The IRS issued a notice announcing relief for certain retirement plans that do not have a written plan in place by January 1, 2009. The new guidance is for retirement plans covering employees at public schools, colleges and universities, and other tax exempt organizations. These retirement plans are often referred to as 403(b) plans after the relevant section in the tax code.

The IRS is extending the deadline for plan sponsors to adopt new written plans or amend existing plans to satisfy the requirement of the final 403(b) regulations because of difficulties expressed by numerous plan administrators in meeting the current deadline of January 1, 2009. This extension will give plan sponsors additional time to put their plan documents in place.

The IRS will treat these plans as meeting the requirements of 403(b) and the regulations during the 2009 calendar year if:

• By December 31, 2009, the plan sponsor of the plan has adopted a written 403(b) plan that is intended to satisfy the requirements of 403(b) and the regulations.
• During 2009, the plan sponsor operates the plan in accordance with a reasonable interpretation of 403(b) and the related regulations.
• By the end of 2009, the plan sponsor makes its best effort to retroactively correct any operational failure during the 2009 calendar year to conform to the written plan.

The IRS plans to issue further guidance on 403(b) plans, including a revenue procedure establishing programs for 403(b) plans to obtain IRS approval of the plan document and allowing these plans to make remedial amendments to retroactively fix plan provisions under rules that are similar to those that apply for 401(a) qualified plans.

Notice 2009-3 is available on IRS.gov.

Cowden Advisers, Inc. is an investment advisory group that focuses exclusively on the needs of retirement plan sponsors and participants by providing fiduciary guidance and investment advice for qualified and non-qualified plans.

Please contact Jere Cowden or Elliot Dinkin at 412-394-9330 to discuss how Cowden Advisers, Inc. can provide fiduciary guidance to you and your plan.

As a plan sponsor, you are aware that Section 401(a)(9) of the Internal Revenue Code (IRC) requires retirees over age 70½ to take minimum required distributions (MRDs) from their defined contribution retirement plans. If the retiree fails to take a required MRD, there is an excise tax of 50% on the amount that should have been withdrawn. A retiree over age 70½ is required to take the MRD out of the plan by December 31.

The Internal Revenue Service has indicated they intend to issue relief within the next few weeks which would allow retirees to withdraw the calculated required percentage of their current balance versus their December 31, 2007 balance to satisfy Section 401(a)(9) of the IRC relative to MRDs.

Why This Will Help?

With the severe hit to current 401(k) plan balances, a retiree’s account balance most likely is much less today than it was on December 31, 2007. This relief will change the effective date used to calculate the MRDs affording the retiree to only withdraw the required percentage based on their current balance versus their December 31, 2007 balance.

What Should You Do?

Currently, we do not know what relief will be available for 2008, so we recommend you hold off on MRDs until the last possible minute, or until MRD relief is published. We will make every attempt to keep you informed of any events that unfold.

Please don’t hesitate to contact Jere Cowden or Elliot Dinkin at 412-394-9330 should you have any questions.

The Canadian Government has implemented an ambitious agenda to reduce taxes and to create a Canadian Tax Advantage. Cuts to corporate taxes, personal income taxes and the Goods and Services Tax (GST) have improved competitiveness and Canadians’ standard of living. As noted in Advantage Canada, reducing taxes on savings promotes investment, jobs and economic growth and is one of the key remaining areas for action.

How the Tax-Free Savings Account Will Work

• Starting in 2009, Canadian residents age 18 or older will be eligible to contribute up to $5,000 annually to a TFSA, with unused room being carried forward.
• Contributions will not be deductible.
• Capital gains and other investment income earned in a TFSA will not be taxed.
• Withdrawals will be tax-free.
• Neither income earned within a TFSA nor withdrawals from it will affect eligibility for federal income-tested benefits and credits.
• Withdrawals will create contribution room for future savings.
• Contributions to a spouse’s or common-law partner’s TFSA will be allowed, and TFSA assets will be transferable to the TFSA of a spouse or common-law partner upon death.
• Qualified investments include all arm’s-length Registered Retirement Savings Plan (RRSP) qualified investments.
• The $5,000 annual contribution limit will be indexed to inflation in $500 increments.

Click here to read the entire article.

Elliot Dinkin, Executive Vice President of Cowden Associates, Inc. discussed the current economic recession and how employers in Pittsburgh can take action now to remain strong and ready for when the economy rebounds.

Click above to view Elliot's discussion with Bill Flanagan on "Our Region's Business.
(Courtesy of the Allegheny Conference on Community Development and WPXI-TV. Originally Aired on December 7, 2008)