Blue Ridge ESOP Associates Industry News

On November 2, 2023, the IRS announced cost of living adjustments affecting qualified retirement plans for 2024.

The Setting Every Community Up for Retirement Enhancement Act of 2019 (“SECURE Act”) contained provisions aimed at increasing access to tax-advantaged accounts and changes to required minimum distribution rules.   The budget bill signed by President Biden on December 23, 2022 included the SECURE 2.0 Act of 2022 (“SECURE 2.0”). SECURE 2.0 builds on the SECURE Act with changes aimed to strengthen the retirement system and financial preparedness upon retirement.

(Section415)*Prior to recent IRS announcements, Plan Sponsors were facing the task of amending their ESOP and 401(k) documents before the end of the 2022 plan year for certain mandatory changes and/or optional changes enacted as part of the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE) and the Coronavirus Aid Relief and Economic Security Act of 2020 (CARES) – together the “Acts”. IRS Notices 2022-33 and 2022-45 announced an extension to amend until December 31, 2025.

Final Hardship Regulations

Blue Ridge ESOP Associates was proud to be represented again at the Mid-Year Fellows Workshop in Honor of Louis O. Kelso in January. This workshop was organized by Institute for the Study of Employee Ownership and Profit Sharing of the Rutgers University School of Management and Labor Relations. The program is named after Louis Kelso who was a political economist, corporate and financial lawyer, author, and merchant banker. He is widely credited as the inventor and pioneer of the Employee Stock Ownership Plan (ESOP), enabling workers without savings to own stock in their employer company. The purpose of the annual workshop is to study broad-based forms of capital ownership and capital income such as employee stock ownership, equity compensation, profit sharing, gain sharing, and worker cooperatives in the corporation.  The workshop also explores approaches to broadened citizen capital ownership, “second income”, and dividend funds for citizens in the society in the United States.  The workshop provides an opportunity for scholars to present research in progress, receive mutual mentoring and feedback, work on joint research projects and publications, and meet foundation officials and publishers interested in this scholarship.  The workshop convenes members of the research Fellowship Program of the Institute for the Study of Employee Ownership and Profit Sharing from around the globe.

Form 5500 changes are coming. The IRS published the proposed Form 5500 for 2015, and new questions are embedded in the return:

• Trust information, including name of trust and its federal identification number, name of trustee and trustee phone number
• Plan document questions relating to whether the plan has been timely amended ,and a request for the date of the most recent determination letter (or opinion letter for plans using a volume submitter or prototype document)
• Question regarding any tax deductible dividends paid by a C corporation ESOP
• Question on whether the plan has incurred unrelated business taxable income
• 401(k) nondiscrimination testing questions
• Coverage testing questions

If you are wondering if your plan can be creative with compensation used to allocate employer contributions, then you need to be aware of the ramifications of such changes.

Read the first section of this article here regarding ESOP & 401(k) Coordination Tips Post-Disclosure.

After several postponements, 401(k) fee disclosure was mandated by the DOL (Department of Labor) before July 1st of 2012. So what kind of impact have we seen in the ESOP world? Has it been successful in helping plan sponsors and participants understand the costs of their 401(k) Plans?