Compliance November 23, 2010

IRS Provides Guidance on Pre-Approved IRAs

In Revenue Procedure 2010-48, the Internal Revenue Service (IRS) provides guidance to drafters and users of pre-approved IRAs.
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The document includes guidance to drafters and users of prototype IRAs, including rules for when documents must be submitted to the Internal Revenue Service and new user fees for individual retirement annuities.  In addition, the IRS provides guidance to users of its model IRAs and describes the availability of new model individual retirement annuities.   

Specifically, the agency said a prototype IRA may, but need not, be amended to reflect a statutory change made since 2002, including provisions in the Heroes Earnings Assistance and Relief Act of 2008 (HEART) and the Worker, Retiree, and Employer Recovery Act of 2008 (WRERA). Prototype IRAs may be amended, solely to incorporate the statutory changes, without affecting reliance on a favorable opinion letter.  

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A Listing of Required Modifications (LRMs) that the Service finds acceptable for prototype IRAs is available at www.irs.gov, by searching for LRMs. In order to receive a favorable opinion letter, prototype documents must include language that addresses every issue addressed in the LRMs, unless clearly inapplicable.  

According to the Revenue Procedure, beginning with applications submitted after December 13, 2010, prototype sponsors of individual retirement annuities described in § 408(b) that use one IRA endorsement with one or more annuity contracts may submit only the IRA endorsement (and not the contracts) to the Service for approval. Sponsors that take advantage of this new procedure will be issued an opinion letter referencing the IRA endorsement, thereby reducing the number of opinion letters issued and, correspondingly, the applicable user fees.  

In addition, the IRS said model IRAs need not be amended in order for trustees to operate in accordance with the statutory provisions listed in the Revenue Procedure. The service will issue two model IRAs for use by issuers and annuitants to establish a traditional individual retirement annuity or a SIMPLE individual retirement annuity. The forms – Form 5305-B, Individual Retirement Annuity Endorsement; and Form 5305-SB, SIMPLE Individual Retirement Annuity Endorsement – are expected to be available shortly.  

The IRS said it recommends adoption of the latest model IRAs.  

Revenue Procedure 2010-48 is here and will be published in Internal Revenue Bulletin 2010-50 on December 13, 2010.
Deals & People November 23, 2010

New Managing Director of DCIO at Schwab

Charles Schwab has appointed Neil T. Hickey to be Managing Director, Defined Contribution Investment Only.
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A news release said Hickey will be responsible for working with consultants, recordkeepers and plan sponsors to increase the adoption of Schwab’s retirement investment products in defined contribution plans.  Hickey will be based in Boston.

Hickey joins Schwab from Old Mutual Asset Management where he was a Vice President responsible for distribution of investment products including mutual funds, SMA’s and alternative investments to consultants, plan sponsors and retirement platforms as well as the RIA market. 

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Prior to Old Mutual Asset Management, Hickey spent 15 years at Fidelity Investments where he was responsible for sales and relationship management coverage providing custody, investment and product solutions to fee-based registered investment advisers, bank trust, family offices and third party retirement plan administrators.

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