Benefits cus Employer Update In this issue: IRS Discontinues Retirement Plan Determination Letter Cycles New Law Extends Form 5500 Deadlines Correcting Missed Required Minimum Distributions 4 th Quarter Reporting and Disclosure Requirements Electronic Delivery Methods Upcoming Benefits in Focus Webinars 4 th Quarter 2015 IRS DISCONTINUES THE RETIREMENT PLAN DETERMINATION LETTER CYCLES FOR INDIVIDUALLY DESIGNED PLANS EFFECTIVE 2017 On July 21, 2015, the IRS issued Announcement 2015-19, announcing that they will be making several changes to the determination letter program, including eliminating the 5-year determination letter remedial amendment cycles (Cycles A-E) for individually designed plans, effective January 1, 2017. Going forward, the IRS will limit the scope of the determination letter program for individually designed plans to initial plan qualification, upon plan termination, and other limited circumstances. The IRS is also looking for ways to make it easier for plan sponsors to comply with document requirements for qualified plans in the future. The sponsors of the current Cycle E plans can continue to submit determination applications through January 31, 2016. Additionally, sponsors of Cycle A plans will continue to be permitted to submit determination letter applications during the period beginning February 1, 2016 and ending January 31, 2017. Effective immediately, the IRS is no longer accepting any determination letter applications that are submitted off-cycle. NOTE: This announcement does not impact qualified retirement plans that use an IRS preapproved (prototype or volume-submitter) document. Page 1 of 5 The IRS explains that these changes are necessary to more efficiently direct its limited resources. However, this also seems to be consistent with their efforts to encourage plan sponsors to convert individually designed plans to IRS pre-approved plan documents. Currently, plan sponsors can use pre-approved documents for defined benefit plans and defined contribution plans (such as 401(k), profit sharing and money-purchase plans). In the near future, IRS pre-approved plan documents will be available for cash-balance, ESOP, and 403(b) plans. In connection with this Announcement, the IRS has requested comments on several issues related to the revisions to the determination letter program. The IRS intends to reflect the changes described in the Announcement in an official update to the current determination letter revenue procedures. Benefits in Focus is a publication circulated by USI Consulting Group and is designed to highlight various retirement and employee benefit matters of general interest to our readers. It is not intended to interpret laws, regulations or to address specific client situations. The information contained herein is meant for general educational purposes only. We will keep you posted as more information becomes available on this topic. In the meantime, USI Consulting Group is available to answer any questions you may have regarding this Announcement. Please contact your USI Consulting Group representative for further information. NEW LAW EXTENDS FORM 5500 DEADLINES On July 31, 2015, President Obama signed the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015 (the Act ). Although this Act largely deals with transportation matters, it contained a number of unrelated items, including the extension of various tax return filings, one of which is the Form 5500 deadline. Under the current rules, employee benefit plans are required to file their annual Form 5500 no later than seven months after the end of the plan year (July 31 for calendar year plans). An automatic 2 ½ month extension is granted by filing a request on Form 5558, making the extended deadline. In accordance with the Act, the new law will grant an automatic 3 ½ month extension upon request. This means the deadline for calendar year plans, under the new rules, will be November 15, after filing Form 5558 for an extension.
Page 2 of 5 EFFECTIVE DATE: The new rule takes effect with the 2016 plan year returns, which will be filed in 2017. Until the new law takes effect, the maximum extension available will continue to be 2 ½ months. In other words, the 2014 and 2015 Form 5500 filings are still subject to the maximum 2 ½ month extension. The IRS will be modifying the regulations applicable to Form 5500 reporting to comply with the new law. Please speak to your USI Consulting Group representative for further information. CORRECTING MISSED REQUIRED MINIMUM DISTRIBUTIONS The 3 rd Quarter issue of the Benefits in Focus Newsletter included an article entitled, Required Minimum Distribution Basics. The focus of that article was to present the basic rules applicable to required minimum distributions ( RMDs ). Please click here to view the 3 rd Quarter Newsletter. It was also noted that a follow up article would include the methods for correcting missed RMDs available to both plan sponsors and plan participants. This is the follow-up article. A participant in a qualified retirement plan (including defined benefit plans, cash balance plans, 401(k), profit-sharing, money purchase pension, 403(b) or governmental 457(b) plans) or an IRA owner is required to receive an RMD by his required beginning date ( RBD ), and additional payments thereafter at least annually. A participant who does not receive the full amount (or any of the required amount) of his RMD as of his RBD, or if he does not receive the full amount (or any of the required amount) of his subsequent RMD payments when they are due, is subject to a 50% excise tax penalty pursuant to the Internal Revenue Code. The 50% penalty is imposed on the amount of the payment he received that is less than the required amount (or in the case of a nonpayment, 50% is imposed on the entire amount of the payment that should have been received by the participant). Correction: The correction for a missed RMD from a defined contribution plan is for the missed or underpaid amounts to be distributed to the participant, together with earnings calculated from the date by which the distribution should have been received to the actual date of distribution. A defined benefit plan corrects a missed RMD by distributing the missed required amount together with an interest payment to replace the loss of the use of the missed payment amount. Excise Tax Waiver: Note that there are two permissible methods for requesting that the IRS waive the 50% penalty on the RMD underpayment or non-payment amount. First, an individual participant can apply for relief from the penalty by completing and attaching IRS Form 5329 to his individual federal tax return. In the alternative, the plan sponsor of the retirement plan from which the payment should have been distributed can utilize the correction provided under EPCRS (Employee Plans Compliance Resolution System) to request a waiver of the 50% penalty on behalf of one or more participants who did not receive timely payments of their respective RMD payments. The plan sponsor submits a VCP (Voluntary Correction Program) filing to the IRS, together with an IRS User Fee and a written explanation of the failure to support the waiver request. If the missed RMD is the only failure described in the VCP submission, the IRS User Fee is substantially reduced from the normal fee. If the waiver request is approved, the IRS will respond with a Compliance Statement indicating that the excise tax will be waived and the matter will be closed with the plan s qualification status intact. It is important for plan sponsors to ensure that missed RMDs do not occur in the first place and in the future by implementing best practices procedures and processes to monitor the age of plan participants (and beneficiaries of deceased participants entitled to RMDs) who are approaching their RBD. USI Consulting Group can assist plan sponsors in meeting their fiduciary obligation regarding payment of RMDs and thereby help to protect the plan s tax qualification status. Please speak to your USI Consulting Group representative for further information. 4 th QUARTER REPORTING AND DISCLOSURE REQUIREMENTS This is a reminder of the reporting and disclosure requirements and deadlines which may apply to your plan for 4 th quarter of the calendar year. Due dates are generally based on a calendar year plan and are applicable to plans subject to the Employee Retirement Income Security Act of 1974 (ERISA).
Page 3 of 5 Month Plan Type Task Requirement Due Date* Status October Make Third Quarter Contribution for 2015 Plan Year Distribute Annual Funding Notice File 2015 PBGC Comprehensive Filing Quarterly contribution due 15 days after the end of applicable quarter. Deadline for small plans (covering 100 or fewer participants) to distribute Annual Funding Notice. Annual PBGC Premium Payment for plans of all sizes, which includes the variable-rate premium and flat-rate premium. / File IRS Form 5310-A To give notice to IRS of Qualified Separate Lines of Business, where applicable. / Submit Form 5500 Deadline to submit Form 5500 for plans with Form 5558 filing extension. (Due by the 15th day of the 9th full month following the month in which the plan year began) ** (2½ month extension if Form 5558 was filed timely) Amend the plan to correct for coverage/nondiscrimination failure Deadline for adopting retroactive amendment to correct coverage/nondiscrimination failure October December Distribute Annual 401(k) Plan Safe Harbor Notice Provide notice to eligible employees. Employers who want the option to provide a Qualified Non-Elective Contribution (QNEC) 3% employer contribution must also issue a 401(k) Plan Safe Harbor Contingent notice to eligible employees. Distribute Qualified Default Investment Alternative (QDIA) Notice Provide annual notice to all participants (including alternate payees and beneficiaries) to inform of their rights to direct investments and how their accounts will be invested if they do not direct investments. Distribute Annual Automatic Enrollment Notice Provide annual notice to all eligible employees (can be combined with Safe Harbor and QDIA notice). December Make 2015 Required Minimum Distributions Age 70½ Due to participants who have begun receiving minimum distributions. / Adopt Discretionary Amendments Deadline for formal adoption of amendments for any discretionary changes that became effective during the current plan year. Annual Benefit Statement Notice As an alternative to furnishing a Benefit Statement once every three years, provide an annual notice to participants regarding availability and how to obtain Benefit Statements. Benefit Statement requirement considered met if notice is provided at least once per year Review the Plan Forfeiture Account Allocate Forfeiture accounts. Review the plan document regarding the allocation of Forfeiture monies. Last day of Plan Year
Page 4 of 5 Month Plan Type Task Requirement Due Date* Status December Make Corrective Distributions for Excess 2014 Contributions Deadline for distribution of corrective distributions (for failed ADP/ACP test with 10% excise tax). Credit Balance Elections Deadline for plan sponsor to make a voluntary election to reduce credit balances, or revoke a previous credit balance election, for funding purposes. Final AFTAP Certification Deadline for plan actuary to certify final AFTAP if plan is operating under an issued range certification. * Dates shown assume a January 1 plan year and calendar year tax years. ** Tax Relief for Victims of Severe Storms, Tornadoes, Straight-line Winds and Flooding in Texas the IRS has postponed the tax filing deadlines for taxpayers in areas covered by the disaster declaration in the state of Texas. More specifically, plan sponsors that qualify for this relief will have until November 2, 2015 to submit the 2014 Form 5500. Please refer to the following site to see if your plan qualifies for this extension: http://www.irs.gov/uac/tax-relief-for-victims-of-severe-storms-tornadoes-straight-line-winds-and-flooding-in-texas ELECTRONIC DELIVERY METHODS The 4 th quarter is a busy time of year for plan administrators, with many annual notices due to be distributed to employees during this quarter (such as defined benefit plan annual funding notices, and defined contribution plan safe harbor, automatic enrollment, and QDIA notices). Plan administrators often have questions as to how this information can be disclosed, in particular, whether these notices can be distributed electronically. Plan administrators of retirement plans covered by Title I of ERISA may provide plan information using electronic media in addition to in-hand delivery, or by mail. Although electronic delivery is permissible, the Department of Labor Reg. 2520.104b-1(c), limits electronic delivery to individuals who meet one of two classifications: 1. Currently employed participants who have effective access to electronic disclosures wherever the participant is reasonably expected to work and where access to the electronic information system is an integral part of the participant s duties. NOTE: The use of common areas, such as a kiosk, is not a permissible means by which to deliver documents required to be furnished to participants. However, it could be a supplemental method. 2. Other participants (including former employees, beneficiaries, and current employees who do not use a computer as an integral part of their duties) who affirmatively consent to receiving disclosures electronically. The following rules apply to this affirmative consent requirement. What are the consent requirements for furnishing documents through the Internet or other network? The individual must affirmatively consent, or confirm consent electronically. The consent must be in a manner that reasonably demonstrates the individual s ability to access information in the electronic form that will be used to provide the information that is the subject of the consent, and has provided an address to receive the documents electronically. What Information must be provided to participants prior to consent? Before a participant, beneficiary or other individual consents to receiving information electronically, they must be provided with a clear and conspicuous statement, in electronic or non-electronic form, indicating the following: The types of documents to which the consent applies; The consent can be withdrawn at any time without charge; The procedures for withdrawing consent and for updating their address for receipt of electronically furnished documents or other information;
Page 5 of 5 The right to request and obtain a paper version (including whether the paper version will be provided free of charge); and Hardware and software requirements to access and retain the documents. What if there is a change in hardware or software requirements? After a person has consented, if a change in hardware or software requirements needed to access or retain electronic documents creates a material risk that the individual will be unable to access or retain electronically furnished documents, the following must occur: Provide the individual with a statement of the revised hardware and software requirements for access to and retention of electronically furnished documents; and Give the right to withdraw consent without charge and without any conditions or consequences not disclosed when initial consent was provided. The individual must again consent to receiving documents electronically. Please contact your USI Consulting Group representative if you have any questions regarding these requirements and their application to your plan. UPCOMING BENEFITS IN FOCUS WEBINARS Invitations for our Benefits in Focus webinars will continue to be sent to you, as part of our regulary-scheduled webinar series. USI Holdings Corporation 2015 All Rights Reserved This communication is published for general informational purposes and is not intended as advice or a recommendation specific to your plan. Neither USI nor its affiliates and/or employees/agents offer legal or tax advice.