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[Guidance Overview]

DOL Provides Welcome Guidance on 401(k) Plan Investment in Private Equity

"The guidance ... was heralded by both the DOL and the [SEC] as helping Americans who are saving for retirement gain access to alternative investments. However, ... [Information Letter 2020-06-03] does not approve of private equity investments as a standalone direct investment for 401(k) plans. It also only addresses private equity fund investments, and does not discuss whether the same considerations would apply to investments in other private funds, such as real estate funds, debt funds, infrastructure funds or venture capital funds."

King & Spalding

California Supreme Court Leaves the California Rule Largely Intact in Opinion Concerning Public Employee Pension Rights

"The Court's ruling largely leaves the traditional California Rule and analysis intact with one deviation.... [T]he Court determined that where pension benefits are protected by the contract clause of the California Constitution, any modification of a constitutionally protected pension benefit must be reasonable in that it 'must bear some material relation to the theory of a pension system and its successful operation.' Whereas traditionally, such a modification must be accompanied by other benefits, the Court found that where, as here, providing alternative benefits would be inconsistent with the purpose of the constitutionally proper modification, alternative benefits would not be required." [Alameda County Deputy Sheriff's Ass'n v. Alameda County Employees' Retirement Ass'n., No. S247095 (Cal. Jul. 30, 2020)]

Liebert Cassidy Whitmore

California Supreme Court Determines Local Governments Can Crack Down on Pension Spiking

"Reformers had hoped the court would use this case to strike down the California Rule, or conclude that it allows broader adjustments to pension formulas going forward. They didn't get that." [Alameda County Deputy Sheriff's Ass'n v. Alameda County Employees' Retirement Ass'n., No. S247095 (Cal. Jul. 30, 2020)]

Orange County Register

Princeton 403(b) Excessive Fee Settlement Features $5.8 Million Price Tag

"In addition to the payment into a settlement fund, Princeton ... will not increase the plans' recordkeeping fees for three years and will use commercially reasonable best efforts to continue to attempt to reduce recordkeeping fees. Princeton has also agreed to conduct [an RFP] process for recordkeeping-administrative services and outside independent investment consulting services within three years after the settlement approval." [Nicolas v. The Trustees of Princeton Univ., No. 17-3695 (D.N.J. proposed settlement filed Jul. 28, 2020)]


IRS Updates Operational Compliance List for Retirement Plans

"The recent OC List includes changes effective in 2020 ... [1] Nondiscrimination testing relief for closed defined benefit plans; [2] Penalty-free distributions from qualified retirement plans to pay for childbirth or adoption expenses; [3] Increase in the starting age for minimum required distributions from 70-1/2 to 72; [4] Portability of lifetime income options from defined contribution plans; [5] Reduction in the minimum age for in-service distributions from 62 to 59-1/2."


CARES Act: Implications for Retirement Security of American Workers

"[There are] potentially significant reductions in retirement balances as a multiple of pay at age 65 when employees take full CRDs and fail to pay them back.... The most catastrophic scenario is one in which workers are provided CARES-Act-like access to withdrawals time and again as various crises occur.... In this scenario, the overall median reduction in retirement balances as a multiple of pay at age 65 is 54 percent."

Employee Benefit Research Institute [EBRI]

Protecting Retirement Plan Participants and Your Company's Bottom Line When Employees Return to Work

"This article provides an overview of the more common retirement plan issues facing plan sponsors along with suggestions for addressing these challenges. [1] Salary and bonus reductions to conserve cash ... [2] Furloughs and layoffs ... [3] Partial retirement plan terminations ... [4] Suspending employer contributions to retirement plans ... [5] Retirement plan relief under the CARES Act ... [6] Performance-based equity awards ... [7] Repricing of stock options or stock appreciation rights (SARs) ... [8] Deferred compensation plans ... [9] Defined benefit pension plans ... [10] Fiduciary considerations for plan sponsors."

Ice Miller LLP

The Key to Turning on 401(k) Annuities

"Before income-generating annuities can become a common feature in 401(k) plans ... plan recordkeepers will need an easier way to swap data with the life insurers who badly want to market annuities through those plans.... The target market for annuities includes participants who've been defaulted into TDFs.... But will plan sponsors acquiesce to such an arrangement, especially if the rider costs as much as 100 basis points per year?"

Retirement Income Journal

Estimated Cost of Retiree Pension Risk Transfer Rises in June (PDF)

"During June, the estimated cost to transfer retiree pension risk to an insurer rose 70 basis points, from 103.9% of a plan's total liabilities to 104.6% of those liabilities. This means the estimated retiree PRT cost for the month is now 4.6% more than those plans' retiree accumulated benefit obligation (ABO)."



IRI Comment Letter to DOL on ESG Proposal (PDF)

"IRI and our members respectfully urge the Department to withdraw the Proposal.... Singling out the ESG investment category for unique treatment and scrutiny is inconsistent with well-established, principles-based ERISA regulations. Further, the ESG Proposal will trigger unintended consequences, expose plan fiduciaries to additional regulatory scrutiny, and heighten litigation risks related to the selection of all plan investment options."

Insured Retirement Institute [IRI]


Editor's Pick Rising Cost of Government Employee Retirement Plans Is Untenable in Some States

"In Canada, some of the most successful public pensions ... have all adopted a form of risk sharing ... When times are tough, they will partially or fully remove inflation protection for a brief period and typically restore it retroactively when their plan is fully funded again. This ensures intergenerational equity between active and retired members of the plan and it ensures that as more and more members retire, the risk of the plan is borne by active and retired members."

Pension Pulse

Benefits in General

[Guidance Overview]

IRS Letter Allows Allocation of Contributions Between HRA and Profit-Sharing Plan

"In a private letter ruling, the IRS has affirmed that employees may allocate employer contributions between a funded [HRA] and a qualified profit-sharing plan without altering the tax effects of either plan. The ruling was requested by a union proposing plan amendments that would give employees an annual advance election to allocate a portion of their employers' contributions ... between the HRA and the profit-sharing plan. In the absence of an employee election, a default uniform fixed contribution would be allocated to the profit-sharing plan and the remainder would go to the HRA."

Thomson Reuters / EBIA

Plans That Have Many Employers/Members in Many States May Have Better Chance Winning Choice of Law Issues

"[M]any states ban discretionary language in ERISA plans. This issue tees up litigation over what state law will apply ... This new case ... provides helpful analysis when litigating choice of law issues ... Choice of law decisions may be more favorable when the employer's plan is part of a trust with a Master Policy covering participating members over many states." [Earle v. Unum Life Ins. Co. of America, No. 19-2903 (C.D. Cal. Jul. 23, 2020)]

Lane Powell PC

How to Communicate Employee Benefits in Uncertain Times

"Develop a plan and use a variety of communication channels ... Determine the right channels to reach the workforce ... Benefits communication Is a year-round opportunity ... Measure, refine, and plan for next year."


For Employees: Understanding and Maximizing Your Employee Benefits

"[It] can be challenging to consider all angles of a benefits package at the early stages of your career, or conversely, difficult to re-assess as life progresses and your needs change.... [This guide can] serve as a summary of the most common benefits provided by employers, with some helpful hints to help you navigate the world of employee benefits as you review your options."

Wealthspire Advisors

Executive Compensation
and Nonqualified Plans

COVID-19 Considerations for Nonqualified DC Plans

"Employers should not assume that the tax-qualified rules under the [CARES Act] automatically apply to nonqualified plans, including the power to cease deferrals.... [A] furlough would typically not be considered a separation of service that would trigger a nonqualified plan payment ... 409A does provide some flexibility to temporarily delay payment with one important caveat: A delay is only possible if making the payment as specified in the plan would jeopardize the ability of the employer to continue as a going concern."

Hall Benefits Law

Selected Discussions
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Owner Wants to Disown an Adult Child -- Affects HCE Aggregation Rules?

"If a business owner legally disowns and/or disinherits his adult son, would his son still be considered a Highly Compensated Employee? The son has no direct ownership of the company and is well under the compensation threshold."

BenefitsLink Message Boards

Starting and Stopping Deferrals in a 401(k) Plan

"Client's plan document has entry dates of 1/1 and 7/1. It says that changes to deferrals can be made on entry dates. Several participants stopped their deferrals during this COVID pandemic, and now want to restart them before 1/1/2021. Can they start again next payroll? I don't see anything in their document that says they can restart at any time, but is that a given?"

BenefitsLink Message Boards

Due Date for 2019 Calendar Year 5500 -- Extension in the Works?

"Is anyone hearing anything as to whether the October 15 extended deadline will be extended to 1/1/2021 due to COVID-19?"

BenefitsLink Message Boards

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Press Releases

Most Popular Items in the Previous Issue

Practice Note on ASOP No. 51: Risk Assessment in Practice (PDF)
Pension Committee of the American Academy of Actuaries, Inc.
1298 Minnesota Avenue, Suite H
Winter Park, Florida 32789
(407) 644-4146

Lois Baker, J.D., President
David Rhett Baker, J.D., Editor and Publisher
Holly Horton, Business Manager

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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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