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2019 Qualified Plan Limits Released

The Internal Revenue Service released the 2019 dollar limits for retirement plans, as adjusted under Code Section 415(d). We have summarized the new limits (along with the limits from the last few years) in the chart below.

Type of Limitation

2019 2018 2017 2016 2015 Elective Deferrals (401(k), 403(b), 457(b)(2) and 457(c)(1)) $19,000 $18,500 $18,000 $18,000 $18,000 Section 414(v) Catch-Up Deferrals to 401(k), 403(b), 457(b), or SARSEP Plans (457(b)(3) and 402(g) provide separate catch-up rules to be considered as appropriate) $6,000 $6,000 $6,000 $6,000 $6,000 SIMPLE Salary Deferral $13,000 $12,500 $12,500 $12,500 $12,500 SIMPLE 401(k) or regular SIMPLE plans, Catch-Up Deferrals $3,000 $3,000 $3,000 $3,000 $3,000 415 limit for Defined Benefit Plans $225,000 $220,000 $215,000 $210,000 $210,000 415 limit for Defined Contribution Plans $56,000 $55,000 $54,000 $53,000 $53,000 Annual Compensation Limit $280,000 $275,000 $270,000 $265,000 $265,000 Annual Compensation Limit for Grandfathered Participants in Governmental Plans Which Followed 401(a)(17) Limits (With Indexing) on July 1, 1993  

$415,000  

$405,000  

$400,000  

$395,000  

$395,000 Highly Compensated Employee 414(q)(1)(B) $125,000 $120,000 $120,000 $120,000 $120,000 Key employee in top heavy plan (officer) $180,000 $175,000 $175,000 $170,000 $170,000 Tax Credit ESOP Maximum balance $1,130,000 $1,105,000 $1,080,000 $1,070,000 $1,070,000 Amount for Lengthening of 5-Year ESOP Period $225,000 $220,000 $215,000 $210,000 $210,000 Taxable Wage Base $132,900 $128,400 $127,200 $118,500 $118,500 IRAs for individuals 49 and below $6,000 $5,500 $5,500 $5,500 $5,500 IRAs for individuals 50 and above $7,000 $6,500 $6,500 $6,500 $6,500 FICA Tax for employees and employers 7.65% 7.65%

2018 Qualified Plan Limits Released

The Internal Revenue Service today released the 2018 dollar limits for retirement plans, as adjusted under Code Section 415(d). We have summarized the new limits (along with the limits from the last few years) in the chart below.

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*For taxable years beginning after 12/31/12, an employer must withhold Additional Medicare Tax on wages or compensation paid to an employee in excess of $200,000 in a calendar year for single/head of household filing status ($250,000 for married filing jointly).

Cautionary Observations from the Proposed 457 Regulations

Governmental Buildings and MoneyAfter more than nine years of deliberations, the IRS has finally released proposed regulations governing all types of deferred compensation plans maintained by non-profit organizations and governmental entities.

In issuing these regulations, the IRS reiterates its long-standing theme that these regulations are intended to work in harmony with, and be supplemental to, the 409A regulations. However, the IRS provides little guidance on how these regulations interact with each other.  The following discussion focuses on 3 key aspects of the new guidance: the severance exemption, the substantial risk of forfeiture requirement, and leave programs.

As with the 409A regulations, the 457 regulations exempt severance pay plans from the rules and taxes applicable to deferred compensation. The 457 regulations apply similar criteria with one notable exception: they do not apply the 401(a)(17) compensation limit in determining the “two times” dollar cap on amounts that can be paid pursuant to an exempt severance pay plan.  Practitioners in the for-profit arena currently believe they enjoy wide latitude in restructuring severance arrangements that are exempt from 409A.  It would not appear that practitioners will have that same latitude for severance arrangements that are exempt from 457, unless the arrangements also satisfy the severance pay exemption under 409A, particularly with regard to the dollar cap limit.

Historically, the proposed 457 rules afforded

2014 Qualified Plan Limits – Now in Tabular Form!

2014 Qualified Plan Limits – Now in Tabular Form!

January 22, 2014

Authored by: benefitsbclp

As a follow up to our post on November 1, 2013, regarding changes to the qualified plan limits for 2014, we’ve issued a Client Alert providing the qualified plan limits for 2014 (as well as 2011 – 2013) in tabular form.

We’ve also reproduced the limits table below for ease of reference:

Type of Limitation

2014

2013

2012 

2011

Elective Deferrals (401(k), 403(b), 457(b)(2) and 457(c)(1))

$17,500

$17,500

$17,000

$16,500

Section 414(v) Catch-Up Deferrals to 401(k), 403(b), 457(b), or SARSEP Plans (457(b)(3) and 402(g) provide separate catch-up rules to be considered as appropriate)

$5,500

$5,500

$5,500

$5,500

SIMPLE 401(k) or regular SIMPLE plans, Catch-Up Deferrals

$2,500

$2,500

$2,500

$2,500

415 limit for Defined Benefit Plans

$210,000

$205,000

$200,000

$195,000

415 limit for Defined Contribution Plans

$52,000

$51,000

$50,000

$49,000

Annual Compensation Limit

$260,000

$255,000

$250,000

$245,000

Annual Compensation Limit for Grandfathered Participants in Governmental Plans Which Followed 401(a)(17) Limits (With Indexing) on July 1, 1993

$385,000

Do Your Plan a Favor: Eschew Escheating

Given the migratory nature of society these days, it is not uncommon for an employee benefit plan to accumulate significant sums of money attributable to the accounts of lost participants.  For a number of States, the assets attributable to lost participants are an attractive revenue source.  Utilizing their unclaimed property statutes, many States attempt to seize these funds so they can add them to the State’s coffers.

Most employee benefit plans subject to ERISA can sidestep this potential leakage of plan assets through the use of clear plan language that expressly provides for the forfeiture of amounts from the accounts of participants who are determined to be lost after some predetermined period. The language should also provide that those forfeited funds will be utilized either through a reduction of the sponsor’s contribution obligation or their application to reduce plan expenses.  The Department of Labor has unequivocally concluded that such plan provisions are to be honored irrespective of unclaimed property statutes that might otherwise dictate a contrary result. Most plans that provide for the forfeiture of the accounts of lost participants further provide that those accounts will be restored if the lost participants are later found.

Employee benefit plans that are not subject to ERISA and, therefore, do not benefit from  ERISA preemption, can be designed to sidestep unclaimed property statutes with plan provisions that provide for forfeitures before the shortest applicable escheat period runs.

An exception to this approach, however, applies to employee benefit plans that

IRS Updates Retirement Plan Correction Program

IRS Updates Retirement Plan Correction Program

January 14, 2013

Authored by: benefitsbclp

After a long wait, an updated Revenue Procedure for the Employee Plans Compliance Resolution System (EPCRS) was released in the form of Rev. Proc. 2013-12.  The new Revenue Procedure makes some important changes to the EPCRS.

As many plan sponsors know, the EPCRS includes the self-correction program (SCP), which requires prescribed corrections but does not require submission to the IRS; the voluntary correction program (VCP), which requires both prescribed corrections and submission to and approval by the IRS; and correction of problems discovered on audit (Audit CAP).

The purpose of the updated Revenue Procedure is to improve some features of the EPCRS and clarify others, based in large part on comments from the employee benefits community.  The IRS expects to make more changes of this type in the future, also based on comments from the employee benefits community.  Generally speaking, the IRS was responsive to many of the concerns raised by the employee benefits community and addressed them in a helpful manner in the revised EPCRS.

The biggest news is that 403(b) plans, are now eligible for EPCRS.  In particular, 403(b) plan sponsors can now use VCP to correct failure to adopt a written 403(b) plan on time.

Correction procedures are also provided on an experimental basis for 457(b) plans, primarily for governmental 457(b) plans, in a new program separate from the EPCRS.

Other new or revised procedures in the EPCRS include:

  • SCP correction of recurring excess annual additions under Section 415(c) of the Internal

Year-End Qualified Retirement Plan Checklist

Year-End Qualified Retirement Plan Checklist

October 31, 2012

Authored by: benefitsbclp

It’s time to ensure year-end qualified plan deadlines are satisfied. Below is a checklist designed to help employers with this process.

A.      QUALIFIED PLAN AMENDMENTS

The deadline for adopting the amendments listed below is the last day of the plan year beginning on or after January 1, 2012.  For calendar year plans, the deadline is December 31, 2012.  Note that some of the provisions became effective and required operational compliance prior to 2012.  Plan sponsors should review their plans’ administration to ensure that the plans have been operated in compliance with the applicable provision.

          1.      DEFINED BENEFIT PLANS

□        Code § 436 Funding Based Benefit Restrictions.  The Pension Protection Act of 2006 (“PPA”) added Section 436, which imposes restrictions on distributions and benefit accruals based on the funding status of a defined benefit plan, to the Internal Revenue Code (“Code”).  Plans that do not meet certain funding targets must limit benefit accruals, cannot be amended to increase benefit liabilities, and must limit certain forms of benefit payments.  These provisions are effective for plan years beginning after December 31, 2007.  In Notice 2011-96, the IRS extended the due date for adopting the amendment to the last day of the plan year beginning on or after January 1, 2012 and provided sample language for the amendment.

□        Cash Balance and Hybrid Plans.  PPA made several changes affecting cash balance and hybrid pension plans, including requiring three-year vesting and prohibiting interest credits at an

Updated Qualified Plan Limits

Updated Qualified Plan Limits

October 22, 2012

Authored by: Chris Rylands

Last week, the IRS updated various qualified plan limits for 2013 to reflect increases in the cost of living.  A table of those limits, along with a listing of limits from prior years, is below.

Disclaimer/IRS Circular 230 Notice

 

Governmental Plans: Are Your Plan Fees Reasonable?

October 15, 2012

Categories

Governmental Plans: Are Your Plan Fees Reasonable?

October 15, 2012

Authored by: benefitsbclp

Have you recently received fee disclosures from your plan service providers?  Do you know the total compensation your service providers receive for their services?  Are you aware how these costs impact plan participants?  Are these fees reasonable?

All plan fiduciaries, including governmental plan fiduciaries, have the duty to make sure fees paid for services are reasonable. However, until now, there hasn’t been any formal regulatory disclosure requirement governing service provider compensation. In 2012, the Department of Labor (DOL) finalized fee disclosure rules applicable to ERISA plans.  Generally, these rules were issued to assist plan sponsors and fiduciaries in determining whether plan-related fees are reasonable for and to provide transparency for plan fiduciaries and participants.  Although these fee disclosure rules only apply to ERISA-governed private sector plans, governmental plans should consider following these new rules as a fiduciary best practice.

The DOL fee disclosure rules consists of two disclosure requirements: (1) the service provider fee disclosure, and (2) the participant-level fee disclosure.

Service Provider Fee Disclosure

Generally, the service provider fee disclosure requires “covered service providers” (such as recordkeepers, brokerage services, investment advisors, investment fund and managers, etc.) to provide sponsors of defined benefit plans and defined contribution plans a disclosure of their fees and services. In general, the service provider fee disclosure requires:

  • A description of services to be provided pursuant to the contract or arrangement;
  • Information on whether the services provided to the plan by the provider are done in a fiduciary capacity or

Recent Guidance on Normal Retirement Age Regulations for Governmental Plans

The IRS and Treasury Department recently issued Notice 2012-29, which provides new guidance for the final “normal retirement age” regulations relating to governmental plans. The Notice provides that the IRS and the Treasury intend to further extend the effective date for governmental plans to comply with the final regulations to annuity starting dates that occur in plan years beginning on or after the later of:

  • January 1, 2015, or
  • the close of the first regular legislative session of the legislative body with the authority to amend the plan that begins on or after the date that is three months after the final regulations are published in the Federal Register.

The Notice also provides that the IRS and Treasury will make two important clarifications in the final regulations:

  • The final regulations will clarify that governmental plans that do not provide for in-service distributions before age 62 do not have to have a definition of normal retirement age that complies with the final regulations or even define normal retirement age; and
  • The final regulations will expand the age-50 safe harbor rule, which currently applies only for plans in which substantially all of the participants are qualified public safety employees, to also apply to a group substantially all of whom are qualified public safety employees. This means that a governmental plan could satisfy the normal retirement age requirement by using a normal retirement age as low as 50 for qualified public safety employees, and a later normal retirement
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