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[Official Guidance]

Text of IRS Form 14568-A: Model VCP Compliance Statement -- Schedule 1: Interim Nonamender Failures (PDF)

Rev. Nov. 2019. "Schedule 1 can be used to report the correction of a failure to timely adopt interim amendments. A compliance statement issued for a Schedule 1 failure results in the corrective amendment being treated as if it had been timely adopted for purposes of determining the availability of the extended remedial amendment period. Thus, an Applicant may use Schedule 1 for the failure to adopt a required interim amendment ONLY if the corrective amendment was adopted before the expiration of the plan's extended remedial amendment cycle ... for that amendment."

Internal Revenue Service [IRS]

[Official Guidance]

Text of PBGC OIG Semiannual Report to Congress, for the Period April 1, 2019 to September 30, 2019 (PDF)

45 pages. "During the period April 1, 2019 through September 30, 2019, we: [1] Closed 4 recommendations and issued 13 new recommendations. The total number of open audit recommendations is 84.... [2] Issued the following reports: PBGC's Fiscal Year 2018 Compliance with the Improper Payments Elimination and Recovery Act.... Use of the Women-Owned Small Business Federal Contracting Set-Aside Program.... PBGC's Telework Program.... PBGC's Efforts to Reduce the Collection, Maintenance, and Use of Social Security Numbers.... PBGC's Property Management Program.... PBGC's Compliance with the Digital Accountability and Transparency Act.... [3] Continued work on our Deceased Participants Program. "

Office of Inspector General, Pension Benefit Guaranty Corporation [PBGC]

First Circuit Holds Sun Capital Private Equity Funds Not Liable for Withdrawal Liability of Portfolio Company

"Specifically, the First Circuit held that: [1] Under the partnership test in Luna v. Commissioner, the two funds did not create an implied partnership-in-fact that constituted a control group ... [2] Congress did not firmly indicate an intent to impose withdrawal liability in this situation.... [The decision focused] on the issue of common control. The First Circuit did not address any other issue, such as the trade or business issue." [Teets v. Great-West Life & Annuity Ins. Co., No. 18-1019 (10th Cir. Mar. 27, 2019; cert. denied Nov. 25, 2019)]

Thomson Reuters Practical Law

Estee Lauder Cybersecurity Lawsuit Raises Tough Questions About ERISA Remedies for 401(k) Account Thefts

"A number of recordkeepers routinely restore 401(k) account balances that have been fraudulently withdrawn even though the recordkeeper believes it followed all of its security procedures in processing the withdrawal. ... This case suggests that, at least for some plan service providers, the willingness to cover fraudulent withdrawals may have run out.... [T]he plaintiff could have, but has not yet, named the plan itself as a defendant in a claim for benefits under section 502(a)(1)(B) of ERISA. If such a claim were brought, it could raise additional questions as to how a 401(k) plan should allocate fraud losses among all of the remaining participants in the plan." [Berman v. Estee Lauder, No. 19-6489 (N.D. Cal. complaint filed Oct. 9, 2019)]

Plan Sponsor Council of America [PSCA]

Supreme Court Will Not Review Case Alleging Fiduciary Breach by Group Annuity Provider

"[The] decision lets stand a ruling that Great-West ... was not liable for alleged ERISA violations.... [T]he 10th Circuit held that [1] Great-West's contractual power to choose the credited rate did not render it a fiduciary under ERISA because participants could 'veto' the chosen rate by withdrawing their money from the fund in question.... [2] Great-West did not have control over its compensation and thus was not a fiduciary because the ultimate amount it earned depended on participants' electing to keep their money in the investment fund each quarter." [Teets v. Great-West Life & Annuity Ins. Co., No. 18-1019 (10th Cir. Mar. 27, 2019; cert. denied Nov. 25, 2019)]


Editor's Pick Auto-Enrollment's Long-Term Effect on Retirement Saving (PDF)

"401(k) savings plans are increasingly offering auto-enrollment coupled with higher employee default deferral rates. Auto-enrollment almost doubles plan participation and successfully gets participants who might not have otherwise saved, saving. However, it can also result in participants saving less than those who voluntarily opt in and set their own deferral rate. Auto-enrollment combined with auto escalation creates better participation and savings outcomes."

T. Rowe Price

Recent Sun Capital Decision Reverses Lower Court's Ruling That Funds Are Liable for a Portfolio Company's Withdrawal Liability

"While the Court of Appeals' decision should make it more difficult to establish a controlled group where no investor by itself has the required ownership to result in such a relationship, the decision in this case does not preclude the possibility that under other facts two funds could be deemed to form a partnership under federal law." [Sun Capital Partners III, LP v. New England Teamsters & Trucking Industry Pension Fund, Nos. 16-1376, 19-1002 (1st Cir. Nov. 22, 2019)]


Argument Preview: Supreme Court to Consider 'Actual Knowledge' in Determining the Window for Filing Claims Against Retirement Plan Fiduciaries

"The appeals court held that unless the undisputed record established that Sulyma specifically reviewed the provided materials and was 'actually aware' of the disclosed information, summary judgment based on the limitations defense must be denied.... According to Intel, allowing the 9th Circuit's holding to stand would reward participants who decide to ignore the disclosure materials that are meant to empower them to enforce their rights under ERISA.... In this call for a 'plain meaning' interpretation of 'actual knowledge,' Sulyma is joined by the federal government, which filed a 'friend of the court' brief and will participate in the oral argument. " [Sulyma v. Intel Corp. Investment Policy Comm., No. 17-15864 (9th Cir. Nov. 28, 2018; cert. pet. granted June 10, 2019; oral arg. sched. Dec. 4, 2019)]



How Political Correctness Affects Retirement Plan Design (PDF)

"[P]rivate sector employers are losing the freedom to sponsor individually designed pension programs that meet their specific objectives at the least cost. PC-ers do not understand that IRS regulations permitting greater benefits for higher-paid employees with less IRS meddling enable greater benefits for all employees."

H. C. Foster & Company

Benefits in General

Life Expectancy and Mortality Rates in the United States, 1959-2017

"Between 1959 and 2016, US life expectancy increased from 69.9 years to 78.9 years but declined for 3 consecutive years after 2014. The recent decrease in US life expectancy culminated a period of increasing cause-specific mortality among adults aged 25 to 64 years that began in the 1990s, ultimately producing an increase in all-cause mortality that began in 2010.... By 2014, midlife mortality was increasing across all racial groups, caused by drug overdoses, alcohol abuse, suicides, and a diverse list of organ system diseases."

JAMA Network

Court Upholds ERISA Plan's Forum Selection Clause

"Explaining that 'forum-selection clauses should control except in unusual cases,' the court stated that in the absence of fraud it was irrelevant that she was unaware of the forum selection provision when she filed suit. The court also rejected the employee's argument that compelling the case to be litigated in Wisconsin contravened ERISA's legislative intent and public policy by denying the employee 'ready access to federal courts.' " [Manuel-Clark v. ManpowerGroup Short-Term Disability Plan, No. 19-147 (E.D.N.C. Oct. 28, 2019; notice of appeal filed Oct. 28, 2019)]

Thomson Reuters / EBIA

Executive Compensation
and Nonqualified Plans

Editor's Pick Compensation Considerations for the Upcoming 2020 Proxy Season

"[1] Adopt an annual grant policy ... [2] Consider a stock-price forfeiture provision to avoid the drag of underwater stock options ... [3] Separate non-employee director equity plan [with] 5% minimum 1 year vesting carve-out ... [4] Separate non-employee director equity plan [with] stockholder approved director compensation ... [5] Director compensation ... [6] Consider increasing the deductibility of compensation ... [7] Increase net withholding."

Hunton Andrews Kurth

Selected Discussions
on the BenefitsLink Message Boards

Sponsor Decided 401(k) Plan Will Terminate in 2020 -- Custodian Won't Allow Further Distributions

"A 401k plan has decided to terminate on 1/1/2020. The company is closing. Only 3 participants; one is terminated. The terminated participant submitted distribution paperwork on 10/31/2019 to move his account to an IRA but the 401k provider froze the plan as soon as they were notified of a plan termination. The other two participants are also submitting paperwork to roll their money out (one is a part owner). Does the 401k provider have the right to freeze the plan? When can the participants expect to roll their money over? After 1/1/2020?"

BenefitsLink Message Boards

Is This Plan Up the Top-Heavy Creek Without a Paddle?

"Plan started in 2018. Only the owners deferred. Obviously, ADP failed. Refunds done. Obviously, Plan is TH for '18 and '19. Owners stopped deferring for 2019. Not sure if any were made, but let's call it zero. Is there any way around the $40,000 Top Heavy contribution that is due for 2018 given this fact pattern? (No TH for 2019, as no deferrals for keys). I thought, aggressively, we could have had the refunds as 12/31/18 liabilities and accrued it back and thus have EOY '18 balance of zero. But one key was over 50, and some of his deferrals were considered catch-up and stayed in the plan."

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BenefitsLink Retirement Plans Newsletter, ISSN no. 1536-9587. Copyright 2019, 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, 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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