Retirement Plans Newsletter

March 13, 2020

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[Official Guidance]

Text of IRS Notice 2020-16: Weighted Average Interest Rates, Yield Curves, and Segment Rates for March 2020 (PDF)

"This notice provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under Section 417(e)(3), and the 24-month average segment rates under Section 430(h)(2) ... In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under Section 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008 and the 30-year Treasury weighted average rate under Section 431(c)(6)(E)(ii)(I)."

Internal Revenue Service [IRS]

[Guidance Overview]

Editor's Pick IRS EP Issue Snapshot: Plan Loan Cure Period

Mar. 12, 2020. "This snapshot discusses common scenarios involving the cure period.... Audit Tips: [1] Review the plan document to determine if the plan allows participant loans. [2] Does the plan document allow for a cure period? If so, what is the duration of the cure period? [3] Review the loan agreement to verify that the repayment terms meet the level amortization requirement of IRC Section 72(p)(2)(C). [4] Is there an adequate accounting for participant loans?"

Internal Revenue Service [IRS]

[Guidance Overview]

Editor's Pick IRS EP Issue Snapshot: Design-Based Safe Harbor Plan Compensation

Mar. 12, 2020. "Reviewer Tips: Review the plan document to determine if the plan's compensation definition automatically satisfies IRC Section 414(s), by meeting one of the safe harbors ... If it does not, [1] on a determination case where the applicant has elected to have the plan reviewed as a design-based safe harbor, secure either an amendment to the plan, or a revised Form 5300 changing this election request to the negative.... [2] on an examination where nondiscrimination in the amount of employer-provided benefit is being evaluated, secure and review a compensation inclusion test. If the compensation inclusion test is not passed, an employer cannot claim reliance on a design-based safe harbor, and plan benefits would have to pass the general test for nondiscrimination."

Internal Revenue Service [IRS]

[Guidance Overview]

GASB Proposes Changes to Section 457 Plans

"The [March 5] exposure draft is intended to improve the consistency of the reporting of fiduciary component units and enhance the comparability in the application of accounting and financial reporting requirements for deferred compensation plans. The amended guidance applies to all governmental organizations subject to generally accepted accounting principles (GAAP) for state and local governments. Comments are due by April 10, 2020."

Moss Adams LLP

Advisors: ERISA and Fiduciary Process Have Evolved -- Have You?

"Engaged advisors are moving beyond the Fiduciary 2.0 deliverables of 'funds and fees' to demonstrating, in conjunction with plan sponsors, clear process quantification ... While as a legal matter, ERISA fiduciaries will continue to be measured by their process, rather than results, advisors who can produce measurable results and quantify their value around participant outcomes and process are the leaders who will prosper in the Fiduciary 3.0 world[.]"

The Wagner Law Group

Maturing Public Pension Plans: Strategies to Overcome Market Volatility and Portfolio Illiquidity

"As public pension plans age and their demographic composition shifts ... plans experience a cash drain, with significant investment implications. This paper considers solutions, and shows that many public pension plans actually do have the capacity to add illiquidity to their portfolios, enabling them to potentially build out larger allocations to core alternatives. Core alternatives ... can potentially offer high income, low beta to traditional markets and relatively high returns. [The authors] also consider other solutions to aging public pension plans' challenges, including long-duration bonds, cash flow matching and derivative overlays/leverage."

J.P. Morgan Asset Management

Benefits in General

How to Prep for an Employee Benefit Plan Audit

"[1] Meet with auditors early in the year ... [2] Prepare schedules or accumulate data during the year ... [3] Ask for an assistance letter ... [4] Bring the changes up early in the audit process so it's not a surprise when the audit starts ... [5] Let your auditors know what concerns you have about your plan ... [6] Hold frequent meetings with your internal team and the auditors during and after the audit fieldwork is completed ... [7] Have a debriefing meeting."

Meaden & Moore

Coronavirus Issues for Employee Benefit Plans

"What if the vendor that provides or administers employee benefits for its employees invokes [a force majeure clause] to excuse its performance due to a COVID-19 epidemic or quarantine affecting its workforce? ... [T]he result could be catastrophic. And to the extent an affected benefit is governed by [ERISA], the potential liability could be exponential.... [An] employer cannot and should not request that its group health plan provide information regarding an employee's illnesses or potential positive COVID-19 status. While there are exceptions to the Privacy Rule ... these exceptions are limited and very specific.... An employer may wish to consult employee benefits counsel to determine whether an employee who has contracted COVID-19 or who is subject to quarantine could qualify for a hardship distribution under its 401(k) plan."

Thompson Hine, via Bloomberg Law

Executive Compensation
and Nonqualified Plans

[Guidance Overview]

Proposed Section 162(m) Regs: Key Provisions

"[1] Existing Section 162(m) regulations remain in place for grandfathered arrangements ... [2] Expanded definition of publicly held corporation ... [3] Expanded definition of covered employee ... [4] Applicable employee remuneration ... [5] Privately held corporations that become publicly held corporations ... [6] Grandfathered arrangements ... [7] Coordination with Section 409A ... [8] Effective dates."

Thompson Coburn LLP

Selected Discussions
on the BenefitsLink Message Boards

QNEC for Plan That Uses Prior Year Testing Method

"It's my understanding that a plan that fails ADP/ACP testing using the prior-year testing method cannot allocate QNECs as a corrective measure. Is there any way around that? Can an SCP amendment be done to retroactively change the testing method to current year so that the plan sponsor can do a QNEC?"

BenefitsLink Message Boards

Qualified Birth or Adoption Distributions After the SECURE Act -- Active Employees Only?

"Assuming that the plan sponsor has authorized SECURE Act qualified birth or adoption distributions under the plan, may a terminated employee who maintains an account balance in a plan receive a qualified birth or adoption distribution? I believe so, but I can't find anything in the statutory text or the Joint Committee on Taxation Report that limits qualified birth or adoption distributions to active employees. Agree?"

BenefitsLink Message Boards

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Upcoming Events About Retirement Plans or Executive Compensation

Mar. 16
Texas
IRA Seminar
Ascensus
Mar. 16
Webcast
ERISA Plan Investments in the Financial Markets 2020: The Fundamentals
Practising Law Institute
Mar. 17
Webcast
Free
Impact of the SECURE Act on Retirement Income Adequacy
EBRI [Employee Benefit Research Institute]
Mar. 17
Webcast
Free
Getting It Right - Know Your Fiduciary Responsibilities: Retirement and Health Plan Sponsors - Day 3
Employee Benefits Security Administration [EBSA], U.S. Department of Labor
Mar. 17
Webcast
ERISA Litigation Recent Hot Issues
Western Pension & Benefits Council
Mar. 18
Webcast
FAQs on the SECURE Act
American Society of Pension Professionals & Actuaries [ASPPA]
Mar. 18
Texas
IRA and HSA Seminar
Ascensus
Mar. 18
Webcast
Free
Voluntary Fiduciary Correction Program
Employee Benefits Security Administration [EBSA], U.S. Department of Labor
Mar. 18
Michigan
Impact of the SECURE Act
Fraser Trebilcock
Mar. 18
Webcast
Multiemployer Pension Plan Withdrawal: An In-Depth Examination
Strafford
Mar. 19
Webcast
Basics of Qualified Retirement Plans: Session 4
ASC
Mar. 19
Webcast
Free
The Importance of Prudently Monitoring Target Date Funds
Multnomah Group
Mar. 19
Georgia
PECA Welcomes the DOL - Back by Popular Demand
Pension Education Council of Atlanta [PECA]

Most Popular Items in the Previous Issue

ERISA Advisory Council Report: Voluntary Transfers of Uncashed Checks from ERISA Plans to State Unclaimed Property Programs (PDF)
Advisory Council on Employee Welfare and Pension Benefit Plans, Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL]

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Lois Baker, J.D., President  loisbaker@benefitslink.com
David Rhett Baker, J.D., Editor and Publisher  davebaker@benefitslink.com
Holly Horton, Business Manager  hollyhorton@benefitslink.com

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BenefitsLink Retirement Plans Newsletter, ISSN no. 1536-9587. Copyright 2020 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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