The Internal Revenue Service (IRS) has said
applicants requesting determination letters for their defined
benefit (DB) plans should identify whether the plan has lump-sum
risk transfer language in either the cover letter to their
application or an attachment.
For plans that do, they must also identify the
appropriate plan section and whether the plan satisfies one of
the conditions in Notice 2015-49. In Notice 2015-49, the IRS
announced its intent “to amend the required minimum
distribution regulations under § 401(a)(9) of the Internal
Revenue Code to address the use of lump-sum payments to replace
annuity payments being paid by a qualified defined benefit
pension plan.” Effective July 9, 2015, DB plan sponsors may no
longer offer a lump-sum window to participants who have begun
receiving installments.
On its website, the IRS says if the plan
sponsor advises that the plan has risk transfer language and
satisfies one of the four conditions in Notice 2015-49, the
agency will review the plan document to verify that it satisfies
the qualification requirements of the Code. The plan’s
determination letter will contain a favorable caveat providing
reliance on the risk transfer language. Click Here for
full article
Additional links: IRS Announces Halt to
Certain Lump-Sum Offerings
| Notice 2015-49 | New Process for Defined Benefit D-Letter
Applications
JUST OUT OF REISH | Published in June 2016
Key advice for plan sponsors
By
PLANSPONSOR staff| *Fred Reisch | June 2016
This is my last column for PLANSPONSOR magazine.
I’ve written these monthly columns for more than a decade;
however, at some point, all things come to an end. With the heavy
burdens of my legal practice, and particularly with the increase
in client needs because of the Department of Labor (DOL)’s
fiduciary regulation and exemptions, now is the time.
In closing, I want to leave you with some parting
thoughts:
- Most plan sponsors want to do the right thing
and, in fact, are making good faith efforts to provide
quality investments and services to their participants. But,
for the system to work, it takes more than that.
- Many plan sponsors pay too much attention to
plan features and nowhere near enough to plan results.
Appealing investments and attractive websites are good to
have, but are far less important than operating a plan that
results in adequate retirement benefits. Somehow, the cart
has been placed before the horse. Where else in the business
world is so much emphasis placed on being attractive and so little
on the bottom line? Click Here for
full article
*Fred Reish is a partner in
Drinker Biddle & Reath LLP’s employee benefits and executive
compensation practice group and chair of the financial services
ERISA team.