The Internal Revenue Service has identified an increasing number of small employers that maintain multiple tax-qualified retirement plans, an arrangement that is not a violation of tax code rules but that raises questions, an IRS official said May 13 during an agency-sponsored phone forum.
An estimated 79,000, about 20 percent, of the nearly 396,000 sponsors of Section 401(k) plans with fewer than 100 participants reported having such arrangements in their responses to an IRS 401(k) survey questionnaire, said Monika A. Templeman, director of employee plans examinations at IRS.
“In recent years, this type of arrangement has become more common in safe harbor 401(k) plans paired with cross-tested defined benefit or cash balance plans,” Templeman said. “More plans means more complexity and more need for internal controls, so we are a little bit concerned,” she said.
“Historically, small employers have used multiple plans in order to pay owners larger benefits, but promoters have also used these arrangements for tax avoidance schemes,” Templeman said.
The phone forum, What You Need to Know About the IRS Final 401(k) Questionnaire Report and Next Steps, focused on an IRS report released April 1.
The increasing number of small employers with multiple plans, a source of potential noncompliance with tax code Section 415 limits, is one of several concerns that came to light in analyzing results from the 2010 survey questionnaire and that will be the basis for several new compliance, education, and enforcement projects, Templeman said.
Click here for a special report on the 401(k) questionnaire.
Excerpted from a story that ran in Pension & Benefits Daily (5/14/2013).
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to firstname.lastname@example.org.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to email@example.com.
Put me on standing order
Notify me when new releases are available (no standing order will be created)