Blue Ridge ESOP Associates Industry News

The fair market value of employer stock is determined by an independent valuation firm; however, the fiduciary is ultimately responsible for making sure the stock has been properly valued. Over or under valued stock can lead to deduction issues, a prohibited transaction, or other violations. Fiduciaries must act prudently and in good faith with the fair market value calculated with adequate consideration to prevent such issues.

REMINDER - SECURE/CARES Act Amendments

New Plan Limits for 2020

Over the past three months there have been a number of updates provided to the retirement community by both the Department of Labor and the Internal Revenue Service.

New Plan Limits for 2020

Final Hardship Regulations

For ESOPs whose stock isn’t publicly traded, the timing rules for diversification have historically been difficult to meet.   The law says the plan has to issue notices to participants who are eligible for a diversification within 90 days after the close of the plan year.  For those electing a diversification, the plan has until 180 days from the close of the prior plan year to make the payment.  Many ESOPs are not able to get the stock appraisal and annual work done in the 90 or 180 days to comply with the law.  The industry best practice has always been to issue a preliminary notice within the 90 day window informing a diversification eligible participant of their right to diversify.  After the annual work was done, plans would then issue the actual diversification notice and make the payments as soon as feasible thereafter.

IRS Provides Help with Rollovers

If you receive a distribution check and fail to roll over the payment to an IRA or other plan within 60 days, you may be in luck.  The IRS has provided a self-certification procedure for those who inadvertently fail to complete a rollover within 60 days.  Revenue Procedure 2016-47 provides a sample self-certification letter that a taxpayer can use to notify an IRA or other institution that he qualifies for a waiver of the 60-day rollover requirement.  The waiver applies if one or more of 11 circumstances apply, including:

• Check was misplaced and not cashed
• Taxpayer’s home was severely damaged
• A family member died
• Taxpayer or family member was seriously ill
• Taxpayer was in jail
• Postal error

Form 5500

The IRS, Department of Labor (DOL) and Pension Benefit Guaranty Corporation (PBGC) have decided that Form 5500 requires a major update.   The proposed revisions will be published July 21, followed by a 75-day comment period.  The revised Form 5500 is targeted for rollout with the 2019 filing year.  According to a DOL press release, proposed revisions are intended to:

An unusual provision was slipped into the Surface Transportation and Veterans Health Care Choice Improvement Act of 2015. This legislation provided that the time for filing Form 5500 returns for 2016 and later could be extended an additional 3 ½ months instead of the current extension period of 2 ½ months.   That would have meant the possibility for extending the filing deadline for a calendar 2016 plan to November 15, 2017!   Complaints about the extension did NOT fall on deaf ears. Congress passed the Fixing America’s Surface Transportation Act of 2015, which REPEALS the new extended filing deadline.