IRS Seeks Recommendations for Priority Guidance

The Treasury Department and the IRS use the Priority Guidance Plan each year to identify and prioritize the tax issues that should be addressed through published administrative guidance.

The Department of Treasury and Internal Revenue Service (IRS) are inviting public comment for recommendations of items that should be included in the 2016-2017 Priority Guidance Plan.

In Notice 2016-26, the agencies note that the Treasury Department’s Office of Tax Policy and the IRS use the Priority Guidance Plan each year to identify and prioritize the tax issues that should be addressed through regulations, revenue rulings, revenue procedures, notices, and other published administrative guidance.  The 2016-2017 Priority Guidance Plan will identify guidance projects that the Treasury Department and the IRS intend to work on as priorities during the period from July 1, 2016, through June 30, 2017. 

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The Treasury Department and the IRS say they recognize the importance of public input in formulating a Priority Guidance Plan that focuses resources on guidance items that are most important to taxpayers and tax administration. Published guidance plays an important role in increasing voluntary compliance by helping to clarify ambiguous areas of the tax law. The published guidance process is most successful if the Treasury Department and the IRS have the benefit of the experience and knowledge of taxpayers and practitioners who must apply the rules implementing the internal revenue laws.  

What the agencies will consider and how to submit recommendations can be found in the Notice.

Famous Fifth Third Stock Drop Suit Reaches Settlement

A Supreme Court ruling in the case set new standards of pleading for lawsuits against retirement plans that hold on to company stock.

A federal district court has preliminarily approved a settlement in the case of Dudenhoeffer v. Fifth Third Bancorp

The settlement agreement calls for $6 million to be placed into an account to be distributed to all class members in the case, minus certain fees. 

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In addition, the agreement calls for Fifth Third to make design changes to its retirement plan, including freezing the Fifth Third Stock Fund, so that no new money will be put into the fund. However, plan participants are allowed to transfer out of the fund if they wish. The recordkeeper of the plan will send an annual notice to participants that have more than 20% of their account invested in Fifth Third Stock Fund and educate them about the benefits of asset allocation and diversification. 

According to the settlement agreement, Fifth Third currently funds plan contributions in the form of cash (not shares) and agrees not to change this for at least the next eight years. The Fifth Third Bancorp Pension, Profit Sharing, and Medical Plan Committee members will receive annual fiduciary training, and Fifth Third agrees to increase this training to be conducted at least twice annually. 

NEXT: Long case history, ultimately achieving fame

The case was filed in 2008 when John Dudenhoefer, a Fifth Third employee, charged that the bank hid its true financial picture leading to its stock price to be artificially inflated. Then the stock suffered a major plunge in its share price when the company's financial problems were revealed. The suit alleges the bank's action caused the plan to lose millions of dollars.

In 2010, a federal judge in Ohio turned aside arguments that Fifth Third Bancorp committed a fiduciary breach when it continued to include company stock in its profit-sharing plan. Senior U.S. District Judge Sandra S. Beckwith of the U.S. District Court for the Southern District of Ohio based her decision on the presumption of prudence established in a 1995 decision in Moench v. Robertson.

However, the 6th U.S. Circuit Court of Appeals reversed the decision, saying that the “legislative history combined with a natural and clear reading of Section 404 [of the Employee Retirement Income Security Act (ERISA)] [led] to the inexorable conclusion that ESOP fiduciaries are subject to the same fiduciary standards as any other fiduciary except to the extent that the standards require diversification of investments.” 

The U.S. Supreme Court agreed to rule on the presumption of prudence issue, and in June 2014, decided fiduciaries of employee stock ownership plans (ESOPs) are not entitled to any special presumption of prudence under ERISA. The high court’s decision also set new standards of pleading for lawsuits against retirement plans that hold on to company stock, that have been used in many such lawsuits since the decision.

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