Retirement Plans Newsletter

June 9, 2020 logo logo
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Get Wise to Investing and Asset Allocation
June 10, 2020 WEBCAST

Preventing Fraud in Your Retirement Plan
June 12, 2020 WEBCAST
Defined Contribution Institutional Investment Association [DCIIA]

Coronavirus Tax Relief for Employers and Business Owners
June 12, 2020 WEBCAST
Wage and Hour Division [WHD], U.S. Department of Labor [DOL]

Recent ERISA Litigation and Decisions: Updates and Takeaways for Plan Sponsors
June 17, 2020 WEBCAST
Multnomah Group

Get Wise to Annuities
June 17, 2020 WEBCAST

Benefit Fund Offices: Lessons From the COVID-19 Crisis
June 18, 2020 WEBCAST
The Segal Group

COVID-19: Top 10 Considerations for your Employee Benefits Plans
June 24, 2020 WEBCAST
ABD Insurance & Financial Services

IRA Legal Issues and How to Avoid Them
July 16, 2020 WEBCAST

Common 401(K) Plan Errors
August 26, 2020 WEBCAST
Nova 401(k) Associates

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[Guidance Overview]

Electronic Delivery of Required ERISA Notices for 401(k) Plans Made Easier Under New DOL Rules

"Covered individuals may continue to receive their covered documents by e-delivery even after they separate from employment with the plan sponsor.... As a best practice, plan administrators should keep a secondary electronic address for the covered individual on file and send the notice to the secondary address if they are alerted to an invalid or inoperable primary electronic address."

Troutman Sanders

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[Guidance Overview]

DOL: Plan Fiduciaries Can Include Private Equity Investment Options for Defined Contribution Retirement Plans

"Private equity sponsors should bear in mind that all or a portion of an asset allocation fund's investment could constitute 'plan assets' under ERISA and, therefore, would need to be taken into consideration in determining whether benefit plan investors are 'significant' ... If benefit plan investment is significant, ... the sponsor will need to manage the fund as an ERISA plan asset fund, with appropriate procedures for satisfying ERISA fiduciary, plan asset, and prohibited transaction rules."

Latham & Watkins

[Guidance Overview]

DOL Issues Guidance About Private Equity Investments in 401(k) Plans

"While the information letter does not provide a formal safe harbor for plan fiduciaries that select a target date, target risk or balanced investment option with a private equity component, it provides significant comfort to plan fiduciaries that such a decision would not be per se imprudent for a defined contribution plan. It also sets forth the guidelines that a prudent fiduciary should follow when making such an investment decision."

Mayer Brown

Supreme Court Limits Ability of Pension Plan Participants to Sue for Fiduciary Breach

"[T]he Eighth Circuit, from which this appeal was brought, focused its decision ... on the fact that the plan became overfunded over the course of the litigation at the district court ... [and] concluded that, as a result, the plaintiffs lacked statutory standing under ERISA sections 502(a)(2) and (a)(3). By contrast, the Supreme Court held that the plaintiffs lack constitutional standing, and did not base its decision on the fact that the plan was overfunded." [Thole v. U.S. Bank N.A., No. 17-1712 (S. Ct. Jun. 1, 2020)]

Groom Law Group

Supreme Court Clears Bankruptcy Restructuring of Puerto Rico Government Pension Plans

"While the restructuring process has not yet ended, barring unexpected developments within the next couple of years the plans are likely to be modified as follows: the accumulation of additional defined accruals will be permanently frozen; government employees in Puerto Rico will be covered solely under a defined contributions/savings plan; and previously accrued pension benefits will be reduced by up to 8.5 percent." [Financial Oversight and Management Board for Puerto Rico v. Aurelius Investment, LLC, No. 18-1334 (S. Ct. Jun. 1, 2020)]

Ogletree Deakins


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Eighth Circuit Affirms in Part, Reverses in Part University's Early Win in ERISA Fee Suit

"The Eighth Circuit affirmed the dismissal of plaintiffs' fund-by-fund challenge of fees and performance ... However, the Court reversed the dismissal of plaintiffs' claim based on including retail share classes in the plan. Recognizing there could be lawful reasons for the fiduciaries' conduct, the Court emphasized that inferences must be drawn in favor of the plaintiffs when reasonable, and the allegations that lower-cost share classes existed and that the plan had the buying power to invest in them stated a claim at the pleading stage." [Davis v. Washington Univ. in St. Louis, No. 18-3345 (8th Cir. May 22, 2020)]

Jackson Lewis P.C.

Defined Benefit Plans Excel in Depressed Financial Markets (PDF)

"Although the Fair Market Value (FMV) of a plan's assets may have decreased by 25% or more, there may be little or no impact on DB plans' funding costs: [1] Unfunded liabilities are at their least for valuation dates on or before February 1, 2020.... [2] Life annuity payments directly from DB Plan assets smooth the effects of market fluctuations.... [3] Lump Sum Distributions and single premium life annuity purchases amplify market losses.... [4] DB Plan investments are outside the reach of panicky participant investment churning.... [5] DB Plans usually limit participant withdrawal rights before retirement age."

H. C. Foster & Company

Attitudes Toward Retirement by Women of Different Marital Statuses

"76 percent of married women expressed being very or somewhat confident they will have enough money to live comfortably throughout their retirement years, with only 43 percent of divorced women workers and 51 percent of never-married women workers sharing this confidence.... The divorced women workers were markedly more likely to have smaller levels of assets ... Unmarried women were also less likely to have tried to figure out how much money they will need to live comfortably throughout retirement[.]"

Employee Benefit Research Institute [EBRI]

Editor's Pick 401(k) Plan Sponsors Should Make Employees Aware of Age-Based Social Security Risk

"The Average Wage Index (AWI) for 2020 will ... be the AWI used to determine indexing on all applicable earnings for those born in 1960. The widespread layoffs and (corresponding decrease in annual wages) from the COVID-related recession means 2020 AWI is projected to go down for the first time since 2009 and for only the second time since 1951.... If the lower projection holds true, the reduction in 2020 AWI means every indexed year of earnings is reduced for those born in 1960 when compared to workers born in 1957, 1958, and 1959.  Are 401k plan sponsors doing enough to explain to employees the implications of Social Security and the impact it may have on its retirement assumptions?"

Fiduciary News

Three Proactive Conversations You Need to Have with Plan Sponsor Clients

"During the unprecedented chain of events we are seeing unfold thus far in 2020, an extra layer of fiduciary care couldn't hurt.... Mid-year projections may help anticipate nondiscrimination testing failures and could be an opportunity to help employers get ahead of the issue.... Offering your guidance and expertise on broader financial topics may help strengthen your relationships and help your clients better provide for those employees recovering from financial hardships."

Fiduciary Benchmarks


Pandemic Heightens Concerns About Target Date Fund Risk (PDF)

"Target date funds (TDFs) have grown tenfold since 2008, when they lost 30%, from $200 billion to $2.5 trillion. Recent COVID-induced losses have alerted investors to the risk in TDFs.... Most TDFs are more than 85% in risky assets at their target dates."

Target Date Solutions


DOL Allowing Private Equity in 401(k)s Draws Mixed Reaction

"The landmark decision pries open the door to the multi-trillion-dollar retirement plan market for the private equity market, long keen on gaining access.... [O]pponents have expressed concerns about average 401(k) participants not understanding the increased risk of investing in private equity, the potential for more lawsuits against plan sponsors for breach of fiduciary duty.... But proponents of allowing private equity investments in 401(k)s have been plenty vocal as well -- particularly those who had something to do with it."

401(k) Specialist

Benefits in General

[Guidance Overview]

Editor's Pick Survey of State Laws Covering E-Signatures and Remote Online Notarization

"Today, electronic notarization is legally authorized in all states by [the Electronic Signatures in Global and National Commerce Act (E-SIGN)] and/or [the Uniform Electronic Transactions Act (UETA]. However, as of March 2020, only 23 states have laws that enable their notaries to conduct remote notarizations."

Ballard Spahr LLP

[Guidance Overview]

PPP Loan Forgiveness: Calculating Payroll Costs

"Except for owner-employees, the amount of health insurance premiums paid for by the employer may also be included for those paid or incurred during the chosen covered period.... [T]hese should also include health reimbursement arrangement [HRA] and health savings account (HSA) employer contributions.... Because guidance has so far strayed from the 'paid and incurred' to 'paid or incurred' standard, it's possible (absent further guidance) that employers could pay their full 2019 retirement contributions, 2020 match contributions (safe harbor or not), and even potentially their full year's 2020 profit sharing, money purchase pension, or other defined contribution plan contributions to the plan during the chosen coverage period, and have it count towards payroll costs eligible for loan forgiveness. If this interpretation stands in some form of Treasury and/or SBA final guidance, there are numerous operational issues to consider[.]"

Kushner & Company

Using Zoom for Confidential Meetings

"[L]et's look at specific steps that you can take to enhance security.... These are strong protections. They do not completely replicate the privacy of an in-person mediation, but they are close. So what are the problems?"

Bob Blum Mediation

Selected Discussions
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Line 19 of IRS Form 5310 -- Proving That Rollovers Into the Plan Were Qualified

"Any practical suggestions for responding to line 19, which requires submission of proof that any rollovers or asset transfers received by the plan applying for the determination letter were from a qualified plan or IRA? For instance, is it sufficient to describe the plan's rollover process in general? Or is the IRS looking for something more particularized for each rollover accepted?"

BenefitsLink Message Boards

Cash Balance Plan Follows RMD Rules for DB Plans: Adjust the Hypothetical Account Balance to Reflect the Distribution?

"I understand that cash balance plan should follow 401(a)(9) rules (DB rules) to calculate RMD amount. Do I need to adjust the hypothetical account balance to reflect RMD withdrawal? If we adjust the balance and the plan is frozen, it would result in accrued benefit decreasing, which in turn reduces the next RMD amount. Shouldn't the DB RMD with Life Annuity payment be level?"

BenefitsLink Message Boards

How to Code a Roth Distribution Due to Disability?

"How would you process a Roth direct distribution due to disability? My original thought was that it should be code 'B' and '3', but the 1099-R instructions state that code 3 can only be used with one other code ('D')."

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Press Releases

Elizabeth Catterson Earns QKA Designation by ASPPA
Steidle Pension Solutions, LLC, [SPS]

Romero Wealth Management is Certified for Fiduciary Excellence
Centre for Fiduciary Excellence [CEFEX]

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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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