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Retirement Plans Newsletter August 13, 2020 |
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Newly Posted Reframing Employee and Retirement Plan Participant Communication
Will COVID-19 Trigger Teacher Retirements?
Distribution Options for Employees
IRA Excess Contributions and Recharacterizations
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Discussions |
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This Newsletter:
BenefitsLink Health & Welfare Plans Newsletter:
Message Boards Digest:
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[Official Guidance]
"This notice provides guidance regarding the election of alternative minimum funding standards for certain defined benefit pension plans under Section 430(m) of the Internal Revenue Code, which was added by section 115 of the [SECURE Act] ... [T]his notice: [1] Specifies the applicable United States Treasury obligation yield curve that is used to determine the present value of certain increases in benefits; [2] Sets forth rules and procedures relating to the election under Section 430(m), including a limited period for plan sponsors to make the election for prior years; [3] Provides relief related to the impact of the election on the application of Section 436; [4] Provides additional flexibility under Section 430 to facilitate retroactive elections; and [5] Provides guidance on the reporting requirements that reflect the effect of the election." Internal Revenue Service [IRS] |
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[Official Guidance]
"The September 2020 lump sum interest assumptions will be 0.00 percent for the period during which a benefit is (or is assumed to be) in pay status and 4.00 percent during any years preceding the benefit's placement in pay status. In comparison with the interest assumptions in effect for August 2020, these assumptions represent no change in the immediate rate and are otherwise unchanged." Pension Benefit Guaranty Corporation [PBGC] |
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[Guidance Overview]
"The updated safe harbor explanations reflect the increased age for determining the required beginning date for minimum distributions (age 72, for individuals attaining age 70-1/2 after 2019), and address the tax treatment of qualified birth or adoption distributions -- both enacted as part of the [SECURE] Act ... The notice explains that coronavirus-related distributions under the [CARES] Act may be recontributed to an eligible retirement plan, but they are not eligible rollover distributions for certain purposes, so a plan administrator is not required to provide Code Section 402(f) notices to recipients of those distributions." Thomson Reuters / EBIA |
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"It may not feel like an ideal time for plan sponsors to review their retirement plan offerings; however, market stress and current economic hardships may uncover plan design shortfalls, gaps or opportunities. Taking time now to revisit and re-evaluate plan design and its impact on retirement plan health can support employees' financial well-being and retirement security in this age of uncertainty." PLANSPONSOR; free registration may be required |
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"As soon I mentioned '50-something Gen X,' I bet that assumptions were made about some of my behaviors. Were they correct? If not, you can see what a challenge it might be for a recordkeeper/TPA to engage participants like me, particularly since they may be making assumptions about a large demographic within the plan." Cammack Retirement Group |
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"[10] The ERISA bond does not protect plan fiduciaries from liability.... [9] The use of a corporate trustee does not protect the plan sponsor from liability.... [8] If plan fiduciaries are not retirement plan experts, they should hire some ... [7] The hiring of plan fiduciaries must be selected through a process.... [6] Plan fiduciaries need to keep good records.... [5] Avoid the one-stop-shop; plan fiduciaries should hire at least one retirement plan provider who is independent.... [4] Plan fiduciaries need to know the cost of their plan's administration ... [3] Plan fiduciaries need to annually review the cost and services of their plan providers, as well as their Plan.... [2] Plan fiduciaries are responsible for the errors and malfeasance by the retirement plan providers they selected.... [1] Just because a plan is participant-directed, plan fiduciaries may still be on the hook." Ary Rosenbaum, via JD Supra |
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"It is too soon to know whether defendants will succeed in having the case dismissed on the pleadings but this case shines a light on some best practices for a fiduciary considering an interim valuation to reflect subsequent material adverse events like the COVID-19 pandemic, including: [1] working with the plan sponsor and plan counsel to make sure the plan documents permit this or are revised to permit this, before proceeding, and [2] considering whether not setting a special valuation increases the risk of loss for the plan trust so failing to conduct interim valuations could be a fiduciary breach in itself." [Lipshires v. Behan Bros. Inc. Retirement Plan, No. 20-252 (D.R.I. complaint filed Jun. 8, 2020)] Jackson Lewis P.C. |
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"McKinsey & Co. agreed to pay $39.5 million to settle a complaint that the company and an affiliate violated ERISA rules against self-dealing in the management of two company retirement plans.... McKinsey will retain an independent third party for at least three years 'to review the plans' investment options and review all expense reimbursements to McKinsey, MIO, or any other affiliated person or entity,' said the proposed settlement document[.]" [Bhatia v. McKinsey & Company, Inc., No. 19-1466 (S.D.N.Y. proposed settlement filed Aug. 10, 2020)] Pensions & Investments |
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"As part of the negotiated settlement, VFA agreed to an undertaking capping its management fees at 45 basis points for all Florida K-12 teachers who currently participate (and, in some cases, those who prospectively participate) in its advisory product in Florida's 403(b) and 457(b) retirement programs. The cap will remain in effect for the duration of the clients' enrollment in the programs.... As it has in recent enforcement initiatives, the SEC put market participants on notice that it would be looking closely at the administration of 403(b) and 457(b) plans whose beneficiaries are 'main street investors,' despite that they are administered, in many cases, by large government agencies." Proskauer |
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"In the past, investment recommendations may have been more focused on achieving minimum compliance and checking the fixed income box rather than anticipating participant investment needs at every stage of accumulation and decumulation.... As the prevalence and amount of guaranteed retirement income from other sources declines (e.g., defined benefit pension plans, etc.), and as more participants age into retirement, a more diverse set of fixed income options may be needed for income generation.." American Retirement Association [ARA] |
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[Opinion]
"TSP administrators and staff have done a fine job managing the TSP for the growing number of participants by making gradual improvements over the years. However, index fund investing has essentially become a commoditized business, and there is little reason for the [federal] government to continue to render a core service when the private sector can perform the service just as well or better." Government Executive |
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Executive Compensation |
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[Guidance Overview]
"Code Section 4960 imposes two different excise taxes, each at the highest corporate tax rate (currently 21%), on certain employers that either [1] pay their highest paid employees remuneration in excess of $1 million in any one year, or [2] pay those employees parachute payments (compensation contingent on separation of employment) equal to at least three times a covered employee's average pay.... [B]eginning in 2017, each [applicable tax-exempt organization (ATEO)] must track a cumulative list of each year's top 5 highest compensated employees. Compensation for this purpose, includes remuneration provided by both the ATEO and by 'any related organization with respect to the ATEO.' Once a person is a covered employee, compensation paid to that person in any future year could trigger the excise taxes." Vorys |
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Selected Discussions |
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"Re the new 402(f) notices. How quickly do you think these (or similarly updated Notices) need to be utilized? For distributions as of today, or are we realistically OK for a couple of weeks, etc.? Doesn't take long to manually copy the IRS model into a Word document and do this manually, but takes a little time to update systems/procedures, etc. Curious as to how quickly folks are implementing this." BenefitsLink Message Boards |
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"Cannot seem to find whether, for 2020, the 20% withholding is waived on distributions -- not hardship/COVID-related, just a regular distribution. It's still required, correct? I'm aware of the 10% waiver for 59-1/2." BenefitsLink Message Boards |
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Press Releases |
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Most Popular Items in the Previous Issue |
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Text of IRS Announcement 2020-14: Changes to User Fees for Certain Letter Ruling and Determination Letter Requests (PDF)
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Text of IRS Pub. 5411: Retirement Plans Reporting and Disclosure Requirements (PDF)
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David Rhett Baker, J.D., Editor and Publisher
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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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