IRS Guidance

Industry & Regulatory News
IRS Updates Letter Ruling Procedures for DB Plan Spin-Offs and Terminations

The IRS has issued Revenue Procedure (Rev. Proc.) 2022-28, which updates Rev. Proc. 2022-3, on whether the IRS will issue letter rulings or determination letters. The IRS will no longer issue letter rulings on whether an employer reversion of cash and the fair market value of other property received from a qualified plan occurs in connection with a spin-off/termination transaction that involved excess assets. For this Revenue Procedure, a “spin-off/termination transaction that involves excess assets” is defined as a transaction in which:

June 21 2022
Industry & Regulatory News
IRS Issues Yield Curves and Segment Rates for DB Plan Calculations

The IRS has issued Notice 2022-25, 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 May used under Internal Revenue Code Section (IRC Sec.) 417(e)(3), and the 24-month average segment rates under IRC Sec. 

May 20 2022
Industry & Regulatory News
Washington Pulse: IRS Issues Proposed MEP Rule

Employers of all types have expressed interest in learning more about multiple employer plans (MEPs). But the unified plan rule, sometimes known as the “one bad apple rule,” has discouraged some employers from pursuing MEP participation.

May 02 2022
Industry & Regulatory News
IRS Issues Yield Curves and Segment Rates for DB Plan Calculations

The IRS has issued Notice 2022-16, 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 April 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.

April 19 2022
Industry & Regulatory News
IRS Announces Applicable Federal Rates for May 2022

The IRS has issued Revenue Ruling 2022-9, which contains the applicable federal rates (AFR) for May 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.”

April 19 2022
Industry & Regulatory News
Additional 403(b) Plan Document Guidance Released

The IRS has released a revised Section 403(b) Pre-Approved Plans Listing of Required Modifications and Information Package (April 2022), which includes sample plan provisions to assist drafters of 403(b) pre-approved plan documents in satisfying the requirements of Internal Revenue Code Section 403(b) and associated regulations. This revised information package consists of five sections with sample provisions related to 1) all 403(b) plans and elective deferral only arrangements, 2) contributions other than elective deferrals, 3) standardized plan provisions, 4) nonstandardized plan provisions, and 5) retirement income accounts. This guidance has been updated to accommodate the 2022 Cumulative List of Changes in Section 403(b) Requirements for Section 403(b) Pre-approved Plans in Notice 2022-8, which was previously announced.

April 19 2022
Industry & Regulatory News
IRS Issues Deadline Relief for Puerto Rico for Severe Storms

The IRS has issued a news release announcing the postponement of certain tax-related deadlines for victims of severe storms, flooding, and landslides in Puerto Rico. The tax relief postpones various tax filing deadlines that began February 4, 2022. Affected individuals and households who reside or have a business in municipalities of Cataño, Dorado, Toa Baja, Vega Alta, and Vega Baja 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 February 4, 2022, and before June 15, 2022, will have until June 15, 2022, to complete the acts. This includes filing Form 5500 series returns that are required to be filed on or after February 4, 2022, and before June 15, 2022.

"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.

April 05 2022
Industry & Regulatory News
IRS Updates Yield Curves and Segment Rates for DB Plan Calculations

The IRS has issued Notice 2022-14, 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 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.

March 21 2022
Industry & Regulatory News
IRS Issues Proposed MEP Rule

The IRS has released a new proposed rule providing for an exception, if certain requirements are met, to the application of the “unified plan rule” for multiple employer plans (MEPs) when there is a failure by one or more participating employers to take actions necessary to satisfy requirements of the Internal Revenue Code. The unified plan rule (also referred to as “one bad apple rule”) specifies that the failure by one participating employer to satisfy an applicable qualification requirement would result in the disqualification of the MEP for all employers maintaining the plan. The release also withdraws prior proposed regulations that were published in the Federal Register on July 3, 2019.

The Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act) created a statutory exception to the unified plan rule for certain types of MEPs and directed the Secretary to issue guidance to carry out that provision. The exception applies to defined contribution plans maintained by employers that have a “common interest” or have a “pooled plan provider” and failed to take action required to meet qualification requirements, subject to the following conditions.

  • The plan assets attributable to employees of the employer that failed to take action will be transferred to a plan maintained only by that employer
  • The employer (and not the plan or any other employer in the plan) will generally be responsible for liabilities with respect to the plan attributable to employees of that employer
  • The pooled plan provider performs substantially all of the administrative duties for which it is responsible for any plan year

The proposed regulations provide that the terms of the MEP document must include language describing the procedures that will be followed to address a participating employer failure, including a description of the notices that the plan administrator will send and when such notices will be sent. The plan terms must also describe the actions that the plan administrator will take if by the end of the 60-day period following the date the final notice is provided, the unresponsive participating employer does not take appropriate action with respect to the failure or initiate a spinoff to a separate plan maintained by the employer. The IRS intends to publish model language for this purpose in connection with a final rule.

Under the proposal, a MEP plan administrator may be required to provide up to three notices to an unresponsive participating employer regarding a failure—with the final notice also being provided to affected participants and the Department of Labor. The unresponsive participating employer can either take appropriate remedial action or initiate a spinoff. The proposal delineates notice requirements for both “a failure to provide information” and a “failure to take action”, and in situations where a failure by a participating employer is initially a failure to provide information, but becomes a failure to take action, more than three notices may be necessary.

If an unresponsive participating employer neither takes appropriate action or initiates a spinoff within 60 days after the final notice is provided, the MEP plan administrator must 1) stop accepting contributions from the unresponsive participating employer and participants, 2) provide notice to affected participants of the unresponsive participating employer, and 3) provide participants with an election regarding treatment of their accounts.

Comments may be submitted within 60 days of publication in the Federal Register. A public hearing on the proposed rule has been scheduled for Wednesday, June 22.

March 25 2022
Industry & Regulatory News
Washington Pulse: IRS Releases Proposed Required Minimum Distribution Regulations

After a two year wait, we have guidance regarding certain changes brought about by the SECURE Act. On February 23, 2022, the IRS released proposed regulations that revise the existing required minimum distribution (RMD) regulations and other related regulations.

March 09 2022