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Retirement Plans Newsletter April 15, 2020 |
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[Guidance Overview] Implementing a Coronavirus Distribution Program in Your DB Plan "The CARES Act does not change when a distribution may be made to a DB participant. The short version is that lump sum distributions to terminated vested participants are allowed, subject to participant ... consent where the present value of the benefit is greater than $5,000. For other participants, including those 'furloughed' (but not permanently 'separated from employment') by the sponsor in the Coronavirus crisis, active employees over age 59-1/2, and retirees, the answer is more complicated[.]" October Three Consulting |
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How Do I Get Out of This Employer Contribution to Our Retirement Plan? "In pandemic times, employer contributions to retirement plans are not immune to cost-cutting initiatives, as corporate cash flows and liquidity dwindle. However, discontinuing discretionary contributions does not always eliminate all employer contribution requirements, and it is important for employers to anticipate and budget for any contributions that cannot be eliminated." Belfint Lyons Shuman |
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Pension Funding Concerns ... and Solutions "80 percent of defined benefit plan sponsors are concerned about 'funding risk' (their ability to fund the plan), and 77 percent are concerned about the impact of investment losses on their company's bottom line... While 56 percent of plan sponsors were under the impression they have sufficient assets to cover the plan's liabilities, ... only 23 percent indicated a funded status of 90 percent or more at the time of the survey. No doubt, these funding concerns and positions have been exacerbated by recent market events." MassMutual |
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Credit Spreads Take Pensions for a Wild Ride "[P]lan sponsors should reassess the credit component of the liability-hedging portfolio.... [1] Size the credit component appropriately relative to the Aa nature of the liability discount rate and the size and 'riskiness' of the growth portfolio; [2] Employ active management strategies ... and [3] Potentially overweight credit relative to Treasuries as credit spreads remain high, while keeping the overall interest-rate hedge ratio within tolerance ranges and considering transaction costs." Cambridge Associates |
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"[W]hen an employer engages in a workforce reduction that involves the cessation of operations, the closure of one or more facilities, and the termination of employment of a significant segment of its workforce ... the employer needs to quickly determine whether that action will require it to notify the PBGC of the event and recognize that significant additional pension funding obligations could be forced upon it." BakerHostetler |
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IRS Extension of Tax-Related Deadlines Includes ESOP Provisions "[A] deadline falling on or after April 1, 2020, and before July 15, 2020, is extended to July 15, 2020.... Distribute C Corp stock dividends made to the plan ... Provide or exercise put options on employer stock distributed from the ESOP; Repurchase of employer stock after a total distribution ... [or] after installment distributions; Commence distributions within the maximum timeframes allowed under IRC Sec. 409(o); Purchase qualified replacement property to avoid taxable sale of employer stock to an ESOP." Ascensus |
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State and Local Government Contributions to Statewide Pension Plans: FY 2018 (PDF) "[On] a national basis, contributions made by employers -- states and local governments -- in 2018 accounted for nearly three-fourths of all contributions received by public pension plans.... [Of] the $8 trillion in public pension revenue since 1989, 37 percent, or approximately $3 trillion, came from contributions paid by employers and employees." National Association of State Retirement Administrators [NASRA] |
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Retirement Plan Changes During COVID-19: Considerations for Public Agencies "[1] Are these plan changes subject to 'meet and confer' requirements? ... [2] Who has the authority to amend your plan? ... [3] Have you analyzed the administrative burdens associated with these changes? ... [4] Many of the new rules are much harder to administer if you have multiple plans.... [5] You'll need to revisit plan policies, prior loans and withdrawals, and current plan provisions." Best Best & Krieger LLP |
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Employment at Older Ages and Social Security Benefit Claiming, 1980-2018 "This research and statistics note ... presents new data on trends in the [labor force participation rate (LFPR)] of older Americans, in the age at which people claim Social Security retired-worker benefits, and in the proportion of men and women aged 62 or older who receive disabled-worker or retired-worker benefits. The data are summarized in six charts." U.S. Social Security Administration [SSA] |
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[Opinion] Mercer Letter Asking Senate for Pension Relief (PDF) "We therefore consider it vital that Congress provide longer-term financial relief to single-employer plan sponsors, and give employers the ability to direct financial resources toward sustaining their businesses and preserving current jobs. ... We urge Congress to give plan sponsors additional relief by: [1] Extending the amortization period ... Continuing interest rate relief beyond 2020." Mercer |
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[Opinion] "[We] agree that some sort of temporary accommodation is needed so that participants can retire and access funds they may need to respond to the current emergency.... [We] make the following recommendations to reduce the risks for spouses.... [1] Modify, rather than excuse, the usual spousal disclosure and consent requirements.... [2] Any modification to the physical presence requirement should be temporary ... [3] Lump sum distributions from defined benefit plans should be limited in size ... [4] Recorded video chats or telephone conversations can be permissible temporary alternatives ... [5] Remote notarization should not be permissible for this emergency purpose ... [6] Paper disclosures and backups required." Pension Rights Center and National Women's Law Center |
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Selected Discussions |
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Notice 2020-23 Extension Applies to Annual Funding Notices? "Does the recent IRS Notice 2020-23 apply to Annual Funding Notices? Would they be delayed to July 15 as well or still due April 30?" BenefitsLink Message Boards |
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CARES Act -- Increase Loan Limits Beyond 50% of Account Balance? "A large, mid-Atlantic recordkeeper has advised our client that while it can increase its loan limit to $100k, they recommend the client not increase to 100% of the vested balance but instead stand pat at 50% (or perhaps 75% if the client feels strongly about it), citing ERISA's adequate security requirement. Has anyone else encountered this concern?" BenefitsLink Message Boards |
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CARES Act Loan Provisions -- Optional vs. Mandatory "After a week of parsing through the analyses and commentaries, it appears that a general consensus has emerged that all of the CARES Act benefit provisions (RMD waiver, coronavirus -related distributions, loan maximum and loan repayment suspension) will be treated as optional. With regard to the RMD waiver, in 2009 the IRS even allowed companies to have participants choose whether to take the RMD. Is that the conclusion you guys have reached?" BenefitsLink Message Boards |
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Excess Deferral (402(g) Limit) Distribution Deadline -- Extended to July 15? "Do you know if the April 15 deadline for Distribution for Excess Deferrals (participant worked at 2 companies during the year and exceeded the Deferral Limit when we look at the total Deferrals) is now July 15 for 2020 due to COVID-19?" BenefitsLink Message Boards |
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CARES Act Distribution from a FICA Alternative Plan (Section 401(a) Plan) "Are there any provision(s) required in a FICA Alternative 401(a) plan which would prevent the addition of a CARES Act distribution provision?" BenefitsLink Message Boards |
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Automatic Extension for Form 5500 for Deadlines Through July 15? "Has anyone heard of an automatic extension of 5500s for deadlines falling between April 1 and July 15, 2020? This article from ASPPA states there is: https://www.asppa.org/news/browse-topics/irs-5500-extension-comes-short , but when our office called the IRS for guidance, they denied any knowledge of such automatic extension." BenefitsLink Message Boards |
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Press Releases |
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Most Popular Items in the Previous Issue |
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The CARES Act: Do We Have To?
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The CARES Act Suspends Required Minimum Distributions for 2020
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