Retirement Plans Newsletter

April 7, 2020

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Webcasts, Conferences

Top 5 COVID-19 Benefits Questions
RECORDED
Groom Law Group

The CARES Act Makes It Easier to Take Distributions and Loans from Retirement Accounts
RECORDED
TheStreet

Pension Plan Issues for Insurance Companies
April 9, 2020 WEBCAST
Eversheds Sutherland

Benefits Plans and COVID-19 - Update on Key Compliance Issues
April 9, 2020 WEBCAST
Groom Law Group

Furloughs and Layoffs - Key Issues and Impacts on Qualified and Non-Qualified Plans
April 14, 2020 WEBCAST
Groom Law Group

COVID-19 Issues: Employment & Benefits FAQs
April 14, 2020 WEBCAST
Morris, Manning & Martin, LLP

2020 State of the Fiduciary
April 14, 2020 WEBCAST
fi360

COVID-19 - View from Groom on Legislative and Regulatory Activity
April 16, 2020 WEBCAST
Groom Law Group

Building and Maintaining a Compliant IRA Program
May 21, 2020 WEBCAST
Ascensus

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View Coronavirus (COVID-19) News and Resources
View Coronavirus (COVID-19) Webcasts

[Guidance Overview]

Editor's Pick COVID-19: Retirement Plan Questions and Answers (PDF)

30 pages. Topics: [1] Coronavirus-related distribution; [2] Coronavirus-related loan extensions; [3] Qualified individual/certification; [4] Spousal consent; [5] Safe harbor/QACA 401(k) suspensions; [6] Required Minimum Distribution relief; [7] Plan amendments: CARES and other; [8] Defined benefit funding relief; [9] Deadline extensions; [10] Partial plan terminations; [11] Interim valuations; [12] Termination/severance/separation; [13] Treatment of furloughed employees/service crediting; [14] SIMPLE plans; [15] Regular hardship Distributions; [16] FFCRA: compensation; [17] PPP forgivable small business loans; [18] Miscellaneous questions. (See also a small correction issued by the author pertaining to rollovers of Roth and after-tax contributions).

S. Derrin Watson, for ERISApedia.com

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[Guidance Overview]

Coronavirus-Related Distributions Under the CARES Act: Optional or Required?

"A plan sponsor is not required to permit a distribution to a qualifying individual. One area of confusion, however, relates to which plans can permit these distributions.... An individual’s ability to treat a distribution as a [Cornonavirus-related (COVID-19)] distribution is not dependent on how a plan treats the distribution."

Robert Richter, for American Retirement Association [ARA]

Enhanced Loans for Qualified 401(k) Participants

"The CARES Act provides new options for participants to use the money in their 401k accounts to survive financially through changes in the participant loan rules and provisions for special coronavirus-related distributions. In addition, for those who can afford to do so, the CARES Act provides for a waiver of their required minimum distributions for 2020. All three of these changes are in effect now but are temporary changes. These are not mandatory changes, and it will be up to plan sponsors to decide whether to implement them."

Fred Reish, for 401(k) Specialist

COVID-19 Extensions for Retirement Plan Filings and Payments: No 5500 Extension Yet

"An extension for the return of excess employee 401(k) contributions was not part of the compliance relief. The return of those excess contributions adjusted for earning are still due no later than April 15, 2020 in order to exclude the distributions from income.... The [DOL] now has expanded authority to postpone certain ERISA filing deadlines including Form 5500. To date, the DOL has not done so."

The Retirement Plan Blog

Senator Urges DOL to Extend ERISA Filing Deadlines

"Sen. Patty Murray, D-Wash.... urged the [DOL] to provide at least a 90-day extension for 'certain ERISA notice and disclosure requirements' given the 'foreseeable increase in hardship withdrawal and loan requests' due to the coronavirus pandemic."

Pensions & Investments

Editor's Pick Unintended Consequences of Using Your Defined Benefit Plan to Assist with Workforce Management

"If you are considering major changes in your workforce and think your defined benefit (DB) plan can help ease the pain of this transition, you will want to proceed carefully.... Keep this in mind if you are increasing staff and are exploring: In-service distributions ... Waiving suspension of benefits for rehired retirees ... Increasing Normal Retirement Age ... If you are decreasing staff and are exploring: An early retirement window ... Lower Normal Retirement Age."

Milliman Retirement Town Hall

Markets 2020: Effect on DC Plan Participants

"The effect of asset gains/losses is obvious.... In effect, interest rate declines represent an increase in the cost of retirement income.... [T]his article [reviews] the effect of the current market turmoil on two example participants: [1] a 35-year old invested in a 2050 target date fund (TDF), and [2] a 55-year old invested in a 2030 target date fund (TDF)."

October Three Consulting

ERISA Fiduciary Best Practices and Prudence in the Evolving COVID-19 Environment

"Closely monitor your investments ... Robustly assess your investments.... Maintain a diverse investment lineup.... Pay particular attention to employer stock funds.... Plan for the future ... Document your fiduciary process.... Keep communicating -- but be careful.... Given the current market climate, many of the actions fiduciaries take today will no doubt be called into question by aggressive plaintiff's attorneys in the coming months and years. The best advice we can give is to avoid the temptation to take kneejerk reactions to the current market downturn."

Mayer Brown

Federal District Court Finds Fault with Fiduciary Fee Review

"A federal judge has found that a provider breached its fiduciary duty of overseeing its own 401(k) by failing to monitor proprietary funds and its recordkeeping expenses -- though it was not obligated to consider options other than mutual funds." [Moitoso v. FMR LLC, No. 18-12122 (D. Mass. Mar. 27, 2020)]

American Retirement Association [ARA]

CARES Act Offers Lifeline to DB Plans But Doesn't Address Greater Problem of Lower Interest Rates

"The law doesn’t address the source of the greater problem: low interest rates driving up contributions. Pension Protection Act rules, born in a different interest rate era, are the key driver of increasing contribution patterns. Many plan sponsors can expect significantly higher contributions for several years even if investments meet their expected returns. If equity markets don’t recover substantially in the near term, these increases will be even greater."

The Principal Blog

PBGC Single-Employer Plan Program Could Get Busy

"The Pension Benefit Guaranty Corp.'s good news, just six months ago, that its single-employer program enjoyed a healthy surplus could become another casualty of the current economic crisis. As sponsors of some of the largest pension plans now wrestle with plummeting revenues and market values, the prospect of the PBGC having to step in if they wind up in bankruptcy suddenly seems less far-fetched."

Pensions & Investments

Participants Show Interest in Guaranteed Income

"77% of those who currently are enrolled in employer-sponsored plans would consider adding an option that offers guaranteed lifetime income. Fifty-nine percent indicated they would specifically consider adding an annuity.... 60% of those surveyed are not sure of the benefits of having an annuity in their plan, which indicates a big task ahead for the defined contribution and insurance industries."

Allianz Life Insurance Company of North America

Practical Barriers to Better Retirement Outcomes: Assessing Challenges and Taking Action (PDF)

"[F]ive potential roadblocks to successful retirement outcomes are: [1] Missing participants; [2] 401(k) loan leakage; [3] Movement of assets out of plans via rollovers; [4] Participants leaving the plan at retirement; [5] Obstacles to in-plan annuities."

Defined Contribution Institutional Investment Association [DCIIA]

[Opinion]

Will Your Multiemployer Pension Plan Weather the Storm?

"Although there may be severe challenges in the short term, most plans, especially those that are better funded, are likely to recover in the long term as the economy rebounds. With that said, rising unemployment and investment losses will have a significant impact all multiemployer pension plans, which is why they need legislative relief -- now more than ever."

Segal Consulting

Benefits in General

[Guidance Overview]

Employee Benefits Provisions of the CARES Act and Other Federal Relief

"[T]he CARES Act ... made 4 key changes that apply generally to tax-favored retirement vehicles -- [1] the creation of 'coronavirus-related distributions,' [2] an expansion of the limits available for participant loans, [3] a suspension of participant loan repayments and [4] 2020 required minimum distribution (RMD) relief.... [T]he 2020 RMD relief will likely be mandatory but the loan and coronavirus-related distribution provisions will likely not be.... [T]he CARES Act requires that group health plans cover certain COVID-19 preventative care within 15 days of recommendation."

Sullivan & Worcester

Selected Discussions
on the BenefitsLink Message Boards

How Does a Retirement Plan TPA Know What Outcomes Would Result from Ending a Plan's Safe Harbor Status?

"When a retirement plan has always used a safe-harbor regime (or has used one for many years), the plan's sponsor might lack information to predict what coverage, non-discrimination, and top-heavy test would show absent the safe-harbor treatment. Consider, while a good-enough sense of this information might be obvious to those with the data, it might be almost an unknown to the plan's sponsor, and might be a complete unknown to the plan sponsor's lawyer. If a plan's sponsor wants information to help the sponsor decide whether to discontinue a safe-harbor contribution, how quickly does a recordkeeper or third-party administrator turn around that testing?"

BenefitsLink Message Boards

Hardship Distributions Under the FEMA Provisions

"Shout out to Derrin Watson who, on the ERISApedia webcast today, provided an important clarification regarding hardship distributions under the FEMA provisions, as described below.

The definition is more specific then I had realized.

Abridged version of the reg:

(7) Expenses and losses (including loss of income) incurred by the employee on account of a disaster declared by the Federal Emergency Management Agency (FEMA) …provided that the employee's principal residence was located in an area designated by FEMA for individual assistance with respect to the disaster.

How do we know if the state was in a FEMA disaster area that was designated for Individual Assistance?

  1. Go to this website: https://www.fema.gov/disasters
  2. From the state drop-down, select the State. Click on the “Apply" button.
  3. Click on the link for COVID-19 Pandemic (if there is one!). Make sure you click on the most recent one.
  4. Go to the Financial Assistance section.
  5. If it says 'Individual Assistance' then the employee is eligible for these hardship distributions. If for example it only says “public assistance” then it does NOT qualify."

BenefitsLink Message Boards

Loans Under the Paycheck Protection Program: How Are Retirement Contributions Taken Into Account?

"The PPP loans cover retirement plan contributions. Does this by any chance include DB plan contributions?"

BenefitsLink Message Boards

COVID-19 Distributions from J&S Plans -- Spousal Consent Still Required?

"Is spousal consent still required in order to make a lump sum distribution from a retirement plan that's subject to the QJSA rules?"

BenefitsLink Message Boards

Suspension of 401(k) Loan Repayments: When to Submit Form to Recordkeeper?

"We are getting many calls to submit the 12 month suspension request to the recordkeepers for loan repayments by participants who were laid off from their jobs. Would there be any advantage or disadvantage to waiting until closer to the end of the cure period to submit the 12 month suspension form to the recordkeeper?"

BenefitsLink Message Boards

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Press Releases

Federal Court Orders Maryland Company to Restore $28,650,604 To Employer Benefit Plans After U.S. DOL Investigation
Employee Benefits Security Administration [EBSA], U.S. Department of Labor

Most Popular Items in the Previous Issue

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David Rhett Baker, J.D., Editor and Publisher  davebaker@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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