Caron Bletzer News

2014 Retirement Plan Limit Increases Announced

The IRS announced yesterday the new limits for 2014. The most important changes applicable to retirement plans are outlined below.

The §415(c)(1)(A) limit on total contributions to a defined contribution plan was increased from $51,000 to $52,000.

The §415(b)(1)(A) limitation on the annual benefit under a defined benefit pension plan increased from $205,000 to $210,000.

The dollar threshold for determining “highly compensated employee” status remains at $115,000, and the annual compensation limit under §401(a)(17) that governs the amount of compensation that may be considered in a defined contribution plan increased from $255,000 to $260,000.

The §402(g) elective deferral (employee contribution) limit and the “catch-up” contribution limit both remain unchanged at $17,500 and $5,500, respectively, for 401(k), 403(b) and most 457 plans.

Additionally, the taxable wage base for social security increased from $113,700 to $117,000.  For a full listing of changes, including those impacting IRAs, SEPs and SIMPLEs, please see  the IRS’ COLA Table.

C&B Runners Go the Distance

Congratulations to team Caron & Bletzer for their outstanding effort in the 21st Annual Cigna/Elliot Corporate 5K Road Race in Manchester, NH!  The race is a celebration of health and fitness and a great way to build team spirit.  Our women’s team finished 25th out of 116 teams while the men were 65th of 99.  Great job everyone! 

 

Team Caron & Bletzer

Team Caron & Bletzer

 

DOL Extends 404(a)(5) Participant Fee Disclosure Deadline

The Department of Labor (“DOL”) issued Field Assistance Bulletin (“FAB”) 2013-02 on July 22, 2013, extending the deadline for plan sponsors to make their second round of required 404(a)(5) participant fees disclosures.  The 404(a)(5) regulations, effective in 2012, required plan sponsors to provide certain fee disclosure information to participants by August 30, 2012.  The regulations also required that the disclosures be made annually to participants no later than the anniversary of the initial date they were provided in 2012.  For example, if in 2012 a plan sponsor provided the disclosures on July 31, 2012 then the 2013 disclosures would be due no later than July 31, 2013.

 

FAB 2013-02 extended enforcement of the 12 month deadline , as set forth by the regulations, to 18 months, effective for the second round of 404(a)(5) disclosures.  In the above example, the plan sponsor now has until January 31, 2014 to make their 2013 participant fee disclosures.  Assuming the disclosures are made on January 31, 2014, then going forward the next disclosures are due 12 months from that date.

 

This relief provides for a one time extension and may only be used once by plan sponsors.  Plan sponsors may only elect to use the extension if a plan administrator reasonably determines delay will benefit participants (for example, reducing plan administrative costs or by providing the information at a time more relevant to participant).  If a plan sponsor has already made the 2013 participant fee disclosures they may take advantage of the extension with their 2014 disclosures.  The FAB should allow plan sponsors to reduce costs by aligning the timing of fee disclosures with other required annual disclosures that typically occur around the beginning of a plan year.  This will prevent duplicative mailing costs and enable participants to consider the disclosures at the same time they receive other important plan disclosures.

 

The FAB also helps reduce the impact of deadline creep.  Interpreted literally, the regulations state that the participant fee disclosures are due by the anniversary of the previous disclosure.  So if a plan sponsor provides the fee disclosures earlier than the latest possible deadline, then over time the deadline will become earlier and earlier.  The DOL has announced they are considering changing the regulations to allow a 30-45 day disclosure window to prevent this from occurring and has requested public comments.

 

It is important to note that FAB 2013-02 does not extend the deadline of the required 408(b)(2) covered service provider fee disclosures to plan sponsors or any other required plan disclosures.

The Impact of the Unconstitutionality of DOMA on benefit plans

The Supreme Court of the United States, in its decision handed down on June 26, 2013, found the Defense of Marriage Act, which was enacted in 1996, violates the U.S. Constitution.  The decision will have wide-ranging implications for individuals and employers, and we will begin to see some of these immediately.

Same sex married couples must now be afforded the same treatment under federal law as any married couple, at least in states that recognize their marriages.  Retirement plans governed by ERISA, a federal statute, must now recognize legally married same sex couples for all purposes in plan administration, including spousal consent for distributions, loans and beneficiary designations, where required, death benefits, QDROs, annuity payment options, spousal rollovers and death benefits.  Additionally, legally married spouses will be eligible to participate in a myriad of welfare benefit plans, including health insurance plans, with no adverse federal tax consequences.

We expect to see government agencies issue guidance on many of the changes resulting from this ruling over the next several months.  All employers should be sure to consider, in consultation with their benefits counsel and other employee benefits advisors, the impact that the death of DOMA has on their plan administration, and be sure that they are taking all necessary steps to follow the law.

In-Plan ROTH conversions

As a result of the dreaded fiscal cliff negotiations, on January 1, 2013, Congress passed the American Taxpayer Relief Act of 2012.  One of the provisions of this bill was to expand in-plan Roth conversions.  These new provisions may appeal to individuals who expect their tax rates to increase or to wealthy individuals who want to leave their retirement accounts to heirs. 

In-plan Roth conversions were first introduced in 2010.  At the time the Small Business Jobs and Credit Act was passed to allow plan sponsors to permit 401(k), 403(b), or 457 plan participants to convert employee pre-tax accounts to Roth accounts.  However, this conversion feature was limited to amounts that were currently eligible for distribution from the plan.  Generally, this limited most active participants to only being able to do an in-plan Roth conversion if they were eligible to take a 59 ½ in-service distribution.

The American Taxpayer Relief Act greatly expands a participant’s ability to do an in-plan Roth conversion.  Instead of being limited to amounts that would be otherwise eligible for a distribution, the new legislation allows for in-plan Roth conversion of any employee contribution accounts.  Under the law any Roth conversions will be taxed in the year of the conversion.  This is a change from the prior legislation which allowed taxes from a Roth conversion to be paid over a two year period.

It is important to note that in order for a plan sponsor to allow in-plan Roth conversions their plan document must allow for Roth contributions and must be formally amended to permit in-plan Roth conversions.

C&B Tax Presentation on Itemized Deductions – Rescheduled for Wednesday March 20th

Caron & Bletzer, PLLC will be sponsoring a presentation entitled “Tax Deductions on Your 1040” at the Kingston Library on Wednesday, March 20, 2013 at 12:00.  The presentation will last about 45 minutes and be led by Kelly Root, CPA and Nora Tellifson, CPA.  Refreshments will be offered.  The Kingston Library is located at 2 Library Lane, Kingston, NH.  Come join us for your lunch hour!

IRS Announces Update to EPCRS

At long last, the IRS has released their much-anticipated updated Employee Plans Compliance Resolution System (“EPCRS”) guidance, that allows, among other things, 403(b) plans to fully participate in the correction opportunities that program provides.  Revenue Procedure 2013-12 was released late in the afternoon on New Year’s Eve.  The 148-page document provides welcome guidance to 403(b) plan sponsors that have been unable to correct errors under existing guidance with any certainty.

In general, the Rev. Proc. allows 403(b) plans to correct operational errors in the same manner as qualified plans.  It specifically allows these plans to self-correct significant operational errors within specified time frames although they do not have determination letters.  It provides a mechanism for plan sponsors who failed to timely adopt a written plan document in compliance with the 2007 regulations to do so under VCP.  The Rev. Proc. further notes that it is available to correct failures of plans to comply with section 403(b) prior to 2009, but since there was no written plan document requirement prior to that time (under the Internal Revenue Code, ERISA being another story entirely), there is no need to provide relief for failure to follow plan terms earlier than 2009.

In general this guidance is a gift to the retirement plan community, especially 403(b) plan sponsors who have been in limbo with regard to correcting errors.  The IRS will now be able to consider corrections that may involve plan document amendments.   If you think that you may benefit from voluntary correction of known errors, we suggest discussing the new guidance with ERISA counsel, and your auditors, if applicable.

Hardship Distribution and Participant Loan Requirements Relaxed for Hurricane Sandy Victims

The Internal Revenue Service (“IRS”) has recently relaxed 401(k) rules in order to provide relief to those adversely affected by Hurricane Sandy.  Participants in 401(k) and 403(b) plans, regardless of where of where they are live or work, may take a hardship distribution and use it to assist themselves, dependents, parents or grandparents who lived or worked in the disaster area.  Click the following link for a list of those counties (http://www.irs.gov/uac/Newsroom/Help-for-Victims-of-Hurricane-Sandy).  Further, the IRS will waive the requirement that participant contributions be suspended for six-months following a hardship distribution.  Plans are also allowed to relax any documentation requirements that they normally have in place for hardship distributions.

Under this relief plans are also able to make participant loans before the plan is formally amended to allow them.  This also applies to hardship distributions.  If the plan does not currently allow such distributions they can permit them for the above reasons and do a formal amendment later.  To qualify for this relief withdrawals must be made by February 1, 2013.  For more detailed information please see IRS Announcement 2012-44 (http://www.irs.gov/pub/irs-drop/a-12-44.pdf).

Ann Driscoll Promoted to Principal

We are very pleased to announce that effective July 1, 2012, Ann T. Driscoll, CPA has joined the partnership as Principal.  Ann has been with the firm since 1999.  Prior to joining Caron & Bletzer, Ann served as Finance Manager at Healthsource Preferred, and as Audit Manager at Coopers & Lybrand (now PricewaterhouseCoopers, LLP).  While at the firm, Ann has concentrated her practice in ERISA and runs many of our most complex benefit plan engagements, including medical plan audits.  Her wealth of knowledge and experience have helped propel us to a leadership position in our niche area of employee benefit plan audits, and we are very pleased to announce her promotion.

2013 Retirement Plan Limits Announced

On October 18, 2012, the IRS announced the new limits for 2013 and for a second year in a row some of the limits are increasing.

The elective deferral (employee contribution) limit increases from $17,000 to $17,500 for 401(k), 403(b) and most 457 plans, however the “catch-up” contribution limit for participants over age 50 in those plans remains unchanged at $5,500.

The §415(c)(1)(A) limit on total contributions to a defined contribution plan was raised from $50,000 to $51,000.

The §415(b)(1)(A) limitation on the annual benefit under a defined benefit pension plan increased from $200,000 to $205,000.

The dollar threshold for determining “highly compensated employee” status remains at $115,000, and the annual compensation limit under §401(a)(17) that governs the amount of compensation that may be considered in a defined contribution plan increased from $250,000 to $255,000.

Additionally, the taxable wage base for social security increased from $110,100 to $113,700.  For a full listing of changes, please see COLA Table.