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

handle is hein.journals/newsqtrly2 and id is 1 raw text is: SECTION OF TAXATION r b ... ........... qv qB= 'now Vol.2No 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. Withholding 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. Reporting 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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