Internal Revenue Code Archives - Page 6 of 14

Cracking the Code: Taxing Developments in Benefit Compliance

by McDermott Will & Emery | Aug 21, 2015 | Employment, Fiduciary and Investment Issues, Retirement Plans

Generally, any type of organization can offer a defined benefit pension plan under Section 4019a) in the Internal Revenue Code of 1986, as amended (the “Code) or a Code Section 401(k) Plan. However, only employers described in Code Section 501(a) and educational organizations described in Code Section 170(b)(A)(iii) are permitted to sponsor Code Section 403(b) plans. Equally, Code Section 457 plans can only be sponsored by governmental and other organizations exempt from tax under the Code. Until roughly 2009, both Code Sections 403(b) plans and Code Section 457 plans had been basically ignored or overlooked by the Internal Revenue Service (“IRS”) and the Department of Labor (“DOL”). However, as these two plans have accumulated significant assets over the course of time (many occurring due to the consolidation of large plans in the healthcare sector through business combinations), the IRS and DOL have deemed it necessary to start taking a closer look. The audits of Code Section 403(b) plans and Code Section 457 plans has increased dramatically in the last few years to the point where the IRS has now issued its “top ten list” of issues which tax-exempt entities need to focus on when sponsoring these types of plans.

Read the full article from the Journal of Compensation and Benefits.

IRS Announces Major Changes to Its Determination Letter Program for Individually Designed Retirement Plans

by Alan D. Nesburg, PC and Stephen Pavlick | Aug 4, 2015 | Benefit Controversies, Labor, Retirement Plans

On July 21, 2015, the Internal Revenue Service (IRS) issued Announcement 2015-19 (the Announcement), which ends the five-year remedial amendment cycles for individually designed plans effective January 1, 2017. For remedial amendment cycles beginning after 2016, plan sponsors will no longer be able to apply for determination letters on their individually designed defined contribution and defined benefit plans, except for initial qualification and qualification upon termination. Effective on the Announcement date, off-cycle requests for determination letters will no longer be accepted. The IRS intends to publish additional guidance periodically, and seeks comments on the upcoming changes.

Click here to read the full On the Subject.

IRS Issues Q&As on Information Reporting under Code Section 6055 and 6056

by McDermott Will & Emery | May 22, 2015 | Health and Welfare Plans

Yesterday the U.S. Internal Revenue Service issued new Questions & Answers regarding the Affordable Care Act’s reporting rules under Code Section 6055 and 6056. The categories under the guidance include: Basics of the Reporting, Who is Required to Report, Methods of Reporting (for employers), What Information Must be Reported (for providers), and How and When to Report the Required Information.

White House Budget Proposal Includes Many Retirement-Related Provisions

by Stephen Pavlick | Mar 5, 2015 | Employee Stock Ownership Plans (ESOPs), Retirement Plans

On February 2, 2015, the White House released its Fiscal Year 2016 Budget, which includes a number of tax reforms targeting retirement savings. The provisions, if enacted as presented, would have a significant effect on current retirement-related tax incentives.

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IRS Permits Puerto Rico-Qualified Plans in U.S. Group Trusts, Extends Deadline for Certain Puerto Rico Spin-Offs

by Jeffrey Holdvogt | Feb 10, 2015 | Retirement Plans

The U.S. Internal Revenue Service (IRS) recently issued Revenue Ruling 2014-24, which expressly permits retirement plans that are tax qualified only in Puerto Rico (Puerto Rico-only plans) to continue to pool assets with U.S.-qualified plans in Revenue Ruling 81-100 group trusts (group trusts) now and in the future. The ruling is welcome relief for Puerto Rico plan sponsors, institutional investors, and trustees, who previously were relying on transition relief that permitted Puerto Rico-only plans to participate in U.S. group trusts for only a limited time without facing potential disqualification of the participating U.S. plans and trusts.

Revenue Ruling 2014-24 also extends the deadline for sponsors of certain retirement plans qualified in both the United States and Puerto Rico (dual-qualified plans) that participated in a group trust to make a tax-free transfer of benefits for Puerto Rico employees to a Puerto Rico-only qualified plan prior to January 1, 2016. Eligibility is limited only to dual-qualified plans that participated in a group trust as of January 10, 2011.

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Reevaluating Paid Time Off and New Challenges

by McDermott Will & Emery | Jan 15, 2015 | Employment, Labor

Cost containment evaluation and strategies relating to overall management of human capital costs remain a continual struggle for many organizations. Labor costs, far and away, continue to be the largest cost for many organizations. Consequently, this has resulted in an organizational focus on ways to create efficiencies within their existing benefits programs. Interestingly, it appears that paid time off (PTO) is one area where organizations have an opportunity to create efficiencies, as well as mitigate long-term financial risk and compliance risk.

Historically, many organizations provided their employees with separate holidays, vacation days, personal days, and sick time. Over time, however, many of these organizations have redesigned these programs to incorporate a “total” combined time off (CTO) approach where all of these different categories of personal time are included in one overall pool of days. A CTO approach simplifies administration of these arrangements and, in general, when compared to the traditional separate days approach, results in organizations overall providing fewer days of total time off. Changing to a CTO methodology did provide many of these organizations with initial cost savings, but other potential opportunities may exist as well as new challenges that have arisen.

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Employer Shared Responsibility Payments and Reporting Requirements Under the Affordable Care Act: Code Sections 6055 and 6056

by Jacob Mattinson | Sep 16, 2014 | Health and Welfare Plans

The Affordable Care Act (ACA) imposes reporting requirements on certain employers offering minimum essential coverage and those large employers subject to the employer shared responsibility requirements. Recently issued draft forms indicate how employers will comply with these reporting requirements.

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Camp Tax Reform Proposal Targets Executive Compensation

by Andrew Liazos | Aug 5, 2014 | Executive Compensation

On February 26, 2014, U.S. House of Representatives Committee on Ways and Means Chairman Dave Camp (R-Mich.) released the proposed Tax Reform Act of 2014 (the Camp Proposal). In addition to simplifying the Internal Revenue Code (IRC) and reducing corporate and individual tax rates, the Camp Proposal would fundamentally change the income tax rules that apply to nonqualified deferred compensation arrangements and would further restrict tax deductions available to publicly held corporation when paying named executive officers. It would also impose a new excise tax on employees of certain tax-exempt organizations who receive excessive compensation and certain payments that are contingent upon a change in control. Although unlikely to be enacted this year, the Camp Proposal provides a blueprint for other legislators to propose tax law changes that would significantly impact current executive compensation practices. Given the current political environment and the way tax revenue is estimated by Congress when preparing budgets, it is likely that we have not seen the last of the executive compensation changes included in the Camp Proposal, which makes it important to understand how they work and what they would mean for current executive compensation programs.

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Final Regulations Allow Retirement Plan Payments for Accident, Health and Disability Insurance

by McDermott Will & Emery | Jun 10, 2014 | Health and Welfare Plans, Retirement Plans

On May 9, 2014, the Internal Revenue Service finalized regulations that govern the tax treatment of payments made by retirement plans to pay accident or health insurance premiums. Under the final regulations, accident or health insurance premium payments by qualified defined contribution plans are taxable distributions to the participant unless those payments are used to pay premiums for disability insurance that replace retirement plan contributions for disabled employees. The regulations apply for tax years beginning January 1, 2015, although taxpayers may elect to apply them to earlier years.

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IRS Rules Captive Reinsurance Arrangement Involving Retiree Medical Benefits Qualifies as Insurance for Federal Tax Purposes

by Brian Tiemann, Elizabeth Erickson, Kristen E. Hazel and Thomas M. Jones, PC | Jun 3, 2014 | Health and Welfare Plans

On May 18, 2014, the Internal Revenue Service (IRS) ruled that an employer’s wholly owned captive insurance subsidiary could reinsure the employer’s retiree medical benefit risks and still qualify as insurance for federal tax purposes, even though the retiree medical reinsurance policy was the only business of the captive. The IRS held that the insured risks were those of the retirees and their dependents, not of the employer or the employer’s voluntary employee benefit association that purchased the insurance policy reinsured through the captive. The ruling will serve as guidance for employers seeking to structure and implement similar captive reinsurance arrangements that are eligible for favorable federal tax treatment.

Read the full article.

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