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[Guidance Overview]

Editor's Pick IRS Issue Snapshot: Catch-Up Contributions Under Section 457(b) Plan of Governmental and Tax-Exempt Employers

"This issue snapshot discusses catch-up contributions under an IRC Section 457(b) plan.... Annual deferrals participants make to an IRC Section 457(b) plan are limited by the basic annual limitation unless a catch-up provision applies, in which case they're higher. IRC Section 457(b) plans may permit special 457 catch-up contributions during the last three taxable years before a participant's normal retirement age. Governmental IRC Section 457(b) plans may also permit age 50 catch-up contributions."

Internal Revenue Service [IRS]

[Guidance Overview]

Private Equity in ERISA DC Plans: DOL Issues Guidance

"Fiduciaries will still have to deal with any prohibited transaction concerns under ERISA, as well as securities, banking and other laws, which the guidance does not address.... The types of funds the DOL has in mind under [Information Letter 2020-06-03] are those with partial exposure to PE; the remainder of the fund's portfolio would need to have 'a range of asset classes with different risk and return characteristics and investment horizons.' The DOL specifically envisions the non-PE asset classes to be both liquid and have readily ascertainable market values, such as publicly-traded securities."

Stradley Ronon

[Guidance Overview]

DOL Final Regs Establish an Alternative Safe Harbor for Electronic Disclosure of ERISA Information

"The new safe harbor becomes effective on July 27, 2020 ... The preamble to the new regulations clarifies that plan administrators may rely on the new safe harbor before that date.... [W]ith the present COVID-19 crisis and the disclosure relief presently in place, ... most plan administrators will wait until the end of the current disclosure relief period (60 days following the end of the COVID-19 declared emergency) before implementing the new safe harbor."

McDonald Hopkins

[Guidance Overview]

DOL Finalizes New Electronic Disclosure Option for Retirement Plans

"The relief provided in [EBSA Disaster Relief Notice 2020-01], including the expanded use of electronic means of communicating, is short-term during the COVID Outbreak Period.... [T]hese final regulations, along with the 2002 final regulations, should be used to determine retirement plan compliance on an ongoing basis ... [P]lans now have substantial flexibility to respond to the challenges of the COVID outbreak."


[Guidance Overview]

IRS Allows Remote Notarization of Participant Elections for 2020

"Although it is unclear whether the IRS will move to make a more permanent change for future years, plan sponsors and recordkeepers can rely on this important relief for this year (retroactive to January 1). Plans subject to these notary restrictions (e.g., defined benefit plans and money purchase pension plans) should consider modifying distribution and loan procedures accordingly for 2020. And 401(k), etc. plans may wish to incorporate these steps in their account beneficiary designation procedures for the year."

Groom Law Group

[Guidance Overview]

Temporary Relief Regarding Spousal Consent Under Qualified Retirement Plans

"The temporary relief is helpful to retirement plan administrators and participants who are electing benefits. However, plan administrators may be reluctant to follow the additional procedures for elections witnessed by a plan representative. They may be less reluctant to utilize remote notarization, which generally places the compliance obligation on the notary."


District Court Opinion Highlights the Dangers of Cybersecurity Breaches for Plan Sponsors and Service Providers

"The court ruled that the TPA service provider, after being sued by the plan sponsor for the cybersecurity breach, may bring counterclaims against the plan sponsor for contribution and indemnity because the plan sponsor was alleged to be 'careless' in its 'computer/IT systems' and 'employment policies' in permitting an employee and plan participant to work remotely without adequate safeguards to do so. The decision suggests a looming threat of security breaches and a resulting broad scope of fiduciary liability that can touch everyone involved in the running of a plan, regardless of traditional fiduciary titles." [Leventhal v. MandMarblestone Group, LLC, No. 18-2727 (E.D. Penn. May 27, 2020)]

The Wagner Law Group

ERISA Fiduciaries Get Protection as a Result of Supreme Court Ruling

"[A] footnote in the Court's opinion states that the Court declined to rule on whether pension plan participants would be able to bring a similar suit if fiduciary mismanagement jeopardized the employer's and the plan's ability to make benefit payments on a go-forward basis because those facts had not been alleged in the case.... Armed with the reasoning, holdings and conclusions of the Supreme Court in U.S. Bank, ERISA fiduciaries may now have some new grounds to mount a successful defense against plaintiff-participant allegations, particularly in class actions." [Thole v. U.S. Bank N.A., No. 17-1712 (S. Ct. Jun. 1, 2020)]

Cozen O'Connor

Supreme Court Bars ERISA Lawsuits by DB Plan Participants Without Concrete Injuries

"In a notable limitation to its decision, the Court avoided resolving an argument by amici curiae that an injury in fact could arise from mismanagement that was so egregious that it substantially increased the risk that both the plan and the employer would fail.... Such theories might be addressed in future cases, particularly where the pension plan is underfunded, unlike the U.S. Bank plan in this case." [Thole v. U.S. Bank N.A., No. 17-1712 (S. Ct. Jun. 1, 2020)]

Winston & Strawn LLP

SCOTUS Rules That Pension Plan Participants Did Not Have Standing to Sue Plan Fiduciaries

"It is difficult to read this decision and not conclude that the majority was suspicious of the growing number of class action ERISA lawsuits being brought by the plaintiffs' bar that are driven more by the prospect of attorney's fees rather than recovery to the plaintiffs. As a practical matter, if the plaintiffs, in this case, were to succeed in their lawsuit, U.S. Bank would ... [have] to make a payment to the plan ... [which] would simply reduce U.S. Bank's funding obligation to the plan, without increasing participants' benefits. But even a small damages payment could lead to an award of attorneys' fees, which is a significant driver behind these lawsuits." [Thole v. U.S. Bank N.A., No. 17-1712 (S. Ct. Jun. 1, 2020)]

Nixon Peabody LLP

Sixth Circuit: Bankruptcy Chapter 13 Debtor May Exclude 401(k) Plan Contributions from Disposable Income

"Applying several canons of statutory construction to the statute, the Sixth Circuit held that the hanging paragraph excludes from disposable income in the debtor's post-bankruptcy petition her 401(k) plan contributions in the dollar amount that the debtor's employer withheld from her wages before her bankruptcy.' [In re Davis, No. 19-3117 (6th Cir. Jun. 1, 2020)]

Thomson Reuters Practical Law

Should You Tap Retirement Funds in a Crisis? Increasingly, People Say Yes

"A move to loosen retirement-account rules underscores a growing acceptance of the idea that retirement accounts, which hold trillions in wealth, do double duty as emergency funds. The shift in thinking coincides with trends under way before the last recession. People are living and working longer while juggling careers interrupted by spells of unemployment and career switching. Saving steadily for 40 years to fund maybe three decades of retirement no longer matches the life cycle of a growing chunk of the population."

The Wall Street Journal; subscription may be required

Comparison of Retirement Spending Budget Calculation Approaches: 'Lumpy' Income and Expenses Must Be Considered

"Income may start and stop at different times during retirement and may not be payable in real dollars throughout retirement. We call these sources of income 'lumpy income.' ... Most of the simpler budget calculation approaches do not coordinate with lumpy income sources and none of the approaches other than the Actuarial Approach coordinates with lumpy expenses.... [The authors] believe it is important to separately budget for non-recurring lumpy expenses, as it is simply inefficient to fund the same as for recurring lifetime expenses if they will not actually be payable for life."

Ken Steiner, FSA Retired


Supreme Court Decision Means Workers Now Stripped of Right to Sue for Pension Plan Mismanagement

"The opinion ... gives short shrift to the provisions in [ERISA], that say that participants have the right to sue to enforce provisions of the law that require plan trustees to manage plan money prudently, without conflicts of interest, and solely in the interest of plan participants and beneficiaries.... The opinion asserts that legal action by retirees is not needed because pension funds face 'a regulatory phalanx' consisting of employers and their shareholders, the [DOL], and other plan fiduciaries." [Thole v. U.S. Bank N.A., No. 17-1712 (S. Ct. Jun. 1, 2020)]

Pension Rights Center

Selected Discussions
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Missed the Blackout Notice and Other Disclosures

"We have a client that moved from one recordkeeper to another. They were provided with several notices by the new recordkeeper and the funds have been transferred. Yesterday we found out the client did not distribute any of the notices. What are the penalties for something like this and does it require reporting to DOL/IRS?"

BenefitsLink Message Boards

Removal of Automatic Force-Out: A Prohibited Cutback of Benefits, Rights or Features?

"For those plans that just don't participate in the automatic force-out process and therefore aren't following the helpful provision that's in their document: is it a cutback to remove 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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