Friday, November 7, 2014

N-2014-69: Group Health Plans that Fail to Cover In-Patient Hospitalization Services



Notice 2014-69 advises employers and other taxpayers that employer-sponsored health plans that fail to provide substantial coverage for in-patient hospitalization services or for physician services do not provide minimum value within the meaning of § 36B and that the IRS, the Treasury Department, and the Department of Health and Human Services (HHS) expect shortly to propose regulations to this effect.  The notice also advises that IRS, Treasury, and HHS are considering whether the continuance tables underlying the Minimum Value Calculator produce valid actuarial results for plans with these designs. Employers offering plans that fail to cover in-patient hospitalization or physician services should exercise caution in relying on the Minimum Value Calculator to demonstrate that these plans provide minimum value for any portion of a taxable year after publication of final regulations.

Notice 2014-69 will appear in IRB 2014-48 dated Nov. 24, 2014.

Save Twice with the Saver’s Credit



If you are a low-to-moderate income worker, you can take steps now to save two ways for the same amount. With the saver’s credit you can save for your retirement and save on your taxes with a special tax credit.. Here are six tips you should know about this credit:

1. Save for retirement.  The formal name of the saver’s credit is the retirement savings contributions credit. You may be able to claim this tax credit in addition to any other tax savings that also apply. The saver’s credit helps offset part of the first $2,000 you voluntarily save for your retirement. This includes amounts you contribute to IRAs, 401(k) plans and similar workplace plans.

2. Save on taxes.  The saver’s credit can increase your refund or reduce the tax you owe. The maximum credit is $1,000, or $2,000 for married couples. The credit you receive is often much less, due in part because of the deductions and other credits you may claim.

3. Income limits.  Income limits vary based on your filing status. You may be able to claim the saver’s credit if you’re a:

• Married couple filing jointly with income up to $60,000 in 2014 or $61,000 in 2015.
• Head of Household with income up to $45,000 in 2014 or $45,750 in 2015.
• Married person filing separately or single with income up to $30,000 in 2014 or $30,500 in 2015.

4. When to contribute.  If you’re eligible you still have time to contribute and get the saver’s credit on your 2014 tax return. You have until April 15, 2015, to set up a new IRA or add money to an existing IRA for 2014.. You must make an elective deferral (contribution) by the end of the year to a 401(k) plan or similar workplace program.

If you can’t set aside money for this year you may want to schedule your 2015 contributions soon so your employer can begin withholding them in January.

5. Special rules apply.  Other special rules that apply to the credit include:

• You must be at least 18 years of age.
• You can’t have been a full-time student in 2014.
• Another person can’t claim you as a dependent on their tax return.

6. Visit IRS.gov.  You figure your credit amount based on your filing status, adjusted gross income, tax liability and the amount of your qualified contribution. Other rules also apply. For more information visit IRS.gov.

If you found this Tax Tip helpful, please share it through your social media platforms. A great way to get tax information is to use IRS Social Media. Subscribe to IRS Tax Tips or any of our e-news subscriptions.

Additional IRS Resources:

Thursday, October 23, 2014

IRS Announces 2015 Pension Plan Limitations; Taxpayers May Contribute up to $18,000 to their 401(k) plans in 2015



WASHINGTON — The Internal Revenue Service today announced cost of living adjustments affecting dollar limitations for pension plans and other retirement-related items for tax year 2015.  Many of the pension plan limitations will change for 2015 because the increase in the cost-of-living index met the statutory thresholds that trigger their adjustment.  However, other limitations will remain unchanged because the increase in the index did not meet the statutory thresholds that trigger their adjustment.  Highlights include the following:
  • The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $17,500 to $18,000.
  • The catch-up contribution limit for employees aged 50 and over who participate in 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan is increased from $5,500 to $6,000.
  • The limit on annual contributions to an Individual Retirement Arrangement (IRA) remains unchanged at $5,500.  The additional catch-up contribution limit for individuals aged 50 and over is not subject to an annual cost-of-living adjustment and remains $1,000.
  • The deduction for taxpayers making contributions to a traditional IRA is phased out for singles and heads of household who are covered by a workplace retirement plan and have modified adjusted gross incomes (AGI) between $61,000 and $71,000, up from $60,000 and $70,000 in 2014.  For married couples filing jointly, in which the spouse who makes the IRA contribution is covered by a workplace retirement plan, the income phase-out range is $98,000 to $118,000, up from $96,000 to $116,000.  For an IRA contributor who is not covered by a workplace retirement plan and is married to someone who is covered, the deduction is phased out if the couple’s income is between $183,000 and $193,000, up from $181,000 and $191,000.  For a married individual filing a separate return who is covered by a workplace retirement plan, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
  • The AGI phase-out range for taxpayers making contributions to a Roth IRA is $183,000 to $193,000 for married couples filing jointly, up from $181,000 to $191,000 in 2014.  For singles and heads of household, the income phase-out range is $116,000 to $131,000, up from $114,000 to $129,000.  For a married individual filing a separate return, the phase-out range is not subject to an annual cost-of-living adjustment and remains $0 to $10,000.
  • The AGI limit for the saver’s credit (also known as the retirement savings contribution credit) for low- and moderate-income workers is $61,000 for married couples filing jointly, up from $60,000 in 2014; $45,750 for heads of household, up from $45,000; and $30,500 for married individuals filing separately and for singles, up from $30,000.
Below are details on both the adjusted and unchanged limitations.

Section 415 of the Internal Revenue Code provides for dollar limitations on benefits and contributions under qualified retirement plans.  Section 415(d) requires that the Secretary of the Treasury annually adjust these limits for cost of living increases.  Other limitations applicable to deferred compensation plans are also affected by these adjustments under Section 415.  Under Section 415(d), the adjustments are to be made under adjustment procedures similar to those used to adjust benefit amounts under Section 215(i)(2)(A) of the Social Security Act.

Effective January 1, 2015, the limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) remains unchanged at $210,000.  For a participant who separated from service before January 1, 2015, the limitation for defined benefit plans under Section 415(b)(1)(B) is computed by multiplying the participant's compensation limitation, as adjusted through 2014, by 1.0178.

The limitation for defined contribution plans under Section 415(c)(1)(A) is increased in 2015 from $52,000 to $53,000.

The Code provides that various other dollar amounts are to be adjusted at the same time and in the same manner as the dollar limitation of Section 415(b)(1)(A).  After taking into account the applicable rounding rules, the amounts for 2015 are as follows:

The limitation under Section 402(g)(1) on the exclusion for elective deferrals described in Section 402(g)(3) is increased from $17,500 to $18,000.

The annual compensation limit under Sections 401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii) is increased from $260,000 to $265,000.

The dollar limitation under Section 416(i)(1)(A)(i) concerning the definition of key employee in a top-heavy plan remains unchanged at $170,000..

The dollar amount under Section 409(o)(1)(C)(ii) for determining the maximum account balance in an employee stock ownership plan subject to a 5 year distribution period is increased from $1,050,000 to $1,070,000, while the dollar amount used to determine the lengthening of the 5 year distribution period remains unchanged at $210,000.

The limitation used in the definition of highly compensated employee under Section 414(q)(1)(B) is increased from $115,000 to $120,000.

The dollar limitation under Section 414(v)(2)(B)(i) for catch-up contributions to an applicable employer plan other than a plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over is increased from $5,500 to $6,000.  The dollar limitation under Section 414(v)(2)(B)(ii) for catch-up contributions to an applicable employer plan described in Section 401(k)(11) or Section 408(p) for individuals aged 50 or over is increased from $2,500 to $3,000.

The annual compensation limitation under Section 401(a)(17) for eligible participants in certain governmental plans that, under the plan as in effect on July 1, 1993, allowed cost of living adjustments to the compensation limitation under the plan under Section 401(a)(17) to be taken into account, is increased from $385,000 to $395,000.

The compensation amount under Section 408(k)(2)(C) regarding simplified employee pensions (SEPs) is increased from $550 to $600.

The limitation under Section 408(p)(2)(E) regarding SIMPLE retirement accounts is increased from $12,000 to $12,500.

The limitation on deferrals under Section 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations is increased from $17,500 to $18,000.

The compensation amount under Section 1.61 21(f)(5)(i) of the Income Tax Regulations concerning the definition of “control employee” for fringe benefit valuation remains unchanged at $105,000.  The compensation amount under Section 1.61 21(f)(5)(iii) is increased from $210,000 to $215,000.

The Code also provides that several retirement-related amounts are to be adjusted using the cost-of-living adjustment under Section 1(f)(3).  After taking the applicable rounding rules into account, the amounts for 2015 are as follows:

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for married taxpayers filing a joint return is increased from $36,000 to $36,500; the limitation under Section 25B(b)(1)(B) is increased from $39,000 to $39,500; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $60,000 to $61,000.

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for taxpayers filing as head of household is increased from $27,000 to $27,375; the limitation under Section 25B(b)(1)(B) is increased from $29,250 to $29,625; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $45,000 to $45,750.

The adjusted gross income limitation under Section 25B(b)(1)(A) for determining the retirement savings contribution credit for all other taxpayers is increased from $18,000 to $18,250; the limitation under Section 25B(b)(1)(B) is increased from $19,500 to $19,750; and the limitation under Sections 25B(b)(1)(C) and 25B(b)(1)(D) is increased from $30,000 to $30,500.

The deductible amount under Section 219(b)(5)(A) for an individual making qualified retirement contributions remains unchanged at $5,500.

The applicable dollar amount under Section 219(g)(3)(B)(i) for determining the deductible amount of an IRA contribution for taxpayers who are active participants filing a joint return or as a qualifying widow(er) is increased from $96,000 to $98,000.  The applicable dollar amount under Section 219(g)(3)(B)(ii) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $60,000 to $61,000.  The applicable dollar amount under Section 219(g)(3)(B)(iii) for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0.  The applicable dollar amount under Section 219(g)(7)(A) for a taxpayer who is not an active participant but whose spouse is an active participant is increased from $181,000 to $183,000.

The adjusted gross income limitation under Section 408A(c)(3)(B)(ii)(I) for determining the maximum Roth IRA contribution for married taxpayers filing a joint return or for taxpayers filing as a qualifying widow(er) is increased from $181,000 to $183,000.  The adjusted gross income limitation under Section 408A(c)(3)(B)(ii)(II) for all other taxpayers (other than married taxpayers filing separate returns) is increased from $114,000 to $116,000.  The applicable dollar amount under Section 408A(c)(3)(B)(ii)(III) for a married individual filing a separate return is not subject to an annual cost-of-living adjustment and remains $0.

The dollar amount under Section 430(c)(7)(D)(i)(II) used to determine excess employee compensation with respect to a single-employer defined benefit pension plan for which the special election under Section 430(c)(2)(D) has been made is increased from $1,084,000 to $1,101,000.

Saturday, October 18, 2014

Information for Employers about Their Responsibilities Under the Affordable Care Act

IRS Health Care Tax Tip 2014-21, Oct. 16, 2014

If you are an employer, the number of employees in your business will affect what you need to know about the Affordable Care Act (ACA).

Employers with 50 or more full-time and full-time-equivalent employees are generally considered to be “applicable large employers” (ALEs) under the employer shared responsibility provisions of the ACA.  Applicable large employers are subject to the employer shared responsibility provisions.

However, more than 95 percent of employers are not ALEs and are not subject to these provisions because they have fewer than 50 full-time and full-time-equivalent employees.

Whether an employer is an ALE is determined each calendar year based on employment and hours of service data from the prior calendar year. An employer can find information about determining the size of its workforce in the employer shared responsibility provision questions and answers section of the IRS.gov/aca website and in the related final regulations.

In general, beginning January 1, 2015, ALEs with at least 100 full-time and full-time equivalent employees must offer affordable health coverage that provides minimum value to their full-time employees and their dependents or they may be subject to an employer shared responsibility payment.  This payment would apply only if at least one of its full-time employees receives a premium tax credit through enrollment in a state based Marketplace or a federally facilitated or Marketplace.  Also, starting in 2016 ALEs must report to the IRS information about the health care coverage, if any, they offered to their full-time employees for calendar year 2015, and must also furnish related statements to their full-time employees.

For 2014, the IRS will not assess employer shared responsibility payments and the information reporting related to the employer shared responsibility provisions is voluntary.  In addition, the employer shared responsibility provisions will be phased in for smaller ALEs from 2015 to 2016.

Specifically, ALEs that meet certain conditions regarding maintenance of workforce size and coverage in 2014 are not subject to the employer shared responsibility provision for 2015.  For these employers, no employer shared responsibility payment will apply for any calendar month during 2015 (including, for an employer with a non-calendar year plan, the months in 2016 that are part of the 2015 plan year). However these employers are required to meet the information reporting requirements for 2015.  The employer shared responsibility provision questions and answers section of the IRS.gov/aca website and the preamble to the employer shared responsibility final regulations describe the requirements for this relief in more detail.  Both resources also describe additional forms of transition relief that apply for 2015.

Small employers, specifically those with fewer than 25 full-time equivalent employees, may be eligible for the small business health care tax credit.

Regardless of the number of employees, if an employer sponsors a self-insured health plan, it must report to the IRS certain information about its health insurance coverage plan for each covered employee.

More information

Find out more about the small business health care tax credit, applicable large employers, the employer shared responsibility provision, information reporting requirements and the premium tax credit at IRS.gov/aca.

Find out more about the health care law at HealthCare.gov.

Thursday, October 16, 2014

CPAs and tax preparers do not normally owe a fiduciary duty to their clients

Plaintiff sued his accountant for negligence and was trying to get around the 3-year statute of limitations of 52-577.  In opposition to the defendant’s summary judgment, the plaintiff alleged the accountant owed him a fiduciary duty to disclose his mistake and this tolled the statute of limitation.  The majority of the Supreme Court affirmed the recent Appellate Court decision in this dispute that CPAs and tax preparers do not normally owe a fiduciary duty to their clients absent more involvement in their client’s affairs, such as: representing them in tax disputes with the IRS; providing investment advice; handling their finances; or recommending financial transactions they might participate in.  The dissent objected to such a bright line rule for CPAs and would have left the issue to the jury to decide.  The majority responded in a footnote that their decision was consistent with the majority of states and was not a bright line rule.  They said the plaintiff here simply failed to put forth any evidence of anything more by the CPA other than preparing tax returns.  The plaintiff’s opposition to summary judgment was full of conclusory statements like “he trusted them,” “he relied upon them,” “they had superior knowledge,” etc.  But such generic statements are not enough.

The decision also looked to when fiduciary roles can toll the statute of limitations.  Tolling due to fraudulent concealment under CGS 52-595 require three elements: [1] knowledge of the mistake; [2] intentional concealment; and [3] for the purpose of delaying the claim.  The federal rule allows concealment element #2 to be satisfied by showing a fiduciary relationship.   [The Court said it did not need to decide in this case whether CT would adopt the federal rule but it looks to me like they would if presented with the correct fact pattern.]

Wednesday, October 15, 2014

Premium Payment Instructions & Addresses

Premium Payment Instructions, including illustrative forms:
Premium Payment Instructions & Contact Information

Payment outside of My PAA is permitted for any filing and is required if multiple filings are uploaded at the same time (i.e., a batch upload). However, separate payments must be submitted for each plan. Do not combine premiums for two or more plans into one payment.
The preferred payment option outside of My PAA is Pay.gov, which is fast, secure, and free for premium payers.

For fast, automatic posting to the premium account, the payment must reference the plan's employer identification number, plan number and the plan year commencement date. If you send a paper check, we request that you include a completed paper check voucher. Note that these addresses are also used for all prior year premium filings and payments (outside of My PAA).
  • Pay.gov for secure electronic payments:Go to http://www.Pay.gov. This is a direct link to the PBGC Premium Insurance Payments Form. This link can also be found at www.Pay.gov. You will be automatically directed to a secure site. Select Pension Benefit Guaranty Corporation from the Agency List. You will need the plan's EIN, PN, and Plan Year Commencement Date to complete the payment.
  • Mailing Address if using the United States Postal Service:
    Pension Benefit Guaranty Corporation
    P.O. Box 105758
    Atlanta, GA 30348-5758
  • Deliver to Address, if you send a paper check or correspondence via a delivery service that does not deliver to a P.O. Box (e.g., FedEx, UPS):Bank of America
    1075 Inner Loop Road (2nd Floor)
    Atlanta, GA 30337
    ATTN: PBGC Box 105758
    Phone: 404-209-6322
  • Electronic Funds Transfers other than Pay.gov:
    JPMorgan Chase Bank, N.A.
    ABA: 071000013
    Account: 656510666
    Beneficiary: PBGC
    Reference: "EIN/PN: XXXXXXXXX/XXX         PYC: MM/DD/YY"
Customer Service
Phone: 1-800-736-2444 and select the premium option
Paper Check Voucher (for printing) [PDF]
Notice to Customers Making Payment by Check

When you provide a check as payment, you authorize us either to use information from your check to make a one-time electronic fund transfer from your account or to process the payment as a check transaction.

Privacy Act — A Privacy Act Statement required by 5 U.S.C. § 552a(e)(3) stating our authority for soliciting and collecting the information from your check, and explaining the purposes and routine uses which will be made of your check information, is available from our internet site at (http://www.fms.treas.gov/otcnet/legal.html), or call toll free at (1-866-945-7920) to obtain a copy by mail. Furnishing the check information is voluntary, but a decision not to do so may require you to make payment by some other method.



Premium Contact Information
  • E-mail a question
  • Call: 1-800-736-2444 or (202) 326-4242 and select the "premium" option.
    TTY/ASCII users should call the Federal Relay Service toll-free at 1-800-877-8339 and ask to be connected to 1-800-736-2444.
  • Mail correspondence to:
    Pension Benefit Guaranty Corporation
    P.O. Box 105758
    Atlanta, GA 30348-5758

Technical Update 14-1: Effect of HATFA on PBGC Premiums

September 24, 2014

This Technical Update 14-1 provides Pension Benefit Guaranty Corporation (PBGC) guidance on the effect of the Highway and Transportation Funding Act of 2014 (HATFA) on PBGC premiums.

The guidance in this Technical Update 14-1 supersedes any inconsistent guidance in PBGC's 2014 premium instructions. It does not affect the guidance in PBGC Technical Update 12-1 (Effect of MAP-21 on PBGC Premiums), which continues to apply for plan years to which HATFA applies.

I. Background and Guidance

A. 2014 premium underpayments that may result from decision to use 2013 HATFA rates

The Moving Ahead for Progress in the 21st Century Act (MAP-21) provided stabilization rules that limited the volatility of discount rates used for certain funding and benefit restriction purposes by constraining them within a corridor around 25-year average rates. The MAP-21 corridor was scheduled to widen over time, starting with a slightly wider corridor for plan years beginning in 2013. HATFA extends, through 2017 plan years, the period during which the narrowest corridor applies. The change is retroactive to 2013 plan years, but plan sponsors may decide whether to have the narrowest corridor (under HATFA) or the slightly wider corridor (under MAP-21) apply to 2013.

The choice of a rate corridor for the plan year beginning in 2013 affects a plan's variable-rate premium for the 2014 plan year. This is because –
  • The discounted value of contributions made for the 2013 plan year after the end of that plan year is included in the value of assets for purposes of determining the 2014 variable-rate premium; and
  • The discount rate used for this purpose is the effective interest rate for 2013, which is affected by the 2013 rate corridor.
The effect of using HATFA rates rather than MAP-21 rates is relatively modest. For example, if a $1 million contribution made six months after year-end is discounted with the HATFA effective interest rate rather than the MAP-21 rate, the variable-rate premium will increase by less than $30.

PBGC believes most plans have already determined the 2013 effective interest rate based on the wider MAP-21 rate corridor and many (but not all) plans have not determined the 2013 effective interest rate based on the narrower HATFA corridor. Under IRS Notice 2014-53, plans may decide whether to use MAP-21 or HATFA rates for 2013 funding determinations as late as December 31, 2014 (or, if later, the due date for the 2013 5500).

PBGC expects most plans with premium filings due in calendar year 2014 that haven't already filed a 2013 Schedule SB based on HATFA calculations will find it administratively less burdensome to determine their 2014 variable-rate premium based on an asset value that includes contributions receivable discounted at the MAP-21 effective interest rate, even though many of those plans will ultimately use 2013 HATFA rates. Under PBGC's regulations, a plan in this situation that ultimately uses 2013 HATFA rates should amend its premium filing and pay the additional premium and late payment charges.

The situation created by HATFA for the 2013 effective interest rate is unique. HATFA was enacted August 8, 2014, long after the end of most 2013 plan years (and close to the deadline for filing the Form 5500 annual report for calendar 2013 plan years). Yet it has retroactive application to 2013 years depending on decisions that may be made as late as December 31, 2014 (or, if later, the due date for the 2013 5500). Like the 2013 Form 5500, the 2014 PBGC premium filing for calendar-year plans is due less than ten weeks after HATFA became law. In addition, the discrepancy in the variable-rate premium resulting from HATFA rates is generally modest — in most cases likely less than the cost of making an amended premium filing.

Accordingly, in the exercise of enforcement discretion, PBGC will not require a plan that makes a 2014 premium filing using an asset value that includes 2013 contributions receivable discounted using MAP-21 effective interest rates and uses HATFA rates for 2013funding purposes, to pay additional premium or late payment charges or amend its 2014 premium filing where all of the following conditions are met:
  • The 2014 premium filing is due on or before December 31, 2014, and is timely made.
  • As of the 2014 premium due date, the plan has not filed a 2013 Schedule SB based on HATFA calculations.
  • The asset value reported in the 2014 premium filing included contributions made after the end of the 2013 plan year discounted using the effective interest rate that would have applied had HATFA not been enacted (i.e., based on the MAP‑21 corridor).
  • The plan's contributions for the 2013 plan year made after the end of such plan year do not exceed $25 million.
B. Redesignation of 2013 contributions under HATFA

Section IV.D of IRS Notice 2014-53 says:

Despite the general position of the Service that a contribution designated for a particular plan year cannot be redesignated to apply for another plan year after the Schedule SB is filed, the plan sponsor may choose to redesignate all or a portion of a contribution that was originally designated as applying to the plan year beginning in 2013 to apply to a plan year that begins in 2014. This rule applies only to contributions made after the end of the 2013 plan year and on or before September 30, 2014 and applies only if the designation is on a Schedule SB for the 2013 plan year that is filed on or before December 31, 2014.

In a 2011 policy statement,1 PBGC considered the treatment of amended premium filings, showing increased assets and decreased variable-rate premium, supported by amended Schedules SB (or B) that reflected recharacterization of contributions, and submitted with a view to obtaining premium refunds.

PBGC has reviewed its policy statement in light of IRS's explicit endorsement of one specific type of redesignation in connection with the implementation of HATFA. Under the circumstances, plans that redesignate 2013 contributions to 2014 in accordance with IRS Notice 2014‑ 53 should amend their 2014 premium filings to exclude the discounted value of such redesignated contributions from the value of assets used to determine the 2014 VRP. In general, such a redesignation will affect premiums for both 2014 and 2015. If the redesignation is made after the 2014 premium filing, the 2014 filing should be amended to reflect the higher premium.2

II. PBGC Contact

For questions about this Technical Update 14-1, contact Amy Viener, Senior Policy Actuary, Policy, Research and Analysis Department, at (202) 326‑4080, ext. 3919, or viener.amy@pbgc.gov.

176 FR 79714 (Dec. 22, 2011).

2Since the redesignation means that the original filing contained a discrepancy unrelated to the use of an effective interest rate based on MAP-21 rules instead of HATFA rules, plans that make such redesignations do not qualify for the relief described in A. above.

Fidelity Bonds and Depositing Plan Contributions

The Employee Plans Compliance Unit (EPCU) looked at the compliance rate of Virgin Island plan sponsors on two issues IRS discovered during limited audits of these plan and found that most of the sampled plans sponsors complied with their bonding and contribution deposit requirements. However, the EPCU did find a few plan sponsors who either:
  • didn’t have adequate fidelity bonding, or
  • didn’t deposit contributions by the required deadlines.
Fidelity bonds

Under ERISA, plan sponsors are required to secure fidelity bonds to protect the plan against loss because of fraud or dishonesty by any plan fiduciary or someone who handles the plan’s assets.
Everyone who meets the bonding requirement is required to secure a bond for at least 10% of the amount of funds handled during a plan year ($1,000 minimum and $500,000 maximum per plan). The Department of Labor increased the maximum required bond to $1,000,000 for officials of plans that hold employer securities for plan years beginning on or after January 1, 2008. For more guidance on ERISA fidelity bonding requirements, see DOL Field Assistance Bulletin 2008-04.

Contribution deposits

Plan sponsors are required to keep employee contributions and salary deferral contributions separate from the company’s general funds. The DOL requires that the employer must deposit contributions into the trust as soon as administratively possible.

Rules for when an employer must deposit matching or other contributions are different from those for elective deferrals. To obtain a current tax deduction, the employer must deposit matching contributions by the employer’s income tax return filing deadline, including extensions.

If the employer doesn’t make the contribution deposits by the required deadline the plan may have operational mistakes that may lead to prohibited transactions or plan disqualification. Although an employer can correct certain operational mistakes under the Employee Plans Compliance Resolution System, an employer can’t correct prohibited transactions using this program. Employers may resolve prohibited transactions using the DOL Voluntary Fiduciary Correction Program (VFCP). If the plan document contains language for the timing of salary deferral deposits, an employer may correct failures to follow the plan document terms under EPCRS.

Planning tips

Review your plan’s administrative procedures so these mistakes don’t happen and consult with your benefits professional to ensure that you have administrative procedures in place to prevent these operational errors. If you find errors, take prompt action to correct them.

We have many resources to help you monitor compliance with your retirement plan. If you find a mistake or problem in your retirement plan, learn how to fix plan errors and avoid future errors.

Contact us

If you have questions about this project, email us and include “Virgin Islands” in the subject line. Make sure to include your telephone number so we can contact you with answers.

Additional resources

Mandatory Electronic Filing for Certain Form 8955-SSA and 5500-series Returns

  • Final Regulations issued under Internal Revenue Code Sections 6057, 6058 and 6059 (T.D. 9695) generally require filers who have to file at least 250 returns with the IRS during the calendar year to file Form 5500-series returns and Form 8955-SSA electronically.

  • The preamble to the regulations notes that the IRS anticipates adding items on the 2015 Forms 5500 and 5500-SF that relate solely to the Internal Revenue Code requirements and providing an optional paper-only form containing those Code-related items to filers who aren’t required to file electronically.
If you don’t file electronically when required to do so, you’ll be considered to not have filed the return, and you may incur appropriate penalties.

Effective date
  • Form 8955-SSA, Annual Registration Statement Identifying Separated Participants with Deferred Vested Benefits, must be filed electronically for plan years beginning on or after January 1, 2014, but only for returns with a filing date on or after July 31, 2015 (not including extensions).

  • Form 5500 series returns must be filed electronically for plan years that begin on or after January 1, 2015, but only for returns with a filing deadline (not including extensions) after December 31, 2015.
Electronic filing systems

Use EFAST2 (ERISA Filing Acceptance System) to electronically file:
  • Form 5500, Annual Return/Report of Employee Benefit Plan, and
  • Form 5500-SF, Short Form Annual Return/Report of Small Employee Benefit Plan.
Use FIRE (Filing Information Returns Electronically) to electronically file Form 8955-SSA.

One-participant plans

Electronic filing isn’t available for Form 5500-EZ, Annual Return of One-Participant (Owners and their Spouses) Retirement Plan. However, Form 5500-EZ filers required to file their returns electronically under the final regulations, who would otherwise file a paper Form 5500-EZ, must instead file Form 5500-SF electronically through EFAST2, but aren’t required to attach:
  • Schedule SB, Single-Employer Defined Benefit Plan Actuarial Information, or
  • Schedule MB, Multiemployer Defined Benefit Plan and Certain Money Purchase Plan Actuarial Information.
250-return threshold

When determining the 250-return threshold, aggregate all returns, including information returns. For example, include the following returns:
  • Forms W-2 and 1099-R; and
  • income, employment and excise tax returns.
Certain delinquent returns

Late filers who want relief under the following programs must file paper returns and meet other program requirements:
Additional resources