Compliance April 11, 2008

IRS Continues Fleshing Out PPA DB Funding Mandates

April 11, 2008 (PLANSPONSOR.com) - As part of regulators' continuing efforts to flesh out the Pension Protection Act's (PPA) mandates, the Internal Revenue Service (IRS) on Friday issued proposed regulations on single-employer defined benefit plan funding requirements.
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A news release said REG 108508-08, tied to Section 430, along with three earlier sets of regulations should help plan sponsors figure out the PPA’s required DB plan contribution, including the application of the quarterly contribution requirements.   

According to the new document, under section 430(j)(3)(A), quarterly contributions must be made during a plan year if the plan had a funding shortfall for the preceding plan year. Each quarterly installment is 25% of the required annual payment while the required annual payment is equal to the lesser of 90% of the minimum required contribution under section 430 for the plan year or 100% of the minimum required contribution under section 430 (determined without regard to any waiver under section 412) for the preceding plan year.

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The determination of the amount of the minimum required contribution for a plan year depends on whether the value of plan assets, as reduced to reflect certain funding balances pursuant to section 430(f)(4)(B) (but not below zero), equals or exceeds the plan’s funding target for the plan year, the IRS said in the new guidance. If this value of plan assets is less than the funding target for the plan year, the minimum required contribution for that plan year is equal to the sum of the plan’s target normal cost for the plan year plus any applicable shortfall amortization installments and waiver amortization installments.

If this value of plan assets equals or exceeds the funding target for the plan year, the minimum required contribution for that plan year is equal to the target normal cost of the plan for the plan year reduced (but not below zero) by any such excess.

IRS officials said although the new funding rules are generally effective for plan years beginning on or after January 1, 2008, the regulations are proposed to be effective for plan years beginning on or after January 1, 2009. Plan sponsors can rely on the proposed regulations to satisfy the minimum funding requirements for plan years beginning in 2008.

The funding regulations will be amended to reflect any changes from the PPA technical corrections bill moving through Congress.

Public comments on the funding regulations should be sent to: CC:PA:LPD:PR (REG-108508-08), room 5203, Internal Revenue Service, PO Box 7604, Ben Franklin Station, Washington, DC 20044. Submissions may be hand-delivered Monday through Friday between the hours of 8 a.m. and 4 p.m. to CC:PA:LPD:PR (REG-108508-08), Courier’s Desk, Internal Revenue Service, 1111 Constitution Avenue NW., Washington, DC, or sent electronically via the Federal eRulemaking Portal at www.regulations.gov (IRS-REG- 108508-08).

The latest proposed funding regulations are available here .

Products April 10, 2008

RIA Firm Rolls Out Advice Service

April 10, 2008 (PLANSPONSOR.com) - A Newton, Massachusetts-based advisory firm has announced the launch of a personalized investment advisory service for lower- and middle-income Americans.
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According to a press release, I-Pension clients can receive money management services for as little as $.50 a day for 401(k) accounts.

“We’ve heard a lot about Universal Health care, both in the media and throughout the presidential elections; however, what about universal wealth care? Every American – including lower- and middle-class individuals – should have the right to financial security when they reach retirement age,” says Jane Mancini, CEO, I-Pension, a registered investment adviser.

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I-Pension has no minimum account size and charges a flat rate for 401(k), 403(b), and 457 accounts: $1.00 a day for accounts of $40,000 or more, and $.50 a day for accounts under $40,000. There are no other costs, according to the firm.

“The unique thing about our program from the employer’s perspective is that they don’t have to change anything about their existing 401(k) plan,” says Mancini. “The I-Pension approach works with any plan administrator and any investment options.”

Non-Employer Account Options

For non-employer sponsored accounts, I-Pension charges a 1.0% annual fee, and, using low-cost index funds and ETFs, I-Pension also can provide a diversified asset-allocation program and a dedicated investment adviser for an all-in cost of 1.2% to 1.5%.

I-Pension clients complete a three-page questionnaire and are matched with an investment model that reflects their investment temperament, time horizon, and outlook. Every client is provided a personalized Investment Policy Statement that describes how his or her account will be managed. Accounts are monitored daily and kept on track using a rules-based rebalancing system, according to the firm.

More information about the I-Pension program is available on www.I-Pension.com .

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