EPCRS is updated by Revenue Procedure 2006-27.
The Employee Plans Compliance Resolution System ("EPCRS") is the tool IRS has provided for retirement plan sponsors (including qualified plans, 403(b) tax-sheltered annuities, SEPs and SIMPLE retirement accounts) voluntarily to correct common problems. EPCRS has been updated to make it easier to correct plan loan failures and improperly excluded employees from 401(k) plans, among other revisions. The former EPCRS rules, found in Revenue Procedure 2003-44, are replaced.IRS has issued a sample plan amendment for 401(k) plans wishing to receive Roth contributions.
Beginning this year, 401(k) plans may allow participants to make after-tax elective deferrals, called Roth contributions. IRS Notice 2006-44 provides a sample amendment in its appendix for use by pre-approved (prototype) plans and individually designed plans. The sample amendment does not address the extent to which an employee may elect that a distribution is to be made from either a Roth account or another account.The Department of Labor has issued final regulations and a Prohibited Transaction Exemption to aid the termination and distribution of benefits from abandoned individual account plans.
The rules are effective 30 days after publication in the Federal Register. Financial institutions are empowered by these rules to wind up the affairs of abandoned individual account plans so that benefit distributions can be made to participants and beneficiaries without the expense of costly court procedures.The Department of Labor has announced standards for distributing mutual fund settlements.
Standards are set for distribution of proceeds from the settlement of cases alleging improper late trading and market timing activities in mutual fund shares. The Labor Department advises plan fiduciaries to document fully their compliance with these standards and work closely with their record-keepers to assure that they are properly implemented. Concerns include when such amounts become "plan assets," how the funds are allocated to participants in the plan, and which participants are entitled to share in the proceeds. (Field Assistance Bulletin 2006-1)The Department of Labor has amended Prohibited Transaction 80-26 to allow plans and parties-in-interest to enter into interest-free loans for periods in excess of three business days.
The proposal to delete the 3-day cap was announced in December 2004 as a means of aiding plans facing liquidity problems. Loans for a term of more than 60 days must be made pursuant to a written loan agreement that contains all of the material terms of the loan.A U. S. Court of Appeals (2nd Circuit) decision indicates that the evidentiary burden can be placed on the participant to
establish that the participant is entitled to greater benefits than the plan has determined, but notice of that burden of proof must be provided in the plan’s summary plan description. (Wilkins v. Mason Tenders; 2nd Cir. No. 05-2303-cv. 4/21/06). This decision may suggest a useful tool for plans which sometimes find it hard to prove that benefits have been paid in full.Employee Welfare Benefit Plans: April 2006 Developments
Form 5500 instructions for the 2005 plan year include special instructions for the first time on reporting on Form 5500 a welfare benefit "wrap plan," or a "comprehensive welfare benefit plan."
These plans are used by employers to group number of welfare benefit plans into a single ERISA plan for purposes of the Form 5500 reporting requirements. The main advantage of using a "wrap plan" is the reduction of the number of Form 5500s that must be filed. According to the Labor Department, any individual who is a participant in any one of the welfare benefits covered by the wrap plan counts as a plan participant. Thus, wrapping together a number of benefit programs with under 100 participants who are not all the same individuals may force the plan to file a Form 5500, even if no constituent benefit program covers over 100 participants.Executive Compensation: April 2006 Developments
Final Code Section 409A regulations have not been issued.
Conflicting reports suggest issuance either in summer or fall. It is not too soon to be working out strategies to respond to this important new regulation of nonqualified deferred compensation.The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
