Regulatory and Legislative

Proposal to Encourage Profit Sharing Introduced in House

Congresswoman Bonnie Watson Coleman (D-NJ) has introduced H.R. 2628, the Employee Profit-Sharing Encouragement Act. According to a press release, the bill would incentivize large companies to implement an employee profit-sharing plan by requiring any company with more than $25 million in annual earnings to establish and fund an employee profit sharing distribution or lose the ability to deduct executive compensation expenses from their federal taxes. The press release indicates the employer would need to provide at least a 5 percent of companies’ annual net income as a cash benefit for all employees who have been with the company for one year or more.

While the bill text requires qualified profit-sharing distributions according to a written plan, it is unclear whether it is intended to be an arrangement under IRC 401(a). Additionally, a “specified employer” subject to the requirements of the bill is defined as any employer which meets the gross receipts test of IRC 448(c) — an employer that has annual gross receipts that do not exceed $25 million — as opposed to earnings greater than $25 million.

Regulatory and Legislative

IRS Provides 403(b) Amendment Cycle Updates

IRS Provides 403(b) Amendment Cycle Updates

The Internal Revenue Service has announced that it intends to begin issuing opinion letters regarding Cycle 2 pre-approved 403(b) plans, including the 2022 cumulative list of changes in those requirements.