Internal Revenue Service Archives - Page 7 of 23

7 Tips to Avoid Compliance Missteps During Open Enrollment

by Jacob Mattinson and Megan Mardy | Nov 6, 2018 | Employee Benefits, Health and Welfare Plans, Privacy and Data Security

One of the busiest times of year for an employee benefits professional is open enrollment. It is a crucial and yet stressful time of year that typically results in numerous employee questions and complaints and is a time of year with high potential for both employer and employee mistakes. Despite the stress and potential for problems, open enrollment provides an opportunity for a company to set itself up for success for the following year.

The Employee Retirement Income Security Act (ERISA) does not require an annual opportunity for employees to change benefit plan elections. However, because of compliance issues that can spring from not offering a regular enrollment period, most companies choose to offer an “open enrollment” period, usually taking place in mid- to late fall for calendar-year health and welfare benefit plans.

Employee attention to employer communications during this period is often high, and attention to detail in participant communications behooves an employer during this period. Well-written and timely notices may be relied upon to satisfy many compliance obligations. Inaccurate or incomplete open enrollment materials, however, can create employee confusion and result in legal liability under the complex network of federal laws governing employer-sponsored benefit programs.

Read the full article here for a sampling of key issues to consider to help you avoid compliance missteps during this year’s open enrollment period.

Originally published in BenefitsPRO.com, October 2018.

Get Your Game On – How To Handle IRS and DOL Audits

by Allison Wilkerson and McDermott Will & Emery | Oct 25, 2018 | Employee Benefits, Health and Welfare Plans, Retirement Plans

During the Tax in the City event held in Dallas, Erin Turley and Allison Wilkerson gave an overview of benefit plan audits and the IRS examination process. They discussed various areas of focus, including, required minimum distributions, investment issues, benefit calculations and appropriate tax reporting. They provided attendees with best practices before an audit, as well as helpful resources from the IRS and DOL.

View the full presentation.

IRS Corrections Go Digital in 2019

by Joseph K. Urwitz, Lisa Loesel and Maggie McTigue | Oct 23, 2018 | Employee Benefits, Retirement Plans

Late last month, the IRS released the latest version of its Employee Plans Compliance Resolution System, the IRS’s program for correcting retirement plan errors. The newest version of the correction program—effective beginning in 2019—includes mostly minor changes and clarifications. Most importantly, however, it requires electronic filing of Voluntary Correction Program submissions beginning April 1, 2019.

Access the full article.

Webinar | Employer Options for Student Loan Benefits

by McDermott Will & Emery | Sep 28, 2018 | Employee Benefits, Retirement Plans

Join us Friday, October 5 for our monthly Fridays with Benefits webinar on employer options for student loan benefits. Student loan debt is an increasingly significant concern for employees and student loan benefits are becoming an increasingly significant way for employers to attract and retain key talent.

Join members of the McDermott Benefits Team for a discussion on employer options and strategies for employee student loan benefits that your company won’t want to miss! We will address refinancing options, direct financial assistance, and developments in retirement plan designs for benefits tied to student loan repayments.

Friday, October 5, 2018
10:00 – 10:45 am PDT
11:00 – 11:45 am MDT
12:00 – 12:45 pm CDT
1:00 – 1:45 pm EDT

Register now.

Extension of Nondiscrimination Relief to Certain Closed Defined Benefit Plans

by Kay Kemp and Lisa Loesel | Sep 6, 2018 | Employee Benefits, Retirement Plans

The Internal Revenue Service (IRS) has again extended the temporary nondiscrimination relief for closed defined benefit plans. This extended relief is intended to enable closed pension plans (defined as pension plans that have been closed to new participants before December 13, 2013 but continue to provide ongoing benefit accruals for certain participants) to more easily satisfy certain nondiscrimination testing requirements. In most cases where the relief applies, the closed defined benefit plan is aggregated with a defined contribution plan to satisfy the nondiscrimination testing requirements. The relief assists the aggregated plan in passing nondiscrimination requirements that apply to accrued benefits and to certain rights and features relating to those benefits.

The original nondiscrimination testing relief for closed pension plans was provided in a 2014 IRS Notice. This relief was already extended on three prior occasions, and the most recent IRS Notice further extends the relief until the end of plan years that begin before 2020, as long as the conditions of the original 2014 IRS Notice continue to be satisfied. In 2019, the IRS also intends to issue final regulations under Section 401(a)(4) of the tax code that address the nondiscrimination requirements for closed pension plans. Until then, the IRS indicated that plan sponsors can rely on the proposed 2016 IRS regulations under Section 401(a)(4) for plan years that begin before 2020.

IRS Issues Long-Awaited Initial Guidance under Section 162(m)

by Andrew Liazos, Joseph K. Urwitz, McDermott Will & Emery and William R. Pomierski | Aug 23, 2018 | Employee Benefits, Executive Compensation

On August 21, 2018, the IRS issued guidance regarding recent statutory changes made to Section 162(m) of the Internal Revenue Code. Overall, Notice 2018-68 strictly interprets the Section 162(m) grandfathering rule under the Tax Cuts and Jobs Act.

Public companies and other issuers subject to these deduction limitations will want to closely consider this guidance in connection with filing upcoming periodic reports with securities regulators. Further action to support existing tax positions or adjustments to deferred tax asset reporting in financial statements may be warranted in light of this guidance.

Access the full article.

Groundbreaking IRS Ruling Helps Clear the Way for New 401(k) Plan Student Loan Benefits

by Jeffrey Holdvogt and Sarah L. Engle | Aug 20, 2018 | Employee Benefits, Retirement Plans

On Friday, the IRS released a private letter ruling (PLR) which will help clear the way for employers to provide a new type of student loan repayment benefit as part of their 401(k) plans. By issuing the PLR, the IRS gave its blessing to an employer-provided student loan repayment benefit offered through an employer’s 401(k) plan. Historically, many plan sponsors had questioned whether such an approach would be permissible under IRS rules. As a result, the PLR provides welcome confirmation that such an arrangement is permissible under certain circumstances.

Generally speaking, the PLR confirmed that, under certain circumstances, employers may be able to link the amount of employer contributions made on an employee’s behalf under a 401(k) plan to the amount of student loan repayments made by the employee outside the plan. More specifically, as explained in our On the Subject published on Friday, the IRS concluded that an employer could make a non-elective contribution to its 401(k) plan where the amount of the non-elective contribution would be based on an employee’s total student loan repayments and would be contributed to the plan in lieu of the matching contributions that would otherwise be made to the plan had the employee made pre-tax, Roth 401(k) or after-tax contributions.

Because student loan benefit programs are becoming an increasingly powerful way for employers to attract and retain key talent, particularly employers with a young and educated workforce, the PLR will very likely cause many employers to consider offering a student loan benefit as part of their retirement program. Importantly, employers who wish to do so should take care to review their 401(k) plans for special rules, features or design elements (outside those discussed in the PLR) that might create additional hurdles to linking the amount of employer contributions made on an employee’s behalf under a 401(k) plan to the amount of student loan repayments made by the employee outside the plan. For example, some of the special rules that apply to safe harbor plans could limit an employer’s ability to create a similar student loan benefit structure.

For more information about this groundbreaking ruling, including the key features of the student loan benefit program described in the PLR, the advantages of such programs and other important considerations, please see our On the Subject published on Friday.

IRS Finalizes Regulations Allowing Use of Forfeitures to Fund Safe Harbor Contributions, QNECs and QMACs

by Sarah L. Engle and McDermott Will & Emery | Aug 9, 2018 | Employee Benefits, Retirement Plans

The Internal Revenue Service recently released final regulations confirming that employers can use plan forfeitures to fund qualified non-elective contributions (QNECs), qualified matching contributions (QMACs) and safe harbor contributions.

As explained in our earlier On the Subject discussing this topic, IRS regulations historically provided that QNECs, QMACs and certain safe harbor contributions had to be 100 percent vested at the time the amounts were contributed to an employer’s plan. The IRS interpreted this requirement to prohibit employers from using forfeitures to fund QNECs, QMACs and certain safe harbor contributions. In particular, according to the IRS, using forfeitures for this purpose was impermissible because contributions allocated to a plan’s forfeiture account were subject to a vesting schedule when the contributions were first made to the plan (as employer matching or profit sharing contributions). Therefore, the IRS took the position that forfeitures could never be used to fund QNECs, QMACs or certain safe harbor contributions even if the forfeitures were fully vested at the time they were ultimately re-allocated to participant accounts as QNECs, QMACs or safe harbor contributions.

In response to numerous comments regarding this requirement, the IRS issued proposed regulations in January, 2017 clarifying that QNECs, QMACs and safe harbor contributions were only required to be fully vested at the time the contributions were allocated to participant accounts, rather than when first contributed to the plan. As a result, employers could use forfeitures to fund QNECs, QMACs and safe harbor contributions.

The final regulations issued late last month confirm the approach outlined in the proposed regulations. Importantly, employers were actually permitted to rely on those proposed regulations immediately. As a result, the final regulations simply confirm that plan sponsors can continue to use forfeitures to fund QNECs, QMACs and safe harbor contributions. Before doing so, however, plan sponsors should review their plan documents carefully to ensure that the plans allow forfeitures to be used for such purposes.

IRS Announces Limits for Health Savings Accounts and High-Deductible Health Plans for 2019

by Jacob Mattinson, Megan Mardy and McDermott Will & Emery | May 17, 2018 | Employee Benefits, Employment, Fiduciary and Investment Issues, Health and Welfare Plans

On May 10, 2018, the IRS announced cost-of-living adjustments to the applicable dollar limits for health savings accounts and high-deductible health plans for 2019. Many of the limits will change for 2019.

Access the full article.

Impact of Tax Reform on Compensation Structures and Popular Fringe Benefits

by Samantha Souza | May 10, 2018 | Employee Benefits, Executive Compensation

US tax reform is changing the game with respect to many of the popular benefits employers have traditionally provided to their employees. These new rules have produced a great deal of questions. However, while the Internal Revenue Service (IRS) is formulating guidance, employers are left to navigate these changes on their own in order to determine the impact on both themselves and their employees. Employers are also reevaluating their benefit offerings in light of the new rules. These issues and more were addressed during the 2018 McDermott Tax Symposium on April 24, 2018.

The McDermott panel left the audience with these core takeaways:

Due to the suspension of their employees’ ability to take many itemized deductions, employers should consider the feasibility of restructuring their compensation arrangements to save income taxes and FICA taxes.
Certain employers that are public employers, private employers with public debt or non-U.S. employers with ADRs traded on a U.S. market should evaluate their executive pay arrangements to determine whether the grandfathering rules under section 162(m) apply to any compensation and further ensure compliance with the new rules under section 162(m).
Employers should consider whether they will continue to provide popular benefits such as qualified transportation fringes and employer-provided meals. If employers choose to continue to provide these benefits, they will need to confirm that their systems are updated to reflect the changes in deductibility.
Employers should begin using the updated Form W-4, if they are not already.
Employers should encourage their employees to utilize the IRS’ updated withholding calculator to verify that the proper tax amounts are being withheld.

For additional information on these topics and other items addressed by McDermott tax professionals during the symposium, please see the compilation of slides. For additional tax reform resources, please visit McDermott’s Take on Tax Reform.

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