Products December 19, 2012

The Principal Announces New Website for TPAs

The Principal Financial Group created a website designed to make it easier for third-party administrators (TPAs) to manage client retirement plans online.
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The website features more of the information and transactional capabilities TPAs need to administer plans more efficiently. TPAs will be able to more easily handle plan and participant transactions, plan compliance testing, government filing information and other key day-to-day tasks.   

It is available only to TPAs who work with The Principal.  

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The website was launched following the first Principal TPA Edge Sales Academy, allowing TPAs from across the country to network and attend training sessions to boost sales expertise. The academy is part of the Principal TPA Edge program of services and tools http://www.principal.com/about/news/2012/ris-tpa-value-add062012.htm designed to help TPAs develop and manage their businesses.

Compliance December 19, 2012

Fixing Late Deposit of Salary Deferrals

The Internal Revenue Service (IRS) website explains what defined contribution (DC) plan sponsors can do if they fail to timely deposit withheld salary deferrals.
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Failing to timely deposit salary deferrals is a fiduciary violation and could subject a plan to the Department of Labor’s (DOL’s) civil penalties, and could violate the plan’s terms and jeopardize its tax-exempt status. Failing to segregate salary deferrals from a plan sponsor’s general assets and timely forwarding them to the plan’s trust allows the sponsor prohibited use of plan assets. This can result in the plan sponsor engaging in a prohibited transaction for which it can be assessed excise tax.  

Two correction programs are available for this plan error: the Department of Labor’s Voluntary Fiduciary Correction Program (VFCP) and the Internal Revenue Service’s Employee Plans Compliance Resolution System. The IRS notes that these two programs are not interchangeable. The goal of the VFCP is to ensure that the employer isn’t subject to DOL’s civil penalties. The goal of the IRS’s correction programs is to ensure that the plan does not lose tax benefits arising from its qualified status. It is critical for plan sponsors to know what their objectives are before deciding which program to use. Also, sponsors may use both the DOL and IRS programs if they have a dual objective of avoiding the imposition of DOL’s civil penalties and the IRS’s revocation of the plan’s qualified status.   

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If a plan sponsor failed to deposit salary deferrals to the plan, it must make corrective contributions in the amount of the salary deferrals it should have timely deposited adjusted for earnings. The adjustment for earnings is measured from the earliest date the sponsor could have segregated the salary deferrals from general assets to the date the corrective contributions are made. If a plan sponsor deposited the salary deferrals, but not timely, it must contribute the earnings on the late deposited salary deferrals. Earnings are what the late deposited deferrals would have earned measured from the earliest date the sponsor could have segregated them from general assets to the date the deferrals were deposited to the plan.  

The general premise of both the DOL and IRS correction programs is to restore the plan to the position it would have been had salary deferrals been deposited timely. However, the earnings calculation in both programs could be different.  

More information about this and other helpful information is available via the IRS’s Retirement News for Employers Fall 2012 Edition at http://www.irs.gov/Retirement-Plans/Retirement-News-for-Employers.

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