The American Retirement Association has submitted a comment letter to the IRS concerning the IRS’ 2018-2019 Priority Guidance Plan.
- will resolve significant issues relevant to many retirement plan sponsors and practitioners (not just a small group);
- will promote sound tax administration by helping plan sponsors and practitioners to maintain retirement plans in compliance with tax code qualification rules; and
- can be drafted in a manner that can be easily understood and applied by plan sponsors and practitioners.
Following are the areas the ARA considers most worthy of IRS attention, in order of importance.
Update and Expand EPCRS
The ARA suggests that the IRS “continue to improve and expand the program, particularly the self-correction program as outlined in our April 4, 2018 comment letter and for overpayments, as outlined in a recent comment letter; plan loan failures, as outlined in an earlier comment letter; and for certain 403(b) plan issues.”
Guidance on Changes Made by Recent Legislation
The ARA recommends that guidance be issued as soon as possible so that plan administrators can appropriately implement changes made by the Tax Cuts and Jobs Act and the budget bill this year that will affect retirement plans, and provide sufficient transition relief, particularly for provisions that are already effective. “Moreover,” says the letter, “this guidance should confirm that the hardship changes are optional and therefore a plan sponsor can elect to retain the six-month suspension period and/or elect to require loans to be taken first without loss of safe harbor hardship and/or safe harbor 401(k)/(m) status.”
Guidance Regarding the Aggregation Rules for Affiliated Service Groups under Section 414(m)
The ARA recommends that the IRS provide:
- guidance on the determination of affiliated service groups and management groups;
- guidance on the impact of overlapping controlled groups and affiliated service groups; and
- a method to obtain a ruling on affiliated service group status, either by reopening the determination letter process or permitting private letter rulings.
Determination Letter Program
The ARA recommends that the IRS address issues related to the changes to the determination letter program for individually designed plans.
Church Plan Issues
The ARA recommends that the IRS provide guidance related to church plans. It considers guidance to be particularly important in relation to 403(b) plan issues and in light of the PATH Act changes in 2015, and that this also should include guidance on the mergers and transfers between 401(a) plans and 403(b) plans.
Mid-Year Changes to Safe Harbor Plans
The ARA thanks the IRS for its recent steps to address items impacting safe harbor plans, and recommends that the IRS address certain issues related to mid-year changes to safe harbor plans.
The ARA recommends that the IRS work jointly with the Department of Labor to develop comprehensive guidance regarding a plan sponsor’s obligation concerning missing participants.
Merger and Acquisition Issues
The ARA recommends that the IRS address issues that result from mergers and acquisitions impacting 401(k) and 403(b) plans (including the treatment of safe harbor plans), the determination of highly compensated employees (HCEs) and the determination of years of service credit.
Lifetime Income Guidance
The ARA suggests that the IRS provide general guidance that helps address certain open tax issues such as nondiscrimination testing and the application of the QJSA/QPSA requirements to lifetime income products to put them on an equal footing with other types of investment products.
The ARA recommends that the IRS publish “long-awaited guidance” on the definition of a governmental plan under Code Section 414(d).
Update Revenue Procedure 2000-40
The ARA recommends that the IRS give priority to guidance on approval of:
- a change in valuation date;
- a change in method from fair market value to an asset averaging method; and
- a change from one set of segment rates to another or between segment rates and the full yield curve.
Retirement Plan Deadlines
The ARA recommends that the IRS provide guidance on which retirement plan deadlines are extended when a deadline falls on a weekend or holiday. It further suggests that the RIS publish guidance on the deadline for amending 403(b) plan for regulatory and discretionary changes.
Expenses Included in Target Normal Cost
The ARA recommends that the IRS provide guidance on pension plan expenses that are and are not to be included in the Target Normal Cost.
Hybrid Plan Regulations
The ARA recommends that the IRS finalize its 2010 proposed regulations applicable to hybrid plans, particularly regarding projecting interest crediting rates for nondiscrimination and accrual rules purposes.
Top 25 Nondiscrimination
The ARA recommends that the IRS provide guidance under the “High 25” rule, particularly when the plan covers only HCEs, to coordinate the use of certain terms under that rule with terms used in Code Section 430 and to review the restrictions under the High 25 rule in light of the Code Section 436 benefit restrictions.
Reduce Regulatory Burdens
The ARA recommends that the IRS revise existing regulations in order to support innovation and reduce administrative burdens on the retirement plan system, with a focus on simplifying and creating uniform rules for electronic disclosure under ERISA and the Internal Revenue Code and permitting plan sponsors to choose electronic communications as the “default” method for required disclosures.