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                                           Retirement News 

                                                      for Employers
                                                                                         
                                              Tax Information for Sponsors of Retirement Plans 
                                                               Internal Revenue Service            Tax Exempt and Government Entities 

Volume 6, Winter 2010            April 30, 2010, Filing Deadline for  Adopting Employers of  
                                 Pre-Approved Plans – Filing Tips for Submissions 
A Look Inside 
                                 When to Adopt and File 
Timing of employer contributions 
to a deined contribution plan…   The IRS wants to remind employers entitled to use the pre-approved plan six-year cycle 
more on page 2                   of an upcoming April 30, 2010, deadline to adopt the inal approved version of the deined 
                                 contribution pre-approved plan and submit applications for determination letters, if 
Guidance clarifying retirement 
                                 applicable. 
plan provisions of the HEART 
Act…more on page 3               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 
ERPA publication summarizes      submitter (VS) deined contribution plan approved by the IRS for EGTRRA and other plan 
application, renewal and 
                                 qualiication requirements on the 2004 Cumulative List by April 30, 2010, for the plan’s 
continuing educ. requirements… 
                                 restatement to be eligible for retroactive correction and reliance. 
more on page 5 

Taxability of Roth IRA           April 30, 2010, is also the iling deadline for employers who have adopted an M&P or VS 
distributions…more on page 8     deined contribution plan and need to ile a determination letter request for reliance (in 
                                 other words, where the employer makes certain changes to the document) or otherwise 
EP Exam Director discusses the   wish to ile a request for a determination letter. 
latest in 403(b) plans in “Desk 
Side Chat”...more on page 9      Filing Requirements for an M&P Plan or a VS Plan When the Employer has 
                                 Modiied the Pre-Approved Document 

                                 An employer who adopts an M&P plan and makes changes to the pre-approved plan 
Also in this Issue 
                                 document (other than choosing adoption agreement options and amending a plan as 
   Tax Return Prep. Reqmts.  4 
                                 described in Revenue Procedure 2005-16, §§5.02 and 19.03) must generally ile a Form 
   The Filing Cabinet       5 
   We’re Glad You Asked!     6   5300. The IRS will review an M&P plan that has been modiied and submitted for a 
   SEP Phone Forum            10 determination letter based on the Cumulative List in effect for the year the determination 
   DOL News               11     letter is iled (current Cumulative List). In this case, the employer must: 
   Recent Guidance        13 
                                 •	    follow the normal iling procedures for Form 5300 as described in Revenue 
   New on the Web         14
   Mark Your Calendar     15           Procedure 2010-6; and 

   Timing is Everything   16     •	    ensure that any modiications (including interim amendments for changes in 
                                       qualiication 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 ile an application for a 
                                 determination letter by using either Form 5307 or Form 5300, depending on the extent of

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       Winter 2010                             Retirement News for Employers 

  the changes. If a Form 5307 is iled, 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 iling 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 iling procedures for pre-approved plans, including what types of 
  amendments to submit, seeAnnouncement 2008-23. Also, see Revenue Procedure 2010-6, and Revenue Procedure 2007-44, 
  §19 for further information. 

  Here are a few iling tips and reminders: 

     •	  IRS will not accept faxed determination letter applications. 

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

     •	  Send all determination letter applications (including those iled 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 deined 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 iled. 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 ile 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 Qualiied Plans) 

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    Winter 2010 	                            Retirement News for Employers 

Clariication 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 clariies some of the following Act provisions. 

Death Beneits 

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 qualiied military service (QMS) as being re-employed 
prior to death and, therefore, entitled to certain additional beneits provided under the plan, such as: 

   •	  accelerated vesting; 

   •	  ancillary life insurance beneits; and 

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

The Notice provides: 

   •	  The plan’s additional death beneits are not required to include beneit accruals (if a deined beneit plan) or 
       contributions (if a deined 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 beneits unless the participant was entitled to 
       reemployment with the employer maintaining the plan following his or her QMS. 

Contributions or Beneits for  Time of Military Service 

Other clariications 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 beneit 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 beneits 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 beneits 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 clariies 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. 

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  Winter 2010                                  Retirement News for Employers 

  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 irst 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 iling seasons. These steps will not be in effect for the current 2010 iling 
  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 identiication number. These preparers will be subject to a limited tax compliance check to ensure 
          they have iled 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, certiied 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-certiication during 
          the registration renewal process, they generally must complete continuing education to retain their professional 
          credentials.  If data is collected in the future that identiies 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. 
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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 
   Qualiied 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 Simpliied 
   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. 

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     Winter 2010                             Retirement News for Employers 

  We’re Glad You Asked!

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

  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 a401(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 ill 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 
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     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 iling 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 Qualiied 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 70½ last year. I received a payment from my former employer’s deined 
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 qualiied 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 70½ 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 proit-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 irst 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 irst payment you received from the plan in 2010, you 
must irst 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) 

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  Winter 2010                                   Retirement News for Employers 

  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 “qualiied distribution,” earnings, too, escape being included in gross income.  
  A “qualiied distribution” from a Roth IRA is one made: 

  1.  after 5 years – (measured from January 1 of the year for which you irst made any Roth IRA contributions to any 
      Roth IRA, including rollover or conversion contributions, to the last day of the ifth year); and 

  2.   a. on or after you are age 59 ½; 

      b. because you are disabled; 

      c. after you die; or 

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

  Qualiied 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 qualiied distribution, it can be subject to both income tax 
  and the Code §72(t) additional tax. 

  To calculate what portion, if any, of your nonqualiied 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 nonqualiied 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 irst-in-irst-out basis) and within each rollover or 
      conversion, in the following order: 
            1.   the taxable portion (the amount that you previously included in       Contributors to this Issue: 

               income at the time of the rollover or conversion) – not subject         Milo Atlas 
               to income tax but, unless some Code §72(t) exception applies,           Anita Bower 
               is subject to the additional 10% early distribution tax  ifbeing        Kathy Davis 
               distributed within 5 years of when these were rolled over or            James Flannery 
               converted. Note: a separate 5-year period applies to each conversion    Ingrid Grinde 
               and rollover and is the not the same 5-year period used for             Daniel Jones 
               determining whether a distribution is qualiied.                         Joyce Kahn 
            2.   the nontaxable portion – not subject to income tax or the Code §72(t) Roger Kuehnle 
               additional tax.                                                         Angelo Noe 
                                                                                       Nancy Payne 
  •	  Finally, from earnings - subject to income tax and, unless some Code §72(t)      Sharon Perkins 
      exception applies, to the additional 10% early distribution tax.                 Bonnie Schaumberg 
  See “Roth IRA Distributions” in Employee Plans News, Winter 2010 for additional      John Schmidt 
  information, including examples, on nonqualiied distribution ordering rules.         Brenda Smith-Custer 
                                                                                       Monika Templeman 
                                                                                       Mikio Thomas 
                                                                                       Kathy Tuite 
                                                                                       Catherine Waite 
                                                                                       Robert Walsh 
                                                                                       JoAnna Weber 
                                                                                       Carol Zimmerman 
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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 deined 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 inding?

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 classiication 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 indings 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 ind 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 speciic 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.
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Winter 2010 Retirement News for Employers

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

Another common error occurs with the 15-year catch-up provisions. Agents ind 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 ind 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 ind numerous errors with loans and hardship distributions. Maintaining a loan program in a 403(b) plan can be
dificult. 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
inancial 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 totwo 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 ind 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.

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Winter 2010 	                                 Retirement News for Employers 

DOL News
The Department of Labor’s Employee Beneits 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 beneits 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 Beneits Security Administration, 
Ofice 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 Beneit Plans 

On January 14, DOL/EBSA published a inal rule to protect employee contributions deposited to small retirement and 
welfare beneit 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 
                                                                       th
be segregated from the general assets of the employer, but no later than the 15  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 inal 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 inal 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 suficient 
to evaluate current practices of such employers and assess the costs, beneits and risks to participants associated with 
extending the safe harbor to large plans. 

The inal 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 iling for the Forms 5500 and the new 
Form 5500-SF. Now, the all-electronic EFAST2 system allows the public to submit and access ilings 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.                                                             11

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Winter 2010 Retirement News for Employers

Filers may also use EFAST2-approved software to complete and submit their ilings. 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 ile an annual return/report regarding their inancial conditions, investments and operations
each year generally satisfy that requirement by iling 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 ilings also now must be iled electronically except that timely 2008 plan year ilings
may still be iled 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 iling;

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

• 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 beneits who separated
from the service covered by the plan must now be iled directly with the IRS.

A helpful video about electronic iling 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 ilers and other plan oficials with the changes to the Form 5500 and the iling 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 iled solely with
the IRS. Another webcast will be held this spring. Subscribe to DOL/EBSA’s homepage for notiication of the upcoming
webcast and other guidance related to the changes to iling the Form 5500 and the new EFAST2 system.

Investment Advice

On November 20, DOL/EBSA published a notice in the Federal Register withdrawing the inal rule on the provision of
investment advice under ERISA’s prohibited transaction provisions.

The notice withdraws the January 21, 2009, inal 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 suficient doubts on whether the conditions of the inal rule and the
class exemption associated with the rule could adequately protect the interests of plan participants and beneiciaries. DOL/
EBSA recently extended the applicability and effective dates of the inal 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 beneit
plans, visit EBSA’s homepage.

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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 beneits 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 beneits.

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 qualiied retirement plan dollar limitations on beneits 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 qualiied retirement plans for certain Code requirements, as added by the Pension
Protection Act and subsequently modiied, to the last day of the irst 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 nonqualiied 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 deined beneit plan determination
letter applications iled on Form 5307. This does not affect employers who want to ile Form 5307 for pre-approved
deined contribution plans.

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Winter 2010 Retirement News for Employers

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 deined beneit 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 ind
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.

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Winter 2010 Retirement News for Employers

Mark Your Calendar
Retirement News for Employers
Stay on top of your retirement plan’s mandatory deadlines! Here are some
important dates in the upcoming months. Please note that that the iling dates are
Retirement News for Employers is a free,
quarterly newsletter aimed at keeping for calendar-year plans. Non-calendar-year plans must adjust these dates.

employers informed about retirement plan March 1: Paper Forms 1099-R and Form 1096 for 2009 distributions due to
sponsorship. RNE is prepared by the IRS’s
IRS.
Employee Plans (Tax Exempt and
Government Entities) ofice. March 15:Application of Waiver for 2009 Minimum Funding Standard for
deined beneit plans due.
For your convenience, RNE includes Internet
links – identiied by the blue underlined text March 15: ADP/ACP distributions of 2009 excess amounts, with earnings, due
– to referenced materials. to highly compensated participants to avoid 10% excise tax (June 30, in the case
of certain eligible automatic contribution arrangements.)
How to Subscribe
March 15: Form 1042S, Foreign Person’s U.S. Source Income Subject to
RNE is distributed exclusively through IRS Withholding, and Form 1042 , Annual Withholding Tax Return for U.S. Source
e-mail. Sign up for your free subscription by Income of Foreign Persons, due to IRS to report retirement plan distributions
going to theRetirement Plans Community and income tax withheld from distributions made to nonresident aliens.
Web page and selecting “Newsletters” in the
left pane. Prior editions of the RNE are also March 15: 2009 corporate employer contributions due to take tax deduction
archived there. (with no corporate iling extension).

March 31: Electronic iling of Forms 1099-R for 2009 distributions due to IRS.
Send Comments/Suggestions to:
March 31: Last day for sponsors of single employer deined beneit plans
EP Customer Education & Outreach to obtain AFTAP certiication from enrolled actuary to avoid possible
SE:T:EP:CEO
10-percentage-point decrease in presumed AFTAP.
1111 Constitution Ave., N.W., PE-4C3
Washington, DC 20224 April 1: Sponsors of single employer deined beneit plans that have not
FAX: (202) 283-9525 received a certiied AFTAP from the enrolled actuary should review beneit
E-Mail: RetirementPlanComments@irs.gov restrictions under Code §436 to determine whether additional restrictions apply
or whether other action is required.
Have a Question?
April 15: Deadline for returning 2009 participant deferrals, with earnings, in
For taxpayer assistance with retirement plans excess of $16,500 ($22,000, if 50 or older).
technical and procedural questions:
April 15: Deadline to make 2009 traditional and Roth IRA contributions.
Please call (877) 829-5500 or visit the
“Contact EP/Services” section at April 15: First quarterly deined beneit contribution installment due for the
www.irs.gov/ep. 2010 plan year.

April 15: 2009 self-employed individual and partnership contributions due to
For questions relating to retirement income,
take tax deduction for 2009 (with no iling extension).
IRAs, Roth IRAs, educational IRAs, medical
savings accounts and §125 cafeteria plans: April 30: Last day to adopt EGTRRA pre-approved deined contribution plans,
and submit them for a determination letter, if desired, to the IRS.
Please call (800) 829-1040.
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

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   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 ind the answer to your retirement plan questions by 
   clicking theAlphabetical Index and reading topics ranging from 
   contributions to vesting. 

•	 Our Deinitions 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

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