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Newsletter
March
2005 Volume
22 - Number 1
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This
newsletter is addressed to our clients their attorneys, accountants and other
professional advisors. Citations may be included for those who want to refer
directly to the source material. IN THIS ISSUE:
THE FUTURE OF BENEFIT & CONTRIBUTION LIMITATIONS-will retirement plans be a target
again? A GUIDE TO PAYING PLAN RELATED EXPENSES - IRS & DOL have issued guidance. Attached is a reference table STAFF NEWS |
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THE FUTURE OF BENEFIT & CONTRIBUTION LIMITATIONS During the past three years, there have been significant changes in the rules and regulations governing benefit and contribution limitations for qualified plans. Through our newsletters and other communications, this office attempts to keep you up to date on what these changes mean to your existing plans. Contribution and benefit limitations have been increasing. Since the increased amounts are indexed, the current limitations are almost as high as they were in 1982 when Congress attempted to help balance the budget by severely reducing the limitations for all types of qualified plans. With the
current budget problems, the question arises as to whether the benefit
indexing will continue or whether the limitations will again be decreased.
When the decrease in limitations and the elimination of indexing occurred in
1982, it resulted in the termination of large numbers of plans. Perhaps
Congress will be more sensitive to this issue now. However, reductions in plan deductible limits are viewed by
many in Congress as a way to generate more tax income without increasing
income taxes. On the
other hand, with the genuine Social Security problems, it could be that
private plans will continue to be encouraged to enable employees to
supplement their Social Security benefits, whatever they may be and whenever
they become payable. This is
truly a time when our citizens should be able to look to Congress for a
bi-partisan effort to develop a coherent national policy for private plans,
and to deal with existing plans without the usual political rhetoric. In the
interim, it would probably be wise for plan sponsors and participants to take
advantage of the current favorable environment for funding plan contributions
and benefits. John F. Tapson, President,
Fellow of the American Society of Pension Professionals and Actuaries |
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A GUIDE TO PAYING PLAN RELATED EXPENSES(The
following is an excerpt from an article by William D. Whitman, JD, LLM of
Sungard Corbel, published in The ASPPA Journal, Sept.-Oct.2004. The American
Society of Pension Professionals & Actuaries is an organization of
actuaries, consultants, administrators and other benefits professionals. (For
more information see www.asppa.org.) Both the
DOL (Department of Labor) and IRS have issued guidance relating to the
payment of plan expenses from participant accounts (DOL Field Assistance
Bulleting 2003-3 and IRS Revenue Ruling 2004-10. The attached table
categorizes plan related expenses based on the type of expense and designates
who is a proper party to pay the expense. The table is for general reference
only. The context in which a particular fee or expense arises, such as plan
installation or plan termination may alter the result. All expenses that a
plan pays must be reasonable in amount and are subject to other limitations,
including the prohibited transaction rules |
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STAFF NEWS We are
delighted to announce that Michelle X. Zhang, CPC has rejoined PRP. Michelle began
her career in the pension industry in 1993 and joined PRP in 1996. She
received the American Society of Pension Professionals and Actuaries (ASPPA)
designation of Qualified Plan Administrator in 1998, and Certified Pension
Consultant designation in 1999. Following a brief period of employment with a
high tech firm and with Deloitte & Touche, she has returned to PRP as a
Senior Consultant. Michelle provides services to all types of plans with an
emphasis on 401(k) programs. Welcome back Michelle. Also,
we are proud to report that Barbara Spievack passed the ASPPA C-3 exam in
December 2004. This exam deals with the Financial and Fiduciary Aspects of
qualified plans. Congratulations Barbara! |
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Endnotes: ©
Copyright 2004 Sungard Corbel 1 A
Plan may charge reasonable (non-settlor) expenses to participants pro rata
relative to their account balances. A plan also may be able to charge such
expenses equally to participants (per capita) provided the charges are fixed
expenses not determined on the basis of participant account balances. A plan
may charge to a terminated participant’s account a pro rata share of
the plan’s reasonable administrative expenses, even if the employer pays
those expenses with respect to current employee participants. Rev. Rul.
2004-10; DOL FAB 2003-3 2 The
employer must pay “settlor expenses,” which include plan design expenses. 3 A
plan may pay expenses associated with the implementation of a settlor
decision 4 The DOL may
challenge a per capita allocation of fees determined on the basis of the
participant’s account balance as arbitrary. DOL FAB 2003-3 |
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