Year-EndCompliance WorkshopFall 2007

Resource Information

Compliance Call Center» 1-877-872-3244, Option 3

Plan Technical Support» 1-877-872-3244, Option 1

Agenda

» Plan compliance services overview

» Plan compliance services timeline

» Team reporting structure and escalation procedures

» 2008 Focus and initiatives

» Plan Service Center (PSC) demo

» Legislative changes

Plan Year-End Non-Discrimination Testing:» On-line data collection tool» HCE/Key determination» Top heavy determination» Eligibility calculation» Coverage testing» Plan deferral limits (HCE and NHCE)» 402(g) monitoring» Age 50 catch-up» Annual additions» Employer/forfeiture allocations» ADP/ACP Non-discrimination testing» E-mail notification of testing results summary» On-line results delivery and storage

» Auditor support (i.e. coverage testing, etc.)

Plan Compliance Core Services

Plan Compliance Core ServicesSignature Ready IRS Form 5500 Preparation:» Reconcile conversion assets» IRS Form 5558 extension filing» IRS Form 5330 excise tax reporting for refunds made after deadline» E-mail notification of completed IRS Form 5500 packet» On-line delivery and storage» Respond to DOL inquiries» Auditor support

Other Compliance Services:» Mid-year ADP/ACP testing» Assist with self correction methods (SCP,VCP filings)» Assist with late IRS Form 5500 filings (DFVC filings)

» Multiple scenario allocations/illustrations

» Cash to accrual financial reporting

» Revised testing due to census revisions by client

» Benefits, Rights, and Features testing under IRC §401(a)(4)

Plan Compliance Non-Core Services

Census data request packet December 3, 2007

Confirmation e-mail December 14, 2007

Confirmation phone call December 21, 2007

First follow-up e-mail January 15, 2008

Census data deadline January, 31, 2008

Excess ADP/ACP refund deadline March 14, 2008

IRC §402(g) letter (failures only) March 24, 2008

Second follow-up e-mail April 15, 2008

IRS Form 5500 (if data rec’d by 5/1/08) July 1, 2008

IRS Form 5558 extension letter July 15, 2008

IRS Form 5500 partial - deadline letter July 15, 2008

IRS Form 5500 deadline July 31, 2008

IRS Form 5500 deadline w/extension October 15, 2008

Non-responsive client letter November 3, 2008

For plan years ending 12/31/07

Plan Compliance Services Timeline

Plan Compliance Team

» Tricia Day, APA» 11+ years Financial Industry experience» M.S. Management and Organizational Development, University of Colorado» B.A. Business Administration, California State University» Denver Location

» Brendon Walkenhorst» 9+ years Financial Industry experience» B.S. Finance, Fort Lewis College» Denver Location

» Krissy Ptacek» 1+ year Financial Industry experience» Denver Location

» Kris Conley» 6+ years Financial Industry experience » B.S. Finance, University of Colorado» Denver Location

Plan Compliance Team» Jeri Steen

» 18+ years Financial Industry experience» B.A. Business Administration, Colorado State University» M.B.A., University of Phoenix» Denver Location

» Michael Schleelein» M.B.A. Masters of Business Administration, National University» Denver Location

» Anthony Reed» 3+ years Financial Industry experience» Denver Location

» Ryan Strankowski» 3+ years Financial Industry experience» B.S. in Economics, University of Wisconsin» Milwaukee Location

Plan Compliance Team» Dawn Benavides

» 12+ years Financial Industry experience» University of Wisconsin and UWWC» Milwaukee Location

» Tim Zabinski» 10+ years Financial Industry experience» M.B.A. Masters of Business Administration, Marquette University» Milwaukee Location

» Shelley Stefaniak» 10+ years Financial Industry experience» B.A. in History, University of Milwaukee» Milwaukee Location

» Yana Parfenovich» B.S. Finance, University of Wisconsin» Milwaukee Location

» Kevin Pomazal» 2 years Financial Industry experience» Milwaukee Location

Plan Compliance Management Team» Colleen Wolfe, Assistant Manager

» 9+ years Financial Industry experience» B.S. University of Wisconsin» Milwaukee Location

» Kris Mullihan QPA, QKA, Associate Manager» 27+ years Financial Industry experience» B.A. Business Administration, University of Wisconsin» Milwaukee Location

» Kelli Hasken, Associate Manager» 16+ years Financial Industry experience (5+ years with GWRS)» B.A. Business Administration, University of Iowa » Held Series 6» Denver Location

» Tracy Nimmer APA, Associate Manager» 12+ years Financial Industry experience (10+ years with GWRS)» B.A. English/History, University of Missouri» Denver Location

» Frank Porter APA, QKA, QPA, AVP» 16+ years Financial Industry experience (13+ years with GWRS)» Member of the American Society of Pension Professionals and Actuaries

Government Affairs 401(k) Sub-committee» Author of various articles published by the Society and added to the compendium

of reading materials for the Certified Pension Consultant exams

Plan Compliance Escalation Procedures» FASCore compliance analyst will respond to/answer inquires as

follows:– Respond same day on calls received in the morning

(mountain time)– Respond in the morning the following day, if calls

received in the afternoon

» If the compliance analyst has not provided a resolution within three business days, please forward the request to Colleen Wolfe, Kelli Hasken, Tracy Nimmer or Kris Mullihan

» If you do not receive a resolution within one business day, the request should be forwarded to Frank Porter

Plan Compliance Services 2008 Focus» Compliance Call Center

» Year testing questions (including census upload)» 5500 related questions» Employer allocation liaison

» On-Demand Testing

On-Demand Testing

» Client will have the ability to create and test on any period within the plan year

» Link to video demonstration which highlights the process

» Fully automated process

» 5 day turnaround time

» Questionable data report

» Unlimited number of tests allowed

» Online results delivery and storage

» Contact compliance call center for support

2007/2008 Limits for Qualified Plans

2007 2008

» 402(g) Limit for 401(k) and 403(b) deferrals1: $15,500 $15,500

» Catch-up Contribution Limit1: $5,000 $5,000

» Limit on Annual Additions 415(c): $45,000 $46,000

» Compensation Limit 401(a)(17): $225,000 $230,000

» Highly Compensated Employee 414(q): $100,000 $105,000

» Officer compensation 416(i)(1)(A)(i): $145,000 $150,000

» Taxable Wage Base: $97,500 $102,000

• 1Combined limit for 401k and Roth 401k contributions

Step 8Participant notified of applicable

corrections

Step 2Recordkeeping system

stores data fromeach payroll file

Step 4 Client

reviews data via web site,

makes corrections,and submits

data for testing

Step 5Analyst

performs tests and submits

results to web site

Step 7 Client accesses results

and follows steps for any applicable corrections

Step 1During Implementation data is mapped from HR/Payroll data file

Step 6 Analyst e-mails

summary to client and directs client to

web site

Step 3Census packet mailed to client indicating data

ready for review/

submission

Recordkeeping system updates

Contribution/DistributionProcessing

Testing Process Milestones

Pension Protection Act and Regulatory Updates

Automatic Enrollment

» Eligible Automatic Contribution Arrangement “EACA”:» Annual notice requirement» ADP/ACP tests - 6 months to refund excess

contributions» Provides for default investment

» Qualified Automatic Contribution Arrangement “QACA” » Must meet EACA requirements» Automatic Increase» Safe Harbor contribution

» Match of 100% of the first 1%, plus 50% of the next 5% (3.5% total) OR

» Non-elective of 3%» No ADP/ACP testing» Not subject to Top Heavy if only safe harbor

contributions» 2-year cliff vesting allowed

» Effective for 2007 plan years

» Plans required to provide applicable distribution notices no less than 30 or more than 180 days before distribution commences

» Notice must include description of participant’s right to defer receipt of distribution and consequences of failure to defer

» Applicable distributions notices include:» Rollover notice - IRC 402(f)» General consent notice - IRC 411(a)(11)» Qualified joint and survivor annuity notice - IRC 417

» Notice 2007-7 answers questions regarding deadlines

» Can comply in “good faith” until IRS issues regulations

Notice and Consent Disclosure for Distributions

Rollovers by Non-Spouse Beneficiaries

» Non-spouse beneficiaries will now be able to roll distributions from a qualified plan, 403(b) annuity or governmental 457(b) into an IRA

» Notice 2007-7 allows plan to provide without amending plan. (Technical corrections will require all plans to provide provision)

» Required minimum distribution rules available to inherited IRA

» 5 year rule – must rollover within 5 years = must take distribution from IRA within 5 years

» Life expectancy rule - distributions to begin by December 31 of the year following the year of the participant’s death

Quarterly Participant Statements

» Effective for plan years after December 31, 2006, defined contribution plans must provide a benefit statement to participants with individually directed accounts every quarter and to all other participants and beneficiaries once per year

» The benefit statement must include:» a valuation of the participant’s account, » a statement regarding the need to diversify

investments, and » a description of any limitations or conditions on the

participant’s ability to control his or her investments.» Link to DOL website for more information

» DOL issued Field Assistance Bulletin 2006-3 to provide additional interim guidance

Field Assistance Bulletins

» FAB 2006-3» Allows for good-faith compliance until further guidance

is issued

» Clarifies dates for furnishing statements» Good-faith of 45 days following the end of quarter

» Allows information to be provided from multiple sources

» Contains sample diversification explanation

» Provides acceptable guidelines for the use of electronic statements

» FAB 2007-3» Provides profit sharing plans earlier of 5500 filing date

or due date of 5500 filing

Increased Bonding

» Effective for plan years beginning on or after January 1, 2008

» Maximum bond for plans with employer securities is the lesser of

» 10% of plan assets or» $1,000,000

EGTRRA Remedial Amendment Period Restatements

» EGTRRA remedial amendment period for individually designed plans – extended to the end of the applicable 5-year remedial amendment cycle (Rev. Proc. 2005-66)

» Rev. Proc. 2007-44 updates and supersedes Rev. Proc. 2005-66» “on-cycle” review status for certain “off-cycle” determination letter

filings» Clarifications on the 6-year cycle for pre-approved plans» Expanded guidance on the coordination between remedial

amendment periods» Special rules for tax-exempt organizations and governmental

entities

» Rev. Proc. 2007-49 provided clarification of Rev. Proc. 2007-44 and provided EPCRS updates for streamlined VCP filings

» Prototype document restatement scheduled for the 2nd quarter of 2008

Current Developments

» Beyond the number of PPA provisions, new notices, and IRS/DOL guidance, we also received the following:

» Final Code 415 regulations» Partial termination guidance» Final Roth 401(k) regulations» Final 403(b) regulations

Final 415 Regulations

» Final 415 regulations incorporates IRS guidance in effect since the mid-1980s

» Effective for Limitation Year beginning on or after 7/1/2007» Mainly effects DB plans» Treatment of post-severance compensation changes

» Severance pay is not included as 415 compensation» Plan may exclude post-severance compensation» Raises issues regarding ADP/ACP test

Final Roth Regulations

» Final Roth regulations very similar to the proposed regulations

» Effective for plan years beginning on or after 1/1/2007» Retains rules regarding “qualified”distributions

» Must satisfy “5-year rule” and must be a qualified event

» If not qualified distribution the employee is taxed on earnings (not deferral amount)

» Clarifies rollover rules from Roth 401(k) and Roth 401(b) plans

» Announcement 2007-59 allows a safe harbor 401(k) plan to add Roth provisions midyear

» No supplemental notice requirement» Must distribute new election forms» Must distribute new SMM

Final 403(b) Regulations

» Effective Dates» Taxable years beginning January 1, 2009» Prior to 2009, may comply with either current law or

the final regulations so long as they are applied on a consistent and reasonable basis

» Delayed effective dates apply to collectively bargained plans, as well as certain church and governmental plans

» Changes Effective September 25, 2007» Life Insurance – no new purchases allowed» 90-24 Transfers - new restrictions apply

(Additional IRS Guidance Expected Soon)

Final 403(b) Regulations, cont.

» Plan Requirements» All 403(b) plans must adopt a written plan no later than

January 1, 2009» Universal Availability – repeal of a number of

administrative exemptions under Notice 89-23» Discrimination Rules – repeal of good faith compliance

standard provided under Notice 89-23. Non-discrimination rules that currently apply to 401(k) plans now apply to ERISA-covered employers

» Field Assistance Bulletin 2007-2 confirms employers can comply with the final regulations and still remain within the DOL safe harbor ERISA exemption

Final 403(b) Regulations, cont.

» Contributions» Elective Deferral Ordering - use of special 403(b) catch

up and age 50 catch up» Contributions of Sick and Vacation Pay» Remitting Contributions to Contracts» Post Severance Contributions

» Separate Accounting Requirements» Vesting – use of a separate account to hold non-vested

accounts» 415 excess – use of a separate account to hold 415

excess

Final 403(b) Regulations, cont.

» Plan Termination» Plan termination is now allowed if all the

requirements of the final regulations are met and benefits distributed as soon as practicable

» Distributions do qualify for rollover» Plan may terminate prior to January 1, 2009 without

a written plan so long as all other regulation requirements are satisfied

» Employer may not establish another 403(b) plan for 12 months

Final 403(b) Regulations, cont.

» Failure to Satisfy 403(b)» Defects relating only to a participant’s contract

(i.e. violation of loan limits) will only disqualify that participant’s contract

» Failure to maintain a plan document, a nondiscrimination failure or an employer eligibility failure will affect all contracts under the plan

IRS Identifies Plan Potential Mistakes

http://www.irs.gov/pub/irs-tege/401k_mistakes.pdf

Plan Potential Mistakes, cont.

Plan Potential Mistakes, cont.

Plan Potential Mistakes, cont.

Plan Potential Mistakes, cont.

Summary

» Plan compliance services overview

» Plan compliance services timeline

» Team reporting structure and escalation procedures

» 2008 Focus and Initiatives

» Plan Service Center (PSC) Demo

» Legislative Changes

» Question and Answer

Thank You!