Retirement Plans

The American Jobs Creation Act of 2004: Employee Benefits Related Issues

On October 22, 2004, the President signed the American Jobs Creation Act of 2004 (the “Act”), a major piece of corporate tax legislation. The Act contains significant new rules for nonqualified deferred compensation plans which were analyzed in the October 2004 Trucker Huss Special Alert (“Deferred Compensation Update”). The Act also contains a number of […]

Pension Plan Limitations for 2005

The Internal Revenue Service has announced the annual cost-of-living adjustments applicable to dollar limitations for pension plans and other items for Tax Year 2005. The increases that will affect the most plans are the increase in limitations on deferrals and catch-up contributions, the increase in the maximum compensation limit and the increase in the limitation […]

The Automatic Rollover of Mandatory Cash-Outs: The Department of Labor’s Safe Harbor Final Regulations

The Department of Labor (the “DOL”) issued a final regulation on September 28, 2004 that establishes a safe harbor pursuant to which a fiduciary of a retirement plan subject to Title I of the Employee Retirement Income Security Act of 1974 (“ERISA”) may meet its fiduciary responsibilities with respect to the automatic rollover of mandatory […]

IRS Issues Final 401(a)(9) Minimum Distribution Regulations

New Program On June 15, 2004, the Internal Revenue Service issued final regulations under Section 401(a)(9) of the Internal Revenue Code (the “Code”). Treasury Regulations section 1.401(a)(9)–6 provides guidance on the minimum distribution requirements for defined benefit plans, for annuity contracts purchased with account balances under defined contribution and individual retirement plans, and for annuity […]

Unanimous Supreme Court Decision Determines That Post-Retirement Plan Amendment Violates ERISA’s Anti-Cutback Rule

For two decades IRS informal documents, including the Internal Revenue Manual, have allowed plans to make amendments that change the types of post-retirement employment that trigger the suspension of benefits, even when the amendments apply retroactively to accrued benefits. In addition, the IRS has endorsed this practice by issuing favorable determination letters to plans containing […]

PBGC Announces New Participant Notice Voluntary Correction Program

New Program On May 7, 2004, the Pension Benefit Guaranty Corporation (“PBGC”) announced its new Participant Notice Voluntary Correction Program (“VCP”). The program will allow plan administrators of underfunded defined benefit plans to correct a failure to provide required Participant Notices for the 2002 and 2003 plan years without penalty. It is also designed to […]

DOL Addresses Modifications Made to Pre-Existing QDROs

In recently published Advisory Opinion 2004–02A, the Department of Labor (the “DOL”) provides guidance concerning modifications made to pre-existing qualified domestic relations orders (“QDROs”). The guidance explains that plan administrators who receive court-approved domestic relations orders (“Orders”) that modify the terms of a pre-existing QDRO must honor such Orders, if the Order otherwise is determined […]

New Requirement for Automatic Rollovers of Small Cash-Outs from Qualified Plans: The Proposed Regulations

Introduction Qualified plans generally cannot distribute a benefit prior to normal retirement age without the participant’s consent. However, the law permits a plan to provide for an automatic distribution, or “cash-out,” to a participant who terminates employment with a benefit valued at $5,000 or less. Many plans provide for these automatic cash-outs to avoid administering […]

Revenue Procedure 2004–25 Extends Remedial Amendment Period Only for Certain Specified Disqualifying Provisions

On April 19, 2004, the Internal Revenue Service (“IRS”) issued Revenue Procedure 2004–25 (“2004–25”), which extends the Remedial Amendment Period (“RAP”) for certain disqualifying provisions. To remain qualified, a plan must satisfy the qualification requirements of the Internal Revenue Code (“Code”) in operation and in form (i.e., its provisions). The RAP is the period during […]

IRS Issues Updated Procedures for Waiver of Minimum Funding Standards

On February 17, 2004, the Internal Revenue Service (the “IRS”) published Revenue Procedure 2004–15, superseding Revenue Procedure 94–41, which outlines the updated procedures for obtaining a waiver of the minimum funding standards of Section 412(d) of the Internal Revenue Code (the “Code”) or Section 303 of the Employee Retirement Income Security Act of 1974 (“ERISA”). […]

IRS Issues Guidance Clarifying Allocation of Plan Expenses to Inactive Participants

In 2003, the Department of Labor issued Field Assistance Bulletin 2003–3 (the “FAB”), which provides guidance on the allocation of expenses paid with plan assets in defined contribution plans. In the FAB, the DOL, in part, stated that plans may charge the accounts of vested separated participants with the account’s share of reasonable plan expenses, […]

New Legislation Clarifies Rule on Plan Loans to Service members

On December 19, 2003, President Bush signed the Servicemembers Civil Relief Act (the “SCRA”) which restates, clarifies, revises and renames the Soldiers’ and Sailors’ Civil Relief Act of 1940. In general, the SCRA temporarily suspends legal proceedings and transactions of individuals entering military service so that they may devote their entire energy to the defense […]

Proposed 401(k) Regulations Include Interesting ESOP Change

On July 17, 2003, the Internal Revenue Service (“IRS”) issued proposed regulations that update and modify the regulations related to 401(k) plans. Hidden in the proposed 401(k) plan regulations is an important change that involves the interaction of employee stock ownership plans (“ESOPs”) and 401(k) plans. The new set of regulations would be effective no […]

Pension Plan Limitations for 2004

The Internal Revenue Service has announced the annual cost-of-living adjustments applicable to dollar limitations for pension plans and other items for Tax Year 2004. The increases that will affect the most plans are the increase in limitations on deferrals and catch-up contributions, and the increase in the maximum compensation limit. EGTRRA Limitation Increases The Economic […]

Recent Court Cases on Cash Balance Plans

Courts have recently decided a number of new cases involving cash balance plans. The issues involved are major, and the decisions, if upheld, could have drastic implications for all cash balance plans. This article analyzes the possible effects of the two most significant cases: Cooper v. The IBM Personal Pension Plan, 2003–2 USTC P 50,596 […]

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