It’s All About the Benjamins…2023 IRS Limits Announced

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by Lyn Domenick

The IRS has announced the 2023 cost of living adjustments to qualified plan limits. As expected, many of the limits increased substantially compared with prior years. Below are the highlights, and our full historical chart can be found here for easy reference.

2023 2022 2021
Annual Compensation 330,000 305,000 290,000
Elective Deferrals 22,500 20,500 19,500
Catch-up Contributions 7,500 6,500 6,500
Defined Contribution Limit 66,000 61,000 58,000
ESOP Distribution Limits 1,330,000
265,000		 1,230,000
245,000		 1,165,000
230,000
Defined Benefit Limit 265,000 245,000 230,000
HCE Threshold 150,000 135,000 130,000
Key Employee 215,000 200,000 185,000
457 Elective Deferrals 22,500 20,500 19,500
Taxable Wage Base 160,200 147,000 142,800

It May Not Be Urgent…But It’s Still an Emergency

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by Lyn Domenick

Although businesses, schools, and the general population seem to be moving COVID-19 to the background, it’s still very much on the forefront of employer health plan administration.

Health and Human Services (HHS) recently announced another 90-day extension of the Public Health Emergency (PHE), effective October 13, 2022, extending it through January 10, 2023. HHS has indicated that it will give 60 days advance notice of the end of this particular PHE period, which has been in effect since January 27, 2020. If this is to be the final 90-day period of the PHE, then HHS should announce its forthcoming end by November 12, 2022. What does this mean for employer health plans? For one thing, group health plans must continue to cover COVID-19 diagnostic testing and related services to participants without cost sharing. Nothing has changed for now. Read more

The Times They Are A-Changin’…IRS Provides Further Retirement Plan Amendment Deadline Relief

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by Benjamin Gibbons

The IRS has picked up where it left off last month with additional retirement plan amendment deadline extensions. As you may recall from our August 5, 2022 blog post, Time Is On My Side: Some Retirement Plan Amendment Deadlines Pushed Back, the IRS recently extended certain SECURE Act, Miner’s Act, and CARES Act amendment deadlines for retirement plans but notably did not extend the deadline for coronavirus-related distributions and loan plan loan relief under the CARES Act. While it is unclear whether those omissions were intentional or an oversight, the IRS has rendered that question moot in IRS Notice 2022-45. Read more

Time Is On My Side: Some Retirement Plan Amendment Deadlines Pushed Back

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by Brenda Berg

The IRS has given plan sponsors more time to adopt some – but apparently not all – retirement plan amendments reflecting law changes in the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), the Bipartisan Miners Act of 2019 (Miners Act), and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Notice 2022-23, issued August 3, 2022, generally provides that the deadline to adopt these amendments is extended to December 31, 2025. This is the deadline for qualified plans regardless of the plan year, and this deadline also applies to 403(b) plans and collectively bargained plans. Governmental plans generally have until 90 days after the third regular legislative session of the body with the authority to amend the plan that begins after December 31, 2023. Read more

Take A Chance On Me? Could We Finally See Legislation Expanding Section 1042 Deferral to S Corp ESOPS?

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by Elizabeth Nedrow

One of the most popular incentives for small business owners to establish an ESOP (employee stock ownership plan) is the ability to defer tax on the gain they will receive in the sale through the Section 1042 deferral. If certain requirements are met (most notably that the ESOP must end up owning at least 30% of the company), the selling shareholders can defer tax on their gain by investing the proceeds in certain types of “qualified replacement property.” Read more

Old MacDonald Had a Farm…EIN Confusion?

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by Becky Achten

The trusts maintained to hold assets of ERISA plans are separate tax entities from the employers sponsoring the plans. Therefore, each is required to have its own federal tax ID number. Knowing when and where to use whose EIN can be confusing. Here are a few tidbits of information on that topic. This information applies to single employer plans. Multi- and multiple-employer plans may have different rules. Read more

B-Side – Dual Status Issues with Partnership LTI

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By Kevin Selzer

Long term incentive plans offered by an entity that is taxed as a partnership present an additional problem compared to their corporate A-side counterparts.  If an employee is given an equity interest in the partnership, the individual will generally no longer be considered an employee for tax purposes.  Instead, that individual is considered a partner in a partnership, will receive a K-1 for future pay (rather than a W-2), must pay estimated taxes, becomes ineligible for certain benefits, etc.  This dual status issue is generally nonexistent within corporate entities – indeed, it is commonplace for employees to also be shareholders, perhaps as a result of a traditional restricted stock or option grant. Read more

We Just Need Your Compliance…IRS Announces Pilot Pre-Examination Program for Qualified Plans

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by Lyn Domenick

IRS Employee Plans has just announced a pilot program for pre-examination compliance checks of qualified retirement plans, beginning this month. If your plan is targeted, you will receive a letter from the IRS notifying you that your retirement plan has been selected for an upcoming IRS examination. What’s new under the pilot program is that the IRS will give you 90 days to perform your own self-compliance check and determine if the plan is in compliance with current IRS guidance, with the enticement that this self-review may avoid an IRS examination.

During the 90 days, you would complete a compliance review of your plan and, if you do not find any errors, you would assert to the IRS that the plan meets current tax law requirements. Or, if you discover some matters that need correction, you may correct mistakes using the self-correction principles or the voluntary compliance program (VCP) under the IRS correction program, EPCRS. If the errors are eligible for self-correction under EPCRS, it appears that no penalty will apply. If the errors are eligible for VCP but not self-correction, the IRS may issue a closing agreement and assess a fee based on the VCP fee that would otherwise have been charged if the plan had filed a VCP application under EPCRS before this process had begun. If the IRS disagrees with the correction–or if you fail to respond to the IRS within the 90-day period–the IRS will likely schedule a limited or full-scope examination. Read more

It’s So Easy To … Put Your Employees’ HSAs at Risk

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by Elizabeth Nedrow

Whether you’re a fan of the Buddy Holly version or Linda Ronstadt’s, you’ve got to admit “It’s so easy to fall in love” is a catchy tune. Just as it’s easy to get that song stuck in your head, it’s also easy to put your employee’s health savings accounts (HSAs) at risk!

HSAs are one of the many “consumer directed” programs that are touted as putting employee’s health care within their own control. The idea is that if consumers have an amount of money to spend on their own healthcare, they’ll be savvy about what services they seek and how much they spend on them, with the ultimate goal of making the healthcare marketplace more efficient. Congress gives tax advantages to accounts that qualify as HSAs in order to encourage employers to offer and employees to maintain them. Read more

Bye Bye Bye . . . Or Not. Rehiring Retirees in Pay Status

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by Leslie Thomson

If your qualified pension plan does not provide for in-service distributions and has commenced benefit distributions to a retiree who experienced a bona fide retirement, the IRS says your plan may be able to rehire that retiree and let him or her continue to receive benefit payments upon rehire. Read more