|
Retirement Plans Newsletter April 3, 2020 |
|
|
CARES Act Suspension of Loan Repayments -- Is It Employer's Choice or the Participant's Choice? "The statute seems to make the suspension mandatory; yet ... there's a legal problem with this, given loans are existing, valid contracts under state law; ... Did the IRS recognize this issue and try to fix it by claiming that the employer has the choice, because of its ability to change the loan policy under the plan? You know that there will be 'curmudgeonly' employers out there who will NOT approve the suspension. [The author] would think that the IRS could not tax that loan as being defaulted, even though it was reported as such on a 1099." Business of Benefits |
|
SEC Says Coronavirus Will Not Delay Reg BI, Form CRS "[SEC] Chairman Jay Clayton has publicly confirmed that the June 30 deadline for compliance with the SEC’s Regulation Best Interest (Reg BI) rulemaking package remains in effect.... Clayton notes that, over the past 10 months, the SEC has engaged extensively with broker/dealers, investment advisers, retail investors and other market participants, as well as FINRA and other regulatory partners, regarding the implementation of Reg BI and the associated Form CRS." planadviser |
|
Will Workforce Cuts Cause Partial Terminations in DC Plans? "Generally, if the employer's turnover rate is at least 20% during the applicable time period, there is a presumption that a partial termination of the plan has occurred. The time period in question depends on the facts and circumstances of a situation ... Identifying a partial plan termination is important since the failure to recognize and act on it can cause disqualification of the entire plan." Callan |
|
COVID-19 Takes Bite Out of U.S. Corporate Pension Plans "The funded status of the nation's largest corporate pension plans fell by eight percentage points during the first quarter of 2020, driven primarily by declines in equity markets ... [P]ension plan data for 376 Fortune 1000 companies ... indicate the aggregate pension funded status is estimated to be 79% as of March 31, 2020, compared with 87% at the end of 2019. That's the lowest funded status plans have experienced since 2012, when the year-end funded status stood at 77%." Willis Towers Watson |
|
Jarvis Appeals Unsuccessful Challenge to CalSavers Auto-IRA Decision "The Howard Jarvis Taxpayers Association has filed ... [a notice of] appeal of a decision last month which held that that the Golden State's auto-IRA program for private sector workers is neither an employee benefit plan nor does it relate to an ERISA plan, and therefore was not preempted by ERISA.' [Howard Jarvis Taxpayers Ass'n v. The California Secure Choice Retirement Savings Program, No. 18-1584 (E.D. Cal. Mar. 10, 2020)] American Retirement Association [ARA] |
|
Construction Company Workers Get Support in ESOP Appeal "The Pension Rights Center waded into a dispute involving Choate Construction Co.'s employee stock ownership plan, urging the Fourth Circuit to revive the employees' lawsuit and recognize the 'special risks' these plans pose for workers.... The Choate employees allege they were forced to pay $198 million for company stock that may have been worth less than $65 million[.]" [Lee v. Argent Trust Co., No. 19-156 (E.D.N.C. Aug. 7, 2019; amicus brief to 4th Cir. filed Mar. 30, 2020)] Bloomberg Law |
|
Should You Withdraw From Your 401(k)? "The best-case scenario that would make tapping into your 401(k) this year a financially responsible decision is if you expect that you will be able to repay those funds within three years. If you can do that, you will not have to pay tax on the withdrawal, and you will have essentially received a three-year interest-free loan. No harm, no foul. The reality, though, is that the next several months are going to be incredibly difficult for millions of Americans." InvestmentU |
|
Before You Take That Retirement Plan Withdrawal... "Withdrawals turn 'paper' losses into actual losses.... Withdrawals destroy the magic that is compounding, particularly for younger participants.... Withdrawals are often just a band-aid for an underlying financial problem." Cammack Retirement Group |
|
[Opinion] TDFs (and Plan Fiduciaries) in the Crosshairs: Investment Lessons from the Coronavirus (PDF) "It's hard to imagine that anything good could come out of a pandemic, but this one has exposed a scandal in retirement savings plans ... There are two fiduciary breaches that are scandalous: [1] Fiduciaries, namely investment advisors, are breaching their duty of loyalty by not vetting their TDF selection. Self interests are taking precedence over beneficiary interests, violating the SEC's Best Interest (BI) standard. And [2] Fiduciaries are breaching their duty of care by turning a blind eye to the risk near the retirement date in the TDFs they choose, exposing beneficiaries to excessive risk. Fiduciaries are responsible for harm that should have been avoided." Target Date Solutions |
|
Selected Discussions |
|
"Client with a SIMPLE IRA wants to suspend matching contributions. CARES Act addresses 401(k) mid-year suspension but not SIMPLE IRA." BenefitsLink Message Boards |
|
Can Real Estate Sales Agents Participate in a 401(k) Plan? "Can a ' 3508 direct seller' person participate in a 401(k) Plan? They are paid by way of a 1099 rather than W-2 and are recognized as 'Employees' for some benefit purposes. We do not have experience with this type of 'employee'. If the plan defines compensation as W-2 income then they have no compensation to defer from. Maybe they make Roth deferrals or Voluntary Employee Contributions? The plan sponsor DOES want to cover such persons if a way can be found to do so." BenefitsLink Message Boards |
|
CARES Act Effect on Hardship Withdrawals -- Renders 1-per-Year Restriction Unenforceable? "If a 401(k) plan has a limit of 1 hardship withdrawal per plan year, does the CARES Act override this provision so that a participant can take an additional withdrawal?" BenefitsLink Message Boards |
|
Terminating Profit Sharing Plan -- Still Must Take an RMD Prior to Rollover? "Profit sharing plan is in the process of termination, the owners have been taking their RMDs each year. Under the CARES Act, does the requirement to pocket an RMD prior to rolling over the rest still apply?" BenefitsLink Message Boards |
|
COVID-19 Sick and Leave Pay Counts as Compensation for Retirement Plan Purposes? "Am I correct in assuming if a Plan uses the 'W-2' definition of compensation then the compensation earned as COVID-19 Sick or Leave Pay would be considered as compensation for plan purposes?" BenefitsLink Message Boards |
|
"I have seen some discrepancy in summaries of the RMD rules for 2020 under the CARES Act. Section 2203 (a)(I)(ii) says that the RMD rules are suspended for 2020. Section 2203(a)(I)(ii) adds what I thought was a special rule/clarification that required beginning dates in 2020 are effectively suspended. But I've seen summaries that imply that the RMD suspension ONLY applies for distributions for those participants with required beginning dates in 2020. So, which is it -- are all RMDs suspended in 2020 or only those for required beginning dates in 2020?" BenefitsLink Message Boards |
|
► Subscribe to the BenefitsLink Message Boards Digest -- a free daily email of all new discussions (not just the selected few shown above). View a sample issue. |
|
Most Popular Items in the Previous Issue |
|
Financial Wellness During COVID-19: Moving from Panic Towards Peace (PDF)
|
|
How the CARES Act Affects Retirement Plans
|
|
Retirement and Pension Provisions in the CARES Act
|
BenefitsLink.com, Inc.
1298 Minnesota Avenue, Suite H
Winter Park, Florida 32789
(407) 644-4146
Lois Baker, J.D., President
David Rhett Baker, J.D., Editor and Publisher
Holly Horton, Business Manager
Article submission: Online form
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.
Links to web sites other than BenefitsLink.com and EmployeeBenefitsJobs.com are offered as a service to our readers; we were not involved in their production and are not responsible for their content.