The first round
of electronically filled 5500s is over. The process was interesting and
not without some hiccups.
vendors found mass rejection of 5550s as volume picked up toward the
sponsors didn't understand that the name they entered with DOL had
to match perfectly with the name registered on the website�even
down to spaces and periods.
gave up and had clients sign paper copies (and an authorization form
and sent them back to be filed. Unfortunately, this means that the
plan sponsors' signatures are available on the DOL website for use
identity theft scams.
clients (if necessary) through the filing process--and not one of our
clients filed late.
With the 2010
forms available earlier next year, we anticipate the process moving
Broader Definition of Fiduciary Coming
selling any type of investment or insurance product to a retirement plan
will be considered a fiduciary under proposed regulations issued by
definition: If the participant or plan sponsor believes that what is
being sold is a recommendation, then the person making the sale will be
considered a fiduciary.
One way to avoid
being a fiduciary while selling something to a plan. Tell the person
(probably have the client sign) that you are selling something that may
be contrary to the best interest of the plan! Frankly this is a bad way
to approach product sales.
What's the Big
act in the best interest of the plan/participants. This is the same
standard that Registered Investment Advisors (RIAs) are held to under
with the Securities and Exchange Commission (SEC). Fees and commissions
must be structured in the best interest of the participants. If one
product pays more commissions, there has to be a good reason to
recommend it over a product with a lower commission.
It is expected
that this will be effective towards the end of 2011.
Pension Limits Unchanged for 2011
Just like Social
Security, there will not be any increase in the pension related limits
for 2011. So we will still have the same limits as 2009 and 2010:
Maximum Catch Up
(over age 50)
(before catch up)
Aspects of In-Plan Roth Rollovers
From an administrative
perspective, the notable aspects of in-plan Roth rollovers include the
as a Distribution. An in-plan Roth rollover is not
treated as a distribution for purposes of:
loans. Loans that are transferred in an in-plan Roth
rollover are not considered to be new loans if the
payment schedule remains the same. As a result, the
restrictions applicable to loan refinancing under Code �
72(p) do not apply.
Spousal consent. Married participants are not
required under Code � 411(a)(11) to obtain spousal
consent for an in-plan Roth rollover.
to defer. The amount rolled over continues to be
taken into account in determining whether a
participant's accrued benefit exceeds $5,000 under Code
� 411(a)(11), and notice of the right to defer
distribution is not required for the rollover.
Optional forms. Distribution rights (e.g., the right
to an immediate distribution of the amount rolled over)
cannot be eliminated by an in-plan Roth rollover.
the Rollover. Unlike rollovers to Roth IRAs,
participants who elect an in-plan Roth rollover cannot
later elect to unwind or recharacterize the rollover.
Treatment. In-plan Roth rollovers are not subject to the
20% mandatory withholding. The taxable amount of the
rollover is includible in the participant's income in the
taxable year in which the distribution occurs. However, an
exception applies for rollovers in 2010, by which half of
the taxable amount is included in income in 2011 and half in
2012 unless the participant elects to include it all in
income in 2010. That election applies to all in-plan Roth
rollovers made by the individual in 2010, and cannot be
changed after the due date (including extensions) for filing
the individual's tax return. (Notably, the election is
independent of the participant's election regarding
rollovers he or she made to a Roth IRA in 2010.) If a
participant does defer income inclusion to 2011 and 2012 and
takes distribution in 2010 or 2011 of an amount that would
otherwise not be included until a later year, income
acceleration will apply. Income acceleration would not apply
if the amount is rolled over to another designated Roth
account or to a Roth IRA, however. In-plan Roth rollovers
are separately accounted for within the plan's designated
Roth account. The basis recovery rules under Code � 72 and
Treasury Regulation � 1.402A-1, Q&A-9 apply in determining
how an amount distributed from the plan is allocated to the
taxable portion of an in-plan Roth rollover for purposes of
applying the income acceleration and 5-year recapture rules.
Recapture and 10% Penalty. Similar to the 5-year
recapture rule applicable to Roth IRAs, if an amount
allocable to the taxable portion of an in-plan Roth rollover
is distributed within five years following the rollover
(i.e., within the five-taxable year period beginning with
the first day of the participant's taxable year in which the
rollover is made), the distribution is includible in income.
In that case, the 10% early distribution penalty under Code
� 72(t) will also apply to the taxable portion unless an
exception under Code � 72(t)(2) pertains - such as where
distribution is made after the attainment of age 59�, or
after separation from service after the attainment of age
November 1, 2010