IRS and DOL Release Final Regulatory Review Plans to Help Distressed Sponsors and Retirement Plans
In January 2011, President Obama issued Executive Order 13563, Improving Regulation and Regulatory Review, requiring agencies to review current regulations and determine if they are necessary and effective. On August 22, 2011, the Internal Revenue Service (IRS) and the U.S. Department of Labor (DOL) released their final plans for regulatory review. The IRS and DOL final plans for regulatory review aim to assist distressed sponsors and help retirement plans.
According to a White House fact sheet, the IRS is in the process of reviewing regulations pertaining to retirement plans to determine whether “any modifications could better achieve the objective of promoting retirement security by facilitating the offering of benefit distribution options in the form of retirement income.” This initiative plans to reduce administrative burdens for retirement plan sponsors looking to expand employees retirement income options.
Additionally, the IRS is considering providing relief to employers facing financial difficulty from requirements under the existing regulations pertaining to safe harbor contributions to 401(k) plans. The IRS proposal would provide flexibility to plan sponsors by allowing them to suspend required contributions based on financial health. According to the White House, the proposed regulations are in response to concerns raised by employers experiencing economic hardship and incapable of meeting certain safe harbor contributions under their plans.
The DOL Employee Benefits Security Administration (EBSA) will propose revisions to 401(k) plans that have been abandoned by their sponsors to reflect changes in the U.S. Bankruptcy Code. The proposed regulation would provide a streamlined program to terminate plans, including those for businesses involved in bankruptcy liquidations, with little EBSA involvement. Expanding the program to cover plans in liquidation would allow bankruptcy trustees to use the streamlined termination process to better discharge its obligations. The proposal is expected to be published in December 2011.
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