IRS

The IRS has announced the postponement of certain tax-related deadlines for victims of severe winter storm and snowstorm in New York. The tax relief postpones various tax filing deadlines that began on November 18, 2022. Affected individuals and households who reside or have a business in Cattaraugus, Chautauqua, Erie, Genesee, Jefferson, Lewis, Niagara, Oneida, Oswego, St. Lawrence, and Wyoming counties, as well as taxpayers with records located in the covered area that are needed to meet covered deadlines, qualify for relief.

In addition to extending certain tax filing and tax payment deadlines, the relief includes completion of many time-sensitive, tax-related acts described in IRS Revenue Procedure 2018-58 and Treasury Regulation 301.7508A-1(c)(1). Affected taxpayers with a covered deadline on or after November 18, 2022, and before March 15, 2023, will have until March 15, 2023, to complete the acts. This includes filing Form 5500 series returns that are required to be filed on or after November 18, 2022, and before March 15, 2023.

“Affected taxpayer” automatically includes any individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Those who reside or have a business located outside the covered disaster area, but have been affected by the disaster, may contact the IRS to request relief.

Earlier this year (and announced), the IRS issued Notice 2022-27, further extending temporary relief from the physical presence requirements for certain elections that are made by participants and beneficiaries in qualified retirement plans and other tax favored arrangements. This included signatures of those making an election ordinarily needing to be witnessed in the physical presence of a plan representative or notary public, including spousal consent and certain forms of distribution from retirement plans.

Barring further guidance from the IRS in the next few weeks, this relief ends after December 31, 2022. Participant elections, including spousal consents, after this time that are required to be witnessed by a plan representative or a notary public under Treasury Regulation § 1.401(a)-21(d)(6) will no longer be available for relief from these requirements.

The Federal Emergency Management Agency (FEMA) has issued a disaster declaration for severe storms, flooding, landslides, and mudslides in West Virginia, for the periods of July 12, 2022 – July 13, 2022, and August 14, 2022 – August 15, 2022.

Employers with qualified retirement plans may allow participants to take hardship distributions if

• they have incurred expenses and losses because of a FEMA-declared disaster, and
• their principal residence or place of employment at the time of the disaster is located in an area designated by FEMA as eligible for individual disaster assistance.

If the employer permits hardship distributions for expenses and losses related to a federally declared disaster, participants can check fema.gov/locations to determine if they are located in a disaster area designated for individual assistance.

The IRS may also issue relief related to this disaster for certain tax-related deadlines. Additional information can be found at irs.gov/newsroom/tax-relief-in-disaster-situations.

The IRS has issued Notice 2022-60, which contains updated guidance on factors used in certain defined benefit (DB) pension plan minimum funding and present value calculations. Updates include the corporate bond monthly yield curve, the corresponding spot segment rates for November used under Internal Revenue Code Section (IRC Sec.) 417(e)(3), and the 24-month average segment rates under IRC Sec. 430(h)(2). IRC Sec. 417 contains definitions and special rules for minimum survivor annuity requirements in DB plans. IRC Sec. 430 addresses minimum funding standards for single-employer DB plans.

The IRS has announced the postponement of certain tax-related deadlines for victims of severe storm and flooding in Illinois. The tax relief postpones various tax filing deadlines that began on July 25, 2022. Affected individuals and households who reside or have a business in St. Clair County, as well as taxpayers with records located in the covered area that are needed to meet covered deadlines, qualify for relief.

In addition to extending certain tax filing and tax payment deadlines, the relief includes completion of many time-sensitive, tax-related acts described in IRS Revenue Procedure 2018-58 and Treasury Regulation 301.7508A-1(c)(1). Affected taxpayers with a covered deadline on or after July 25, 2022, and before February 15, 2023, will have until February 15, 2023, to complete the acts. This includes filing Form 5500 series returns that are required to be filed on or after July 25, 2022, and before February 15, 2023.

“Affected taxpayer” automatically includes any individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Those who reside or have a business located outside the covered disaster area, but have been affected by the disaster, may contact the IRS to request relief.

The IRS has issued Revenue Ruling 2022-22, which contains the applicable federal rates (AFR) for December 2022. These rates are used for such purposes as calculating distributions from retirement savings arrangements that meet the requirements for substantially equal periodic payments (a 10 percent early distribution penalty tax exception), also referred to as "72(t) payments."

The IRS has issued Notice 2022-59, providing the adjusted applicable dollar amount to be multiplied by the average number of covered lives for purposes of calculating the fee imposed by Internal Revenue Code Sections 4375 and 4376, for health insurance policy years and plan years that end on or after October 1, 2022, and before October 1, 2023.
 
The Affordable Care Act imposes a fee on issuers of specified health insurance policies and plan sponsors of applicable self-insured health plans, to help fund the Patient-Centered Outcomes Research Institute (PCORI). This fee, also known as the PCORI fee, is calculated using the average number of lives covered under the policy or plan and the applicable dollar amount for that policy year or plan year. Notice 2022-04 provided that the adjusted applicable dollar amount for policy years and plan years that ended on or after October 1, 2021, and before October 1, 2022, is $2.79. Notice 2022-59 provides that the adjusted applicable dollar amount for policy years and plan years that end on or after October 1, 2022, and before October 1, 2023, is $3.00.
 
The PCORI fee is filed using Form 720. Although Form 720 is a quarterly return, PCORI Form 720 is filed annually only, by July 31. Plan sponsors should apply the applicable PCORI fees and file Form 720 corresponding to policy or plan years ending from January 1, 2022, to December 31, 2022, by July 31, 2023.

The White House announced President Joe Biden’s intent to nominate Danny Werfel as the next Commissioner of the Internal Revenue Service (IRS). The Commissioner is appointed by the President, by and with the advice and consent of the Senate, for a five-year term. If confirmed by the Senate, Mr. Werfel will replace Commissioner Charles Rettig, whose term expires November 12, 2022.

The IRS has issued Revenue Procedure 2022-40, which permits the submission of determination letter applications for 403(b) individually designed plans. Beginning June 1, 2023, plan sponsors that maintain 403(b) individually designed plans can submit a determination letter application for an initial plan determination, for a determination upon plan termination, for certain merged plans, or for other circumstances that will be announced later in the Internal Revenue Bulletin.

The date on which an application may be submitted for an initial plan determination is staggered over three dates (June 1, 2023, June 1, 2024, and June 1, 2025), depending on the last digit of the plan sponsor’s employer identification number.

Under the revised rules, the IRS generally will consider the qualification requirements and the 403(b) requirements that are in effect, or that have been included, on a required amendments list, on or before the last day of the second calendar year preceding the year in which the determination letter application is submitted. Additionally, a prior letter issued to a pre-approved plan adopter is not treated as an initial plan determination. For example, a determination letter issued to an adopter of a pre-approved retirement plan as a result of filing Form 5307, Application for Determination for Adopters of Modified Volume Submitter Plans, is no longer considered in determining whether a plan sponsor is eligible to submit that plan for a determination letter for an initial plan determination on Form 5300, Application for Determination for Employee Benefit Plan.

The IRS indicates that it will release additional procedural requirements and forms updates in the near future.

The IRS has issued its 2022-2023 Priority Guidance Plan, in which it describes guidance projects in the current fiscal year. Many items in the plan have appeared in prior years’ Priority Guidance Plans. A number of the guidance items deal with retirement savings arrangements, including the following, which have been included in previous plans.

• Regulations and guidance relating to the 10 percent early distribution tax
• Comprehensive IRA regulations
• Final regulations on the application of the normal retirement age regulations under Internal Revenue Code Section (IRC Sec.) 401(a) for governmental plans
• Regulations and guidance updating electronic delivery rules for providing applicable notices and making participant elections
• Final regulations regarding RMD requirements under the SECURE Act (proposed regulations were published in February 2022)
• Regulations relating to SECURE Act modifications to certain rules governing 401(k) plans
• Guidance on student loan payments and their interplay with qualified retirement plans and 403(b) plans
• Guidance on closed defined benefit plans and related matters
• Regulations on the exception to the unified plan rule for IRC Sec. 413(e) multiple employer plans (proposed regulations were issued in July 2019)
• Regulations on the definition of "governmental plan"
• Final regulations updating minimum-present-value requirements for defined benefit pension plans (proposed regulations were issued in November 2016)
• Regulations on mortality tables to determine present value for single-employer defined benefit pension plans
• Final regulations for withholding on distributions when payments are made to a non-U.S. address (proposed regulations were issued in May 2019)
• Regulations relating to the IRC Sec. 6057 reporting requirements (proposed regulations were issued in June 2012)
• Guidance updating electronic filing requirements for employee plans to reflect changes made by the Taxpayer First Act

 Two new noteworthy items include

• Regulations relating to the timing of the use or allocation of forfeitures in qualified retirement plans
• Regulations on the definition of church plan under IRC Sec. 414(e)