2 Sec. Tax'n Newsl. 1 (1982-1983)

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lished by the Section of Taxation, American Bar/

TEFRA Heralds Pension, Compliance Changes

Tax-Qualified Retirement Plans
The Tax Equity and Fiscal Responsibility Act of
1982 (TEFRA) made major changes in the re-
quirements applicable to tax-qualified retirement
plans. Reduced benefit and contribution limitations
become effective in 1983 and will require immediate
attention. In 1984, distinctions between corporate
retirement plans and those benefiting self-employed
individuals will be eliminated, while new restrictions
will apply to top-heavy plans. These provisions will
require reexamination and amendment of virtually all
qualified plans and may encourage personal service
corporations formed to escape H.R. 10 plan limita-
tions to liquidate during 1983 and 1984.
Limits on Benefits and Contributions
Under prior law (section 415), the maximum annual
benefit payable under a defined benefit pension plan
was the lesser of 100% of compensation or $136,425,
beginning at age 55. The maximum annual addition
(including employer contributions, forfeitures and cer-
tain employee contributions) that could be allocated to
a participant's account under a defined contribution
plan was the lesser of 25%  of compensation or
$45,475. Both dollar limits were adjusted annually to
reflect cost-of-living increases. Moreover, if an
employee participated in both a defined benefit plan
and a defined contribution plan maintained by the
same employer, the sum of the ratio of the
participant's annual benefit to the maximum permit-
ted benefit and the ratio of his total annual additions
to the maximum annual additions permitted could not
exceed 140% of the limits applicable to the separate
plans for all years.
(See New Pension Rules continued on page 12)

Compliance Provisions of TEFRA
The Tax Equity and Fiscal Responsibility Act of
1982 (TEFRA) contains 64 provisions designed to
increase taxpayer compliance with the revenue laws.
Comprising a substantial part of the Act, they add 36
new sections to the Internal Revenue Code and
significantly amend many existing sections. The
following is a brief description of some of the
highlights of these provisions.
Under TEFRA, new withholding requirements are
imposed in two areas. First, the Act requires
withholding of 10% from payments of interest (in-
cluding original issue discount) and dividends (sections
3451-3456). There are a number of exemptions from
the withholding requirement, however, including ex-
emptions for payments to persons with minimal tax
liability, payments of minimal amounts of interest
($150 or less annually) and payments to corporations,
governments, securities dealers, money market funds,
exempt organizations and certain other recipients. Se-
cond, TEFRA requires withholding from the taxable
portion of distributions from pension, annuity and
other deferred compensation plans as well as commer-
cial annuity contracts and individual retirement ac-
counts (section 3405). Recipients of such distributions,
however, may elect not to have the withholding re-
quirements apply.
Expanded reporting requirements are imposed on
(1) large food and beverage establishments with
respect to tips (section 6053(c)), (2) payors of interest
(section 6049) and dividends (section 6042), (3) payors
(See TEFRA continued on page 10)

Important Announcements!
The 1983 Midyear Meeting Schedule, Ticket Forms, and Hotel Reservation Form are on pages
14-16. Deadline for Theatre Ticket Order is December 1, 1982. Hotel reservations must be made
by January 5, 1983.
For the first time, the Committee Preference Form will appear in the Winter issue of the
Newsletter. You will not receive a separate mailing. Look for the form on the last two pages of
the next issue. Complete the form and mail it promptly.

rA Ilk

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