Category: Corporate & Business law
IRS Expands Self-Correction of Plan Qualification Errors
May 14, 2019 | Barna, Guzy & Steffen, Ltd.In 2018, the IRS modified its program for correction of plan qualification failures to significantly increase the fees for getting approval of corrections under the Voluntary Compliance Program (“VCP”). Since that occurred, the IRS has issued expanded permissible self-correction methods under Revenue Procedure 2019-19. This new Procedure provides many new ways in which a plan sponsor may act independently to fix errors to retain the plan’s tax qualification, without IRS filings, user fees, or other involvement. The new procedure permits plans to self-correct failures in two categories that previously required VCP filings: problems with participant loans and plan amendments. 1. In regards to loan failures, the new procedure permits self-correction of loan failures if the failure relates to • A default on loan payments (if the five-year maximum repayment period has not expired); • Allowing participants to have multiple loans even though not permitted under the plan or loan procedure; • Providing a loan when the plan does not permit (which was allowed under the old procedure, and continues under the new); or • The failure to obtain spousal consent (assuming that the spouse is now willing to provide that consent—if not, VCP is required to repair this failure). A loan failure correction of the above can either result in participant avoiding being…
Read MoreWhen the Government Goes Out of Business
April 11, 2019 | Scott M. LepakThe North Suburban Hospital District, a political subdivision representing the citizens of Blaine, Fridley, Hilltop, Mounds View and Spring Lake Park, quietly and gracefully ended its long existence on April 10, 2019. The Hospital District was formed in 1960 for the primary purpose of building and initially operating Unity Hospital in Fridley. At the time it was formed and for the next 50 plus years, the Hospital District provided its citizens with a locally focused and stand-alone hospital providing a broad range of services. In meeting its obligation to the citizens of the five cities, the Hospital District contracted with service providers who operated the hospital. In recent years, the Hospital District weaned Unity from relying on tax dollars and did not levy taxes on its citizens. With the advancement and consolidation of health care in the metro area, the Hospital District board determined that it accomplished its mission. Unity is a facility that has been significantly updated. The area is now served by two hospitals as well as multiple clinics providing a broad array of services. Health care is a regional rather than local issue and is less centralized. An individual can now go into their local clinic and receive care that was only provided in hospitals as recently as a decade…
Read MoreSignificant Changes to Retirement Plans Proposed
April 3, 2019 | Barna, Guzy & Steffen, Ltd.As of April 2, 2019, there are two bills rapidly moving through Congress with bipartisan support. The Setting Every Community Up for Retirement Enhancement Act of 2019 (“SECURE”) passed the House and the Senate has proposed the Retirement Enhancement Security Act of 2019 (“RESA”). The bills are very similar and because there is bipartisan support it is likely that something will be passed soon. Some of the proposed changes are as follows: 1. Encourage employees to participate in automatic contributions in 401(k) plans and require employers to provide estimates of how much an employee’s account would provide employees if it were invested in an annuity. 2. Make it easier for small employers to join other employers in multiple-employer plans. 3. Easing nondiscrimination rules for frozen defined benefit plans. 4. Adding a safe harbor for selecting lifetime income providers in defined contribution plans. 5. Increase the automatic enrollment safe harbor cap from 10{a0c01d20c42349884e67ff80c137866b0a9fe47aaae8f8a86a605a369ae487c3} to 15{a0c01d20c42349884e67ff80c137866b0a9fe47aaae8f8a86a605a369ae487c3}. 6. Require employers to allow long time, part time employees to participate in their 401(k) plans. 7. SECURE would change the required minimum distribution age that distributions must begin from age 70 ½ to 72 years old. RESA does not include this provision.
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