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<< Older News  |  September 25, 2020

News

All News > 401(k) Plans

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Long-Term Part-Time Employee 401(k) Elective Deferrals
Kushner & Company Link to more items from this source
[Guidance Overview]
Sept. 23, 2020

"[Notice 2020-68] clarifies that all years of service, even years before 2021, must be considered for determining a long-term part-time employee's vesting in any employer contributions allocated to that participant's account.... Many employers were counting on only having to track part-time employee service on a going-forward basis after Jan. 1, 2021. However, this vesting service requirement likely adds a significant administrative burden on employers."

Tags: 401(k) Plans  •  Retirement Plan Administration  •  SECURE Act

IRS Issues Guidance on SECURE and Bipartisan American Miners Acts
Mercer Link to more items from this source
[Guidance Overview]
Sept. 23, 2020

"The SECURE Act generally provides that amendments for its changes aren't due before the last day of the first plan year beginning on or after Jan. 1, 2022 (or a later date prescribed by IRS). For governmental and certain collectively bargained plans, amendments aren't due before the last day of the first plan year beginning on or after Jan. 1, 2024. [Notice 2020-68] clarifies that the same deadlines apply to both discretionary and required SECURE Act amendments and to amendments for the Miners Act."

Tags: 401(k) Plans  •  Retirement Plan Design  •  SECURE Act

Editor's Pick New 401(k) Coverage Rules for Long-Term, Part-Time Workers
E is for ERISA Link to more items from this source
[Guidance Overview]
Sept. 23, 2020

"The new rules under the SECURE Act ... ramp up between 2021 and 2024. However, some employer action is already required ... [This article] walks you through the new rules, including those contained in IRS Notice 2020-68 ... If inclusion of your long-term, part-time workers will push your existing plan over the 100 participant threshold, you might give thought to separating them out in a separate plan, such that both of your plans will be under the audit threshold."

Tags: 401(k) Plans  •  Retirement Plan Administration  •  SECURE Act

Mutual of Omaha to Settle ERISA Case for $6.7 Million
Pensions & Investments Link to more items from this source
Sept. 23, 2020

"Mutual of Omaha Insurance Co. has agreed to pay $6.7 million to settle ERISA complaints by participants in two company 401(k) plans that fiduciaries favored some proprietary products over other investment options and charged extra fees for non-proprietary funds in the investment lineups.... The preliminary settlement agreement said more than 7,000 participants had account balances at the end of 2018."

Tags: 401(k) Plans  •  Retirement Plan Investments

Judge Rejects Petition to Throw Out AutoZone ERISA Lawsuit
Pensions & Investments Link to more items from this source
Sept. 23, 2020

"The participants ... [argued] that AutoZone fiduciaries violated ERISA by retaining GoalMaker, an asset allocation service ... which allegedly steered participants' investments into high-cost investment options.... The judge ruled that plaintiffs had provided enough information to allow the complaint to go to trial regarding the use of GoalMaker; the retention of a stable value fund; the use of actively managed mutual funds and separate accounts; the fiduciaries' methodology for selecting investment share classes; and the comparing of record keeping fees to benchmarks." [Miller v. AutoZone, Inc., No. 19-2779 (W.D. Tenn. Sep. 18, 2020)]

Tags: 401(k) Plans  •  Fiduciary Duties  •  Retirement Plan Investments

Adding a Safe Harbor Provision While Maintaining Flexibility in Contribution Costs
DWC Link to more items from this source
Sept. 22, 2020

"Because the safe harbor rules are meant to ensure a certain minimum level of contribution for the non-HCEs, you can design your plan so that contributions are required for the non-HCEs but optional for the HCEs. Presto! You have a safe harbor plan with the flexibility to reduce your contribution cost by more than 70% in any given year should you need to do so."

Tags: 401(k) Plans  •  Retirement Plan Design

What Can Plan Sponsors Do to Bring Employees Up to the Optimal Deferral Target?
Fiduciary News; free registration required Link to more items from this source
Sept. 22, 2020

"[T]he company match alone cannot represent the sole target for salary deferral. It might represent a minimum, but it is very clearly not a good measure for the maximum (unless the match is extremely generous).... Plan sponsors shouldn't make the mistake to think assisting employees to save the optimal deferral percentage is limited to a periodic meeting. It should be inculcated throughout the organization.... Plan sponsors need to be more proactive to get employees to reach their salary deferral target."

Tags: 401(k) Plans  •  Retirement Plan Administration  •  Retirement Plan Design

IRS SECURE Act Guidance Clarifies Key Issues for Retirement Plans
Groom Law Group Link to more items from this source
[Guidance Overview]
Sept. 22, 2020

"When considering the QBAD feature, plan sponsors should take into account the various changes necessary to implement the participant-friendly provision (and coordinate with their record-keeper), including: [1] account sources; [2] 1099-R reporting changes; [3] 402(f), rollover and withholding changes; [4] updated Summary Plan Description (or Summary of Material Modification); [5] certification process and coordination for all controlled group plans; [6] recontribution process/procedures; and [7] plan amendment terms."

Tags: 401(k) Plans  •  Retirement Plan Design  •  SECURE Act

Family 'SECURity': Early Withdrawal Tax Exception for Qualified Births and Adoptions
Hall Benefits Law Link to more items from this source
[Guidance Overview]
Sept. 21, 2020

"[Notice 2020-68] clarifies that if a retirement plan is amended to allow qualified birth or adoption distributions, the plan is required to accept recontributions if the individual received such a distribution from that plan and the individual is eligible to make a rollover distribution to that plan at the time of recontribution. This suggests that an employee who receives a qualified birth or adoption distribution and then separates from service will not be able to make a recontribution to that plan. Presumably, however, these individuals would be able to recontribute the amount to an IRA."

Tags: 401(k) Plans  •  CARES Act  •  Coronavirus (COVID-19)  •  Retirement Plan Administration

September 22 is Last Chance for COVID-19-Related 401(k) Loans
Forbes Link to more items from this source
Sept. 21, 2020

"Congress loosened the rules for taking money out of retirement accounts for those adversely affected by COVID-19, but ... there's a deadline coming up for taking enhanced loans: It's September 22. The deadline for taking 401(k) or IRA distributions under the special rules is December 31."

Tags: 401(k) Plans  •  CARES Act  •  Coronavirus (COVID-19)  •  Retirement Plan Administration

Pandemic Sharpens Focus on Employee Financial Wellness
Strategic Benefits Advisors Link to more items from this source
Sept. 21, 2020

"To gauge how well employees are utilizing their benefits, plan sponsors can ask their administrators to answer [specific] questions ... If the data shows employees aren't taking full advantage of the financial features of their benefits, additional employee education and communication may be in order."

Tags: 401(k) Plans  •  Health Plan Design  •  Retirement Plan Design  •  Stock Plans

IRS Provides Additional SECURE Act Guidance
Ascensus Link to more items from this source
[Guidance Overview]
Sept. 17, 2020

"Notice 2020-68 [1] clarifies that employers may receive a credit for each year during a single three-year period, starting in the first year that an employer adds an EACA.... [2] clarifies that each eligible employer that participates in a multiple employer plan (MEP) may receive the tax credit.... [3] states that employers with qualified retirement plans and 403(b) plans that are not maintained by a public school will have until the last day of the first plan year beginning on or after January 1, 2022, to amend their plans for the SECURE Act and the Bipartisan American Miners Act."

Tags: 401(k) Plans  •  MEP/PEP  •  Retirement Plan Administration  •  Retirement Plan Design  •  SECURE Act

Are Cybercriminals Stalking Your 401(k) Plan?
Benefits Law Group of Chicago Link to more items from this source
Sept. 17, 2020

"At least two pending federal cases deal with attacks on individual 401(k) plan accounts. The fact patterns are similar: a participant submits an electronic benefit withdrawal request to the employer or the plan's record keeper. The request is passed on to the plan's custodian for implementation.... Implementing an additional verification step could not only prevent cybercrime but also could establish a better defense based on the provider's claim of non-fiduciary status."

Tags: 401(k) Plans  •  Cybersecurity  •  Retirement Plan Administration

Why 'Six Is the New Three' When It Comes to Automatic Enrollment
Cammack Retirement Group Link to more items from this source
Sept. 17, 2020

"While this could backfire if more participants opt out of auto-enrollment because of the higher rate automatic deferral rate, according to John Hancock's State of the Participant 2020 report, the opposite is actually the case. 12% of employees opt out at 3%, but only 10.4% did so at 6%. Thus, it is possible that with an auto-deferral rate of 6%, more employees, rather than fewer, may contribute to the retirement plan, than they would at 3%."

Tags: 401(k) Plans  •  Retirement Plan Design

IRS Clarifies 'SECURity' Through 401(k) Plan Expansion to Long-Term, Part-Time Workers
Hall Benefits Law Link to more items from this source
[Guidance Overview]
Sept. 16, 2020

"As a result of the difference between service taken into consideration for elective deferral eligibility and service taken into consideration for vesting of other employer contributions, employers that elect to expand eligibility for employer contributions are required to track service ... over two different periods, posing potentially significant administrative burdens.... [S]maller employers with a substantial employee base of part-time workers may be newly subject to [the Form 5500 Independent Qualified Auditor's Report] requirement beginning in 2024. "

Tags: 401(k) Plans  •  Retirement Plan Administration  •  Retirement Plan Design  •  SECURE Act

DOL Issues Guidance for DC Plans on Lifetime Income Disclosures to Participants
Kilpatrick Townsend Link to more items from this source
[Guidance Overview]
Sept. 16, 2020

"[T]he DOL's regulations will provide a very rough estimate ... based on hypothetical assumptions involving the participant's age, the annuity start date and the survivor annuity percentage, as discussed below. This approach simplifies the disclosures from an administrative perspective by minimizing the participant-specific data that must be taken into account."

Tags: 401(k) Plans  •  Retirement Plan Administration

Can a Former Employee Roll a Coronavirus-Related Distribution Back Into Our Plan?
DWC Link to more items from this source
Sept. 15, 2020

"The short answer: no, your former employee's only options are to rollover her CRD into an IRA or a new employer's plan (if permitted by that plan).... [C]ompany-sponsored plans ... can only accept rollovers from participants or, in some cases ... new hires who haven't yet met the plan's eligibility requirements ... A former employee who has taken a full distribution is neither a participant nor an eligible employee ... What about a situation in which the former employee still has an account balance in your plan? That is a bit trickier, as there isn't much in the way of clear guidance."

Tags: 401(k) Plans  •  CARES Act  •  Coronavirus (COVID-19)  •  Retirement Plan Administration

Laid Off Employees' 401(k) Accounts Can Mean Higher Risk and Cost
ORBA Link to more items from this source
Sept. 15, 2020

"The price tag for an annual audit can easily total $10,000 or more. This particularly significant administrative cost could disappear if you reduce the number of your plan's orphan accounts.... Another consideration is fiduciary liability. Your duty to safeguard the interests of plan participants who are no longer on your payroll -- whether they are former employees you have laid off, retirees or ex-workers who left to work for a competitor -- is the same as for your active employee participants."

Tags: 401(k) Plans  •  Fiduciary Duties  •  Retirement Plan Administration

401(k) Savers Want Help Understanding How Much They'll Need for Retirement
Charles Schwab Link to more items from this source
Sept. 15, 2020

"The area where 401(k) participants say they could most use help is understanding how much they'll need to save for retirement ... Over two thirds (68%) of participants gave an estimate of how long their retirement savings will last, with the average being 24 years. The remaining 32% say they do not know how many years their retirement savings might last ... [P]articipants expect 44% of [their retirement income] to come from a 401(k). The remaining 56% is expected to come from a range of different sources." [Also available: Summary of survey results (14 presentation slides)]

Tags: 401(k) Plans  •  Retirement Plan Administration  •  Retirement Plan Design

Participant Savings Strategies That Are More Effective Than Projected Income Disclosure
Fiduciary News; free registration required Link to more items from this source
Sept. 15, 2020

"[1] Automatic enrollment is the one most commonly recognized 'go-to' strategy when it comes to encouraging savings, especially among younger workers.... [2] 401k plans were designed specifically to encourage retirement savings by offering financial incentives to save.... [3] Participants won't know what they're capable of if they aren't educated.... [4] The retirement savings account should be meant to motivate a savings mentality and project out where an individual can be, not where they currently are ... All these strategies can be employed today and have proven themselves effective. It's unclear that disclosing projected retirement income will provide the kind of incentive that will work."

Tags: 401(k) Plans  •  Retirement Plan Administration  •  Retirement Plan Design

Overpaying and Undersaving: Correlated Mistakes in Retirement Saving and Health Insurance Choices
TIAA Institute Link to more items from this source
Sept. 15, 2020

"Many employees pick a more expensive health plan option, even when, for all possible spending realizations, lower costs are more likely in the cheapest plan. People who make mistakes in health insurance choices are more likely to save too little for retirement and forgo employer-matching funds. Employees with lower salaries and longer tenure have higher rates of shared mistakes. Employees who are younger and have shorter tenure and higher salaries are less likely to make mistakes in either domain."

Tags: 401(k) Plans  •  Health Plan Design  •  Retirement Plan Design

401(k) Plan Concerns -- from the Auditor Perspective
Bradley Bartells, CPA, via LinkedIn Link to more items from this source
Sept. 14, 2020

"[1] No established retirement plan committee.... [2] No investment policy statement.... [3] Definition of compensation issues.... [4] Lack of minutes from retirement plan oversight committee meetings.... [5] Lack of documentation of review of investment fees and other fees.... [6] Lack of documentation of annual review of service provider SOC-1 reports.... [7] Continued instances of late remittances of [employee elective] deferrals.... [8] Lack of cybersecurity controls and education to participants."

Tags: 401(k) Plans  •  Retirement Plan Administration

California Requires Cannabis Companies to Provide Retirement Plans by September 30
CannaBizCentral Link to more items from this source
Sept. 14, 2020

"[T]he deadline for cannabis companies with more than 100 employees is September 30, 2020.... For cannabis employers with more than 50 employees, the deadline is June 30, 2021; for cannabis employers with five or more employees, June 30, 2022.... While cannabis remains illegal under the federal law of the Controlled Substances Act, under ... the Internal Revenue [and ERISA], cannabis companies can sponsor and/or participate in 401(k) plans."

Tags: 401(k) Plans  •  Local Regulation  •  Retirement Plan Design

Illinois Mandated Retirement Program May Mean Penalties for State's Cannabis Industry
CannaBizCentral Link to more items from this source
Sept. 14, 2020

"[E]mployers in Illinois with at least 25 employees must comply with the Illinois' Secure Choice or offer employees an employer-sponsored retirement plan.... Enrollment for large employers with at least 500 employees was in December 2018; for employers with 100-499, July 2019; and for employers with 25-99, November 2019. In other words, if you have been operating for at least two years with 25 employees, ... [and] you haven't registered for Secure Choice and you haven't established a 401(k) plan, then you are exposed to a penalty of $250 per employee for the first year, and $500 per employee for each subsequent year."

Tags: 401(k) Plans  •  Retirement Plan Policy

Prepare Now to Count Hours for Part-Time Employee Eligibility and Vesting
Husch Blackwell Link to more items from this source
[Guidance Overview]
Sept. 11, 2020

"[Notice 2020-68 clarifies] that for purposes of vesting in any employer contributions, you must credit a year of vesting service for all years, not just years after 2020, in which a long-term part-time employee had at least 500 hours of service. In other words, for eligibility purposes, only years after 2020 in which a part-time employee has at least 500 hours of service are counted. But for vesting purposes, once an employee qualifies as a long-term part-time employee based on service after 2020, all years in which the employee had at least 500 hours, including years before 2021, are counted. "

Tags: 401(k) Plans  •  Retirement Plan Administration  •  SECURE Act


<< Older News  |  September 25, 2020

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