IRS Guidance

The IRS has released a proposed rule intending to clarify the use and timing of the allocation of forfeitures in qualified retirement plans.

The IRS has issued Notice 2023-19, which contains updated guidance on factors used in certain defined benefit (DB) pension plan minimum funding and present value calculations.

The Department of Labor’s (DOL’s) Employee Benefits Security Administration, the IRS, and the Pension Benefit Guaranty Corporation (PBGC) have released a third and final phase that implements a September 2021 regulatory proposal.

The IRS has released final regulations amending rules intended to increase the filing of electronic returns in accordance with the Taxpayer First Act of 2019.

The IRS has released Announcement 2023-6, stating that it expects to issue opinion letters for pre-approved defined benefit plans that were filed with the IRS during the third remedial amendment cycle “on February 28, 2023, or, in some cases, as soon as possible thereafter.”

The IRS has announced the postponement of certain tax-related deadlines for victims of severe storms, flooding and landslides in California. The tax relief postpones various tax filing deadlines that began on December 27, 2022. Affected individuals and households who reside or have a business in Calaveras, Merced, Monterey, Sacramento, San Joaquin, San Luis Obispo, Santa Barbara, and Santa Cruz 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 December 27, 2022, and before May 15, 2023, will have until May 15, 2023, to complete the acts. This includes filing Form 5500 series returns that are required to be filed on or after December 27, 2022, and before May 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 Notice 2023-12, 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 January 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 issued Revenue Procedure (Rev. Proc.) 2023-4, which updates guidance on determination letter submission procedures. Changes from the prior year Rev. Proc. 2022-4 include the following.

• Sections 6, 8, 9, 10, 11, 19, and 20 and Appendix B have been revised to provide the procedures for obtaining a determination letter with respect to a § 403(b) individually designed plan, beginning June 1, 2023. Appendix A adds user fees for these submissions.
• Sections 6.02 and 16 are revised to provide that Form 5307, Application for Determination for Adopters of Modified Nonstandardized Pre-Approved Plans, and Form 5316, Application for Group or Pooled Trust Ruling, may be submitted electronically beginning June 1, 2023, and must be submitted electronically beginning July 1, 2023, including payment of the user fee.
• Sections 3 and 31 and  Appendix A reflect the temporary suspension of the opinion letter program for prototype IRAs (Traditional, Roth and SIMPLE IRAs), SEPs (including salary reduction SEPs (SARSEPs)), and SIMPLE IRA plans.
• Section 02 of this revenue procedure reflects changes to the scope of determination letters.
• Appendix A has been modified to increase certain user fees.

A new Appendix G has been added which provides a checklist for applications for nonbank trustee approval letters.

The IRS has announced the postponement of certain tax-related deadlines for victims of severe winter storms, flooding, and mudslides in California. The tax relief postpones various tax filing deadlines that began on January 8, 2023. Affected individuals and households who reside or have a business in Colusa, El Dorado, Glenn, Humboldt, Los Angeles, Marin, Mariposa, Mendocino, Merced, Monterey, Napa, Orange, Placer, Riverside, Sacramento, San Bernardino, San Diego, San Joaquin, San Luis Obispo, San Mateo, Santa Barbara, Santa Clara, Santa Cruz, Solano, Sonoma, Stanislaus, Sutter, Tehama, Ventura, Yolo, and Yuba 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 January 8, 2023, and before May 15, 2023, will have until May 15, 2023, to complete the acts. This includes filing Form 5500 series returns that are required to be filed on or after January 8, 2023, and before May 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 released a proposed rule titled Use of an Electronic Medium to Make Participant Elections and Spousal Consents. The proposed regulation provides an alternative to in-person witnessing of spousal consents required to be witnessed by a notary public or a plan representative and clarifies that certain special rules for the use of an electronic medium for participant elections also apply to spousal consents.

The regulation is proposed to apply beginning on the date that is six months after publication of the Treasury decision adopting these rules as a final regulation in the Federal Register. However, taxpayers may immediately rely on the proposed rule. This guidance comes as previous temporary relief from the physical presence requirements expires at the end of the year.

Under the proposal, a plan may accept a spousal consent witnessed remotely by a notary public provided that

• The signature of the person signing the spousal consent is witnessed by the notary public using live audio-video technology,
• Requirements related to access, authentication, review and confirmation are met,
• The remote witnessing is consistent with state law requirements that apply to the notary public

The proposed rule also sets forth remote witnessing rules for spousal consents witnessed by a plan representative. A plan may accept spousal consent witnessed remotely by a plan representative, provided that

• The signature of the person signing is witnessed using live audio-video technology
• Requirements related to access, authentication, review and confirmation are met, and
• The remote witnessing satisfies the following five requirements
  • The person signing the spousal consent must present a valid photo ID
  • The live audio-video conference must allow for direct interaction between the person signing and the plan representative
  • The person signing must transmit by electronic means a legible copy of the signed document directly to the plan representative on the same date that the spousal consent is signed
  • The plan representative must acknowledge that the signature has been witnessed and transmit the consent and acknowledgement back to the person signing the consent
  • A recording of the audio-video conference during which the spousal consent was signed remotely must be made and retained by the plan representative

The rule makes several other clarifications — including defining spousal consent and specifying that rules regarding use of an electronic medium for participant elections also applies to spousal consents — and modifies Example 3 in the regulation to demonstrate applicability of requirements with respect to spousal consent.

The proposal is set to be published on December 30, 2022. Comments must be made within 90 days of publication in the Federal Register.