Volume 3, Summer 2006 

Inside This Issue 

Waiver of the 60-Day 

Rollver Period 

page 3 

New User Fee Schedule for 

2006 

page 3 

President Signs HERO Act 

page 4 

A Virtual Small Business Tax 

Workshop DVD 

page 4 

Critical FewPoints...by 

Michael Julianelle (Director, 

EP Examinations) 

page 5 

The Fix Is In 

page 7 

Product Profile - Designated 

Roth Accounts under a 401(k) 

or 403(b) Plan Publication 

page 9 

The Filing Cabinet 

page 9 

Net Gains 

page 12 

DOL Corner 

page 13 

This Way to the Forums 

page 14 

Calendar of Events 

and Deadlines 

page 15 

“Timing is Everything” 

Flyer 

page 16 

Retirement News 

for Employers 

Helping Business Owners with Retirement Plans 

Internal Revenue Service Tax Exempt and Government Entities 

Pension Protection Act of 2006 

The Pension Protection Act of 2006 (H.R. 4) was signed into law by the President on August 

17, 2006. The law includes a number of significant tax incentives to enhance retirement 

savings for millions of Americans. The following is a brief summary of some of the retirement 

related provisions included in the law: 

1. Permanent Retirement and Savings Incentives - The Economic Growth and Tax Relief 

Reconciliation Act of 2001 (EGTRRA) substantially increased pension and individual 

retirement account (IRA) contribution limits through 2010 as well as making other 

improvements in pensions and retirement savings through enhanced vesting, portability and 

reduced regulatory burdens. The law makes these favorable changes permanent. The law also 

indexes the income limits for traditional, spousal and Roth IRAs to prevent these benefits from 

being eroded by inflation. 

2. Minimum Funding Standards - Significant changes in defined benefit funding rules, for 

both single and multiemployer plans. These are the most sweeping changes in the funding 

rules since the enactment of ERISA. 

3. Benefit Accruals Under Hybrid Plans - Rules regarding hybrid plans including cash 

balance and pension equity plans are incorporated in Titles I and II of ERISA, and the Age 

Discrimination in Employment Act. 

4. IRS Correction Programs (EPCRS) - The law provides that the Treasury has the full 

authority to establish and implement EPCRS, including the authority to 

waive income, excise or other taxes to ensure that any 

tax, penalty or sanction is not excessive and bears a 

reasonable relationship to the nature, extent and severity 

of a plan mistake (i.e., compliance failure). The 

Treasury is instructed to give special attention to the 

concerns and circumstances that small employers face 

with respect to compliance and correction of plan 

mistakes. 

5. Saver’s Credit Made Permanent - The law makes 

permanent the Saver’s Credit of up to $2,000. Without 

this extension, the credit would not have been 

available after 2006. The law also indexes the Saver’s 

Credit income limits to prevent this benefit from being eroded by inflation. 
Summer 2006 Retirement News for Employers 

6. Requirement to Allow Employees to Divest Plan Assets - The law requires employers to 

allow participants in defined contribution plans that are invested in employer securities to 

elect to direct the plan to divest employer securities into other investment options. 

7. Combined Defined Benefit and Defined Contribution Plan - The law creates a new type 

of plan for small employers (with not more than 500 employees) consisting of a combination 

defined benefit plan and defined contribution plan where the assets are held in a single trust. 

8. Automatic Enrollment - The law creates a safe harbor to encourage employers to offer 

automatic enrollment in employer-sponsored defined contribution pension plans, which will 

encourage employee participation. 

9. Treatment of IRA Contributions for Guard and Reservists Called to Active Duty ­

The law provides that distributions from an IRA or pension plan taken by members of the 

National Guard and Reserves called to active duty through 2007 are not subject to early 

withdrawal penalties. Withdrawn amounts may be repaid to the IRA or pension plan within 

two years of the distribution without regard to the annual contribution limit. 

10. Long Term Care/Annuity Products - The law authorizes a new insurance product which 

allows annuities to carry a long-term care rider, so that annuity earnings can also be used to 

provide coverage against long-term care needs. 

11. Public Safety Officer Retirement Distributions for Health and Long Term Care 

Insurance - Public safety officers who retire or become disabled may make tax-free 

distributions of up to $3,000 annually from their governmental pension plans if the 

distribution is used to purchase health or long-term care insurance. 

12. Rollover Rules - The law provides new rollover requirements for after-tax rollovers in 

annuity contracts, direct rollovers from retirement plans to Roth IRAs, and rollovers by 

nonspouse beneficiaries of certain retirement plan distributions. 

13. Transfers of Excess Defined Benefit Fund Assets for Retiree Health - The law allows 

assets in excess of 120 percent of current liability to be used to fund retiree health benefits. 

Further, additional contributions to the defined benefit plan would be required when asset 

values fall below 120 percent of current liability. The law applies to both single employer 

plans and collectively bargained plans. 

14. Lump Sum Interest Rate - The law phases out the use of the 30-year Treasury rate in 

computing lump sum distributions, and replaces it with a segmented corporate bond yield 

curve rate. 

15. In-Service Distributions at age 62 - The law allows pension plans to provide for 

distributions to employees who have attained age 62 and who have not separated from 

employment at the time of the distributions. 

For additional information, see: 

• President Bush Signs H.R. 4, the Pension Protection Act of 2006 [View] 

• Summary and Bill Information - Pension Protection Act of 2006 [View] 

• Technical Explanation of the Pension Protection Act of 2006 [View] 

2 
Summer 2006 Retirement News for Employers 

Waiver of the 60-Day Rollover Period 

Before 2002, taxpayers who missed the 60-day deadline for rollovers from a qualified plan 

or Individual Retirement Account (IRA) were out of luck. The law with respect to the 60­

day rule was very rigid and the IRS didn’t have the authority to consider equities. 

Effective for distributions after December 31, 2001, the IRS has discretion to waive the 60­

day rule under certain circumstances. Please go to www.irs.gov/ep, select “Plan 

Participant/Employee,” select “Resources for Retirement Plan Participant/Employee” and 

see the “IRA Online Resource Guide” to find information on obtaining a waiver of the 60­

day rollover requirements. 

In general, a rollover is a tax-free distribution of cash or other assets from an employersponsored retirement plan or IRA. This is contributed or “rolled over” to a second 

retirement plan or IRA. If the rollover contribution is not made by the 60th day after the 

distribution is received, the recipient is liable for income taxes on the amount withdrawn, 

plus a 10% additional tax if the recipient is under age 59 1⁄2. 

When an employee separates from service with his/her employer or 

retires and receives a distribution from the employer-sponsored New User Fee Schedule for retirement plan, generally the distribution is eligible for rollover to a 

2006 traditional IRA or to another eligible retirement plan with a different 

employer. Before making the distribution, the plan must give the The Retirement Plans Community is recipient a written explanation of rollover treatment, including an reminded that many user fees explanation of the 60-day rollover rule. increased on July 1, 2006. To 

accommodate these updated fees, Rollovers also can occur between IRAs. Rolling over assets between 

the IRS revised Form 8717, User the same types of IRAs for better investment is a very popular IRA 

Fee for Employee Plan transaction. However, unlike distributions from an employerDetermination, Opinion, and sponsored retirement plan, the IRA trustee or custodian is not 

Advisory Letter Request. required to provide a written explanation of rollover treatment or 

other tax consequences that may occur as a result of the withdrawal The new fee schedule took effect in from the IRA. As a result, many well-intentioned taxpayers miss the two phases: 60-day cutoff date for re-depositing their IRA distributions into 

• Phase one, effective February 1, another IRA. In many cases the money is re-deposited into a non-IRA 

2006, impacted the fees for EP letter by the 60th day after receipt. However, since it was not re-deposited 

rulings. into an IRA, it is not a tax-free rollover. 

• Phase two, effective July 1, 2006, Example. An employee, age 55, separates from service with her 

revised the fees for opinion and employer and receives a distribution from her employer-sponsored 

advisory letters and determination retirement plan. In accordance with the law, a written explanation of 

applications involving Forms 5300, rollover treatment is given before the distribution. After receiving the 

5307 and 5310. distribution, she makes a timely rollover into an IRA certificate of 

deposit (CD) with her local bank. Thirteen months later the IRA CD 

For more information about user matures. She researches CD rates and finds that a CD at the bank 

fees and a complete schedule, see around the corner is paying a higher interest rate, so she withdraws 

New User Fee Schedule for 2006 the money from her IRA CD and purchases a CD at the bank around 

or Revenue Procedures 2006-1 and the corner. This transaction takes place well within the 60-day 

2006-8, in Internal Revenue Bulletin rollover period. After the 60-day period has expired, she learns that 

2006-1, Jan. 3, 2006. the CD that she purchased was a non-IRA CD and therefore the 

3 
Summer 2006 Retirement News for Employers 

distribution from her IRA CD is now fully taxable. In addition, since she is under 59 1⁄2, she is 

also subject to an additional 10% early withdrawal tax. 

Since IRA trustees and/or custodians are not required by law to explain the rollover options 

and tax consequences of not rolling over a distribution, it is important for individuals to know 

the rules and know whether or not their money is going into an IRA or a non-IRA account. 

In the example, the individual can request a waiver of the 60-day rollover requirement from 

the IRS. However, the IRS may or may not grant the waiver. The IRS will evaluate the 

relevant facts and circumstances that caused the individual to miss the 60-day deadline. 

Relevant facts in the example would include: evidence of the individual’s intent to make a 

timely rollover, the amount of time that has elapsed since the date she received the 

distribution, whether the bank deposited her funds into the wrong account, and reliance on the 

advice of the bank’s employee or agent. Ignorance of the 60-day rollover rule is generally not 

sufficient justification for the IRS to grant a waiver. 

The intent of the rollover rules is to promote and protect the portability of retirement assets, 

not to be loopholes for personal use of tax-deferred assets. Thus, if an individual used the 

money for a short term loan of any kind, the request for a waiver will be denied. Requests 

based on miscalculation of the tax consequences or evidence of a lack of timely intent to roll 

over an eligible distribution could also result in a denial. The IRS will adhere to the criteria 

provided in Revenue Procedure 2003-16 and is likely to grant a waiver of the 60-day period 

if an individual is a victim of circumstances reasonably beyond his/her control. 

The IRS publishes private letter rulings that it issues to individuals in response to requests for 

a waiver of the 60-day rollover requirements. While these rulings are limited to the 

individual’s specific facts and circumstance, tax and legal professionals use the published 

rulings for guidance in drafting future requests and in advising their clients on his/her 

chances of getting a favorable ruling from the IRS. However, the IRS rationale and policy 

with respect to denials are seldom published since many individuals exercise their right to 

withdraw their requests prior to the issuance of a denial or adverse ruling. 

President Signs HERO Act 

President Bush has signed into law the Heroes Earned Retirement Opportunities Act, H.R. 

1499. The HERO Act lets members of the armed forces include their combat zone 

compensation (otherwise excludable from gross income) in their calculation of earned income 

for purposes of determining tax deductions for contributions to retirement savings plans. The 

Act is retroactive to tax years beginning after December 31, 2003. 

A Virtual Small Business Tax Workshop DVD 

Publication 1066C is now available for viewing online or ordering a DVD copy by visiting 

www.irs.gov, selecting “Businesses” and then “Small Business Products Online Ordering.” 

A Virtual Small Business Tax Workshop DVD is an innovative DVD designed to help new and 

existing small business owners understand and meet their federal tax obligations.The 

workshop provides information and resources in an interactive format and features ten 

lessons. One of the lessons is entitled “How to set up a retirement plan for yourself and your 

employees.” 

4 
Summer 2006 Retirement News for Employers 

Critical Fewpoints...by Michael Julianelle (Director, EP


Examinations)


Hello again everyone. Isn’t it sad when the temperature goes below 95 and we think it is a


cool spell? Nonetheless, grab yourself a glass of iced tea and join me as I share with you the


latest in the Retirement Plans Community.


Using the focused examinations techniques and the various examination initiatives currently


underway, I felt that it was a good time to reiterate our policy regarding the preferred place


for performing an EP examination. I asked for comments from you to assist me in preparing


this article through RetirementPlansComments@irs.gov. I want to thank those of you who


took the time to share your comments with me. It is important to know your thoughts and


ideas.


What I am about to write in no way changes our past policy and I want to discuss the reasons 

why we have this policy in place. I want to ensure that the EP agents’ time is efficiently used 

by having access to source documents where they are stored. To accomplish this goal, I am 

encouraging EP agents to initially PLAN on performing the audit where the taxpayer’s 

original books, records and source documents pertinent to the examination are located, 

which is generally at the taxpayer’s place of business. 

Refer to Regulation Section 301.7605-1(d), which provides, in part: 

“A field examination will generally take place at the location where the taxpayer’s 

original books, records, and source documents pertinent to the examination are 

maintained. In the case of a sole proprietorship or taxpayer entity, this will usually be 

the taxpayer’s principal place of business.” 

The regulation very clearly sets out what the policy is, but it’s important to understand why


the IRS has this policy and what I hope to accomplish by following this policy. I don’t want


to use our authority to insist on the place of audit simply for the sake of demonstrating that


we can, especially as it appears Employee Plans hasn’t taken a 

consistent position in the past. Sometimes there are valid reasons 

By performing the not to perform the audit at the taxpayer’s place of business. But, 

audit at the please note that we are not auditing the information entered 

taxpayer’s place of onto the Form 5500, we are auditing the operation of the plan. 

business, the books, By performing the audit at the taxpayer’s place of business, the 

records and source books, records and source documents are more readily available, 

documents are more and this should lessen both the number of document requests and 

the added time these requests require. For example, Forms W-2, readily available, 940 and 941; payroll records; personnel files and the entity’s 

and this should income tax return are all examples of documents and records that 

lessen both the would not normally be stored at a pension professional’s place of 

number of business. A review of these and other records often leads to 

document requests questions that require additional records that are at the taxpayer’s 

and the added time place of business. 

these requests Another goal for conducting the audit at the taxpayer’s place of 

require. business is to provide an opportunity for agents to familiarize 

5 
Summer 2006 Retirement News for Employers 

themselves with the business operations by inspecting the premises and interviewing the 

taxpayer. Experience has shown that pension professionals are extremely knowledgeable 

regarding the plan’s operation, but are not as well-versed in how the taxpayer conducts 

business. Without dealing with someone from the business who knows about its daily 

operations, our EP agents cannot resolve their questions. In addition, unless an interview 

with the taxpayer has been pre-arranged, the representative’s lack of knowledge 

significantly diminishes the value of the initial interview. 

Additionally, agents need to evaluate the internal controls that are in place for plan and 

business operations. Without having access to someone who works in the taxpayer’s 

location, it is difficult for the agent to evaluate whether the census information provided to 

the pension professional is accurate. For example, does the office manager fully understand 

how the plan should work, including entry dates, includable compensation, related 

businesses that could have an impact on various operational tests, etc.? If not, the 

information provided to the pension professional may be flawed. 

It is for these reasons that my agents have been instructed to initially plan on performing 

the audit at the taxpayer’s place of business. Both agents and managers will use appropriate 

business and professional judgment in determining where and when the audit will take 

place. 

However, with respect to certain businesses, especially small businesses, I realize there may 

be valid reasons for not holding the examination at the taxpayer’s principal place of 

business. I am particularly sensitive to situations where: 

• The agent’s presence would disrupt the business operations. 

• There is a lack of office space to perform the audit. 

If it makes better business sense to conduct the examination at a location other than the 

taxpayer’s place of business (for example, if the agent’s presence would disrupt the 

business operations), then the taxpayer or their authorized representative may submit a 

request outlining the reasons. If this is approved, the agent will request an opportunity to 

conduct a walk-through of the business premises and an opportunity to direct questions to 

the taxpayer to resolve questions regarding business operations. 

In conclusion, I expect my agents to utilize their professional judgment in determining 

when it is appropriate to deviate from the normal policy of conducting audits at the 

taxpayer’s place of business. I am confident that my agents and their managers, with your 

input, will use appropriate business and professional judgment in determining where and 

when the audit will take place and when it is appropriate to request a walk-through of the 

business premises. 

Please feel free to e-mail any questions or comments on this topic to 

RetirementPlansComments@irs.gov and type “Place of Audit Comments” in the subject 

line. I will address any further comments or questions either in a future article or on the 

Retirement Plans Community web page www.irs.gov/ep. 

Thank you for reading my words. Be well. 

6 
Summer 2006 Retirement News for Employers 

The Fix Is In: Common Plan Mistakes 

In each issue of the Retirement News for Employers we present a common mistake that 

happens in retirement plans. We describe the problem, how it happened, how to fix it and 

how to lessen the probability of the problem happening again. This edition of the column 

focuses on “Plan Loan Failures and Deemed Distributions.” 

The Issue 

Many employers make participant loans available in their retirement plans. When a plan 

makes loans available, there are two important statutory requirements to consider: §72(p) 

dealing with taxability of participant loans and §4975(d) dealing with prohibited transactions. 

This column focuses on the tax rules under §72(p). 

A plan loan is a taxable distribution unless the loan satisfies the exception under §72(p)(2) 

which sets limits on the amount of a nontaxable loan and the repayment of the loan. 

Participants may receive a nontaxable loan of up to 50% of their vested account balance not 

to exceed $50,000. A minimum loan up to $10,000 can be made that exceeds the 50% rule as 

long as the excess is secured with additional collateral. The participant loan, by its terms, 

must be repaid within five years. The repayment period may be exceeded if the loan is for

the purchase of a primary residence. Principal and interest must be paid in substantially level 

payments at least quarterly. 

The Problem 

The most common plan loan failures relate to: 

1) loans that exceed the maximum dollar amount,


2) loans with payment schedules that don’t meet the time or payment limits, and


3) defaulted loans due to failure to make required payments.


Each of these will cause the loan (or portion thereof) to become a “deemed” distribution for 

tax purposes. A deemed distribution differs from other distributions in that the participant is 

taxed as if the distribution were received, but the treatment of the loan as a distribution does 

not excuse the participant from the obligation to repay the loan. A failure to repay the loan 

may result in additional tax consequences and, in some cases, a prohibited transaction. 

If a participant loan is in excess of the maximum amount allowed, only the excess portion is 

taxable. For example, a $60,000 non-principal residence loan would trigger a $10,000 

deemed distribution. If a participant loan doesn’t satisfy the 5-year, quarterly payment 

requirement, the entire loan is taxable, including a loan that is within the dollar limit. For 

example, a non-principal residence loan for $5,000 with a 6-year repayment period is made. 

Since the 5-year repayment term limit is exceeded, the entire $5,000 is taxable even though it 

is within the dollar limit. Similarly, if the loan was properly set up as a 5 year loan but 

provided for 5 annual payments, the entire $5,000 is taxable as a deemed distribution. When 

a loan goes into default, whether from participant or administrator error, a deemed 

distribution of the entire unpaid loan balance plus accrued interest results. 

The Fix 

If the plan contains language that reflects the loan limits under §72(p)(2), the violations 

discussed will also cause a plan to become disqualified, resulting in adverse tax 

consequences to the employer and employees under the plan; however, employers may get 

7 
Summer 2006 Retirement News for Employers 

relief from these adverse consequences through the Employee Plans Compliance 

Resolution System (EPCRS) by correcting the failures. The Voluntary Correction Program 

(VCP) can be used to correct these mistakes. 

Revenue Procedure 2006-27 adds three new corrections for plan loan failures which, when 

made through VCP, removes the §72(p) deemed distribution tax reporting requirements. 

These corrections are only allowed if the normal maximum period for repayment of the loan 

has not expired. The Service reserves the right to limit the use of the correction methods to 

situations that it considers appropriate: for example, where the loan failure is caused by 

employer action. 

Where a plan loan has exceeded the dollar limit, correction will be permitted if there is a 

payment to the plan based on the excess loan amount. If loan repayments were made before 

correction, the prior repayments may be applied either: 

1) 	to interest on the excess so the participant only repays the excess loan amount, 

2) 	only to the amount of the loan not exceeding the dollar limit so that the participant

 repays the excess loan amount (plus interest), or 

3) 	pro rata against the loan excess and the maximum loan amount, so that the

 corrective repayment would equal the outstanding balance remaining on the

 original loan excess on the date that corrective repayment is made. 

Where a plan loan has a payment schedule that is greater than allowable by law, the loan can 

be reamortized over the remaining period of the proper maximum payment period measured 

from the original date of the loan. For example, a participant loan has a repayment period of 

six years. Two years later it was discovered that the loan should have been repaid over five 

years. To correct the error, the outstanding loan balance is reamortized over the remaining 

3-year period. Correction is not available where the statutory term of the loan has expired. In 

that case, VCP can be used to report deemed distributions in the current year. 

Finally, for loans that are deemed in default, correction can be: 

1) 	a lump sum payment equal to what should have been made to the plan, plus

 interest, 

2) 	reamortization of the outstanding balance of the loan over the remaining payment

 schedule of the original term of the loan, or 

3) 	a combination of either of the above methods. 

Additionally, in certain situations involving defaulted loans (e.g., where the employer didn’t 

start payroll withholding for repayment of the loan), the employer may be required to pay a 

portion of the repayment made by the employee in order to correct the defaulted loan. 

Making Sure It Doesn’t Happen Again 

Employers need to have a system in place to ensure that plan loans are administered in 

compliance with the plan document and any separate written loan policy adopted. Employers 

should work with plan administrators to ensure that the administrators have sufficient 

participant loan information to verify that the proper loan payments are being made timely. 

However, keep in mind that, despite all of your good efforts, mistakes can happen. In that 

case, the IRS can help you correct the problem and retain the benefits of your qualified plan 

and delay or eliminate the need for reporting deemed distributions. 

8 
Summer 2006 Retirement News for Employers 

Product Profile - Designated Roth Accounts under a 401(k) 

or 403(b) Plan Publication 

Have you read about the “new Roth 401(k) plans” but not really 

known what they were all about? We, here in Employee Plans, knew 

you would have questions and we have developed a new publication, 

Designated Roth Accounts under a 401(k) or 403(b) Plan ­

Frequently Asked Questions (FAQs), (Publication 4530) to provide 

you with answers. 

This publication provides a sampling of our Frequently Asked 

Questions in the areas of contributions to and distributions from a 

Designated Roth Account. In addition, it provides a feature 

comparison chart of Roth 401(k), Roth IRA and Traditional 401(k) 

retirement accounts. It also provides you with additional information 

on where to go if you have even more questions. For example, one 

of the resources is www.irs.gov/ep, where you will find, among 

others things, that these are not new plans at all, but separate 

accounts under a 401(k) or 403(b) plan to which designated Roth 

contributions are made. 

The publication can be found on the Retirement Plans Community 

web page by clicking on “EP Forms & Publications” under the 

“Retirement Plans Community Topics” section. 

The Filing Cabinet 

Forms - you can’t live with them, you can’t live without them. Just like you use forms when 

running your business - everything from spreadsheets to receipts to invoices - you also use 

forms when dealing with a retirement plan. 

The 2006 Form 5500 - Just Looking 

With its Media Release of July 13, 2006, DOL/EBSA, along with the 

IRS and Pension Benefit Guaranty Corporation, announced the release 

of the 2006 Form 5500, Annual Return/Report of Employee Benefit 

Plan, instructions and schedules (also see the DOL Corner that 

appears on page 13 in this newsletter). 

Informational copies of the entire Form 5500-series for 2006 are 

available for viewing on EBSA’s web site http://www.efast.dol.gov/. 

Paper copies will not be available until October 16, 2006. 

9 
Summer 2006 Retirement News for Employers 

Revised Form 8717 Now Available 

The Retirement Plans Community is reminded that many of the IRS user fees increased on 

July 1, 2006. To accommodate these updated fees, the IRS has released a revised 

Form 8717, User Fee for Employee Plan Determination, Opinion, and Advisory Letter 

Request. (See article on page 3 of this newsletter.) 

So You Need More Time? 

When it comes to inquiries about the signature requirements for the Form 5558, Application 

for Extension of Time To File Certain Employee Plan Returns, our phones have been ringing 

off the hook. 

To help clarify: 

1.	 A signature is not required for an automatic extension of the Form 5500, Annual 

Return/Report of Employee Benefit Plan or Form 5500-EZ, Annual Return of OneParticipant (Owners and Their Spouses) Retirement Plan (Box 1a on Form 5558). 

2.	 A signature is required if the extension is for the filing of Form 5330, Return of 

Excise Taxes Related to Employee Benefit Plans (Box 1b on Form 5558). 

The person who signs this form may be one of the following: 

•	 Employer 

•	 Plan sponsor 

•	 Plan administrator 

•	 Disqualified person required to file From 5330 

•	 Attorney qualified to practice before the IRS 

•	 CPA qualified to practice before the IRS 

•	 Person enrolled to practice before the IRS 

•	 Person holding a power of attorney 

Although not yet ready for public consumption, the Form 5558 will be revised by the fall 

2006 to better reflect this practice. 

Hold Onto Those Schedules 

Beginning in 2005, the Instructions for Form 5500-EZ, indicate that “Filers of Form 5500­

EZ will not be required to file any schedules or attachments.” Some customers are 

misinterpreting this item. 

In a nutshell, Form 5500-EZ filers no longer have to file Schedule B or Schedule P with their 

Form 5500-EZ or submit any other attachments (i.e., actuarial reports) that they may have 

formerly been attaching to explain answers on their Form 5500-EZ. 

10 
Summer 2006 Retirement News for Employers 

If, however, a Form 5500-EZ is filed late, a copy of Form 5558, Application for Extension of Time To 

File Certain Employee Plan Returns, or a reasonable cause statement for late filing will still need to 

be attached in order to request the waiving of any late filing penalties. Note: One-participant plans 

are automatically granted an extension of time to file Form 5500-EZ until the extended due date of 

the Federal income tax return of the employer (and are not required to file Form 5558) if certain 

conditions detailed in the Form 5500-EZ Instructions are met. 

It is important to note that this change does not eliminate the requirement to both perform an 

annual valuation and maintain the funding standard account for all plans subject to the 

minimum funding requirements of IRS section 412. If Schedule B is required, as in the case with a 

defined benefit plan (or a money purchase plan with a minimum funding waiver), the filer will still 

be required to collect and retain completed and signed copies that must be produced if requested. 

A completed and signed Schedule P should also be retained by the Form 5500-EZ filer for 2005. 

New Publications Coming Your Way! 

Just in time for your end-of-summer reading, we’re happy to announce the release of the following 

two new publications: 

• Publication 4530, Designated Roth Accounts Under a 401(k) or 403 (b) Plan is an 

introductory brochure that contains a sampling of the more comprehensive list of FAQs found 

on the EP web page, along with a chart that compares some of the features in Roth 401(k), 

Roth IRA, and traditional 401(k) retirement accounts (also see the Product Profile on page 9 

in this newsletter). 

• Publication 4531, 401(k) Plan Checklist is directed at small business owners or plan 

sponsors and is designed to help them identify possible operational problems within their 

specific 401(k) plan. 

And you thought it was safe to go into the water! 

All of these forms and publications are available electronically on the 

Retirement Plans Community web page by clicking on “EP Forms & IRS employees contributing to Publications” under the “Retirement Plans Community Topics” section. this edition of the Retirement 

News for Employers are:	 Paper copies can be requested by calling (800) TAX-FORM (829-3676). Be 

aware that paper copies of Publication 4530 and Publication 4531 will not be Evelyn DeWald,


Michael Julianelle, available until mid-September. As mentioned above, paper copies of the Form


Joyce Kahn, 5550 material for 2006 will not be available until October 16, 2006.


Donzel Littlejohn,


Peter McConkey,


Todd Newman,


Mark O’Donnell,


Nancy Payne,


Martin Pippins,


Keith Ruprecht,


John Schmidt,


Mikio Thomas, and


Brenda Smith-Custer


11

Summer 2006 Retirement News for Employers 

Net Gains 

Welcome back to Net Gains, the column devoted to providing you with the latest Retirement 

Plans Community web page information. This portion of the IRS web site contains almost 

everything you want to know about retirement plans but didn’t know where to find it. 

New! Information about Rollovers 

We have added a new resource for Rollovers from qualified retirement plans. The 

information includes a rollover chart summarizing the rollover rules, FAQs for obtaining a 

waiver of the 60-day rollover period and resources for additional information. 

CONTACTING 

EMPLOYEE PLANS 

The Retirement News for Employers welcomes 

your comments about this issue and/or your 

suggestions for future articles. 

Send comments/suggestions to: 

EP Customer Education & Outreach 

SE:T:EP:CEO 

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

Washington, D.C. 20224 

or FAX (202) 283-9525 

or E-Mail: RetirementPlanComments@irs.gov 

For EP Taxpayer Assistance: 

For retirement plans technical and procedural 

questions: 

Please call (877) 829-5500 

Or visit the EP Customer Account Services 

section at www.irs.gov/ep. 

For questions relating to retirement income, 

IRAs, Roth IRAs, educational IRAs, medical 

savings accounts and section 125 cafeteria 

plans: 

Please call (800) 829-1040 

For further Employee Plans Information: Go to 

www.irs.gov/ep. 

Correcting Plan Errors 

As we mentioned in the Spring edition of the Retirement News 

for Employers, we recently redesigned our page on Correcting 

Plan Errors. Since then, we have added a new link called 

“Q&A’s – Recent Outreach Events.” The featured questions 

and answers are based on oral presentations made by IRS 

officials at the ASPPA web cast on June 6, 2006, entitled, “It’s 

Finally Here. EPCRS Updated” and the June 13, 2006 Tax Talk 

Today Program - “Why Fix Mistakes in Retirement Plans Now 

Rather than Later?” The questions were submitted by the 

attendees and the responses were given at the meetings. Check it 

out. There’s sure to be something there for you. 

“Timing is Everything” Archive 

If you’re new to the Retirement News for Employers, or if you’re 

memory-impaired like us here at the RNE, check out the archive 

of “Timing is Everything” flyers. Each one-page Timing flyer 

has plain-language retirement information for employees and 

plan participants. 

The Timing archive is on both the Plan Sponsor/Employer and 

Plan Participant/Employee sections on the Retirement Plans 

Community web page. And when you go to the online archive, 

you’ll discover that the flyers have even more help to offer 

because we’ve provided links on each flyer that provide more 

details about specific retirement plans and products. As always, 

we welcome your suggestions about future Timing topics, so 

drop us a line at RetirementPlanComments@irs.gov. 

12

Summer 2006 Retirement News for Employers 

DOL Corner 

The Department of Labor’s Employee Benefits Security Administration (DOL/EBSA) 

announced new guidance, relief and tools to assist plan sponsors and practitioners in 

complying with ERISA. You can subscribe to DOL/EBSA’s web site homepage as well as 

the Compliance Assistance page for notice of updates posted on the web site. 

Electronic Filing and Proposed Improvements to Form 5500 Annual 

Reports 

On July 21, DOL/EBSA published in the Federal Register a final regulation requiring plans 

to file Form 5500 Annual Reports electronically beginning with 2008 plan year filings due 

in 2009. Simultaneously, DOL/EBSA, along with the IRS and PBGC, proposed changes to 

the forms that will be processed under the new electronic system. 

The final electronic filing rule is effective for plan years starting on or after January 1, 

2008. This will give plans and service providers needed time to adapt to the new system 

and any changes to the Form 5500. The wholly electronic filing system will be streamlined, 

cost-effective and more efficient for plans. It will also increase the accuracy of the 

information used by the public and the government. 

The proposed changes to the content of the form are intended to simplify filing and ensure 

compatibility with the electronic processing system. Among the proposed revisions to the 

Form 5500 are: creation of a new short form for small plans whose assets are held in easy 

to value investments with regulated financial institutions; increased transparency of planrelated fees and expenses; improved information on the funding of defined benefit plans; 

and realignment of the reporting rules of 403(b) plans (subject to Title I) to be compatible 

with those of 401(k) plans. The new system will also customize information required to be 

filed to the type of plan involved in each filing. 

Written comments on the proposed Form 5500 revisions should be submitted by September 

19, 2006, to the Office of Regulations and Interpretations, Employee Benefits Security 

Administration, Room N-5669, U.S. Department of Labor, 200 Constitution Avenue, NW, 

Washington, DC 20210, Attn: Form 5500 Revisions or by email to e-ori@dol.gov. 

For further information, see DOL/EBSA’s web page on electronic filing and the proposed 

improvements. 

2006 Form 5500 Annual Report 

On July 13, DOL/EBSA, the IRS and PBGC released advance copies of the 2006 Form 

5500 and instructions. 

The modifications to the Form 5500 for plan year 2006 are described under “Changes to 

Note” in the 2006 Instructions. Of particular importance, the Schedule P (Annual Return of 

Fiduciary of Employee Benefit Trust) is no longer required; the instructions for the 

Schedules H and I are updated to refer to EBSA’s revised Voluntary Fiduciary Correction 

Program and companion exemption; new addresses for submitting late filing penalties 

13 
Summer 2006 Retirement News for Employers 

under the Form 5500 Delinquent Filer Voluntary Compliance Program are provided and the 

instructions for counting welfare participants and beneficiaries are improved. 

Information copies of the forms, schedules and instructions are available on DOL/EBSA’s 

web site at www.efast.dol.gov. Filers should monitor the EFAST web site for information on 

approved software vendors for completing the 2006 forms and on the availability of the 

official, government printed forms. Advance copies of the 2006 Form 5500 cannot be used 

for 2005 filings. 

Upcoming Compliance Assistance Events 

• 	Fiduciary Education Seminars: November 8 in Milwaukee, Wisconsin;

 December 5 in Sacramento, California 

• 	Voluntary Fiduciary Correction Program Workshops: August 22 in


 Charlotte, North Carolina; September 12 in Salt Lake City, Utah


Visit DOL/EBSA’s web site at www.dol.gov/ebsa for registration brochures for these 

seminars and for the announcement of additional seminars around the country. 

How to Subscribe to 

Retirement News for 

Employers 

The Retirement News for 

Employers will be issued 

only through IRS e-mail. 

For your free subscription, 

please go to the Retirement 

Plans Community web page 

and subscribe online by 

selecting “Newsletters” 

under “Retirement Plan 

Community Topics.” All 

editions of the Retirement 

News for Employers will be 

archived there. 

For your convenience, we 

have included Internet links 

to referenced materials 

throughout the electronic 

version of Retirement News 

for Employers. These links 

are identified by the blue 

and underlined text. 

This Way to the Forums 

There is still time to register for the two remaining 2006 IRS Nationwide 

Tax Forums! The EP seminars are Accessing Money from a Retirement 

Plan and Roth 401(k) and Tips. Accessing Money presents highlights of 

minimum required, early, and hardship distributions; loans and prohibited 

transactions; and the distinction between withdrawals from traditional 

accounts and Roth accounts. Roth 401(k) features the latest information on 

the new Roth 401(k) accounts as well as tips on avoiding common pit-falls 

discovered in examination projects conducted on SIMPLE IRA, SEP, and 

traditional 401(k) plans. In addition, Employee Plans (EP) and Exempt 

Organizations (EO) will sponsor a booth in the exhibit hall where you can 

pick up our products or speak with an EP or EO specialist. 

The locations and dates for the two remaining Tax Forums are: 

Las Vegas, NV August 22 - August 24 

New York, NY August 29 - August 31 

Tax Forums have already been completed in Anaheim, CA, 

Chicago, IL, Atlanta, GA and Orlando, FL to rave reviews. 

To get additional information about the Tax Forums, visit 

www.irs.gov and then go to “Tax Professionals,” and select “IRS 

Nationwide Tax Forums.” You can register online at 

www.taxforuminfo.com. 

14

Summer 2006 Retirement News for Employers 

Let’s Just Take It One Three-Month Period at a Time


= contribution 

= conference 

= file forms 

Operating a retirement plan can be a time-consuming job. 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 you navigate the retirement plan timeline, here is our month-by-month look at 

some of the important moments in the months to come. Please note that all of the filing 

dates below are for calendar year plans - adjust the dates for non-calendar year plans: 

August 22-24: IRS Nationwide Tax Forum – Las Vegas, NV. 

August 29-31: IRS Nationwide Tax Forum – New York, NY. 

September 15: Deadline for making final required minimum contributions for 2005 

calendar year money purchase and defined benefit plans. 

October 15: Third quarterly contribution due date for 2006 calendar year defined benefit 

plans. 

October 16: File the 2005 Form 5500, Annual Return/Report of Employee Benefit Plan or


Form 5500-EZ, Annual Return of One-Participant (Owners and Their Spouses) Retirement


Plan with DOL/EFAST for those who filed for a 2 1/2 month extension prior to August 1. 

November 1: Last date for employers with SIMPLE IRA plans or SIMPLE 401(k) plans to 

notify eligible employees of salary reduction rights and of the type of employer contribution 

to be made. 

For a comprehensive list of upcoming EP Educational Events, visit the Retirement Plans 

Community web page, select “Educational Services” under “Retirement Plans Community 

Topics” and then “Upcoming EP Educational Events.” 

Department of the Treasury Publication 4278 (8-2006)


Internal Revenue Service Catalog Number 37968B


www.irs.gov 

15 
Summer 2006 Retirement News for Employers 

Timing is 

Everything 

Some helpful retirement tips for employees from the IRS... 

As a participant in a retirement plan, you’re entitled to receive certain 

information about your plan to help you plan for your future. Here are a 

few examples: 

Within 120 days after the end of a plan year, your employer is 

required to provide you with a statement of your accrued and 

vested benefit. 

Most retirement plans are required to file a Form 5500, Annual Return/Report of 

Employee Benefit Plan, by July 31 of the following year. Your employer is 

required to give you a copy of the return within 30 days of your written request. 

By September 30, your employer is required to give you a copy of 

the plan’s Summary Annual Report which summarizes the plan’s 

financial status for the prior year. 

If you participate in a SIMPLE IRA or SIMPLE 401(k) plan, you 

must get an annual election notice describing your right to make 

salary reduction contributions and your employer’s decision to make 

either matching or nonelective contributions for the next year by 

November 1. 

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 (8-2006) 

Internal Revenue Service Catalog Number 47879B 

www.irs.gov