IRS

Subscribe to IRS via RSS
markus-winkler-afW1hht0NSs-unsplash

Seyfarth Synopsis:  Over the years, plan sponsors and administrators have wrestled with the question of what to do with the accounts of participants who left employment years earlier and cannot now be located.  Notwithstanding their best efforts, plans continue to maintain accounts of participants who are either missing or unresponsive to plan correspondence (“missing participants”). On January 14, 2025, the DOL issued Field Assistance Bulletin (FAB) 2025-01 that allows sponsors and administrators of ongoing defined contribution (DC) plans to transfer unclaimed small accounts to a state unclaimed property fund of the participant’s last known address provided the fund satisfies certain requirements.

The issue of what to do with the accounts of missing participants is an age-old question. In 2014 the DOL issued FAB 2014-01, stating that an IRA was the preferred destination for unclaimed defined contribution (DC) plan accounts. That same FAB also acknowledged that IRAs may not be available for terminating DC plans, and suggested that in certain circumstances, a state unclaimed property fund or an interest-bearing FDIC-insured bank account might also be appropriate. More recently, the DOL became concerned that IRAs may not be the sole (or even most) appropriate destination for unclaimed plan accounts, as IRAs charge fees that often exceed the investment returns of small accounts, resulting in the account being eaten away by fees. In fact, when plan sponsors started looking to IRAs as the destination of its unclaimed account balances, the sponsors found it challenging to find an IRA provider who would accept all accounts, particularly small accounts, and that the limited choices resulted in front end, back end, and/or annual fees that would quickly exhaust the account balance. From the fiduciary perspective, many plan fiduciaries were reluctant to make such transfers. As time passed, however, more IRA providers became available and fees dropped. But not necessarily to zero.Continue Reading Missing Participants – What to do With Abandoned Accounts

micheile-henderson-lZ_4nPFKcV8-unsplash (4)

Seyfarth Synopsis: New proposed regulations issued by The Department of Treasury and IRS provide guidance on the provisions related to catch-up contributions that were included under SECURE 2.0 Act of 2022 (“SECURE 2.0”).

The recently issued proposed regulations address several changes to the catch-up contribution provisions made by SECURE 2.0, including the following:

  • Section 603,
…
dane-deaner-_-KLkj7on_c-unsplash (1)

Seyfarth Synopsis: On January 16, 2025, the IRS issued proposed regulations under Section 162(m) of the Internal Revenue Code of 1986 (the “Code”), which limit the amount of compensation a publicly held corporation may deduct for wages paid to its “covered employees” to $1 million per year. Section 162(m) has been amended over the years to expand the definition of a “covered employee,” which originally was limited to a corporation’s principal executive officer (“PEO”), principal financial officer (“PFO”), and its next three most highly compensated executive officers. Most recently, in 2021 the American Rescue Plan Act of 2021 (“ARPA”) amended the definition of “covered employee” to include, for tax years beginning after December 31, 2026, the corporation’s five highest compensated employees other than its PEO, its PFO and its next three most highly compensated executive officers. The proposed regulations provide guidance on determining and applying Section 162(m) to these next five most highly compensated employees.Continue Reading How Now, High Five? IRS Issues Proposed Regulations for the Expanded Definition of “Covered Employee” Under Section 162(m) that Applies Beginning in 2027

test

Seyfarth Synopsis:  Since September 2023, there have been at least 25 lawsuits filed claiming the ability to choose between using 401(k) forfeitures to reduce plan expenses or the plan sponsor’s contributions is a fiduciary choice, and that choosing to reduce the plan sponsor’s contributions constitutes a violation of ERISA’s fiduciary duties.  In the latest decision…