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Retirement Plans Newsletter April 17, 2020 |
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Newly Posted The Advisor Perspective on HSAs
Cash Preservation in the Time of COVID-19: Six Tax Strategies You Need to Know Now
Three weeks into the CARES Act, now what? - A Q&A with Retirement Law Group
ESOP Valuations in COVID-19 Environment and Issues Pertaining to Interim Valuations
Post-pandemic employee benefits considerations - a closer look at the 'new normal' for employers
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Discussions |
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This Newsletter:
BenefitsLink Health & Welfare Plans Newsletter:
Message Boards Digest:
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[Guidance Overview] "[P]lan administrators ... should identify the plans under which [coronavirus related distributions (CVRDs)] are permitted and establish a centralized process for tracking CVRDs from these plans.... If this is not feasible, plan administrators may want to consider auditing CVRDs to determine compliance with the $100,000 controlled-group cap and, if applicable, self-correct any excess distributions." Morgan Lewis |
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[Guidance Overview]
"[N]owhere does [the CARES Act] specifically mention the impact of the loss of employment or reduction in hours of the spouse of the participant in the calculation of what are the causes of the participant's adverse financial circumstances.... When you apply 'under the circumstances then prevailing' standard, would not a fiduciary be hard pressed to challenge the certification especially given the pandemic and the remedial nature of the statute?" Business of Benefits |
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[Guidance Overview] IRS and PBGC Issue Employee Benefit Plan Relief for COVID-19 Pandemic "While the extensions help employers and retirement plan service providers deal with business disruptions from the COVID-19 pandemic, more agency relief is needed. Key provisions of the IRS notice assist only certain noncalendar-year plans. In addition, the [DOL] has yet to issue any retirement plan relief -- including for the upcoming April 30 deadline for annual funding notices and for plans offering loans under the [CARES] Act." Mercer |
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Checklist for Plan Sponsors Before Adopting Retirement Plan Provisions of the CARES Act "Although some retirement plan recordkeepers and [TPAs] have reached out to plan sponsors on decisions regarding ... coronavirus-related withdrawal and loan relief options, others are waiting for additional guidance. [This article provides] a checklist of issues to consider to help you navigate decision-making ... and determine whether your TPA has procedures in place to ensure compliance with the CARES Act provisions." Husch Blackwell |
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CalSavers Extends Registration Deadline for Large Employers "The extension will give employers until Sept. 30, 2020 to register with CalSavers; the deadline had been June 30, 2020. The board took this action because of the COVID-19 pandemic. The board has issued a Notice of Proposed Emergency Regulation Action to amend Section 10002(a)(1) of the CalSavers Retirement Savings Program regulations to change the registration deadline for eligible employers with more than 100 employees from June 30, 2020 to Sept.30, 2020." American Retirement Association [ARA] |
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Unions Say Next Virus Relief Package Needs Pension Reform "A coalition of more than two dozen unions, retirement funds and pension-protection activist groups urged congressional leadership in a recent letter to include retirement security measures in whatever legislation they send to the president's desk." Law360 |
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"[T]he complaint is particularly interesting in its description of how the theft occurred, and may point to some useful approaches to try to reduce future fraud. The complaint also illustrates that cybersecurity over retirement accounts is not limited to the systems and records of the plan sponsor and the recordkeeper; cybersecurity at the individual participant level is also critical." [Bartnett v. Abbott Laboratories, No. 20-2127 (N.D. Ill. complaint filed Apr. 3, 2020)] Groom Law Group |
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Trust Company Hit with Class Suit Over $106 Million Stock Plan Deal "The class action complaint ... claims GreatBanc signed off on the deal without performing adequate due diligence.... At issue is a 2015 transaction in which Triad -- a producer of custom wood furniture and fixtures -- became 100% employee-owned through the creation of an [ESOP]." [Smith v. GreatBanc Trust Co., No. 20-2350 (N.D. Ill. complaint filed Apr. 15, 2020)] Cohen Milstein |
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"Half of ERISA 403(b) plan participants are in hospital plans, which held 37 percent of ERISA 403(b) plan assets in plan year 2016. Another 22 percent of ERISA 403(b) plan participants were in educational services, holding nearly half (46 percent) of ERISA 403(b) plan assets.... A majority of large 403(b) plans reported participant loans outstanding.... The average large ERISA 403(b) plan offered 25 core investment options in 2016[.]" Investment Company Institute [ICI] and BrightScope |
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Annuity Purchase Update: April 2020 Interest Rates "The strong equity market returns of 2019 were set back by poor performance in the first quarter of 2020. The average duration 7 annuity purchase interest rates increased by roughly 30 basis points and average duration 15 rates increased by over 60 basis points since last month." October Three Consulting |
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Public Pensions Hammered by COVID-19 Economic Volatility -- $419 Billion in Market Value Shed in Q1 "During Q1 2020, the overall funded ratio for [the nation's 100 largest public defined benefit pension plans] suffered the single largest quarterly drop in the history of the PPFI, decreasing from 74.9% to 66.0% between Jan. 1 and March 31. Economic volatility from the COVID-19 pandemic resulted in a $419 billion loss in the market value of assets for these pensions, which in aggregate experienced investment returns of -10.81% in Q1." Milliman Retirement Town Hall |
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Summary of the Quarterly Survey of Public Pensions for Fourth Quarter 2019 (PDF) "For the 100 largest public-employee pension systems in the country, assets (cash and investments) totaled $4,115.0 billion in the fourth quarter of 2019, increasing by 3.4 percent from the third quarter of 2019 level of $3,977.8 billion. Compared to the same quarter in 2018, assets for these major public-pension systems increased 13.2 percent from $3,634.5 billion." U.S. Census Bureau |
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Cannabis 401(k) Plans: Here's Where We Stand Now "It appears the DOJ has ceased investigations of those cannabis companies compliant with their state laws on legalization ... It appears that retirement service providers to those cannabis companies were similarly left untouched." AllThingsERISA at FisherBroyles |
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[Opinion] "[A] reduction in wages does not qualify an individual for relief under the retirement plan relief provisions of the CARES Act. We respectfully submit that this omission was an oversight in the drafting of the CARES Act.... [T]his omission will prevent needy individuals from accessing retirement plan relief that was intended for these very individuals financially harmed by the COVID-19 crisis." Smith, Gambrell & Russell, LLP |
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[Opinion]
"Long before the pandemic, pension managers had invested in risky assets to overcome chronic underfunding with outsized returns in the stock market. Now those returns have evaporated.... Public pensions did not always invest so heavily in the stock market.... Over the past 60 years, these investments have become even riskier in an effort to maintain benefit levels while reducing taxes. Reinvesting public funds in public investments could address several crises at once." The Washington Post; subscription may be required |
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Selected Discussions |
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"We use the immediate and heavy financial need safe harbor definition, including expenses incurred as a result of a FEMA declared disaster. The regs provide the employee's principal residence or place of employment at the time of the disaster must be in an area designated by FEMA 'for individual assistance with respect to the disaster.' I interpret this to mean that just because a state/area is declared a disaster, that isn't sufficient for a hardship but rather must be eligible for FEMA's individual assistance program. So while FEMA's site (https://www.fema.gov/disasters) provides that most, if not all, states are declared disasters due to COVID-19, only a few states appear eligible for the individual assistance program. I've seen conflicting interpretations stating that if a state is declared a disaster, that is sufficient for a hardship." BenefitsLink Message Boards |
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FFCRA Wages Subject to 401(k) Withholding? "Are FFCRA wages subject to 401(k) withholding? And the subsequent match responsibility?" BenefitsLink Message Boards |
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CARES Act Effect on Participant Loan Provisions "[1] Does the $100k limit increase come with any provisions for extended loan repayments, or do they have to abide by the 5 year rule? [2] Can a 'qualified individual' take a new loan and suspend payments immediately until 1/1/2021, or do the suspension rules only apply to outstanding loans as of 3/27/2020. Just a question of whether these rules only apply to already existing loans or new loans too." BenefitsLink Message Boards |
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Corrective Distribution on Behalf of Deceased Participant "If a plan needs to make a corrective distribution due to a 415 violation in a prior year, but the participant has since died, to whom is the distribution payable? The participant's estate? And is it reported on a 1099-R as Code 4? EDIT: Code 4 in addition to Code E. Or just E? Still not clear to whom it is payable." BenefitsLink Message Boards |
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Employer Already Out of Business -- Effect on Form 5500 Audit Requirement "An employer has already gone out of business due to the business impact of coronavirus. All employees have been terminated. They had over 200 participants at the end of 2019. Are they able to submit their final 5500 without an audit? The business is shuttered and there is presumably no one still employed to even have the auditors in. How is this to be handled?" BenefitsLink Message Boards |
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Press Releases |
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Most Popular Items in the Previous Issue |
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Text of FRTIB Interim Rule: Temporary Waiver of Notarization Requirement for Spousal Consent
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CARES Act Brings Immediate Changes for 401(k) Plans
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CARES Act Q&A for Retirement Plan Sponsors (PDF)
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