Industry & Regulatory News

IRS Issues Deadline Relief for Hurricane Ida Victims in New Jersey

The IRS has issued a news release announcing the postponement of certain tax-related deadlines for victims of Hurricane Ida in New Jersey. The tax relief postpones various tax filing deadlines that began September 1, 2021. Affected individuals and households who reside or have a business in Bergen, Gloucester, Hunterdon, Middlesex, Passaic, and Somerset counties, as well as taxpayers with records located in the covered area that are needed to meet covered deadlines qualify for relief. This relief will be automatically granted to taxpayers in Ida-affected locations in other parts of the state subsequently designated by the Federal Emergency Management Agency (FEMA).

In addition to extending certain tax filing and tax payment deadlines, the relief includes completion of many time-sensitive, tax-related acts described in IRS Revenue Procedure 2018-58 and Treasury Regulation 301.7508A-1(c)(1). Affected taxpayers with a covered deadline on or after September 1, 2021, and before January 3, 2022, will have until January 3, 2022, to complete the acts. This includes filing Form 5500 series returns that are required to be filed on or after September 1, 2021, and before January 3, 2022.

“Affected taxpayer” automatically includes any individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Those who reside or have a business located outside the covered disaster area, but have been affected by the disaster, may contact the IRS to request relief.


IRS Priority Guidance Plan Includes Retirement Items

The IRS has issued its initial 2021-2022 Priority Guidance Plan, in which it describes guidance projects in the current fiscal year. Many items in the plan have appeared in prior years’ Priority Guidance Plans. A number of the guidance items deal with retirement savings arrangements, including the following.

  • Guidance related to several IRS tax-exempt and government entities programs, including the EPCRS, pre-approved plan, and determination letter programs
  • Regulations and guidance relating to the 10 percent early distribution tax
  • Comprehensive IRA regulations
  • Final regulations on normal retirement age under governmental plans (proposed regulations issued in January 2016)
  • Regulations and guidance updating electronic delivery rules for providing applicable notices and making participant elections
  • Regulations relating to SECURE Act modifications, including required minimum distributions and other rules for 401(k) plans
  • Guidance on student loan payments and their interplay with qualified retirement plans and 403(b) plans
  • Regulations on closed defined benefit plans (proposed regulations issued in January 2016)
  • Guidance on missing participants and uncashed checks
  • Regulations on the exception to the unified plan rule for Internal Revenue Code Section 413(e) multiple employer plans (proposed regulations issued in July 2019)
  • Regulations on the definition of “governmental plan”
  • Final regulations updating minimum-present-value requirements for defined benefit pension plans (proposed regulations issued in November 2016)
  • Regulations on mortality tables to determine present value for single-employer defined benefit pension plans
  • Guidance implementing changes and relief provided under the American Rescue Plan Act of 2021 for defined benefit plans
  • Final regulations for withholding on distributions when payments are made to a non-U.S. address (proposed regulations issued in May 2019)
  • Regulations relating to the Section 6057 reporting requirements (proposed regulations issued in June 2012)
  • Guidance updating electronic filing requirements as required by the Taxpayer First Act

IRS Issues Deadline Relief for Hurricane Ida Victims in New York

The IRS has issued a news release announcing the postponement of certain tax-related deadlines for victims of Hurricane Ida in New York. The tax relief postpones various tax filing deadlines that began September 1, 2021. Affected individuals and households who reside or have a business in Bronx, Kings, New York, Queens, Richmond, and Westchester counties, as well as taxpayers with records located in the covered area that are needed to meet covered deadlines qualify for relief. The IRS has indicated similar guidance will be released for Bergen, Gloucester, Hunterdon, Middlesex, Passaic, and Somerset counties in New Jersey. This relief will be automatically granted to taxpayers in Ida-affected locations in other parts of these states subsequently designated by the Federal Emergency Management Agency (FEMA).

In addition to extending certain tax filing and tax payment deadlines, the relief includes completion of many time-sensitive, tax-related acts described in IRS Revenue Procedure 2018-58 and Treasury Regulation 3.01.7508A-1(c)(1). Affected taxpayers with a covered deadline on or after September 1, 2021, and before January 3, 2022, will have until January 3, 2022, to complete the acts. This includes filing Form 5500 series returns that are required to be filed on or after September 1, 2021, and before January 3, 2022.

“Affected taxpayer” automatically includes any individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Those who reside or have a business located outside the covered disaster area, but have been affected by the disaster, may contact the IRS to request relief.


Early House Budget Reconciliation Text Includes Retirement Reform

The House Ways and Means Committee has released draft legislative text as part of what is currently planned to be a $3.5 trillion tax and spending package. The proposal would require employers without an employer-sponsored retirement plan to automatically enroll their employees in an automatic IRA plan or other retirement arrangement at a rate of at least 6 percent and increasing annually to 10 percent of compensation beginning in 2023. Representative Richard Neal (D-MA) previously proposed such legislation under the Automatic Retirement Plan Act of 2017. The current proposal exempts employers with 5 or fewer employees earning at least $5,000, or those that have been in business for less than 2 years from these requirements. The legislation includes enhancements to credits for small employers to offset plan costs and imposes an excise tax of $10 per participant per day to employers that fail to provide an automatic arrangement.

Additionally, the proposal would modify the saver’s credit to create a refundable tax credit or “saver’s match” of up to $500 (adjusted for inflation), based on a percentage of the contributions made by the taxpayer to a retirement account. The taxpayer would designate on his or her tax return an eligible retirement account for the credit to be funded. Similar proposals have been introduced by Senator Ron Wyden (D-OR) with the Encouraging Americans to Save Act of 2021, and also by Senator’s Ben Cardin (R-MD) and Ron Portman (R-OH) as part of the Retirement Security and Savings Act of 2021.

The House Ways and Means Committee is scheduled to hold markup sessions this week to debate the legislation.


IRS Provides Amendment Guidance

The IRS has released Revenue Procedure 2021-37, providing procedures for the issuance of opinion letters and the timing requirements of remedial amendment periods for Cycle 2 approvals of 403(b) plans. The guidance aligns the 403(b) pre-approval process with the 401(a) process in several ways.

  • Replaces the prototype and volume submitter programs with a single opinion letter program
  • Provides that the IRS will issue a Cumulative List of Changes identifying requirements that will be considered in reviewing plans submitted for Cycle 2
  • Creates a determination letter program using Form 5307 for limited circumstances
  • Provides details on the system of remedial amendment periods that follows the initial remedial amendment period

The submission period for on-cycle applications for Cycle 2 opinion letters starts on May 2, 2022, and ends on May 1, 2023. The deadline to adopt interim amendments for most 403(b) plans will be the end of the second calendar year following the calendar year in which the change is effective.

The IRS simultaneously issued Revenue Procedure 2021-38, whereby the interim amendment deadline for pre-approved plans qualified under IRC 401(a) will similarly be the end of the second calendar year following the calendar year in which the change is effective. Employers are no longer required to consider their tax-filing deadline in determining the date by which the interim amendment must be adopted. The new deadline is applicable to disqualifying provisions that are effective after December 31, 2020.

 


IRS Issues Deadline Relief for Hurricane Ida Victims in Louisiana and Neighboring States

The IRS has issued news releases IR-2021-175 and LA-2021-04 announcing the postponement of certain tax-related deadlines for Hurricane Ida victims in Louisiana. The tax relief postpones various tax filing deadlines that began August 26, 2021. Affected individuals and households who reside or have a business anywhere in the state of Louisiana, as well as taxpayers with records located in the covered area that are needed to meet covered deadlines qualify for relief. This relief will be automatically granted to taxpayers in Ida-impacted locations in neighboring states designated by the Federal Emergency Management Agency (FEMA) as qualifying for individual or public assistance.

In addition to extending certain tax filing and tax payment deadlines, the relief includes completion of many time-sensitive, tax-related acts described in IRS Revenue Procedure 2018-58 and Treasury Regulation 301.7508A-1(c)(1). Affected taxpayers with a covered deadline on or after August 26, 2021, and before January 3, 2022, will have until January 3, 2022, to complete the acts. This includes filing Form 5500 series returns that are required to be filed on or after August 26, 2021, and before January 3, 2022. Additionally, penalties on deposits due on or after August 26, 2021, and before September 10, 2021, will be abated, as long as the tax deposits are made by September 10, 2021.

“Affected taxpayer” automatically includes any individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Those who reside or have a business located outside the covered disaster area, but have been affected by the disaster, may contact the IRS to request relief.


IRS Issues Deadline Relief for California Wildfire Victims

The IRS has issued a news release announcing the postponement of certain tax-related deadlines for California wildfire victims. The tax relief postpones various tax filing and payment deadlines that began on July 14, 2021. Affected individuals and households that reside or have a business in Lassen, Nevada, Placer, and Plumas counties, as well as taxpayers with records located in the covered area that are needed to meet covered deadlines qualify for relief.

In addition to extending certain tax filing and tax payment deadlines, the relief includes completion of many time-sensitive, tax-related acts described in IRS Revenue Procedure 2018-58 and Treasury Regulation 301.7508A-1(c)(1). Affected taxpayers with a covered deadline on or after July 14, 2021, and before November 15, 2021, will have until November 15, 2021, to complete the acts. This includes filing of the Form 5500 series returns that are required to be filed on or after July 14, 2021, and before November 15, 2021.

“Affected taxpayer” automatically includes any individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Those who reside or have a business located outside the covered disaster area, but have been affected by the disaster, may contact the IRS at 866-562-5227 to request relief.

 


IRS Issues Deadline Relief for Tennessee Severe Storms and Flooding Victims

The IRS has issued a news release announcing the postponement of certain tax-related deadlines for Tennessee victims of severe storms and flooding. The tax relief postpones various tax filing and payment deadlines that began on August 21, 2021. Affected individuals and households that reside or have a business in Dickson, Hickman, Houston, and Humphreys counties, as well as taxpayers with records located in the covered area that are needed to meet covered deadlines qualify for relief.

In addition to extending certain tax filing and tax payment deadlines, the relief includes completion of many time-sensitive, tax-related acts described in IRS Revenue Procedure 2018-58 and Treasury Regulation 301.7508A-1(c)(1). Affected taxpayers with a covered deadline on or after August 21, 2021, and before January 3, 2022, will have until January 3, 2022, to complete the acts. This includes filing of the Form 5500 series returns that are required to be filed on or after August 21, 2021, and before January 3, 2022.

“Affected taxpayer” automatically includes any individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Those who reside or have a business located outside the covered disaster area, but have been affected by the disaster, may contact the IRS at 866-562-5227 to request relief.


GAO Reports on 401(k) Fee Information

The Government Accountability Office (GAO) has released a report titled “401(K) Retirement Plans – Many Participants Do Not Understand Fee Information, but DOL Could Take Additional Steps to Help Them”. The GAO analyzed survey responses from 1,004 401(k) plan participants and found that nearly 40 percent of respondents do not fully understand the fee information found in fee disclosures required to be provided to participants. Further, the GAO determined that 45 percent of participants cannot use the information provided in disclosures to determine the cost of their investment, and 41 percent of participants falsely believed they had no 401(k) plan fees.

The GAO also reviewed disclosure practices in three countries and the European Union that have participant directed account-based retirement plans. The GAO has outlined several recommendations for the DOL to consider in improving disclosure requirements for participant directed accounts.

  • Use consistent terminology to describe and measure asset-based investment fees
  • Provide participants with the actual cost of asset-based investment fees paid
  • Provide graphic illustrations and explanations that convey the cumulative effects of fees on saving over time
  • Require the inclusion of benchmarks to assess the value of in-plan investment options against other investments
  • Include ticker information for in-plan investment options when available

 

The DOL acknowledged that the study reinforces the complexities faced in trying to help plan participants with varying degrees of investment sophistication understand the fees and costs associated with plan investments.

 

The GAO report was requested by Chairman Robert C. “Bobby” Scott (D-VA), House Education and Labor Committee, and Chair Patty Murray (D-WA), Senate Health, Education, Labor, and Pensions Committee to examine how well participants can understand and use the fee disclosures.


Bill Would Provide Permanent Retirement Distribution Relief for Federal Disasters

Senators Bill Cassidy (R-LA) and Robert Menendez (D-NJ) have introduced legislation that would make permanent certain rules for distributions and loans from retirement plans and IRAs in connection with federally declared disasters. This legislation is intended to aid victims by providing consistent treatment of and improving response times associated with disaster relief.

The proposal follows previous disaster distribution guidance and provides for a waiver of the 10 percent early withdrawal penalty tax on distributions of up to $100,000 per disaster made to those who have a primary residence in the affected area and have sustained an economic loss. The relief would apply to distributions on or after the first day of the incident period of the disaster and within 180 days after the later of either the incident period, the date of enactment, or the applicable disaster declaration. The proposal also allows the taxpayer to treat the distribution as income ratably over a three-year period, as well as to recontribute the distribution to a plan or IRA within three years.

Additionally, the bill would allow recontributions of withdrawals for home purchase or construction in the event that the assets were not used for that purpose. The maximum amount available for a plan loan would also be increased to the lesser of $100,000 or the greater of $10,000 or 100 percent of the nonforfeitable benefit of the participant. A one-year extension of loan repayments would also be permitted for loan payments due on or after the first incident date of the disaster and within the subsequent 180-day period.

The bill was referred to the Senate Committee on Finance. It will be monitored for further developments.