Volume 6, Fall 2009 

A Look Inside 

Forms 5500 and 5500-SF must be 

filed electronically for plan years 

beginning on or after January 1, 

2009...more on page 2 

Establish a SEP or SIMPLE IRA 

plan in one of three ways...more 

on page 3 

IRAs may not engage in certain 

investments or transactions...more 

on page 4 

The SARSEP Fix-It-Guide helps 

SARSEP plan sponsors identify 

potential errors...more on page 5 

“Good internal controls are crucial 

for a well-run plan,” states the 

Director, EP Examinations...more 

on page 10 

Also in this Issue 

We’re Glad You Asked! 6

 New on the Web 7

 Recent Guidance 8

 DOL News 11

 Mark Your Calendar 12 

Timing is Everything 13 

Retirement News 

 for Employers
 

Tax Information for Sponsors of Retirement Plans 

Internal Revenue Service Tax Exempt and Government Entities 

Roth & Roll: 2010 Roth IRAs & Rollovers 

Beginning on January 1, 2010, regardless of your income or filing status, you will be able 

to roll over (convert) to a Roth IRA: 

•	 your traditional individual retirement arrangement (IRA), SEP IRA or SIMPLE 

IRA; or 

•	 an eligible rollover distribution (ERD) from your or your deceased spouse’s 

employer-sponsored retirement plan (for example, a 401(k) or a 403(b) plan). 

Also, in 2010, if you are the nonspouse beneficiary of an employer sponsored retirement

plan, you can do a direct trustee-to-trustee transfer of an ERD from the plan into an

inherited Roth IRA regardless of your income or filing status. 

A special 2-year option will apply for conversions and rollovers in 2010 only. Under 

this 2-year option, you will report half the taxable portion of your rollover in your gross

income for 2011 and half in 2012, unless you elect to include the entire amount in gross 

income for 2010. 

Current Rules 

Under the current rules, you can roll over your traditional IRA or an ERD from your 

retirement plan to a Roth IRA only if you meet both the following income and filing

status requirements: 

•	 your modified adjusted gross income (modified AGI) for Roth IRA purposes is 

$100,000 or less; and

•	 you are not married filing a separate return. 

Note: These requirements do not apply to a rollover from either a designated Roth 

account to a Roth IRA or to a rollover from one Roth IRA to another. 

When you roll over to a Roth IRA (or convert a traditional IRA to a Roth IRA), you must 

include any previously untaxed amounts and earnings in your gross income in the year

they are distributed or transferred from the plan or non-Roth IRA. 

What is a Roth IRA? 

A Roth IRA is either an individual retirement account or an annuity that is designated as a

Roth IRA when established. A deemed IRA can be a Roth IRA, but neither a SEP IRA nor 

a SIMPLE IRA can be designated as a Roth IRA. Unlike a traditional IRA, contributions 
Fall 2009 Retirement News for Employers 

to a Roth IRA are not deductible; however, qualified distributions from a Roth IRA are tax-free. Roth IRAs are not subject 

to required minimum distributions during the owner’s life and contributions can continue after age 70 1⁄2. 

Contributions may be made to your Roth IRA if you have taxable compensation and, for 2009, your modified AGI for 

Roth IRA purposes is less than: 

•	 $176,000 and your filing status is married filing jointly or qualifying widow(er); 

•	 $120,000 and your filing status is single, head of household, or married filing separately and you did not live with 

your spouse at any time during the year; and 

•	 $10,000 if you are married filing separately and you lived with your spouse at any time during the year. 

The $176,000 amount, above, increases to $177,000 for 2010; the other amounts stay the same. 

Conversions 

If you convert your traditional IRA to a Roth IRA, you may be able to ‘undo’ the conversion by recharacterizing it. If you

convert an amount from a traditional IRA to a Roth IRA and then transfer that amount back to a traditional IRA in the 

same year, you may not reconvert that amount from the traditional IRA to a Roth IRA before: 

•	 the beginning of the year after the year in which the amount was converted to a Roth IRA or, if later, 

•	 the end of the 30-day period measured from the day you recharacterized back from the Roth IRA. 

Similar rules apply for rollovers from plans to Roth IRAs. 

For more information on Roth IRAs, see: 

•	 Publication 590, Individual Retirement Arrangements (IRAs) 

•	 IRA Online Resource Guide - Information About Roth IRA s 

5500 for 2009 and Later Required to be Filed Electronically 

Starting with plan years beginning on or after January 1, 2009, the Department of Labor (DOL) will process Forms 5500 

and 5500-SF exclusively through its Employee Retirement Income Security Act Filing Acceptance System (EFAST2). 

Paper versions of Form 5500, Annual Return/Report of Employee Benefit Plan, and Form 5500-SF, Short Form Annual 

Return/Report of Small Benefit Plan, will not be available for plan years starting on or after January 1, 2009. 

Also for 2009 and later plan years, all “one-participant” plans will have the option to file Form 5500-SF electronically in 

place of a paper-only Form 5500-EZ. One-participant plans that file the electronic Form 5500-SF need to only complete 

those questions on the Form that they would have completed had they filed the paper version of the Form 5500-EZ. The 

2009 Form 5500-EZ (paper format) will be available in early 2010. 

Schedule SSA, (Form 5500) Annual Registration Statement Identifying Separated Participants with Deferred Vested 

Benefits, is being eliminated as a schedule to Form 5500 series and will become its own form. You cannot file the SSA 

electronically until the 2010 plan year. We will provide more electronic filing information for the 2009 plan year SSA data 

in the next few months. 

Finally, for the 2009 plan year, certain retirement plans maintained outside the U.S. primarily for the benefit of 

nonresident aliens are instructed to file Form 5500-EZ rather than Form 5500. 

If you need help completing the 2009 Form 5500 or 5500-SF or have related questions, call the EFAST2 Help Line (tollfree) at 866-463-3278, Monday through Friday from 8 a.m. to 8 p.m. ET, or, visit the EFAST2 Web site. 

2 
Fall 2009 Retirement News for Employers 

Establishing a SEP or SIMPLE IRA Plan 

SEP or SIMPLE IRA plans allow an employer to contribute directly to individual retirement arrangements (IRAs) for all 

eligible employees (including the employer). An employer can establish a SEP or a SIMPLE IRA plan by adopting an 

IRS model Form or a prototype plan. As an alternative to these pre-approved plans, an employer can use an individually 

designed plan. 

Adopting a SEP Plan 

An employer may establish a SEP plan in one of three ways. 

First, an employer can complete Form 5305-SEP, Simplified Employee Pension – Individual Retirement Accounts 

Contribution Agreement. However, the Form 5305-SEP can’t be used by an employer who: 

1.		 has any other qualified plans (other than another SEP plan); 

2.		 wants a plan year other than the calendar plan year; 

3.		 has leased employees; 

4.		 is a member of a controlled group, affiliated service group or trade or business under common control (unless 

all eligible employees participate in the SEP plan); or 

5.		 wants an allocation formula other than a same-percentage-of-compensation formula. 

Second, the employer can purchase and adopt a prototype SEP plan. Mutual fund companies, insurance companies, banks, 

credit unions and certain other businesses offer prototype SEP plans. Prototype plans have been reviewed by the IRS. An 

employer that adopts a prototype plan can rely on the opinion letter issued to the prototype plan sponsor as evidence that 

the prototype plan’s terms meet the tax-qualification requirements of the Internal Revenue Code (Code). 

Third, the employer can adopt an individually designed plan that is usually drafted for the employer by a benefits 

practitioner. Unlike a model Form plan or a prototype plan, an individually designed plan cannot be relied upon to meet 

the requirements of the Code unless the plan receives a favorable determination letter from IRS. 

Adopting a SIMPLE IRA Plan 

When establishing a SIMPLE IRA plan, an employer may: 

•	 choose one of the IRS model SIMPLE IRA Plans by completing: 

•	 Form 5304-SIMPLE, Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) - Not 

for Use With a Designated Financial Institution, or 

•	 Form 5305-SIMPLE, Savings Incentive Match Plan for Employees of Small Employers (SIMPLE) - for 

Use With a Designated Financial Institution. 

•	 purchase and adopt a SIMPLE IRA prototype plan and rely on the opinion letter issued to the prototype plan 

sponsor as evidence that the prototype plan’s terms meet the Code’s tax-qualification requirements; or 

•	 adopt an individually designed SIMPLE IRA plan and apply for a determination letter from the IRS in order to 

ensure that the plan’s terms meet the Code’s tax-qualification requirements. 

For more information on SEP and SIMPLE IRA plans, see: 

•	 Publication 590, Individual Retirement Arrangements (IRAs) 

•	 Publication 560, Retirement Plans for Small Business 

•	 IRA Online Resource Guide - IRA-Funded Plans - SEP Plans - How to Set Up a SEP Pla n 

•	 IRA Online Resource Guide - IRA-Funded Plans - SIMPLE IRA Plans - How to Set Up a SIMPLE IRA Pl an 

•	 IRA FAQ s 

3 
Fall 2009 Retirement News for Employers 

IRA Investments 

Especially with the current financial situation, many people are concerned about making the right investment decisions 

for their individual retirement accounts (IRAs). While the IRS never gives investment advice, we can tell you that the 

law does not allow IRAs (including Roth IRAs) to make certain types of investments or engage in certain transactions 

involving self-dealing. 

The law does not permit IRAs to invest in life insurance contracts. Also, under Code §408(m), IRAs cannot generally 

invest in many types of collectibles, such as: 

•	 artwork; 

•	 stamps; 

•	 most types of coins; 

•	 rugs; 

•	 antiques; 

•	 metals; 

•	 gems; or 

•	 alcoholic beverages. 

The law also does not permit an IRA owner or his or her beneficiary to use any IRA assets to purchase life, health, 

accident or other insurance. 

An IRA owner or any disqualified person may not engage in prohibited transactions with the IRA. Disqualified persons 

include the owner’s beneficiary, the fiduciary and the owner’s family members (spouse, ancestor, lineal descendant and 

any spouse of a lineal descendant). There are many prohibited transactions listed in the Code, including: 

•	 using the IRA as security for a loan; 

•	 selling, exchanging or leasing assets of the IRA; 

•	 furnishing goods or services to the IRA; or 

•	 borrowing or lending from it. 

See Code §408 and §4975 for a complete list of investment restrictions and prohibited transaction rules, as well as their 

exceptions. 

When an IRA invests in any collectible, that collectible’s cost is treated as distributed to the IRA owner and may be 

subject to the additional 10% early withdrawal tax. In the case of an IRA owner or beneficiary who does not follow 

prohibited transaction rules, the IRA is considered to be distributed to its owner, at its fair market value, on the first day of 

the year in which the prohibited transaction occurs. The distributed amount is includible in income (except for the aftertax amounts in a traditional IRA and certain amounts in a Roth IRA) for the owner for the year and may be subject to the 

additional 10% early withdrawal tax. If a disqualified person engages in a prohibited transaction, that person may be liable 

for certain taxes. 

Institutions that hold IRAs may impose additional restrictions on investments. For example, many institutions do not 

permit IRAs to invest in real estate, even though the law does not prohibit it. 

Since the funding vehicle for SEP plans is a traditional IRA, and for SIMPLE IRA plans, a SIMPLE IRA, contributions, 

once deposited to these plans, become IRA assets. This means that these IRA assets are subject to the IRA investment and 

prohibited transaction rules discussed above. With a SEP or SIMPLE IRA plan, although the employer establishes and 

maintains the plan, it is the institution holding the IRAs for these plans that determines the investment choices available 

to those IRAs. Therefore, an employer’s or an employee’s search for a financial institution should consider the IRA 

4 investment options it offers. 
Fall 2009 Retirement News for Employers 

For more information, see: 

•	 Publication 590, Individual Retirement Arrangements (IRAs) 

•	 Publication 3125, The IRS Does Not Approve IRA Investments 

•	 Retirement Plans FAQs regarding IRA s 

•	 Savings Fitness: A Guide to Your Money and Your Financial Futur e 

•	 Managing Your IRA Vide o 

New Web Tool for SARSEP Plans 

The SARSEP Fix-It-Guide helps SARSEP plan sponsors identify potential errors. If an employer finds they have made a 

mistake, the guide leads them to an explanation of how to correct it using IRS’s Employee Plans Compliance Resolution 

System. By answering 10 questions, a SARSEP plan sponsor can quickly spot some common mistakes. The Fix-It-Guide 

also provides tips for current and future plan compliance. Examples of some of the issues addressed are: 

1.		 Was your SARSEP established prior to January 1, 1997, and subsequently amended for current law? 

SARSEPS were no longer permitted to be established as of January 1, 1997, and, like any qualified plan, they 

must be amended for law changes. 

2.		 Do you have 25 or fewer eligible employees? 

If an employer has more than 25 eligible employees (see next question) in the prior year, then no employee may 

make contributions to his or her SARSEP IRA. 

3.		 Are all eligible employees, who are at least age 21, worked in 3 out of the 5 prior years and received at least $550 

in compensation during the current year, participating in the plan? 

All employees, even part-time, seasonal and temporary, who meet the above requirements must be given an 

opportunity to participate in the SARSEP plan. 

4. Are you determining each eligible employee’s compensation using the definition in your SARSEP document? 

Since an employee’s elective deferrals to the SARSEP plan are based on his or her compensation, it is important 

to use the correct amount of compensation before withholding and depositing elective deferrals to his or her IRA. 

Use the plan’s definition of “compensation” and limit it to the annual dollar amount, which is $245,000 for 2009 

and 2010, and subject to cost-of-living adjustments in future years. 

5.		 Are all employee elective deferrals within the appropriate limit as defined under Code §402(g) for the calendar 

year and have any excess deferrals been distributed? 

An employee’s elective deferrals to all plans cannot exceed an annual limit. For 2009 and 2010, this limit is the 

lesser of $16,500 or 25% of his or her compensation. If the limit is exceeded, the plan must distribute the excess 

contributions to the employee by the following April 15th or he or she will be subject to additional taxes. 

There’s more.... See the SARSEP Fix-It-Guide for questions 6-10. 

5 
Fall 2009 Retirement News for Employers 

We’re Glad You Asked!
 

Each issue of the RNE looks at a common question we receive and provides an answer and additional resources in response to the question. 

Our 401(k) plan uses an automatic enrollment feature. Some employees have indicated they do not want 

to participate in the automatic enrollment. Are these employees still considered plan participants? 

Yes. Choosing not to defer at the plan’s automatic enrollment default percentage by affirmatively electing a different 

amount, including zero, simply means that the employees have opted out of the 401(k) plan’s automatic enrollment 

feature. An automatic enrollment feature allows the employer to reduce an employee’s wages by a default percentage 

stated in the plan and contribute that amount to the employee’s plan account. If the employee is unhappy with the plan’s 

default percentage, he or she may affirmatively choose to contribute a different amount or no amount at all. 

Employees who meet your plan’s eligibility requirements must be allowed to participate in the plan even if they 

affirmatively decline to participate in the plan’s automatic enrollment feature. Your 401(k) plan may have other types of 

contributions, such as: 

•	 employer discretionary contributions; 

•	 employer matching contributions; or 

•	 employer nonelective contributions. 

Employees who decline to participate in the plan’s automatic enrollment feature must still receive any employer 

contributions they would be eligible to receive under the plan’s terms. Similarly, these employees’ accounts would be 

entitled to receive any forfeiture allocations, as determined under the plan’s terms. 

Additional Resources: 

Publication 4674, Automatic Enrollment 401(k) Plans for Small Businesses 

FAQs Regarding Automatic Contribution Arrangements (Automatic Enrollment Arrangements) in Retirement Plans 

What are the requirements for distributing a deceased participant’s account balance to someone other 

than his or her surviving spouse? 

For plan years beginning after December 31, 2009, retirement plan distributions to a nonspouse beneficiary are subject 

to many of the same rules that apply to other eligible rollover distributions (ERDs). Plans must offer a nonspouse 

beneficiary the option to do a direct rollover (a trustee-to-trustee transfer) of an ERD to an inherited individual retirement 

arrangement (IRA). 

As the plan administrator, you are required to give all nonspouse beneficiaries a written notice explaining the: 

•	 direct rollover rules; and 

•	 mandatory 20% income tax withholding rules for distributions not directly rolled over. 

You should give this explanation to the nonspouse beneficiary no earlier than 180 days and no later than 30 days before 

making the distribution. Notice 2009-68 contains two sample notices that plans may give to nonspouse beneficiaries. 

A nonspouse beneficiary can only roll over the distribution of an inherited amount into an inherited IRA. As an inherited 

IRA, the designated nonspouse beneficiary: 

•	 cannot make any contributions to the inherited IRA; 

•	 cannot roll over any amounts into or out of the inherited IRA, but may do a trustee-to-trustee transfer into another 

inherited IRA in the original deceased account owner’s name with the same beneficiary; 

6 
 

 

Fall 2009 Retirement News for Employers 

•	 has the same basis in the inherited traditional IRA assets as of the original deceased account owner; 

•	 may not combine the basis in this inherited IRA with the basis in his or her own traditional IRAs, or any of his or 

her other inherited IRAs; 

•	 will not owe taxes on the inherited traditional IRA assets until he or she receives distributions from the IRA; and 

•	 must begin receiving distributions under the beneficiary distribution rules. 

Additional Resources: 

Publication 590, Individual Retirement Arrangements (IRAs) 

Pension Protection Act of 2006 - §829
 

Worker, Retiree, and Employer Recovery Act of 2008 - §108(f)
	

New on the Web 

Here are the latest updates to the Retirement Plans Community Web page: 

•	 The 2010 annual dollar limit Cost-of-Living Increases. 

•	 The 2010 IRA Contribution and Deduction Limits. 

•	 Retirement & Savings Initiatives page has the latest news 

for employers and employees on issues like automatic 

plan enrollment, major life events that affect your 

retirement planning and rollover information. 

•	 The Retirement Plans Navigator, a Web guide to 

encourage small business owners to establish employee 

retirement plans. This guide will help employers choose a 

retirement plan, maintain it and correct plan errors. 

•	 Updated 401(k) Checklist and Fix-It Guide with revisions, 

including participant loan issues. The revised checklist 

asks plan sponsors “yes” or “no” questions. If users 

answer “no” they may have a mistake in their plan’s 

operation. If they select “(More),” they will find further 

information on how to find, fix and avoid the mistake. 

7 
 

 

Fall 2009 Retirement News for Employers 

Employee Plans Published Guidance 

Announcements 

Announcement 2009-82, 2009-48 I.R.B. Provides relief for sponsors of statutory hybrid plans that must 

amend their interest crediting rate. 

Regulations 

T.D. 9459, 74 Fed. Reg. 45993 Permits governmental plans (including governmental 403(b) 

contracts and governmental 457(b) plans) to continue using 

the required minimum distribution rules by using a good faith 

interpretation of the statute. 

T.D. 9467, 74 Fed. Reg. 53004 Contains guidance for single employer defined benefit plans on 

the measurement of assets and liabilities for pension funding, 

benefit restrictions for underfunded pension plans and benefit 

restriction notices. 

REG-159704-03 74 Fed. Reg. 48030 Updates the eligibility requirements for performing actuarial 

services for ERISA-covered employee pension benefit plans and 

includes their continuing education requirements and standards. 

Revenue Rulings 

Rev. Rul. 2009-30, 2009-39 I.R.B. 391 Gives two examples of how a 401(k) plan sponsor may 

automatically increase an eligible employee’s default 

contribution percentage. 

Rev. Rul. 2009-31, 2009-39 I.R.B. 395 States that qualified plans may be amended to permit certain 

annual contributions of the dollar equivalent of unused paid time 

off as employer contributions or elective 401(k) contributions. 

Rev. Rul. 2009-32, 2009-39 I.R.B. 398 States that qualified plans may, under certain circumstances, 

allow employees upon termination of employment to contribute 

the dollar equivalent of unused paid time off to the plan. 

Revenue Procedures 

Rev. Proc. 2009-36, 2009-35 I.R.B. 304 States that a §414(d) governmental plan’s remedial amendment 

cycle will not end before the end of the 91st day after the close of 

the first legislative session that begins more than 120 days after 

the plan’s determination letter based on a timely submission to 

the IRS. The sponsor of an individually designed governmental 

plan may elect Cycle E (instead of Cycle C) as the plan’s initial 

(EGTRRA) remedial amendment cycle. 

8 

Rev. Proc. 2009-43, 2009-40 I.R.B. 460 Provides for automatic IRS approval of a revocation request 

under WRERA §204. This revokes an election to treat the plan 

as being funded at the prior year’s certified level with IRS’s 

approval if certain requirements are met. This Rev. Proc. also 

states special rules for automatic IRS approval of revocation 

requests made pursuant to the resolution of arbitration and that 

the IRS will consider revocation requests that do not satisfy the 

standard for automatic approval if these requests are submitted 

in accordance with IRS’s normal ruling letter procedures. 
 

 

 

Fall 2009 Retirement News for Employers
	

Notices 

Notice 2009-65, 2009-39 I.R.B. 413 Provides sample automatic enrollment plan language that a 

401(k) plan sponsor can adopt with automatic IRS approval. 

Notice 2009-66, 2009-39 I.R.B. 418 Includes guidance to help small employers use automatic 

enrollment for their SIMPLE IRA plans. 

Notice 2009-67, 2009-39 I.R.B. 420 Provides sample automatic enrollment plan language that a 

SIMPLE IRA plan sponsor can adopt with automatic IRS 

approval. 

Notice 2009-68, 2009-39 I.R.B. 436 Contains two updated safe harbor 402(f) notices plans may 

give to recipients of an eligible rollover distribution. These 

updated notices reflect law changes (such as information on a 

distribution from a designated Roth account under an employer 

plan) and explain rules that apply in special situations (such 

as when a distribution is made to a surviving spouse or other 

beneficiary). 

Notice 2009-71, 2009-35 I.R.B. 262 Announces the IRS’s plan to issue guidance for eligible 

combined plans under §414(x) and requests comments on issues 

related to these combined plans. 

Notice 2009-75, 2009-39 I.R.B. 436 Describes the federal income tax consequences of rolling over 

an eligible rollover distribution from qualified plans, 403(a) 

annuities, 403(b) plans or eligible 457(b) governmental plans to 

a Roth IRA. 

Notice 2009-82, 2009-41 I.R.B. 491 Allows transition relief for the waiver of 2009 required 

minimum distributions (RMDs) under WRERA. It also contains 

two sample amendments that plans may adopt to give recipients 

a choice to either waive or receive the 2009 RMDs. The sample 

amendments can be used by plan sponsors to conform the terms 

of their plan with the operation of their plan related to the 2009 

RMDs. 

Notice 2009-86, 2009-46 I.R.B. 629 Announces the extension of the final effective date for pension 

distributions at Normal Retirement Age from governmental 

plans. 

Contributors 

Anita Bower, Kathy Davis, Jim Flannery, Ann Junkins, Roger Kuehnle,
	

Mark O’Donnell, Nancy Payne, Sharon Perkins, Bonnie Schaumberg, Brenda Smith-Custer,
	

Monika Templeman, Mikio Thomas, Kathy Tuite, Vikki Vrooman
	

9 
 

 

Fall 2009 Retirement News for Employers 

Desk Side Chat...With Monika Templeman 

The Importance of Internal Controls and Plan Self-Correction 

In each issue, Monika Templeman, Director of EP Examinations, responds to questions and offers insights on retirement plan topics uncovered 

during audits. You may provide feedback or suggest future topics for discussion by e-mailing her at: RetirementPlanComments@irs.gov. 

In your presentations, you always briefly discuss internal controls and the IRS’s self-correction and voluntary 

correction programs. 

I include this topic in my speeches because I think it is very important for plan sponsors and practitioners to understand the 

importance of having effective internal controls. I also inform them about the web-based tools that are available on 

www.irs.gov/ep which help them find and fix mistakes in their plans. 

Why are internal controls important for a small business’s retirement plan? 

Effective retirement plan internal control implies that the organization generates reliable financial reporting and substantially 

complies with the plan document. Internal controls also play an important role in the prevention and detection of fraud. For 

example, a business owner, with two employees can easily administer his retirement plan. As the business grows, the owner 

may hire outside companies to handle plan administration. This is when errors and possibly fraud could occur. It is imperative 

to have internal control procedures in place to reduce the errors and the chance of fraudulent activity. 

In what areas of the plan should the employer set up internal controls? 

I would suggest starting at the beginning. Internal controls for payroll data are essential to figure a plan’s eligibility and 

coverage. From there, set up controls for the plan’s vesting, contributions, contribution limitations, distributions and so on. 

Can you give some specific examples? 

I’ll use “vesting” as an example. There should be a system to recognize that any employee contributions are always fully, 

or 100%, vested. For most employer contributions, the plan should have procedures to determine who earned a year of 

service per the plan’s definition. This will assure that vesting is properly calculated. There should also be procedures on how 

forfeitures are handled in the plan. 

Does the IRS Web site provide assistance for employers who want to establish or improve their internal 

controls? 

We maintain an Examination Process Guide which helps our customers through our audit process. Section 2 of this guide 

provides tools, such as examination tips, audit techniques, and “check-ups” for plan sponsors to establish or improve their 

internal controls. We also maintain a set of four internal control questionnaires; items my agents use to determine a company’s 

level of internal controls when they examine a plan. Small business owners can benefit from the questionnaires as a guide to 

improving their internal controls. 

When employers find a mistake in the plan, what action should they take? 

I highly recommend taking advantage of our Self-Correction Program (SCP) or, if the error cannot be resolved using SCP, the 

Voluntary Correction Program (VCP). We have Fix-It Guides for SEPs, SIMPLE IRA plans, SARSEPs and 401(k) plans that 

describe potential plan mistakes and provide descriptions of how to correct them using one of these programs. 

What are the advantages of using these programs? 

SCP involves no fee to and no contact with the IRS. VCP involves a fee, that is a lot less than if the error is found during 

examination. The impact of non-compliance left unchecked can be costly. Not only will the plan sponsor incur the cost of 

correcting the plan error, but the company will also be responsible for paying a sanction to the IRS. Lack of internal controls 

ultimately leads to plan errors that present a real risk to plan sponsors and plan participants. 

Your response brings us back to the start – good internal controls will eliminate or greatly reduce the amount 

of plan errors, and if an error is found, it can possibly be corrected without any IRS contact and without 

paying a fee. 

I could not have said it better myself. 10 
Fall 2009 Retirement News for Employers 

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 homepage for updates. 

Additional Guidance on Schedule C Reporting for 2009 Form 5500 

On October 23, DOL/EBSA issued additional guidance to help plan administrators and service providers comply with the 

expanded requirements for reporting service provider fee and compensation information on the Form 5500. The expanded 

requirements apply for plan years beginning on or after January 1, 2009. 

The new guidance is provided in the form of 25 supplemental frequently asked questions (FAQs) on the new Schedule C 

requirements. Some of the issues covered in the new FAQs include reporting of: 

•	 gifts, entertainment and other non-monetary compensation; 

•	 compensation to hedge fund investment manager; 

•	 “Look-through” investment funds; 

•	 mutual fund redemption fees; and 

•	 ERISA fee recapture accounts. 

The supplemental FAQs also provide clarification regarding the 2009 plan year transition relief for service providers by 

explaining that the transition relief also covers plan administrators and Form 5500 preparers who rely on those service 

providers for information needed to complete the Schedule C. The details about the transition relief are explained in an 

earlier set of FAQs published in July 2008. 

Use of Summary Prospectus Requirements 

On September 8, DOL/EBSA issued Field Assistance Bulletin (FAB) 2009-03 describing the circumstances under which 

a participant-directed individual account plan may satisfy the prospectus delivery requirements of ERISA §404(c) by 

furnishing a “Summary Prospectus” pursuant to requirements established by the Securities and Exchange Commission 

(SEC). 

Under new SEC rules, the Summary Prospectus is a short-form document, written in a plain English and user-friendly 

format. It provides a summary of key information about a mutual fund that is useful to participants and beneficiaries in 

evaluating and comparing their plan investment options. In addition, if a participant or beneficiary wishes additional 

information, the Summary Prospectus lists an Internet address that leads directly to the broader statutory prospectus as 

well as a telephone number and email address for obtaining free of charge the paper version or electronic version of the 

statutory prospectus and other information. 

The guidance provided by the FAB enables plans to take advantage of updated prospectus disclosure changes adopted by 

the SEC to improve investor disclosure materials. 

Getting Ready for the 2009 Form 5500 and Electronic Filing 

DOL/EBSA is continuing to make filers and other plan officials aware of the upcoming changes to the Form 5500 and 

the filing process beginning with the 2009 plan year filings. Information on the new EFAST2 system has been posted 

on the EFAST Web site. The EFAST2 system will be will be available on January 1, 2010. Three archived DOL/EBSA 

webcasts are also available. The most recent webcast, held on November 5, included a discussion of the Schedule C FAQs 

noted above and 403(b) guidance noted in the Summer RNE “DOL Corner.” Subscribe to DOL/EBSA’s homepage for 

notification of upcoming webcasts on the changes to filing the Form 5500. See related article on page 2. 

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. 

11 
 

 

 

 

 

Fall 2009 Retirement News for Employers 

Retirement News for Employers 

Retirement News for Employers 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 

e-mail. 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 

Stay on top of your retirement plan’s mandatory deadlines! Here are some 

important dates in the upcoming months. Please note that that the filing dates 

are for calendar-year plans. Non-calendar-year plans must adjust these dates. 

Dec. 2: Deadline to give the notice to eligible employees for safe harbor 

401(k) plans and safe harbor auto enroll plans and plans containing an eligible 

automatic contribution agreement in order to automatically satisfy the timing 

requirements of these notices for the 2010 plan year. 

Dec. 8: DOL’s Fiduciary Education Seminar – St. Louis, MO. 

Dec. 31: Deadline for distributing 2008 401(k) excess contributions (including 

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

Jan. 15: Fourth quarterly contribution due date for 2009 defined benefit plans. 

Jan. 28: DOL’s Fiduciary Education Seminar – Pasadena, CA. 

Feb. 1: Deadline for: filing Form 945, Annual Return of Withheld Federal 

Income Tax; and giving recipients of 2009 retirement plan distributions Form 

1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing 

Plans, IRAs, Insurance Contracts, etc. 

For a complete list of upcoming EP Educational Events, visit the 

Retirement Plans Community Web page. 

Department of the Treasury Publication 4278 (11-2009)

 Internal Revenue Service Catalog No. 37968D 

www.irs.gov 

12 
 

 

 

Summer 2009 Retirement News for Employers 

Timing is Everything 

Saver’s Credit: A Bonus for Saving in Tough Economic Times 

Many people are rethinking their spending habits and cutting back these days. However, your 

retirement savings may be the wrong place to cut back. More money in your pocket now 

means less money when you and your family may need it later. Try making the most of your salary deferrals. Remember, 

the more of your pre-tax wages that you contribute to your retirement plan, the less your taxable income will be for the 

year. 

Low- and moderate-income taxpayers can save even more on their taxes by saving for retirement. The Saver’s Credit is a 

tax credit of up to $1,000 ($2,000 if married filing jointly) if you contribute to a traditional or Roth IRA, 401(k), 403(b), 

governmental 457, SARSEP or SIMPLE IRA plan. 

The credit is equal to 50%, 20% or 10% of your contribution depending on your adjusted gross income reported on Form 

1040 or 1040A (federal income tax return). The maximum annual contribution for determining the credit is limited to 

$2,000 per person. The credit you may claim against your 2009 taxes is shown in the following table: 

Credit Rate Married Filing Jointly Head of Household All Other Filers* 

50% of Contribution not more than $33,000 not more than $24,750 not more than $16,500 

20% of Contribution $33,001 - $36,000 $24,751 - $27,000 $16,500 - $18,000 

10% of Contribution $36,001 - $55,500 $27,001 - $41,625 $18,001 - $27,750 

0% of Contribution more than $55,500 more than $41,625 more than $27,750

 *single, married filing separately or qualifying widow(er). 

For 2010, the income limits to claim the credit at the 50% rate are increased to: $33,500 for married filing jointly; $25,125 

for head of household; and $16,750 for all other filers. The starting income limits to claim the 20% rate are increased to: 

$33,501 for married filing jointly; $25,126 for head of household; and $16,751 for all other filers. All other income limits 

remain the same for 2010. 

Claim the 2009 Saver’s Credit by filing Form 8880, Credit for Qualified Retirement Savings Contributions. 

See Publication 590, Individual Retirement Arrangements (IRAs), for additional information. 

Department of the Treasury Publication 4278-B (11-2009)

 Internal Revenue Service Catalog No. 47978D 

www.irs.gov 

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