Retirement Plans Newsletter

May 19, 2020

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View Coronavirus (COVID-19) News and Resources

[Guidance Overview]

DOL Provides Limited Relief to Retirement Plans and Their Fiduciaries in Dealing with the COVID-19 Pandemic

"[EBSA Disaster Relief Notice 2020-01] addresses the following issues as impacted by the Pandemic: [1] deadlines for providing participant disclosures and notices; [2] procedures for plan fiduciaries to authorize loans and distributions, and the timing for adopting amendments under the CARES Act; [3] delays in making deposits of participant contributions and loan repayments; [4] failures to provide advance notice of a blackout period; [5] extension of certain Form 5500 filing deadlines, and [6] relaxed enforcement of compliance with ERISA’s fiduciary standards."

Trucker Huss

Does e-Disclosure Rule Allow for Postcard Notification of Website Links?

"If finalized in its current form, the rule would still not permit the use of a postcard or letter with a website link as safe-harbor disclosure compliance for an SPD.... [A] notice to a retirement plan participant could be sent to an electronic address provided to by the participant or assigned by the employer to the employee for such purpose. Additionally, if the participant has opted out of covered documents electronically, the delivery of this notice of internet availability would fall outside of the safe-harbor, as proposed."

PLANSPONSOR; free registration may be required

How Layoffs Will Impact Your Upcoming 401(k) Plan Audit

"[If] you're a business that serves as a 401(k) plan sponsor and has had to lay off employees during the pandemic, it's imperative that you understand how these layoffs will affect your 401(k) plan audit.... Auditors will most likely pull bigger samples.... Auditors will probably ask you more questions.... Auditors will need to consider additional disclosures.... Gather and maintain all relevant documentation.... Revisit your processes.... Ensure the appropriate people have access to pertinent materials.... Contact your auditor."

Summit CPA Group, via ForUsAll

Should We Make Up for Earnings Lost as a Result of a Delayed Distribution?

"[If] you make the determination that your particular distribution processing delay was in fact a fiduciary error that supports making a restoration payment, that likely means you should apply a similar standard to all other distribution requests (in the recent past and in the future). If you typically turn distributions around in two days and this one took you five, that might still be administratively reasonable under the circumstances. However, if it took two weeks, it seems one could reasonably argue there was a fiduciary misstep."

DWC

CRDs and Roth Conversions -- Abuse of the Rules?

"The CARES Act does not appear to preclude an affected person from taking a CRD and immediately rolling those dollars into a Roth as a conversion. The taxes can then be spread over the CRD-allowable 3-year period. Individuals who do not need the money from their retirement account due to a coronavirus emergency, but who can otherwise shoehorn themselves into the definition of an 'affected person,' could abuse this loophole."

Slott Report

Editor's Pick Retirement Security Amid COVID-19: The Outlook of Three Generations (PDF)

141 presentation slides. "Almost one in four workers (23 percent) say their confidence in their ability to retire comfortably has declined in light of the pandemic. Across generations, the decline in retirement confidence increases with age ... Seven in 10 workers are currently saving for retirement through their current/former employer's retirement plan and/or outside the workplace ... One in five workers (22 percent) have already and/or plan to take a loan and/or withdrawal from their 401(k), 403(b), or similar plan, including 15 percent who have already done so and 13 percent who plan to do so.... Millennials are more likely than older generations to be dipping into their retirement savings."

Transamerica Center for Retirement Studies

How We Rescued Retirement Savings from the 401(k) Frankenstein Created by an Infatuation with the 'Style Box'

"In 1992, Morningstar introduced their 'Style Box' format. This simple nine-box square offered an easily digestible way for investors to understand the differentiating characteristics of the mutual funds they held.... And, almost overnight, the 401(k) industry changed.... Not only did the infatuation with style boxes lead to plan designs which arguably hurt investors, it has ended up encouraging a form of behavior among portfolio managers that can harm investment performance.... After all these years, 401(k) plans have returned to the original concept of mixed asset lifestyle portfolios."

Fiduciary News

Estimated Cost of Retiree Pension Risk Transfer Drops Slightly from April

"During April, the estimated cost to transfer retiree pension risk to an insurer decreased slightly for the month, with costs ticking down from 105.7% of a plan's total liabilities to 105.5% of those liabilities. This means the estimated retiree PRT cost for the month is now 5.5% more than those plans' retiree accumulated benefit obligation (ABO). April's decrease is the result of discount rates dropping by 56 basis points, compared to a 51 basis point drop for annuity purchase rates, so that the relative cost of annuities declined slightly."

Milliman

Public Retirement System Governance: Stakeholder Roles (PDF)

"[1] Public retirement system governance is dispersed among different stakeholders ... to prevent one group from accumulating excessive authority in one area.... [2] [W]ithin their unique responsibilities each stakeholder faces restrictions and limitations on their activities. [3] The legislature is generally responsible for the primary elements of public retirement system governance ... which are the most consequential in terms of affecting a plan's funding level and cost."

National Association of State Retirement Administrators [NASRA]

House Democrats Propose New Round of Stimulus That Includes Significant DB Minimum Funding Relief

"The HEROES Act would reduce ERISA defined benefit plan minimum funding requirements in three ways: [1] Increase/extend interest rate stabilization relief ... [2] 5% floor on 25-year average rate: ... [3] Amortization bases set to zero as of 2020, 15-year amortization going forward: ... The HEROES Act does not change the variable-rate premium rules."

October Three Consulting

[Opinion]

Pension Rights Center Letter to FRTIB Objecting to Temporary Waiver of Notarization Requirement for Spousal Consent (PDF)

"The Board should not allow electronic signatures, especially at the same time it is obviating the need for in-person notarization.... Requiring notarization is no guarantee that fraud will not occur, but at least it makes the fraud more difficult to complete. Without it, TSP processing of withdrawal applications under the Interim Rule will essentially be operating on the honor system.... We urge the Board to provide that the Rule should automatically sunset within 6 months from the date it was published, or when the President announces that the National Emergency has ended, whichever is sooner."

Pension Rights Center and National Women's Law Center

Benefits in General

Tenth Circuit Upholds Choice-of-Law Provisions in ERISA Health Benefits Plan

"[T]he panel held that if there were a legitimate connection to the state whose law was chosen by a plan, then that state's law should govern the enforceability of any discretion-granting clauses.... [T]his holding clarified whether [the health benefit] policy was governed by Pennsylvania law -- as it declared in a choice-of-law provision -- or subject to a Colorado statute that forbids insurance policies from giving insurers, plan administrators or claim administrators discretion to interpret the plan's terms to make benefits decisions." [Ellis v. Liberty Life Assurance Co. of Boston, No. 19-1074 (10th Cir. May 13, 2020)]

Troutman Sanders

Selected Discussions
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Participant Count in a Prevailing Wage Retirement Plan

"Client established a separate 401(a) plan just for prevailing wage contributions. They have a group of SCA employees who are the eligible participants. Out of 35 total SCA employees only 15 received contributions and have account balances. The other 20 had no excess after wages and other benefits so they received no prevailing wage contributions. For the Form 5500-SF, are the 20 who did not receive contributions considered participants?"

BenefitsLink Message Boards

AFTAP Certifications in the Age of COVID

"Anyone seeing (or acting on) situations where the 1/1/2020 funded ratio is 'high' (90% or above) and the plan sponsor is instructing the actuary not to issue the 2020 AFTAP certification, thus letting the default percentages apply? Could be useful when [1] the plan allows lump sums greater than $5,000 and [2] the sponsor is trying to save cash in the plan very soon after the assets have taken a dive. Any other thoughts on the process? The communication (etc.)?"

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Press Releases

America is Looking to Safely Get Back to Work
National Alliance of Healthcare Purchaser Coalitions

PSCA Honors Phyllis Borzi With Lifetime Achievement Award
PSCA [Plan Sponsor Council of America]

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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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