Volume 5, Fall 2008 

A Look Inside 

Failing to remit payroll taxes and 

retirement plan contributions in 

a timely manner is not only a violation 

of your legal obligations; it can also 

subject you to heavy penalties. So, do 

the right thing...more on page 3 

Use the worksheets posted on our web 

site to calculate the amount of RMDs 

from IRA accounts and also see our 

FAQs regarding RMDs... 

more on page 4 

In today’s economic world, many plan 

sponsors are taking a second look at 

their retirement plan. They may wonder 

if their current plan is the right 

one...more on page 4 

Help us to better serve you! Coming 

soon is our short survey for Retirement 

News for Employers...more on page 5 

The employer must provide a safe 

harbor 401(k) notice to participants 

within a reasonable time period before 

the beginning of each plan year. 

However, an employer that failed to 

provide this notice can correct the error 

by following the procedures discussed 

in “Failure to Provide a Safe Harbor 

401(k) Plan Notice.”...more on page 6 

The 2009 COLAs applicable to 

retirement plans have been 

announced...more on page 9 

Also in this Issue 

New on the Web Page 2 

Recent Guidance Page 3 

We’re Glad You Asked! Page 8 

DOL News Page 10 

Mark Your Calendar Page 11 

Timing is Everything Page 12 

Retirement News

 for Employers
 

Information for Sponsors of Retirement Plans 

Internal Revenue Service Tax Exempt and Government Entities 

Help Your Employees Weather the Storm:
 

Hardship Withdrawals and Loans from Retirement Plans
 

Like many people these days, some of your employees may be experiencing 

financial hardships and need access to the money in their retirement plans. Under 

certain circumstances, employees might be eligible for a loan or a hardship 

withdrawal from their retirement plan accounts. Below are questions you may 

have in helping your employees: 

Can my employees get a loan or withdraw money from their 

retirement plan? 

Although not required to do so, many retirement plans offer loans and hardship 

withdrawals. Check your retirement plan documents, such as a copy of the plan 

or the summary plan description, to see if your plan provides loans and/or 

hardship withdrawals. Remember, the law does not permit loans from IRA-based 

plans, such as SEPs and SIMPLE IRA plans. 

What is the difference between a loan and a hardship withdrawal? 

A loan is an amount employees can borrow from their retirement plan accounts 

and then pay back with interest. As long as the employee repays the borrowed 

amount, it is not taxed and the employee’s retirement plan account balance is 

restored by the amount borrowed. Employees are not required to prove financial 

hardship to get a loan. 

A hardship withdrawal is an amount that employees can receive from their 

retirement plan accounts and do not have to pay back. The amount withdrawn 

permanently reduces their account balance. To be eligible for a hardship 

withdrawal, employees must meet the requirements of a hardship withdrawal as 

stated in your plan. Usually, this means the employees must prove they have an 

unforeseeable financial hardship they cannot meet through any other available 

means, including a loan, if available, from the plan. Employees will have to pay 

taxes on the withdrawn amount. 

How can employees get a loan from the retirement plan? 

If the plan allow loans, it will outline the procedures employees need to follow to 

get the loan. Typically, employees will need to fill out loan forms and sign a 

repayment agreement outlining the number, the amount, and the due dates of 

repayment. The employees must pay interest on the amount borrowed and, 

depending upon the terms for loans as stated in your plan, may have to agree to 

repay the loan using automatic deductions from their future wages. The plan may 
 

Fall 2008 Retirement News for Employers 

New on the Web 

Here are the latest postings to the Retirement 

Plans Community web page: 

Fix-It Guides Web Page 

The SEP Fix-It Guide is here! It provides tips 

on how to find, fix, and avoid common mistakes 

in SEP plans. Check out our consolidated Fix-It 

Guides web page for both the 401(k) and SEP 

Fix-It Guides. SIMPLE IRA and SARSEP plan 

Fix-It Guides are coming soon. 

ERPA Web Page 

See our ERPA web page for information on the 

Enrolled Retirement Plan Agent (ERPA) 

program. If you have a question on the ERPA 

program, send them via our e-mail box for ERPA 

questions. 

IRS Nationwide Tax Forums – EP 

Presentations 

You can now view the materials used in EP’s 

presentations at the 2008 IRS Nationwide Tax 

Forums, Retirement Plan Choices for SelfEmployed Individuals, 401(k) Plans for SelfEmployed Individuals, and Retirement Plan 

Pitfalls Workshop (Use IRS Fix-It Guides to 

Keep Your Clients Out of Trouble). 

Correcting Plan Errors Web Page 

We have made updates detailing the changes to 

the EPCRS Program in Revenue Procedure 

2008-50 to our Correcting Plan Errors web 

page including updates to Other EPCRS 

Resources. 

Frequently Asked Questions on Required 

Minimum Distributions 

We have updated our FAQs on Required 

Minimum Distributions web page. See our two 

worksheets on how to calculate your Required 

Minimum Distribution from your IRA. 

COLA Increases 

The IRS recently announced the 2009 Cost-of 

Living Adjustments for pension plans. We have 

updated our COLA Increases for Dollar 

Limitations on Benefits and Contributions 

web page.• 

limit the amount of money employees can borrow, but the maximum 

amount the plan can loan is: (1) the greater of $10,000 or 50% of the 

balance of the employee’s retirement plan account; or (2) $50,000, 

whichever is less. All of an employee’s outstanding loans must be 

taken into account when determining the maximum amount he or 

she can borrow. 

When are employees eligible for hardship withdrawals 

from their retirement plan accounts? 

Your plan documents should state whether employees can make 

hardship withdrawals and under what circumstances. Typically, 

hardship withdrawals are only for unforeseeable emergency 

expenses employees and/or their spouses, dependents, or 

beneficiaries are facing and are unable to pay using any other 

available resources, including loans, if available, from the plan. 

Depending upon the type of plan, these emergency expenses may 

include having to pay for: 

(1) medical expenses; 

(2) funeral expenses; 

(3) repairs to their primary home after a fire or other damage; 

(4) prevention of eviction or mortgage foreclosure; 

(5) tuition expenses; or 

(6) the purchase of their primary home. 

Plans may limit the circumstances under which employees can get a 

hardship withdrawal. For example, some plans may only allow 

hardship withdrawals to pay funeral or medical expenses, but not to 

purchase a first home or to pay tuition expenses. Employees are 

usually required to provide proof of their hardship and, in some 

plans, cannot contribute to the plan from their wages for the next six 

months. Some plans may restrict the amount employees can 

withdraw as a hardship withdrawal to just the amount they have 

contributed to the plan from their wages, not contributions that the 

employer has made. 

How can employees make hardship withdrawals? 

Plan documents usually state specific procedures to obtain a 

hardship withdrawal. Generally, these procedures require employees 

to describe the specific hardship they are undergoing and verify they 

have no other resources, including potential loans from the plan, to 

meet their current financial crisis. 

In IRA-based plans, there are no restrictions on withdrawing 

amounts, but there are tax consequences as described below. 

What are the tax consequences of failing to repay a loan or 

making a hardship withdrawal? 

The law does not consider a loan taxable income as long as the 

employee repays the loan. If they fail to repay the loan, the unpaid 

amount is taxable income in the year they fail to repay it and is 

subject to an additional 10% early withdrawal tax unless some 

exception to this early withdrawal tax applies. 

2 
Fall 2008 Retirement News for Employers 

Recent Guidance 

Code §411(a)(11) Proposed Regulations 

REG 107318-08 73 Fed. Reg. 59575 (October 9, 

2008) 

These proposed regulations provide that the 

notice required under §411(a)(11) to inform a 

participant of his or her right, if any, to defer 

receipt of an immediately distributable benefit 

must also describe the consequences of failing to 

defer receipt of the distribution. They also 

provide that the applicable election period for 

waiving the qualified joint and survivor annuity 

form of benefit under §417 is the 180-day period 

ending on the annuity starting date, and that a 

notice required to be provided under §§402(f), 

411(a)(11), or 417 may be provided to a 

participant as much as 180 days before the 

annuity starting date (or, for a notice under 

§402(f), the distribution date). 

Notice 2008-102, 2008-45 I.R.B. 1106, Cost-ofLiving Adjustments 

This notice lists cost-of-living adjustments 

effective January 1, 2009, for the dollar 

limitations on benefits and contributions under 

qualified retirement plans. See IR-2008-118 

issued October 16, 2008.• 

The law considers the amount of a hardship withdrawal to be taxable 

income in the year the employee makes that withdrawal and it is 

subject to a 10% early withdrawal tax unless, again, some exception 

to this early withdrawal tax applies. The plan administrator needs to 

withhold taxes from the amount of the withdrawal. Remind your 

employee to consider the taxes that will be withheld and that he or 

she will owe on the withdrawal when determining the amount to 

withdraw. 

Please refer to Publication 575, Pension and Annuity Income, for 

additional details on loans, and our Frequently Asked Questions on 

loans and hardship withdrawals.• 

Do the Right Thing Even When Times are Tough! 

Like many businesses, you might be feeling the financial crunch 

these days and be tempted to use money you deduct for taxes and 

retirement plan contributions from employee wages. However, 

failing to remit payroll taxes and retirement plan contributions in 

a timely manner is not only a violation of your legal obligations; it 

can also subject you to heavy penalties. 

Remember, when you, as an employer, deduct income and Social 

Security taxes from your employees’ wages, that money is not yours 

to use, even for a short period of time. You must remit the deducted 

amounts, along with your portion of payroll taxes, by your next 

scheduled Federal Tax Deposit deadline. There are deposit 

penalties for making late deposits and for not depositing the proper 

amount. Additionally, there are penalties for willful failure to file 

returns and pay taxes when due, for filing false returns, and for 

submitting bad checks. The rate of these penalties increases with 

every passing day until you make the deposits. Interest is also 

charged on the total unpaid tax and the penalty. These penalties and 

interest can add up quickly and lead to even bigger financial 

troubles for your business. 

If you maintain a retirement plan and allow employees to make 

contributions from their wages, you cannot use any money you 

deduct for contributions to pay other business expenses. Instead, you 

have fiduciary obligations under the Employee Retirement 

Income Security Act of 1974 (ERISA) to deposit the deducted 

amounts as soon as they can be segregated from your general assets, 

but no later than the 15th business day of the month immediately 

after the month in which you received or withheld the contributions. 

A DOL proposed rule allows plans with less than 100 participants a 

safe harbor of seven business days to deposit employee 

contributions. 

Instead of using money that is not yours, explore other options. For 

example, look into reducing your overhead or borrowing money. In 

the long run, these other options will be better for you and your 

business!• 3 
Fall 2008 Retirement News for Employers 

Desk Side Chat with Monika Templeman 

Is My Plan the Right Plan? 

Required Minimum 

Distribution Reminder 

Required Minimum Distributions 

(RMDs) are amounts an employee must 

start withdrawing annually from their 

retirement plan by December 31 of the 

year of the later of: reaching 70 1⁄2 years 

of age or when he or she retires. 

However, an employee who is a 5% or 

more owner of the business sponsoring 

the retirement plan must begin taking 

RMDs by April 1 of the year following 

the year in which he or she turns 70 1⁄2 

years of age, regardless of whether he or 

she is retired. 

RMDs from IRAs must begin by 

December 31 of the year the IRA account 

holder turns 70 1⁄2. However, like the 

retirement plan RMDs, the first RMD 

payment can be delayed until April 1 of 

the year following the year in which the 

account holder turns 70 1⁄2. 

Use the worksheets posted on our web 

site to calculate the amount of RMDs 

from IRA accounts and also see our 

FAQs regarding Required Minimum 

Distributions.• 

In each issue, Monika Templeman, Director of EP Examinations, responds to 

questions and offers insights on retirement plan topics. You may provide 

feedback or suggest future topics for discussion by e-mailing her at: 

RetirementPlanComments@irs.gov. 

In today’s economic world, many plan sponsors are taking a 

second look at their retirement plan. They may wonder if their 

current plan is the right one for them and their employees. 

I’m glad to hear that many plan sponsors are taking an interest in 

making certain they have the right plan, not only for themselves, but 

for their employees. Retirement plans are a valuable retirement 

vehicle, and it is important to use the type of plan that best meets the 

needs of your workforce. As your business grows or changes, it is 

wise to re-evaluate whether your current plan is still a good fit. This 

type of strategic planning helps plan sponsors and their employees 

prepare for their future retirement. 

Is it important that plan sponsors replace their current plan if 

that plan is not right for them? 

Technically speaking, replacing is not the correct term. Terminating 

the current plan and starting a new one is often the best solution. I 

recommend going to our EP web site at www.irs.gov/ep and 

checking out our Navigator to help decide what plan would be the 

best retirement vehicle to use. 

Would you please remind employers of the key benefits in 

sponsoring a plan? 

I would be happy to. For employers, there are several excellent 

benefits when they sponsor a plan. These include the fact that 

employer contributions are tax deductible, assets in the plan grow 

tax-deferred with compounding interest, and having a retirement 

plan can attract and retain employees. 

What are some employee benefits? 

The main benefit for employees is better financial security. Other 

benefits are employees can easily contribute through payroll 

deduction, tax on both employee contributions and investment gains 

is deferred until distributed, and retirement assets can be carried 

from one employer to another. 

What would you recommend to plan sponsors who want to start 

the process of re-evaluating their plan? 

I highly recommend that they familiarize themselves with the 

various options and carefully compare the features of the different 

types of plans. The IRS has terrific tools to help employers select the 

right plan. I recommend a publication entitled Choosing a 

Retirement Solution for Your Small Business. 

4 
Fall 2008 Retirement News for Employers 

Contributors to 

this Issue: 

Avaneesh Bhagat 

Anita Bower 

Kathy Davis 

Roger Kuehnle 

Mark O’Donnell 

Nancy Payne 

John Schmidt 

Brenda Smith-Custer 

Monika Templeman 

Mikio Thomas 

Kathy Tuite• 

How will this publication help? 

This user-friendly publication contains a comprehensive chart 

(located in the center of the document) that compares the different 

plans based on key advantages, employer eligibility, contributors to 

the plan, coverage, vesting requirements, and other factors. The 

publication also provides a brief description of each type of plan. If 

the employer wants more information on a particular type of plan, 

they can visit the online Navigator. 

How can plan sponsors get the “Choosing” publication? 

They can download and print the publication (Publication 3998) 

from the IRS web site, order paper copies, or visit our exhibit booths 

at the IRS Nationwide Tax Forums and IRS Benefits Conferences. 

If they visit a benefits conference where I am speaking, I would love 

the opportunity to meet them and hear any questions or concerns. 

Should plan sponsors do anything else? 

I recommend that they consider contacting a tax professional familiar 

with retirement plans. Another alternative is to contact a financial 

institution that offers retirement plans. Deciding on what type of plan 

would be most advantageous is a crucial decision and it is important 

to get the best advice possible. Between our web content and the 

advice of a tax professional, plan sponsors should be able to find the 

right plan for themselves and their employees.• 

RNE Survey 

Help us to better serve you! Coming soon is our short survey for 

Retirement News for Employers subscribers. We want your thoughts 

on the type of articles that appeal to you. So, please take a minute to 

tell us about the type of information you would like to see published 

in our newsletter. 

The Retirement News for Employers is a free, electronic, quarterly 

newsletter provided by the Employee Plans office of the Internal 

Revenue Service. Its goal is to provide practical retirement plan 

information to employers and business owners – and their tax 

advisors.• 

5 
Fall 2008 Retirement News for Employers 

Fixing Common Plan Mistakes: 

Failure to Provide a Safe Harbor 401(k) Plan Notice 

Each issue of the RNE looks at a common error that occurs in retirement plans 

and provides information on fixing the problem and lessening the probability of 

its recurrence. 

Background: 

A safe harbor 401(k) plan requires the employer to provide: 

•	 timely notice to eligible employees informing them of their 

rights and obligations under the plan and 

•	 certain minimum benefits to eligible employees either in the 

form of matching or nonelective contributions. 

The employer should provide the rights and obligations notice within 

a reasonable period before the beginning of each plan year (or in the 

year an employee becomes eligible, within a reasonable period before 

the employee becomes eligible). In general, the law considers notices 

timely if the employer gives them to employees at least 30 days (and 

no more than 90 days) before the beginning of each plan year. The 

notice must include, at a minimum, details on: 

•	 whether the employer will make matching or nonelective 

contributions,
 

• other contributions under the terms of the plan,
 

•	 the plan to which the safe harbor contributions are made, if 

more than one plan, 

•	 the type and amount of compensation that may be deferred 

under the plan, 

•	 how to make cash or deferred elections, 

•	 the specific time periods available under the plan to make 

cash or deferred elections, 

•	 withdrawal and vesting provisions for plan contributions, and 

•	 how to easily obtain additional information about the plan 

(including a copy of the summary plan description). 

The Problem: 

Rainbow Company established a safe harbor 401(k) plan in 2005. The 

plan provides for matching contributions in an amount equal to: 100% 

of elective contributions up to 3% of the employee’s compensation 

plus 50% of elective contributions greater than 3%, but not more than 

5% of the employee’s compensation. Eligible employees received 

timely notices in 2004, 2005, and 2006. However, in 2007 Rainbow 

failed to provide safe harbor notice to its employees. In addition, 

Rainbow did not furnish notices to employees who became eligible to 

participate in the plan in 2008. Rainbow discovered the problem when 

it conducted an internal review of its plan operations at the end of 

2008. 

Violet first became eligible to participate in the plan on January 1, 

2008. She did not receive notice and Rainbow did not inform her of 

6 
Fall 2008 Retirement News for Employers 

her right to make elective contributions to the plan. She earned $20,000 

in compensation in 2008. 

Indigo has been a participant in the plan since 2005. She has made 

elective contributions of 2% of compensation each year, after receiving 

notices in 2004, 2005, and 2006. While she did not receive a notice in 

2007, the human resource department (HR) informed her that the 

employer’s matching contribution formula will remain the same for 

2008 and that she should inform HR if she wanted to make any changes 

to her elective contributions for 2008. 

Finding the Mistake: 

In order to find the mistake, review: 

•	 The deferral decisions among eligible employees. If many 

eligible employees are either not making elective contributions 

or deferring at low rates, it is possible that they did not have 

timely access to the information contained in the notice. 

•	 The plan’s procedures for issuing notices. 

•	 The plan’s records showing that the employer followed the 

plan’s procedures relating to the distribution of notices. 

Fixing the Mistake: 

Rainbow must evaluate the impact of its failure to provide notice to its 

eligible employees. The solution might be different for each affected 

employee. As illustrated in this problem, the failure to provide notice 

could require correction for the exclusion of an eligible employee or a 

simple revision to an administrative procedure. 

Exclusion of an eligible employee. Violet belongs in this category. Due 

to its failure to provide notice, Rainbow did not inform Violet of her 

ability to make an elective contribution when she was eligible. To 

correct the failure, Rainbow must make a corrective contribution for 

Violet to replace her missed deferral opportunity and the missed 

matching contributions that occurred because Rainbow improperly 

excluded her from the plan. The corrective contributions are determined 

as follows: 

(a) Missed deferral opportunity: If an employee is not provided 

with the opportunity to elect and make elective deferrals to a 

safe harbor §401(k) plan that uses a rate of matching 

contributions to satisfy the safe harbor requirements of 

§401(k)(12), then the missed deferral is deemed equal to the 

greater of 3% of compensation or the maximum deferral 

percentage for which the employer provides a matching 

contribution rate that is at least as favorable as 100% of the 

elective deferral made by the employee. Violet’s missed 

deferral is 3% of her compensation of $20,000, or $600. 

Violet’s missed deferral opportunity is 50% of her missed 

deferral of $600, or $300. Rainbow needs to make a corrective 

contribution to replace Violet’s missed opportunity to make 

elective contributions of $300 (adjusted for earnings). 

7 
 

Fall 2008 Retirement News for Employers 

(b) Missed matching contribution: If Violet made an elective 

deferral of $600, she would have received an employer matching 

contribution of $600. Rainbow needs to make a corrective 

contribution to replace the missed matching contribution of 

$600 (adjusted for earnings). 

Fixing an administrative problem. Indigo belongs in this category. The 

failure to provide notice did not prevent her from making an informed 

timely election to change (or maintain) her elective contribution to the 

plan. No corrective contribution for Indigo is required. The plan needs to 

reform its procedures to ensure that she receives timely notices in the 

future. 

Correction Program(s) Available: 

Rainbow may use the correction programs described in Revenue 

Procedure 2008-50 to correct the mistake. 

Avoiding the Mistake: 

Employers should maintain a calendar for due dates by which certain 

tasks need to be completed. In the case of a safe harbor 401(k) plan, this 

includes the timely distribution of notices to eligible employees.• 

We’re Glad You Asked! 

For additional information, see: 

Pub 575, Pension and Annuity Income 

Pub 590, Individual Retirement 

Arrangements(IRAs) 

Code Section 402(c)(2)• 

Each issue of the RNE looks at a common question we receive and provides 

an answer and additional resources in response to the question. 

My account in my employer’s retirement plan is made up of 

employer contributions, my after-tax employee contributions, 

and earnings on both. Can I take out just the after-tax portion 

and roll it to a Roth IRA and leave the rest in the plan? 

No, you may not take a distribution of only your after-tax contributions. 

Any distribution from a retirement plan account in which there is basis 

is treated as consisting of both pre-tax amounts (your employer’s pretax contributions and earnings) and your after-tax contributions. The 

after-tax contribution portion of each distribution is tax-free, but the rest 

must be included in your gross income. To determine the amount of the 

distribution to include in your income, subtract the portion that 

represents your after-tax contributions. You can use the following 

formula: 

Amount of Distribution x Your After-Tax Contributions = After-Tax Portion 

Your Account Balance 

The total amount of the distribution minus your after-tax portion equals

the amount that must be included in your gross income. 

If you roll over the distribution to a Roth IRA (assuming you meet the

income limits and filing status for making rollovers to Roth IRAs), the

pre-tax portion (employer contributions and earnings) must still be

included in your gross income. If you roll over only part of the

distribution, the first dollars rolled over are considered the pre-tax

dollars. These same rules apply if you make a direct rollover to the Roth

IRA.• 

8 
 

Fall 2008 Retirement News for Employers 

2009 Retirement Plan Limits Announced 

The IRS announced the following cost-of-living adjustments 

(COLAs) to retirement plan limits for 2009: 

Limit 2009 

Defined Contribution Plan Annual Dollar Limit 

(The maximum dollar amount that may be contributed to a participant's 

account under IRC §415(c)) 

$49,000 

Defined Benefit Plan Annual Dollar Limit 

(The maximum dollar amount that may be payable to a participant under 

IRC §415(b)) 

$195,000 

401(k)/403(b) Elective Deferral Limit 

(The maximum annual amount of elective deferrals and designated Roth 

contributions (if permitted under the plan) to 401(k) and 403(b) plans 

under IRC §402(g)(1)) 

$16,500 

Governments/Tax-Exempts Deferral Limit 

(The maximum annual amount of elective deferrals to 457 plans under IRC 

§457(e)(15)) 

$16,500 

SEP Minimum Annual Compensation Limit 

(The least amount an employee must earn in compensation to be eligible to 

participate in a SEP under IRC §408(k)(2)(C)) 

$550 

401(k)/403(b)/457 "Catch-up" Limit 

(The additional amount that a participant age 50 or older may defer to 

401(k), 403(b), or 457 plans under IRC §414(v)(2)(B)(i)) 

$5,500 

SIMPLE Employee Contribution Limit 

(The maximum annual amount of elective deferrals to SIMPLE plans under 

IRC §§401(k)(11) and 408(p)(2)(E)) 

$11,500 

SIMPLE "Catch-up" Limit 

(The additional amount a participant age 50 or older may defer to 

SIMPLE plans under IRC §414(v)(2)(B)(ii)) 

$2,500 

Highly Compensated Employee Compensation Limit 

(The compensation threshold triggering classification of an employee as 

"highly compensated" under IRC §414(q)(1)(B)) 

$110,000 

Annual Compensation Limit 

(An employee's maximum compensation that a plan may take into account 

for determining employer contributions and deductions under IRC 

§§401(a)(17), 404(l), 408(k)(3)(C), and 408(k)(6)(D)(ii)) 

$245,000 

Top-Heavy Plan's Key Employee Compensation Limit 

(The definition of "key employee" compensation level triggering the 

application of top-heavy rules under IRC §416(i)(1)(A)(i)) 

$160,000 

9 
Fall 2008 Retirement News for Employers 

Free Compliance Assistance Events: 

For dates and locations of free compliance 

assistance events sponsored by EBSA for 

both retirement and health benefit plans, 

visit EBSA’s homepage. 

DOL News 

The Department of Labor’s Employee Benefits Security Administration 

(DOL/EBSA) announced new guidance as featured below. You can 

subscribe to DOL/EBSA’s web site homepage or PPA page for 

updates. 

Guidance on Exercising Shareholder Rights and Investing in 

Economically Targeted Investments 

On October 17, DOL/EBSA published two interpretive bulletins in the 

Federal Register clarifying the obligations of plan fiduciaries when 

considering shareholder rights and investments in economically 

targeted investments. 

The bulletin on economically targeted investments supplements earlier 

guidance issued by DOL/EBSA addressing the limited circumstances 

under which ERISA fiduciaries may, in connection with investment 

decisions, take into account factors other than the economic interests of 

the plan. The supplement further clarifies, through explanation and 

examples, that fiduciary consideration of non-economic factors should 

be rare and, when considered, must comply with ERISA’s rigorous 

fiduciary standards. 

The bulletin on shareholder rights updates prior guidance issued by 

DOL/EBSA on the application of ERISA’s fiduciary standards to proxy 

voting. The new bulletin includes clarifications of the earlier guidance, 

as well as interpretive positions issued by DOL/EBSA since 1994 on 

shareholder activism and socially-directed proxy voting initiatives. 

The guidance reiterates that plan fiduciaries, who are charged by law 

with the responsibility for operating employee benefit plans on behalf 

of plan participants, may never increase expenses, sacrifice investment 

returns, or reduce the security of plan benefits in order to promote 

legislative, regulatory, or public policy goals that have no connection to 

the payment of benefits or plan administrative expenses. 

Proposed Rules on Investment Advice Exemption for 401(k) 

Plans and IRAs 

The PPA amended ERISA to add a new prohibited transaction 

exemption that allows greater flexibility for participants in 401(k) plans 

and IRAs to obtain investment advice. 

On August 22, DOL/EBSA published a proposed regulation providing 

general guidance on the statutory exemption’s requirements, including 

computer model certification, and a non-mandatory model form that 

advisers may use to satisfy the exemption’s fee disclosure requirement. 

DOL/EBSA also published a proposed class exemption that permits 

advisers to provide individualized advice to a worker after giving 

advice generated by use of a computer model. 

On October 21, DOL/EBSA held a public hearing on the proposals. 

Comments on the proposed regulation and information about the 

hearing as well as comments on the proposed class exemption are 

10 posted on DOL/EBSA’s web site.• 
Fall 2008 Retirement News for Employers 

Retirement News for Employers 

Retirement News for Employers (RNE) is a 

free, quarterly newsletter aimed at keeping 

employers informed about retirement plan 

sponsorship. RNE is prepared by the IRS’s 

Employee Plans (Tax Exempt and 

Government Entities) office. 

For your convenience, RNE includes Internet 

links – identified by the blue underlined text – 

to referenced materials. 

How to Subscribe 

RNE is distributed exclusively through IRS email. Sign up for your free subscription by 

going to the Retirement Plans Community 

web page and selecting “Newsletters” in the 

left pane. Prior editions of the RNE are also 

archived there. 

Send Comments/Suggestions to: 

EP Customer Education & Outreach 

SE:T:EP:CEO 

1111 Constitution Ave., N.W., PE-4C3 

Washington, DC 20224 

FAX: (202) 283-9525 

E-Mail: RetirementPlanComments@irs.gov 

Have a Question? 

For taxpayer assistance with retirement 

plans technical and procedural questions: 

Please call (877) 829-5500 or visit the 

“Contact EP/Services” section at 

www.irs.gov/ep. 

For questions relating to retirement income, 

IRAs, Roth IRAs, educational IRAs, 

medical savings accounts, and §125 

cafeteria plans: 

Please call (800) 829-1040.• 

Mark Your Calendar 

Operating a retirement plan can be time-consuming. There are 

deadlines, not just for reports and forms but also for making 

contributions. There are conferences and seminars, and then there is 

information you need to give to participants. 

So to help navigate the retirement plan timeline, here is a look at 

some of the important dates in the months to come. Please note that 

all filing dates listed below are for calendar-year plans – adjust the 

dates for noncalendar-year plans: 

Dec. 2: Deadline to provide safe harbor notice for Safe Harbor 

401(k) plans for 2009 plan year. 

Dec. 2: Deadline to give eligible employees Automatic Enrollment 

Notice. 

Dec. 31: Deadline for: making 2008 required minimum distributions; 

and distributing 2007 401(k) excess contributions (including income 

or losses) without jeopardizing a plan’s tax-qualified status. 

Jan. 15: Fourth quarterly contribution due date for 2008 defined 

benefit plans. 

Jan. 28: DOL’s Fiduciary Education Seminar – New Orleans, LA. 

Feb. 2: Deadline for: filing Form 945, Annual Return of Withheld 

Federal Income Tax; and giving recipients of 2008 retirement plan 

distributions Form 1099-R, Distributions From Pensions, Annuities, 

Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. 

Feb. 12: DOL’s Fiduciary Education Seminar – Melville, NY. 

See our web page for a complete list of upcoming IRS’s EP 

Education Events on various retirement plan topics.• 

Department of the Treasury Publication 4278 (11-2008) 

Internal Revenue Service Catalog Number 37968B 

www.irs.gov 

11 
Fall 2008 Retirement News for Employers 

Timing is Everything 

Some helpful retirement planning tips from the IRS... 

Employee Notices – At certain times, an employer is required to give notices 

to employees regarding your retirement plan. Here is information on some of 

the more common notices. 

When You Start in Your Plan 

•	 Summary Plan Description: The summary plan description contains information on what the plan 

benefits are and how they will be provided. You should receive a summary plan description within 90 days 

after becoming a participant. 

•	 Salary Deferral Election Form: The salary deferral election form lets you designate how much money 

(either a percentage of pay or a certain dollar amount) to withhold from your future salary/wages to be 

deposited into the trust, if the plan provides for salary deferrals. 

•	 Beneficiary Designation Form: The beneficiary form lets you designate who will receive benefits if you 

die before receiving all of your benefits. If you fail to complete this form before your death, the plan will 

pay benefits asdescribed in the plan document. 

When You Contribute to Your Plan 

•	 Individual Benefits Statement: An individual statement reflecting your accrued benefit and vested 

pension amount. It may also identify benefits that may be forfeited upon your termination. It should be 

given to you at least once each quarter for individual account plans that permit participants to direct 

their investments and at least once each year, for individual account plans that do not permit participants 

to direct their investments. 

When You Stop Working 

•	 Rollover Notice: The notice, commonly known as a §402(f) Notice, generally explains the rollover rules, 

including the automatic 20% withholding. The plan administrator must provide it within a reasonable 

period of time but no less than 30 days and no more than 90 days before the distribution is to be made. 

The participant may waive the 30-day period. 

•	 Automatic Rollover Notice: If your account balance is over $1,000, then the law requires your plan to 

automatically roll it over to an IRA unless you say otherwise. The plan administrator must first notify you 

(either separately or as part of the §402(f) Notice), that your account will be rolled over to an IRA unless 

you elect otherwise. 

Ask your employer or visit www.irs.gov/ep for additional information on these items. 

Department of the Treasury Publication 4278 (11-2008) 

Internal Revenue Service Catalog Number 37976B 

www.irs.gov