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Retirement Plans Newsletter December 24, 2019 |
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Webcasts, Conferences SECURE Act and its Impact on Retirement Plans
SECURE Act
SECURE Act - The Next Steps for MEPs and PEPs
TPA Boot Camp
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Discussions |
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This Newsletter:
BenefitsLink Health & Welfare Plans Newsletter:
Message Boards Digest:
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[Guidance Overview] SECURE Retirement Legislation Becomes Law: Overview of Provisions Affecting Retirement Plans "Plan fiduciaries will want to be sure to understand ... how the lifetime income amount in those disclosures may change ... in order to evaluate whether any communications might help participants during the transition.... Plan sponsors should also consider whether the plan should be amended to accept in-kind transfers of lifetime income investments, such as through a rollover from a previous employer-sponsored plan.... [D]istribution reporting will need to be updated beginning January 1, 2020, for participants who turn 70-1/2 in 2020, to ensure that distributions between age 70-1/2 and 72 are treated as being eligible for tax-free rollover, and subjected to a mandatory 20% withholding to the extent not rolled over." Morgan Lewis |
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[Guidance Overview] The SECURE Act's Significant Impact on Beneficiaries "[A] 19-year-old (who is not an 'eligible designated beneficiary') inheriting a $500,000 IRA is currently required to withdraw approximately $7,800 annually in RMDs based on the life expectancy calculation. Under the SECURE Act, the entire account balance would have to be withdrawn by the end of the 10th year following the account owner's death.... [T]his would require an annual withdrawal of approximately $50,000, in many cases entirely taxed as ordinary income." Warner Norcross & Judd LLP |
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[Guidance Overview] President Signs Spending Legislation Including SECURE Act "Highlights of the new legislation include: [1] A DC annuity fiduciary safe harbor; [2] Mandatory lifetime income disclosure; [3] Closed group nondiscrimination relief; [4] Authorization of DC Open MEPs; [5] Required coverage of long-term part-time employees; [6] Increase the cap on the automatic escalation of contributions in 401(k) testing safe harbor; [7] Increase the mandatory distribution age from 70-1/2 to 72." October Three Consulting |
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"Many of the bill's reforms are effective starting in 2020 (or even retroactively), so plan sponsors should quickly review which provisions might be affected and what, if any, plan amendments and systems changes must be implemented. Some clarifications from regulators will be needed in the months ahead." Mercer |
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"[We] have not yet had occasion to consider the availability of reformation to plaintiffs in circumstances such as these, where the written terms of a pension plan indisputably violate ERISA, but there is no allegation that the violation stems from traditional fraud, mistake, or otherwise inequitable conduct. We nonetheless conclude that reformation of the Plan was available here under ERISA Section 502(a)(3), and that, consistent with our precedent, the district court was then authorized to enforce the reformed Plan as a second step under Section 502(a)(1)(B).... After concluding that reformation of the Plan is available to Plaintiffs under Section 502(a)(3), we have little trouble holding that the district courtʹs authority to grant Step of Plaintiffsʹ proposed remedy ‐‐ enforcement of the reformed Plan under Section 502(a)(1)(B) ‐‐ follows." [Laurent v. PricewaterhouseCoopers LLP, No. 18-487 (2d Cir. Dec. 23, 2019)] U.S. Court of Appeals for the Second Circuit |
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403(b) Plan Restatement Deadline Fast Approaching! "By 2009, [403(b)] plan sponsors were required to use plan documents ... In 2013, the IRS allowed for pre-approved plan documents for 403(b) plans.... For 403(b) plan sponsors who haven't yet had a chance to restated their plans, March 31 is the deadline." Hall Benefits Law |
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Mitigating Retirement Plan Cyber Crimes "Although the U.S. courts have yet to decide whether managing cybersecurity risk is a fiduciary function, the ERISA Advisory Council has asked the [DOL] to issue guidance for retirement plan cybersecurity [and] lawmakers have asked the [GAO] to examine cybersecurity in the U.S. retirement system.... Some providers are now offering cybersecurity guarantees.... There are steps plan sponsors should encourage participants to take as well to protect their retirement plan accounts." PLANSPONSOR; free registration may be required |
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[Opinion] "As part of our preliminary analysis, [the authors] have identified areas where the Proposal has the potential to effectively address weaknesses that are present under current law, without imposing undue practical challenges for plan sponsors. [They] have also identified areas of concern [they] see within the Proposal that may be problematic for plan sponsors, participants, and contributing employers." American Academy of Actuaries |
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Benefits in General |
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[Guidance Overview] SECURE Act In; Cadillac Tax Out -- The Spending Act Makes Serious Changes to Benefits Rules "[The SECURE Act] encourage employers to offer retirement plans, promote additional retirement savings, enhance retiree financial security, and ease administrative requirements of plans. Many of the provisions became effective either immediately or will become effective as of January 1, 2020.... The spending package also includes a full repeal of three [ACA] taxes -- the tax on high-cost health plans known as the 'Cadillac tax,' the health insurer tax, or 'HIT' tax, and the medical device tax." Ballard Spahr LLP |
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Executive Compensation |
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[Guidance Overview] "Many 'go private' transactions in which publicly held corporations are acquired by private equity funds or other non-publicly traded acquirers result in a short taxable year for the target ... The proposed regulations make clear that compensation for this short taxable year ... would be subject to Section 162(m). The result is that the deductibility associated with often substantial transaction-based pay to executives in such transactions (e.g., option or RSU cash-outs) would now be sharply curtailed or eliminated." Ropes & Gray LLP |
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"[T]he United States Court of Appeals for the First Circuit held that, under Massachusetts law, a terminated employee asserting a claim for being deprived of lost compensation in breach of the implied covenant of good faith and fair dealing must demonstrate that the lost compensation was clearly related to past services that were already performed. The Court concluded that a former executive's implied covenant claim failed where he had make progress in achieving, but had not fully achieved the milestone that would have entitled him to additional equity compensation under his employment agreement." [Suzuki v. Abiomed, Inc., No. 19-1233 (1st Cir. Nov. 27, 2019)] Seyfarth Shaw LLP |
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Selected Discussions |
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Reporting a Later-Corrected Funding Deficiency at Date of Plan Termination "I have a DB plan (not Cash Balance) that was terminated this year and has a funding deficiency. Because this would be the final SB filed for the plan, I am unclear how to show the correction of the deficiency on the SB since instructions say to report only contributions made with 8-1/2 post year-end. The minimum contribution was due 9-15-19 but wasn't funded until 11-15-19. The contribution made was adjusted for interest using the effective interest rate for 2019 and the deficiency corrected. We are wondering whether to un-terminate for 2019 so a clean and final SB could be filed for 2020. Client is concerned about the audit risk." BenefitsLink Message Boards |
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Press Releases |
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Most Popular Items in the Previous Issue |
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SECURE Act Finally Becomes Law
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SECURE Act: The Wait is Finally Over
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