Message from the Firm

By Nick White

Welcome to the summer edition of our ERISA Audit Report for 2009! It’s late August, which means our ERISA Department is about to enter a busy time of the year for helping plan sponsors and their advisors wrap up their employee benefit and welfare plan issues for 2009, and finalize their plans for 2010. It also means the 2010 Los Angeles Benefits Conference is fast approaching (January 20 - 22, 2010). This year’s conference has particular significance for me, as I am an ASPPA Co-Chair of the conference. I welcome this opportunity. In fact, I have looked forward to it since I first started working on the LABC’s Executive Committee back in 1997. Next year’s LABC will mark my 16th year of participation in the conference, dating back to 1994 when I had my first speaking opportunity, which was on behalf of the IRS as the Western Region Walk-in Closing Agreement Coordinator.

As always, our ERISA Department continues to assist plan sponsors and their advisors with IRS audits, Department of Labor (DOL) investigations and PBGC investigations, and the correction of compliance defects under these agency’s programs and procedures. We note that there has been a marked increase in our work in these areas over the last year, as it appears all of the government agencies have increased their enforcement activities and are taking somewhat of a harder line on correction methodologies and related costs, as well as the imposition of penalties.

In our first article, Marty Heming and I discuss a case involving multiple plans and multiple plan sponsors, all of which had come under audit by the same IRS revenue agent. Each of the plan sponsors believed it was operating an independent retirement program, so a fair amount of concern broke out when the IRS determined that the plan sponsors were all part of the same affiliated service group and, therefore, the retirement plans had to be tested for coverage, participation and benefits as if the companies were a single employer. This case highlights the flexibility that may be available under the Audit Closing Agreement Program and how it can be used to bring about a good result, provided you have the experience and creativity to take advantage of the opportunities presented.

In our second article, Bruce Ashton discusses a DOL investigation that highlights an interesting issue regarding the much-talked-about proposed regulations under ERISA §408(b)(2). That is, notwithstanding the fact that the DOL withdrew the proposed regulations, it is still using its enforcement authority to impose the requirements on service providers. You’ll be interested in reading Bruce’s article to see how this is being accomplished.

In our third article, Heather Abrigo addresses a real hot button right now in the retirement plan world—that is, what appears to us to be the often arbitrary and greatly disproportionate penalties being assessed under Internal Revenue Code §6707A, ostensibly to curb abusive tax avoidance schemes. As Heather explains, it appears Congress is becoming increasingly concerned about the application of these penalties, and some relief may be on its way.

In our final article, Marty discusses a case that highlights what a powerful tool the IRS’ Self-Correction Program (SCP) can be, particularly in the context of an IRS audit of the plan. That’s right, notwithstanding the fact that a plan is under audit, you may still be able to self correct an operational failure, provided certain conditions exist and you know how to use them. Marty’s case also highlights how SCP can be used as an effective alternative to the correction methodologies available under an IRS closing agreement.

As always, we welcome your comments and questions. Please let us know if we can be of assistance to you and/or your clients.

Learn more about Reish & Reicher's related practice areas:
Employee Benefits