Retirement Plans Newsletter

April 20, 2020 logo logo
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[Official Guidance]

Text of Circular Letter No. 20-24: Special Distributions from Qualified Retirement Plans and Individual Retirement Accounts Due to a Disaster Declared by the Governor of Puerto Rico

"[T]he Department issues this Circular Letter with the purpose of amending CC RI 20-09 to eliminate the requirement of signing before a notary public of the request for a Special Disaster Distribution and allow the requests to be processed. electronically without the need for the intervention of a notary public." [Editor's note: Link is to the Google Translate version of the official text in Spanish.]

Puerto Rico Departamento De Hacienda


BenefitsLink Celebrates 25 Years Today -- 1995-2020

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Since April 20, 1995, we've brought you the best in employee benefits on the web. Thank you to all our readers! Tell us what else we can do to help you -- we'd love to hear from you! Learn more

New Lawsuit Against Abbott and Alight Could Clarify Fiduciary Responsibility for Cybersecurity

"A lawsuit ... brought by a participant in the Estee Lauder plan whose account was stolen by an imposter was recently settled.... [A]nother lawsuit has been filed by a participant whose plan account also was stolen by an imposter. This time, the plan sponsor defendant is Abbott Laboratories, but the recordkeeper, Alight (formerly Aon) is the same.... The facts as alleged in the complaint are troubling. This was not a direct hack into the system. The imposter engaged in phone conversations with an Alight call center representative because the imposter was unable to process account withdrawals online without assistance." [Bartnett v. Abbott Laboratories, No. 20-2127 (N.D. Ill. complaint filed Apr. 3, 2020)]

Cohen & Buckmann, P.C.

401(k) Plan Participants Say Fiduciaries Ignored Excessive Fees

"According to the allegations, the funds in the plan have stayed relatively unchanged since 2014. The complaint includes a chart of comparisons as of 2018 that plaintiffs say shows more than 60% of funds in the plan were much more expensive than comparable funds found in similarly sized plans." [Kendall v. Pharmaceutical Product Development, LLC, No. 20-071 (E.D.N.C. complaint filed Apr. 15, 2020)]


When Does an ERISA Service Provider Incur Liability for Breach of Fiduciary Duties? (PDF)

[Article begins on page 14.] "In two cases decided a year apart, the issue was whether a life insurance company, which was not a named fiduciary, but which provided investment services to a 401(k) retirement plan, could be sued as a plan fiduciary. The cases involved similar facts. Each case was certified as a class action. In each case, the district court granted summary judgment to the insurer. But when the summary judgments were appealed, the outcomes in the Tenth and Eighth Circuit Courts of Appeals were very different."

Defense Research Institute

Foreign Employee Benefit Claims: Does ERISA Apply? (PDF)

[Article begins on page 14.] "In addition to considerations of the extent to which ERISA may have extra-territorial effect, the issue may also be impacted by an express exemption in ERISA for plans 'maintained outside of the United States primarily for the benefit of persons substantially all of whom are nonresident aliens' ... As a very general proposition, where the issue is directly raised, courts have tended to find ERISA inapplicable to claims of foreign nationals arising overseas. The cases discussed [in this article] illustrate that general approach."

Defense Research Institute

Coronavirus-Related Deadline Extensions in New Jersey, California

"Citing the impact of the Coronavirus pandemic, the Garden State has extended the deadline for considering its proposed fiduciary rule, and the Golden State has extended the CalSavers registration deadline for large employers."

American Retirement Association [ARA]

Yes, Retirees and Near Retirees Can, and Should, Plan for Stock Market Crashes

"Depending on the reasonableness of the investment return assumptions baked into a Stochastic model, it can be a reasonable tool for assessing investment risk, but it is not necessarily an effective risk management strategy.  ... Monte Carlo models used by many financial advisors tend to underestimate the risk associated with investment in risky assets. ... [A] sustainable spending budget should be developed based on a comparison of all retirement assets and spending liabilities, and withdrawals from investible assets should be determined by subtracting income from other sources from the sustainable spending budget."

Ken Steiner, FSA Retired

Qualified Charitable Distributions: Still Available in 2020 and Still a Good Strategy

"You may be wondering if you can still do a [qualified charitable distribution (QCD)] for 2020 even though your RMD is waived. The answer is yes. QCDs can still be made even in years when no RMD is required. QCDs from IRAs are still available in 2020 and still offer tax benefits, even though RMDs are not required."

Slott Report

Benefits in General

Discovery in De Novo Matters: It Is Real and Here to Stay (PDF)

[Article begins at page 6.] "The increasing number of claims subject to a de novo review were initially shielded from discovery as the so called conflict of interest did not factor into the analysis of a case subject to de novo review. In recent years, that changed again, however. [This article] will discuss the latest trends and case law in this evolving area of the law."

Wilson Elser, via ABA Employee Benefits Law

Executive Compensation
and Nonqualified Plans

Bracing for a New Disclosure Rule on Executive Pay for Performance

"This pay-for-performance rule is meant to show the relationship between actual executive pay, as disclosed in the proxy (with certain adjustments), and company performance, as represented by company stock price performance plus dividends, or total shareholder return (TSR). Although conceptually understandable, the proposed rules were released by the SEC in 2015 but never finalized ... Here are some of the more material issues that public companies may soon need to address[.]"

Meridian Compensation Partners, LLC

Selected Discussions
on the BenefitsLink Message Boards

Timing of Retirement Plan Contributions for Purposes of Paycheck Protection Program

"Retirement contributions are a permissible payroll cost for purposes of Paycheck Protection Program loan forgiveness under the CARES Act. However, in order to be forgiven, the expense must be 'incurred' during the 8-week covered period following the loan origination. In order to be 'incurred,' does the contribution actually have to be made to the plan, or is it sufficient that a tentative liability is accruing during the covered period? (I suspect the former... i.e., that this is handled on a cash, not accrual, basis.) Has anyone considered how this will affect plans with an 'employment on the last day of the plan year' allocation condition, which would normally not be made until early in the next plan year?"

BenefitsLink Message Boards

Terminated Participant -- Loan Extended Due to COVID-19

"A participant terminated employment due to COVID at the end of March. She has a loan outstanding and wants to take a full distribution. Once the full distribution is processed, should the loan be offset? I realize that for regular distributions, the loan would be offset once a full distribution is taken. However, can she freeze the loan until 12/31/2020 because she was affected by COVID?"

BenefitsLink Message Boards

Withholding on Distributions During 2020 for Plans That Don't Provide CRDs

"We have some clients that feel their plans offer sufficient distribution options already and do not want a new special in-service distribution option (a coronavirus related distribution). Now a participant who terminated 5 years ago wants to take a distribution as a CRD because they were laid off from their current employer. They are told by the recordkeeper that because the plan sponsor decided not to allow CRDs, they will be subject to 20% mandatory withholding. At this point it should not be the plan sponsor's decision, should it?"

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BenefitsLink Retirement Plans Newsletter, ISSN no. 1536-9587. Copyright 2020, 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, 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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