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The IRS has issued proposed regulations on the treatment of forfeitures under defined benefit and defined contribution plans.  The proposed guidance, which would amend Treasury Regulation 1.401-7, synthesizes (and updates the existing regulation to reflect) guidance previously found in Revenue Rulings, an IRS newsletter, and certain changes to the Internal Revenue Code (the “Code”), made during the last 35 years or so.  The proposed regulation would also generally clarify and extend what had been previously understood to be the deadline for “zeroing out” forfeiture accounts under defined contribution plans. …

Continue Reading IRS Issues Proposed Forfeiture Regulations

The Internal Revenue Service (IRS) has released its annual cost-of-living adjustments applicable to employee benefit plans for 2023. A year-to-year comparison of limitations can be found here: 2023 Annual Limitations Chart

These contribution limits are generally adjusted for inflation and, consistent with prior years, the IRS has increased the limits based on a cost-of-living index. For 2023, the adjustments to qualified retirement plan limitations include an increase in the contribution limit (section 415 limitation) for defined contribution plans from $61,000 to $66,000, and an increase to the annual compensation limit for purposes of Internal Revenue Code Section 401(a)(17) from $305,000 to $330,000 (from $450,000 to $490,000 for certain governmental plans).…

Continue Reading IRS Releases 2023 Cost of Living Adjustments for Benefit Plans

On May 18, 2021, the IRS furnished much-needed guidance to employers on how to implement the COBRA premium subsidy provisions under the American Rescue Plan Act (ARPA). Notice 2021-31 includes more than seven dozen Q&As, which cover topics including eligibility requirements, applicable coverage periods and limitations, and notice and election procedures.

As summarized in our prior post, ARPA includes a 100% COBRA premium subsidy for “assistance eligible individuals” who elect (or who previously elected) COBRA continuation coverage for the period from April 1, 2021 through September 30, 2021. “Assistance eligible individuals” are generally those whose terminations occur as a result of an involuntary termination of employment (other than due to gross misconduct, for which COBRA is not available) or due to a reduction of hours.

ARPA provides that, by May 31, 2021, employers are required to distribute a notice regarding the COBRA premium subsidies to “assistance eligible individuals.” Given the May 31 deadline, employers were anxiously awaiting guidance from the IRS on many of the aspects of the COBRA premium subsidies. Pending issuance of guidance by the IRS under ARPA, many looked to the guidance that was issued to implement the 2009 American Recovery and Reinvestment Act (ARRA) COBRA subsidy for some indication of how the IRS might interpret ARPA’s provisions. Fortunately, much of the ARPA guidance—particularly relating to what constitutes an involuntary termination of employment—is consistent with that prior ARRA guidance.…

Continue Reading IRS Issues Much Needed COBRA Guidance