Regulatory Developments
The American Institute of Certified Public Accountants (“AICPA”) held its annual national conference on employee benefit plans for practitioners, administrators and plan sponsors. Leading regulators and practitioners addressed both the tax and audit side of employee benefits. As discussed below, the conference included regulatory, audit, accounting and reporting updates, as well as sessions focusing on specific and complex issues, such as FAS 157 and 403(b) plan audits.
Suspension of Required
Minimum Distribution Requirement
One of the many provisions in the Worker, Retiree, and Employer Recovery
Act, which was signed into effect in December 2008 by then President Bush,
provided for a one-year suspension of the required minimum distribution
(“RMD”) payments for certain retirement plan accounts.
Under current law, the RMD rules provide that participants in “qualified plans” and individual retirement arrangements (“IRAs”) are generally required to begin taking distributions of their accounts no later than April 1 of the year after they attain age 70-1/2. However, where an individual is still actively employed and is not a five-percent owner of the employer maintaining the retirement plan, commencement of the distribution of the RMD is delayed to April 1 of the year subsequent to the individual’s retirement.
As a result of the suspension, RMDs that would otherwise have been made for the 2009 plan year are no longer required. This relief applies to 2009 RMD payments only. Any 2008 RMD payments for participants who attained age 70-1/2 in 2008 and deferred payment until April 1, 2009, are not excluded.
Final Rule on Investment
Advice Exemption for 401(k) Plans and IRAs
The DOL published a final rule in January 2009 to make investment advice
more accessible for participants in 401(k) plans and IRAs. The rule includes
a regulation that implements the new statutory exemption for investment
advice added to ERISA by the Pension Protection Act of 2006 (“PPA”). The PPA
amended ERISA by adding a new prohibited transaction exemption that allows
greater flexibility for investment advisors to give advice to participants
of 401(k) plans and IRAs.
Automatic Contribution
Arrangements
In February 2009, the Treasury Department published final rules related
to the automatic contribution arrangements. The final rules clarified the
effects of mid-year increases in the default contribution percentage under
qualified automatic contribution arrangements (“QACA”). An eligible
automatic contribution arrangement (“EACA”) is a feature in a 401(k) plan
that provides for automatic enrollment of a uniform default percentage for
all covered employees who do not have an affirmative deferral election in
effect. Originally, it was to be applied uniformly to all employees. These
final regulations allow employers to specify in the plan document the
employees that will and will not be covered by the EACA. It permits multiple
EACAs with different default deferral percentages. A participant in an EACA
must request withdrawal within 90 days of the first pay date upon which the
deferrals were withheld. Under the PPA the QACA is effective for plan years
beginning in 2008 or later and EACA on or after January 1, 2010.
Suspension of Safe Harbor
Nonelective Contributions
In May 2009, proposed regulations issued by the Internal Revenue Service
(“IRS”) permit plan sponsors of 401(k) safe harbor retirement plans to
suspend or reduce safe harbor nonelective contributions mid-plan-year when
they experience a substantial business hardship. These proposed regulations
do not allow for the suspension of safe harbor matching contributions.
Previously, plans were only permitted to cease safe harbor nonelective
contributions upon termination of the plan for specified situations. The
proposed regulations are effective for amendments adopted after May 18, 2009
and, according to the IRS, may be relied upon for guidance pending the
issuance of final regulations.
2009 Form 5500
Plans and service providers will be required to comply with the changes
to the 2009 Form 5500 and the electronic filing of the Form 5500 on the due
date for the Plan’s 2009 Form 5500. Among the changes to the 2009 Form 5500
are:
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A new simplified annual reporting form for small plans with easy to value investments;
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Expanded reporting by large plans of compensation received by plan service providers (See "Fee Disclosures" section of the Audit, Accounting and Reporting Updates article);
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Realignment of the reporting rules for Internal Revenue Code section 403(b) pension plans subject to Title I of ERISA to make them on par with 401(k) plans; and
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Annual reporting changes required by the PPA for defined benefit pension plans and
multiemployer plans.
The DOL, IRS and the Pension Benefit Guaranty Corporation (“PBGC”) created the ERISA Filing Acceptance System (“EFAST”) to streamline the Form 5500 and the method by which it is filed and processed. The EFAST system is being replaced. The new filing system, EFAST2, will receive only electronic filing submissions (including the independent auditors’ report in pdf format) and will not accept paper filings. Any such paper filings will not be processed and will be returned to the filer.
To assist plan sponsors and service providers in preparing for the changes to the Form 5500 and the electronic filing requirement, the DOL has scheduled a series of webcasts and other educational outreach programs throughout 2009. The 2009 Form 5500 package and the related Federal Register notices are available on the DOL’s EBSA EFAST web site at www.efast.dol.gov.
Employee Benefit Plan Commentator is provided by Somerset’s Employee Benefits Team for our clients and other interested persons upon request. For additional information on the issues discussed, please contact Yvette C. Ward, CPA. Since technical information is presented in generalized fashion, no final conclusion on these topics should be made without further review.
These articles were written by and published herein
with the permission from professionals of BDO Seidman, LLP. Somerset is a
member of the BDO Seidman Alliance, a nationwide association of
independently owned accounting and consulting firms.
Somerset CPAs,
P.C.
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Indianapolis, Indiana 46240
317.472.2200 • 800.469.7206 • FAX 317.208.1200
www.somersetcpas.com
info@somersetcpas.com
