Retirement Plans Newsletter

August 14, 2019

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[Official Guidance]

Text of IRS Rev. Rul. 2019-19: Failure to Cash a Distribution Check from a Qualified Retirement Plan (PDF)

"Under Section 402(a), the amount of the designated distribution is actually distributed from Plan X to Individual A in 2019. Because Individual A has no investment in the contract within the meaning of Section 72 and no exception to Section 402(a) applies, the amount of the designated distribution is includible in her gross income in 2019. Individual A's failure to cash the distribution check she received in 2019 does not permit her to exclude the amount of the designated distribution from her gross income in that year under Section 402(a)."

Internal Revenue Service [IRS]

[Official Guidance]

Text of PBGC Interest Rate Update for Benefits Payable in Terminated Single-Employer Plans, September 2019

"The September 2019 lump sum interest assumptions will be 0.50 percent for the period during which a benefit is (or is assumed to be) in pay status and 4.00 percent during any years preceding the benefit's placement in pay status. In comparison with the interest assumptions in effect for August 2019, these assumptions represent no change in the immediate rate and are otherwise unchanged."

Pension Benefit Guaranty Corporation [PBGC]

[Guidance Overview]

Proposed Regs on Hardship Distributions for the Public Sector

"In late 2018, the [IRS] issued proposed regulations regarding hardship distributions from 401(k) and 403(b) plans. Beginning on January 1, 2020, plans must operationally comply with some of the key provisions of these Proposed Regulations. In addition, plans must be amended by December 31, 2019 to reflect any optional changes implemented in 2019."

Ice Miller LLP

Meet the MEPs: Working Owners Can Participate

"[P]ast DOL Advisory Opinions have consistently held that owner-only companies could not participate in MEPs. Taking it a step further, if a MEP did allow such a company to join, it would torpedo the plan’s status as a MEP.... [T]he new MEP regulations tweak the definition of Employer so that it now includes working owners who meet certain conditions.  That means owner-only businesses can now participate in multiple employer plans."

DWC

Feds Push for Weak ERISA Disclosure Duty in IBM Stock-Drop Case

"The solicitor general’s Aug. 13 brief cautions the justices against interpreting [ERISA] to require the disclosure of inside corporate information, absent 'extraordinary circumstances.' In this case, a participant in International Business Machine Corp.'s [ESOP] said corporate insiders should have publicly disclosed the company’s struggles with its microchip business in order to help protect workers from a 7% drop in stock price that affected their retirement accounts." [Jander v. Retirement Plans Comittee of IBM [sic], No. 17-3518 (2d Cir. Dec. 10, 2018; cert. pet. granted Jun. 3, 2019)]

Bloomberg Law

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Defined Contribution Plan Auto-Portability Program Is First to Gain DOL Approval

"The final PTE ... imposes several conditions on the program, including fee restrictions, participant communications, recordkeeping requirements, annual audits and several other requirements. Over [the objection of Retirement Clearinghouse LLC (RCH)], the PTE will last only five years. When the PTE expires, RCH will have to provide statistics showing whether the program provided meaningful benefits to a significant number of people.... The PTE doesn’t let RCH restrict unrelated third parties from developing a similar 'loan-and-match' process[.]"

Mercer

DOL's New Guidance Helps Employers of Uniformed Service Members Manage Pension Obligations

"[U]nder USERRA, service members who were reemployed after a uniformed services-related absence are treated as though they did not have a break in civilian employment for purposes of participation, vesting and accrual of pension benefits. The fact sheet addresses how USERRA applies to employers that pay pension benefits as a percentage of an employee's total earnings."

Stinson

DOL Offers Relief for Incorrect MEP Form 5500 Filings

"The DOL is granting MEPs a special filing extension of up to 2-1/2 months to file their annual report in compliance by checking special extension under Part I, Line D on the 2018 Form 5500 / 5500-SF and entering 'FAB 2019-01.'  MEPs using this extension do not need to file a Form 5558 with the IRS."

ERISAdiagnostics, Inc.

Federal Court Dismisses Challenge to ESOP Transaction

"[T]he court dismissed ERISA claims challenging an ESOP stock transaction because the plaintiff ... did not allege that she suffered any injury. This decision is important to educate other courts about economics, particularly in cases where plaintiffs rely on little more than the post-transaction valuation as evidence of supposed overvaluation." [Lee v. Argent Trust Co., No. 19-156 (E.D.N.C. Aug. 6, 2019)]

McDermott Will & Emery

You Misunderstood the Valuation: Court Rejects ESOP Fiduciary Breach Suit

"[The federal district court judge] explained that, if the fair market value of the company stock when it was purchased by the ESOP with 100% financing was $198 million, then one would expect the value of the ESOP’s interest soon after the transaction to be $0. In other words, the subsequent valuation necessarily took the debt into consideration. However ... the value subsequently placed on the company stock ... was $64.8 million.... [T]he court concluded that the plaintiff realized a clear benefit as opposed to suffering any injury that would provide her with standing and agreed to dismiss the suit." [Lee v. Argent Trust Co., No. 19-156 (E.D.N.C. Aug. 6, 2019)]

Bradley

[Opinion]

Severability in the Regulation of Financial Planning Fees

"[If] the objective of regulation is to better protect consumers, then it’s important to recognize the role that fee severability plays in the process, as certain types of models (e.g., fee-for-service models which have been gaining traction in recent years) already have more of those key protections naturally built in. And while regulators continue to struggle with finding ways to make the more traditional sales-based models less conflicted and more transparent and severable, perhaps the focus for regulators when looking at the fee-for-service models is simply keeping them that way?"

Nerd's Eye View

Benefits in General

[Guidance Overview]

Does Your Plan Use a Limited Scope Audit for Form 5500 Financial Reporting?

"AICPA will no longer use the term "limited scope audits." Rather, such audits will be referred to as ERISA Section 103(a)(3(C) audits. SAS 136 includes new performance and reporting requirements for these audits, and because of that, the audit will no longer be considered to have a scope limitation."

The Wagner Law Group

How Employers Can Provide Student Loan Repayment Assistance as an Employee Benefit (PDF)

"The Employer Participation in Student Loan Assistance Act (HR 795) was first introduced in the House of Representatives in 2017 ... A similar bill, the Employer Participation in Repayment Act of 2019 (S 460), was introduced in the Senate in 2019 ... These bills aim to make student loan repayment assistance tax-free for employers."

Schulte Roth & Zabel LLP

Selected Discussions
on the BenefitsLink Message Boards

Employee Laid Off with Recall Rights Under a CBA -- Terminated for Retirement Plan Purposes?

Does anyone know when an employee on layoff with recall rights under a CBA is treated as terminated for purposes of a qualified retirement plan? Neither the plan nor the CBA appears to covers this issue.

BenefitsLink Message Boards

Household Employees of Business Owner

100% owner of an LLC business that has a 401k plan also has two household service employees (W-2). Do the two household employees count as employees under the controlled group rules, or is there an exception where their employment is not in the pursuit of a profit?

BenefitsLink Message Boards

Too Much Withholding

Participant had 20% withheld on full distribution. Part of the distribution was for Roth money which was not taken into account and the full distribution was treated as pre-tax money. Need to issue amended 1099-R. Original withholding was done for $5,000 but upon revision the withholding should only have been $3,000. When issuing the amended 1099-R how do you show the withholding amount -- what it actually was, or what it should have been? Also, what's the best way to get the over withholding back?

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BenefitsLink Retirement Plans Newsletter, ISSN no. 1536-9587. Copyright 2019 BenefitsLink.com, Inc. All materials contained in this newsletter are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of BenefitsLink.com, Inc., or in the case of third party materials, the owner of those materials. You may not alter or remove any trademark, copyright or other notices from copies of the content.

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