Retirement-Misc

Miscellaneous Retirement Plan

Legislative & Regulatory Updates

June 10, 2010 - EBSA Issues Final Rule on DROs

(PLANSPONSOR.com) – The Department of Labor’s Employee Benefit Security Administration has issued a final rule clarifying certain issues relating to the timing and order of domestic relations orders (DROs).

Under ERISA, plan administrators are given an 18-month period to determine whether a DRO meets the requirements of a qualified domestic relations order (QDRO). After that time, a QDRO is carried out prospectively.

However, in the Pension Protection Act of 2006, Congress instructed the Secretary of Labor to issue regulations to clarify that a domestic relations order otherwise meeting the requirements to be a QDRO shall not fail to be treated as a QDRO solely because the order is issued after, or revises, another domestic relations order or QDRO; or because of the time at which it is issued.

EBSA notes that in the case of a DRO that is issued after or revises another DRO or QDRO, the DRO fails to be a QDRO if it assigns benefits already assigned to another alternate payee under another QDRO.

The EBSA gave examples in its interim regulations that a plan administrator cannot disqualify a DRO because it is issued after a participant’s death or annuity starting date In the case of a DRO issued after a participant’s annuity starting date, the plan is merely required to pay a portion of the benefit otherwise due to the participant to another person, EBSA said. Any domestic relations order received by a plan after the original annuity starting date of the participant that would require reannuitization with a new annuity starting date would fail to be a QDRO, unless the plan specifically provides for such an option.

The rule provides guidance to plan administrators, service providers, participants, and alternate payees on the QDRO requirements under ERISA, and is effective on August 9, 2010.

In response to comments the EBSA said it will update its educational handbook ‘‘QDROs—The Division of Pensions Through Qualified Domestic Relations Orders’’ available at http://www.dol.gov/EBSA/publications.

The full text of the final rule is here.

May 18, 2010 - 401(k) Questionnaire Coming to 1,200 Employers

During the week of May 17th, IRS Employee Plans Compliance Unit (EPCU) will send a letter and instructions to 1,200 employers sponsoring 401(k) plans asking them to complete the 401(k) Compliance Check Questionnaire. The information gathered from the Questionnaire will provide a comprehensive view of 401(k) plans and will help EP maximize its resources for education, outreach, guidance and enforcement efforts while minimizing the burden to compliant plan sponsors.

EPCU will use a secure website to collect responses on the following topics:

Demographics
Participation
Employer and employee contributions
Top-heavy and nondiscrimination testing
Distributions and plan loans
Other plan operations
Automatic contribution arrangements
Designated Roth features
IRS voluntary compliance and correction programs
Plan administration

All plan sponsors will complete the same Questionnaire; however, some questions may only apply to plans with particular features. Failure to respond or provide complete information will result in further action or examination of the plan.

The Questionnaire was developed because of the critical role 401(k) plans play in our private retirement system. There are nearly half a million 401(k) plans in America covering over 50 million participants.

See the EPCU Web page for more information on the Questionnaire, which is the featured project on the page, or click here.

US Department of Labor Issues Final Safe Harbor Rule on Employee Contributions to Small Pension and Welfare Plans

WASHINGTON - January 13, 2010 - The U.S. Department of Labor announced the publication of a final rule to protect employee contributions deposited to small pension and welfare benefit plans with fewer than 100 participants by providing a safe harbor period of seven business days following receipt or withholding by employers.

"This rule will give employers greater clarity in remitting participant contributions to small pension and welfare plans in a timely manner," said Phyllis C. Borzi, assistant secretary of labor for the department's Employee Benefits Security Administration. "We estimate participant accounts could grow by $19 to $44 million as a result of these rules." Read more

2010 Social Security and Supplemental Security Income Benefits

With consumer prices down over the past year, monthly Social Security and Supplemental Security Income benefits for more than 57 million Americans will not automatically increase in 2010. This will be the first year without an automatic Cost-of-Living Adjustment (COLA) since they went into effect in 1975.

The Social Security Act provides that Social Security and Supplemental Security Income benefits increase automatically each year if there is an increase in the Bureau of Labor Statistics' Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of the last year to the third quarter of the current year. This year there was no increase in the CPI-W from the third quarter of 2008 to the third quarter of 2009. In addition, because there was no increase in the CPI-W this year, under the law the starting point for determinations regarding a possible 2011 COLA will remain the third quarter of 2008.

Some other changes that would normally take effect in January 2010 based on the increase in average wages also will not take effect, even though average wages did increase. Since there is no COLA, the statute prohibits an increase in the maximum amount of earnings subject to the Social Security tax as well as the retirement earnings test exempt amounts. These amounts will remain unchanged in 2010. Download the fact sheet that provides more information on 2010 Social Security changes.

New IRS Rulings Expand Employees Ability to Save

The IRS released several pieces of guidance on September 8th designed to boost tax incentives for retirement savings. The initiatives include expanded opportunities for automatic enrollment in 401(k) plans, vehicles for taxpayers to save their tax refunds and convert accrued vacation time into savings, and better explanations of the available options for taxpayers receiving rollover distributions from Roth and non-Roth employer plans. Read more

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