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Pension News in 2011

The following list tracks important guidance that has been released in 2011. These items are summarized in detail, with appropriate commentary, in our quarterly newsletter, eRISA Update. See our Newsletters page to sign up for eRISA Update.

Legislative Developments

  • 1994 Puerto Rico Internal Revenue Code replaced by the 2011 Puerto Rico Internal Revenue Code (January 31, 2011) (particularly section 1081.01 (formerly section 1165 of the 1994 code; also see http://www.groom.com/media/publication/918 _The%20New%20Puerto%20Rico%20Internal%20Revenue%20Code.pdf (article by The Groom Law Group), and http://www.mcvpr.com/CM/McVAlerts/Retirement-Plans- Impacted-by-New-PR-Internal-Revenue-Code.pdf (article by McConnell Valdés LLC)

Treasury Regulations

  • Revisions to FBAR regulations to provide clarification of filing requirements; revisions to FBAR instructions [Citation: FinCEN Reg. §1010.350 (redesignation of former §103.24), 76 F.R. 10234 (February 24, 2011) (issued by the Financial Crimes Enforcement Network (FinCEN), a bureau of the Treasury Department)]
  •  Amendments to Circular 230 finalized; registered tax return preparer practitioner designation established [Citation: Treas. Reg. §10.0-10.9, 10.20, 10.25, 10.30, 10.34, 10.36, 10.38, 10.50 - 10.53, 10.60-10.69, 10.72, 10.76-10.82, 10.90, 31 C.F.R. Part 10, 76 F.R. 32286 (June 3, 2011), available at http://www.gpo.gov/fdsys/pkg/FR-2011-06-03/pdf/2011-13666.pdf]
  •  Final regulations update standards for enrolled actuaries to reflect changes in the law and industry practice [Citation: 20 C.F.R. Part 201, Reg. §§901.0, 901.1, 901.10-901.12, 901.20, 901.31, 901.32, 901.47 and 901.72, 76 F.R. 17762 (March 31, 2011) (http://www.gpo.gov/fdsys/pkg/ FR-2011-03-31/pdf/2011-7573.pdf)]
  • Regulations set fees for the RTRP competency exam and fingerprinting [Citation: Treas. Reg. §300.12 and redesignation of §300.12 (relating to PTIN user fees) as §300.13, 76 F.R. ____ (November 25, 2011), Prop. Treas. Reg. §300.14, 76 F.R. 59329 (September 26, 2011), available at http://www.gpo.gov/fdsys/pkg/FR-2011-09-26/pdf/2011-24771.pdf]
  • Notice of advance rulemaking on definition of governmental plans [Citation: Determination of Governmental Plan Status, 76 F.R. 69172 (November 8, 2011)]
  • Notice of advance rulemaking on definition of Indian tribal government plans [Citation: Indian Tribal Government Plans, 76 F.R. 69188 (November 8, 2011)]

IRS Guidance

  • Annual update of user fee procedure for 2011 [Citation: Rev. Proc. 2011-8, 2011-1 I.R.B. (January 3, 2011)]
  • Annual update of determination letter procedure for 2010 [Citation: Rev. Proc. 2011-6, 2011-1 I.R.B. (January 3, 2011)]
  • IRS guidance on special amortization elections allowed under the Pension Relief Act of 2010 for 2008-2011 plan years [Citation: Notice 2011-3, 2011-2 I.R.B. (January 10, 2011)]
  • Transition relief for certain transfers from qualified plans to non-qualified foreign trust or to Puerto Rico trust extended for one year [Citation: Rev. Rul. 2011-1, 2011-2 I.R.B. (January 10, 2011)]
  • Group trust ruling (Rev. Rul. 81-100) expanded to cover governmental section 457(b) plans [Citation: Rev. Rul. 2011-1, 2011-2 I.R.B. (January 10, 2011)]
  • IRS provides interim guidance on PTIN requirements; exempts Form 5500 preparers from PTIN requirement [Citation: Notice 2011-6, 2011-3 I.R.B. (January 18, 2011)]; FAQs add Forms 5558 and 8955-SSA as exempt from PTIN requirements, provide a refund procedure for PTINs obtained by individuals who do not require them by reason of IRS guidance [Citation: New Requirements for Tax Return Preparers (FAQ-9 under "Scenarios"), http://www.irs.gov/taxpros/article/0,,id=218611,00.html#Requirements, Additional Frequently Asked Questions About New Requirements for Tax Return Preparers (FAQ-4 under "Fees"), http://www.irs.gov/taxpros/article/0,,id=230145,00.html]
  • IRS issues 2011 covered compensation table [Citation: Rev. Rul. 2011-3, 2011-4 I.R.B. (January 24, 2011)]
  • Refund procedure for unnecessary PTINs [Citation: http://www.irs.gov/taxpros/article/0,,id=230145,00.html#Fees (FAQ #4 under the "Fees" questions)] IRS is allowing individuals to request a refund for the fees paid with respect to obtaining a PTIN before IRS announced in Notice 2011-6 that they were not required to have a PTIN (e.g., an individual who only prepares Forms 5500, W-2, 1099)
  •  FAQs add Forms 5558 and 8955-SSA as exempt from PTIN requirements, provide a refund procedure for PTINs obtained by individuals who do not require them by reason of IRS guidance [Citation: New Requirements for Tax Return Preparers (FAQ-9 under “Scenarios”), http://www.irs.gov/taxpros/article/0,,id=218611,00.html#Requirements, Additional Frequently Asked Questions About New Requirements for Tax Return Preparers (FAQ-4 under “Fees”), http://www.irs.gov/taxpros/article/0,,id=230145,00.html]
  • Definition of "readily tradable" employer securities prescribed by IRC §401(a)(35) regulations applicable to other specified tax code sections [Citation: Notice 2011-19, I.R.B. 2011-11 (March 11, 2011)]
  • IRS provides guidance on how a 403(b) plan successfully terminates [Citation: Rev. Rul. 2011-7, 2011-10 I.R.B. (March 7, 2011)]
  •  2009 Form 8955-SSA now available; additional extension for 2009 & 2010 forms; instructions for electronic filing released [Citation: IRS Employee Plans News 2011-5, http://www.irs.gov/pub/irs-tege/epn_2011_5.pdf (June 22, 2011), Rev. Proc. 2011-31, I.R.B. 2011-22 (May 27, 2011)]
  •  Revised Form 5558 includes extension request for Form 8955-SSA [Citation: Form 5558 (Rev. June 2011), available at IRS website (http://www.irs.gov/pub/irs-pdf/f5558.pdf)]
  •  Delays for FBAR filings for certain persons [Citation: FinCEN Notice 2011-1 (May 25, 2011), available at http://www.fincen.gov/statutes_regs/guidance/pdf/FBAR-Extension-Notice-5-25-11-Clean.pdf FinCEN Notice 2011-2 (June 17, 2011), available at http://www.fincen.gov/statutes_regs/guidance/pdf/ FBARFinCENNotice.pdf, IRS Notice 2011-54, I.R.B. 2011-29 (July 15, 2011) (advance release on June 16, 2011)]
  • Voluntary reclassification of workers relief program [Citation: Announcement 2011-64, I.R.B. 2011-41 (October 7, 2011), available at http://www.irs.gov/pub/irs-drop/a-11-64.pdf]; IRS and DOL coordinate efforts to stop misclassification of employees as independent contractors [Wage and Hour Division News Release, September 19, 2011, available at http://www.dol.gov/ opa/media/press/whd/WHD20111373.htm]
  • Form 5316 released [Citation: Form 5316, Application for Group or Pooled Trust Ruling, available at http://www.irs.gov/pub/irs-pdf/f5316.pdf]
  • Revised Form 5300 issued [Citation: Form 5300 (Rev. April 2011), http://www.irs.gov/pub/irs-pdf/f5300.pdf]
  • IRS requires interested party notice as a condition for obtaining a ruling that a plan is a church plan under IRC §414(e) if the plan will be a nonelecting church plan [Citation: Rev. Proc. 2011-4, I.R.B. 2011-39 (September 23, 2011), available at http://www.irs.gov/pub/ irs-drop/rp-11-44.pdf]
  • Follow-up guidance on PTINs and the RTRP practice classification [Citation: Notice 2011-80, I.R.B. 2011-43 (October 21, 2011), available at http://www.irs.gov/pub/irs-utl/n-11-80.pdf, IR-2011-96 (September 21, 2011), available at http://www.irs.gov/newsroom/article/0,,id=246227,00.html)]
  • Updated procedure addresses applications for opinion and advisory letters; launches second RAP cycle for Pre-Approved Plans [Citation: Rev. Proc. 2011-49, I.R.B. 2015-44 (October 28, 2011), as modified by Announcement 2012-3, 2012-4 I.R.B. (January 23, 2012)]
  • Limited amendment extension to 2011 plan year for specific PPA 2006 provisions relating to statutory hybrid plans; extension of anti-cutback relief [Citation: Notice 2011-85, 2011-44 I.R.B. (October 28, 2011)]
  • Adjusted dollar limits for 2012 [Citation: IR-2011-103 (October, 20, 2011), available at http://www.irs.gov/newsroom/article/0,,id=248482,00.html; IRS-published table of dollar limits for 2010-2012, available at http://www.irs.gov/retirement/article/0,,id=96461,00.html]
  • IRS provides FAQ guidance on SSA reporting requirements for 403(b) plans [Citation: http://www.irs.gov/retirement/article/0,,id=238940,00.html]
  • Individuals do not need PTINs to become ERPAs or renew ERPA status, but PTIN required for form preparation that necessitates a PTIN [Citation: Notice 2011-91, 2011-47 I.R.B. (November 21, 2011), advance release copy at http://www.irs.gov/pub/irs-utl/n-11-91.pdf]
  • Limited amendment extension to 2011 plan year for specific PPA 2006 provisions relating to statutory hybrid plans; extension of anti-cutback relief [Citation: Notice 2011-85, 2011-44 I.R.B. (October 31, 2011)]
  • IRS guidance on user fee waiver for certain small employers [Citation: Notice 2011-86, 2011-45 I.R.B. (November 7, 2011)]
  • Suspension of enforcement of IRC §4975 with respect to IRAs engaged in transactions described in DOL Advisory Opinions 2009-03A and 2011-09A [Citation: Announcement 2011-81, 2011-52 I.R.B. (December 26, 2011)]
  • Use of Form 5307 significantly restricted after May 1, 2012; determination letters on coverage and nondiscrimination testing no longer available starting in 2012 [Citation: Announcement 2011-82, 2011-52 I.R.B. (December 26, 2011)]
  • 2011 list issued for Cycle B plans [Citation: Notice 2011-97, 2011-52 I.R.B. (December 26, 2011), http://www.irs.gov/pub/irs-drop/n-11-97.pdf]
  • Delayed amendment deadline for IRC §436 amendments; sample amendment provided [Citation: Notice 2011-96, 2011-52 I.R.B. (December 30, 2011)]

IRS Private Letter Rulings/IRS Internal Communications

  • Wrap fees may be paid by IRA owner without regard to contribution limits under IRC §219 [Citation: PLR 201104061]
  •  Withdrawal of determination letter application where there is a potential qualification issue generates caveat on IRS withdrawal letter [Citation: Memorandum from Andy Zuckerman, Director, Rulings and Agreements, to Managers and Employees EP Determinations (June 9, 2009), available at the IRS website at http://www.irs.gov/pub/foia/ig/tege/tege-07-0609-01.pdf]
  • Minor child was given more time to complete rollover and avoid income inclusion due to improper distribution of funds requested by her mother as guardian [Citation: PLR 201139011 (July 7, 2011), posted at http://www.irs.gov/pub/irs-wd/1139011.pdf.]
  • Sale of subsidiaries will not affect status of plan as a qualified replacement plan retained by seller as long as 95% test is satisfied after the sale [Citation: PLR 201143034 (August 2, 2011)]
  • Safe harbor 401(k) plan serving as qualified replacement plan may not use suspense account to pay for safe harbor matching contributions; consequences of not fully allocating suspense account within statutory 7-year period discussed [Citation: PLR 201147032 (August 10, 2010)]
  • IRS updates procedures for verifying prior documentation during a determination letter review [Citation: Quality Assurance Bulletin (QAB) 2012-1 (released on October 24, 2011), available at http://www.irs.gov/pub/irs-tege/qab_102411.pdf]

DOL Regulations

  •  Extension of transition rule for initial disclosures required under participant fee disclosure regulations [Citation: DOL Reg. §2550.404a-5(j)(3)(i), 76 F.R. 42539 (July 19, 2011), available at http://www.gpo.gov/fdsys/pkg/FR-2011-07-19/pdf/2011-18029.pdf]
  •  Effective date of ERISA §408(b)(2) regulations delayed [Citation: DOL Reg. §2550.408b-2(c)(1)(xii), 76 F.R. 42539 (July 19, 2011), available at http://www.gpo.gov/fdsys/pkg/FR-2011-07-19/pdf/2011-18029.pdf]
  • DOL will re-propose in early 2012 its regulations that would expand the definition of a fiduciary with respect to persons who provide investment advice for a fee [Citation: Prop. DOL Reg. §2510.3-21(c), 75 F.R. 65263 (October 22, 2010), announcement of re-proposal in News Release dated September 19, 2011 (available at the DOL website - http://www.dol.gov/opa/media/press/ebsa/EBSA20111382.htm)]
  • DOL updates its application procedures for administrative and class exemptions from the prohibited transaction rules, and consolidates DOL guidance regarding exemption applications [Citation: DOL Reg. §§2570.30-2570.52, 76 F.R. 66637 (October 27, 2011]
  • Regulations prescribe requirements for statutory exemption under ERISA §408(b)(14) and IRC §4975(d)(17) with respect to investment advice rendered by a fiduciary adviser, replacing withdrawn regulations issued by the prior Administration [Citation: DOL Reg. §§2550.408g-1 and 2550.408g-2, 76 F.R. 66136 (October 25, 2011)]

DOL Formal Guidance/Prohibited Transaction Exemptions

  • Amendments to PTE 96-23 modify the definition of an in-house asset manager (INHAM) and clarify certain aspects of PTE 96-23 [Citation: Amendments to PTE 96-23, 76 F.R. 18255 (April 1, 2011) (http://www.gpo.gov/fdsys/pkg/FR-2011-04-01/pdf/2011-7655.pdf)]
  • Interim guidance on using electronic media to furnish participant fee disclosures [Citation: DOL Technical Release 2011-03 (September 13, 2011), available at the DOL website (http://www.dol.gov/ebsa/newsroom/tr11-03.html)]

PBGC regulations and other guidance

  • Proposed regulations implement PPA 2006 amendments requiring 5-year phase-in for guaranteed benefits to be applied to unpredictable contingent event benefits as if amendment is adopted on the date the event occurs [Citation: Prop. PBGC Reg. §§4022.27 (with conforming amendments to §§4022.2, 4022.24 and 4022.62, 76 F.R. 13304 (March 11, 2011)]
  •  Regulations finalized that implement section 404 of the PPA 2006 regarding substitution of an employer’s bankruptcy filing date for the plan’s termination date to make certain determinations [Citation: PBGC Reg. §§4001.2, 4022.2, 4022.3, 4022.4, 4022.6, 4022.21, 4022.22, 4022.23, 4022.24, 4022.25, 4022.51, 4022.61, 4022.62, 4022.63, 4022.81, 4022.82, 4044.1, 4044.2, 4044.3, 4044.10, 4044.13, 76 F.R. 34590 (June 14, 2011), available at http://www.gpo.gov/fdsys/pkg/FR-2011-06-14/pdf/ 2011-14241.pdf]
  • PBGC announces premium penalty relief for short-term late periods; expands “Box 5" relief with respect to plans that made errors regarding the alternative premium funding target election [Citation: Notice on Premium Penalty Relief; Alternative Premium Funding Target Election Relief, 76 F.R. 57082 (September 15, 2011), available at http://www.gpo.gov/ fdsys/pkg/FR-2011-09-15/pdf/2011-23692.pdf]
  • Benefit determinations and plan valuations for statutory hybrid plans, allocation of assets under terminated statutory hybrid plan that is trusteed by the PBGC [Citation: Prop. PBGC Reg. §§4022.120-4022.123, 4041.28(c)(3), 4044.52(e), 4044.76, 76 F.R. 67105 (October 31, 2011)]
  • Extension of guidance in Technical Update 09-4 to reportable events for the 2012 plan year [Citation: PBGC Technical Update 11-1 (December 7, 2011), available http://www.pbgc.gov/res/other-guidance/tu/tu11-1.html]
  • Interim guidance on using electronic media to furnish participant fee disclosures [Citation: DOL Technical Release 2011-03R (December 8, 2011), available at the DOL website (http://www.dol.gov/ebsa/newsroom/tr11-03R.html)]
  • 2012 maximum guaranteed benefits and 2012 premium rates [Citation:http://www.pbgc.gov/prac/prem/premium-rates.html and http://www.pbgc.gov/news/press/releases/pr11-04.html]
  • PBGC issues policy statement on premium refund requests due to contribution recharacterizations on amended Schedule SB [Citation: Premium Changes Based on Recharacterization of Contributions, 76 F.R. 79714 (December 22, 2011), http://www.gpo.gov/fdsys/pkg/FR-2011-12-22/pdf/2011-32804.pdf]

EBSA Advisory Opinions, Field Assistance Bulletins and other informal guidance

  • Unclear whether tribal court is recognized under New Mexico law with authority to issue QDROs [Citation: Advisory Opinion 2011-03A (February 2, 2011), text available at http://www.dol.gov/ebsa/regs/aos/ao2011-03a.html]
  • Purchase by IRA of note and deed of trust from bank constitutes extension of credit between IRA and IRA owner [Citation: Advisory Opinion 2011-04A (February 3, 2011), text available at http://www.dol.gov/ebsa/regs/aos/ao2011-04a.html]
  • DOL looks only to vertical chain of interest to determine "indirect" ownership under party-in-interest definition [Citation: Advisory Opinion 2011-06A (February 4, 2011), text available at http://www.dol.gov/ebsa/regs/aos/ao2011-06a.html]
  •  Investment advice fiduciaries are eligible for PTE 86-128 relief [Citation: Advisory Opinion 2011-08A, text available at http://www.dol.gov/ebsa/regs/aos/ao2011-08a.html]
  • Requirement that IRA owner provide indemnification agreement to broker setting up futures trading account for IRA is a prohibited extension of credit that is not eligible for relief under PTE 80-26 [Citation: Advisory Opinion 2011-09A (October 20, 2011), http://www.dol.gov/ebsa/regs/aos/ao2011-09a.html]

ERISA Litigation

  • Third Circuit adopts Seventh Circuit approach to determining whether successor liability transfers in an asset sale with respect to contribution obligations under a multiemployer plan [Citation: Einhorn v. M.L. Rubertson Construction Company, ___ F.3d ___ (2011 WL 182131) (3rd Cir. January 21, 2011)]
  • Criminal penalties upheld with respect to conversion of 401(k) deferrals and false statements on valuation report [Citation: U.S. v. Eriksen, 2011 WL 801816 (9th Cir. March 9, 2011)]
  • Tax Court rules that IRS may not take inconsistent positions on income tax issues and excise tax issues involving DISCs owned by Roth IRAs; rejects IRS contention that Notice 2004-8 applies [Citation: Hellweg v. Commissioner, 2011-58 T.C.M. (Tax Ct. March 9, 2011)]
  • Tax Court cases uphold IRS' retroactive disqualification of plans for failure to amend timely for law changes [Citation: Christy & Swan Profit Sharing Plan v. Commissioner, T.C. Memo 2011-62 (Tax Ct. March 15, 2011); Michael C. Hollen, D.D.S., P.C. v. Commissioner, T.C. Memo 2011-2, 101 T.C.M. 1004 (January 4, 2011)]
  •  Fiduciaries held liable for imprudent conduct with respect to failure to divest some of participant’s holdings in closely-held employer securities in a non-404(c) participant-directed plan [Citation: Peabody v. Davis, 636 F.3d 368 (7th Cir. April 12, 2011)]
  •  Criminal conviction for conversion/embezzlement involving employer’s failure to fund discretionary contribution authorized by board is overturned [Citation: U.S. v. Smith, ___ F.3d ___ (50 EBC 2712) (10th Cir. April 12, 2011)]
  •  Broad language in spin-off documents unambiguously transferred assets and liabilities of a now-terminated plan to the spin-off company, even though the transferor company continued to administer the plan [Citation: Lockheed Martin Corporation v. Retail Holdings, 639 F.3d 63 (2nd Cir. April 26, 2011)]
  •  DOL’s administrative document subpoenas enforceable; fiduciary exception to attorney-client privilege applied [Citation: Solis v. Food Employers Labor Relations Association, ___ F.3d ___ (50 EBC 2697) (4th Cir. May 4, 2011)]
  • Appropriate equitable relief under ERISA §502(a)(3) is the appropriate authority for fashioning a remedy to address harm suffered by participants for misleading disclosure documents [Citation: CIGNA v. Amara, 131 S.Ct. 2900 (50 EBC 3016) (Sup.Ct. May 16, 2011)]
  • Five-factor test for determining whether to award attorney’s fees continues to apply in the Second Circuit in a post-Hardt world; bias is still in favor of not awarding attorney’s fees to defendants who have at least some degree of success on the merits in the absence of bad faith on the part of the plaintiffs [Citation: Toussaint v. JJ Weiser, Inc., 648 F.3d 108 (2nd Cir. June 6, 2011)]
  • 45-day delay in paying lump sum from defined benefit plan was unreasonable; participants owed interest for delayed payment [Citation: Stephens v. US Airways Group, Inc., 644 F.3d 437 (D.C. Cir. July 15, 2011)]
  • ERISA does not authorize an administrator to consider or investigate the subjective intentions or good faith underlying a divorce when determining whether a domestic relations order is a QDRO [Citation: Brown v. Continental Airlines, Inc., 647 F.3d 221 (5th Cir. July 18, 2011)]
  • Reversal of defined benefit plan termination did not violate anti-cutback rule merely because it resulted in a loss of the right to plan distributions on account of plan termination [Citation: Carter v. Pension Plan of A.Finkl & Sons Co. for Eligible Office Employees, 2011 WL 3559918 (7th Cir. August 15, 2011), affirming ___ F.Supp.3d ___ (2010 WL 3516079) (N.D.Ill. September 1, 2010)]
  • Spouse’s consent was valid where the participant, as the plan’s representative, witnessed the spouse’s signature [Citation: Burns v. Orthotek, Inc. Employees’ Pension Plan and Trust, ___ F.3d ___ (2011 WL 4089798) (7th Cir. September 15, 2011)]
  • Participant awarded losses incurred by his account due to delayed distribution as a result of fiduciary’s breach with respect to a failure to furnish distribution information [Citation: Kujanek v. Houston Poly Bag I, Limited, ___ F.3d ___ (2011 WL 4445993) (5th Cir. September 27, 2011)]
  • Asset purchase agreement effected a valid amendment to company’s ERISA plans [Citation: Evans v. Sterling Chemicals, Incorporated, 660 F.3d 862 (5th Cir. October 13, 2011)]
  • Anti-alienation provisions are not violated when judgment is enforced against the plan for improper payment of participant’s benefits to ex-spouse, even though account balances will be affected as a result of the loss [Citation: Milgram v. Orthopedic Associates Defined Contribution Pension Plan, 666 F.3d 68 (2nd Cir. December 23, 2011)]

Miscellaneous Guidance

  • SEC issues “no action” letter to DOL regarding the applicability of Rule 482 to the participant fee disclosure rules under DOL Reg. §2550.404a-5 [Citation: Response of the SEC Office or Chief Counsel Division of Investment Management to Department of Labor, Ref. No. 20081112953 (October 26, 2011), posted at http://www.dol.gov/ebsa/pdf/SECnoactionletter.pdf]

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