Blue Ridge ESOP Associates Industry News

December 2018 - IRS/DOL Corner

Posted by Dolores P. Lawrence, CPA, QKA

Dec 12, 2018 2:30:00 PM

IRS/DOL Corner

New Plan Limits for 2019

The IRS has announced cost of living adjustments affecting qualified retirement plans.

Selected Limits

 

2019

2018

401(k) Elective Deferrals

$19,000

$18,500

401(k) Catch Up Deferrals

$6,000

$6,000

 

 

 

Annual Defined Contribution Limit (Section 415)*

$56,000

$55,000

 

 

 

Annual Compensation Limit **

$280,000

$275,000

Highly Compensated Employees

(look-back year calculation)**

$125,000

$120,000

 

 

 

Key Employee – Officer Threshold*

$180,000

$175,000

Social Security Wage Base

$132,900

$128,400

 

 

 

ESOP Threshold Balance for lengthening the 5-year installment period

$1,130,000

$1,105,000

 

 

 

Amount for lengthening the 5-year ESOP installment period

$225,000

$220,000

 


*Effective for limitation years ending in calendar year

**Effective for plan years beginning in the calendar year

The AGI limit for the saver’s credit (also known as the retirement savings contribution credit) for low- and moderate-income workers is $64,000 for married couples filing jointly, up from $63,000 $48,000 for heads of household, up from $47,250; and $32,000 for married individuals filing separately and for singles, up from $31,500.

Update to the IRS Special Tax Notice

IRS has updated the model tax notice that is provided to participants as part of a distributions form packet.  The tax notice, sometimes referred to as a “402(f) notice” now reflects changes coming from recent legislation.  IRS Notice 2018-74 includes the updated model notices that are used for plans with and without Roth accounts.  Among other things, the new notices include:

  • Information on self-certification for participants who missed the 60- day deadline for rolling over distributions,
  • Notification that participants may have special rollover rights if affected by a federally declared disaster, and
  • Changes related to distributions and rollover rights when there is an outstanding participant loan balance.

VCP Filings

A new Revenue Procedure from the IRS will change how Voluntary Correction Program (VCP) filings are done.  Beginning January 1, 2019, VCP applications will be submitted through the www.pay.gov website and payment of user fees will also be submitted through that site.  VCP submissions can continue to be made in paper form during a transition period that ends April 1, 2019.

VCP is one of the IRS programs available to plan sponsors who wish to correct plan document or plan operational failures.

Representatives in Congress Raise Concerns about Unfair ESOP Enforcement

In October, 27 members of the House of Representatives sent a letter to President Trump, urging him to rein in unfair enforcement of ESOP regulations.  The letter addresses the department’s practice of “regulation through litigation” and inconsistency with the positions it has taken on legal issues.  The letter says that DOL should eliminate regulatory uncertainty by collaborating with the ESOP community to develop clear guidance on valuation and other important issues. 

Copies of the letter were sent to the Secretary of Labor, the Assistant Secretary of Labor in charge of EBSA and the Solicitor of Labor.  Copies are available on The ESOP Association website. 

Hurricane Relief

Hurricane Michael victims in parts of Florida and elsewhere have until February 28, 2019 to file certain tax returns, including Form 5500.  The relief is offered to any Major Disaster Declaration area designated by FEMA as qualifying for relief.  For more information, please refer to the IRS website.