Category Archives: Final 415 Regs

Today in ERISA History

April 30, 2007 – The IRS published Final Regulations on Limitations on Benefits and Contributions Under Qualified Plans, T.D. 9319, also known as the Final 415 Regs. The last time the IRS released comprehensive regulations pursuant to Code section 415 was on Jan. 7, 1981. These regulations update those 1981 comprehensive regulations and incorporate guidance the IRS issued in the form of notices and revenue rulings between Jan. 7, 1981 and April 30, 2007 along with statutory changes made by Congress during this time frame.

Some of the changes made by Congress during this time frame include:

  • The current statutory limitations under sections 415(b)(1)(A) and 415(c)(1) applicable for defined benefit and defined contribution plans, respectively, as most recently amended by EGTRRA.
  • Changes to the rules for age adjustments to the applicable limitations under defined benefit plans, under which the dollar limitation is adjusted for commencement before age 62 or after age 65.
  • Changes to the rules, including specification of parameters, for benefit adjustments under defined benefit plans.
  • The phase-in of the dollar limitation under section 415(b)(1)(A) over 10 years of participation, as added by TRA ’86.
  • The addition of the section 401(a)(17) limitation on compensation that is permitted to be taken into account in determining plan benefits, as added by TRA ’86, and the interaction of this requirement with the limitations under section 415.
  • Exceptions to the compensation-based limitation under section 415(b)(1)(B) for governmental plans and multiemployer plans.
  • Changes to the aggregation rules under section 415(f) under which multiemployer plans are not aggregated with single-employer plans for purposes of applying the compensation-based limitation of section 415(b)(1)(B) to a single-employer plan.
  • The repeal under SBJPA of the section 415(e) combined limitation on participation in a defined benefit plan and a defined contribution plan.
  • The changes to section 415(c) that were made in conjunction with the repeal under EGTRRA of the exclusion allowance under section 403(b)(2).
  • The current rounding and base period rules for annual cost-of-living adjustments pursuant to section 415(d), as most recently amended in EGTRRA and WFTRA.
  • Changes to section 415(c) under which certain types of arrangements are no longer subject to the limitations of section 415(c) (such as individual retirement accounts other than SEPs) and other types of arrangements have become subject to the limitations of section 415(c) (such as certain individual medical accounts).
  • The inclusion in compensation (for purposes of section 415) of certain salary reduction amounts not included in gross income.
  • The modification for distributions with annuity starting dates in plan years beginning in years 2004 and 2005 made by PFEA with respect to the interest rate assumptions in section 415(b)(2)(E) for converting certain forms of benefits to an actuarially equivalent straight life annuity.
  • The following modifications to section 415 that were made by PPA ’06:
    • (i) changes to the interest rate assumptions in section 415(b)(2)(E) that are used for converting certain forms of benefits to an equivalent straight life annuity (section 303 of PPA ’06);
    • (ii) elimination of the active participation requirement in determining a participant’s high-3 years of service in section 415(b)(3) (section 832 of PPA ’06);
    • (iii) exemption from the section 415(b)(1)(B) compensation limit for certain benefits provided under a defined benefit plan maintained by an organization described in section 3121(w)(3)(A) (section 867 of PPA ’06); and
    • (iv) expansion of the definition of qualified participant in section 415(b)(2)(H) to include certain participants in a defined benefit plan maintained by an Indian tribal government (section 906(b) of PPA ’06).

The regulations are effective April 7, 2007. The principal authors of these regs. are Vernon S. Carter, Linda S.F. Marshall, and Christopher A. Crouch.

Amendment for Final 415 Regs

From the Cincinnati Benefits Conference today comes information about the amendment for the Final 415 Regulations. The IRS will not be issuing a model or sample amendment, so plan sponsors should plan on adopting a good faith amendment to incorporate the changes made by these regulations into their plan documents.

The deadline for adopting the amendment is the tax filing deadline for the 2008 plan year. For calendar year plans, this means that the deadline is March 15, 2009, or September 15, 2009.

The Final 415 Regulations were released on April 5, 2007, and the IRS released a special 2-page edition of Employee Plan News in April of 2007 containing a summary of the changes made by the Final 415 Regulations.

For pension geeks, the IRS released the revised version of the Defined Benefit List of Required Modifications (LRM). Contained within this LRM is around 20 pages on plan language to incorporate the Final 415 Regs into prototype plan documents. It is a must read for anyone thinking of drafting a good faith Final 415 Reg amendment.

[tags]Pension Protection Act, ppa, IRS, ERISA, Final 415 Regulations, compensation, LRM[/tags]

IRS Has a Busy Day

New information today from the IRS, PBGC and the Government Printing Office.

Today, the IRS released Revenue Procedure 2007-37, setting forth the procedure that a sponsor of a defined benefit plan, other than a multiemployer plan, can request and obtain approval for the use of plan-specific mortality tables. This revenue procedure contains specific information, including the deadline to make the request, the address to mail the request to and the fee for applying. A copy is available on the IRS’ website at http://www.irs.gov/pub/irs-drop/rp-07-37.pdf. The topic of this Revenue Procedure looks familiar because the IRS issued proposed regulations on this topic on May 29th.

On May 29th, the IRS released Proposed Regulations on Mortality Tables for Determining Present Value. These proposed regulations provide mortality tables to be used in determining present value or making any computation for purposes of applying certain pension funding requirements. A copy is available at http://benefitslink.com/taxregs/07-2631.pdf.

Today, the IRS also released Announcement 2007-59, providing Guidance for Employer Concerned About Certain Mid-Year Changes to a Safe Harbor 401(k) Plan. This announcement is only one page in length, and provides that a plan will not fail to satisfy the requirements to be a § 401(k) safe harbor plan merely because of mid-year changes to implement a qualified Roth contribution program (as defined in § 402A) or the hardship withdrawals described in part III of Notice 2007-7. The IRS also requests comments on this issue by September 17, 2007. A copy of Announcement 2007-59 is available on the IRS’ website at http://www.irs.gov/pub/irs-drop/a-07-59.pdf.

Today, the IRS also issued Proposed Regulations on Employer Comparable Contributions to Health Savings Accounts under Section 4980G. These proposed regulations provide guidance on employer comparable contributions to HSAs under Code section 4980G where an employee has not established an HSA by December 31st. It also addresses where an employer accelerates contributions for the calendar year for employees who have incurred qualified medical expenses. A copy of these proposed regulations is available at http://benefitslink.com/taxregs/4980g_prop_regs.pdf.

Today, the PBGC issued a Proposed Rule on Variable Rate Premiums for Single-Employer Plans. This proposed rule would amend PBGC’s regulations on Premium Rates and Payment of Premiums to implement the amendment to ERISA section 4006 made by the Pension Protection Act. A copy of the Proposed Rule is available at http://benefitslink.com/pbgcregs/E7-10412.pdf.

Today, the Government Printing Office published a 65-page transcript of the Congressional Hearing on Are Hidden 401(k) Fees Undermining Retirement Security, which took place March 6th. The report is an interesting indication of what may become Congressionally mandated regulations for 401(k) fees. The hearing begins with the Committee Chairman’s comment that “We have to ask whether or not all of these fees are necessary, and we have to examine whether they are undermining the workers retirement security.” Another interesting statement is: “If you go through this information packet for these fees, I am sure that either your head will be on your chest, your eyes will be glazed over, and you simply will not be able to decipher the information that you need as the saver.” A copy is available at http://frwebgate.access.gpo.gov/cgi-bin/useftp.cgi?IPaddress=162.140.64.120&filename=33655.pdf&directory=/disk3/wais/data/110_house_hearings.

Hat tip to BenefitsLink.com.

[tags]Pension Protection Act, ppa, IRS, mortality tables, 401(k) fees, revenue procedure, variable rate premiums, 2007-37, 2007-59, retirement, pension, health savings accounts, HSA[/tags]

IRS Summary of Final 415 Regs

The IRS released a short two-page summary of the Final 415 Regs in the form of a special edition of Employee Plan News. The summary for the items changed by the Pension Protection Act are:

The following modifications to section 415 made by the Pension Protection Act of 2006:

    i. changes to the interest rate assumptions in section 415(b)(2)(E) that are used for converting certain forms of benefits to an equivalent straight life annuity;

    ii. elimination of the active participation requirement in determining a participant’s high-3 years of service in section 415(b)(3);

    iii. exemption from the section 415(b)(1)(B) compensation limit for certain benefits provided under a defined benefit plan maintained by an organization described in section 3121(w)(3)(A); and

    iv. expansion of the definition of qualified participant in section 415(b)(2)(H) to include certain participants in a defined benefit plan maintained by an Indian tribal government.

According to the summary, some other important changes made by the Final 415 Regs are several changes to the definition of 415 compensation and “repeal of the section 415(e) combined limitation on participation in a defined benefit plan and a defined contribution plan”.

Another note is that Monika Templeman has been promoted to the Director of EP Examinations effective April 1, 2007. [tags]Pension Protection Act, defined benefit, 415, regulations, IRS, pension, ppa[/tags]

Final 415 Regs issued by IRS

The IRS finally issued the long-awaited Final 415 Regs. These regs are effective April 5, 2007, and generally apply for limitations years beginning after July 1, 2007. BenefitsLink.com posted two versions – one from the Federal Register, which is a three-column version of the regs that are 55-pages long, and the other version is the single-column version which is 210 pages long. That said, no short summary of these regs tonight. It is going to take a while to read through them and digest them. Also curious about what changes were made between the Proposed 415 Regs released a couple of years ago, and these Final 415 Regs.

After a quick count, and just because I was curious, the preamble contains 31 mentions of the Pension Protection Act. [tags]Pension Protection Act, defined benefit, ppa, 415[/tags]