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The Consolidated Appropriations Act of 2021 and Benefits Changes Employers Need to Focus on Right Now

Retirement Plans Additional Relief May Help Prevent Partial Plan Terminations The recently adopted Consolidated Appropriations Act of 2021 (the ?Ç£CAA?Ç¥) provides relief for qualified retirement plans of employers that had to reduce their workforce as a result of the pandemic (through furloughs, layoffs, or terminations) for plan years that include the period beginning on March 13, 2020 and ending on March 31, 2021. Specifically, these plans shall not be treated as incurring a partial plan termination if the number of active participants covered by the plan on March 31, 2021 is at least 80% of the number of active participants that were covered by the plan on March 13, 2020. A partial plan termination generally occurs when more than 20% of a plan?ÇÖs participants are terminated in a plan year. If a partial plan termination occurs, then the plan is required to 100% vest any ?Ç£affected employees?Ç¥. ?Ç£Affected employees?Ç¥ are… Continue Reading

The DOL Finalizes the Prohibited Transaction Exemption Covering Investment Advice Fiduciaries

The DOL recently finalized Prohibited Transaction Exemption 2020-02 ?Çô Improving Investment Advice for Workers & Retirees (?Ç£PTE 2020-02?Ç¥) for investment advice fiduciaries.?á PTE 2020-02 finalizes the proposed exemption which we previously reported on here.?á This guidance for investment advice fiduciaries completes the regulatory process that began in 2016 with the new fiduciary regulations and exemptions issued under the Obama administration, which were vacated in 2018, and the reinstatement of prior regulations and the issuance of new exemption guidance earlier this year.?á While PTE 2020-02 makes some changes to the proposed exemption, it largely retains the proposed exemption?ÇÖs protective framework, including the ?Ç£Impartial Conduct Standards?Ç¥ (under which investment advice fiduciaries must provide advice that is in the retirement investor?ÇÖs ?Ç£best interest?Ç¥), required disclosures, implementation of policies and procedures to comply with the standards and mitigate conflicts of interest, and retrospective compliance review.?á The final exemption also includes a self-correction mechanism for… Continue Reading

Last Day for Coronavirus-Related Distributions is December 30, 2020

As a reminder, the last day that coronavirus-related distributions may be made from an eligible retirement plan to a qualified individual is December 30, 2020, and not December 31, 2020.?á Distributions may be included in income ratably over the 2020, 2021, and 2022 tax years or, if the participant elects, may be included entirely in income in 2020.?á For more information on coronavirus-related distributions, please see the IRS FAQs here.

IRS Issues Final Regulations Regarding Timing of Qualified Plan Loan Offset Amount Rollovers

The IRS recently issued final regulations relating to amendments made to Code Section 402(c) by the Tax Cuts and Jobs Act of 2017 (the ?Ç£TCJA?Ç¥).?á The TCJA provides an extended rollover period for plan loan offset amounts that are treated as distributed from a qualified plan due to (i) termination of the plan or (ii) failure to repay the loan due to the participant?ÇÖs severance from employment, each a ?Ç£qualified plan loan offset?Ç¥ (?Ç£QPLO?Ç¥).?á Although most of the general rules relating to plan loan offsets apply to QPLO amounts, the permissible rollover period is extended.?á Generally, a participant has only 60 days to contribute the loan offset amount in a tax-free rollover to another qualified retirement plan.?á However, a participant may roll over QPLO amounts into another qualified retirement plan until the due date for his or her personal income tax return for the year in which the QPLO occurred.… Continue Reading

IRS Issues Safe Harbor Plan Guidance on Sections 102 and 103 of the SECURE Act

The IRS recently issued Notice 2020-86 (the ?Ç£Notice?Ç¥), which provides guidance through a series of questions and answers with respect to Sections 102 and 103 of the Setting Every Community Up for Retirement Enhancement Act of 2019 (the ?Ç£SECURE Act?Ç¥). Section 102 of the SECURE Act increases the maximum automatic elective deferral percentage for automatic enrollment safe harbor plans from 10% to 15% (provided, however, that the maximum automatic deferral rate remains 10% during the initial period of automatic elective contributions).  Notably, the Notice clarifies that a QACA safe harbor 401(k) plan is not required to increase the maximum percentage, so long as the percentage is (i) applied uniformly, (ii) does not exceed 15% (or 10% during the initial period of automatic elective contributions), and (iii) satisfies certain other minimum percentage requirements as described in Code Section 401(k)(13)(C)(iii).  The Notice also clarifies that, if a plan incorporates the maximum qualified… Continue Reading

Substantial Changes to Norwegian Defined Contribution Plans Effective January 1, 2021

As reported by the U.S. Social Security Administration (the ?Ç£SSA?Ç¥), Norway finalized certain legal and operational changes to employer defined contribution pension plans to be effective January 1, 2021, which include: (i) eliminating vesting periods for employer contributions; (ii) permitting employees to select pension providers other than the ones chosen by their employers for administration of the employee?ÇÖs defined contribution account balances; and (iii) unless an employee opts out, automatically transferring all of an employee’s account balances under his or her prior employer defined contribution plans into the employee’s account under his or her current employer?ÇÖs defined contribution plan. Information on these changes is available on the SSA’s website here.

Controlled Group Companies are Potentially Liable if a Dissolving Company Does Not Terminate its ERISA Plans and is Not Replaced by a New Plan Sponsor

In Pension Benefit Guaranty Corp. v. 50509 Marine LLC,?áthe U.S. Court of Appeals for the Eleventh Circuit held that ?Ç£where the sponsor of an ERISA plan dissolves under state law but continues to authorize payments to beneficiaries and is not supplanted as the plan?ÇÖs sponsor by another entity, it remains the constructive sponsor such that other members of its controlled group may be held liable for the plan?ÇÖs termination liabilities.?Ç¥?á In this case, Liberty Lightening Co. Inc. (?Ç£Liberty?Ç¥) sponsored and administered a pension plan under ERISA (the ?Ç£Pension Plan?Ç¥).?á When Liberty went bankrupt and was dissolved under state law in 1992, Liberty continued to be the de facto sponsor of the Pension Plan, and the Pension Plan continued to operate.?á In 2012, the Pension Plan was formally terminated and taken over by the Pension Benefit Guarantee Corporation (the ?Ç£PBGC?Ç¥) due to the Pension Plan?ÇÖs pending insolvency.?á Six years later, the… Continue Reading

Is it Time for an Investment Committee Tune-up?

Companies sponsoring a 401(k) plan to help their employees save for retirement often form an investment committee to help select plan investments without realizing the duties that the committee assumes.?á To help prevent investment committee members from unintentionally breaching their fiduciary duties, companies periodically review their investment committee compliance and should keep complete records of appointments, policies, and procedures.?á The following investment committee checklist can be a starting point for this review: Review the underlying plan document to determine who it lists as the ?Ç£named fiduciary?Ç¥.?á Most plan documents provided by third party administrators list the ?Ç£plan sponsor?Ç¥ as the named fiduciary, which means the board of directors is the governing body responsible for acting as a fiduciary, absent a delegation of such fiduciary responsibility by the board of directors to a committee.?á If your plan lists the ?Ç£plan sponsor?Ç¥ as the named fiduciary and you have a committee selecting… Continue Reading

IRS Issue Snapshot Highlights Plan Sponsor Responsibilities to Missing Participants and Beneficiaries

The IRS recently published an Issue Snapshot (the ?Ç£Snapshot?Ç¥) on IRS.gov that revisits the steps a plan sponsor must complete in order to locate missing plan participants and beneficiaries. While the Snapshot does not contain any new guidance, its publication is an indication that ensuring plan sponsors are undertaking appropriate steps to locate missing participants and beneficiaries remains an area of focus for the IRS, including when they are conducting plan audits. Under current IRS guidance, plan sponsors should complete the following steps to attempt to locate missing plan participants and beneficiaries: Search for alternate contact information (address, telephone number, email, etc.) held by the plan or any related plan, sponsor, or publicly-available records or directories. Use a commercial locator service, credit reporting agency, or proprietary Internet search tool for locating individuals. Mail a letter via certified mail to the last known mailing address and through any appropriate means for… Continue Reading

IRS Expands Reasons for Self-Certification of Eligibility for a Waiver of the 60-Day Rollover Requirements

The Internal Revenue Code provides that amounts distributed from a qualified plan or individual retirement arrangement (?Ç£IRA?Ç¥) will be excluded from income if they are transferred to an eligible retirement plan within 60 days following the day of receipt. The IRS previously announced in Rev. Proc. 2016-47 (the ?Ç£Prior Rev. Proc.?Ç¥) that individuals who fail to rollover retirement plan distributions into a new retirement plan or IRA within 60 days may self-certify to the new plan?ÇÖs administrator or the IRA?ÇÖs trustee that the individual qualifies for a waiver of the 60-day rollover requirement. The Prior Rev. Proc. listed 11 reasons that support waiving the 60-day rollover requirement, which include an error committed by a financial institution, a lost or uncashed distribution check, or the death or serious illness of a family member. In Rev. Proc. 2020-46, the IRS expanded this list to include instances in which the distribution was made… Continue Reading

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