Products February 21, 2017

Groom Solution Makes Up for Loss of Determination Letter Program

Groom has developed its Document Compliance Service (DCS) for individually designed plans that have current IRS determination letters.
Reported by

Groom Law Group announced it will offer plan sponsors a practical solution for maintaining Internal Revenue Service (IRS)-compliant retirement plan documents now that the IRS is no longer issuing periodic determination letters.

The IRS ended its five-year determination letter cycle for individually designed plans. Groom says the abrupt pullback of this 60-year-old IRS program calls for a new approach for employers to maintain the tax-qualification of their plan documents. Such IRS qualification is essential to preserve fully tax-deductible employer contributions and pre-tax participant contributions; tax exemption for trust investment earnings; and tax deferral and rollovers for employees.

Never miss a story — sign up for PLANADVISER newsletters to keep up on the latest retirement plan adviser news.

Groom has developed its Document Compliance Service (DCS) for individually designed plans that have current IRS determination letters. The service builds on a plan’s last determination letter from the IRS, the IRS’ new “required amendment” lists and Groom’s extensive and continuous monitoring of legal developments as they arise. The end result of this effort will be an opinion intended to confirm continued satisfaction of the IRS document requirements applicable to an employer’s plan(s).

“We have designed this program recognizing that the IRS has emphasized the importance of an opinion of legal counsel for individually designed plans as we go forward,” David Levine, with Groom Law Group, Chartered, tells PLANADVISER.

DCS is available for tax-qualified plans of all types, including pension, cash balance, pension equity, profit sharing, 401(k), employee stock ownership plans (ESOPs) and money purchase pension plans. And all types of plan sponsors may take advantage of the service, including corporate, tax-exempt, governmental and other entities.

Without updated determination letters, plan sponsors and fiduciaries may still need documentation of IRS plan qualification to satisfy requests from plan auditors, compliance officers, investment managers and third-party administrators, among others.

Groom designed DCS to serve as a key internal control for an organization’s plans, and to help avoid costly IRS plan document corrections. DCS also is expected to be available to support merger and acquisition activities.

“We have designed this program to assist plan sponsors and their service providers with coming up with practical solutions that allow them to represent to investment managers and courts of law that their plans satisfy the IRS qualification requirements,” Levine adds.

Compliance February 17, 2017

Passage of Resolutions Creates Uncertainty for State-Run Plans

John Scott with Pew Charitable Trusts says there are some complicating factors that do not lend to a straightforward analysis of how this will affect those plans if the resolutions get signed into law.
Reported by

The U.S. House of Representatives has passed two resolutions introduced last week by lawmakers that would block regulations issued by the Department of Labor (DOL) regarding the set-up of state- and municipal-run retirement plans for private-sector employees.

John Scott, director of retirement savings at Pew Charitable Trusts, who is based in Washington, D.C., tells PLANSPONSOR the resolutions would still have to be passed by the U.S. Senate and signed by President Donald Trump in order for the DOL regulations to be halted. So, as of right now, it is not affecting states in the process of implementing laws or the program launched this year by the state of Washington.

Want the latest retirement plan adviser news and insights? Sign up for PLANADVISER newsletters.

Scott says there are some complicating factors that do not lend to a straightforward analysis of how this will affect those plans if the resolutions get signed into law. He notes that the basis for the DOL final rule dates back to regulations in the 1970s about payroll deductions for individual retirement accounts (IRAs). Back then, the DOL said if an employer sets up a payroll deduction for a contribution to an employee’s IRA, it is not considered an employer plan under the Employee Retirement Income Security Act (ERISA).

The new rule clarifies this specifically for those plans that would use automatic enrollment into the state- or municipal-run plan. “If they take away this newer guidance, it’s an open question whether these plans can go forward or not,” Scott says. “Some states have already passed laws and some have not. There is a lot of uncertainty now, so it’s unsure what they should do.”

According to Scott, when the DOL issued the rule, it said it was ultimately for the courts to decide. “A judge will have to rule on this at some point. That may be the ultimate answer,” he says.

But, there may be a lot of time before the resolutions go into effect, if they do at all. Scott says it depends on the Senate leadership and how fast they want to move it. He notes that the Senate is on recess next week, so it won’t get to the resolutions until the following week at the earliest; it could be somewhere between the end of February and the end of April. He also notes that the Senate has confirmation hearings to go through and it depends on what bills lawmakers think are important to tackle. “It’s anybody’s guess what the timing would be,” he concludes.

«