NEW GUIDANCE
- IRS Issues Final Regulations on Notices to Interested Parties. Before the IRS can issue a determination letter on the qualification of a retirement plan, the plan sponsor requesting the determination must provide evidence to the IRS that it has notified all persons who qualify as interested parties that a determination letter application will be filed. The new final regulations generally adopt the standards in the proposed regulations issued in January of 2001, including the safe harbor for electronic notices. The final regulations require that the notice must be provided within 10 to 24 days before the determination letter application is made, regardless of the method of delivery (electronic or otherwise).
- IRS Issues Revenue Ruling 2002-45 Describing Treatment of Restorative Payments to 401(k) Plans. Restorative payments are payments made by the employer to the plan in an attempt to restore losses caused by events that are or are reasonably believed to be breaches of fiduciary duty under ERISA. The IRS ruled that these restorative payments are not treated as employer "contributions" to the plan for purposes of relevant Internal Revenue Code sections.
- IRS Issues Revenue Ruling 2002-46 Clarifying the Timing for Permissible Deductions to be taken by an employer whose tax year is not the same as that employer's 401(k), profit sharing, or stock bonus plan year. Generally, employer contributions made after the close of the employer's tax year but before the end of the plan year that are also attributable to compensation earned by the participants after the close of the employer's tax year are not deductible by the employer until the next tax year. Employers may pre-pay these contributions before the close of the company's tax year if they would like to take the deduction in the first year.
- IRS Issues Revenue Procedure 2002-47 Updating the Employee Plans Compliance Resolution System ("EPCRS"). EPCRS allows plans to rectify potentially disqualifying defects or errors by entering into one of the several IRS correction programs in the system.
- IRS Issues Revenue Ruling 2002-43 Establishing a New Method for Calculating Excise Taxes on loans that are prohibited transactions.
- IRS Issues Proposed Regulations on the Method for Calculating Earnings on returned or recharacterized IRA contributions (updating Regulation §1.408-4(c)(2)(ii) and Notice 2000-39).
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