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The IRS explains that Section
1.403(b)-6(d)(2) provides that a hardship
distribution of 403(b) elective deferrals
is subject to the rules and restrictions
set forth in Section 1.401(k)-1(d)(3); thus,
the proposed rules relating to withdrawals
against elective contributions to
a Section 401(k) plan generally apply to
Section 403(b) plans. Yet, IRC Section
403(b)(11) was not amended by Section
41114 of the Bipartisan Budget Act;
therefore, income attributable to 403(b)
elective deferrals remains ineligible for
hardship distributions.
Amounts attributable to QNECs and
QMACs may be distributed from a 403(b)
plan only to the extent that the hardship
is a permitted distributable event for such
nonelective savings. Thus, QNECs and
QMACs in a 403(b) plan that are not in a
custodial account may be distributed due
to hardship, but QNECs and QMACs in a
403(b) custodial account are ineligible.
The Treasury Department and the
IRS expect that, if these regulations are
finalized as proposed, plan sponsors will
need to amend their plans.
The process for ascertaining the
deadline to amend a disqualifying provision
is set forth in Revenue Procedure
2016-37. For example, for an individually
designed, nongovernment plan, the deadline
to amend the plan for a change in
qualification requirements is the end of
the second calendar year beginning after
the issue of the Required Amendments
List that includes the change.
The due date for comments on
the notice of proposed rulemaking is
January 14, 2019.
Separately in the notice, the IRS
extended the relief provided to victims of
Hurricane Maria and the 2017 California
wildfires, as specified in Announcement
2017-15, to similarly situated victims of
hurricanes Florence and Michael, with the
" incident dates " having been updated by
FEMA. Relief is provided through March
15, 2019. -Rebecca Moore
More From Washington
And the Courts
Changes to Financial
Audits Approved
The Auditing Standards Board (ASB) has
voted to adopt a new auditing standard:
" Statement on Auditing Standards (SAS),
Forming an Opinion and Reporting
on Financial Statements of Employee
Benefit Plans Subject to ERISA [Employee
Retirement Income Security Act]. "
Proposed in April 2017, the SAS addresses
auditors' responsibility to form an opinion
and report on the financial statements
of ERISA plans and specifies the form
and content of such reporting. Auditors
would evaluate plan provisions relating
to an ERISA plan's financial statements
and report when management limits the
audit's scope in accordance with ERISA
Section 103(a)(3)(C).
The ASB expects to consider amendments
addressing, for example: engagement
acceptance requirements ancillary
to AU-C Section 210; new performance
requirements that serve as a basis for
a new reporting requirement, " Report
on Specific Plan Provisions Relating to
the Financial Statements " ; new required
procedures when the ERISA-permitted
audit scope limitation is imposed; written
management representations ancillary to
AU-C Section 580; considerations relating
to filing Form 5500, which the auditor's
report accompanies; an expanded description
of management's responsibilities;
and expanded communications on ERISA
supplemental schedules.
Others amendments to be considered
deal with new form and content requirements
when the ERISA-permitted audit
scope limitation is imposed, including
broadened auditor responsibilities relating
to the certified information; and required
emphasis-of-matter paragraphs.
Although the ASB has voted to
issue this SAS as a final standard, it
expects to consider whether conforming
amendments to it will be necessary once
the " Proposed Statements on Auditing
Standards Auditor Reporting and Related
Amendments " is also approved. This is
expected to occur in the first half of 2019
and to become effective for financial statements
audits for periods ending on or
after December 15, 2020.
USC Asks SCOTUS to
Weigh In on Arbitration
The University of Southern California
(USC) has asked the U.S. Supreme Court
(SCOTUS) to determine whether participants
who filed a lawsuit challenging
the management of the university's two
Employee Retirement Income Security
Act (ERISA) retirement plans should
be compelled to arbitrate their claims
pursuant to an employment agreement
they were required to sign with the university.
The arbitration agreement stated that
the employees could only arbitrate claims
brought on their behalf.
Denying a motion to compel arbitration,
the 9th U.S. Circuit Court of Appeals
concluded that the dispute fell outside
the scope of the arbitration agreements
because the claims were brought on behalf
of the ERISA plans, not the individuals.
In a petition for a writ of certiorari,
USC says the question before the high
court is " whether an agreement to arbitrate
'all claims' that an ERISA plan participant
'may have' against a plan fiduciary encompasses
a breach-of-fiduciary-duty claim
under ERISA Section 502(a)(2). "
In its petition, USC says the Supreme
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