested. However, the IRS went on to clarify that the Code would … Continue Reading
By Porter Wright on The Internal Revenue Code sets forth various dollar limitations on benefits, contributions, compensation under employee benefit plans. The IRS has announced limits for 2015 tax years. For your reference, the IRS Cost-of-Living Adjustments summarizes these dollar limitations, as modified by the IRS for cost-of-living adjustments (COLAs), for 2015 and prior years.… Continue Reading
By Porter Wright on Plan administrators who fail to timely file Form 5500 annual returns/reports are subject to penalties under both Title I of the Employee Retirement Income Security Act of 1974 (“ERISA”) and the Internal Revenue Code (the “Code”). The Department of Labor (the “DOL”) has the authority to assess civil penalties of up to $1,100 per day … Continue Reading
By Greg Daugherty on Legend had it at my law school that one day, a lost student walked into a torts class and asked the professor if this class was wills, trusts, and estates. The torts professor replied, “We haven’t gotten that far yet.” A dry sense of humor on the professor’s part? Perhaps. His point, however, was that … Continue Reading
By Porter Wright on During the most recent recession (some might say a mini depression), many employers requested greater flexibility to reduce or suspend safe harbor non-elective contributions to their 401(k) plans. They felt that a temporary reduction or suspension of contributions would be a better alternative than outright terminating their plans. Although the applicable regulations contained procedures for reducing or suspending safe harbor matching contributions, it wasn’t until Treasury issued proposed regulations on May 18, 2009, that a procedure was available to reduce or suspend safe harbor non-elective contributions. Recently, Treasury issued final regulations that revise the requirements for permitted mid-year reductions or suspensions of safe harbor non-elective contributions. Somewhat surprisingly, the final regulations also modified the procedures for mid-year reductions or suspensions of safe harbor matching contributions to 401(k) plans. They also suggested that some relief may be on the way with respect to other types of mid-year plan amendments.… Continue Reading
By Greg Daugherty on Are you able to accrue and deduct annual bonuses for a 2013 calendar year performance period in 2013, so long as you pay the bonuses to your employees by March 15, 2014? If this question sounds familiar, it is because we have blogged about past efforts of the IRS to address this issue. Historically, most employers believed that the answer was they could deduct the bonuses in the year accrued rather than the year paid, but during the past few years, the IRS has chipped away at that belief. In a recent Chief Counsel Advice Memorandum, the IRS issued its most sweeping guidance to date on the issue.… Continue Reading
By Greg Daugherty on Legendary UCLA Men’s Basketball Coach John Wooden once asked, “If you don’t have time to do it right, when will you have time to do it over?” If you sponsor a 403(b) plan, the IRS may have helped answer this question for you. In our prior blog, we highlighted the new Employee Plans Compliance Resolution … Continue Reading
By Greg Daugherty on Do you sponsor a qualified retirement plan? If you're a tax-exempt or governmental employer, do you sponsor a 403(b) plan? If you answered yes to either of these questions, you know that despite having the best administrative procedures in place, it is easy to make mistakes with respect to the plan. If the IRS were to catch these mistakes on audit, it has the potential to disqualify the plan. … Continue Reading
By Greg Daugherty on The IRS recently issued an important ruling on whether dividends and dividend equivalents related to restricted stock and restricted stock units (“RSUs”) can be treated as performance-based compensation for purposes of Code Section 162(m).… Continue Reading
By Porter Wright on In a recent blog, we discussed the need for employers with non-calendar year health FSAs to act now to implement the new $2,500 FSA limits imposed under health care reform. Thankfully, recent IRS guidance eliminates these concerns.… Continue Reading
By Porter Wright on Beginning January 1, 2013, the Patient Protection and Affordable Care Act ("PPACA") requires plan sponsors to limit pre-tax health flexible spending account ("FSA") contributions to no more than $2,500 per calendar year. There are currently no limits on health FSA contributions. This change is anticipated to be a revenue-raiser, because the new limit is lower than most existing plan-imposed pre-tax FSA contribution limits, and affected employees will pay taxes on more of their salary. … Continue Reading
By Porter Wright on The Treasury has announced proposed regulations and rulings regarding lifetime income choices. This guidance presumes that employers want to adopt more pension risk by providing more annuity options in their defined contribution and defined benefit retirement plans. … Continue Reading
By Porter Wright on While conducting a health care reform webinar recently, we received questions that suggested the need to remind employers sponsoring group health care plans about their self-reporting obligations, and significant potential exposure to excise taxes. … Continue Reading
By Greg Daugherty on Several important changes will take effect in the determination letter program beginning in 2012. The IRS has stated that these changes are intended to (1) reduce the burden on employers for filing determination letter applications (and in some cases, eliminate the need to file an application) and (2) reduce the time it takes for the IRS to process determination letter applications. … Continue Reading
By Greg Daugherty on Are you able to accrue and deduct annual bonuses for a 2011 performance period in 2011, despite the fact that an employee is required to be employed through the payment date in 2012 in order to receive the bonus? A few years ago, the IRS issued guidance that strongly suggested the answer was no, the deduction could not be taken in 2011.… Continue Reading
By Porter Wright on The Patient Protection and Affordable Care Act (PPACA) shared responsibility provisions require speculation about whether health care coverage will be affordable for an individual. Whether affordable coverage was available, whether an individual was eligible for a premium credit, and whether an employer was subject to penalties, cannot be determined until after the individual files a personal tax return. … Continue Reading
By Porter Wright on The Internal Revenue Service ("IRS") recently announced cost of living adjustments affecting retirement plans. These new limitations are effective for tax year 2012. Many, but not all, applicable dollar limitations will increase. For this purpose, the IRS uses an adjustment process that is similar to the process used to adjust Social Security benefits (which also will increase effective in 2012).… Continue Reading
By Porter Wright on In an attempt up clear up confusion about the tax treatment of employer–provided cell phones, the Internal Revenue Service (the "IRS") has issued Notice 2011‐72. The Notice was issued on September 14, 2011, and the tax exclusion rules described below are effective for all cell phone usage after December 31, 2009. This new guidance likely will be appreciated both for the resulting clarity (or at least increased clarity) and for the position taken by the IRS. Note that the guidance in the Notice is limited expressly to cell phones.… Continue Reading
By Porter Wright on This time of year, many employers are struggling to satisfy the independent auditors of their employee benefit plans so that they can obtain opinions and file their Forms 5500 on time. For a calendar year plan that filed a Form 5558 extension, the deadline is generally October 15 (but is October 17 this year, given that the 15th is a Saturday). As the deadline nears, employers may also encounter problems with electronic filing (now in its second year) and with getting answers to their questions regarding the filing. The potential penalties for failure to timely file a Form 5500 are substantial. … Continue Reading
By Greg Daugherty on In our recent blog about public equity compensation arrangements, we noted inconsistencies regarding the effective date of new guidance. The IRS and Treasury subsequently corrected the 162(m) guidance, and based upon this correction, we reaffirm that public companies need to review their equity compensation arrangements as soon as possible to minimize potential negative tax ramifications. Public Companies … Continue Reading