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News Items, by Subject

403(b) plans


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403(b) Retirement Plan Fee Litigation: An Update
"While each lawsuit makes claims based on the particular facts and circumstances of the plan in question, there are some common themes that have emerged ... [P]lan sponsors should understand the issues being raised and keep track of the litigation, in order to manage risk. [A chart provides] a status update on each of the 403(b) lawsuits." (Cammack Retirement Group)
Brown University Settles 403(b) Fiduciary Class Action Suit for $3.5 Million
"Brown University, Providence, R.I., settled a class-action lawsuit alleging the university's 403(b) plans' managers breached their fiduciary duties under ERISA by offering too many similar investment options and paying excessive fees for investments." (Pensions & Investments)
403(b) Plan Remedial Period Closing Less Than Year from Now
"While the March 31, 2020 deadline may seem far off, the correction process requires significant time. Since amendments to the plan document must be retroactive to January 1, 2010 (or the plan's effective date, if later), a review must be done to evaluate both [1] all amendments made to the plan since that date, and [2] whether the plan has in fact been administered consistently with the plan document since that date." (Sheppard Mullin)
Time to Review 403(b) Plans for Compliance with IRS Requirements
"The IRS has established a pre-approved plan program under which a plan sponsor has until March 31, 2020, to retroactively adopt a plan document which the IRS has already opined complies with the requirements of Internal Revenue Code section 403(b). A plan sponsor should analyze whether a pre-approved plan document works administratively and structurally with its objectives. The IRS has indicated that it does not intend to establish a determination letter program for individually designed section 403(b) plans." (Miller Canfield)
2019 Compliance Checklist for Non-ERISA Plans (PDF)
"The Compliance Checklist incorporates requirements for governmental and nonelecting church plans, non-ERISA 403(b) plans, 457 plans and nonqualified executive benefit plans, and provides information on the materials that you will need to file, filing due dates and agencies to which the filings should be made." (Prudential)
2019 Compliance Checklist for Plans Subject to ERISA (PDF)
44 pages. "The Compliance Checklist incorporates defined benefit (DB), defined contribution (DC) and ERISA 403(b) requirements and provides information on the materials that you will need to file, filing due dates and agencies to which the filings should be made." (Prudential)
Why Borrowing from a Retirement Plan to Pay Off Debt Is a Bad Idea
"Borrowing more doesn't address the issue of how the debt was acquired in the first place.... Some retirement plans require immediate repayment of loans if you change jobs, or else the entire loan is offset against your retirement plan account balance.... [B]orrowing from a retirement plan will ultimately reduce your income in retirement. The earlier in your working career you borrow, the greater the impact; due to the time-value of money." (Cammack Retirement Group)
The First Circuit's Putnam Decision: Where Does ERISA 401(k)/403(b) Litigation Go Now?
"The First Circuit's decision was ... well-reasoned and well-written. While the decision itself was important, perhaps the most memorable aspect of the decision was the First Circuit's admonition to 401(k) and, by implication, 403(b) ERISA plans and plan sponsors ... The First Circuit's statement raises a number of questions for ERISA 401(k)/403(b) excessive fees/breach of fiduciary duty litigation going forward." [Brotherston v. Putnam Investments, LLC, No. 17-1711 (1st Cir. Oct. 15, 2018)] (The Prudent Investment Fiduciary Rules)
Hardship Distributions and Recent IRS Changes
"Under the new rules, a plan sponsor can accept a written statement from the participant where they certify there is a financial need.... [Other changes include:] [1] No plan loan requirement -- although [this change] is not mandatory ... [2] Allow for further contributions ... This mandatory rule is effective January 1, 2020 but can be applied earlier. [3] Investment earnings distribution ... 403(b) plans still prohibit investment earnings to be counted for hardship withdrawals." (PlanPILOT)
403(b) Plan Participants Drop ERISA Lawsuit Against Long Island University
"Participants in a 403(b) plan run by Long Island University have dropped their ERISA lawsuit after having accused plan manager of having allowed excessive fees.... The record keeper, TIAA-CREF, was not named as a defendant." [Mulligan v. Long Island Univ., No. 18-2885 (E.D.N.Y. Feb. 8, 2019)] (Pensions & Investments)
Annual Plan Deadlines for the Plan Year Ending December 31, 2019 (PDF)
"[This] chart provides an explanation of key plan events and the deadline for each for Section 401(a) and 401(k) defined contribution plans with a plan year ending December 31, 2019. Off-calendar year plans should adjust the deadlines accordingly based on the time frames described in the chart." (VOYA Financial)
2019 Annual Plan Deadlines by Event (PDF)
10 pages. "[This] chart includes the key annual events which must occur within a specific deadline. The chart is intended to serve as a tool that can be used by employers to monitor compliance over the plan and calendar year." (VOYA Financial)
[Guidance Overview] IRS 401(k) Plan Fix-It Guide: Hardship Distributions Were Not Made Properly
Feb. 11, 2019. "How to avoid the mistake: [1] Review the plan document language ... [2] When you amend your plan document, make certain the language for hardship distributions is in the most recent document. [3] Establish hardship distribution procedures ... [4] Only allow hardship distributions that meet the plan document and IRC Section 401(k) requirements. [5] Look for signs that the hardship distribution program is being abused or badly managed." (Internal Revenue Service [IRS])
[Opinion] NTSA and the Swimming Pool Dilemma
"Recently, the National Tax-Deferred Savings Association [NTSA] released a report titled Improving Retirement Savings for America's Public Educators in which it aims to provide evidence that increasing or maintaining (many) choices for public educators increases participation.... The main conclusion was that 'The data shows a decrease in the participation rates for 403(b) plans when the number of choices are reduced.' If true, this report would be evidence that Nobel winning research on behavioral finance is wrong. However, it's not true. The data doesn't confirm the claims[.]" (The Teacher's Advocate)
Georgetown Win in 403(b) Investment Suit May Help Other Schools
"The court acknowledged that because the backgrounds and structures of 403(b) and 401(k) plans are different, the application of ERISA's fiduciary standards should also be different.... This was a departure from the view of other courts addressing the university lawsuits thus far, most of which have not delved deeply into differences between the two types of plans. As the cases move to the appellate courts, the universities may rely on this minority view to argue that the differences matter." (Groom Law Group, via Bloomberg BNA)
[Opinion] 403(b) Results Aren't Adding Up
"The secret sauce of a truly great 403(b) plan is a low fixed costs pricing structure which results in greater compounding of wealth than the products in many 403(b) plans that feature high asset-based costs. It's critical for school districts to understand how much high -- and ongoing -- asset-based costs can erode savings in a 403(b) plan over an educator's career." (W. Scott Simon, in Morningstar Advisor)
Assessing Likely Impacts of IRS Hardship Withdrawal Rule Changes
"New rules established by Congress and the IRS simplify the process for participants to request a hardship withdrawal of DC plan assets; some experts say this could increase 'leakage,' while others anticipate more positive effects, such as lower debt among cash-strapped participants." (planadviser)
Evaluating Judicial Dismissals of 401(k)/403(b) Fiduciary Breach Actions
"In one recent decision, the court dismissed an ERISA action based the disallowance of the plaintiff's use of Vanguard for benchmarking purposes.... A common rationale given by the courts for dismissing ERISA actions is the number of investment options offered by a plan.... Several courts have recently dismissed ERISA actions on the grounds that the expense ratios of the funds involved were appropriate as a matter of law." (The Prudent Investment Fiduciary Rules)
[Guidance Overview] The 403(b) Hardship Distribution That's Not a Hardship Distribution Under the Proposed Regs
"[A] 403(b) QNEC and QMAC distribution ... is made under Reg 1.403(b)-6(b), under which amounts NOT attributable to elective deferrals can be distributed.... This [has] at least four operational effects: [1] [T]hese amounts CAN be rolled over, unlike a 403(b)(11) distribution of elective deferrals ... [2] [T]he plan document language which will need to be amended is NOT the hardship section. Rather, it is the in-service withdrawal section of the plan document.... [3] [T]he 'financial need,' 'deemed hardship' and other rules required of hardship distributions by statute or regulation will not apply as a matter of law, but only as a matter of chosen plan operational rules ... [4] [T]he 402(f) notice needs to properly identify the tax attributes of this type of distribution, that is, that it can be rolled over." (Business of Benefits)
Relief for 403(b) Plans That Wrongly Excluded Part-Time Workers
"Employers that do not allow part-time employees to make elective deferrals to the 403(b) plan should carefully consider [IRS Notice 2018-95] and determine whether they need to change their administrative procedures or plan documents. Under the transition relief, 403(b) plans may need to operationalize this new guidance as early as January 1, 2019." (Willis Towers Watson)
#10YearChallenge for 403(b) Plans
"The restatement deadline is an opportunity to retroactively restate the plan document (generally, to January 1, 2010) to correct any defects in the terms of the plan documents, such as missed plan amendments. It is also the last chance for tax-exempt employers with individually designed plan documents to restate onto a pre-approved document, as the IRS does not now, and does not intend to, issue approval letters for individually designed 403(b) plans" (E is for ERISA)
The Georgetown University 403(b) Decision and the Future of 403(b) Fiduciary Litigation
"Based on the nature of the arguments within the Court's analysis of the Stock fund, the Court based its opinion purely on the fund's returns, both the fund's nominal, or stated, and risk-adjusted returns. For the courts to start basing decisions even in part on Morningstar' 'star' system is not a good sign." [Wilcox v. Georgetown Univ., No. 18-422 (D.D.C. Jan. 8, 2019)] (The Prudent Investment Fiduciary Rules)
[Guidance Overview] IRS Proposed Regs Relax Requirements for Hardship Distributions
"The proposed regulations generally clarify or supplement recent statutory changes, including those made by the Bipartisan Budget Act of 2018. Except where noted, the rules and changes summarized herein also apply to plans of tax-exempt organizations under Section 403(b).... Except for the required elimination of the six-month contribution suspension as of January 1, 2020, plan sponsors generally will have flexibility with implementing the above changes after the proposed regulations are finalized." (McCarter & English)
Another University Wins 403(b) Suit
"In the course of the 28-page ruling, [Judge Collyer] took the plaintiffs to task for: [1] not appreciating the difference in standing between defined benefit and defined contribution plans ... [2] applying 401(k) plan standards to 403(b) ... and [3] 20/20 hindsight in evaluating investment decisions[.]" [Wilcox v. Georgetown Univ., No. 18-422 (D.D.C. Jan. 8, 2019)] (National Association of Plan Advisors [NAPA])
Who's Got My Beneficiary Designation ... or Who Lost It?
"When plans and participants were younger, it is likely that no one paid these important forms much attention -- after all, no one was going to die, right?! But, with the workforce aging and plans maturing, it will be increasingly important that designations are retained somewhere so that the participant's named beneficiaries get what is coming to them.... Here are a few ideas for making sure you have proper beneficiary information when it is needed[.]" (Ferenczy Benefits Law Center)
[Guidance Overview] IRS Provides Relief for Improper Exclusion of Part-Time Employees from 403(b) Plan Participation
"According to [Notice 2018-95], a 403(b) plan with a provision to exclude employees working less than 20 hours per week will not be considered noncompliant if it did not consider such employees eligible to participate in the 403(b) plan on an ongoing basis once those employees first completed 1,000 hours of service. The Notice includes a 'Relief Period' and a 'Fresh Start.' " (Voya)
[Official Guidance] Text of 2018 IRS Publication 571: Tax-Sheltered Annuity Plans (403(b) Plans) for Employees of Public Schools and Certain Tax-Exempt Organizations (PDF)
22 pages; rev. Jan. 2019. "Beginning in 2018, as part of a provision contained in the Tax Cuts and Jobs Act of 2017, a retirement savings contribution credit may be claimed for the amount of contributions you make before January 1, 2026, to an ABLE account for which you are the designated beneficiary as defined by section 529A." (Internal Revenue Service [IRS])
Bill Would Allow Use of Retirement Plans to Provide Student Loan Repayment Benefits
"[Two U.S. senators] have introduced legislation that would allow 401(k), 403(b) and SIMPLE retirement plan sponsors to use their plans to provide student loan repayment benefits to employees. The Retirement Parity for Student Loans Act would permit these plan sponsors to make matching contributions to workers as if their student loan payments were salary reduction contributions.... The benefit cannot be provided to workers who are not eligible to participate in the retirement plan." (PLANSPONSOR)
[Guidance Overview] Relief for 403(b) Plans Regarding the Exclusion of Part-Time Employees
"During the Relief Period, a section 403(b) pre-approved plan will not be treated as failing to satisfy the conditions of the part-time exclusion or failing to follow plan terms in light of a failure to follow the OIAI exclusion condition, and is not required to be amended to reflect that the plan failed to apply the OIAI exclusion condition. For individually designed plans, an employer has until March 31, 2020, the end of the current remedial amendment period, to amend plan language to reflect the actual application of the OIAI exclusion condition." (Groom Law Group)
[Guidance Overview] Important Guidance and Relief for 403(b) Plan Sponsors Who Exclude Part-Time Employees
"[Notice 2018-95] contains many conditions to qualify for the relief. It also does not provide blanket relief covering all potential administrative issues involving the exclusion of part-time workers. So, just as important as the relief itself is what the relief does not cover, serving as an important reminder to plan sponsors about the circumstances in which part-time employees may be excluded from 403(b) plans." (Jackson Lewis P.C.)
[Guidance Overview] IRS Formalizes and Provides Relief for Section 403(b) 'Once-In-Always-In' Part-Time Rule -- Immediate Action Required
"This appears to be yet another instance where an unrelated retirement plan requirement -- in this case, under ERISA -- is imported through the section 403(b) tax regulations and generally extended to section 403(b) programs.... The plan document relief is highly pragmatic; pre-approved documents are widely in use for section 403(b) programs, and the need to adopt plan amendments is limited to the smaller population of individually designed plans ... The operational relief is less pragmatic, in that the Notice requires all section 403(b) programs potentially to be dealing with its implications in January 2019, less than a month after its release." (Eversheds Sutherland)
Litigation Lessons for 401(k) and 403(b) Fiduciaries: Apply These in 2019
"[1] Your process matters.... [2] Put it in writing.... [3] Know and review your options.... [4] Understand target date funds.... [5] Benchmark plan fees ... [6] Retain an expert to help you.... [7] Consult outside counsel when necessary.... [8] Hold regular committee meetings.... [9] Review your providers.... [10] Schedule regular RFPs." (Cohen & Buckmann, P.C.)
[Guidance Overview] IRS Provides 403(b) Plan Relief for Improper Exclusion of Part-Time Employees
"Employers must begin to operate the part-time employee exclusion under their 403(b) plans correctly for the plan year immediately following the transition relief period, which will mean as soon as January 1, 2019 for many 403(b) plan sponsors.... [M]any employers will need to amend their 403(b) plans to properly reflect the conditions that must be satisfied to exclude part-time employees from 403(b) plan participation." (McDermott Will & Emery)
A Solution to What Shouldn't Be a Problem? IRS Provides Some 403(b) Universal Availability Relief
"[Notice 2018-95] provides some temporary relief from this [Once-In-Always-In] requirement until 12/31/19 for most plans ... But once 2020 rolls around, we will be back to business as usual regarding the rules.... [H]ere are the cliff notes: the rules for excluding employees is a complicated three-part test that requires extensive counting of individual employee hours worked.... Sometimes plan sponsors just make it hard on themselves by electing to administer impossible retirement plan provisions that provide minimal cost savings. This is one of those provisions." (Cammack Retirement Group)
[Guidance Overview] IRS Announces Transition Relief for Excluding Part-Time Employees Under 403(b) Plans
"If a 403(b) plan provides that the preceding-year exclusion is determined on a plan year basis, the Relief Period ends on the last day of the last plan year that ends before December 31, 2019. If a 403(b) plan provides that the preceding-year exclusion is determined based upon an employee's anniversary year, the Relief Period will end on different dates for different employees based upon the date of each employee's anniversary of employment, but no later than December 31, 2019." (Proskauer Rose LLP)
[Guidance Overview] IRS Announces Transition Relief from the Once-In-Always-In Requirement for Excluding Part-Time Employees Under 403(b) Plans
"[F]or purposes of excluding part-time employees, the Final Regulations impose three distinct conditions that employers must satisfy for an employee to be excluded.... Many employers applied the first-year exclusion condition for an employee's first year and applied the preceding-year exclusion condition separately for each succeeding Exclusion Year, but did not apply the OIAI requirement to prevent an employee who failed to meet either the first-year exclusion condition or the preceding-year exclusion condition from being excluded in all subsequent Exclusion Years." (Proskauer's ERISA Practice Center)
[Guidance Overview] The Ins and Outs of 403(b) Deferrals -- IRS Solves the Problem
"[T]here are many 403(b) plans ... that have operated for years in good faith under the in-and-out rule. Most 403(b) plans are now being restated onto preapproved documents, with a retroactive effective date of 2010. The plan language contradicts the plans' operations for nearly a decade, thereby running the risk that the IRS would consider those operations as failures to comply with Section 403(b) -- a potentially very costly result.... Notice 2018‑95 addresses this issue in several ways." (Ferenczy Benefits Law Center)
[Guidance Overview] IRS Provides Relief for 403(b) Plans Regarding Part-Time Employee Exception to Universal Availability Requirement
"Notice 2018‑95 provides transition relief ... in response to comments indicating that many employers did not apply the ['once-in-always-in'] exclusion condition when an employee failed to meet the first-year or preceding-year exclusion condition.... The Notice provides for a 'fresh start opportunity' for plans after the relief period ends for exclusion periods beginning on or after January 1, 2019." (Thomson Reuters Practical Law)
[Guidance Overview] Tax-Exempt Employers: IRS Issues Relief from Confusing 403(b) Eligibility Requirement Applicable to Part-Time Employees
"403(b) plans that had improperly excluded part-time employees ... will not be considered as having failed to satisfy the universal availability requirement, provided that such plans were consistently administered under the first year and preceding year exclusion conditions.... This relief is extended [by Notice 2018‑95] for the period starting with the first tax year beginning after December 31, 2008, ... and through the last exclusion year that ends before December 31, 2019." (Seyfarth Shaw LLP)
A Close Look at ERISA 403(b) Plans, 2015 (PDF)
68 pages. "In 2015, four-fifths of large ERISA 403(b) plans covering nearly three-quarters of large ERISA 403(b) plan participants had employer contributions.... 37 percent [of these plans] had automatic employer contributions, 60 percent had simple matches, and 16 percent had both of these features ... 55 percent of large ERISA 403(b) plans had participant loans outstanding ... The average large ERISA 403(b) plan offered 27 core investment options in 2015[.]" (BrightScope and Investment Company Institute [ICI])
The Proposed Hardship Distribution Regs: Some Misconceptions
"Plan sponsors are NOT required to eliminate the provision that borrowing be exhausted in order to take a hardship distribution ... Plan sponsors MUST eliminate the requirement to suspend elective deferrals for six months following a hardship distribution ... These regulations have no effect on 457(b) plans." (Cammack Retirement Group)
[Official Guidance] Text of IRS Notice 2018-95: Relief from the Once-In-Always-In Condition for Excluding Part-Time Employees from Making Elective Deferrals Under a Section 403(b) Plan (PDF)
15 pages. "This notice provides transition relief from the 'once-in-always-in' (OIAI) condition for excluding part-time employees under Section 1.403(b)-5(b)(4)(iii)(B) of the Treasury Regulations. Under the OIAI exclusion condition, for a Section 403(b) plan that excludes part-time employees from making elective deferrals, once an employee is eligible to make elective deferrals, the employee may not be excluded from making elective deferrals in any later exclusion year ... on the basis that the employee is a part-time employee. In addition, in applying the OIAI exclusion condition for exclusion years after the transition relief ends, this notice provides a fresh-start opportunity for plans." (Internal Revenue Service [IRS])
[Guidance Overview] Proposed IRS Regulations for Hardship Distributions Offer Welcome Guidance
"While the expansion of available sources for hardship distributions and the elimination of the requirement that a participant first take a plan loan are voluntary changes, the proposed regulations require that, for any hardship distribution made on or after January 1, 2020, a plan may not impose the six-month suspension of employee contributions as a condition of obtaining the distribution." (Pepper Hamilton LLP)
2018 End of Year Plan Sponsor 'To Do' List: Qualified Retirement Plans
Action Items for: [1] All qualified plans; [2] Section 401(k) plans; [3] Defined contribution plans (other than Section 401(k) plans); [4] Defined benefit plans; and [5] Section 403(b) plans. (Snell & Wilmer)
Court Dismisses Fiduciary Breach Lawsuit Against Washington University 403(b) Retirement Plans
"Plaintiffs alleged that [fiduciaries]: ... [1] paid too much for recordkeeping and administrative services; [2] caused losses to plan participants by offering only retail class funds, when lower-cost institutional fund options were available; and [3] failed to remove poorly performing funds.... The judge ... [found] that the university satisfied its duty to offer an acceptable array of investment funds with reasonable fees, and that no facts indicated that the fiduciaries failed to use a prudent process in selecting plan investment options." [Davis v. Washington Univ. in St. Louis, No. 17-1641 (E.D. Mo. Sept. 28, 2018)] (Hodgson Russ LLP)
[Official Guidance] Text of IRS FAQs on 403(b) Pre-Approved Plan Program: Eligible Adopting Employers and Reliance on Letters
"Who can adopt a 403(b) prototype or volume submitter specimen plan? ... What is an IRS opinion or advisory letter for a 403(b) pre-approved plan? ... To what extent can an adopting employer rely on a 403(b) prototype plan's opinion letter? ... To what extent can an adopting employer rely on a 403(b) volume submitter plan's advisory letter?" (Internal Revenue Service [IRS])
[Guidance Overview] IRS Issues Proposed Regs for Hardship Distributions
"[1] Clarification of Code Section 165 casualty loss deduction ... [2] Additional safe harbor for certain disasters ... [3] Extension of relief for victims of Hurricanes Florence and Michael ... [4] Elimination of six-month suspension period ... [5] Elimination of requirement that participant take all available plan loans ... [6] Expansion of available sources ... [7] Elimination of 'facts and circumstances' test ... [8] Plan amendment deadlines." (Ice Miller LLP)
[Guidance Overview] IRS Proposes Hardship Distribution Regs, Including Some Permanent Disaster Relief
"Employers that treat property damage to a principal residence as an eligible hardship even if unrelated to a federally declared disaster must amend their plans to exclude the condition that the loss be of a type deductible based on the current 401(k) regulation, assuming they plan to conform to the revised safe harbor list.... [The proposed disaster] criterion is different from ... earlier announcements ... First, it does not provide relief from documentation protocols, and second, it does not draw in expenses for participants with lineal ascendants or descendants, spouses or dependents who lived or worked in an area impacted by the disaster." (Buck)
[Guidance Overview] IRS Proposes Changes to Hardship Distribution Regs
"[B]efore the end of the year, plan sponsors are encouraged to ... [1] Review hardship distribution provisions in Code Sec. 401(k) and 403(b) plan documents. [2] Determine which of the modifications described in the proposed regulation apply to the plan, and when or whether to implement any changes, including the adoption of related plan amendments. [3] Review and discuss any operational changes ... with third-party administrators." (McGuireWoods)
Year-End Compliance Reminders for Defined Contribution Plans Subject to ERISA (PDF)
"Every year, plan sponsors must make sure their plans meet certain compliance requirements ... This publication identifies the materials you need to review and will help you prepare for year-end." (Prudential)
[Guidance Overview] Proposed Amendments to the Hardship Distribution Regs (PDF)
"[This article includes] a table reflecting the various effective/applicability dates.... The Proposed Regulations make it automatic that a hardship distribution for those in FEMA-designated areas is permissible when there is a major federally declared disaster ... [T]he Proposed Regulations allow a plan to retroactively apply the new disaster event [rules] for 2018.... Employers will need to make operational decisions to implement changes under the Proposed Regulations prior to adopting a plan amendment.... A Hardship Distribution Operational Checklist will be helpful in this regard." (ASC)
New Hardship Rules, Other Statutory Changes Reflected in Newly Proposed 401(k) Regulations
"The stance taken by the IRS with regard to hardship distributions for casualty losses was unexpected.... [T]he proposed regulations allow (but do not require) plans to eliminate the requirement to suspend contributions for six months on the first day of the first plan year beginning on or after December 31, 2018, even if the hardship distribution was made prior to that date." (Newport Group)
How to Contribute to Multiple 401(k)s
"If you are one of the over 7 million who have more than one job, you could have the opportunity to make salary deferral contributions to more than one 401(k) plan. When doing so, you must take care not to exceed the statutory limit of $18,500 for 2018/ $19,000 for 2019, plus any catch-up contributions for which you are eligible. This is a 'per person' limit.... If you participate in a governmental 457(b) plan, you may defer up to 100% of your compensation, up to $18,500 for 2018/ $19,000 for 2019, plus catch-up contributions of $6,000 if you are eligible. This is in addition to (separate from) any salary deferral contributions that you make to a 401(k) plan." (Denise Appleby, via Forbes)
[Guidance Overview] IRS Proposes Regs on Hardship Withdrawals
"Although 403(b) plans generally follow the hardship rules applicable to 401(k) plans, the proposed regulations do not modify the 403(b) rules to permit withdrawal of earnings on 403(b) elective deferrals or QNECs/QMACs that are in custodial accounts.... 403(b) plan sponsors will need to exercise care when amending their plans to comply with BBA 2018 and the proposed regulations." (Morgan Lewis)
[Guidance Overview] IRS Issues Much Anticipated Hardship Guidance
"The proposed regulations generally address: [1] the required elimination of the post-withdrawal suspension of elective deferrals, [2] the optional elimination of the requirement for participants to take plan loans first, [3] the ability to include additional plan account sources in hardship distributions, [4] changes in the ability to qualify for a hardship distribution in the case of casualty losses and losses associated with federal disaster areas, and [5] changes in the administrative process required to document that a participant has demonstrated the requisite financial need." (Groom Law Group)
Fiduciary Liability Claim Trends (PDF)
10 pages. "While insurers have not reacted in a unified way, the claim environment has become much more active and severe during the past 24‑36 months, highlighted by well-publicized excessive fee litigation under ERISA. This ... report discusses ... the many excessive fee cases brought against universities, why proprietary funds are more challenging risks, and recent results from a Boston College study examining the causes and consequences of 401(k) lawsuits." (Lockton)
[Guidance Overview] Select Limits, Hardship Withdrawal Changes and a Rollover Automation Option
"[T]he employer or plan sponsor needs to contact its plan's record keeper to determine when their system might be updated to accommodate the new options under the proposed regulations. Some of the provisions in the proposed regulations can be effective earlier than Plan years beginning on or after January 1, 2020, but the systems need to be ready to support the plan changes and record keepers may wait for final regulations before commencing the programming changes." (Winstead PC)
Improving Retirement Savings for America's Public Educators (PDF)
"[T]he number one factor driving participation and savings rates in school districts is participant choice.... [1] There is 25% greater participation in plans with 15 or more investment providers compared to plans with only one provider. [2] On average, account balances are 73% higher among plans with 15 or more providers compared to single provider arrangements. [3] There is a 203% increase in average contribution rates among plans providing access to 15 or more providers compared to plans with only one provider. [4] Single provider arrangements have the lowest participation rate; 8% below the national average." (National Tax-Deferred Savings Association [NTSA])
Reminders of What's New for Plan Sponsors in 2019
"All plans: New claims procedures regulations for disability benefits claims, after multiple delays, have finally been set.... Retirement Plans: Plan participants no longer need to take the maximum available loan under the plan before requesting a hardship withdrawal for plan years beginning in 2018 ... BBA changes to hardship withdrawals are likely to require a plan amendment to be adopted on or before the end of the 2019 plan year, and a summary of material modifications to be issued soon thereafter.... Health Plans: The IRS ... [set] the 2019 affordability threshold for the ACA employer mandate at 9.86 percent." (Findley)
[Guidance Overview] New Hardship Distribution Guidance Brings Several Surprises
"Depending on when a plan sponsor eliminates the 401(k) suspension period, there could be related consequences for administration of the nonqualified deferred compensation plan.... [E]arnings on pre-tax deferrals made to a 403(b) plan continue to be ineligible for hardship distributions. However, QNECs and QMACs would be eligible for hardship distributions in a section 403(b) plan that is not in a custodial account." (Proskauer's ERISA Practice Center)
 
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