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July 10, 2020 logo logo
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[Guidance Overview]

IRS Reminder: IRA Contributions Made by July 15 Count as 2019 Tax Deduction

"Taxpayers can file their 2019 tax return now and claim the deduction before the contribution is actually made. But the contribution must then be made by the July 15 due date of the return, not including extensions.... Eligible taxpayers can usually contribute up to $6,000 to an IRA for 2019. The limit is increased to $7,000 for taxpayers who were age 50 or older by the end of 2019."

Internal Revenue Service [IRS]

[Guidance Overview]

Managing Required Minimum Distributions in 2020

"Individuals have until August 31, 2020, to repay or roll over RMDs taken in 2020 that are no longer required under the CARES Act waiver. Amounts repaid to the same IRA will not be treated as a rollover for purposes of the rule restricting owners to one rollover in a 12-month period. The normal 60-day limitation on rollovers will not apply to RMDs received in 2020 and rolled over by August 31, 2020."

Withum Smith+Brown, PC

[Guidance Overview]

DOL Proposal Would Curtail Social Investing

"Although only a small portion of retirement plan assets is currently invested in ESG funds, the agency recognizes that fiduciaries, sponsors and participants recently have placed greater emphasis on ESG factors. DOL perceives this trend as alarming and worries fiduciaries may be selecting ESG funds that sacrifice investment returns for nonpecuniary interests."


[Guidance Overview]

DOL Proposes New Guidance for Fiduciaries

"The 'new' fiduciary regulation actually reinstates the old ERISA regulation defining who is an 'investment advice fiduciary' (the 'Five-Part Test') which had been revoked with the 2016 Rule, and also reinstates various class exemptions and Interpretive Bulletins ... that had long been in effect prior to the adoption of the now-defunct 2016 Rule.... The Proposed Exemption generally covers any advice to acquire, hold, dispose of, or exchange securities, as well as certain principal transactions and advice to plan participants to rollover assets from an ERISA plan to an IRA."

Paul Hastings LLP

[Guidance Overview]

Editor's Pick DOL Provides Retirement Plans with Additional Safe Harbor for Electronic Disclosure of Required Plan Notices Under ERISA

"The new, additional safe harbor does not supersede the 2002 safe harbor.1 It goes beyond the 2002 safe harbor by covering all retirement plan participants and beneficiaries who have not opted-out, not just those who are 'wired at work' or who affirmatively consent to electronic delivery. The final rule only applies to required retirement plan disclosures that are within the jurisdiction of the DOL and is fundamentally similar to the proposed rule, published on October 23, 2019."

Trucker Huss


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[Guidance Overview]

The DOL's Final Regs on E-Disclosure of Retirement Plan Documents Become Effective Soon -- Are You Ready?

"The voluntary safe harbor provides two optional methods for electronic disclosure. The first method, generally referred to as 'notice and access,' is website posting, whereby plan administrators post covered documents on a website, if appropriate notices of internet availability (NOIA) have been furnished to the electronic address of the covered individual.... The second option is the 'email delivery method', under which plan administrators may send covered documents directly to the electronic address of a covered individual, with the covered documents being provided either in the body of an email or as an attachment."

The Wagner Law Group

Is Personal Information of Retirement Plan Participants an ERISA Plan Asset?

"The essence of the allegations is that employers breach their fiduciary duties of loyalty and prudence when they permit plan service providers to profit from the use of plan assets -- sensitive personal information of plan participants -- for non-plan purposes.... There are some measures plan sponsors can take to minimize the risk of these kinds of claims. [1] Consider relationships with plan service providers more carefully and earlier in the process.... [2] Limit by contract the ability of plan service providers to use plan participant data to market or sell to participants products unrelated to the retirement plan, unless the participants initiate or consent."

Jackson Lewis P.C.

CareerBuilder 401(k) Lawsuit Dismissed: No ERISA Violation in Fees or Investment Options

"The [federal district] court found that the plan offered an acceptable mix of options with expense ratios ranging from .04% to 1.06% -- within the range found to be reasonable as a matter of law by other courts. The court also found that plaintiff's allegations that defendants removed or modified a majority of the funds in the plan over a five-year period actually supported an inference that defendants had a prudent process in place for monitoring the plan's funds." [Martin v. CareerBuilder, No. 19-6463 (N.D. Ill. Jul. 1, 2020)]


CARES Act Expansion of In-Service Withdrawals Highlights 403(b) Plan Surrender Charge Disparity

"These plans typically feature annuities that require the payment of a surrender charge of up to 12% on asset withdrawals or transfers.... If surrender charges do apply, it could make better financial sense to take out a loan, a process which has been made easier for those affected by COVID-19 through the CARES Act.... [M]ost 403(b) loans are collateralized -- the insurance company will freeze a portion of the account and then make a separate loan that it earns profits on."

Hall Benefits Law

Problems with Co-Provider 457(b) Plan Arrangements

"[A] 'co-provider' arrangement ... [has] a single governmental 457(b) plan that is evidenced by a single plan document, with more than one plan recordkeeper and at least one plan investment consultant.... The chances of compliance violations (i.e., excessive deferrals, hardships, loans, etc.) were dramatically increased by having two recordkeepers not communicating with one another.... Neither of the recordkeepers were in a position to track all of the plan-level, participant-level limits and restrictions."

Best Best & Krieger LLP

Public Pension Reform and the 49th Parallel: Lessons from Canada for the U.S.

"Using a primary dataset, [the authors] benchmark the 25 largest U.S. plans against their ten largest Canadian peers, exploring key issues in a paired analysis. Calibrating the two approaches, [they] extract key lessons from the Canadian experience for the U.S. and end with applicable policy recommendations."

Clive Lipshitz and Ingo Walter, via SSRN

Getting to the Whys of Spending in Retirement

"The data show that the average individual aged 55-64 spent $54,500 in 2017. By ages 65-74, spending had decreased on average to $50,300 however, and by ages 75-85 it came in at around $38,500. But not only does the amount of money being spent decreases, the propensity for people to spend heavily in certain areas also changes ... What we cannot understand from the data, however, is why people are changing their spending as they do. This is critically important in designing retirement spending strategies."

Employee Benefits Research Institute [EBRI]

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Review of Vendor Contracts by Plan's Attorney -- OK to Pay Cost from Plan Assets?

"The plan sponsor's new legal counsel wants to review all contracts with their vendors. Due to the complexity of the agreements they want to use outside counsel or a consultant. Can the cost associated with this service be paid from the forfeitures account? Forfeitures are used to offset administration fees. This isn;t a plan design issue because it's just looking at agreements to be sure they're current and they encompass all features provided."

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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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