Compliance November 22, 2016

ERIC Suggests PBGC Expand Missing Participant Program

In a comment letter to the PBGC, the ERISA Industry Committee also encouraged a different fee structure and incorporating electronic rollovers of claimed accounts into qualified plans.
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The ERISA Industry Committee (ERIC) submitted comments in response to the Pension Benefit Guaranty Corporation’s (PBGC) proposed rule regarding missing participants under the Employee Retirement Income Security Act (ERISA) Section 4050.

ERIC notes that the legislative authority to create the PBGC’s missing participants program was limited to terminated defined contribution (DC) plans, but, it says, it would be beneficial to work toward extending the program to all DC plans. “A system of multiple missing participant programs at multiple agencies would be inefficient and lead to confusion for plan sponsors and participants. If the PBGC missing participant program for terminated defined contribution plans is successful, it would be more efficient to extend it to all defined contribution plans, rather than wait for another federal agency to create a separate missing participant program for all other retirement plans,” Will Hansen, vice president of Retirement Policy at ERIC, wrote in the comment letter.

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ERIC also suggests that the PBGC lower the fee waiver threshold from a $250 or less account balance to a $1,000 or less account balance. Hansen notes that if an account balance is $251, the $35 fee represents 14% of the account balance. The letter argues this is cost-prohibitive for plan sponsors.

If the PBGC doesn’t lower the fee waiver threshold, ERIC suggests a tiered fee structure—for example, $15 for account balances between $251 and $500; $25 for account balances between $501 and $1,000, and $35 for account balances greater than $1,000.

In addition, ERIC encourages the PBGC to always maintain the voluntary nature of the program. “Mandates on plan sponsors does not yield additional retirement savings or overall support for the employer-based system,” Hansen wrote.

Finally, ERIC encouraged the PBGC to incorporate a system that will allow the agency to electronically roll over a claimed account balance from the participant to a qualified retirement plan of the participant. “An electronic rollover instead of a paper check may provide a greater likelihood that the funds distributed will be maintained for the purpose of retirement,” Hansen wrote.

ERIC’s comment letter may be viewed here.

Compliance November 22, 2016

New IRS Document Request Process to Affect Employee Plan Examinations

The agency says the updated process will reduce plan sponsors’ burden and provide consistent treatment of them, and allow the IRS to secure more complete and timely responses to Information Document Requests.
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The Tax Exempt and Government Entities TE/GE Division of the Internal Revenue Service (IRS) has announced a new process for issuing information document requests (IDRs), which will affect Employee Plans (EP), as well as other, examinations.

Under the new process:  

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  • Plan sponsors will be involved in the IDR process;
  • Examiners will discuss the issue being examined and the information needed with the plan sponsor prior to issuing an IDR;
  • Examiners will ensure that the IDR clearly states the issue and the relevant information they are requesting;
  • If the plan sponsor does not timely provide the information requested in the IDR by the agreed upon date, including extensions (two extensions are allowed), the examiner will issue a delinquency notice;
  • If the plan sponsor fails to respond to the delinquency notice or provides an incomplete response, the examiner will issue a pre-summons notice to advise the plan sponsor that the IRS will issue a summons unless the missing items are fully provided; and
  • A summons will be issued if the plan sponsor fails to provide a complete response to the pre-summons letter by its response due date.

The IRS says the new process requires the examiners’ managers to be actively involved early in the process and ensures that IRS Counsel is prepared to enforce IDRs through the issuance of a summons when necessary.

The agency says the updated process also will:

  • Provide for open and meaningful communication between the IRS and plan sponsors;
  • Reduce plan sponsors’ burden and provide consistent treatment of them;
  • Allow the IRS to secure more complete and timely responses to IDRs;
  • Provide consistent timelines for IRS agents to review IDR responses; and
  • Promote timely issue resolution.

The changes reflect the agency’s commitment to the Taxpayer Bill of Rights.

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