Officials at the Internal Revenue Service have completed work on regulations that will affect the everyday nuts and bolts of retirement plan administration.
The IRS has released “Limitations on Benefits and Contributions Under Qualified Plans,” a document that combines final regulations with removal of temporary regulations.
The final rule makes many revisions to 1981 regulations implementing Section 415 of the Internal Revenue Code, which deals with limits on benefits under qualified defined benefit plans and on contributions to qualified defined contribution plans.
The new final rule, based on a proposed rule released in May 2005, incorporates years of IRS notices and revenue rulings as well as suggestions made in August 2005 at a public hearing.
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Topics addressed in the final rule include matters such as inclusion of private Social Security supplements in annual benefit totals, mortality adjustments used in computing the dollar limits on a participant’s annual benefit for distributions commencing before age 62, and how to compute the annual benefit for a retiree with multiple annuity benefit distribution starting dates.
IRS officials also have affected many different types of retirement plan computations by broadening the definition of “compensation” as the term is used in IRC Section 415(c)(3).
In the proposed regulations published in May 2005, IRS officials suggested creating specific guidelines for deciding when to include severance benefits from Section 415 compensation.