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IRS Takes Step Towards De-Risking Retiree Lump Sum Windows

On March 6, 2019, the IRS announced that it will not amend the minimum required distribution regulations under Code section 401(a)(9) to expressly prohibit lump-sum window elections for retirees who are already receiving annuity payments under a defined benefit pension plan.  This practice has never been clearly permissible under existing RMD regulations. Nevertheless, some plan sponsors seeking to “de-risk” their pension liability received private letter rulings in the past permitting such action.  Then the IRS issued Notice 2015-49 announcing that it would propose amendments to the RMD regulations clarifying that lump sum windows for retirees are not be permitted.  Now the IRS has altered course on this issue again with Notice 2019-18.

Thoroughly confused?  Not surprising given the shifting positions of the IRS on this issue.

Existing Regulations

Existing regulations state that once annuity payments have commenced over a period of time, the period may only be changed in accordance with certain exceptions enumerated in Treas. Reg. 1.401(a)(9)-6, Q&A-13.  One enumerated exception is for annuity payment increases described in Q&A-14.  The regulations under Q&A-14 provide that annuity payments may increase to allow a beneficiary to convert the survivor portion of a joint and survivor annuity into a single-sum distribution upon the employee’s death.  They do not expressly recognize a similar right to convert an annuity into to a lump sum during the employee’s lifetime.  They do, however, permit the payment of “increased benefits that result from a plan amendment.”  Plan sponsors interested

Meet the CCPA: New Privacy Rules for California Employees

Employers with operations in California should be aware of the California Consumer Privacy Act (“CCPA”), a new privacy law that applies to data collected about California-based employees.   HR professionals should be aware that, although the CCPA refers to “consumers,” as currently drafted the CCPA’s definition of a “consumer” will apply to California-based employees.

Which employers will have to comply with the CCPA?

Employers with employees in California will need to comply with the CCPA if their business falls into one of the following three categories:

1. Their business buys, sells, or shares the “personal information” of 50,000 “consumers” or “devices”;

2. Their business has gross revenue greater than $25 million; or

3. Their business derives 50% or more of its annual revenue from sharing personal information.

What are the key implications of having to comply with the CCPA?

The Employers who have to comply with the CCPA will be subject to the CCPA’s:

1. Expansive definition of “personal information”;

2. New notice requirements for California-based employees, which notices describe the employer’s collection of and use and disclosure of personal information;

3. New data privacy rights for California-based employees, including the right to access, delete, and opt out of the “sale” of personal information;

4. Special rules for the collection and use of personal information of minors;

5. Requirement to implement appropriate and reasonable security practices and procedures;

6. Enforcement

There’s No Such Thing as a Free Lunch…But There are Free Snacks

Something to gnaw on during your lunch hour today (sorry, we couldn’t resist):  the IRS recently released TAM 201903017, which ruled that free employee meals provided by an employer were includible in its employees’ taxable income – and therefore subject to employment taxes.

Section 119(a)(1) of the Code excludes the value of meals provided to an employee by an employer if the meals are furnished on the employer’s business premises “for the convenience of the employer.”  The “convenience” test can be met if the employer has a substantial noncompensatory business reason for providing the free meals, such as that the employee must be available for emergency calls or that there are no nearby alternatives to secure a meal within the employee’s meal period.  Under Section 119(b)(4) of the Code, if more than 50% of an employer’s employees on its premises receive meals that satisfy the “convenience” test, then all meals provided by the employer are deemed to be for its convenience and are therefore excluded as a taxable fringe benefit to its employees.  Section 3121(a)(19) of the Code excludes the value of any such meals from employee wages for purposes of employment tax withholding if it is “reasonable to believe” that the meals are excludable under Section 119.

In TAM 201903017, the employer-taxpayer (which, although redacted, appears to be a large technology corporation) did not include the value of employer-provided meals and snacks in its employees’ income, nor did it withhold and pay the related amount of

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