Compliance August 10, 2005

Feds Unveil New Guidance Schedule

August 10, 2005 (PLANSPONSOR.com) - Federal officials have given a preview of the areas on which they will provide legal and regulatory guidance in the next year.
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Included in the 27-page Priority Guidance Plan are a variety of tax issues to be considered at the request of taxpayers, tax practitioners and industry groups, the officials said in a news release.

Among the issues to be considered in the coming year are 254 projects dealing with issues such as:

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  • guidance on the tax treatment of distributions from Roth retirement plans
  • guidance on the impact of providing a 2 ½ month grace period for flexible spending accounts on health savings accounts (HSAs)
  • regulations under section 529 regarding qualified tuition programs for higher education
  • final regulations on compliance with restrictions on in-service distributions from pension plans and related topics in connection with phased retirement arrangements. Proposed regulations were published on November 10, 2004.
  • final regulations on transmission of notices to participants through electronic means with respect to distributions from qualified retirement plans. Proposed regulations were published on July 14, 2005.
  • guidance on benefits not permitted in a defined benefit plan.
  • revenue procedure implementing the staggered remedial amendment procedures for determination letters.
  • comprehensive final regulations under section 403(b) regarding tax-favored annuities purchased by section 501(c)(3) organizations or public schools.
  • guidance on consistency between tax benefit to employer and allocations to participants in employee stock ownership plans (ESOPs).
  • guidance under section 411 regarding accrual and vesting of benefits provided pursuant to qualified retirement plans.
  • update of the regulations on the definition of “highly compensated employee” under section 414(q) to reflect statutory changes since the existing regulations were issued.
  • comprehensive final regulations regarding the limitations on benefits and contributions under section 415. Proposed regulations were published on May 31, 2005.

“Guidance provides a real service to taxpayers by clarifying how the IRS interprets the law,” said IRS Commissioner Mark Everson, in the news release. “The results of the new plan, published over the next 12 months, will help taxpayers comply with the law.”

The full plan is    here.

Administration August 9, 2005

Bay State's Galvin Fines Franklin $5M

September 20, 2004 (PLANSPONSOR.com) - A Massachusetts securities regulator announced Monday that he slapped two units of Franklin Templeton with a $5 million fine for permitting an investor to market time their mutual funds.
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William Galvin, the Bay State’s Secretary of the Commonwealth, said Franklin Advisers Inc. and Franklin Templeton Alternative Strategies Inc. agreed to the fine and admitted to allowing the improper trades, Reuters reported. The California-based mutual fund firm agreed last month to pay $50 million to settle market timing charges with the US Securities and Exchange Commission (SEC).

Galvin said Franklin allowed a “known market timer” to invest in mutual funds in exchange for an investment in a company hedge fund, in an arrangement also called “sticky assets.”

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“This case was a blatant example of one rule for the ordinary investor but a different practice for a high roller,” Galvin said in a statement. “The admission is a clear signal to investors and the industry that this double standard is illegal and will not be tolerated.”

State and federal regulators have been pursuing a wide-ranging investigation of the mutual fund industry focusing primarily on market timing, late trading, and certain sales practices.

More information about Galvin’s case against Franklin Templeton is at  http://www.sec.state.ma.us/sct/sctft/ftidx.htm .

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