Retirement Plans Newsletter

October 30, 2020

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[Guidance Overview]

Exceptional Usefulness and Quality and Usefulness iconLoans and Distributions Under the CARES Act: Questions and Concerns

"Several sections of the [CARES] Act relate to retirement plans, specifically those relating to distributions and loans to qualified individuals, which provide relatively ready access to money for those suffering financially from the pandemic and the related quarantine.... This article reviews these provisions of the CARES Act, as well as the questions and concerns that have arisen in its wake." Icon to read more

Ferenczy Benefits Law Center

Your [Es]cheating Heart ... Might Be Useful to Retirement Plans Dealing with Missing Participants

"[R]ecent guidance from the IRS (Revenue Ruling 2020-24) makes clear that if a plan escheats funds to the state, it is appropriate for the plan to treat the payment as being includible in gross income and subject to federal income tax withholding, reportable on a Form 1099-R.... [T]he IRS guidance does not address ... [the concern] that ERISA as federal law may pre-empt the plan administrator's ability to use state law to offload the obligation." Icon to read more

Holland & Hart LLP

Presidential Memorandum Focuses Attention on Troubled Multiemployer Plans

"Just days after the Memorandum was published, the U.S. Court of Appeals for the Sixth Circuit ordered the PBGC to respond to the Delphi retirees' petition for a rehearing, which may increase the likelihood of a rehearing in Black v. PBGC, No. 19-1419 (6th Cir. Sept. 1, 2020)." Icon to read more

Jackson Lewis P.C.

Presidential Memorandum Stirs Long-Simmering Pension Issues

"In taking over the Delphi Salaried Pension Plan, the PBGC incurred about $2 billion in insurance losses. Retirees lost another $500 million in non-guaranteed benefits. An association of former salaried employees sued to undo the takeover.... [In] March 2019, ... the district court upheld the takeover. The Sixth Circuit affirmed in September 2020. In the meantime, the association lobbied Congress and the Executive Branch." [Black v. PBGC, No. 19-1419 (6th Cir. Sept. 1, 2020)] Icon to read more

The Wagner Law Group

Latest Mortality Improvement Scale from the Society of Actuaries

"Use of the MP-2020 scale with the Pri-2012 base tables will likely lower balance sheet liabilities between 0.3% and 1.0% depending on the age and gender mix of the population and assuming a discount rate of 4%.... MP-2020 incorporates actual mortality data through 2018. General population mortality data for 2020 that includes the effects of the pandemic will not be available until 2022.... The SOA also revised the assumed long-term rate of improvement after a study of historical mortality improvement over various periods and age groupings.... Plan sponsors should consider using the updated mortality improvement rates immediately for plan accounting." Icon to read more

Cowden Associates, Inc.

Massive New Retirement Bill Would Expand, Mandate Auto-Enrollment

"If the 'Securing a Strong Retirement Act' were to become law, 401k, 403b and SIMPLE plans would be required to automatically enroll participants in the plans upon becoming eligible. The initial automatic enrollment amount is at least 3% but no more than 10%. And then each year that amount is increased by 1% until it reaches 10%.... [A]ll current 401k, 403b and SIMPLE plans are grandfathered, and there is an exception for small businesses with 10 or fewer employees, new businesses, church plans, and governmental plans." Icon to read more

401(k) Specialist

Social Security, Teacher Pensions, and the 'Qualified' Retirement Plan Test

"[D]epending on the state, when teachers enter and exit teaching can have significant effects on their benefit levels. For some groups of teachers, they must serve for many years before qualifying for retirement benefits that are at least as generous as Social Security." Icon to read more

Chad Aldeman, via SSRN

Constitutional Limits on Public Pension Reform: New Directions in Law and Legal Reasoning

"Faced with alarming actuarial deficits, state and local legislatures are enacting comprehensive reforms to avoid insolvency. Government employees, however, are challenging these reforms under the Contract Clause.... [An] overwhelming majority of barriers to pension reform are judge-made, meaning that changing case outcomes would not require a constitutional amendment.... [R]eforms have generally been upheld even in those states in which existing doctrine is more protective of employee pensions. These results have practical implications by suggesting that governments can expand the scope of reforms." Icon to read more

T. Leigh Anenson, Linda Barkacs, and Jennifer Gershberg, via SSRN

[Opinion]

The Spectre of Multiemployer Pension Failures Haunts This Election

"It's imperative that a new COVID-19 relief package -- whenever it's passed -- shore up multiemployer pensions ... [If] this piece of the retirement system is allowed to collapse, it would not only hurt current and future pensioners, it would deal an outsized blow to the employers who contribute to their plans, and to the economy.... Many of these plans are hurtling toward insolvency, while others are deteriorating from the economic fallout of the pandemic. The stakes are so high in some states that the issue could swing the election." Icon to read more

Karen Friedman, via The Hill

Benefits in General

Resources on Time Off for Employee Voting: Rights and Trends

"While federal law does not require employers to give employees time off to vote, many state laws do.... To help employers address the related issues, this roundup provides links to some general information about voting rights and trends from organizations, government websites, third-party resources and news articles." Icon to read more

Mercer

Time Off for Employee Voting: Consider Being More Generous Than Laws Require

"Some states require an employee to give the employer notice, but then the employer must permit some amount of time off for voting. In general, it depends on when the employee's work shift starts and stops in relation to the polls being open.... Arkansas, Mississippi, and Texas do not have notice requirements, but each state requires employers to grant employees time off to make their voice heard at the polls.... Generally, if an employee asks for time off to vote, see if you can work it out." Icon to read more

Bradley

Executive Compensation
and Nonqualified Plans

Restricted Stock and RSUs: Questions to Ask to Make the Most of Your Grant

"[1] Do I have a grant of restricted stock or a grant of restricted stock units? What are the key differences? [2] Is formal acceptance of the grant required? What happens if I don't accept the grant before vesting? [3] What is the vesting schedule? [4] Is vesting based on duration of employment or on performance goals? [5] What would happen to the vesting of my grant if I were to leave or lose my job, die, become disabled, or retire? [6] When the shares vest, what account will they appear in? [7] Does the company offer a choice for the tax withholding, or does it hold back shares to pay the taxes? [8] With RSUs, can I defer the delivery of the shares at vesting? [9] If my company pays dividends to shareholders, will I get dividends on my restricted stock? If so, when? What if I have a grant of RSUs instead? [10] What would happen to my restricted stock in a corporate acquisition or merger?" Icon to read more

myStockOptions.com

Selected Discussions
on the BenefitsLink Message Boards

► It's easy to sign up and participate in discussions! Post answers, ask questions, create custom feeds and views. Join your peers (and potential referral sources or customers)—there is no charge.

Calculating a Self-Employed Owner's Compensation During a Short Plan Year Due to Plan Termination

"Doctor (plan sponsor) gets Schedule C, but is terminating the Safe Harbor plan on 10/31 and wants to close the plan before December 31. How is her compensation calculated? Is it zero because it's not determined until 12/31? Or is it necessary to wait until next year and take 5/6th of her net income from self-employment? Icon to read more

BenefitsLink Message Boards

Stable Value Fund or Money Market Account Required in an Investment Lineup?

"For 457 plans and section 401(a) plans, is a plan's fund lineup required to provide a Stable Value Fund or a Money Market Account as one of the options?" Icon to read more

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Lois Baker, J.D., President  loisbaker@benefitslink.com
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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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