attorney irs tax

Document Sample
attorney irs tax Powered By Docstoc
					Tax Issues/Qualification Letter

        Barbara Phillips, PERAC General Counsel

   Judith Corrigan, PERAC Deputy General Counsel

Public Employee Retirement Administration Commission


              Public Pension Institute
                   August, 2008
IRS Determination Letter
Update


Barbara Phillips
General Counsel, PERAC
Jim Salvie
General Counsel, MTRS
Overview

„ What does qualification do for us?


„ New IRS process


„ What is a Determination Letter?


„ Advantages, costs and

  the latest word from IRS

„ Peer behavior

„ Next steps
                                        2
What does qualification
do for us?

„	 Tax code qualification confers
   certain benefits on members
   and plans:

   „ Deferred taxation of




                            

     accrued benefits


   „ Deferred taxation of employer




                                     

     and employee contributions


                                         3
What does qualification
do for us?
„ Benefits   (continued)

   „ Taxation on fund income deferred
   „ Rollovers
   „ Benefit enhancement can
     sometimes be done on tax deferred
     basis (e.g., MTRS’s RetirementPlus)
   „ In exchange, IRS requires
     compliance with its rules
                                        4
New process

„	 IRS has developed cyclical
   Determination Letter process
   „	 For public plans, requests should
      be filed between February 1, 2008
      and January 31, 2009

„	 Part of IRS’s effort to regulate
   its workload
   „ Problem they face: Too many plans




                                          

     requesting Letters too frequently!




                                      

                                          5
What is a
Determination Letter?
„	 Chapter 32 operates as a qualified plan




                                             

   „ May not comply with changes
     in federal law in some respects

„	 “Determination Letter”: A binding
   opinion from IRS that plan meets
   qualification requirements
   „ Last Determination Letter
     received in Massachusetts in 1973
     by State Board
                                         6
What is a
Determination Letter?

„ Determination Letter and
  Voluntary Compliance Plan (“VCP”)

   „ Description of our Plan

   „ Identifies problems

   „ Proposes solutions




                                      7
Advantages of
Determination Letter

„	 Binding opinion on status of the Plan


„	 Protects Plan through date of
   Letter in case of audit

„	 Best method of correcting existing
   problems; inexpensive, reliable,
   lower scrutiny
   „ Self-correction procedure

   „ Five-year remedial period

                                        8
Costs

„	 Filing fees depend on size of
   system’s membership



„	 PERAC and tax attorneys negotiating
   with IRS for discount for local systems




                                         9
Myth: They don’t know
we’re here.

„	 IRS is aware of governmental plans;
   not sure how many
„	 “Underserved”
„	 IRS Roundtable: Stepping up
   enforcement, will include public
   plans
„	 Efforts to identify us,
   offer “guidance”
                                      10
They know we’re here.

„ Questionnaire to up to 200
  public plans

   „ Targeted toward their
     compliance with federal rules

   „ Results not used against them

   „ Education



                                     11
“We don’t want to scare
 anybody.”

„ Questionnaire precedes




                            

  enforcement effort

   „	 “Compliance check”:




                            

      Less than a full audit

   „	 Corrections accompanied
      by fines
   „	 More expensive than
      Determination Letter/VCP
                                 12
Peer behavior

„	 Dozens of public plans have obtained
   Determination Letters recently

„	 Many of our peers file frequently

„	 Significant number of public plans
   will be filing during Cycle C,
   including those with no current
   Letters



                                       13
Next steps…

„	 IRS has approved “template”
   approach

„	 Each system decides whether to
   apply for its own Letter

„	 PERAC creating template Letter
   request form, with “check-offs”
   for plan variations


                                     14
Next steps…

„	 State Board and Teachers file
   their requests

„	 Local Boards review template

„	 Identifying problems we know
   exist, possible solutions; legislative
   and regulatory changes possible

„	 Drafting and filing application by
   January 2009
                                        15
IRS Determination Letter
Update



Q&A




                           16

				
DOCUMENT INFO
Shared By:
Categories:
Stats:
views:68
posted:12/21/2008
language:English
pages:17