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If It Isn’t Written Down, It Didn’t Happen

If It Isn’t Written Down, It Didn’t Happen

November 8, 2011

Authored by: benefitsbclp

 

We’ve all heard the old adage, advising us to record our thoughts and actions, lest they become lost to obscurity. In EP Quality Assurance Bulletin 2012-1, released November 2, the IRS reminds us of the importance of documentation with regard to the qualified plans in our lives. The Bulletin, entitled “Verification of Prior Plan Documents in the Absence of a Determination Letter,” provides IRS determination letter specialists with updated guidance on verification that retirement plans have been timely amended for prior legislation.

If you are filing your plan during the second remedial amendment cycle and you already have a d-letter covering the first cycle, you need to include all good-faith and interim amendments adopted after your first cycle submission.  In addition, you should include any discretionary amendments adopted since the issue date of the d-letter. However, if you are filing for a plan that does not

Compliance with ERISA Fee Disclosure Rules Considered Consistent with SEC Mutual Fund Advertising Rules

The Securities and Exchange Commission (“SEC”) issued a “no action letter” on October 26, 2011 indicating that issuing disclosures compliant with the Department of Labor (“DOL”) participant fee disclosure rules will not be considered inconsistent with the SEC Rule 482 advertising requirements that apply to mutual funds.

Participant Fee Disclosure Rule – DOL Regulation Section 2550.404a-5 requires plan administrators of participant-directed individual account plans to disclose, among other things, plan and investment-related information. Initial disclosures are not required until 2012. The performance data required to be disclosed in the regulation must be presented in a chart or other comparative format. Generally, the chart must include the average annual total return of the fund for the one-, five, and ten-calendar year periods ending on the date of the most recently completed calendar year. The DOL regulation also requires certain other disclosures, but, with respect to a money market fund,

Letters From Your Friends at the IRS About Your Form 5500

Letters From Your Friends at the IRS About Your Form 5500

October 20, 2011

Authored by: benefitsbclp

The IRS Employee Plans Compliance Unit recently announced that they would be sending letters to plan sponsors whose Form 5500 filings were six to nine months late. From our experience, these letters are usually sent because there was a simple error, such as transposed numbers in the employer’s EIN or failing to mark a final return filed in a prior year as the “Final Return/Report.” Most often, a corrected copy of the Form 5500 will suffice to make the IRS go away for this purpose. A failure to respond to a compliance check letter could result in an audit referral to the IRS’s Employee Plans Examinations or the Department of Labor (“DoL”).

If an employer discovers a simple error, such as those noted above, whether via a letter from the IRS or otherwise, we generally recommend that the employer file an amended return with the DoL processing center

Special Action Items for October

Special Action Items for October

October 13, 2011

Authored by: benefitsbclp

This is a brief reminder on common time-sensitive matters. We distribute these by email every month. If you would like to be added to the list, please comment below or email one of us. If you have questions, please call one of us. Thanks very much.

DEADLINES

Only a few days left to comply with these deadlines:

  • October 15, 2011 is the last day that a calendar-year plan can be corrected by amendment and in operation to address failure of the minimum coverage requirements of Code Section 410(b) and the general nondiscrimination requirements of Code Section 401(a)(4) in 2010. Has your plan received these tests from the plan’s recordkeeper?
  • 2011 third-quarter contributions to defined benefit plans must be made by October 15, 2011.
  • Calendar-year defined benefit plans with 100 or more participants are required to submit online premium filings to the PBGC by October 17, 2011. Special rules apply

Is Prime + 1% a Reasonable Interest Rate for Qualified Plan Loans?

Is Prime + 1% a Reasonable Interest Rate for Qualified Plan Loans?

September 26, 2011

Authored by: benefitsbclp

In a phone forum held on September 12, 2011, Internal Revenue Service (“IRS”) officials were reported by BNA Pension and Benefits Daily in a September 13, 2011 article by Florence Olsen as indicating that the Prime rate + 1% may not be a reasonable interest rate under the Internal Revenue Code prohibited transaction rules which apply to loans from qualified plans. For corrections and audit purposes, the IRS may be looking to the Prime rate + 2%. In recent years, plan administrators typically set the interest rate for plan loans as the Prime rate + 1% in effect on the first of the month during which the loan is originated (or a similar set date). If a participant can not secure a loan in the open market with an interest rate of Prime + 1%, the IRS official indicated that the Prime rate + 2% may be a

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