Volume 6, Winter 2010 

A Look Inside 

Timing of employer contributions 

to a defined contribution plan... 

more on page 2 

Guidance clarifying retirement 

plan provisions of the HEART 

Act...more on page 3 

ERPA publication summarizes 

application, renewal and 

continuing educ. requirements... 

more on page 5 

Taxability of Roth IRA 

distributions...more on page 8 

EP Exam Director discusses the 

latest in 403(b) plans in “Desk 

Side Chat”...more on page 9 

Also in this Issue 

Tax Return Prep. Reqmts. 4 

The Filing Cabinet 5 

We’re Glad You Asked! 6 

SEP Phone Forum 10

 DOL News 11 

Recent Guidance 13 

New on the Web 14

 Mark Your Calendar 15 

Timing is Everything 16 

Retirement News 

 for Employers
 

Tax Information for Sponsors of Retirement Plans 

Internal Revenue Service Tax Exempt and Government Entities 

April 30, 2010, Filing Deadline for Adopting Employers of 

Pre-Approved Plans – Filing Tips for Submissions 

When to Adopt and File 

The IRS wants to remind employers entitled to use the pre-approved plan six-year cycle 

of an upcoming April 30, 2010, deadline to adopt the final approved version of the defined 

contribution pre-approved plan and submit applications for determination letters, if 

applicable. 

Employers entitled to use the six-year remedial amendment cycle described in Revenue 

Procedure 2007-44 must generally adopt either a master and prototype (M&P) or volume 

submitter (VS) defined contribution plan approved by the IRS for EGTRRA and other plan 

qualification requirements on the 2004 Cumulative List by April 30, 2010, for the plan’s 

restatement to be eligible for retroactive correction and reliance. 

April 30, 2010, is also the filing deadline for employers who have adopted an M&P or VS 

defined contribution plan and need to file a determination letter request for reliance (in 

other words, where the employer makes certain changes to the document) or otherwise 

wish to file a request for a determination letter. 

Filing Requirements for an M&P Plan or a VS Plan When the Employer has 

Modified the Pre-Approved Document 

An employer who adopts an M&P plan and makes changes to the pre-approved plan 

document (other than choosing adoption agreement options and amending a plan as 

described in Revenue Procedure 2005-16, §§5.02 and 19.03) must generally file a Form 

5300. The IRS will review an M&P plan that has been modified and submitted for a 

determination letter based on the Cumulative List in effect for the year the determination 

letter is filed (current Cumulative List). In this case, the employer must: 

•	 follow the normal filing procedures for Form 5300 as described in Revenue 

Procedure 2010-6; and 

•	 ensure that any modifications (including interim amendments for changes in 

qualification requirements on the post 2004 Cumulative Lists) are adopted in the 

form of separate amendments and are not incorporated into the underlying M&P 

plan document. 

Unlike an employer who adopts an M&P plan, an employer who adopts a VS plan 

and makes changes to the pre-approved plan document may file an application for a 

determination letter by using either Form 5307 or Form 5300, depending on the extent of 
Winter 2010 Retirement News for Employers 

2 

 

 

 

 

 

 

the changes. If a Form 5307 is filed, it will be reviewed based on the Cumulative List that was used to review the underlying 

VS plan. The IRS will require a Form 5300 when the VS adopter makes changes to the plan that are too extensive or 

complex or otherwise incompatible with the purposes of the VS program. A Form 5300 application will be reviewed based 

on the current Cumulative List. 

In addition to the normal filing requirements applicable to either Form 5300 or Form 5307, the employer: 

•	 may submit VS changes as separate amendments or incorporate them into the plan document. 

•	 must include a list describing each VS change if the changes are incorporated. 

For a description of individual determination letter filing procedures for pre-approved plans, including what types of 

amendments to submit, see Announcement 2008-23. Also, see Revenue Procedure 2010-6, and Revenue Procedure 2007-44, 

§19 for further information. 

Here are a few filing tips and reminders: 

•	 IRS will not accept faxed determination letter applications. 

•	 Employers who timely executed Form 8905, Certification of Intent to Adopt a Pre-approved Plan, must attach it to 

the application. 

•	 Send all determination letter applications (including those filed using Forms 5300, 5307, 5309 or 5310) to EP 

Determinations at: 

Internal Revenue Service Express mail or delivery service:

 P.O. Box 12192 

 Covington, KY 41012-0192 Internal Revenue Service
 201 West Rivercenter Blvd.
 Attn: Extracting Stop 312

Covington, KY 41011 

Deadline for Making Employer Contributions 

Employer contributions to a defined contribution (DC) plan can be made until the due date of the employer’s tax return, 

including extensions, regardless of when the tax return is actually filed. For example, a calendar-year corporate income 

tax return is due on March 15, but, with a valid extension, the corporation has until September 15 to both file its tax return 

and deposit employer contributions into its DC plan’s trust or IRA. If contributions are not deposited timely, the employer 

must amend its tax return and pay any tax, interest and penalties that may apply. 

The employer’s DC contributions for a year can be made until the extended due date of the tax return for that year if: 

•	 the plan was established by the end of the calendar year; and 

•	 the plan treats these contributions as though it had received them on the last day of the calendar year. 

However, a SEP plan sponsor has until the due date of the year’s income tax return, including extensions, to both set up 

and fund the SEP plan for the year. 

Additional Resources: 

SEP FAQs 

SIMPLE IRA Plan FAQs 

Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) 
3 

Winter 2010	 Retirement News for Employers 

Clarification of HEART Act Changes for Retirement Plans 

The IRS issued Notice 2010-15 (Notice) on January 20, 2010, that contains guidance, in the form of 

questions and answers, on many provisions of the Heroes Earnings Assistance and Relief Tax Act of 

2008 (HEART Act). The guidance clarifies some of the following Act provisions. 

Death Benefits 

The Act added Code §401(a)(37) that imposes a new requirement on 401(a) plans, 403(b) annuities 

and 457(b) governmental plans. The Act requires these plans to treat participants who died on or 

after January 1, 2007, while performing qualified military service (QMS) as being re-employed 

prior to death and, therefore, entitled to certain additional benefits provided under the plan, such as: 

•	 accelerated vesting; 

•	 ancillary life insurance benefits; and 

•	 other plan survivor benefits that are contingent on a participant’s termination of employment due to death. 

The Notice provides: 

•	 The plan’s additional death benefits are not required to include benefit accruals (if a defined benefit plan) or 

contributions (if a defined contribution plan) for the QMS period; 

•	 The plan must provide service credit for vesting purposes for the deceased participant’s QMS; and 

•	 A participant’s survivors are not entitled to Code §401(a)(37) death benefits unless the participant was entitled to 

reemployment with the employer maintaining the plan following his or her QMS. 

Contributions or Benefits for Time of Military Service 

Other clarifications in the Notice relate to §104(b) of the Act that permits certain plans to treat participants who die or 

become disabled on or after January 1, 2007, while performing QMS as: 

•	 being rehired the day before his or her death or disability; and 

•	 then terminating employment on the date of death or disability. 

If the plan uses this provision, then it may provide benefit accruals or contributions for the period when the participant 

was absent as would have been required by the Uniformed Services Employment and Reemployment Rights Act 

(USERRA) had the participant actually been rehired. However, the plan must provide the same benefits or contributions 

to all similarly situated participants on a reasonably equivalent basis. 

Differential Pay 

The Notice also describes how a plan treats differential pay that an employer may provide after December 31, 2008, 

for retirement plan purposes. Differential pay is the difference between a person’s pay from the employer and his or 

her military pay. For example, a plan does not have to treat differential pay as compensation to determine contributions 

and benefits but it must consider the differential pay when determining the total amount of employer and employee 

contributions under Code §415(c)(3). 

Plan Distributions 

The Notice clarifies that if a plan allows distributions upon severance of employment, it may treat an individual’s service 

in the uniformed services while on active duty for more than 30 days as a deemed severance from employment under 

Code §§401(k), 403(b) and 457(d) and allow a distribution. If so, the plan can’t permit the individual for a 6-month 

period following the date of the distribution to make: 

•	 an elective deferral to the plan; or 

•	 an employee contribution to the plan. 
Winter 2010 Retirement News for Employers 

4 

 

Required Plan Amendment Date 

Some of the Act’s provisions were effective retroactively to January 1, 2007, while others were effective for later years. 

The Notice extends the remedial amendment period during which a plan can make certain amendments retroactively 

effective to comply with the Act’s provisions. Generally, sponsors must amend their plans for HEART Act provisions by 

the last day of the first plan year beginning on or after January 1, 2010 (January 1, 2012, for governmental plans). 

The IRS is considering additional guidance on various sections of the Act and requests comments from the public. 

Future Requirements for Tax Return Preparers 

On January 4, 2010, the IRS proposed new registration, testing and continuing education requirements for tax return 

preparers that it plans to implement for future filing seasons. These steps will not be in effect for the current 2010 filing 

season. The steps include: 

•	 Requiring all paid tax return preparers who must sign a federal tax return to register with the IRS and obtain a 

preparer tax identification number. These preparers will be subject to a limited tax compliance check to ensure 

they have filed federal personal, employment and business tax returns and that the tax due on those returns has 

been paid. 

•	 Requiring competency tests for all paid tax return preparers, except attorneys, certified public accountants (CPAs) 

and enrolled agents (EAs) who are active and in good standing with their respective licensing agencies. There 

would be two levels of competency examinations for: 

1.	 Wage and non-business Form 1040 series. 

2.	 Wage and Small Business Form 1040 series. 

The IRS plans to monitor the testing process during the implementation period to study whether additional tests 

are necessary and feasible and to add a third test on business tax preparation after the initial implementation phase 

is completed. The IRS does not intend to “grandfather” any tax return preparer from the testing requirement based 

on return preparation experience. 

CPAs, attorneys and EAs already take competency tests. However, in the future, the IRS will study tax return 

accuracy of attorneys and CPAs to ensure that this exemption to testing requirements is warranted. The IRS 

recommends that enrolled actuaries and enrolled retirement plan agents (ERPAs) be required to pass one of the 

IRS competency tests if they intend to prepare Form 1040 series returns. 

•	 Requiring ongoing continuing professional education for all paid tax return preparers except attorneys, CPAs, 

EAs and others who are already subject to continuing education requirements. While attorneys, CPAs, EAs, 

enrolled actuaries and ERPAs are not subject to IRS continuing education requirements or self-certification during 

the registration renewal process, they generally must complete continuing education to retain their professional 

credentials. If data is collected in the future that identifies a need for educational requirements for these 

individuals, the IRS will consider expanding the continuing education requirements to them. 

•	 Extending the ethical rules found in Treasury Department Circular 230 - which currently only apply to attorneys, 

CPAs and EAs who practice before the IRS - to all paid preparers. This expansion would allow the IRS to suspend 

or otherwise discipline tax return preparers who engage in unethical or disreputable conduct. 

Visit the Tax Return Preparer Web page for additional information about the IRS’s Return Preparer Review Study and the 

latest updates. 
5 

Winter 2010	 Retirement News for Employers 

Have You Heard of ERPAs? 

Enrolled Retirement Plans Agent (ERPA) is a new category of practitioner that can represent retirement plans before the 

IRS. An individual becomes an ERPA by passing a two-part exam, applying to the IRS and passing tax compliance and 

background checks.

 ERPAs can represent taxpayers on most retirement issues including: 

•	 IRS Forms 5300 and 5500 issues (but not actuarial forms), 

•	 Employee Plans Determination Letter program, 

•	 Employee Plans Compliance Resolution System program, and 

•	 Employee Plans Master and Prototype and Volume Submitter program. 

Publication 4789, Represent Taxpayers Before the IRS on Retirement Plan Matters, is available for download at 

www.irs.gov/ep by clicking on “Forms/Pubs/Products” or can be ordered by calling (800) TAX-FORM. 

The Filing Cabinet 

Updated Publications 

Revisions are available for the following IRS publications: 

•	 Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and 

Qualified Plans), discusses retirement plans that small business owners can 

set up and maintain for themselves and their employees.
 

•	 Publication 571, Tax-Sheltered Annuity Plans (403(b) Plans) For 

Employees of Public Schools and Certain Tax-Exempt Organizations,
	

covers maximum contribution amounts, excess contributions and the basic 

rules for distributions and rollovers.
 

•	 Publication 575, Pension and Annuity Income (Including Simplified 

General Rule), discusses the tax treatment of pension and annuity plan 

distributions and explains how to report the income on a federal income tax return.
 

•	 Publication 590, Individual Retirement Arrangements (IRAs), discusses these personal savings plans and 

highlights the tax advantages of setting aside money for retirement.
 

These and other publications are available for download at www.irs.gov/ep by clicking on “Forms/Pubs/Products” or can 

be ordered by calling (800) TAX-FORM. 
Winter 2010 Retirement News for Employers 

6 

 

 

 

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. 

I’m over 50 and my employer’s 401(k) plan allows catch-up contributions. Is this a one-time contribution 

or can I make them every year? Can I make them now for 2009? 

An employee who is eligible to make salary deferrals under a 401(k), SIMPLE IRA, 403(b), SARSEP or a governmental 

457(b) plan may be able to make additional deferrals (“catch-up contributions”), up to the catch-up contribution limit, 

every year provided: 

1.	 the plan allows catch-up contributions; 

2.	 the employee is age 50 or older at any time during the calendar year; and 

3.	 the employee makes a valid salary deferral election that includes the amount of the catch-up contributions before 

the end of the calendar year. 

Notwithstanding condition 1 above, if an employee can make salary deferrals under plans of unrelated employers, he or 

she can contribute up to the annual deferral limit plus the amount of the catch-up contribution limit even if none of the 

plans allow catch-up contributions. However, the employee can not exceed the annual deferral limit in any one plan. An 

example of this situation is where an employee, aged 50, participates in both a 401(k) plan and a 403(b) plan of unrelated 

employers. Both plans allow employees to contribute the annual maximum salary deferral limit ($16,500 for both 2009 

and 2010) but neither plan allows catch-up contributions ($5,500 for 2009 and 2010). The employee could elect to 

contribute a combined total of $22,000 ($16,500 plus $5,500 catch-up contributions) via salary deferrals to both plans. 

However, because neither plan allows catch-up contributions, the employee can not contribute more than $16,500 to either 

plan. 

You can only make a catch-up contribution for a year from income that, but for the deferral election, you 

would have received in cash during that year 

Catch-up contributions are salary deferrals (also referred to as “elective deferrals”), and employees fill out salary deferral 

agreements, or election forms, to let the employer know how much to contribute to the plan on the employee’s behalf 

as elective deferrals. Also like regular elective deferrals, catch-up contributions can be pre-tax elective deferrals or 

designated Roth contributions, as chosen by the employee. They are counted for both the regular annual deferral limit and 

the catch-up contribution limit on the basis of the calendar year, and a deferral is counted for a calendar year only if the 

wages subject to the deferral election would otherwise have been received by the employee in cash during the year. 

Therefore, you can’t make catch-up contributions with 2010 wages for 2009. 

Remember that a plan may not treat salary deferrals as catch-up contributions until they exceed the least of the following 

limits: 

•	 any statutory limit, such as the annual limit on elective deferrals ($16,500 for non-SIMPLE plans, $11,500 for 

SIMPLE plans); 

•	 the plan’s actual deferral percentage test limit, if applicable; or 

•	 the plan-imposed limit, if any. 

Catch-up Contribution Limits 

The maximum amount of additional elective deferrals that you can contribute as catch-up contributions depend on your

type of plan. The 2010 limits are: 

401(k) (not SIMPLE), 403(b), governmental 457(b) and SARSEP plans $5,500 

SIMPLE plans $2,500 
7 

Winter 2010 Retirement News for Employers 

Catch-up IRA Contributions 

Regardless of whether you make pre-tax or designated Roth contribution salary deferrals to your employer-sponsored plan 

(including catch-up contributions, if allowed by the plan), you may be able to make catch-up IRA contributions to your 

traditional or Roth IRA. You are allowed to make IRA contributions for a year up until the due date of your tax return for 

that year (not including extensions), which for most people is April 15. The combined IRA contribution limit for 2009 

and 2010 is $5,000. You may also make catch-up IRA contributions for a year if you are age 50 or older before the end of 

that year. The combined catch-up IRA contribution limit is $1,000. However, you may not be able to deduct all or some of 

your traditional IRA contributions, including any catch-up IRA contributions, depending upon the amount of your income, 

your filing status and if you or your spouse are covered by an employer-sponsored retirement plan. Also, you must meet 

certain eligibility requirements to make contributions (including catch-up IRA contributions) to a Roth IRA. 

Additional Resources: 

Life Events That Can Affect Retirement Savings Web page 

Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) 

Publication 571, Tax-Sheltered Annuity Plans (403(b) Plans) For Employees of Public Schools and Certain Tax-Exempt 

Organizations 

Publication 590, Individual Retirement Arrangements (IRAs) 

We’re Glad You Asked! #2 

I am retired and I turned 701⁄2 last year. I received a payment from my former employer’s defined 

contribution (DC) plan on January 30, 2010. Can I roll over this payment? 

Maybe.You may only roll over a payment from a DC plan if it is an eligible rollover distribution (ERD). Certain 

payments from qualified plans, such as required minimum distributions (RMDs) and substantially equal periodic 

payments (SEPPs), are not ERDs and, therefore, may not be rolled over. 

Since you turned 701⁄2 last year and are retired, under normal circumstances you would have had to receive an RMD 

for 2009 by April 1, 2010. However, the Worker, Retiree, and Employer Recovery Act of 2008 (WRERA) waived 2009 

RMDs from IRAs and most DC plans, such as profit-sharing, 401(k), 403(b) and governmental 457(b) plans. WRERA did 

not waive 2010 RMDs and, therefore, you must take a 2010 RMD based on your December 31, 2009, account balance by 

the end of 2010. To determine which payments from a plan during a calendar year are RMDs, Treas. Reg. §1.402(c)-2, 

Q&A-7 provides that the first amounts distributed are RMDs from earlier years not yet distributed, followed by RMDs for 

the current year, until the amount distributed equals RMDs due through the end of the current calendar year. 

Applying this rule to your case, if the January 30 payment was the first payment you received from the plan in 2010, you 

must first apply the payment to the 2010 RMD (because, due to WRERA, there was no RMD for 2009). If the January 30 

payment is more than your 2010 RMD, the excess may be rolled over, assuming it is not a SEPP. 

Also note that ERDs are subject to mandatory 20% withholding, under Code §3405(c), on the amount includible in 

income if not rolled over in a trustee-to-trustee transfer. 

Additional Resources: 

Publication 590, Individual Retirement Arrangements (IRAs) 
Winter 2010 Retirement News for Employers 

8 

Is Your Distribution from Your Roth IRA Taxable? 

Roth IRAs are funded with after-tax contributions, so you don’t have to pay income taxes on those contributions when they 

are distributed, and, if the distribution is a “qualified distribution,” earnings, too, escape being included in gross income. 

A “qualified distribution” from a Roth IRA is one made: 

1. after 5 years – (measured from January 1 of the year for which you first made any Roth IRA contributions to any 

Roth IRA, including rollover or conversion contributions, to the last day of the fifth year); and 

2. a. on or after you are age 59 1⁄2; 

b. because you are disabled; 

c. after you die; or 

d. to buy, build, or rebuild your first home. 

Qualified distributions are not subject to the §72(t) additional 10% early distribution tax because they already meet an 

exception to that tax. 

If you receive a distribution from your Roth IRA that is not a qualified distribution, it can be subject to both income tax 

and the Code §72(t) additional tax. 

To calculate what portion, if any, of your nonqualified distribution is subject to income tax and/or the Code §72(t) 

additional tax, you must apply the special ordering rules for distributions. These ordering rules determine which 

contributions (including rollover contributions) and earnings are distributed in a nonqualified distribution and which 

portion is subject to income tax and/or the Code §72(t) additional tax. The special ordering rules treat distributions as 

coming: 

•	 First, from regular Roth contributions - not subject to income tax or the Code §72(t) additional tax. 

•	 Second, from rollover and conversion contributions (on a first-in-first-out basis) and within each rollover or 

conversion, in the following order: 

1. the taxable portion (the amount that you previously included in 

income at the time of the rollover or conversion) – not subject 

to income tax but, unless some Code §72(t) exception applies, 

is subject to the additional 10% early distribution tax if being 

distributed within 5 years of when these were rolled over or 

converted. Note: a separate 5-year period applies to each conversion 

and rollover and is the not the same 5-year period used for 

determining whether a distribution is qualified. 

2. the nontaxable portion – not subject to income tax or the Code §72(t) 

additional tax. 

•	 Finally, from earnings - subject to income tax and, unless some Code §72(t) 

exception applies, to the additional 10% early distribution tax. 

See “Roth IRA Distributions” in Employee Plans News, Winter 2010 for additional 

information, including examples, on nonqualified distribution ordering rules. 

Contributors to this Issue: 

Milo Atlas 

Anita Bower 

Kathy Davis 

James Flannery 

Ingrid Grinde 

Daniel Jones 

Joyce Kahn 

Roger Kuehnle 

Angelo Noe 

Nancy Payne 

Sharon Perkins 

Bonnie Schaumberg 

John Schmidt 

Brenda Smith-Custer 

Monika Templeman 

Mikio Thomas 

Kathy Tuite 

Catherine Waite 

Robert Walsh 

JoAnna Weber 

Carol Zimmerman 
9 

 

 

 

Winter 2010 Retirement News for Employers 

Desk Side Chat...With Monika Templeman 

The Latest in the World of Code §403(b) Plans 

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. 

Code §403(b) plans are always a hot topic, but it appears they are even hotter right now. Do you agree? 

Yes. We are hearing that there is a great deal of concern and confusion in the 403(b) community with the new Treasury 

regulations requiring that a 403(b) program must be maintained pursuant to a written plan. These tax-sheltered annuity 

plans utilized by educators and exempt organizations are a very important segment for Employee Plans. Estimates indicate 

that there are close to $600 billion in 403(b) plan assets, representing about 17% of total assets of defined contribution 

plans. With those numbers and the impact on the retirement of so many Americans, we need to be proactive in assisting 

these plans to stay compliant. 

The determination letter program for these plans is beginning soon. Can you provide any information on 

how the program will work? 

The 403(b) prototype, or pre-approved program, will begin sometime this spring. We will release a revenue procedure to 

open the program describing it and listing the procedures to submit an application. We will follow up in about one year 

with a revenue procedure for the individually designed plan determination letter process. I would suggest readers visit our 

403(b) Web page for updates. 

Did the employer have any necessary actions to complete during the 2009 calendar year? 

Notice 2009-3 states that the employer, during 2009, must have a written plan adopted on or before December 31, 2009, 

must ensure the plan was operated in accordance with a reasonable interpretation of Code §403(b) and the regulations, and 

have made their best efforts to retroactively correct operational failures to conform to the written plan. 

That answer provides an easy segue to discuss your expertise, the examinations of 403(b) plans. What 

error trends are your agents finding? 

There are several. The most common error is universal availability. The universal availability rule means that, if an 

employer permits one employee to defer salary into a 403(b) plan, then that employer must also extend this offer to all its 

employees that do not meet statutory exclusions. It is easy to incorrectly assume certain employees who have a support 

role in the organization or who work in what some consider a part-time role are not eligible for the plan merely by their 

position classification in the organization. Nurses, substitute teachers and bus drivers are examples of employees that fall 

in this category. 

The Employee Plans Compliance Unit (EPCU) has worked a project on the universal availability issue. 

Can you provide details on this project? 

We contacted public schools from kindergarten through high school in every state and asked them to demonstrate their 

plan’s compliance with this rule. Look for the report on the findings on the EPCU Web page soon. EPCU will be doing the 

same project for colleges and universities and will perform a follow-up project on the public schools. 

What do you hope to find with the follow-up project? 

We want to learn if these plans did actually have an error and, if so, the correction method they used to calculate the 

additional contributions needed. The plans have a choice of two correction methods. 

Why are you anxious to start two new 403(b) projects using the EPCU? 

The purpose of the EPCU is to contact a large portion of a specific market segment of our customers with minimal burden 

to them. The two new 2010 403(b) projects are intended to have a positive impact on compliance and clarify the new rules. 

We understand there will be a learning curve and will address it by attaching an outreach component to the projects. We 

will help 403(b) plans comply with the new requirements, while still holding them accountable for existing 403(b) rules. 
Winter 2010 Retirement News for Employers 

10 

 

What other error trends are your agents finding in the 403(b) examinations? 

Another common error occurs with the 15-year catch-up provisions. Agents find that many 403(b) plans don’t have a 

proper calculation available for them to review. More often than not, when the agent reviews the calculation, most plans 

fail. Also, agents find employers giving credit for service with another unrelated employer when only years of service with 

the current employer should be credited. 

With the current state of the economy, many participants look for loans and hardship distributions from 

the 403(b) plan to tide them over the tough times. Are there any issues in this area? 

We find numerous errors with loans and hardship distributions. Maintaining a loan program in a 403(b) plan can be 

difficult. Some vendors may not allow loans and those that do may not be collecting the loan payments. It is important for 

employers to understand they are ultimately responsible for their plan’s loan program. Relying exclusively on the vendors 

to make certain the plan’s loan program is running smoothly is usually a problem. 

Also, during examinations it is common to see the record keeping for hardship distributions neglected. My agents validate 

that the distribution was a proper amount for the hardship and that the hardship request is for an immediate and heavy 

financial need. 

What information is available on the www.irs.gov/ep Web site for 403(b) plans? 

We have a page devoted to the 403(b) program. Included on this page are links to two mini-courses, one for the employer 

that discusses recent law changes and how to properly operate a 403(b) plan, and one for the employee that provides 

information on the basics of the 403(b) plan and the advantages of participating in the plan. Finally, employers can 

perform their own 403(b) plan check-up and determine if their plan is free of the top errors found during examinations. 

There is more outreach coming, so stay tuned! 

SEP Plan Pitfalls Phone Forum (Free) - February 26, 2010 

Don’t wait until the IRS knocks on your door to find mistakes in your SEP plan. 

Join Mikio Thomas from Employee Plans Customer Education & Outreach and Avaneesh 

Bhagat from Employee Plans Voluntary Compliance for this 90-minute presentation 

beginning at 2:00 p.m. EST. During the forum, you will learn how to use the IRS SEP Plan 

Fix-It Guide to identify and correct mistakes the IRS frequently sees in SEP plans and get 

tips on how to avoid errors in the future. 

Register at the IRS Retirement Plans Web site. Also, visit our Phone Forum Web page for 

information on recently held forums including handouts and transcripts. 
11 

Winter 2010	 Retirement News for Employers 

DOL News
 

The Department of Labor’s Employee Benefits Security Administration (DOL/EBSA) announces new guidance as featured below. You can 

subscribe to DOL/EBSA’s homepage for updates. 

Lifetime Income Options for Retirement Plans 

On February 2, DOL/EBSA and the Department of the Treasury published a request for information (RFI) soliciting 

public comments to assist them in determining what steps, if any, to take to enhance retirement security for workers in 

employer-sponsored retirement plans through lifetime annuities or other arrangements providing a stream of income after 

retiring. 

The RFI seeks comments on a broad range of topics, including: 

•	 The advantages and disadvantages of distributing benefits as a lifetime stream of income both for workers and 

employers, and why lump sum distributions are chosen more often than a lifetime income option; 

•	 The type of information participants need to make informed decisions in selecting the form of retirement 

income;
 

•	 Disclosure of participants’ retirement income in the form of account balances as well as in the form of lifetime 

streams of payment; and 

•	 Developments in the marketplace relating to annuities and other lifetime income options. 

Written comments may be addressed to the U.S. Department of Labor, Employee Benefits Security Administration, 

Office of Regulations and Interpretations, N5655, 200 Constitution Ave, NW, Washington, DC, 20210, Attn: Lifetime 

Income RFI. Comments may also be e-mailed to E-ORI@dol.gov or through the federal e-rulemaking portal. 

Employee Contributions to Small Retirement and Welfare Benefit Plans 

On January 14, DOL/EBSA published a final rule to protect employee contributions deposited to small retirement and 

welfare benefit plans with fewer than 100 participants by providing a safe harbor period of seven business days following 

receipt or withholding by employers. 

Currently, employers of all sizes must transmit employee contributions to retirement plans as soon as they can reasonably 

be segregated from the general assets of the employer, but no later than the 15th business day of the month following 

the month in which contributions are received or withheld by the employer. The latest date for forwarding participant 

contributions to health plans is 90 days from the date such amounts are received or withheld by the employer. 

The final rule amends the participant contribution rules creating a safe harbor period under which participant 

contributions to a small plan will be deemed to comply with the law if those amounts are deposited with the plan within 

seven business days of receipt or withholding. The final rule is consistent with the proposed rule. DOL/EBSA did not 

expand the safe harbor to cover plans with 100 or more participants because of a lack of information and data sufficient 

to evaluate current practices of such employers and assess the costs, benefits and risks to participants associated with 

extending the safe harbor to large plans. 

The final rule was effective upon its publication on January 14, 2010. 

Electronic Filing of Form 5500 Annual Return/Reports 

On December 31, DOL/EBSA converted to a total electronic system of online filing for the Forms 5500 and the new 

Form 5500-SF. Now, the all-electronic EFAST2 system allows the public to submit and access filings online at 

www.efast.dol.gov. 

The revised EFAST Web site has been updated to provide a variety of tools and guidance, including the 2009 and 2010 

Form 5500 and the new Form 5500-SF schedules and instructions, Frequently Asked Questions, user guides and a 

tutorial. Filers and preparers can register for an account, complete the required forms and schedules online (in multiple 

sessions), print a copy for their records and submit it at no cost. 
Winter 2010 Retirement News for Employers 

12 

 

Filers may also use EFAST2-approved software to complete and submit their filings. EFAST2-approved software is 

expected to be easier to use and provide more value-added features than the Government Web application. A list of 

EFAST2-approved software is available on the EFAST2 Web site. 

Retirement plans required to file an annual return/report regarding their financial conditions, investments and operations 

each year generally satisfy that requirement by filing the Form 5500 or Form 5500-SF and any required attachments. 

Filers must submit the 2009 and 2010 annual return/report forms and schedules electronically through EFAST2. Prior year 

delinquent or amended Form 5500 filings also now must be filed electronically except that timely 2008 plan year filings 

may still be filed through the original EFAST on paper until October 15, 2010, or electronically through June 30, 2010. 

Important changes for the 2009 and 2010 forms include: 

•	 Mandatory electronic filing; 

•	 Introduction of the new, two-page Form 5500-SF for eligible small plan filers; 

•	 Expanded disclosure on Schedule C of indirect service provider compensation; 

•	 Expanded reporting by Code §403(b) plans; and 

•	 Elimination of IRS Schedules E and SSA. Information on participants with deferred vested benefits who separated 

from the service covered by the plan must now be filed directly with the IRS. 

A helpful video about electronic filing is available. Assistance with the EFAST2 system and the Form 5500 and 5500-SF is 

available toll-free at (866) 463-3278. 

DOL/EBSA is also helping filers and other plan officials with the changes to the Form 5500 and the filing process through a 

series of webcasts. Archives of four webcasts held are also available. The most recent webcast was held on January 21 and 

included a discussion of the changes to Schedule C, the new EFAST2 system as well as the schedules now filed solely with 

the IRS. Another webcast will be held this spring. Subscribe to DOL/EBSA’s homepage for notification of the upcoming 

webcast and other guidance related to the changes to filing the Form 5500 and the new EFAST2 system. 

Investment Advice 

On November 20, DOL/EBSA published a notice in the Federal Register withdrawing the final rule on the provision of 

investment advice under ERISA’s prohibited transaction provisions. 

The notice withdraws the January 21, 2009, final rule that implemented a statutory prohibited transaction exemption under 

the Pension Protection Act (PPA) and provided an additional administrative class exemption. DOL/EBSA decided to 

withdraw the rule based on public comments that raised sufficient doubts on whether the conditions of the final rule and the 

class exemption associated with the rule could adequately protect the interests of plan participants and beneficiaries. DOL/ 

EBSA recently extended the applicability and effective dates of the final rule until May 17, 2010. That extension expires 

upon the effective date of this withdrawal. 

DOL/EBSA will separately publish a proposed rule that conforms to the PPA statutory exemption on investment advice. 

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. 
13 

Winter 2010 Retirement News for Employers 

Employee Plans Published Guidance 

Regulations 

T.D. 9472, 74 Fed. Reg. 61270 

Contains new regulations on ERISA §204(h) notice requirements for a pension plan amendment that is permitted to 

reduce benefits accrued before the applicable amendment date. 

Revenue Rulings 

Rev. Rul. 2009-40, 2009-52 I.R.B. 942 

Provides covered compensation tables for 2010, that remain the same as 2009, for plans with permitted disparity in 

employer-provided contributions or benefits. 

Revenue Procedures 

Rev. Proc. 2010-4, 2010-1 I.R.B. 122 

Annual EP/EO revenue procedure on letter rulings. 

Rev. Proc. 2010-5, 2010-1 I.R.B. 165 

Annual EP/EO revenue procedure on technical advice. 

Rev. Proc. 2010-6, 2010-1 I.R.B. 193 

Annual EP/EO procedures for employee plans determination letter requests. 

Rev. Proc. 2010-8, 2010-1 I.R.B. 234 

Annual EP/EO revenue procedure on user fees. 

Notices 

Notice 2009-94, 2009-50 I.R.B. 848 

States that qualified retirement plan dollar limitations on benefits and contributions that are adjusted by reference to Code 

§415(d) and those for deferred compensation plans remain unchanged for 2010. 

Notice 2009-97, 2009-52 I.R.B. 972 

Extends deadline for amending qualified retirement plans for certain Code requirements, as added by the Pension 

Protection Act and subsequently modified, to the last day of the first plan year that begins on or after January 1, 2010. 

Notice 2009-98, 2009-52 I.R.B. 974 

Contains the 2009 Cumulative List with statutory, regulatory and guidance changes needed for certain opinion, advisory 

and determination letter requests for the 12-month period beginning February 1, 2010. 

Notice 2010-6, 2010-3 I.R.B. 275 

Provides relief and guidance on correcting certain failures in a nonqualified deferred compensation plan to comply with 

Code §409A(a). 

Notice 2010-15, 2010-6 I.R.B. 390 

Provides question and answer guidance on the Heroes Earnings Assistance and Relief Tax Act of 2008 and requests 

comments on additional Act issues addressed in the notice. 

Announcements 

Announcement 2009-85, 2009-51 I.R.B. 938 

States that, beginning on February 22, 2010, the IRS will temporarily stop accepting defined benefit plan determination 

letter applications filed on Form 5307. This does not affect employers who want to file Form 5307 for pre-approved 

defined contribution plans. 
Winter 2010 Retirement News for Employers 

14 

 

Announcement 2009-89, 2009-52 I.R.B. 1009 

Provides a remedial amendment period and reliance for employers that, pursuant to upcoming revenue procedures, either 

adopt a pre-approved 403(b) plan having a favorable opinion letter or apply for an individual determination letter for a 

403(b) plan when available. Plan sponsors and employers should wait to request a ruling or determination letter for their 

403(b) plans until after the upcoming revenue procedure is published that will outline the application procedures for these 

letters. 

Announcement 2010-03, 2010-4 I.R.B. 333 

Provides, for plan years beginning on or after January 1, 2009, automatic approval for changes in funding method for 

single-employer defined benefit plans in certain circumstances. 

New on the Web 

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

•	 Redesigned Correcting Plan Errors Web page makes it easier to find 

information on using the Employee Plans Compliance Resolution System 

(EPCRS). 

•	 Form 5500 Corner - Notices 1388, 1389 and 1391 describe changes to the 

2008 Form 5500 Instructions for Schedule R, Schedule MB and Schedule 

SB. 

•	 Phone Forum – Employee Plans - Our new Web page provides information 

about upcoming and recently held phone forums on various retirement plan 

topics and includes links to the forum transcripts and handout materials. 

•	 Top Ten Facts about Taking Early Distributions from Retirement Plans 

provides information on the tax consequences of tapping into retirement funds. 
15 

 

 

 

 

Winter 2010 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. 

March 1: Paper Forms 1099-R and Form 1096 for 2009 distributions due to 

IRS. 

March 15: Application of Waiver for 2009 Minimum Funding Standard for 

defined benefit plans due. 

March 15: ADP/ACP distributions of 2009 excess amounts, with earnings, due 

to highly compensated participants to avoid 10% excise tax (June 30, in the case 

of certain eligible automatic contribution arrangements.) 

March 15: Form 1042S, Foreign Person’s U.S. Source Income Subject to 

Withholding, and Form 1042, Annual Withholding Tax Return for U.S. Source 

Income of Foreign Persons, due to IRS to report retirement plan distributions 

and income tax withheld from distributions made to nonresident aliens. 

March 15: 2009 corporate employer contributions due to take tax deduction 

(with no corporate filing extension). 

March 31: Electronic filing of Forms 1099-R for 2009 distributions due to IRS. 

March 31: Last day for sponsors of single employer defined benefit plans 

to obtain AFTAP certification from enrolled actuary to avoid possible 

10-percentage-point decrease in presumed AFTAP. 

April 1: Sponsors of single employer defined benefit plans that have not 

received a certified AFTAP from the enrolled actuary should review benefit 

restrictions under Code §436 to determine whether additional restrictions apply 

or whether other action is required. 

April 15: Deadline for returning 2009 participant deferrals, with earnings, in 

excess of $16,500 ($22,000, if 50 or older). 

April 15: Deadline to make 2009 traditional and Roth IRA contributions. 

April 15: First quarterly defined benefit contribution installment due for the 

2010 plan year. 

April 15: 2009 self-employed individual and partnership contributions due to 

take tax deduction for 2009 (with no filing extension). 

April 30: Last day to adopt EGTRRA pre-approved defined contribution plans, 

and submit them for a determination letter, if desired, to the IRS. 

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

Retirement Plans Community Web page. 

Department of the Treasury Publication 4278 (02-2010)

 Internal Revenue Service Catalog No. 37968D 

www.irs.gov 
 

 

 

 

 

Winter 2010 Retirement News for Employers 

Timing Is Everything
 Some helpful retirement tips for employees from the IRS... 

Major Life Events Can Affect Your Retirement 

Did you know that major life events like: 

•	 losing a job, 

•	 changing your marital status, or 

•	 starting a family 

could affect how you save for retirement? Even though you’ve 

been nurturing that nest egg for years, you still need to know a 

few things before you’re ready to sail away into the sunset. 

•	 Our Life Events Web page will help you manage your retirement 

savings for every stage of your life. Are you starting out in your career 

and wondering if you are eligible to participate in your company’s plan? 

Or did you know that your retirement plan distribution may be subject 

to an additional 10% early distribution tax? 

•	 You can also find the answer to your retirement plan questions by 

clicking the Alphabetical Index and reading topics ranging from 

contributions to vesting. 

•	 Our Definitions section explains common retirement plan terms in plain 

language. 

For more retirement tips, talk to your employer or visit www.irs.gov/ep, select “Plan 

Participant/Employee” and click on “Timing is Everything.” 

Department of the Treasury Publication 4278-B (02-2010)

 Internal Revenue Service Catalog No. 47978D 

www.irs.gov 

16