July 11, 2014
The Internal Revenue Service (IRS) provides a wealth of information on its website that can help trustees operate their qualified plans in accordance with the tax rules. Some of the most useful information is in lists of common plan qualification problems. These lists give trustees a roadmap to what the IRS is likely to look for if it reviews their plans.
This Compliance Alert highlights a number of these problems that are specific to multiemployer plans and suggests steps that trustees can take, if necessary, to help bring their plans into compliance.
The IRS is finding that the following are among the most commonly occurring problems in multiemployer plans:
Given the frequency with which the IRS sees the problems described above, trustees may want to consider reviewing the benefit payment determinations and calculation of adjustments in their plans (and related documents) to determine whether any of these problems exist. There are significant advantages to identifying these, or any other plan problems before the IRS identifies them, particularly in terms of preserving as much flexibility and control with respect to correction as possible and minimizing the associated costs. This might be an ideal time for such troubleshooting because restatements of multiemployer plan documents must be submitted as part of the second Cycle D filing.1
With regard to the particular problems identified above as they are currently reflected in the plan document and to determine the possible need for an amendment in the restatement, trustees might wish to review the following:
If a plan does have a problem in one of these areas either in the document or in operation, the trustees should discuss the issue with fund counsel to determine how best to make needed corrections and whether it is necessary to use any of the IRS correction programs.
Segal Consulting can be retained to work with trustees of multiemployer retirement plans and their fund counsel on the issues identified in this Compliance Alert. Segal consultants are available to help trustees and fund counsel identify problems, evaluate compliance, and determine appropriate corrections if needed. Segal consultants also can help to identify and develop policies and procedures to implement the necessary internal controls. In addition, Segal offers a more comprehensive review service known as a CrosscheckSM, which is described in the box below.
Crosscheck is review of benefit administration for qualified defined benefit and defined contribution multiemployer plans. This service can be limited to a particular area/issue or can provide a more comprehensive review to help trustees:
1 For more information on Cycle D, see Segal’s April 4, 2013 Compliance Alert, “IRS Cycle D Retirement Plan Filings: Gearing Up for Round Two.” (Return to the Compliance Alert.)
2 In addition, trustees of plans that are in the yellow or red zone should confirm that any changes implemented under a Funding Improvement or Rehabilitation Plan are appropriately reflected. (Return to the Compliance Alert.)
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