Year-End
Compliance Workshop
Fall 2007
Resource Information
Compliance Call Center
» 1-877-872-3244, Option 3
Plan Technical Support
» 1-877-872-3244, Option 1
Agenda
»
Plan compliance services overview
»
Plan compliance services timeline
»
Team reporting structure and escalation procedures
»
2008 Focus and initiatives
»
Plan Service Center (PSC) demo
»
Legislative changes
Plan Compliance Core Services
Plan Year-End Non-Discrimination Testing:
»
On-line data collection tool
»
HCE/Key determination
»
Top heavy determination
»
Eligibility calculation
»
Coverage testing
»
Plan deferral limits (HCE and NHCE)
»
402(g) monitoring
»
Age 50 catch-up
»
Annual additions
»
Employer/forfeiture allocations
»
ADP/ACP Non-discrimination testing
»
E-mail notification of testing results summary
»
On-line results delivery and storage
»
Auditor support (i.e. coverage testing, etc.)
Plan Compliance Core Services
Signature Ready IRS Form 5500 Preparation:
» Reconcile conversion assets
» IRS Form 5558 extension filing
» IRS Form 5330 excise tax reporting for refunds made after deadline
» E-mail notification of completed IRS Form 5500 packet
» On-line delivery and storage
» Respond to DOL inquiries
» Auditor support
Other Compliance Services:
» Mid-year ADP/ACP testing
» Assist with self correction methods (SCP,VCP filings)
» Assist with late IRS Form 5500 filings (DFVC filings)
Plan Compliance Non-Core Services
»
Multiple scenario allocations/illustrations
»
Cash to accrual financial reporting
»
Revised testing due to census revisions by client
»
Benefits, Rights, and Features testing under IRC §401(a)(4)
Plan Compliance Services Timeline
Census data request packet
December 3, 2007
Confirmation e-mail
December 14, 2007
Confirmation phone call
December 21, 2007
First follow-up e-mail
January 15, 2008
Census data deadline
January, 31, 2008
Excess ADP/ACP refund deadline
March 14, 2008
IRC §402(g) letter (failures only)
March 24, 2008
Second follow-up e-mail
IRS Form 5500 (if data rec’d by 5/1/08)
April 15, 2008
July 1, 2008
IRS Form 5558 extension letter
July 15, 2008
IRS Form 5500 partial - deadline letter
July 15, 2008
IRS Form 5500 deadline
July 31, 2008
IRS Form 5500 deadline w/extension
Non-responsive client letter
For plan years ending 12/31/07
October 15, 2008
November 3, 2008
Plan Compliance Team
»
Tricia Day, APA
»
11+ years Financial Industry experience
»
M.S. Management and Organizational Development, University of Colorado
»
B.A. Business Administration, California State University
»
Denver Location
»
Brendon Walkenhorst
»
9+ years Financial Industry experience
»
B.S. Finance, Fort Lewis College
»
Denver Location
»
Krissy Ptacek
»
1+ year Financial Industry experience
»
Denver Location
»
Kris Conley
»
6+ years Financial Industry experience
»
B.S. Finance, University of Colorado
»
Denver Location
Plan Compliance Team
»
Jeri Steen
»
18+ years Financial Industry experience
»
B.A. Business Administration, Colorado State University
»
M.B.A., University of Phoenix
»
Denver Location
»
Michael Schleelein
»
M.B.A. Masters of Business Administration, National University
»
Denver Location
»
Anthony Reed
»
3+ years Financial Industry experience
»
Denver Location
»
Ryan Strankowski
»
3+ years Financial Industry experience
»
B.S. in Economics, University of Wisconsin
»
Milwaukee Location
Plan Compliance Team
»
Dawn Benavides
»
12+ years Financial Industry experience
»
University of Wisconsin and UWWC
»
Milwaukee Location
»
Tim Zabinski
»
10+ years Financial Industry experience
»
M.B.A. Masters of Business Administration, Marquette University
»
Milwaukee Location
»
Shelley Stefaniak
»
10+ years Financial Industry experience
»
B.A. in History, University of Milwaukee
»
Milwaukee Location
»
Yana Parfenovich
»
B.S. Finance, University of Wisconsin
»
Milwaukee Location
»
Kevin Pomazal
»
2 years Financial Industry experience
»
Milwaukee Location
Plan Compliance Management Team
»
Colleen Wolfe, Assistant Manager
»
9+ years Financial Industry experience
»
B.S. University of Wisconsin
»
Milwaukee Location
»
Kris Mullihan QPA, QKA, Associate Manager
»
27+ years Financial Industry experience
»
B.A. Business Administration, University of Wisconsin
»
Milwaukee Location
»
Kelli Hasken, Associate Manager
»
16+ years Financial Industry experience (5+ years with GWRS)
»
B.A. Business Administration, University of Iowa
»
Held Series 6
»
Denver Location
»
Tracy Nimmer APA, Associate Manager
»
12+ years Financial Industry experience (10+ years with GWRS)
»
B.A. English/History, University of Missouri
»
Denver Location
»
Frank Porter APA, QKA, QPA, AVP
»
16+ years Financial Industry experience (13+ years with GWRS)
»
Member of the American Society of Pension Professionals and Actuaries Government Affairs
401(k) Sub-committee
»
Author of various articles published by the Society and added to the compendium of reading
materials for the Certified Pension Consultant exams
Plan Compliance Escalation
Procedures
»
FASCore compliance analyst will respond to/answer inquires as follows:
– Respond same day on calls received in the morning (mountain
time)
– Respond in the morning the following day, if calls received in
the afternoon
»
If the compliance analyst has not provided a resolution within three
business days, please forward the request to Colleen Wolfe, Kelli
Hasken, Tracy Nimmer or Kris Mullihan
»
If you do not receive a resolution within one business day, the request
should be forwarded to Frank Porter
Plan Compliance Services 2008 Focus
»
Compliance Call Center
» Year testing questions (including census upload)
» 5500 related questions
» Employer allocation liaison
»
On-Demand Testing
On-Demand Testing
»
Client will have the ability to create and test on any period within the
plan year
»
Link to video demonstration which highlights the process
»
Fully automated process
»
5 day turnaround time
»
Questionable data report
»
Unlimited number of tests allowed
»
Online results delivery and storage
»
Contact compliance call center for support
2007/2008 Limits for Qualified
Plans
2007
2008
$15,500
$15,500
$5,000
$5,000
»
402(g) Limit for 401(k) and 403(b) deferrals1:
»
Catch-up Contribution Limit1:
»
Limit on Annual Additions 415(c):
$45,000
$46,000
»
Compensation Limit 401(a)(17):
$225,000
$230,000
»
Highly Compensated Employee 414(q):
$100,000
$105,000
»
Officer compensation 416(i)(1)(A)(i):
$145,000
$150,000
»
Taxable Wage Base:
$97,500
$102,000
•
1Combined
limit for 401k and Roth 401k contributions
Testing Process Milestones
Step 3
Step 1
Census packet
mailed to client
indicating data
ready for
review/submission
During Implementation
data is mapped from
HR/Payroll data file
Step 4
Step 2
Recordkeeping system
stores data from
each payroll file
Recordkeeping
system updates
Client reviews
data via web
site, makes
corrections,
and submits
data for
testing
Step 8
Participant notified
of applicable
corrections
Contribution/Distribution
Processing
Step 5
Step 7
Client accesses results and
follows steps for any
applicable corrections
Step 6
Analyst e-mails
summary to client and
directs client to web site
Analyst
performs
tests and
submits
results to
web site
Pension Protection Act and
Regulatory Updates
Automatic Enrollment
»
Eligible Automatic Contribution Arrangement “EACA”:
» Annual notice requirement
» ADP/ACP tests - 6 months to refund excess contributions
» Provides for default investment
»
Qualified Automatic Contribution Arrangement “QACA”
» Must meet EACA requirements
» Automatic Increase
» Safe Harbor contribution
» Match of 100% of the first 1%, plus 50% of the next 5%
(3.5% total) OR
» Non-elective of 3%
» No ADP/ACP testing
» Not subject to Top Heavy if only safe harbor contributions
» 2-year cliff vesting allowed
Notice and Consent Disclosure for
Distributions
»
Effective for 2007 plan years
»
Plans required to provide applicable distribution notices no less than 30
or more than 180 days before distribution commences
»
Notice must include description of participant’s right to defer receipt of
distribution and consequences of failure to defer
»
Applicable distributions notices include:
» Rollover notice - IRC 402(f)
» General consent notice - IRC 411(a)(11)
» Qualified joint and survivor annuity notice - IRC 417
»
Notice 2007-7 answers questions regarding deadlines
»
Can comply in “good faith” until IRS issues regulations
Rollovers by Non-Spouse
Beneficiaries
»
Non-spouse beneficiaries will now be able to roll distributions
from a qualified plan, 403(b) annuity or governmental 457(b) into
an IRA
»
Notice 2007-7 allows plan to provide without amending plan.
(Technical corrections will require all plans to provide provision)
»
Required minimum distribution rules available to inherited IRA
» 5 year rule – must rollover within 5 years = must take
distribution from IRA within 5 years
» Life expectancy rule - distributions to begin by December
31 of the year following the year of the participant’s death
Quarterly Participant Statements
»
Effective for plan years after December 31, 2006, defined
contribution plans must provide a benefit statement to participants
with individually directed accounts every quarter and to all other
participants and beneficiaries once per year
»
The benefit statement must include:
» a valuation of the participant’s account,
» a statement regarding the need to diversify investments, and
» a description of any limitations or conditions on the participant’s
ability to control his or her investments.
» Link to DOL website for more information
»
DOL issued Field Assistance Bulletin 2006-3 to provide additional
interim guidance
Field Assistance Bulletins
»
»
FAB 2006-3
» Allows for good-faith compliance until further guidance is
issued
»
Clarifies dates for furnishing statements
» Good-faith of 45 days following the end of quarter
»
Allows information to be provided from multiple sources
»
Contains sample diversification explanation
»
Provides acceptable guidelines for the use of electronic
statements
FAB 2007-3
» Provides profit sharing plans earlier of 5500 filing date or due
date of 5500 filing
Increased Bonding
»
Effective for plan years beginning on or after January 1, 2008
»
Maximum bond for plans with employer securities is the lesser of
» 10% of plan assets or
» $1,000,000
EGTRRA Remedial Amendment Period
Restatements
»
EGTRRA remedial amendment period for individually designed plans –
extended to the end of the applicable 5-year remedial amendment cycle
(Rev. Proc. 2005-66)
»
Rev. Proc. 2007-44 updates and supersedes Rev. Proc. 2005-66
» “on-cycle” review status for certain “off-cycle” determination letter filings
» Clarifications on the 6-year cycle for pre-approved plans
» Expanded guidance on the coordination between remedial amendment
periods
» Special rules for tax-exempt organizations and governmental entities
»
Rev. Proc. 2007-49 provided clarification of Rev. Proc. 2007-44 and
provided EPCRS updates for streamlined VCP filings
»
Prototype document restatement scheduled for the 2nd quarter of 2008
Current Developments
»
Beyond the number of PPA provisions, new notices, and IRS/DOL
guidance, we also received the following:
»
»
»
»
Final Code 415 regulations
Partial termination guidance
Final Roth 401(k) regulations
Final 403(b) regulations
Final 415 Regulations
»
»
»
»
Final 415 regulations incorporates IRS guidance in effect since the
mid-1980s
Effective for Limitation Year beginning on or after 7/1/2007
Mainly effects DB plans
Treatment of post-severance compensation changes
» Severance pay is not included as 415 compensation
» Plan may exclude post-severance compensation
» Raises issues regarding ADP/ACP test
Final Roth Regulations
»
»
»
»
»
Final Roth regulations very similar to the proposed regulations
Effective for plan years beginning on or after 1/1/2007
Retains rules regarding “qualified”distributions
» Must satisfy “5-year rule” and must be a qualified event
» If not qualified distribution the employee is taxed on earnings
(not deferral amount)
Clarifies rollover rules from Roth 401(k) and Roth 401(b) plans
Announcement 2007-59 allows a safe harbor 401(k) plan to add
Roth provisions midyear
» No supplemental notice requirement
» Must distribute new election forms
» Must distribute new SMM
Final 403(b) Regulations
»
Effective Dates
» Taxable years beginning January 1, 2009
» Prior to 2009, may comply with either current law or the final
regulations so long as they are applied on a consistent and
reasonable basis
» Delayed effective dates apply to collectively bargained plans,
as well as certain church and governmental plans
»
Changes Effective September 25, 2007
» Life Insurance – no new purchases allowed
» 90-24 Transfers - new restrictions apply
(Additional IRS Guidance Expected Soon)
Final 403(b) Regulations, cont.
»
Plan Requirements
» All 403(b) plans must adopt a written plan no later than
January 1, 2009
» Universal Availability – repeal of a number of administrative
exemptions under Notice 89-23
» Discrimination Rules – repeal of good faith compliance
standard provided under Notice 89-23. Non-discrimination
rules that currently apply to 401(k) plans now apply to ERISAcovered employers
» Field Assistance Bulletin 2007-2 confirms employers can
comply with the final regulations and still remain within the DOL
safe harbor ERISA exemption
Final 403(b) Regulations, cont.
»
Contributions
» Elective Deferral Ordering - use of special 403(b) catch up and
age 50 catch up
» Contributions of Sick and Vacation Pay
» Remitting Contributions to Contracts
» Post Severance Contributions
»
Separate Accounting Requirements
» Vesting – use of a separate account to hold non-vested
accounts
» 415 excess – use of a separate account to hold 415 excess
Final 403(b) Regulations, cont.
»
Plan Termination
» Plan termination is now allowed if all the requirements of the
final regulations are met and benefits distributed as soon as
practicable
» Distributions do qualify for rollover
» Plan may terminate prior to January 1, 2009 without a
written plan so long as all other regulation requirements are
satisfied
» Employer may not establish another 403(b) plan for 12
months
Final 403(b) Regulations, cont.
»
Failure to Satisfy 403(b)
» Defects relating only to a participant’s contract (i.e.
violation of loan limits) will only disqualify that
participant’s contract
» Failure to maintain a plan document, a nondiscrimination
failure or an employer eligibility failure will affect all
contracts under the plan
IRS Identifies Plan Potential Mistakes
http://www.irs.gov/pub/irs-tege/401k_mistakes.pdf
Plan Potential Mistakes, cont.
Plan Potential Mistakes, cont.
Plan Potential Mistakes, cont.
Plan Potential Mistakes, cont.
Summary
»
Plan compliance services overview
»
Plan compliance services timeline
»
Team reporting structure and escalation procedures
»
2008 Focus and Initiatives
»
Plan Service Center (PSC) Demo
»
Legislative Changes
»
Question and Answer
Thank You!