Compliance April 6, 2015

IRS Answers Questions About Reference Lists

The IRS encourages plan sponsors to include completed reference lists with determination letter applications.
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The Internal Revenue Service (IRS) has made available frequently asked questions (FAQs) about reference lists of changes in qualification requirements for retirement plans.

In February, the agency announced it offers fillable reference lists as tools to help plan sponsors ensure that their plan document incorporates all relevant mandatory and optional changes in plan qualification requirements. The FAQs answer questions about which reference lists to complete for different plan situations, and whether to submit reference lists or plans involved in a merger or spinoff or when filing a Form 5307 application for a pre-approved plan.

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Although not mandatory, the IRS encourages plan sponsors to include completed reference lists with determination letter applications. This will facilitate IRS review of the plan document.

The FAQs can be viewed here.

Compliance April 6, 2015

Reminder About Retirement Plan Distributions to Foreign Persons

If a U.S. retirement plan makes distributions to foreign persons, it must generally withhold 30% of the payment for federal income tax.
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Sponsors of U.S. retirement plans must generally withhold 30% from a plan distribution paid to a foreign payee unless the plan sponsor can reliably associate the payment with valid documentation that establishes the payee is a U.S. person or a foreign person entitled to a rate of withholding lower than 30%.

On an updated page on its website, the Internal Revenue Service (IRS) says documentation can include Form W-9, Form W-8BEN, or other appropriate sources. If a plan sponsor does not have documentation, it may be able to apply a lower withholding rate but only if it can verify that the recipient is a presumed U.S. person under the tax regulations.

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If a plan sponsors cannot reliably document the status of a retirement plan distribution recipient as a U.S. person or a foreign person entitled to lower withholding, the sponsor should apply the presumption rules in the tax regulations. A retirement plan distribution is presumed to be made to a U.S. person only if the withholding agent has a record of a Social Security number for the payee and relies on a payee mailing address that is in the United States or in a foreign country with which the United States has an income tax treaty in effect giving its residents exemption from U.S. tax on payments of this type.

A payment that does not meet these rules is presumed to be made to a foreign person.

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