Compliance January 5, 2018

IRS Changes VCP User Fee Schedule

The total amount of net plan assets determines the applicable user fee now, not the number of participants.

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Effective January 2, 2018, the Internal Revenue Service (IRS) simplified the user fees charged for most submissions made under the Voluntary Correction Program (VCP).

The total amount of net plan assets determines the applicable user fee now, not the number of participants. Most alternative or reduced fees that were part of previous revenue procedures no longer apply.

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Effective for VCP submissions mailed to the IRS on or after January 2, 2018, if net plan assets are from $0 to $500,000, the fee is $1,500; if next plan assets are over $500,000 to $10,000,000, the fee is $3,000; and if net plan assets are over $10,000,000, the fee is $3,500.

The IRS explains that in many cases, retirement plan sponsors determine the amount of plan’s net assets from its most recently filed Form 5500-series return. If the plan is not required to file a Form 5500-series return, plan sponsors should see Rev. Proc. 2018-4, Appendix A.09 for additional information. For SEP/SARSEP/SIMPLE IRA plans, the amount of plan assets is the total value of all plan participants’ IRA account balances associated with the plan.

The new fee schedule doesn’t apply to Group VCP submissions, or submissions for orphan or 457(b) plans. More information is at https://www.irs.gov/retirement-plans/voluntary-correction-program-user-fees-changes.

The agency also issued information about how to obtain or re-establish an employer identification number (EIN) for a retirement plan trust. The IRS notes that retirement plan trustees shouldn’t use the plan sponsor’s EIN for the retirement plan trust.
Compliance January 4, 2018

FinTech Product Providers Hard At Work Programming Tax Cut Response

Changes to the tax code will impact retirement planning beyond individual and pass-through business taxation; investing support tools and tax management platforms trusted by advisers have to make their own adjustments.

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Ken Lotocki, product director at Advicent, recently sat down with PLANADVISER to discuss the passage of the Tax Cuts and Jobs Act late last year.  

Rather than recall the close votes or the supercharged politics of the whole situation, Lotocki instead offered an inside take on how his firm is adjusting its product set to factor in the tax cuts and technical changes made to the revenue code. Of particular interest to retirement specialist advisers, he has been spending time digging into the NaviPlan product, given that one of the support tool’s functionalities is to help advisers manage clients’ anticipated taxes.

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“Since well before the passage of the Tax Cuts and Jobs Act we have been working closely with customers and watching the evolution of the conversation in Washington,” Lotocki said. “It’s been a really interesting and engaging six months for me, given that I actually started out in tax accounting, in school.”

Lotocki said that his team “is still right in the heart of our effort to make the necessary updates to our products.” His team has finished the design of what changes it will make, and implementation has started with the new year.

“I’m sure other advisory support providers will be in a similar position,” he noted. “We’ve put together internal work orders and we have determined that some of the functional changes will most likely be rolled out with a phased approach. For example, advisers will likely see adjustments to NaviPlan’s assumed tax rates and brackets sooner than they will see how the platform will deal with the Tax Cuts and Jobs Act’s various sunset clauses.”

Given his role at Advicent, it’s no surprise that Lotocki urged advisers to lean on their go-to provider partners during this challenging adjustment period—and even potentially some new third party solutions.

“We expect the loss of some of the personal exemptions and deductions is going to have an impact on many advisory clients,” Lotocki suggested. “This will be a good and bad thing for advisers. They will be needed but it will be hard for them to know what advice to give. It puts the emphasis on using good tools.”

Beyond the tax picture, Lotocki observed that Advicent is “really digging into health care planning in 2018.”

“In fact, we hope to be adding more health care cost planning and health savings account [HSA] support capabilities on our platform in the future,” he said. “We really want this functionality and so do our clients. The HSA is clearly a big topic.”

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