2011 Year-End Compliance Information

Transcription

1 2011 Year-End Compliance Information Compliance testing and reporting are annual requirements that are part of the ongoing qualified tax status of a retirement plan. American United Life Insurance Company (AUL) contacts you each year to collect detailed plan and participant information in order to assist with the completion of these requirements. We have highlighted some key topics for your reference and also included a chronological listing of important dates to help you maintain your plan s compliance with Internal Revenue Service (IRS) and Department of Labor (DOL) regulations and deadlines. For more information, visit the Year End Services Center on the eretirement Plan Sponsor website at Distributing annual notices If your plan design requires an annual notice to participants, notices must be distributed at least 30 days prior to the beginning of the next plan year. Therefore, December 1, 2011, is the deadline for calendar year plans. Examples of plan design features that require an annual notice include: Safe Harbor 401(k) Plans Savings Incentive Match Plan for Employees (SIMPLE) Automatic Contribution Arrangement (ACA) Qualified Automatic Contribution Arrangements (QACAs) Eligible Automatic Contribution Arrangements (EACAs) Qualified Default Investment Alternative (QDIA) Your plan may contain more than one of the features indicated above and may require multiple notices. It is important to note that the safe harbor notice language may not be combined with any other notice, but can be distributed to your participants at the same time you distribute any other notice. Following your plan s contribution formula Your adoption agreement or plan document describes the contribution formulas that are used to calculate employer matching and non-elective contributes. If you are not following the formula selected in your document, you have an operational failure and you may need to enter a formal correction program to remedy the failure. The contribution formula in your document may be expressly stated as a fixed formula, which must be funded and can only be changed via a plan amendment, or it may be written as a discretionary formula which allows for some funding flexibility from year to year. However, discretionary does not mean anything you want to give. The discretionary formula in your document may still contain limitations that must be followed when calculating the contribution. Employer matching contributions may be: Limited to one uniform percentage of elective deferrals (e.g., 50 percent of the first 6 percent of compensation deferred) Capped at a percentage of compensation (e.g., 25 percent up to 5 percent of compensation) or a maximum dollar amount (e.g., 50 percent of deferrals up to a maximum of $5,000) Tiered based on the percentage of elective deferrals or years of service (e.g., 100 percent of the first 2 percent of compensation deferred and 50 percent of the next 2 percent of compensation deferred) Employer non-elective contributions may be: Allocated based on the ratio each participant s compensation bears to the total compensation to all participants Allocated as a uniform dollar amount to all participants Allocated based on classification groups Integrated with the Social Security taxable wage base 1 of 6

2 In addition, for any type of employer contribution, the computation period (i.e., the period that is used to calculate the amount of the contribution) in the document must be followed. An annual computation period requires the contribution to be calculated based on the participant s year-end compensation and deferral percentage totals. If your matching contribution computation period is annual and you submit matching contributions more frequently than once per year, you may need to make a year-end true-up contribution to some participants. Similarly, since the computation period for nonelective contributions is usually annual, if you submit nonelective contributions throughout the plan year, you may need to make a true-up contribution. Finally, your plan document may include allocation requirements a participant must satisfy in order to receive an employer contribution. Some examples of allocation requirements are employment on the last day of the plan year and completion of 1,000 hours of service during the plan year. A participant should not receive an allocation of employer contributions until the requirements have been satisfied. Please review your plan to ensure that you are following the terms of your document and contact your plan services consultant if you need assistance. Compliance Testing AUL performs these required compliance tests for its full service customers upon receipt of census data: Deferral limit testing Coverage testing ADP testing ACP testing Annual Additions Limit testing Specialized testing services (if required) 457(b) limitation testing Top heavy determination We also assist our limited service clients with ADP and ACP testing if selected in the ASA. For important testing deadlines, please see the timeline at the end of this publication. Census Data If your ASA specifies, the information provided on your census, certification page and Qualified Plan Information Report (QPIR) will be used in the preparation of many services, including: Calculating vesting Completing forfeiture reallocation (if applicable) Updating employee status Preparing annual report Performing compliance testing Preparing Form 5500 Frequently used Internal Revenue Code section references, acronyms and abbreviations Internal Revenue Code section reference Refers to Description used in this material 401(k) Actual Deferral Percentage test ADP test 401(m) Actual Contribution Percentage test ACP test 415 Annual Additions Limit test or 415 test Annual additions limit test 401(b) Minimum Coverage test Coverage test 416 Top heavy determination Top heavy determination 402(g) 401(k) and 403(b) Deferral limit Deferral limit or 402(g) deferral limit 2 of 6

3 2012 Dollar limits Code 415(c)(1)(A) dollar limitation for defined contribution plans $50,000 If your plan has an anniversary date beginning other than January 1, the Code 415(c)(1)(A) dollar limit will be the limit in effect for the calendar year in which the limitation year ends. Code 402(g)(1) limitation for 401(k) and 403(b) elective deferrals $17,000 Code 401(k)(11)(B)(i)(I) SIMPLE 401(k) retirement account elective deferral limit $11,500 Code 401(a)(17) annual compensation limit $250,000 Your plan s compensation limit may be a lesser amount. Please review your plan document and amendments. Social Security Taxable Wage Base $110,100 Summary Annual Report and Form 5500 Utilizing information from the adoption agreement/ plan document, contract, census and annual report, AUL provides its full service customers with a Summary Annual Report (SAR) and Form 5500(including related schedules) or Form 5500-SF. The DOL requires that each participant in a retirement plan receive an SAR. The SAR provides a financial summary and overview of the plan s activity for the year. It also notes minimum funding standards for money purchase plans, details the participant s right to additional information and gives directions regarding how to obtain that information. In addition, plan sponsors are required to file an annual tax return for each qualified plan they maintain. The DOL Form 5500 (including related schedules) is a summary of the following: Plan s financial activity Participant status data Plan features Funding information Insurance carrier information Fees The DOL utilizes EFAST2 which requires mandatory internet-based electronic filing of Form 5500s and related schedules or Form 5500-SF. As a plan sponsor, you will be required to obtain signer credentials by visiting the DOL website and completing an internet registration. After completing the registration, you will receive a unique User ID, PIN and password that will allow you to sign and transmit a completed Form If you have already registered and obtained credentials, you are not required to register again. As a reminder, Form 8955-SSA (formerly Schedule SSA) will not be filed with the DOL. This form is filed directly with the IRS. Forms 1099-R and 945 IRS Form 1099-R is sent to each participant who has received a distribution during the 2011 calendar year. By January 31, AUL provides 1099-R forms for distributions if this is part of your Administrative Services Agreement (ASA). We will attempt to identify and update incorrect participant addresses if a 1099-R is returned to us as undeliverable. IRS Form 945 reports the federal tax withheld from qualified retirement plan distributions. Taxes withheld from plan distributions paid by AUL are reported to the IRS via the AUL corporate Form 945. Therefore, plan sponsors should report only distributions that are not paid by AUL (tax withholding) on their corporate Form of 6

4 AUL activity schedule Assumes calendar plan year and fiscal year unless noted. December 1, 2011 Any plan year - Deadline for submission of distribution forms for 1st year age 70 ½ Required Minimum Distributions (RMDs) that are due April 1, December 1, 2011 Month prior to beginning of next plan year - Deadline for distributing the following annual notices to participants: Safe harbor notices ACA notices QDIA notices SIMPLE notices December 5, 2011 Prior to plan year end - AUL will send annual census notifications to plan administrators. December 30, 2011 Plan year end - Deadline for processing corrective distributions or for making a qualified non-elective contribution (QNEC) for 2010 nondiscrimination (i.e., ADP and/or ACP) test failures. December 30, 2011 Plan year end - Deadline to sign amendments that must be in place before the beginning of the 2012 plan year. December 30, 2011 Plan year end - Deadline for making annual RMDs that are not 1st year distributions. January 17, weeks after end of the plan year Deadline to remit employee deferrals to ensure included for monitoring of 402(g) deferral limit. Last week of January, 2012 Please see date indicated in your census notification - Deadline for submission of census data to ensure completion of all applicable testing by March 15, March 1, 2012 Any plan year - Deadline for participants who deferred into another employer s plan to notify the plan administrator of any excess deferrals (deferrals over the calendar year deferral limit) that they want distributed from the plan. March 15, ½ months after plan year end - Deadline for completion of required ADP/ACP plan testing for plans without an EACA to avoid IRS 10% excise tax paid by employer for failed tests. March 15, ½ months after fiscal year end - Deadline for filing corporate tax return or filing for an extension and contribution deadline for deductibility purposes for corporations if no filing extension is requested. March 30, 2012 Any plan year - Deadline to notify AUL of excess deferrals from calendar deferral limit. Processing of corrections must be completed by April 15, April 1, 2012 Any plan year - Deadline for processing 1st year RMD s for individuals who turned 70 ½ during 2011 and require an RMD. April 2, months after plan year end - Deadline for filing Form 5330 Return of Excise Taxes Related to Employee Benefit Plans. Form 5330 is used to report and pay excise taxes on excess contributions that occurred in the prior plan year (i.e., 10% excise tax on failed ADP/ACP tests). April 2, months after plan year end - AUL will proceed with producing the annual report if a census is not received. Should you submit a census after the annual report has been processed, the report will automatically be reprocessed and a $300 rework fee will be billed. April 13, 2012 Any plan year - Deadline for processing of corrective distributions for deferral limit failures. 4 of 6

5 April 16, ½ months after plan year end - Approximate date we will prepare Form 5558 Application for Extension of Time To File Certain Employee Plan Returns to the IRS for all plans and contracts that have not been terminated. April 16, ½ months after fiscal year end - Deadline for filing individual and/or partnership tax returns or filing for an extension and contribution deadline for deductibility purposes for unincorporated entities if no filing extension is requested. June 29, months after plan year end - Deadline for completion of required ADP/ACP plan testing for plans with an EACA to avoid IRS 10 percent excise tax paid by employer for failed tests. In order for a plan with an EACA to take advantage of the ability to delay refunds processing until 6 months after the plan year, the EACA provisions must apply to all employees; not just new employees. July 27, days after plan year end - Deadline for distributing Summary of Material Modification (SMM) if the plan was amended in July 31, months after plan year end - Deadline for employer to file the Form 5500 with the DOL. You can take advantage of the extended Form 5500 filing deadline of October 15, 2012, that we requested for your plan by completing Box D on the Form September 17, ½ months after plan year end - For employers who filed corporate income tax extensions, the corporate tax filing due date and deadline for making deductible contributions. September 28, months after plan year end - Deadline to distribute the Summary Annual Report (SAR) unless the Form 5500 was extended. October 15, ½ months after plan year end - Deadline to correct coverage test failure. October 15, ½ months after plan year end - Form 5500 filing deadline for plans extended by Form November 15, days prior to 12 month deadline to complete testing - Final deadline for employer to submit census data to ensure completion of ADP/ACP testing before year end. December 14, ½ months after plan year end - Deadline to distribute the SAR to participants if the Form 5500 filing deadline was extended. December 31, 2012 Last day of plan year following plan year end - Deadline for processing corrective distributions or for making a QNEC for 2011 nondiscrimination test (i.e., ADP/ACP) failures. December 31, 2012 Last day of plan year following plan year end - Deadline to sign amendments that must be in place before the beginning of the 2013 plan year. December 31, 2012 Last day of plan year following plan year end - Deadline for making annual RMDs that are not 1st year distributions. Unless otherwise noted, the dates reflected in the above plan activity schedule apply to plan years and employer fiscal years beginning January 1. If your plan has an anniversary date other than January 1, please make adjustments to the dates to coincide with your plan year. 5 of 6

6 We are here to assist you with plan design changes and annual compliance requirements. We encourage you to utilize the materials available on the Year End Services Center such as: 2011 Census Instructions Frequently Asked Questions Highly Compensated Employee (HCE) Help Guide How We Will Use Your Census Information Key Employee Help Guide How to Understand Your Compliance Testing Results Summary 5500 Overview EFAST2 Registration Guide Timing of contributions and Department of Labor rules Elective deferrals The DOL regulations regarding the timing of depositing employee contributions (including deferrals) and payroll-deducted loan repayments into a qualified retirement plan trust are to ensure that the funds are being invested in the plans rather than remaining in the employer s general corporate funds. The DOL regulations contain a safe harbor period for remitting employee contributions and loan repayments to small retirement plans (plans with fewer than 100 participants at the beginning of the plan year). Under this safe harbor period, employee contributions and loan repayments to a small plan will be deemed to have been timely remitted if those amounts are deposited to the plan within seven business days after they were received or withheld by the employer. Of course, sponsors of small retirement plans may make deposits before the end of the seven day period. has determined that in some instances, employee contributions including deferrals and loan repayments can reasonably be segregated within two business days of receipt or withholding by employers. This is the timeframe that we suggest. The DOL has requested information and data on the current contribution practices of large plans to aid in formulating a possible safe harbor for those plans. Until those rules are finalized, we recommend that large plans remit contributions within two business days of receipt or withholding. Remit Small plan (fewer than 100 participants) Within seven business days after receipt or withholding Large plan (100 or more participants) Within two business days of receipt or withholding Participants include individuals eligible for the plan, not just those actively contributing. Employer contributions You may remit your employer contribution whenever you determine. However, if your plan makes a safe harbor matching contribution with a match computation period shorter than the plan year, the IRS safe harbor regulations require that the contribution be made by the end of the quarter following the quarter for which the match is being made. In addition, if you make an employer contribution after the close of the plan year, remember to designate the plan year for which the contribution is being made. Group variable annuity contracts are issued by AUL and registered group variable annuity contracts are distributed by OneAmerica Securities, Inc., Member FINRA, SIPC, a Registered Investment Advisor, 433 N. Capitol Ave., Indianapolis, IN 46204, , which is a wholly owned subsidiary of AUL. The current deposit rules for large retirement plans (plans with 100 or more participants at the beginning of the plan year) state that you must transmit employee contributions and loan repayments to retirement plans as soon as they can reasonably be segregated from the general assets of the employer. The DOL 6 of 6