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[Official Guidance]

Text of DOL Interim Final Rule: Pension Benefit Statements -- Lifetime Income Illustrations (PDF)

112 pages. "The [DOL] is publishing an interim final regulation regarding the information that must be provided on pension benefit statements required by section 105 of [ERISA, as amended by the SECURE Act]. When applicable, the interim final regulation requires plan administrators of ERISA defined contribution plans to express a participant's current account balance, both as a single life annuity and a qualified joint and survivor annuity income stream. These two income stream illustrations, which must be on the same pension benefit statement, will help participants better understand how the amount of money they have saved so far converts into an estimated monthly payment for the rest of their lives, and how this impacts their retirement planning.

"The regulation provides plan administrators with a set of assumptions to use in preparing the lifetime income illustrations, as well as model language that may be used for benefit statements by plan administrators who wish to obtain relief from liability for the illustrations. The interim final regulation also requests comments from interested parties on the requirements and methodologies of the regulation....

"This interim final rule is effective [one year after date of publication in the Federal Register] and shall apply to pension benefit statements furnished after such date.... Written comments on the interim final rule must be received by [60 days after date of publication in the Federal Register]."

Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL]

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[Guidance Overview]

Text of EBSA Fact Sheet: Pension Benefit Statements -- Lifetime Income Illustrations

"The interim final rule [IFR] is for defined contribution plans that are required, under the new SECURE Act provisions, to include two lifetime income illustrations on participants' pension benefit statement at least once every 12 months.... The IFR also provides the public an opportunity to comment on the IFR's methodologies, requirements, and model language before publication of a final rule.... EBSA believes that illustrating a participant's account balance as a stream of estimated lifetime payments, in accordance with the IFR, will help workers in defined contribution plans to better understand how their account balance translates into monthly income in retirement and therefore to better prepare for retirement."

Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL]

[Guidance Overview]

IRS Issues Further Guidance on CARES Act Changes to Single-Employer DB Plan Funding Rules

"The CARES Act delays the due date of all 2020 required minimum pension plan contributions (including quarterly installment payments) until January 1, 2021, and permits plan sponsors to use the plan's prior year adjusted funding target attainment percentage for 2020.... Notice 2020-61 indicates that interest must be paid on the delayed payments and clarifies that the tax deduction for the contribution may be delayed."

Sidley Austin LLP

[Guidance Overview]

Have No Fear, Brokers and Advisers: Reg BI Is Finally Here

"Reg BI has now passed its compliance date of June 30, 2020. This article aims to provide a brief overview of Reg BI and decipher its implications for brokers and broker-dealers. It will also provide an overview of a recent Risk Alert drafted by the SEC's Office of Compliance Inspections and Examinations (OCIE), and examine the SEC's and [FINRA's] review of Reg BI compliance."

Faegre Drinker

[Guidance Overview]

The Hard-to-Find 'Pre-ERISA Vesting Rules' for Church and Governmental Plans

"With few notable exceptions, the statutory and regulatory references we need in the administration of plans are at our fingertips from a number of easily accessible internet resources, a great deal of them actually available for free.... One of the most annoying of those 'notable exceptions' is found under Code Section 411(e)(6) of the Code, the vesting standards which apply to governmental and church 401(a) plans."

Business of Benefits

American Airlines 401(k) Plan Not Required to Offer Stable Value Fund

"[The decision] is notable for the court's willingness to look past allegations that focused solely on interest rates and to dig deeper into fund characteristics that can make it prudent to select and hold a fund with a lower expected return. Particularly where the fund's purpose is to preserve capital -- and not to achieve long-term returns -- a prudent fiduciary might favor the protection of conservative underlying investments and/or a government guarantee over a higher interest rate." [Ortiz v. American Airlines, No. 16-151 (N.D. Tex. Aug. 5, 2020)]


Supreme Court Asked to Revisit Private Equity Pension Liability

"New England Teamsters & Trucking Industry Pension Fund, Burlington, Mass., is asking the Supreme Court to revisit a long-running legal battle over whether private equity firms could be liable for pension liabilities of portfolio companies.... In the latest court action, the 1st Circuit declined to impose the pension liability on Sun Capital. The New England Teamsters pension fund wants the Supreme Court to reconsider whether that decision is inconsistent with Supreme Court precedent and creates a conflict with other circuits." [Sun Capital Partners III, LP v. New England Teamsters & Trucking Industry Pension Fund, Nos. 16-1376, 19-1002 (1st Cir. Nov. 22, 2019; cert. pet. filed Aug. 10, 2020)]

Pensions & Investments

401(k) Fiduciary Litigation on the Rise: Take These Steps Now to Avoid Liability Later

"[1] Benchmark ... [2] Regularly reevaluate ... [3] Negotiate ... [4] Offer a variety of investment options ... [5] Make detailed investment disclosures ... [6] Attend fiduciary training ... [7] Document everything."

Foley & Lardner LLP

Borrowing to Fund Pension Deficits: Is It Right for Your Plan?

"Pension liabilities are floating costs, varying with interest rates to measure liabilities, asset returns, and changes in covered population; whereas a loan of borrowed funds is a fixed cost unaffected by economic conditions or participant demographics. Also, borrowing to fund pension liabilities can significantly reduce PBGC premiums resulting in a much lower borrowing cost."


Private Equity Was the 'Largest Detractor' for Texas Employees' Retirement System

"Before the pandemic, the Employees' Retirement System of Texas's private equity portfolio was performing well, delivering 7.6 percent in net internal rate of return last year. Then things changed. The $4.4 billion private equity portfolio has lost 2.14 percent ... for the 10 months ending June 30 ... Private equity was the 'largest detractor' from the most recent quarter's performance, losing 1.9 percent."

Institutional Investor

Exceptional Usefulness and Quality iconProjected 2021 IRA and Saver's Credit Limits for 2021

"Maximum 2021 deductions for traditional IRA contributions are projected to remain at 2020 levels. Adjusted gross income (AGI) phase-out thresholds for Roth IRA contributions and a qualified plan participant's deductible traditional IRA contributions are projected to increase slightly in 2021."


Internal Benefits Committee of Non-Profit Hospital Qualified for Church Plan Exemption as Principal Purpose Organization

"The internal benefits committee administering the pension plan of a multi-billion-dollar non-profit hospital constituted a principal purpose organization for purposes of the church plan exemption under ERISA ... The committee, which was empowered with discretionary authority to implement plan provisions, maintained the plan and functioned as a group of people working together for a shared purpose." [Sanzone v. Mercy Health, No. 18-3574 (8th Cir. Mar. 27, 2020, corrected Apr. 9, 2020)]

Wolters Kluwer; free registration required

Exceptional Usefulness and Quality iconAudit Information Request Template

"Your auditor will tailor their actual request based on the specifics of your plan's design, so they may not need every single item included in [this template] or they may find it necessary to request additional information.  ... [A] number of the items will be provided by the third-party administrator or recordkeeper. As such, it is beneficial to provide your auditor with access to the plan's webstation which allows them to download and request the applicable support directly from the service providers, and reduce the number of items on your to-do list."

Belfint Lyons Shuman

Almost Half of Retirees Cannot Maintain Spending

"Those who failed to preserve spending were also more likely to owe mortgage payments, choose lump-sum annuity options and claim Social Security benefits before age 62."

PLANSPONSOR; free registration may be required

Benefits in General

New Research Reveals Shifts in Attitudes About Employee Benefits Amid Pandemic

"[T]he COVID-19 pandemic is changing how both employees and employers feel about benefits.... 73% of employees now say they value the insurance benefits their company offers them, down from 80% three months earlier.... 55% of employees say they trust their company is making the best decisions about the benefits available, compared to 61% in wave one of the study. When asked to rate their organization's overall benefits package compared with what other employers are offering in their marketplace, only 44% rate their benefits as above average compared to 56% in wave one."

The Hartford

Executive Compensation
and Nonqualified Plans

FASB Issues Proposed Update to Simplify Valuation of Private Company Stock Options

"Private companies would be permitted to use any of the following valuation methods: [1] A valuation determined by an independent appraisal within the 12 months preceding the grant date or modification date. [2] A valuation based on a formula that, if used as part of a nonlapse restriction with respect to the share, would be considered the fair market value of the share. [3] A valuation made reasonably and in good faith and evidenced by a written report that considers the relevant factors of the illiquid stock of a start-up corporation (as defined in the Treasury Regulations)."

Thomson Reuters Practical Law

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SH Nonelective Contributions -- Suspend and Then Reinstate in Same Plan Year?

"Is it possible to amend a plan to stop the safe-harbor nonelective contribution in accordance with Section IV of Notice 2020-52, but then amend the plan 30 days before the end of the same plan year to reinstate the safe-harbor nonelective contribution? I don't see any provision in Section 103 of the SECURE Act that would prevent a subsequent amendment."

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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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