CARES Act to Provide Significant Employee Benefit Plan Relief for Participants and Plan Sponsors
"The CARES Act provides companies ... additional time to meet their single-employer plan funding obligations by delaying the due date for 'minimum required contributions' otherwise due during 2020 until Jan. 1, 2021, at which time the 2020 contributions plus interest will be due.... The CARES Act also provides plan sponsors with the option to use the plan's funded status for the last plan year ending before Jan. 1, 2020 for purposes of determining the funding-based benefit limitations under Internal Revenue Code Section 436 for plan years that include calendar year 2020."
BakerHostetler
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Stimulus Bill Would Provide 2020 DB Funding Relief, Access to DC Savings
"The stimulus package provides short-term relief for single-employer DB plans by delaying all 2020 minimum required contributions until 2021 and easing benefit restrictions, among other provisions.... The legislation makes it easier for participants affected by the virus or the resulting economic downturn to access their retirement savings.... Nongovernmental employers have until the end of the first plan year beginning on or after Jan. 1, 2022, to amend their plans for the relief."
Mercer
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ERISA's Statute of Limitations Conundrum (PDF)
"[N]ow that the United States Supreme Court has addressed the issue, plan sponsors and fiduciaries should expect that the six-year limitations period will apply to imprudent-investor claims. If the Supreme Court's decision is not consistent with Congress's intent in creating the three-year limitations period ... the ball is in Congress's court to amend the statute to make its intent clearer.... So what should sponsors and fiduciaries do?" [Intel Corp. Investment Policy Comm. v. Sulyma, No. 18-1116 (S. Ct. Feb. 26, 2020)]
Jose M. Jara and Anthony M. Fassano of Archer & Greiner P.C., via Tax Management Compensation Planning Journal
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COVID-19: Mid-Year Suspension or Reduction of Employer Contributions to 401(k) Plans
"U.S. employers looking to reduce operating costs in the short term in response to the disruption caused by the COVID-19 pandemic may seek to reduce or suspend their matching or nonelective contributions in their 401(k) plan. [This article] summarizes the key issues facing employers in making the determination to suspend or reduce safe-harbor contributions."
Benefits BCLP
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Leverage Your Defined Benefit Plan to Retain Essential Talent
"Your older, more experienced employees, who may now be more critical than ever to your workforce, may struggle with the need to access retirement income and remain employed if hardship withdrawals from a defined contribution plan are not enough. Leverage your defined benefit (DB) plan to retain essential talent.... Offer in-service distributions ... Waive suspension of benefits for rehired retirees ... Increase Normal Retirement Age."
Milliman Retirement Town Hall
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ERISA Plan Investment Management in a Time of Market Disruption
"[C]onsider whether now is a good time for a special meeting of your investment committee ... [C]areful documentation of decisions -- and the reasons behind them -- is critical to protecting yourself against litigation.... [C]heck in with your plan's service providers to verify how they will continue services amidst COVID-19's disruptions."
Dorsey & Whitney LLP
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Innovative Investment Strategies in Volatile Times
"Option contracts (i.e. puts and calls) allow investors to buy or sell risk and potential return, allowing investors to create exactly the risk and return profile they desire with potential outcomes defined in advance and secured by contract. Some option combinations are quite attractive today given increased market volatility."
River and Mercantile Solutions
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Virus Hits Unimmunized Pension Plans Hard!
"Immunization using LDI investment strategies can help reduce asset-liability mismatch risk DB plans encounter from both sudden equity market crashes like the one we are currently experiencing, as well as interest rate volatility which has also been extreme. The more immunized a portfolio is, the less a sponsor needs to worry about the impact of market volatility on the funding position of their DB plan."
The Principal Blog
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Retiree Pension Risk Transfers in a Low Interest Rate Environment: Issues to Consider
"If your company's pension plan is at the PBGC variable premium cap, the PBGC savings will be in excess of $644 per retiree in 2021. In a low interest rate environment, it is likely your plan is at or close to the variable premium cap.... The annuity premium when compared to the economic cost typically results in overall savings for the plan sponsor even in a low interest rate environment.... Annuities cannot be purchased for a plan that is not 80% funded on a PPA interest rate relief basis unless the plan sponsor makes some immediate funding to the plan."
Findley
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Impact of a COVID-19 Temporary Furlough on Multiemployer Plan Withdrawal Liability
"The initial determination of whether an employer's contribution cessation is permanent or temporary is made by the plan sponsor (the board of trustees of the [multiemployer plan]) and is generally upheld unless shown by the preponderance of the evidence to be clearly erroneous.... [B]ased on current guidance, a [multiemployer plan] does not have a solid legal basis to assess complete or partial withdrawal liability against an employer for a cessation of contributions as a result of a furlough in connection with COVID-19."
Akin Gump
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New Challenges for Contributing Employers in Multiemployer Pension Plans -- Is It Panic Time?
"The key risks, during these times of turmoil, for employers contributing to multiemployer plans are these: [1] A change in zone status resulting in a Funding Improvement Plan or Rehabilitation Plan. [2] Layoffs and work stoppages causing a partial withdrawal in 2020. [3] A business downturn causing the company to completely withdraw during 2020. [4] An industry downturn causing a mass withdrawal in 2020 or (even) in the next 3 years."
October Three Consulting
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Withdrawal Activity of Individuals Owning Both Traditional and Roth Individual Retirement Accounts
"Traditional IRAs are the favored source of withdrawals.... Owners of IRAs with the largest balances who took withdrawals each year within the study were among those least likely to take their withdrawal from a Roth IRA, despite being the individuals likely to have the most to gain from taking withdrawals to minimize taxes. There was also little evidence that owners deplete or close one account type before withdrawing from another.
Employee Benefit Research Institute [EBRI]
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Benefits in General
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[Guidance Overview]
How the CARES Act Affects Employee Benefits
"The CARES Act: [1] expands on the types of testing that plans must cover without cost-sharing ... [2] provides that for plan years beginning on or before December 31, 2021 (i.e., for a calendar plan year, the 2020 and 2021 plan years), HDHPs can provide first-dollar coverage for telehealth or other remote care services ... [4] permanently eliminates the ACA rule that requiring that over-the-counter medicines and drugs (other than insulin) be prescribed to be eligible HSA/FSA/HRA expenses.... [5] The 10% early withdrawal tax will not apply to any 'coronavirus-related distribution' (CRD) up to $100,000 for any year.... [6] For individuals who are eligible for a CRD, the cap on 401(k) plan loans is increased from $50,000 to $100,000, and employees may take up to the full balance of their account within that limit."
ABD Insurance & Financial Services
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[Guidance Overview]
How the Stimulus Bill Would Impact Employee Benefit Plans
"The CARES Act provides qualified individuals with a one-year extension to repay qualified retirement plan loans if the due date occurs between the enactment of the CARES Act and December 31, 2020.... For the period between the enactment of the CARES Act and January 1, 2021, employer payments of principal or interest on any qualified education loan of an employee will not be included in the gross income of that employee. These payments may be made to the employee or to a lender."
Ballard Spahr LLP
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Executive Compensation and Nonqualified Plans
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Equity Incentive Considerations During the COVID-19 Crisis
"While employee stock options are generally intended to serve as mid- to long-term incentives, ... extreme volatility means that new awards made today could be substantially underwater tomorrow. Now might be a good time to review the equity incentives for key employees including identifying the organization's key service providers, reviewing the equity incentives held by the key service providers (as well as the overall compensation package), and planning for what adjustments might be needed for price projections when possible."
Holland & Hart LLP
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