Deals & People March 17, 2009

Wells Taps WySTAR, OmniDBEN as RK Platforms

Wells Fargo has selected WySTAR to be the defined contribution recordkeeping system and OmniDBEN as the defined benefit administration system for its institutional clients.
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A Wells Fargo news release said migration to these systems is expected to be complete in the second half of 2010.

“The Wells Fargo Institutional Retirement business has a tremendous opportunity. We are a much bigger than either legacy firm was six months ago, and our size affords us the opportunity to invest and enhance our systems at a time when most of our competitors are cutting back,” said Joe Ready, director of Wells Fargo Institutional Retirement.

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Wells acquired Wachovia last year (see “Wachovia Leaves Citigroup at the Altar’). According to the announcement, the combined Wells Fargo/Wachovia retirement business serves more than 3.7 million participants and more than 10,000 clients.

Wachovia officials have said in recent years that their acquisition strategy centered around marketing of WySTAR and its goal to add two to three significant outsourcing relationships to the system per year (see “Wachovia: BoNY RK Acquisition Part of Long-Term Strategy’).

Compliance March 17, 2009

Mangled by Madoff? IRS Offers Tax Tips for Reporting Ponzi Losses

There’s been a lot of talk of late about so-called ‘Ponzi schemes’ like the $50 billion one perpetrated on investors by Bernie Madoff.
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Now, in Revenue Procedure 2009-9, the Internal Revenue Service (IRS) has outlined the proper income tax treatment for losses resulting from those Ponzi schemes, while Revenue Procedure 2009-20 provides an optional safe harbor method for eligible taxpayers to deduct theft losses from criminally fraudulent investment arrangements that take the form of Ponzi schemes. “The safe harbor method provides a uniform, simplified method for eligible taxpayers to determine the amount and timing of their theft loss deductions,’ according to the IRS.

In releasing the guidance, the IRS noted that both that agency and the Treasury Department recognize that “whether and when investors meet the requirements for claiming a theft loss for an investment in a Ponzi scheme are highly factual determinations that often cannot be made by taxpayers with certainty in the year the loss is discovered.’ Consequently, and “in view of the number of investment arrangements recently discovered to be fraudulent and the extent of the potential losses,’ the revenue procedure provides what the IRS described as an optional safe harbor under which qualified investors (as defined in §4.03 of this revenue procedure) may treat a loss as a theft loss deduction when certain conditions are met. The IRS noted that this treatment “avoids potentially difficult problems of proof in determining how much income reported in prior years was fictitious or a return of capital, and alleviates compliance and administrative burdens on both taxpayers and the Service.’

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The Revenue Procedure is available at www.irs.gov/pub/irs-drop/rp-09-20.pdf

Revenue Ruling 2009-09 addresses the tax treatment of losses from criminally fraudulent investment arrangements that take the form of Ponzi schemes. The ruling holds that the losses are theft losses and provides guidance on the character, timing, and amount of the loss deduction through a series of sample situations.That information is available at www.irs.gov/pub/irs-drop/rr-09-09.pdf

Revenue Procedure 2009-20 and Revenue Ruling 2009-09 will be published in Internal Revenue Bulletin 2009-14 on April 6.

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