Are you in business? Do you have employees? Then listen up: There are new regulations governing 401k and 403b retirement plans. The IRS has just added 400 more auditors and …
... the rules are gonna rule! In a nutshell, here’s what you need to know about the new 401k and 403b regulations: Do everything you can to be in compliance because the fines won’t be pretty.
Here’s something else you should know: the IRS wants to be helpful. Really.
Last week, the Westchester County Association organized a fascinating seminar, geared for businesses large and small: “When the Rules Rule: What You should Know About the New 401K and 403B Regulations.” About seventy people attended and enjoyed a continental breakfast (Thank you Morgan Stanley for hosting the event) and a program led by four experts to explain what’s ahead (Thank you Laura Gaynor, Diversified; Jeffrey D. Mamorsky, Greenberg Traurig, LLP; Charles T. Petrasanta, IRS; and Adam H. Reiss, Citrin Cooperman).
In his welcoming remarks, WCA Board member Tony Maddalena commented, “It looks like there’s over $2 billion in 401k assets in this room alone, and we’ve not scratched the surface of what’s in Westchester...The optimum word now is ‘action.’”
The ‘action’ he was referring to relates to setting up controls and procedures and following them when dealing with 401k and 403b plans. Senior auditor for the IRS Northeast Petrasanta noted: "Employers are responsible for protecting participants’ benefits, and the IRS will be checking to see if there’s a defect in your plans. It’s always better to fix the problem yourself.” He said that the emphasis is on compliance. “So, look at your plan document and try to find any defects. Lots of times there’s just sloppiness and no intention to harm anyone. Word to the wise: If you see a defect, report it as well as come up with a proposed solution. Let the IRS know about it so that the sanction will be small.”
And don’t try to avoid speaking to an IRS agent if he or she calls. As Petrasanta explained: “We want to help. But when there’s a situation like this.... ‘Hello, who’s calling? This is the IRS. Oh. Please hold.’ And we’re still holding twenty minutes later, we take that to mean you are inviting us to come and see you.”