Retirement Plans Newsletter

May 12, 2020

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View Coronavirus (COVID-19) News and Resources

COVID-19 and Retirement Plans: Effects That May Not Be Obvious

"Partial terminations ... Plan conversions and blackout periods ... Pooled plans with annual valuation dates."

Murphy Austin

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Navigating Market Crises: Insights and Recommendations for Plan Sponsors

"[1] Issuing benefit payments on time is top of mind for every plan sponsor, but liquidity is also critical for risk management, particularly for asset class rebalancing and private investment capital calls.... [2] Market volatility in response to the COVID-19 pandemic created ... an imbalance relative to investment policy targets between the growth portfolio and liability-hedging portfolio and, potentially, within each of those portfolios.... [3] Delay in the investment decision-making and execution process is a significant risk that should not be underestimated ... [4] [It] is essential that communications are clear, relevant, and sufficient for all parties[.]"

Cambridge Associates

Vanguard Says DC Losses Not So Bad in Long-Term View

"During the first quarter of 2020, both retail and defined contribution plan investors posted asset declines of 14%. However, when compared against the full one-year period ended March 31, declines for retail and retirement plan investors with 100% equity allocations were only 7% or 8%, ... Defined contribution investors with equity allocations of less than 75%, in fact, saw their wealth increase or stay the same due in part to ongoing contributions[.]"

Pensions & Investments

Coronavirus Concerns for ESOPs and ESOP Auditors

"[T]here may be a negative cascade effect in benefit plan administration if the COVID-19 effect is materially severe following the release of the initial calendar-year-end financial statements. The greatest area of concern is the company stock's value following a consideration of the effect of COVID-19.... The cascade effect may lead to other areas of concern such as the violation of loan covenants. This is a significant risk in newly established ESOP companies that are heavily leveraged. There may even be a going concern issue if, in management's opinion, there is substantial doubt about the company's ability to remain viable in the upcoming year."

Journal of Accountancy

Benefits in General

[Guidance Overview]

Editor's Pick Summary Table and In-Depth Analyses of COVID-19 Legislation for Employer-Based Retirement and Welfare Plans (PDF)

43 pages. "[This article catalogues] the provisions of the FFCRA and CARES Act that impact employer-sponsored retirement plans, health plans, and other benefits ... [The authors] have summarized the statutory provisions as well as related regulatory guidance that has been issued as of the date of this publication. The table includes a high level discussion of the law and practical considerations.... [A] comprehensive discussion of each provision [appears] at the end of the table."

Ice Miller LLP

[Guidance Overview]

Relief for Employee Benefit Plan Fiduciaries Due to COVID-19

"Private sector plan fiduciaries now have additional time during the COVID-19 outbreak to furnish required notices and disclosures to participants and beneficiaries ... The relief applies only if the plan fiduciary acts in good faith, which can include providing electronic disclosure for now ... Plan fiduciaries should be ready to fully comply with the notice and disclosure rules when normal business operations resume."

Hanson Bridgett LLP

Bankruptcy and Benefits Beyond a Crisis: How Chapters 11 and 7 Affect Retirement and Welfare Plans

"A filing under Chapter 11 may or may not affect the business's employee benefit offerings. Under a Chapter 7 filing, however, the business liquidates its assets to pay its creditors and the business ceases to exist. Typically, under a Chapter 7 filing, all benefit plans will be terminated."

Ogletree Deakins

Employer Plan Changes in Response to the COVID-19 Pandemic

"Prescription drug plans are changing to reduce barriers ... Mental health benefits are increasing ... Nearly all employers are offering telehealth services ... Employers are implementing DC plan changes as permitted by the CARES Act ... Health care benefits for furloughed and laid-off workers varies by employer."

International Foundation of Employee Benefit Plans [IFEBP]

Editor's Pick AICPA Delays Required Implementation of New Reporting Standards for Plans Subject to ERISA

"The American Institute of Certified Public Accountants (AICPA) has issued Statement of Auditing Standards (SAS) Number 141, which provides for a delay in effective dates for ... SAS 136, Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA ... to December 15, 2021. Additionally, it amends SAS 136 to no longer preclude early implementation."

Ascensus

Selected Discussions
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Can a Retirement Plan's Sponsor Adopt Disaster and Emergency Provisions in Advance?

"Some plan sponsors would prefer to adopt, once, a provision that allows whatever loans and distributions can be provided without tax-disqualifying the plan. Some would like such a provision to include what becomes allowed under future Acts of Congress. If a sponsor of a prototype or volume-submitter document presented such a provision, would the IRS approve? If a sponsor of a new individually-designed plan presented such a provision, would the IRS approve?"

BenefitsLink Message Boards

Use PPP Loan to Fund 401(k) Matching Contributions?

"Can the required matching contributions to a 401(k) be paid with proceeds from a PPP loan?"

BenefitsLink Message Boards

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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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