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The ERISA Outline Book

Current Developments By Date

In this section we reference significant current developments, in the order of release date, that affect sections of the 2003 Edition of the ERISA Outline Book. In parentheses next to each item, we note the date we posted the item as well. Some of these items are discussed in the "What's New" page of this website. Also, subscribers to eRISA Update receive more detailed information about each of these current developments. We recommend subscribers to The ERISA Outline Book also subscribe to eRISA Update so they can stay current during the year, pending the release of the next year's update of The ERISA Outline Book.

Modifications to 2002 minimum distribution regulations (added January 12, 2003). As expected, and even noted on page 6.295, Notice 2003-2 postpones the mandatory effective date for the temporary and proposed regulations under §1.401(a)(9)-6T (relating to the annuity distribution method and minimum distribution requirements for defined benefit plan). Annuity distributions made under the 1987 or 2001 proposed regulations, at least through the end of the calendar year in which final regulations are issued, will be deemed to satisfy the 2002 temporary and proposed regulations. In addition, the account balance method may used by defined benefit plans at least until that postponed effective date. This primarily affects the information provided in Part E of Section VII of Chapter 6. As anticipated on page 6.355, the amendment deadline for the final 2002 regulations has been postponed, but only for defined benefit plans. See Rev. Proc. 2003-10. The new deadline for these plans is the end of the EGTRRA remedial amendment period (which will not end sooner than the last day of the 2005 plan year). Finally, see Notice 2003-3, for clarifications to the IRA reporting requirements in Notice 2002-27 (discussed on page 1.245 - Part H. of the IRA definition in Chapter 1).

Increase of compensation dollar limit to $200,000 to determine retiree benefits (added January 12, 2003). An amendment to a defined benefit plan to apply the $200,000 compensation limit to increase retiree benefits retained in a defined benefit plan is not discriminatory. See Rev. Rul. 2003-11. The application of the $200,000 limit to defined benefit plans is discussed in Section IV (Part A.2.) of Chapter 3.

Age discrimination rules (added January 12, 2003; amended April 8, 2003). Proposed regulations (Treas. Reg. §1.411(b)-2) would replace the age discrimination proposed regulations issued in April 1988, would clarify how the rules should be applied to cash balance plans (both start-up plans and cash balance conversions). The original release also included special nondiscrimination testing rules under IRC §401(a)(4) if a cash balance plan shows compliance with age discrimination rules on a contributions basis but then shows compliance with the nondiscrimination rules under §401(a)(4) on a benefits basis, but this portion of the regulations was withdrawn by Announcement 2003-22. These regulations are not applicable on an interim basis, nor may they be relied upon prior to their issuance in final form. Pending issuance of final regulations, employer must apply a good faith compliance standard to age discrimination testing, and reliance on the 1988 regulations continues to be good faith compliance. The 1988 regulations are discussed in Part B.5. and Part B.6. of Section III of Chapter 3.

Waiver of 60-day rollover period (added January 12, 2003). Rev. Proc. 2003-16 prescribes procedures for requesting of a waiver of the 60-day rollover period, and grants automatic relief under certain circumstances due to financial institution error. Relates to discussion in Section IV (Part C.3.d.2)) of Chapter 7.

S corporation ESOPs (added January 12, 2003; amended August 3, 2003). See Rev. Rul. 2003-6 for a discussion of how the pre-March 14, 2001, effective date will not apply in the case of certain abusive S corporation ESOP plan designs. Affects the discussion at paragraph 1.c.3) on page 3.59. See Treas. Reg. §1.409(p)-1T (July 21, 2003), regarding the definition of synthetic equity for determining who are disqualified person and whether a plan has a nonallocation year under IRC §409(p). Affects the discussion in Section II, Part E.1.c., of Chapter 3.

Further extension of nondiscrimination testing rules to certain governmental plans (added January 12, 2003). Notice 2003-6 further extends relief that was latest extended by Notice 2001-46 to the first plan year that begins after regulations are issued pertaining to the application of the nondiscrimination rules to these governmental plans. Affects the discussion in paragaraph 7. on page 8.131, paragraph 2. on page 9.2, paragraph 2. on page 9.160, paragraph 1.a. on page 11.285, paragraph 7.a. on page 11.302, and page 11.342. Note that the extension in Notice 2001-46 only applies to governmental plans that are subject to the nondiscrimination tests referenced in the text. Deadlines for nonelecting church plans, also addressed in Notice 2001-46, were not affected by Notice 2003-6.

Deemed IRAs in qualified plans (added January 12, 2003; amended May 29, 2003). See Rev. Proc. 2003-13 for plan document requirements (including a model amendment) for qualified plans that wish to accept deemed IRA contributions, pursuant to IRC §408(q), in any plan year beginning on or after January 1, 2003. Also see Prop. Treas. Reg. §1.408(q)-1, released on May 20, 2003, providing additional guidance on deemed IRAs. Affects the discussion in Part G of the IRA definition in Chapter 1.

Final regulations on blackout notices (added March 2, 2003). The DOL has issued final regulations on the blackout notice rules. Affects the discussion in Section IV, Part F.1., of Chapter 13, which incorporated the interim regulations.

Final regulations under IRC §4980F (added April 9, 2003). Final regulations have been issued under IRC §4980F, which imposes an excise tax on an employer's failure to provide advance notice of an amendment that significantly reduces the rate of future benefit accrual in a pension plan, or eliminates, ceases, or signficantly reduces an early retirement benefit or retirement-type subsidy under a pension plan. Affects the discussion in Section V, Part A.3., of Chapter 3, which incorporated the proposed regulations. The 45-day notice period discussed in the text was adopted by the final regulations as well, with retention of the 15-day notice period for small plans, multiemployer plans, and certain merger transactions.

DOL guidance on allocating expenses under DC plan (added June 2, 2003). Field Assistance Bulletin 2003-3 discusses permissible methods of allocating expenses within a defined contribution plan, including types of expenses that may be charged to individual participants without violating Title I of ERISA. Primarily affects the discussion of plan expenses in Section V, Part D.2., of Chapter 3. But also affects discussion in Section IV, Part D.2.a.3)d), regarding the charging of expenses to the accounts of terminated participants. Although DOL says this is okay under Title I of ERISA, the issue still remains where the IRS would treat it as a significant detriment with respect to the notice and consent requirements.

EPCRS procedure revised (added June 23, 2003). Rev. Proc. 2003-44 is the annual update on EPCRS. Among other things, the procedure formally adds SIMPLE plans, and adopts a uniform fee schedule for all VCP submissions. Affects discussion of EPCRS in Section VI of Chapter 15.

Surplus assets under terminated DB plan (added August 3, 2003). Rev. Rul. 2003-85 confirms that more than 25% of surplus may be transferred to a qualified replacement plan, as described in IRC §4980(d), and even the portion of the transferred amount that exceeds 25% is not subject to the reversion excise tax. Affects the discussion in Section XVIII, Part B.5.g., of Chapter 7.

Determination letter applications (added August 3, 2003). Notice 2003-49 clarifies when the EGTRRA remedial amendment period begins for purposes of the user fee waiver rules for small plans. Affects discussion in Section III, Part A.9., of Chapter 15.

Retroactive annuity starting dates (added August 3, 2003). Final regulations have been issued for retroactive annuity starting dates under defined benefit plans. See Treas. Reg. §1.417(e)-1(b)(3) (July 16, 2003). Affects the discussion in Section IV, Part D.2.e., of Chapter 6, which was based on the proposed regulations.

Section 457 plans (added August 3, 2003). Final regulations were released under IRC §457. See Treas. Reg. §§1.457-1 - 1.457-12, 68 F.R. 41230 (July 11, 2003). They are substantially similar to the proposed regulations, but make some important clarifications about participation in multiple plans, excess deferrals, plan-to-plan transfers, and IRC §83 (regarding option grants). Affects the section 457 plan definition in Chapter 1, which incorporated the proposed regulations.

Catch-up contributions (added August 3, 2003). The regulations on catch-up contributions under IRC section 414(v) were finalized on July 8, 2003. See Treas. Reg. §1.402(g)-2 and §1.414(v)-1, 68 F.R. 40510 (July 8, 2003). The regulations discuss employer-provided limits (and attempts to clarify the status of limits that are set administratively, but pursuant to the terms of the plan), clarifies the application of the catch-up limits to a noncalendar year plan, and exempts collectively-bargained plans from the universal availability requirement. Affects the discussion in Section XI, Part B, of Chapter 11.

Comprehensive proposed regulations under IRC §§401(k) and 401(m) (added August 3, 2003). On July 17, 2003, the Treasury issued Prop. Treas. Reg. §1.401(k)-1 through 1.401(k)-6 and §§1.401(m)-1 through 1.401(m)-5, 68 F.R. 42476. The regulations would be effective for plan years beginning at least 12 months after the publication of final regulations (e.g., if final regulations were published in 2004, calendar year plans would have to comply with regulations beginning in 2006). The regulations would consolidate guidance pertaining to amendments made by SBJPA, TRA '97 and EGTRRA, and in Notices 97-2, 98-1, 98-52, 2001-56, 2000-3, 2000-8, 2002-4. Among other things, the regulations would restrict the use of nonuniform QNEC allocations, especially "bottoms up" QNECs, preclude prefunding of elective deferrals, exclude from ADP and ACP testing any "disproportionate" matching contributions allocated to NHCs, clarify rules for aggregating contributions for HCEs who participate in multiple plans, and eliminate the ability impose allocation conditions on matching contributions that are intended to satisfy the ACP safe harbor. Would affect sections throughout Chapter 11 and the cash or deferred arrangement definition in Chapter 1. Given the prospective effective date of these regulations, however, the text is not affected with respect to current plan years.

GUST deadline relief for certain plans (added September 6, 2003). Rev. Proc. 2003-72 allows plans whose GUST amendment deadline is September 30, October 31, November 30, or December 31, 2003, to elect to postpone amendments beyond that date, so long as a determination letter application (and additional fee) is submitted by January 31, 2004, along with GUST amendments in adopted or proposed form. Alternatively, a plan with any of these GUST deadlines, may adopt the amendments on a timely basis, but file a determination letter application up to January 31, 2004, and have the application deemed to have been submitted by the end of the GUST amendment deadline. Affects the discussion in Part C of the remedial amendment period definition in Chapter 1, and cross-references throughout the book on the applicable GUST amendment deadline.

Amendment deadline for DC plans to adopt final IRC §401(a)(9) rules (added September 6, 2003). Pursuant to Rev. Proc. 2003-72, DC plans may adopt the model amendment for the 2002 final regulations under IRC §401(a)(9) by the later of: (1) the end of the 2003 plan year, or (2) the end of the GUST remedial amendment period (as extended, if applicable, by Rev. Proc. 2003-72). Affects the discussion in Seciton VII, Part Q.3., of Chapter 6.

2004 dollar limits announced (added November 13, 2003). Various dollar limits that are subject to cost-of-living adjustments have been announced by the IRS. Also, the PBGC has announced the guaranteed benefit amounts for 2004. See the current developments by chapter, and the updates for Chapter 15.

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