Category Archives: Industry News

District Court Says No to IRS About RTRPs, Are ERPAs, Enrolled Actuaries or EAs Next?

Almost a month has passed since the U.S. District Court of the District of Columbia issued its opinion about IRS Circular 230 on Jan. 18, 2013, and I’m a little surprised by the lack of discussion about this opinion in ERISA circles because it may be a game-changer when it comes to the IRS permitting non-attorneys to practice before the IRS.

In Loving v. Internal Revenue Service, No. 12-385 (Jan. 18, 2013), the U.S. District Court of the District of Columbia granted summary judgment to three paid tax return preparers who complained that the 2011 addition of section 10.3(f) to IRS Circular 230, creating the category of Registered Tax Return Preparer, would force them to close their businesses if they were forced to comply with Circular 230. Specifically, the Court enumerated the new Circular 230 requirements imposed on those three paid tax return preparers as “annual fees, the entrance exam, and the hefty continuing-education requirement”.

To those of us who practice before the IRS on a daily basis, complying with IRS Circular 230 is nothing new. In my History of Circular 230 class, I was taught that the IRS promulgated Circular 230 in 1966. According to the Court’s 22-page opinion, Circular 230 actually has its origins in an 1884 statute, 31 U.S.C. section 330, which “allows the IRS to regulate “representatives” who “practice” before it.” (quotation marks around “representatives” and “practice” provided by the Court).

Section 10.2(a)(4) of Circular 230 defines practice before the IRS as:

“(4) Practice before the Internal Revenue Service comprehends all matters connected with a presentation to the Internal Revenue Service or any of its officers or employees relating to a taxpayer’s rights, privileges, or liabilities under laws or regulations administered by the Internal Revenue Service. Such presentations include, but are not limited to, preparing documents; filing documents; corresponding and communicating with the Internal Revenue Service; rendering written advice with respect to any entity, transaction, plan or arrangement, or other plan or arrangement having a potential for tax avoidance or evasion; and representing a client at conferences, hearings, and meetings.”

The Court stated the issue before it “turns on whether certain tax-return preparers are representatives who practice before the IRS, and thus are properly subject to the new IRS regulations.” (the new IRS regulations are the 2011 changes to Circular 230). Even though the three tax return preparers are in the business of preparing and filing IRS Form 1040s for unrelated taxpayers, the Court found that they are not representatives who practice before the IRS, and thus were not subject to the new IRS regulations.

According to the Court’s opinion, the IRS argued that “each agency has inherent authority to regulate those who practice before it.” Unlike most agencies, who permit only attorneys to represent the interests of unrelated parties, the IRS has always taken a more pragmatic approach, permitting non-attorneys to represent the interests of unrelated parties before the IRS based upon criteria stated in Circular 230. For example, many years ago, the IRS recognized that Enrolled Actuaries bring a unique understanding to the application of 22 different Internal Revenue Code sections as they pertain to pension and retirement plans, and thus added Section 10.3(d) to Circular 230. This pragmatic approach turned out to be cost-effective for everyone involved. Namely, the IRS could speak directly with the Enrolled Actuary for the plan instead of taking the more circuitous route of speaking to an attorney who could call the Enrolled Actuary for the plan, relay the IRS’ question about an actuarial calculation, obtain the Enrolled Actuary’s response to the question, and then relay the response to the IRS.

Several years after the IRS added Section 10.3(d) to Circular 230, it then added section 10.3(e), permitting Enrolled Retirement Plan Agents, or ERPAs, to practice before the IRS.

In determining whether the IRS can permit non-attorneys to practice before the IRS, the Court focused on the language of 31 U.S.C. section 330(a)(2), which “allows the Secretary to ‘require that the representative demonstrate…(D) competency to advise and assist persons in presenting their cases.” The Court says that it is this language, which “does not disclose who these covered ‘representatives’ are. But it does tell us what the representatives do – what their “practice” is, in the words of both subsections: representatives ‘advise and assist persons in presenting their cases.”

The Court then goes on to say that:

“This statutory equating of ‘practice’ with advising and assisting the presentation of a case provides the first strike against the IRS’ interpretation. Filing a tax return would never, in normal usage, be described as ‘presenting a case.’ At the time of filing, the taxpayer has no dispute with the IRS; there is no ‘case’ to present.”

If, as the Court says, filing a tax return was not included in the statutory framework of Circular 230 practice before the IRS, and if practice before the IRS only includes representing taxpayers who are involved in a dispute with the IRS, such as an appeal, then filing a determination letter application or an EPCRS VCP Application with IRS Employee Plans would also not be included.

After the opinion was issued by the Court, a representative of the IRS said the Service will be working with the Dept. of Justice to appeal this decision.

Time to Vote for Your Favorite Law Blog

The American Bar Association’s list of the top 100 blawgs is out, and voting is open. Voting is open from now to Friday, Dec. 21st.

Once again, no ERISA-related blogs are on the list, but, as we all know, everyone on the list, and everyone reading the list, either has a qualified plan, or should have a qualified plan, so, as Cub fans say, there is always next year. I am happy to see that TaxProf made the list again this year (even though I was expecting it because he has made every ABA Top 100 Blog list since the ABA has been compiling the list). TaxProf is written by Prof. Paul Caron of the University of Cincinnati College of Law. (Go Bearcats!) This is the last year I will share a UC Law connection with Prof. Caron because he is moving to Pepperdine at the end of this school year.

Oddest blog on the list is ZombieLaw by Josh Warren, which is devoted to documenting when judges and litigators cite to the living dead. I haven’t had a chance to read many entries, but am hoping it is somewhere between The Walking Dead and Jerry Garcia post-1995, but for lawyers and judges.

ABA Journal’s Blawg 100 Nominations Due Today

Today is the last day to nominate your favorite blog for the ABA Journal’s Blawg 100, which is the ABA Journal’s annual list of the most interesting legal blogs. Last year, only a handful of tax-related blogs made the list, and no ERISA-related blogs made the list, which is interesting when you consider that everyone contributing to the blawgs on the list, or nominating the blawgs on the list, or reading the blawgs on the list, all probably interact with ERISA on a more regular basis then they interact with divorce law or criminal law, which seem to dominate the list every year (think 401(k) plans, IRAs, QDROs, disability benefits, health care coverage, and/or the Affordable Care Act).

If you are thinking of nominating a blog, there are a number of terrific ERISA-related blogs. The ABA Journal just asks that you consider these factors when nominating a blog:

    1. They are primarily interested in blawgs (law-related blogs) in which the author is recognizable as someone working in a legal field or studying law in the vast majority of his or her posts;
    2. The blawg should be written with an audience of legal professionals or law students – rather than potential clients or potential law students – in mind;
    3. The majority of the blawg’s content should be unique to the blawg and not cross-posted or cut and pasted from other publications; and
    4. They are not interested in blawgs that more or less exist to promote the author’s products and services.

Nominating a blawg involves filling out a short form which includes a few sentences about why you like the blog. To nominate a blog, you can access the form here.

If you need a little help pondering a list of ERISA-related blogs before deciding who to nominate, Justia maintains a list of ERISA-related blogs.

A 401(k) Participant’s Tale of 404(a)(5) Fee Disclosure

In A 401(k) Fee Secret Revealed, Anne Tergesen writes about receiving her first 404(a)(5) fee disclosure notice. She is still a participant in a former employer’s 401(k) plan, and her 404(a)(5) fee disclosure notice says she paid 0.08% for the investments she selected for her 401(k) account.

Her former employer is the McGraw-Hill Companies. A quick check of Brightscope shows this plan has over 20,000 participants with just over $2 billion in assets in 2010.

Sometimes Someone Likes You Too Much

Every now and then, I notice something that I find interesting, and write about it. Last Thursday was one of those days. As I was working on a “Today in ERISA History” post, I noticed a trend with the U.S Supreme Court releasing ERISA-related opinions on Mondays and Thursdays, and wrote about here –

Another company, ERISA Pros, LLC, must have seen what I wrote, liked it, and reposted it on their ERISA Wonk website here – a href=”

Like any writer, I like when other people like what I write. Writing about ERISA is not easy, and it takes considerable time and thought every day. Ask any of the ERISA attorneys who blog about ERISA on a regular basis, and they will say the same thing.

They may see something I wrote, or I may see something they wrote, we quote a couple of words from it, properly attribute it to the person who wrote it, and link to where they originally posted it, as part of a new original article. On average, the quote will be 1% or less of the content of the new original article that we write.

How many words can you post before properly attributing it and linking back to the original post? The Associated Press says it is 4 words. Other aggregators may use a sentence or two before properly attributing the quote and linking back to the original post. Liking it so much that someone screen-scrapes most or all of the original article and republishes an unauthorized copy on their website is not okay.

If you may think it is nice that ERISA Pros, LLC decided that something I wrote was worthy of including on their ERISA Wonk website and I should be happy about it, consider this – ERISA Pros, LLC uses their ERISAWonk webpage to drive traffic to their website. ERISA Pros, LLC does the same thing my company does (we are competitors). So there is nothing nice about “borrowing” my original content to promote their business.

The way the Internet works compounds this even further. Their website, ERISAWonk, is picked up by other websites, like Smart HR Manager published by the Thompson Media Group LLC, who lists it as one of their recommended blogs to read. Thompson probably does not realize that the blog they are recommending, ERISAWonk, is not posting original content but instead is republishing unauthorized copies of original content, and the blogs they should be recommending are the blogs of the authors who wrote the original content.

Update: ERISA Pros, LLC has not responded to my email but did remove the post I wrote about above. After writing this post, someone pointed out that another article I wrote is still posted on their website –

IRS Adding LinkedIn to Communicate About PTINs

News from the IRS today:

The IRS Return Preparer Office is expanding its social media presence in an effort to better communicate with and support the tax professional community. RPO is now on LinkedIn. Follow us to keep up-to-date on the latest changes in your profession. You will find the latest info on PTIN renewals, the Registered Tax Return Preparer Competency Test, the Special Enrollment Exam and continuing education requirements.

I followed the link, and it sent me to a company profile that I could follow. Not quite a LinkedIn group, so no ability to post discussions, but it is a good start and I’m looking forward to seeing what the IRS does on LinkedIn.

Free CLE About Nonqualified Deferred Compensation and 409A

On Wednesday, June 13, 2012, from 1pm to 2:30pm ET, the Practical Law Company is hosting a free webinar on Section 409A: Expert Advice on Avoiding Common Pitfalls. Attending the webinar will earn CLE credit in New York (CLE credit in Illinois, Texas and Virginia is pending).

Speaking at the webinar are Daniel L. Hogans with Morgan Lewis and Regina Olshan with Skadden, Arps, Slate, Meagher & Flom LLP.

The topics they will be discussing during the webinar are:

  • How to identify compensation arrangements subject to Section 409A;
  • Requirements for supplemental executive retirement plans (SERPS) linked to tax-qualified plans;
  • Payment types for stock right awards;
  • “Good reason” termination provisions in employment agreements;
  • Avoiding impermissible severance toggles; and
  • Considerations applicable to payments conditioned on execution and non-revocation of a release.

To attend, you register through Practical Law Publishing’s website.

ABC News on 401(k) Fee Disclosure

Today, ABC News ran a segment on the ABC Evening News about the fee disclosure regulations for 401(k) plans which take effect July 1, 2012. The segment was titled “401(k) Hidden Fees” and contains an example of the impact 0.5% fees have on a typical couple’s 401(k) account balance compared to the impact of 1.5% in fees. Phyllis Borzi of the Dept. of Labor appears in the video.

ABC News 401(k) Hidden Fees, May 30, 2012

Ethics for Benefits Lawyers CLE Teleconference by the ABA on May 31, 2012

On Thursday, May 31, 2012, at 1pm ET, the ABA’s Joint Committee on Employee Benefits is hosting a 90-minute teleconference on Ethics for Benefits Lawyers. To attend, you must pre-register through the ABA’s website.

The speakers are:

  • Gabriel J. Minc, Senior Tax Law Specialist, IRS Office of Employee Plans;
  • Bruce D. Pingree, Baker Botts LLP; and
  • John L. Utz, Utz & Miller LLC

The cost to attend is:

  • $175 general public;
  • $150 ABA Member; or
  • $125 Sponsoring section member

The ABA has requested MCLE ethics credit from a number of states. Check the ABA’s website for specifics on which states have approved CLE credit for attending this teleconference.

Today in ERISA History

April 20, 1995 – Lois Baker and David R. Baker launch, one of the first and largest electronic bulletin boards devoted to ERISA and employee benefits topics. It quickly receives numerous Best of the Web awards and its archives grow to become the largest depository of ERISA and employee benefits-related information available on the Internet.