ML BeneBits

The Internal Revenue Service (IRS) is temporarily suspending the IRS Prototype Opinion Letter Program for individual retirement accounts and individual retirement annuities (IRAs) effective March 14, 2022. As noted in Announcement 2022-6, the IRS will not be accepting applications for opinion letters on prototype traditional, Roth, and SIMPLE IRAs or SEP (including SARSEP) and SIMPLE IRA plans until further notice.

Although variable annuity pension plan (VAPP) designs have been permissible for decades, they have not yet seen widespread adoption—particularly in the Taft-Hartley multiemployer plan space.

Recently, however, we have seen a trend of employers and unions (or existing multiemployer plan boards of trustees) agreeing to set up VAPPs as an alternative to the traditional multiemployer defined benefit plan design (hereafter, “Traditional DB Plan”).

While considering year-end tasks and planning for the upcoming year, qualified plan sponsors should think about whether they need to revise and/or reissue their summary plan descriptions (SPDs) in 2022.

New York Governor Kathy Hochul enacted an auto-IRA law, effective October 21, which requires certain New York employers to either offer their employees a qualified retirement plan or join the state-run IRA program. The new law amends the New York’s Secure Choice Savings Program, a voluntary IRA program that has been in place since 2018 and is run by the New York State Secure Choice Savings Program Board.

The IRS recently issued FAQs to address workforce issues and labor shortages resulting from the COVID-19 pandemic. The guidance seems to be in response to well-publicized labor shortages affecting schools and the education industry, although it is not limited to that industry. The FAQs reaffirm prior IRS guidance, but may give comfort to employers who are contemplating rehiring retirees as they try to manage workforce issues “related to” the pandemic.

President Joseph Biden signed the Infrastructure Investment and Jobs Act (IIJA) into law on November 15, 2021. The IIJA will provide funding to overhaul the country’s physical infrastructure and will serve to give the nation’s roads and bridges a much-needed facelift, but squirreled away in the legislation are tweaks that will give defined benefit plans a bit of a nip and tuck too. The new law also provides further relief for taxpayers facing filing deadlines after a disaster and updates the list of such disasters to include wildfires.

Before 2020, the IRS had long taken the position that an employee stock ownership plan (ESOP), and any other retirement plan for that matter, must be adopted no later than the end of the first tax year in which the employer wished to claim a deduction for a contribution to the plan. As a reminder, effective December 31, 2019, Section 201 of the SECURE Act extended that deadline from the end of the applicable tax year to the due date, including extensions, of the plan sponsor’s income tax return for the applicable tax year. Accordingly, under the SECURE Act, if a plan is adopted by the extended due date, it will be treated as having been adopted as of the last day of that year.