Benefits In Brief

After months of delay, the Department of Labor (“DOL”) today released final regulations under Section 408(b)(2) of ERISA, requiring retirement plan service providers to disclose information about their services and fees to plan sponsors.  In doing so, the DOL delayed the effective date of those rules and made minor modifications to them.  The final regulations defer the compliance date from April 1 to July 1, 2012.  As a consequence, plan sponsors will also have more time to comply with the related participant-level fee disclosure rules.

Congress and the IRS are encouraging individuals to convert their retirement savings into Roth accounts (as a means to increase revenue). Pursuant to changes to the Tax Code made by the Small Business Jobs Act of 2010 (“SBJA 2010”), sponsors of Section 401(k) plans, Section 403(b) plans, and governmental Section 457(b) plans may now allow participants to convert their pre-tax accounts into Roth accounts. And on November 26, 2010, the IRS issued Notice 2010-84 (the “Notice”), clarifying the mechanics of such conversions and providing timing relief for the necessary plan amendments. This article briefly summarizes the basics of Roth contributions, and then examines highlights of the statutory changes and the recent IRS guidance regarding conversions.

It may be summer now, but sponsors of tax-favored retirement plans should keep in mind the many required amendments for which a year-end deadline is fast approaching.  This article highlights some of the more important changes that sponsors must address before the sun sets on 2010.

As we reported in our September 2008 article, most tax-favored retirement plans must be amended by the end of the 2010 plan year to reflect the mandatory provisions of the Heroes Earnings Assistance and Relief Tax Act (the “HEART Act”).

In June of 2008, the Heroes Earnings Assistance and Relief Tax (“HEART”) Act became law. The Act made a number of significant changes to the treatment of military reservists under employee benefit plans. In an August 2008 article, we summarized those changes as they applied to qualified defined benefit and defined contribution plans, Section 403(b) plans, and Section 457(b) plans. In January of 2010, the IRS issued Notice 2010-15 (the “Notice”), which contains guidance on a number of the Act’s provisions. This article summarizes the most significant and surprising elements of that guidance, which apply to differential wage payments, “in-service” distributions on a reservist’s deemed severance from employment, and the Act’s mandatory death benefit provisions.

If your company sponsors a retirement plan that is qualified under Section 401(a) or 403(a) of the Internal Revenue Code (such as a 401(k) plan, a profit sharing plan, or a defined benefit pension plan), your plan must periodically be amended for changes in the tax laws and/or the regulations governing such plans. Those changes include the final regulations under Code Section 415 (regarding the limit on annual additions to defined contribution plans and the limit on annual benefits payable under defined benefit plans).

In June, the Heroes Earnings Assistance and Relief Tax (“HEART”) Act became law. The Act makes a number of significant changes to the treatment of military reservists under employee benefit plans. This article summarizes those changes as they apply to qualified defined benefit and defined contribution plans, Section 403(b) plans, and Section 457(b)plans.

The IRS recently issued Notice 2008-30 (the “Notice”), which provides guidance on three distribution-related provisions of the Pension Protection Act of 2006 (“PPA”) that are first effective in 2008, as well as a distribution requirement introduced by final regulations under Section 402(g) of the Internal Revenue Code (the “Code”) that first applies to corrective distributions made during 2008.

As promised in the final Section 403(b) regulations, the Internal Revenue Service has now released a “model” 403(b) plan document suitable for adoption by any public school. This model language, along with guidance concerning the proper adoption procedures, is contained in Revenue Procedure 2007-71.

The Pension Protection Act of 2006 (“PPA”) amended ERISA to provide fiduciary relief for certain default investments when plan participants do not provide investment direction. The DOL has now issued final regulations, which will take effect on December 24, 2007, under which plan sponsors may enjoy a “safe harbor” from certain fiduciary liability.

It would be hard to accuse the IRS of moving too hastily when it comes to issuing regulatory guidance under Section 403(b) of the Tax Code. The IRS issued comprehensive regulations governing “tax-sheltered annuities” (or “TSAs”) in 1964. Not until 2004 did the IRS propose a comprehensive rewrite of those regulations – despite a host of intervening statutory changes. Those proposed regulations have only now been finalized, and they are not generally effective until 2009.

In April, the IRS issued final regulations under Section 415 of the Internal Revenue Code (the “Code”). These regulations finalize rules proposed in May of 2005 and represent the first comprehensive overhaul of the Section 415 rules since 1981. For sponsors of defined contribution plans, one of the most newsworthy of the many changes is a revamping of the rules governing deferrals from compensation an employee receives after terminating employment.

As you probably already know, President Bush signed the Pension Protection Act of 2006 (the “PPA”) into law on August 17, 2006. Some PPA provisions became effective as of the date of enactment; others preserve existing laws that were set to expire in 2010; and still others are not effective until mid-2007 or 2008. This article summarizes some of the important provisions of the PPA that are effective as of plan years beginning on or after January 1, 2007 – or which apply to distributions, notices, or other events that will occur on or after that date.