Retirement Plans Newsletter

August 19, 2020

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Newly Posted
Webcasts, Conferences

Lifetime Income Illustrations -- DOL Gives 401(k) Plan Participants a View of the Future. How Will They React?
August 20, 2020 WEBCAST
Groom Law Group

Employee Benefit Plans of Tax-Exempt and Governmental Employers 2020 - Part 1
October 15, 2020 WEBCAST
American Law Institute Continuing Legal Education Group [ALI CLE]

Employee Benefit Plans of Tax-Exempt and Governmental Employers 2020 - Part 2
October 22, 2020 WEBCAST
American Law Institute Continuing Legal Education Group [ALI CLE]

Employee Benefit Plans of Tax-Exempt and Governmental Employers 2020 - Part 3
October 29, 2020 WEBCAST
American Law Institute Continuing Legal Education Group [ALI CLE]

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[Guidance Overview]

IRS Issues Rollover Rules for Qualified Plan Loan Offset Amounts

"The IRS has now issued Proposed Regulation section 1.402(c)-3 that defines the difference between a plan loan offset and a qualified plan loan offset (QPLO), as well as addressing the rollover rules applicable to each type of offset transaction.... These proposed regulations provide clarity as to when a retirement plan participants is eligible to rollover a plan loan amount and if eligible how much time the participant has to complete the rollover."

RSM US

[Guidance Overview]

User Fees Going Up

"The IRS just issued the user fees for 2021 in Announcement 2020-14. Unlike in 2018, when the IRS increased user fees overnight with no advance notice (yes, we hold a grudge), the IRS is letting us know several months in advance so that we can take some preemptive action to take advantage of the lower fees while they still apply."

Ferenczy Benefits Law Center

[Guidance Overview]

Time to Update Your Retirement Plan's Tax Notice

"The updated model notice provided by the IRS modifies two provisions as a result of legal changes made by the [SECURE Act]: [1] It explains that a 'qualified birth or adoption distribution' is not subject to the typical 10% additional tax on early withdrawals.... [2] It changes the minimum required distribution age to age 72 for employees born after June 30, 1949."

Foley & Lardner LLP

[Guidance Overview]

IRS Provides Guidance on SECURE Act Community Newspaper DB Relief

"New guidance from IRS explains how defined benefit (DB) plan sponsors can use the special community newspaper funding rules in the [SECURE Act]. Notice 2020-60 specifies how sponsors make the election, clarifies the application to members of the sponsor's controlled group and provides details on the funding calculations for a year when an election is in effect. Sponsors can elect to apply the relaxed funding rules retroactively to plan years ending after Dec. 31, 2017, but must make those elections by Dec. 31, 2020."

Mercer

LinkedIn Joins List of Plan Sponsors Targeted in Stream of Excessive Fee Suits

"As in other excessive fee lawsuits, the use of the Fidelity Freedom Funds target-date fund (TDF) series is called out in the LinkedIn case. However, it is not just for the use of the actively managed version of the TDF suite rather than the index version, as has been the case in other lawsuits, it is also for not offering the CIT version offered by Fidelity. Notably, the complaint says LinkedIn changed the TDFs offered in the plan from Fidelity Freedom K funds to FIAM Blend Target Date Q Funds at some point in late 2018 or early 2019, but the plaintiffs says this was 'too little too late' and say the change 'should have been done much sooner.' " [Bailey v. LinkedIn Corp., No. 20-5704 (N.D. Cal. complaint filed Aug. 14, 2020)]

PLANSPONSOR; free registration may be required

The Fair Market Value Standard for ESOP Transactions: Are the DOL and Some Courts Getting It Wrong? (PDF)

36 presentation slides. Topics: [1] Overview of ERISA standards for an ESOP transaction. [2] Additional sources of guidance. [3] What is 'fair market value'? [4] Where the DOL and courts have gone wrong. [5] Suggestions going forward.

McDermott, Will & Emery and Gibraltar Business Valuations, for National Center for Employee Ownership [NCEO]

Retirement Savers Maintain Commitment Despite COVID-19 Economic Downturn

"The latest recordkeeper data indicate that plan participants remained committed to saving and investing: preliminary estimates indicate that only 2.0 percent of DC plan participants stopped contributing to their plans in the first half of 2020, a typical rate across the majority of the 12 years ICI has tracked these data. That compares with 1.3 percent in the first half of 2019, and 4.6 percent in the first half of 2009 (another time of financial stress)."

Investment Company Institute [ICI]

Exceptional Usefulness and Quality iconA Close Look at 401(k) Plans, 2017 (PDF)

"Larger 401(k) plans are more likely to report that they automatically enroll workers into the plan.... Most 401(k) plans offer employer contributions.... Larger 401(k) plans are more likely to report participant loans outstanding.... Larger 401(k) plans tend to be more likely to have employer contributions, participant loans outstanding, and automatic enrollment.... 401(k) plans with automatic enrollment are more likely to have both employer contributions and participant loans outstanding than plans without automatic enrollment."

BrightScope and Investment Company Institute [ICI]

Contribution Timing for DB Plans in 2020

"DB contribution timing is critical with respect to at least three issues -- ERISA minimum funding, Internal Revenue Code tax deductions, and the calculation of unfunded vested benefits (UVBs) for purposes of determining [PBGC] variable-rate premiums.... [It] has been reported that there is some sentiment in Congress for an extension of the due date for contributions for purposes of the UVB calculation to the end of the year. It is (at least) conceivable that, before October 15, 2020, we may get further guidance on this issue."

October Three Consulting

Options for Amortizing Unfunded Liability

"The plan's funding policy should always contain two important elements: first, covering the cost of benefits that active members are earning this year (the 'normal cost ' or 'service cost'), and second, amortizing (or 'paying down') the unfunded liability. There's really only one approach to funding the normal cost, but there are a whole host of ways to approach amortizing the unfunded liability."

Milliman

High Risk Issue iconMultiemployer Plans Poised for More Actuarial Assumption Lawsuits

"[As] multiemployer plans become less well funded, plan trustees have been using more conservative assumptions based on [PBGC] termination liability in order to increase the employer's liability in withdrawing from the plan. This has led to litigation quarreling over whether actuaries may have best estimates that differ for withdrawal liability and funding purposes. There has been a flurry of decisions on this subject in recent months with different courts split on whether using different assumptions for different purposes can be attacked as presumptively unreasonable both in arbitration and on judicial review."

Greenberg Traurig

The Benefit of Saving Regularly for Retirement

"The article explains how saving at least 15% of gross income (including employer contributions) can allow individuals to save enough for retirement that could last decades. An automated approach to saving on a regular basis ensures it's a priority and helps take the emotion out of investing."

T. Rowe Price

Self-Directed 401(k) Balances Rebound in Q2, Up 13% Quarter-Over-Quarter

"[T]he average account balance across all participant accounts finished Q2 2020 at $285,616, a 3.3% increase year-over-year and a 13% increase from Q1 2020.... Asset allocation remained similar to Q1, with the exception of an increase in equities holdings from 27% in Q1 2020 to 30% in Q2. Mutual funds continue to hold a majority of participant assets (33%), followed by equities (30%), ETFs (18%), cash (17%), and fixed income (2%)."

Charles Schwab

Benefits in General

Exceptional Usefulness and Quality iconMaximizing Premium Assistance Tax Credits for Self-Employed Individuals

"[B]ecause of the unique control that self-employed individuals have over the income and expenses of their businesses, they have a unique opportunity to make business decisions that can also help maximize their ability to receive Premium Tax Credits.... [W]hile a Solo 401(k) contribution may decrease income which both improves the PTC and reduces the Federal tax liability, the reduced income may also make the QBI deduction lower. As a result, making contributions to a Traditional IRA account instead of a Solo 401(k) could be even more beneficial, as the result would still reduce MAGI to increase the PTC, but would not reduce the QBI deduction for the self-employed individual."

Nerd's Eye View

Executive Compensation
and Nonqualified Plans

Fast Facts About Restricted Stock Units

"[1] How are RSUs different from restricted stock? ... [2] Popularity continues to be high.... [3] RSUs can defer time of income taxation.... [4] Recent IRS guidance on the taxation of RSUs: ... [5] FICA may be due earlier than income taxes.... [6] RSUs can solve retirement vesting tax issue.... [7] RSUs can reduce state tax liability.... [8] RSUs can help executives satisfy stock ownership guidelines requirements.... [9] RSUs allow flexibility over dividend rights.... [10] RSUs allow flexibility over settlement in shares or cash."

Foley & Lardner LLP

Selected Discussions
on the BenefitsLink Message Boards

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Insurer on My LTD Policy is Unilaterally Extending the Claim Response Deadline by 7 Days

"In my ERISA long-term disability plan, the insurer is adding about 7 days to the documented date the claim was faxed to them, for 'processing time.' Obviously this gives them 52 days to respond rather than 45. Is this legal? The SPD does not seem to address it."

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Press Releases

Most Popular Items in the Previous Issue

Text of DOL Interim Final Rule: Pension Benefit Statements -- Lifetime Income Illustrations (PDF)
Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL]

Text of EBSA Fact Sheet: Pension Benefit Statements -- Lifetime Income Illustrations
Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL]

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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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