2012 ASPPA Annual Conference Closes with IRS Q & A

| November 15, 2012 | 0 Comments


ASPPA News from the Field
2012 ASPPA Annual Conference

WASHINGTON (October 31, 2012)—The arrival of Hurricane Sandy and Halloween resulted in an eerie combination that closed a truly thrilling 2012 ASPPA Annual Conference. Benefits experts Donald J. Kieffer, Jr. and Ingrid M. Grinde from the IRS and William M. Evans from the Department of the Treasury delivered “tricks and treats” while responding to questions from Ilene H. Ferenczy, Robert M. Richter, and moderator Sal Tripodi during General Session 6. The answers from the panel were their personal opinions and not the official position of ASPPA or any governmental agency. The discussion was not as frightening as Tripodi’s costume (see above) and highlighted several issues that “scream” for additional IRS guidance.

One issue that stimulated debate involved the application of the Internal Revenue Code’s anti-cutback rules to plan amendments. Ferenczy offered a specific fact pattern involving a plan amendment that was intended to eliminate a plan provision that waived the normal allocation condition of last day employment for participants who retired during the year. Kieffer felt that a plan amendment such as this could not be applied to any participant who had attained the plan’s normal retirement age prior to the amendment’s effective date— even if the participant actually retires many years later. Tripodi disagreed and pointed out that this interpretation of the anti-cutback rules could result in application of the waiver provision for many years past the amendment date. “Agreeing to disagree,” Tripodi urged conference attendees to use caution in determining when a participant’s right to share in contributions has become a protected benefit.

Richter questioned Kieffer on the value of an IRS determination letter (DL). The fact pattern presented involved a plan that had a disqualifying provision but received a favorable DL. When asked if the plan could invoke protection under Internal Revenue Code section 7805(b), Kieffer indicated that, while a DL protects the plan from retroactive disqualification, it does not preclude the IRS from requiring that the offending provision be amended retroactively and any associated operational be corrected.

Next, Grinde addressed a relatively typical fact pattern in a stock purchase transaction: a seller terminates its 401(k) plan prior to closing and then adopts the buyer’s 401(k) plan. Recognizing that final 401(k) regulations merely reserved a section on mergers and acquisitions, Grinde agreed that distribution to the participants from the seller’s 401(k) plan would not be precluded, because the existence of a successor plan is determined at the time of the plan termination.


Evans discussed the conflict between a plan sponsor’s suspension of distributions and withdrawals pending receipt of a DL in a plan termination and Revenue Ruling 89-87, which advocates distribution of all plan assets within 12 months following plan termination. No resolution was offered, but he cautioned that once all assets leave a plan, the IRS has nothing further on which to rule.

Ferenczy then raised the question of what limitations apply to a plan sponsor’s ability to adopt specific mid-year amendments to a safe harbor 401(k) plan, particularly those that allow new groups of employees to participate. Evans indicated that this issue is on Treasury’s “radar screen” for possible additional guidance. The ASPPA panelists emphatically encouraged Treasury to publish practical assistance for plan sponsors.

While the answers are sometimes less than clear, the lively dialogue highlighted the value of IRS/Treasury Q&A sessions facilitated by ASPPA. The audience and the experts both become more aware of important actions and issues that can help protect retirement plans. The “ghosts” of open issues will likely be addressed at next year’s ASPPA Annual Conference. We are all encouraged to continue to submit questions through ASPPA’s website.

Denise Goergen
Attorney | Reinhart Boerner Van Deuren s.c.
ASPPA Member since 2009


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