The ERISA Industry Committee is asking the Internal Revenue Service to consider expanding its voluntary compliance programs to allow employers to fix problems and continue running the pension plans, without facing stiff fines and the threat of losing their tax-favored status.
"In most cases, people are just trying to run a pension plan and the rules are so complicated, you trip up," said Janice Gregory, vice president.
Specifically, the Washington group representing large employers, is asking the IRS to redefine "significant" problems, so they are based on importance, rather than on the sheer numbers of people affected by the problem.
Thus, if an employer owes $1 to each of the 500 participants in a plan as a result of a problem, it might not be a "material" change the employer needs to worry about. If however, an employer owes $100 to each of the participants, the plan sponsor would need to fix the problem, Ms. Gregory said.
The trade group also is asking the IRS for permission to let employers amend their plans to fix problems. For example, if an employer lets workers take loans against their 401(k) account balances, but the plan does not allow such loans, the company would be allowed to simply change its plan documents rather than having to ask all of the workers to repay their loans. The group also is asking the IRS to let employers ignore trivial problems, so these are not taken into account in determining penalties.
Finally, the pension lobbying group is asking the IRS to replace the maximum payment amount, the starting point for negotiations with the IRS in an audit. Under current rules, employers may have to pay a penalty of up to 40% of the taxes they would owe if their pension plans were disqualified or be forced to give up their tax-favored status because of violations of law, Ms. Gregory said.
"It's so far out in the stratosphere it's insane," she said.