PFC-1: Plan Financial Consulting Syllabus

Transcription

1 Course PFC-1: Plan Financial Consulting Syllabus The QPFC curriculum has been specifically developed for plan professionals who want to specialize as financial consultants. To earn the credential, the candidate must successfully complete the PFC-1 and PFC-2 examinations. The PFC-1 examination provides the framework for a candidate to achieve core competency on the administrative and consulting issues commonly encountered by financial consultants who service the retirement plans market. PFC-1 focuses on the administrative and consulting issues commonly encountered by financial consultants who service the retirement plans market. All types of defined contribution and defined benefit plans are covered including nonqualified supplemental executive retirement plans (SERPs), cash balance plans, employee stock ownership plans (ESOPs) and the Roth 401(k). Additionally, plan design issues such as eligibility, vesting, nondiscrimination testing, plan documents, top-heavy and deductibility of contributions are discussed. This course also examines the role played by the type of business sponsoring the plan, controlled group issues and the impact that leased employees, independent contractors and Professional Employer Organizations (PEOs) have on qualified plans. Finally, the course addresses the ethical responsibilities of the financial consultant. The candidate will be awarded the Plan Financial Consulting Certificate upon successful completion of this open book exam. The exam is provided exclusively through on-line resources. Simoneaux, Sarah. Retirement Plan Consulting for Financial Professionals, 4 th Edition. Arlington, VA: ASPPA, The Retirement Plan Consulting for Financial Professionals, 4 th Edition is available in print format. A distributable PDF of the publication is also available for purchase (see Multi-User Distributable Educational Materials section below for additional information). Additional (provided at the end of the syllabus): Page 1

2 IRS Updates Plan Correction Procedures. ASPPA ASAP No ASPPA Code of Professional Conduct Recommended Reading Bloom, Lauren. Elegant Ethical Solutions. Elegant Solutions Consulting: Goodlettsville, TN. Time Period Covered by This Material For the 2014 program year, this course and corresponding examination will cover legislative and regulatory changes as amended through August 1, Supplementary Study Materials PFC-1 Webcast Series The webcast series can be utilized for training purposes and to assist candidates preparing for the PFC-1 examination. It is expected that webcast registrants preparing for an examination will thoroughly study the topics covered in this syllabus and the required reading for the corresponding examination. The webcast series should not be used as a substitute for these materials, and candidates should be aware that some currently available webcasts may have been produced in prior program years. While these webcasts are still relevant, candidates should use them as a supplementary exam preparation tool. Visit for more information. Practice Examinations Practice examinations are available for purchase at Educational Material Copyright It is important to note that all ASPPA and NAPA examination and educational materials are copyrighted. No examination or educational materials can be copied, reproduced or shared in any form by any means without written permission from ASPPA. In an effort to provide educational opportunities, ASPPA does offer specific distributable products (see details under Multi-User Distributable Educational Materials). Multi-User Distributable Educational Materials Please note that only products noted as distributable can be distributed. Purchasers of these products are allowed to distribute to direct employees of their Company. In addition, authorized Universities offering ASPPA education are eligible to distribute the purchased materials to their students. Purchasers of this product are prohibited from distribution of these materials to any other parties unless agreed upon by ASPPA in writing. Materials may be ed directly to the above-mentioned parties or published on a non-public portion of the Purchaser s website for access/distribution. Materials may not be placed on a site that has general public access. All other use or distribution of these materials is explicitly prohibited unless otherwise approved in writing by ASPPA. Page 2

3 Exam The corresponding online open-book exam will include 85 multiple choice questions. Upon completion of the PFC-1 exam, a candidate will receive an immediate score and feedback report. A score of 73 or more out of 85 is a passing score. There are two versions of the examination. If a candidate fails one version of the PFC-1 exam, he/she may register, pay and take the second version within the same year. The deadline to submit the 2014 PFC-1 examination is midnight, Eastern Time on December 15, 2014 (11pm Central, 10pm Mountain, 9pm Pacific). There will no exceptions. The PFC- 1 examination cannot be postponed. Upon successful completion of the PFC-1 examination, the Plan Financial Consulting Certificate will be immediately issued online to the candidate. Additional Information All candidates are encouraged to visit Candidate Corner ( for additional information regarding this exam. It is the candidate s responsibility to check the website to obtain current information on examinations and publications. The Candidate Corner includes instructions for locating Prometric test centers to schedule examinations, exam windows and dates, study tips, current information on regulatory limits and other helpful information. You may also contact ASPPA with questions at education@asppa.org. Exam & Publication Errata and References As needed, errata to required reading material and/or practice examinations will be posted on the ASPPA website at It is the candidate s responsibility to check this page regularly for any updates prior to taking an examination. Topic 1: of Retirement Plans Generally, retirement plans are divided into two major groups: qualified and nonqualified plans. Within the qualified category there are welfare benefit and pension benefit plans. This topic discusses the different plan types available and the differences between qualified and nonqualified plans. Financial consultants should gain an understanding of nonqualified plans, as often there is a need to provide additional benefits to a select group of employees beyond what may be provided in a qualified plan. Page 3

4 1.01 Describe what qualified and nonqualified plans are and the reasons a company would want to adopt them Describe the concept of employee benefit plans and identify the primary differences between a welfare benefit plan and a pension benefit plan Identify the different types of nonqualified plans, including who they benefit, and how they are taxed Describe the different funding vehicles that can be used for nonqualified plans and their specific tax implications. This topic will comprise approximately 1 to 5 percent of the exam questions. Chapter 1: Simoneaux, Sarah. Retirement Plan Consulting for Financial Professionals, Topic 2: Understanding the Employer: Types of Entities, Employees and Plans A consultant must understand a client s business structure before recommending a plan to the client. This information will help the consultant determine which plans are available to the employer, and more specifically, which plans will best satisfy the client s goals. Additionally, consultants should be aware of the tax-favored plans that may be sponsored by tax-exempt and governmental entities, as these plans contain rules that are unique to these entities. This topic will also cover the various types of individuals that the employer may employ including independent contractors, common law employees and leased employees. It is important to understand the differences among them as they each have specific rules that must be followed Identify compensation used by each entity type for qualified plan purposes Explain the differences between an independent contractor, a common law employee and a leased employee and describe their impact on qualified plans. Page 4

5 2.03 Explain when to use defined benefit or defined contribution plans relative to the employer's demographics, objectives and competitive concerns Determine the types of qualified plans available to specific employers (e.g., for profit, government and tax-exempt) Explain the differences between and identify the distinguishing characteristics of 403(b) and 457 plans. This topic will comprise approximately 4 to 8 percent of the exam questions. Chapter 2: Simoneaux, Sarah. Retirement Plan Consulting for Financial Professionals, Topic 3: Understanding the Employer: Complex Employer Structures A primary consideration in helping clients establish and maintain their retirement plans is for the consultant to have a clear understanding of who is considered the employer for qualified plan purposes. This is critical in determining which employees must be covered by the plan, as well as what compensation and contribution amounts must be taken into account when determining qualified plan limits. This topic covers how to identify when companies or individual owners have a controlling interest in one or more employers, and when that results in action that all employees must be considered for qualified plan limits, coverage and nondiscrimination testing Identify the potential affect on qualified plans maintained by a member of a controlled group or an affiliated service group (ASG) Identify and distinguish between the different types of controlled groups and ASGs Identify the potential impact of the attribution rules under IRC 1563 and Identify the differences between multiemployer and multiple employer plans Explain a professional employer organization (PEO) and the impact it has on qualified plans. Page 5

6 This topic will comprise approximately 4 to 8 percent of the exam questions. Chapter 3: Simoneaux, Sarah. Retirement Plan Consulting for Financial Professionals, Topic 4: Defined Contribution Plans This topic covers the different types and characteristics of defined contribution plans including ESOPs. Consultants should have an understanding of all available plan types to ensure that their clients are maintaining plans that have been designed to meet their specific needs and the needs of their employees Differentiate between and identify the distinguishing characteristics of different types of defined contribution plans List the reasons an employer might want or not want to establish an ESOP or a leveraged ESOP Explain the diversification rules that pertain to ESOPs Differentiate between and identify the distinguishing characteristics of SIMPLE IRAs and SEP-IRAs List the contribution limits of SIMPLE IRAs, SEP-IRAs and qualified plans Determine when a safe harbor 401(k), SIMPLE IRA or traditional 401(k) is an appropriate plan choice for an employer. This topic will comprise approximately 4 to 8 percent of the exam questions. Chapter 4: Simoneaux, Sarah. Retirement Plan Consulting for Financial Professionals, Page 6

7 Topic 5: Defined Benefit Plans This topic covers basic defined benefit concepts including maximum benefit limitations, concept of accrued benefit, a discussion of the various benefit formulas and forms of payment. Also discussed are the different types of defined benefit plans and the characteristics of each. Additionally, funding requirements and the timing of depositing the contributions will be covered along with the rules regarding obtaining a funding waiver Describe the various types of benefit formulas used in defined benefit plans Describe the maximum benefit limitations under IRC 415 and recognize when adjustments are needed for distributions Define the term accrued benefit, present value of accrued benefits and projected benefits Describe the minimum funding timing requirements Describe the services performed by an actuary in the design and administration of a defined benefit plan Identify the forms of benefit payment in a defined benefit plan. This topic will comprise approximately 4 to 8 percent of the exam questions. Chapter 5: Simoneaux, Sarah. Retirement Plan Consulting for Financial Professionals, Topic 6: 401(k) Plan Design The 401(k) plan continues to be a popular choice among employers. It is important to recognize the options available to employers and the applicable regulations. This topic describes the characteristics of the various types of 401(k) plans, including the Roth 401(k) plan. The special testing rules applicable to 401(k) plans lead into a discussion of how implementing a safe harbor 401(k) plan may avoid these tests. Page 7

8 6.01 Identify characteristics of 401(k) plans (traditional 401(k), Roth 401(k) and safe harbor 401(k)) Identify the contribution and vesting requirements of a safe harbor 401(k) plan List the advantages and disadvantages of a safe harbor match vs. a safe harbor nonelective contribution State the timing requirements of a safe harbor notice Describe the rules for converting a traditional 401(k) plan to or from a safe harbor 401(k) plan Identify the requirements and advantages of using automatic enrollment including eligible automatic contribution arrangements (EACAs) and qualified automatic contribution arrangements (QACAs), in a 401(k) plan. This topic will comprise approximately 4 to 8 percent of the exam questions. Chapter 6: Simoneaux, Sarah. Retirement Plan Consulting for Financial Professionals, Topic 7: Hybrid Plan Designs Hybrid plan designs are garnering a lot of attention from both employers and plan professionals. This topic will cover the characteristics of these plan types and when an employer may be a good fit to utilize a hybrid plan design. Also, the employer deduction limits will be explained for an employer who sponsors both defined benefit and defined contribution plans List the advantages and disadvantages of a cash balance plan Identify the benefits of defined benefit/defined contribution combo plans Define the deduction limits when an employer sponsors both a defined benefit and a defined contribution plan. This topic will comprise approximately 2 to 6 percent of the exam questions. Page 8

9 Chapter 7: Simoneaux, Sarah. Retirement Plan Consulting for Financial Professionals, Topic 8: Eligibility and Vesting Qualified plans must satisfy the eligibility, participation and vesting regulations of ERISA and the IRC. There are certain communications provided to employees, depending on the type of plan and the plan provisions. This topic discusses the various types of provisions allowed and how they impact the administration of the plan Identify the statutory eligibility requirements for qualified plans Differentiate between an eligibility date and plan entry date Define a year of service for eligibility and vesting purposes List types of communication provided to employees upon eligibility, including those automatically enrolled Define how vesting is calculated and determine the vesting schedules that apply to different contribution sources Explain the circumstances under which a participant would become 100% vested. This topic will comprise approximately 4 to 8 percent of the exam questions. Chapter 8: Simoneaux, Sarah. Retirement Plan Consulting for Financial Professionals, Topic 9: Asset and Benefit Rules This topic outlines additional benefits that may be offered in a qualified plan, the restrictions on cutting back those benefits, and some general concepts of asset management in self-directed plans. It is important for a plan professional to help the employer understand the anti-cutback rules and identify protected versus ancillary benefits. Page 9

10 9.01 Describe the implications for including or excluding participant directed investments, loans and/or hardship withdrawals in a plan Explain the written program and enforceable agreement requirements of a participant loan program Explain the loan limits, repayment requirements and refinancing issues of participant loans Explain the consequences of failing to repay a loan on schedule and permissible suspensions of loan repayments Explain the rules and circumstances under which a participant may be granted a safe harbor hardship withdrawal Identify benefits that are protected by the anti-cutback rules. This topic will comprise approximately 4 to 8 percent of the exam questions. Chapter 9: Simoneaux, Sarah. Retirement Plan Consulting for Financial Professionals, Topic 10: Defined Contribution Plans: Contribution Allocations and Deductions This topic will cover defined contribution plans and more specifically the various methods that an employer may use to allocate contributions to participants. It is a common thread throughout qualified plans rules, that contribution allocations must be nondiscriminatory. However, a plan sponsor has a wide range of options for allocation formulas that may be considered nondiscriminatory, especially if the sponsor is willing to perform certain demographic tests on the plan allocations to achieve favorable results for principal employees. Additionally, the plan sponsor is subject to deduction limits for plan contributions. The deduction rules are covered along with the penalties for noncompliance Describe a design-based and a nondesign based safe harbor formula. Page 10

11 10.02 Differentiate between pro rata, permitted disparity, age-weighted and new comparability allocations Explain the formula for determining a participant s annual additions limit and the types of allocations counted as annual additions Explain the concept of forfeitures and describe ways forfeitures may be used Define the maximum deduction limits for all types of defined contribution plans Identify the contribution deduction deadlines applicable to different types of employer entities. This topic will comprise approximately 4 to 8 percent of the exam questions. Chapter 10: Simoneaux, Sarah. Retirement Plan Consulting for Financial Professionals, Topic 11: 401(k) Plans: Deferrals, Catch-Ups and Roth Accounts In conducting employee meetings, participants often ask the financial consultant questions regarding how much may be contributed to a 401(k) plan. When a designated Roth contribution is offered as part of the plan, this often leads to additional questions regarding tax implications and Roth IRAs Identify differences in catch-up contributions (in 403(b), 401(k), and SIMPLE plans) and situations that will result in catch-up contributions Define excess deferrals and the correction methods Identify characteristics of designated Roth contributions Identify the differences between Roth IRA and Roth 401(k) accounts. This topic will comprise approximately 1 to 5 percent of the exam questions. Chapter 11: Simoneaux, Sarah. Retirement Plan Consulting for Financial Professionals, Page 11

12 Topic 12: Highly Compensated and Key Employees At the heart of retirement plan compliance is the identification of highly compensated employees (HCEs) and key employees. The plan administrator must properly identify these employees in order to properly perform nondiscrimination testing (HCEs) and topheavy testing (key employees). This topic will cover how to define the two classifications, so they may be easily differentiated. Also, this topic outlines the rules pertaining to top-heavy status and discusses the impact this has on the employer and plan administration Identify and differentiate HCEs and key employees Describe the impact of being top-heavy on a plan Identify when a plan is deemed to satisfy top-heavy requirements. This topic will comprise approximately 1 to 5 percent of the exam questions. Chapter 12: Simoneaux, Sarah. Retirement Plan Consulting for Financial Professionals, Topic 13: Coverage Testing All qualified plans must satisfy the IRC s coverage testing rules under IRC 410(b) in order to satisfy the compliance requirements. This topic describes the application of these tests and the impact they have on plan administration. Financial professionals will want to have a general understanding of this topic as employers will often inquire about whether it is possible to include or exclude a specific group of employees from the plan Identify who is considered benefiting under IRC 410(b) coverage testing Identify the impact that excluding certain employees has on coverage testing. Page 12

13 13.03 Identify and differentiate the two tests (ratio percentage test and average benefit test) that are used to demonstrate that a plan satisfies coverage requirements Describe the situations in which the ratio percentage test and average benefit test are deemed to be satisfied. This topic will comprise approximately 2 to 6 percent of the exam questions. Chapter 13: Simoneaux, Sarah. Retirement Plan Consulting for Financial Professionals, Topic 14: 401(k) Nondiscrimination Testing (ADP/ACP) Plan professionals should understand the general concepts of the IRC 401(k) and 401(m) nondiscrimination requirements. This topic covers the types of contributions that are included in the testing and gives a brief introduction of how the tests are performed. Also, a discussion of methods for correcting failed tests is included Identify the types of contributions included in the actual deferral percentage (ADP) and/or actual contribution percentage (ACP) tests Identify the two primary methods and timeframes of correcting failed ADP and/or ACP tests Explain the differences in the ADP/ACP rules of traditional 401(k) plans and those that have automatic enrollment Describe actions that may improve ADP and/or ACP test results. This topic will comprise approximately 1 to 5 percent of the exam questions. Chapter 14: Simoneaux, Sarah. Retirement Plan Consulting for Financial Professionals, Page 13

14 Topic 15: Plan Document Basics All qualified plans must have a written document that contains required plan provisions. This topic explains the key documents that must be prepared, the different type of plan documents that may be used and what information must be included. As a financial professional, a participant may ask about information contained in the summary plan description (SPD). This topic will cover SPD requirements and the rules regarding who they must be distributed to and the applicable deadlines. This topic will also cover the compliance programs and correction methods that are available to an employer to fix operational failures and plan document defects. It also covers the consequences of plan disqualification Identify the key documents that must be prepared when implementing a new plan State the differences in the types of documents which may be used for a qualified plan Identify what important provisions must be in a plan document Identify the deadlines for adopting a plan document or an amendment Differentiate among the plan document, SPD and the summary of material modifications (SMM) Describe the requirements of an SPD Describe the methods and compliance programs that allow employers to correct plan document and operational failures State potential consequences of plan disqualification. This topic will comprise approximately 7 to 11 percent of the exam questions. Chapter 15: Simoneaux, Sarah. Retirement Plan Consulting for Financial Professionals, IRS Updates Plan Correction Procedures. ASPPA ASAP No Topic 16: Effects of Plan Changes Financial professionals must be aware of basic plan issues involved when a merger or acquisition takes place between companies. This topic addresses the implication of Page 14

15 merging plans or spinning one plan off from an existing plan. Finally, the factors involved in terminating a qualified plan are examined Describe the impact of a merger or acquisition of the plan sponsor on a qualified plan List the options and areas of concern that the plan sponsor will have regarding the disposition of the plans after a merger or acquisition of the plan sponsor Explain how and when benefits from a 401(k) plan may be distributed after a merger or acquisition of the plan sponsor Describe the impact of freezing accruals in a defined benefit plan Differentiate between a terminated and partially terminated plan List the steps taken to terminate a defined benefit or defined contribution plan and discuss what benefits must be protected Describe the PBGC's role in regards to plan closings. This topic will comprise approximately 4 to 8 percent of the exam questions. Chapter 16: Simoneaux, Sarah. Retirement Plan Consulting for Financial Professionals, Topic 17: Distributions and Taxation Qualified plans afford favorable tax treatment to employers, participants and beneficiaries. The plan s financial consultant should be able to assist in explaining when and what type of benefits may be distributed or rolled over and the related tax implications must be addressed. Also, having an understanding of the rules for when participants must begin to receive required minimum distributions (RMDs) and how the calculation is performed is a must-have skill for financial consultants who work with business owners and their participants Identify distributable events including special restrictions on different contribution types and types of distributions available to those still employed by the plan sponsor. Page 15

16 17.02 Identify and explain each type of in-service withdrawal a plan may permit Describe the taxation of distributions including premature distributions Describe a participant's taxation and distribution options in a designated Roth contribution account Describe the conditions necessary to allow rollovers Identify the circumstances in which involuntary distributions may occur State the RMD requirements and the penalty for noncompliance Determine the required beginning date for RMDs Describe the contents of a valid qualified domestic relations order (QDRO) Identify the requirements of the qualified joint survivor annuity (QJSA) rules Identify the requirements of a qualified pre-retirement survivor annuity (QPSA) Explain the spousal consent rules for loans, hardships and distributions Describe the steps a plan sponsor must take to find missing participants and the plan s distribution options. This topic will comprise approximately 11 to 15 percent of the exam questions. Chapter 17: Simoneaux, Sarah. Retirement Plan Consulting for Financial Professionals, Topic 18: Form 5500: A Plan s Annual Return A financial consultant should be familiar with the Form 5500, its various schedules and the rules regarding the independent audit requirements. Additionally, he or she should understand the relationship between the Form 5500 and the summary annual report (SAR) that must be provided to participants Identify the timing and regulatory requirements of the Form Identify the schedules that are filed with the Form List the conditions that must be satisfied for a small plan (less than 100 participants) to avoid the independent audit requirement List the timing and regulatory requirements for plan asset valuation Describe the requirements of the SAR including when it needs to be provided to participants. Page 16

17 This topic will comprise approximately 3 to 7 percent of the exam questions. Chapter 18: Simoneaux, Sarah. Retirement Plan Consulting for Financial Professionals, Topic 19: Ethics and Professionalism A financial consultant has certain ethical duties owed to participants, the plan and the plan sponsor of a qualified plan. This topic explains the ASPPA Code of Professional Conduct and its impact on the professional Identify whether actions violate the ASPPA Code of Professional Conduct. This topic will comprise approximately 3 to 7 percent of the exam questions. Chapter 19: Simoneaux, Sarah. Retirement Plan Consulting for Financial Professionals, ASPPA Code of Professional Conduct (found at the end of this syllabus). Recommended Reading Bloom, Lauren. Elegant Ethical Solutions. Elegant Solutions Consulting: Goodlettsville, TN. Page 17

18 PFC-1 Additional Reading IRS Updates Plan Correction Procedures ASPPA ASPPA ASAP No Page 18

19 A publication of the ASPPA Government Affairs Committee January 24, 2013 No IRS Updates Plan Correction Procedures By: James C. Paul, Ferenczy & Paul LLP, Georgia and California The IRS recently issued Rev. Proc , updating EPCRS (Employee Plan Compliance Resolution System). The updated procedures must be used for VCP (Voluntary Compliance Program) and SCP (Self Correction Program) submissions and audit CAP (Closing Agreement Program) cases after April 1, Until then, filers have the option to use either this new procedure or the old procedure under Rev. Proc There are no earth shattering changes in the new Rev. Proc., but there are some helpful modifications and additions. Highlights of the updated procedures include The addition of corrections for payments from defined benefit plans in violation of Code 436 (the payout limitations on poorly funded plans); The correction programs are now open for 403(b) plans; Governmental 457(b) plans may be submitted for correction; Forms and procedures have been updated; Some correction methods have been added or revised; and The basic fee schedule for VCP has not been changed. Corrections for Defined Benefit Plans Correcting Violations of 436 If a single employer defined benefit plan pays benefits or is amended to accrue additional benefits or increase liabilities in violation of Code 436(b), (c), or (e), the failure may be corrected by making an additional contribution. Essentially, the employer must fund the plan up to the level at which the additional benefits or liabilities would have been permitted under 436 (with interest). While this addition does provide a method for correction of 436 violations, it likely will be useful only for employers who have the means to fund the plan sufficiently. Corrections for Non 436 Issues for Plans Currently Subject to 436 The Rev. Proc. makes it clear that amendments or distributions made to correct non 436 failures are not subject to 436 for the year being corrected. However, if the plan is limited by 436 in the year during which corrective amendments or distributions are being made, additional contributions may be needed. If an employer makes a corrective distribution in the form of a lump sum payment in a year in which the plan is limited by 436, the employer must contribute an amount equal to the payment (but only half of the payment must be contributed if the plan is subject to restrictions under 436(d)(3), i.e., the AFTAP (Adjusted Funding Target Attainment Percentage) is between 60% and 80%). If a defined benefit plan is amended, the employer must contribute an amount equal to the increase in the plan s funding target caused by the amendment. ASPPA American Society of Pension Professionals & Actuaries 4245 North Fairfax Drive Suite 750 Arlington, VA website 2012, ASPPA All rights reserved, except permission is expressly granted to duplicate this publication for internal purposes only.

20 January 24, 2013 No page 2 Section 6.04(4)(d) clarifies that corrective distributions from defined benefit plans should be increased to reflect the delay in payment, using actuarial equivalence factors in effect at the time the distribution should have been made. Corrections for 403(b) Plans Since 2009 and prior to the release of Rev. Proc , the IRS had not accepted 403(b) plan corrections under EPCRS. Under the new Rev. Proc., 403(b) plan failures may now be corrected once again under EPCRS. Generally, the same correction methods and procedures that are available to 401(a) plans are now available to 403(b) plans. The new Rev. Proc. permits correction of pre 2009 errors, including correction of the failure to timely adopt a 403(b) plan document. There is a 50% fee reduction for eligible employers that submit 403(b) plans to correct the failure to timely adopt a written plan document on or before December 31, (b) Plans Governmental 457(b) plans may be submitted to correct errors outside of EPCRS, applying similar principles. The IRS may consider submissions for correction of errors in 457(b) plans sponsored by tax exempt entities in certain circumstances. The new Rev. Proc. gives one example of a submission that might be accepted where the plan has been erroneously designed to cover non highly compensated employees, if the plan has been operated in a manner similar to a qualified plan. Changes to Forms and Procedures EPCRS applications are now referred to as submissions. VCP submitters must now file Form 8950, Application for Voluntary Correction Program, and Form 8951, Compliance Fee for Voluntary Correction Program Submission. These forms are currently available in draft form on the IRS website, but final versions have not yet been released to use in filing submissions. Form 8950, which is reasonably similar to the old Appendix C, VCP Checklist, requires information about the applicant, the plan, and the type of VCP submission. The new form also requires identification of the schedules being filed, information about whether a determination letter is pending, and it incorporates the required statements by the applicant under penalty of perjury. Finally, the new Form 8950 includes a Procedural Checklist for VCP submissions. There are new addresses for filing VCP submissions, found in section of the new Rev. Proc.. Submissions must now be sent to Covington, Kentucky, instead of Washington, D.C. For filing purposes, Appendices D and F have been replaced by a new Appendix C. Fee Schedules The basic fee schedule for VCP submissions has not changed. If a plan sponsor fails to timely adopt amendments, required for reliance on a favorable determination letter, that error can be corrected under VCP for a $500 fee, if the required amendment(s) is adopted within three months after the deadline for adoption. The Rev. Proc. clarifies that the fee for failure to timely adopt good faith amendments, interim amendments, or amendments required to implement optional law changes is $375, if the amendments are adopted prior to the plan s first on cycle year starting after the amendments were due. The fee for multiemployer or multiple employer plans submitted under VCP is determined based on the number of participants (not plan ASPPA American Society of Pension Professionals & Actuaries 4245 North Fairfax Drive Suite 750 Arlington, VA website 2012, ASPPA All rights reserved, except permission is expressly granted to duplicate this publication for internal purposes only.

21 January 24, 2013 No page 3 assets). Section clarifies how the number of participants is determined for plans that are not required to file Form The new Rev. Proc. also clarifies when a determination letter application must or may be filed with a VCP submission. If a restated plan is submitted as evidence of correction, the submission must identify the corrective language in the restatement. For anonymous submissions, the representative making the submission must meet the power of attorney requirements and must sign a penalty of perjury statement that they are authorized to make the submission. Section provides updated fee schedules for nonamender failures discovered during the determination letter process. Additions and Revisions Earnings: Section 5.04 provides a new, uniform definition that explicitly includes investment losses, as well as gains. 401(k) Plan Corrections: Amounts used to correct failed ADP, ACP, or multiple use tests must meet the definition of a QNEC in Reg (k) 6, including the requirement that such amounts must be fully vested. This language bolsters the IRS position that forfeitures cannot be used to correct these failures. The Service has, however, previously issued opinion, notification, and favorable determination letters on plans with language permitting the use of forfeitures to fund QNECs. ASPPA continues to contest the IRS position on this issue. Matching contributions due to participants who were improperly excluded from making salary deferral contributions may be contributed in the form of regular matching contributions, subject to a vesting schedule. The prior procedures required corrective contributions in the form of QMACs, which must be 100% vested. Corrections for the improper exclusion of an employee from making deferrals in a safe harbor 401(k) plan have been clarified and expanded in Appendix A, section.05(d). In particular, section.05(d)(ii) specifies the correction for a participant excluded improperly from a QACA. Missing Participants: Section 6.02(5)(d) updates procedures required to locate missing participants and clarifies that the IRS Letter Forwarding Procedure is no longer available. Voluntary Correction Program Forms Now Available Fillable application forms and model submission documents are now available for use with Voluntary Correction Program (VCP) submissions made under the Employee Plans Compliance Resolution System (EPCRS). Forms 8950 and 8951 must be included with any VCP submission made under Revenue Procedure Model submission documents can help you resolve certain plan failures (eligibility, loans, late amendments, etc.) and ensure that all required information is included. ASPPA American Society of Pension Professionals & Actuaries 4245 North Fairfax Drive Suite 750 Arlington, VA website 2012, ASPPA All rights reserved, except permission is expressly granted to duplicate this publication for internal purposes only.

22 PFC-1 Additional Reading ASPPA Code of Professional Conduct Page 19

23 AMENDED JULY 1, 2013 CODE OF PROFESSIONAL CONDUCT Preamble The purpose of this Code of Professional Conduct ( Code ) is to identify the professional and ethical standards with which a Member must comply, in order to fulfill the Member s responsibility to ASPPA and its affiliate organizations, other Members, and the public. Members are required to adhere to the high standards of conduct, practice, and qualification set forth in this Code. 1. Definitions Advertising: all communications by whatever medium, including oral communications, which may directly or indirectly influence any person or organization to decide whether there is a need for Professional Services or to select a specific person or firm to perform such services. Confidential Information: information not in the public domain of which the Member becomes aware during the course of rendering Professional Services to a Principal. It may include information of a proprietary nature, information which is legally restricted from circulation, or information which the Member has reason to believe that the Principal would not wish to be divulged. Credential: a membership designation (e.g., Certified Pension Consultant; Member, Society of Pension Actuaries; or Associated Professional Member) conferred by ASPPA. Law: statutes, regulations, judicial decisions, and other statements having legally binding authority. Member: An individual who is a Member of ASPPA or any affiliate organization of ASPPA. Principal: any present or prospective client of a Member or the employer of a Member where the Member provides retirement plan services for their employer s plan. Professional Communication: a written, electronic or oral communication issued by a Member with respect to Professional Services. Professional Services: services provided to a Principal by a Member, including the rendering of advice, recommendations, findings, or opinions related to a retirement or other employee benefit plan. Titles: leadership positions, volunteer experience, awards and other honors conferred by ASPPA.

24 AMENDED JULY 1, Advertising Member shall not engage in any Advertising with respect to Professional Services that the Member knows or is reasonably expected to know are false. 3. Communications A Member who issues a Professional Communication shall take appropriate steps to ensure that the Professional Communication is appropriate to the circumstances and its intended audience. 4. Compliance A Member shall be knowledgeable about this Code, keep current with Code revisions and abide by its provisions. Laws may impose binding obligations on a Member. This Code is not intended to supplant, contradict or supersede Law (e.g., Circular 230) or other Codes of Conduct that establish professional standards for Members in the rendition of Professional Services and that have been sanctioned by the federal or a state government. Where the requirements of Law or such governmentally sanctioned Codes conflict with this Code, the requirements of Law or such governmentally sanctioned Codes take precedence. 5. Confidentiality A Member shall not disclose to another party any Confidential Information obtained in rendering Professional Services for a Principal unless authorized to do so by the Principal or required to do so by Law. 6. Conflicts of Interest A Member shall not perform Professional Services involving an actual conflict of interest unless: A. The Member s ability to act fairly is unimpaired; and B. There has been full disclosure of the conflict to the Principal(s); and C. All Principals have expressly agreed to the performance of the services by the Member. If the Member is aware of any significant conflict between the interests of a Principal and the interests of another party, the Member should advise the Principal of the conflict and include appropriate qualifications or disclosures in any related communication. 7. Control of Work Product A Member shall not perform Professional Services when the Member has reason to believe that they may be altered in a material way or may be used to violate or evade the Law. The Member should recognize the risk that materials prepared by the Member could be misquoted, misinterpreted or otherwise misused by another party to influence the actions of a third party and should take reasonable steps to ensure that the material is presented fairly and that the sources of the material are identified.

25 AMENDED JULY 1, Courtesy and Cooperation A. A Member shall perform Professional Services with courtesy and shall cooperate with others in the Principal s interest. A Principal has an indisputable right to choose a professional advisor. A Member may provide service to any Principal who requests it even though such Principal is being or has been served by another professional in the same manner. B. When a Principal has given consent for a new or additional professional to consult with a Member with respect to a matter for which the Member is providing or has provided Professional Services, the Member shall cooperate in assembling and transmitting pertinent data and documents, subject to receiving reasonable compensation for the work required to do so. In accordance with Circular 230, the Member shall promptly, at the request of the Principal, return any and all records of the Principal that are necessary for the Principal to comply with federal tax Law, even if the Member is not subject to Circular 230. The existence of a fee dispute generally does not relieve the Member of this responsibility except to the extent permitted by applicable state Law. The Member need not provide any items of a proprietary nature or work product for which the Member has not been compensated. 9. Disclosure A Member shall make full and timely disclosure to a present or prospective Principal of all sources of direct or indirect material compensation or other material consideration that the Member or the Member s firm has received or may receive in relation to an assignment for such Principal. The disclosure of sources of material compensation or consideration that the Member s firm has received, or may receive, is limited to those sources known to, or reasonably ascertainable by, the Member. 10. Professional Integrity A Member shall perform Professional Services, and shall take reasonable steps to ensure that Professional Services rendered under the Member s supervision are performed, with honesty, integrity, skill and care. A Member has an obligation to observe standards of professional conduct in the course of providing advice, recommendations and other services performed for a Principal. A Member who pleads guilty to or is found guilty of any misdemeanor related to financial matters or any felony shall be presumed to have contravened this Code and shall be subject to ASPPA s counseling and disciplinary procedures. 11. Qualification Standards A Member shall render opinions or advice, or perform Professional Services, only when qualified to do so based on education, training and experience.

26 AMENDED JULY 1, Titles and Credentials A Member shall make truthful use of the membership Titles and Credentials of ASPPA to which the Member is entitled, and only where that use conforms to the practices authorized by ASPPA. 13. Additional Obligations A. A Member whose professional conduct is regulated by another membership organization shall abide by the professional Code of Conduct (or similar rules) of such organization. For example, a Member who is an actuary shall also abide by the Code of Professional Conduct for actuaries. B. A Member shall respond promptly in writing to any communication received from a person duly authorized by ASPPA to obtain information or assistance regarding a Member s possible violation of this Code. The Member s responsibility to respond shall be subject to Section 5 of this Code, Confidentiality, and any other confidentiality requirements imposed by Law. In the absence of a full and timely response, ASPPA may resolve such possible violations based on available information.