Compliance June 1, 2007

Mid-Year Amendments to 401(k) Safe Harbor Plans Allowed

The Internal Revenue Service has issued guidance sanctioning mid-year changes to 401(k) safe harbor plans regarding new rules for Roth deferrals and hardship withdrawals.
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In announcement 2007-59, the IRS said “a plan will not fail to satisfy the requirements to be a § 401(k) safe harbor plan merely because of mid-year changes to implement a qualified Roth contribution program (as defined in § 402A) or the hardship withdrawals described in part III of Notice 2007-7.”
The IRS said the announcement was issued to address employer concerns about adding provisions during a plan year to their § 401(k) safe harbor plans in order to take advantage of recently effective changes to these rules under the Pension Protection Act of 2006 (PPA) when the pre-year safe harbor notice required from sponsors does not include information about the added provisions.
The PPA made the ability to implement a qualified Roth 401(k) contribution permanent and expanded hardship rules to allow for the distributions to cover qualified expenses for a primary beneficiary of a participant’s account – which may not be a spouse or dependent.
In the announcement the IRS also requested comments regarding whether additional guidance is needed with respect to mid-year changes to a § 401(k) safe harbor plans for the Income Tax Regulations (relating to mid-year amendments to become a safe harbor plan using non-elective contributions) and § 1.401(k)-3(g) (relating to mid-year amendments to suspend or reduce safe harbor matching contributions).
Written comments should be submitted by September 17, 2007 to CC:PA:LPD:DRU (Announcement 2007-59), Room 5203, Internal Revenue Service, POB 7604 Ben Franklin Station, Washington, D.C. 20044.
Comments may also be submitted via the Internet at notice.comments@irscounsel.treas.gov with the subject line: Announcement 2007-59.
In Practice May 31, 2007

CFP Revamps Ethical Standards

The Board of Directors of Certified Financial Planner Board of Standards Inc. (CFP Board) has revised the ethical standards for CFP professionals, requiring them to 'at all times place the interest of the client ahead of his or her own.'
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The current Standards of Professional Conduct, which set forth the ethical standards for CFP professionals, state a lower standard of “reasonable and prudent professional judgment.”

 

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The revised standards also require that CFP professionals who provide financial planning services do so with the duty of care of a “fiduciary,” a term partly defined as acting “in the best interest of the client.”

 

 

The revised ethical standards, which become effective July 1, 2008, apply to the more than 54,500 financial planners in the U.S. who are authorized by CFP Board to use the CFP certification marks. CFP professionals found in violation of CFP Board’s ethical standards may be subject to public discipline, up to a permanent revocation of the right to use the CFP marks.

 

 

The CFP Board began reviewing the Standards of Professional Conduct in 2005 and, since then, released two drafts of proposed revisions for public comment. The Board of Directors also appointed an Ethics Task Force to review the comments received and make recommendations a course of action

 

 

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