With National Retirement Security Week right around the corner, financial services corporation ICMA-RC has released an educational campaign in hopes to motivate local and state government employees to increase their savings within employer-sponsored programs.
“The Whole Journey” campaign provides online and mobile educational tools and webinars to public employees. These resources help public sector employees who serve local communities reflect on their personal retirement goals and determine if they are on track to reach them.
“We are exclusively focused on the public sector and bringing the best possible retirement savings resources to local and state government employees,” says Bob Schultze, president and CEO of ICMA-RC. “National Retirement Security Week encourages everyone to focus on the importance of building retirement security and preparing for a more comfortable and rewarding experience after leaving the workforce.”
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The Internal Revenue Service has
released results of two completed Employee Plans Compliance Unit (EPCU)
projects and announced a new project.
The EPCU Ineligible
Employer-403(b) Plans Project was designed to educate Internal Revenue
Code (IRC) Section 501(c)(3) organizations whose tax-exempt status had
been automatically revoked pursuant to IRC Section 6033(j) to ensure an
employer eligibility failure had not occurred in the sponsoring of an
IRC Section 403(b) plan.
Determine if the box 12 code on Forms W-2 was correctly reported;
Determine whether or not the organization sponsored an IRC Section 403(b) plan;
Verify the sponsor eligibility for an IRC Section 403(b) plan;
Advise the organization on corrective actions necessary with regards to their IRC Section 403(b) plan; and
Educate IRC Section 403(b) sponsors regarding a written plan document.
The
EPCU sent contact letters to 67 entities from the Automatic Revocation
of Exemption List that also filed a 2010 Form W-2 reporting employees
with IRC Section 403(b) elective deferrals.
Responses showed that
the majority of the plan sponsors were educational organizations still
eligible to sponsor their IRC Section 403(b) plan. However, some
employers incorrectly reported IRC Section 403(b) plan deferrals in box
12 showing that the accuracy of the box 12 codes, in addition to Form
990 filing, is still a concern.
In its Partial Termination/Partial
Vesting Project, the EPCU contacted Form 5500 return filers that
reported a decrease in plan participants and had participants that were
not 100% vested and were terminated from employment. The contact made
was to determine if the plan experienced a partial termination. If a
partial termination did occur, the goal of this project was to determine
whether plan administrators were complying with the vesting
requirements of IRC Section 411(d)(3).
Over a span of three
years, nearly 2,000 letters were sent. Approximately half of the
contacts were due to errors on the Form 5500 return. In many of these
cases, the plan sponsors amended their returns and corrected the errors.
Taxpayers made errors in participant counts.
Also, a significant
number of plans had fully vested all their participants as a result of a
partial termination but it was indicated on their Form 5500 that there
were participants who were not fully vested.
The plan
administrators misinterpreted the Form 5500. They counted eligible
participants who chose not to participate in their 401(k) plan as not
being fully vested. Some plans did not experience a partial termination
because account balances were transferred to another plan but failed to
indicate on Form 5500 Schedule H that the assets were in fact
transferred to another plan.
Approximately 30% of the cases were
closed as “no change” cases. In almost 10% of the cases, it was
determined during the compliance check that a partial termination had
occurred and affected participants had not been fully vested.
More information about the results of this project is here.
NEXT: A new compliance project
The ECPU is undergoing a SIMPLE IRA Plans - Eligible Sponsors
Project. The information it has indicates some entities sponsor a SIMPLE
IRA plan, but appear to employ more than 100 employees who earn at
least $5,000. The goal of the project is to ensure that employers
sponsoring a SIMPLE IRA plan are eligible to sponsor those plans.
Code
section 408 allows employees and employers to contribute to traditional
IRAs set up for employees’ own retirement savings. Employees may choose
to make salary reduction contributions and the employer is required to
make either matching or non-elective contributions.
An “eligible
employer” means an employer which had no more than 100 employees who
received at least $5,000 of compensation from the employer for the
preceding year. An eligible employer who establishes and maintains a
plan under this subsection for one or more years and who fails to be an
eligible employer for any subsequent year shall be treated as an
eligible employer for the two years following the last year the employer
was an eligible employer.