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U.S. Master Pension Guide, 2012 Edition
Part of CCH's Master Series of professional guidebooks. The book provides a comprehensive explanatory overview of qualified retirement plans and other retirement arrangements, reflecting up-to-date law changes and regulations. Benefit COLAs, calendars, and tables reflect the year 2012 figures.
The American Society of Pension Professionals and Actuaries (ASPPA) has requested that the IRS and Treasury Department grant relief for sponsors of safe harbor 401(k) plans who are unable to make required 3% nonelective safe harbor contributions for the entire year due to current economic conditions.
In a February 20, 2008 letter to Treasury Benefits Tax Counsel W. Thomas Reeder, IRS Employee Plans Director Michael Julianelle, and IRS Division Counsel/Associate Chief Counsel Nancy Marks, ASPPA urged the IRS to issue guidance that would modify existing regulations to permit an employer to suspend the contribution under Code Sec. 401(k)(12).
Brian Graff, ASPPA executive director and chief executive officer, said that with the economic downturn placing unprecedented financial pressures on employee benefit plan sponsors, the need is great for such a modification and the relief would provide an important alternative to plan termination. “It’s important in this economy that employers and employees are given the opportunity to continue 401(k) plans and save for retirement,” Graff said.
Under existing regulations, employers who cannot afford to continue the 3% nonelective safe harbor contributions to their 401(k) plans for the entire year have no other recourse than to terminate their plans. ASPPA suggested that certain notice requirements and other protections be included in this guidance, including notification about when such a suspension would occur, a timely amendment made to the plan, notification provided to affected employees, and a provision that the 3% nonelective contribution be made for compensation earned prior to the effective date of the suspension. ASPPA further recommended that the plan of an employer who suspends nonelective contributions during a plan year be required to satisfy the actual deferral percentage (ADP) test for the entire plan year. This would ensure that the suspension of nonelective contributions would not result in discriminatory deferrals for highly compensated employees. Such relief is no different from ceasing accruals in a money purchase pension plan during a plan year, ASPPA noted.
Terminating 401(k) plans would have destructive collateral implications, the ASPPA letter emphasized. Plan terminations result in unnecessary additional administrative costs and additional setup expenses if the employer later decides to re-start a 401(k) plan. In addition, ASPPA contended, many employers might never replace plans that were terminated due to financial distress.
SOURCE: ASPPA news release, February 20, 2009.
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