IRS rescinds field agent memorandum on definite predetermined allocation formula

Article Abstract:

The Acting Director of the IRS Employee Plans Division stated in July 1996 that field agents have been applying too broadly a 1994 memorandum calling for closer examination of the definite predetermined allocation formula requirement for profit sharing plans. The requirement under IRC section 401(a) states that the distribution formula should limit corporate discretion in the allocation of benefits. The 1996 memorandum identifies two instances when the allocation formula was questioned inappropriately.

Public Finance Activities, Finance, taxation, & monetary policy, Internal Revenue Service, Profit Sharing, Standards, Executive compensation, Tax auditing, Tax audits

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Allocable share of discretionary profit-sharing contribution is s. 411(d)(6) protected benefit

Article Abstract:

The IRS National Office stated in technical advise memorandum 9735001 that IRC section 411(d)(6) does not allow allocation amendments to discretionary profit-sharing plans once allocable share eligibility is determined. The memo's subject employer's plan allocated the contributions based upon employees' compensation as of the last day of the plan's calendar year, but changed the allocation before distribution in the subsequent year. The IRS cited regulations and federal cases for its conclusion.

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Simon introduces Pension Audit Improvement Act of 1995

Article Abstract:

The Pension Audit Improvement Act of 1995 has been introduced by Sen. Paul Simon to eliminate the limited-scope audit of qualified benefit plans and accelerate reporting of major violations of the Employee Retirement Income Security Act. The limited scope audit has restricted the ability of auditors to issue opinions on financial statements. The bill also establishes strengthened auditor qualifications and requires notice to the Dept of Labor when a plan changes accountants.

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