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Guest Blog:  Linda Segal Blinn on 403(b)

 

Writing a blog on technical/legal/regulatory issues can be daunting. You want the information to be right, but you also want it to be understandable (and in as few words as possible) to the professional who wants to be able to use the information you are trying to provide.  This is why the writings of Linda Segal Blinn caught my attention. A well known professional in the 403(b) world, her technical writings are straightforward, accurate, understandable and make the point well. There are few technical writers who have this skill set.

Linda has graciously accepted my invitation to write something of importance for this blog,  even getting corporate approval to do so. Her following piece on 403(b) plan documents is very timely particularly given that the IRS is now auditing for compliance with the new plan document rules.

 Thank you Linda.  

 

“Planning to Amend”

by Linda Segal Blinn, JD

Vice President of Technical Services, ING

 

“Just do it” may work as an athletic slogan, but it doesn’t always work so well with plan documents.

 Certainly, “just do it” was the reminder to 403(b) sponsors in 2009.  In that year, the IRS’ 403(b) regulations became effective and, with it, the written plan requirement, regardless of an employer’s ERISA status.  As a result, with the limited exception of certain church plans, 501(c)(3) organizations and public schools were reminded – whether through IRS outreach efforts, industry associations, service providers and/or their own counsel – of the importance of adopting a 403(b) plan that folded in these IRS requirements no later than December 31, 2009.

 And so, by and large, sponsors have done what the IRS has asked of them by adopting a written 403(b) plan that reflects the IRS regulations.  In doing so, these employers also had choices to make – did they want to offer a Roth 403(b) feature?  What about loans, hardships, rollovers in, and the like?   Decisions were made, and employers were able to check off that they had timely adopted their 403(b) plan by the IRS’ regulatory due date.

 But a 403(b) plan document is not a “set it and forget it” kind of document.  Yes, it will need to be updated periodically to reflect new tax laws.  To that end, the IRS, industry associations, service providers and tax advisors will again reach out to these employers to remind them of new deadlines to do so.  However, lost in the flurry of paper as employers rushed to adopt their 403(b) plan documents is this important reminder: if an employer wants to tweak plan design, rather than regulatory provisions, the plan document must be amended for that as well.  

 I was reminded of this recently when reviewing a 403(b) plan document.  While the plan document stated that an IRS safe harbor definition would be used, it turned out that, in fact, the plan had just switched over to using a homegrown definition that was perfectly acceptable, given the employer’s objectives. 

 “Is that a problem?” was the predictable question when the discrepancy between plan in form and plan in operation was pointed out.  Well, yes and no.  Both the Internal Revenue Code and ERISA provide that an employer must operate its plan in accordance with the terms of that plan.  Yes, deviating from plan terms is technically not allowed and would make the plan defective.  But adopting a simple amendment to the plan would resolve the matter.  So, perhaps this is not so much a problem as a need for a minor repair.

 And this is where the word needs to get out to 403(b) sponsors. Choice is good and choosing the design features that best fit your plan’s needs is important.  But just as important is not losing sight that if you decide to revisit those choices, you will also need to make sure that you fold those changes into the 403(b) plan document to remain compliant with IRS and ERISA rules.  While “just do it” should create a healthy environment, “just renew it” may be an even better motto for avoiding a plan document defect.

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 (This material was created to provide accurate information on the subjects covered.  It is not intended to provide specific legal, tax or other professional advice. The services of an appropriate professional should be sought regarding your individual situation.  These materials are not intended to be used to avoid tax penalties, and were prepared to support the promotion or marketing of the matters addressed in this document.  The taxpayer should seek advice from an independent tax advisor.)

 

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Linda Segal Blinn is Vice President of ING’s Technical Services. In this capacity, Blinn supervises the provision of legislative, regulatory, and compliance information to assist employers in operating their retirement plans.  Linda’s expertise includes administering and designing defined contribution plans in conformance with the Internal Revenue Code and ERISA.

 

 

 

 

 Since we first published a MEP whitepaper with TAG Resources a few months back, where TAG coined the term “Open MEP,” much has happened in this marketplace. Most recently, Drinker Biddle published its own (very good) whitepaper on this topic, very much affirming, and going into closer detail on, many of the broad points we had raised in the TAG paper.  

As you can imagine, we have spent a lot of time working on this issue so as to come to a measure of comfort on how ERISA applies to multiple employer employee pension benefit plans ("MEPs"). I think we have.
 
ERISA and its regulations specifically lay out the rules which must be met for “an employer or employers” to adopt a single defined contribution multiple employer plan.These rules are extensive, effectively acting as a set of MEP qualification rules. Interestingly enough, in order to actually qualify as an ERISA MEP, the regs under ERISA Section 210 actually require that the plan first meet the rules under 413(c)-including being treated as a single plan under the Code. Here’s the “qualification” list:
 
  • More than one employer.
  • Single plan under the Code.
  • Non-collectively bargained.
  • Application of minimum coverage, vesting,  participation, non-discrimination, and benefit accrual rules in a particular way.
  • Entire plan must be able to be disqualified by one participating employer.
   
With a plan that meets the MEP rules, there are really two ways for an “employer or employers” to actually adopt it and still be honored as a single plan. 
 
The first is the Open MEP model, where an employer directly adopts the plan on behalf of its own employees.  Here, each employer adopting the MEP, including the Lead Employer, has employees who are covered by the plan.  Each employer is acting, under ERISA 3(5), on their own behalf, each for the benefit of their own employees. Simple and straight forward, no so-called "commonality" requirement to qualify as an employer. 
 
The second way to adopt a MEP, it seems to me, is the classic association model. A “person” which is not otherwise an employer adopting a plan for its own employees as an employer, adopts a MEP on behalf of other employers (with employees) that have authorized it to do so. This would not cause much of a problem under 3(5), as it is not such a stretch to recognize a “person” acting on behalf of a single employer. This is clearly permitted under ERISA Section 3(5).  But a single "person" acting on behalf of multiple employers for their employees seems to create an awkward problem:  can one "person" be seen acting as a single "employer" for many employers without there being some sort of common employment relationship between those employers appointing it? Though this may happen in other legal contexts, it is not something for which regulatory guidance has ever been developed under ERISA outside of the collectively bargained arena. Under these circumstances, then, the Advisory Opinions addressing who may act as an "employer"-and the "commonality rule"-make some sense. 
 
Does this mean, though, that all that one of those abusive MEWAs sponsors (upon which most of the DOL Advisory opinions on the definition of "employer" were based) would need to do is to cover an employee of their own organization in order to achieve ERISA MEWA status? I don’t think so. First, ERISA’s preemption rules have (since 1983) permitted state insurance rules to apply to insured MEWAs, thus eliminating the area of the most abuse. Achieving ERISA status for the abusive plans makes little difference anymore.  More importantly, though, ERISA SEction 514(b)(6) gives the DOL the authority to establish rules by which it would recognize (or not recognize) a non-insured MEWA  as a single plan under ERISA 3(1). Though the lead plan sponsor may be an employer under such an approach, there is nothing within the regs recognizing it as a single plan.
 
MEPs, however, are much different. There are regulations which establish a specific set of rules authorizing the adoption of a single employee pension benefit plan by multiple, unrelated employers under certain circumstances.  There are no such specific rules for adopting a welfare plan for multiple employers.  In the absence of such specific rules, MEWA promoters have to resort to cobbling together  the general rules of ERISA to justify such an arrangement.  It appears that, at least from one of the Advisory Opinions, the DOL may well treat any group of multiple employers which attempt to adopt a single welfare plan as an association which must meet the "employer" rules.  This seems well within the DOL’s authority to do (at least they have the authority to establish regulations on this point) particularly as an anti-abuse rule.
 
It seems that, after working it through a bit,  the DOL’s approach to multiple employer arrangements are generally well founded, particularly as they apply to MEWAs.  Under the analysis above, an Open MEP can and should be accorded much different treatment than MEWas, and can be adopted by employers acting on their own behalf. An association, however,  may need to continue to comply with the "commonality" rules if they are not operating under an Open MEP.  
 
As an aside, something to note: ERISA Section 210 and Code Section 413(c) do not apply to 403(b) plans, which then may mean that it would  require an association of sorts to be able to adopt a single, multiple employer 403(b) plan. It would not, otherwise, be an ERISA MEP (a MEP under ERISA must fall under Code Section 413(c)).   It may be that the plan will need to be organized around the concept of employers actively governing the plan, belong to a bona fide association, or have employment bonds beyond the plan itself, unless the DOL issues other guidance.  
 
 

In Robert Pirsig’s novel, Zen and The Art of Motorcycle Maintenance, the protagonist was a technical manual writer who went insane.  The author commented that the book had little relation to either Zen or motorcycle maintenance.  But at the core of the story was the minutiae which eventually drove him mad: to any explanation he could write in any of his manuals, he could always ask the question “why?”

Similarly, on the topic of annuity regulation in DC plans, minutiae is central to the theme. It is in dwelling there, though, is  where I believe that many of the solutions to the public policy challenges raised by this topic can be found. I just hope it doesn’t drive us mad as well…
 
It may seem to some a bit silly to compare annuity regulation to a classic, modern philosophical tome, but its really not. The answer to the questions at which the regulators will arrive will affect an awful lot of people and businesses for an awfully long time. (For my view on how  technical regs reflect important policy, I invite you to read one of my personal favorites-but least read-blogs, Erisa and Mom, which I try to publish every Mother’s Day). You see, what regulators are really doing are attempting to find the right balance between availability, flexibility and securing critical participant retirement rights. As automotive engineers have told me on more than one occasion (yes, I am Imported From Detroit-and have a T-shirt to prove it), every design decision is a trade-off. So for example, you can’t have the safest and most cost/fuel efficient car at the same time (imagine the Bradley fighting vehicle as the family minivan. Beside lousy fuel mileage and high operating costs, it would be hell on the road systems. But it sure would be safe in a collision).  
 
There are a few guiding principles I would think (with the fear of being far too presumptuous, as reg writing is a skill with which I have NO experience) might apply in delving into the minutiae for solutions. For example, it may be helpful  to follow Asimov’s Minimum Necessary Change concept. It could also be useful to keep in mind that not all annuity based guarantees are created equal (for example, does high water mark protection deserve the same policy treatment as guaranteed lifetime income?), nor are all annuity types suitable for retirement plans. At the same time, it is important to preserve the ability of the market to continue to develop innovative (and suitable) retirement products, and for plans to readily adopt them. Finally, if at all possible, keep it as simple as possible-as the DOL has recently been accomplishing with a measure of success. 
 
So, with all that, here are some thoughts what some annuity regulations could look like.

 

Continue Reading Zen and The Art of Annuity Regulation, Part 1

In blogging, I don’t typically write about informal conversations I have had with anyone, including government staff, friends or colleagues, without first discussing it with them.  I fear that otherwise I would indeed lead a lonely life, as who would ever talk with me if there was a chance that conversation would end up on the internet the next day? 

In spite of this, I’ve chosen to write  about a discussion with DOL staff today only because I really think it would be helpful to add a bit more color  to Ilene Ferenczy’s newsletter on "Clues From the Ivory Tower," a well written piece on on the ASPPA meetings with the DOL where issues on multiple employer plans were raised, among others.
 
Ilene appropriately and accurately describes the conversation with the DOL on MEPS in her newsletter, but reactions on the social networks to her newsletter has lead me to think that a little more context may be useful to more fully understanding the conversation. 
 
I was at the same meeting as Ilene. The question arose as to whether a non-association MEP would qualify as a single plan under ERISA, so to enable a single Form 5500, single audit, and a host of other things. DOL staff’s reaction was that they believed that a non-benefit related commonality is needed, but they also expressed a willingness to discuss the idea. We explored several different points.
 
To be fair to the DOL staff, they were presented with the question almost as an afterthought, and staff had not been put on notice that we were looking for a thoughtful response. Likewise, we did not intend to prepare a case for why the answer should be one way or another. It was truly an initial response, to a sort of testing the waters on our part, with DOL staff asking follow up questions exploring why they should rule differently than with the MEWAs.
 
There is little doubt that any 413(c) MEP, including the non-association MEP, has substantial commonality. My ASPPA webcast next week will outline those, but includes vesting, participation, exclusive benefit and a few other things-413(c) even has the DOL drafting special break-in-service rules for 413c, which- I think-never have been written.
 
What it boils down to is actually a narrow question: should ERISA 3(5) be read to require a non-benefits based commonality. That is the concern raised by DOL staff. In my view, the language of ERISA does not require this, nor is there any regulation that does it.  What seems to be the genesis of  this narrow construction was based upon sound public policy: it  was necessary to stop those abusive healthcare MEWAs from continuing to harm participants who were purchasing non-existent health care coverage.  That narrow construction worked well to "plug the dike" until Congress stepped in to change the MEWA rules without requiring the DOL to engage in contortions.
 
The DOL has not ruled (either by Advisory Opinion or informal guidance) on what should be required under ERISA for a 413c plan to be recognized as a single ERISA plan, using the definition of employer under ERISA 3(5).  413c, unlike the MEWA rules, requires substantial commonality to qualify under the Code section as a single plan, but it is a benefits based commonality-one which the DOL position argues against.
 
From a purely policy perspective, as long as the ERISA rules are followed properly, a MEP can actually enhance the compliance that MEWAs were attempting to avoid. Think about it. It really is about professionals now willing to serve as the 3(16) Administrator-after years of TPAs and other professionals (acting on advice of us lawyers) making sure they WEREN’T serving in this role. Now, there appears to be a real market need for it.
 

So, the DOL’s initial, and informal, position is that a non-benefits commonality is required for a 413c MEP-I believe in large part because of the long line of of well established MEWA rulings saying so. I think the answer should be otherwise, as supported by the IRS regulatory structure under 413c of what constitutes a single plan, which is substantially different than the MEWA rules (or lack thereof) upon which the DOL position seems to be based. I suspect there will be some parties making this case to the DOL, in a much better prepared manner, and I would expect, over time, a thoughtful response from the DOL once they have reviewed things. But this means before one sets up a new MEP, one should do it with knowledge that the DOL may eventually not agree with this position. But there are a number of very large plans n the market already, so even the DOL’s nonacquiesence may not be the end of it. Even the GAO has taken an interest, and is doing initial research on whether these MEPS are a good tool to deepen retirement plan penetration in the small end of the marketplace.

Stay tuned, and step cautiously.  

 

 

Any discussion on any tax issue addressed in this blog (including any attachments or links) is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any transaction or tax-related position addressed therein. Further, nothing contained herein is intended to provide legal advice, nor to create an attorney client relationship with any party.   

 

Important Update. On June 21, IRS announced the extension of the 8955-SSA deadline to January 17, 2011, for which no Form 58 extension will need to be filed. The announcement is here

 

The challenges continue for 403(b) plans, as the IRS and DOL continue to implement their plan level rules in the 403(b) space. The most recent: the IRS’s Form 8955-SSA  and instructions for the 2009 plan year, released on June 18th. You will need Adobe X to open them.  It is due to be filed by August 1, with a 2 1/2 month extension permitted if you file a separate Form 5558.

The Form 8955-SSA replaces the old Schedule SSA to the Form 5500, where former employees with vested account balances remaining in the plan are reported.

Prior to 2009, ERISA 403(b) plans (the only 403(b) plans required to file a Form 5500) never had to file a Schedule SSA because the Form 5500 instructions never required them to do so. Curiously enough, it appears that the DOL may never really have had the authority under ERISA Section 110 to waive its filing in prior years because it is required under Code Section 6057(a), not under ERISA. Here’s the language, by the way, from the 2008 5500 instructions:

"403(b) Arrangements: A pension plan or arrangement using a tax deferred annuity arrangement under Code section 403(b)(1) and/or a custodial account for regulated investment company stock under Code section 403(b)(7) as the sole funding vehicle for providing pension benefits need complete only Form 5500, Part I and Part II, lines 1 through 5, and 8 (enter pension feature code 2L, 2M, or both). Note: The administrator of an arrangement described above is not required to engage an independent qualified public accountant, attach an accountant’s opinion to the Form 5500, or attach any schedules to the Form 5500."

Now to the tough part.  For ERISA 403(b) plans for which no SSA has ever been filed, how far back does a 403(b) plan sponsor need to go in reporting past participants? Conni did quite a piece on this for our Thompson Publishing newsletter. She strongly makes the case, with which I concur (but, please, check with your own counsel), that Rev Proc 2007-71 is actually determinative here. Oversimplifyng it, under 2007-71, 403(b) contracts which were issued prior to 1/1/2005, and to which no contributions have been made after 12/31/2004 (but loans, 90-24 transfers and other such things may also come into play), are not considered part of the 403(b) plan.

If you use this as a starting point, it would appear that the plan sponsor may need to go back to the 2005, 2006, 2007, 2008 and 2009 plan years, list all terminating participants from those years, and provide that to their current and deselected vendors. Then they will need to find which of those former employees have a current account balance (as of plan year end 2009)-but only if they had made a deposit to those contracts after 2004. And only for those years in which the plan was an ERISA plan. There is a bit more to it as well, as you are really trying to see who you can exclude for 2007-71 purposes.

A caution: the IRS has not taken this positiion on this. What really would be helpful is if the IRS issued relief telling us we only need to report those who left employment after January 1, 2009. 

408(b)(2) also comes into play here.  I had blogged on the "Flushing Effect" of 408(b)(2), where deselected ERISA 403(b) vendors will be required to make disclosures to plan sponsors in order to keep the comp on these contracts. I suspect that a number of employers will be surprised by these disclosures, and be receiving notices on contracts they may not realize exist.  This, in turn, is likely to cause consternation about the data on the 5500 filings in the past-and the new 8955- which then may need to be amended.

Its not getting any easier.  

 

 

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Any discussion on any tax issue addressed in this blog (including any attachments or links) is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any transaction or tax-related position addressed therein. Further, nothing contained herein is intended to provide legal advice, nor to create an attorney client relationship with any party.   

 

 

 

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There are three key employer groups which utilize 403(b) plans: K-12; colleges and universities; and non-profit healthcare systems.  Of the three, its is healthcare that seems to be most impacted by the new aggregation rules introduced with the 2007 403(b) regulations.

Not-for-profit hospital systems are typically corporations organized under the non-profit corporation rules of the states in which they are domiciled. There is an important feature of these incorporation rules at which the 403(b) changes were aimed: these nonprofit healthcare organizations typically have no stock. Instead of stock ownership, the corporations are generally organized around "membership," or like concepts.

The practical effect of this lack of stock ownership is is that the controlled group rules under Code Sections 414(b),(c),(m) and (o) and 1563 would often not apply (Notice 89-23 only being a safe harbor), meaning the discrimination and coverage rules under 403(b)(12)(A)(i) for 403(b) employer contributions were often tested on an organization by organization (as opposed to controlled group) basis.

Treasury changed this all with the introduction of 1.414(c)-5. In effect, an "80%" control test was introduced, with certain permissive aggregation rules permitted, and with church controlled orgs being able to permissively disaggregate under certain circumstances. 

More than in any other 403(b) plan sponsor community, those in the healthcare system have undergone tremendous consolidation activity over the past 15 years, with hospitals (and other sorts of related entities) seeking to survive and be successful through acquisition and merger.  This activity has often resulted in healthcare systems owning quite an assortment of separate nonprofit and for-profit organizations-with the related odd collection of legacy 403(b) and 401(k) plans.

This merger activity, when combined with the new aggregation rules, has resulted in a very difficult hangover for a number of unsuspecting healthcare systems. First, the traditional rules governing discrimination and coverage apply in ways they didn’t prior to 2009, and many of these legacy programs have never been tested under the new aggregation rules (its that inertia thing). Secondly, there are very specific rules which apply to coverage testing when you have 403(b)  plans and 401(k) plans within these new controlled groups, the application of which may make it difficult (and sometimes impossible) to maintain both kinds of plans-particularly when its a 501(c)(3) maintaining a 401(k) plan.

Even those orgs which have taken the lead in moving to consolidate platforms in order to deal with the new 403(b) regs are finding themselves now in some difficulty, where there is a dawning on just how the new aggregation rules apply.  

Of all the 403(b) hangovers we have experienced in the past few years, my guess is that this is the most unanticipated of them.

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Any discussion on any tax issue addressed in this blog (including any attachments or links) is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any transaction or tax-related position addressed therein. Further, nothing contained herein is intended to provide legal advice, nor to create an attorney client relationship with any party.   


 

 

 

 

 

 

A few weeks ago, I blogged on the important role that the Securities Compliance Officer may play in 408(b)(2) compliance. I touched on some of the securities rules which apply to retirement plans outside of the executive compensation context. Attached is a more htorough explanation of those rules, which can hopefully be useful as we attempt to wend our way through this changng regualtory landscape.  The article I wrote for the “Practical Compliance and Risk Management for the Securities Industry” March-April issue, is entitled “Securties Rules for Retirement Plans.”

 

 

Any discussion on any tax issue addressed in this blog (including any attachments or links) is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any transaction or tax-related position addressed therein. Further, nothing contained herein is intended to provide legal advice, nor to create an attorney client relationship with any party.   


 

T his has become my "annual Mother’s Day" posting, which hopefully helps describe the importance of what we do:

 

ERISA wonks such as ourselves tend to get lost in the press of details which seem to flow non-stop from our regulators and legislators in D.C.  It is sometimes helpful to step back and see the personal impact of the things we do.

A few years back, a good friend of mine who ran the retirement plan operations of a large insurance company asked me to speak about ERISA to a meeting of his administrative processing staff. At the time, they were still struggling with some of the more difficult administrative processes related to the QJSA and QPSA rules. Here’s what I told them:

My father died at Ford’s Rouge Plant in 1970, after 20 years with the company. Back then, the normal form of benefit under a defined benefit plan was a single life annuity, covering the life of only the employee.  There was no such thing yet as a qualified joint and survivor annuity or a qualified pre-retirement survivor’s annuity.  This meant that my father’s pension died with him. My mother was the typical stay-at-home mother of the period who was depending on that pension benefit for the future, but was left with nothing. With my father’s wages topping at $13,000 annually and five kids at home, there was also little chance to accumulate savings.

The Retirement Equity Act of 1984 (a copy of which I still keep in my office) was designed to change all of that. By implementing the requirement of a spousal survivor annuity, a whole class of non-working spouses received protection which was desperately needed.  So in that speech to my friend’s administrative staff, I asked them to take a broader view-if just for a moment- of the important task they were being asked to implement. It was valuable social policy with real, human effect which they were responsible for pulling off, and they should take a measure of pride in the work they were doing.

Things have evolved much over the years, and some of those same rules which provided such valuable protection have become the matter of great policy discussions centering on whether they are appropriately designed, and whether they can be modified in a way to accommodate new benefits like guaranteed lifetime income from defined contribution plans. But the point is that Congress sometimes gets it right, and there is very valuable social benefit often hidden in the day to day  "grunge" of administering what often seems to be silly rules.

Mom, by the way, is still alive and doing well.

  

 

The IRS’s Employer Plans Compliance Unit  is in the process of issuing a 21 question questionnaire, Form 866a, to a sampling of colleges and universities, aimed at  testing  whether or not there is compliance with 403(b)’s "universal eligibility rule."

This inquiry is different than the 401(k) questionnaire that EPCU issued a while back, and is more like the "soft audit" it conducted of K-12 school districts a couple of years ago.  Where the IRS committed that the answers to the questions in the 401(k) questionnaire would not, by themselves, trigger any follow-up enforcement activity, the IRS intends to follow-up with the plan sponsor should the 403(b) questionnaire reveal any problems with either universal eligibility or plan documents. It expects employers to use the EPCRS programs to correct eligibility problems it uncovers.

The "Universal Eligibility" rule is the discrimination test for elective deferrals under 403(b), standing in the stead of ADP testing. It requires that all employees (except for small classes of excludable employees) be given an "effective" opportunity to make elective deferrals into the sponsor’s 403(b) plan, which includes giving employees regular notice of their right to defer.  The most difficult part of this rule is that it is vastly different than the 401(k) eligibility rule, where full time employees can be required to wait a year or two before becoming eligible to defer; where substantial classes of employees can be carved out of participation; and where there is no special requirement to regularly (and currently) advise them as to their right to defer.

This can be a very expensive proposition. EPCRS requires employers who improperly exclude classes of employees to contribute to the plan on behalf of those employees 50% of the average deferral amount that others have made to the plan for all years for which they were improperly excluded, as well as lost earnings on those amounts.

Anyone who has been through the corrections process knows how expensive this can get, as it also includes making a match on those monies where a match was otherwise also made under the plan. Further adding to to the scare on this one is that it is not a new rule that became into play with the 2007 regulations: "Universal Eligibility" has been a requirement for a very long time. It will be interesting to see how the IRS will approach any "long-failing" plans.

The plan document failures, on the other hand, are a recent phenomena-and one in which we will need the EPCRS changes (which are expected to have "non-adopters" corrections) to be published to provide relief under this new "review."

Like the 401(k) questionnaire, the IRS has promised to follow-up on those who fail to answer the questionnaire-as they are now following up on non-responders to the 401(k) questionnaire with formal investigations. 

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Any discussion on any tax issue addressed in this blog (including any attachments or links) is not intended to be used, and cannot be used, for purposes of avoiding penalties imposed under the United States Internal Revenue Code or promoting, marketing or recommending to another person any transaction or tax-related position addressed therein. Further, nothing contained herein is intended to provide legal advice, nor to create an attorney client relationship with any party.