Retirement Plans Newsletter

November 13, 2020

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[Guidance Overview]

Exceptional Usefulness and Quality and Usefulness iconDOL Issues Final ESG Rule; Focuses on Pecuniary Factors

"[P]roduct manufacturers should [1] review how ESG factors are integrated into the investment process and whether such factors are pecuniary factors, ... [2] prepare to receive enhanced scrutiny ... from consultants and plan sponsors, and [3] consider whether any sub-advisers have been properly reviewed from an ERISA perspective.... Plan sponsors should ... [1] consider whether changes should be made to RFPs and RFIs used in connection with hiring consultants, and [2] consider whether they have the necessary tools and expertise to evaluate ESG matters in addition to more traditional investment matters." Icon to read more

K&L Gates

[Guidance Overview]

A Pecuniary Focus: DOL Issues Final Rule on Financial Factors in Selecting Plan Investments

"By focusing on non-pecuniary factors, the DOL is able to more broadly address its concerns over subordinating financial interests for other motives, and it avoids having to define ESG. Nevertheless, given current industry trends and increased interest in ESG investing, the Final Rule should be understood to directly impact ESG investing. The DOL makes it clear in the preamble to the Final Rule that ESG investing was a primary motive behind the new regulatory framework, and it will continue to be an area of ongoing focus and review." Icon to read more

Trucker Huss

The Final DOL ESG Rule

"[T]he final rule will change the subject of the ESG conversation from ESG-themed funds to the more holistic approach of ESG integration. The final rule is likely to create barriers to the further implementation and use of ESG-themed funds, particularly those with short track records, low assets under management, specific and narrow objectives or relatively higher fees compared to other non-ESG-related investment alternatives." Icon to read more

MFS Institutional Advisors, Inc.

Supreme Court Declines Again to Address Circuit Court Split Re Standard for Pleading Breach of Fiduciary Duty Claims

"After the pair of Eighth Circuit decisions this summer, fiduciaries took some comfort that, in most jurisdictions, such claims are still unlikely to survive a motion to dismiss. Now that the Supreme Court has decided not to reconsider the case, plan sponsors and fiduciaries are again left wondering whether other courts will join the Second Circuit or whether a new bright-line rule based on the arguments raised by the Committee, but not considered by the Second Circuit, will emerge." [Jander v. Ret. Plans Comm. of IBM, No. 17-3518 (2d Cir. Jun. 22, 2020; cert. denied Nov. 9, 2020)] Icon to read more

Vorys

2020 DC Consultant Study: Retirement Environment

"79% of [consultants] expect retirement income solution services to be the highest investment service growth area in the coming year. 59% of [consultants] expect financial wellness programs to be the highest non-investment service growth area in the coming year.... The majority of both plan sponsors and consultants rank longevity risk as either the #1 or #2 source of concern for participants in retirement planning." Icon to read more

T. Rowe Price

Do State and Local Government Employees Save Outside of Their Defined Benefit Plans When They Need To?

"Employees whose pensions provide less income are more likely to participate in a supplemental DC plan, but the effect is small. Members of poorly funded pension plans are not more likely to participate in supplemental plans than members of well-funded plans. Employees without Social Security coverage are not compensating with greater participation in supplemental plans." Icon to read more

Center for Retirement Research at Boston College

[Opinion]

ARA Urges IRS to Reduce Potential Burdens Regarding LTPT Employees

"The ARA suggests that the IRS clarify: [1] that the LTPT rules do not apply when the terms of the plan document allow employees to defer immediately; [2] how the LTPT rules are applied if a plan is amended from immediate eligibility to a year of service (with a 1,000 hours); [3] the application of the vesting rules for employees who move from part-time to full-time or vice versa; and [4] that plans may exclude LTPT employees as part of an excludable classification that is not based on service." Icon to read more

American Retirement Association [ARA]

Benefits in General

Employee Benefit Developments in 2020 (PDF)

"PEPs ... Lifetime income demonstrations ... Expanded access to 401(k) plans for part-time workers ... Optional distributions for qualified birth or adoption expenses ... Determination letters and opinion letter 'cycles'... Fiduciary duties of retirement plan investments ... COBRA penalties." Icon to read more

Holland & Hart LLP, via Tax Executive

Court Concludes Plan Administrator Failed to Properly Delegate Discretionary Authority to Service Representative

"[T]he court noted that the plan set forth a procedure for delegating discretionary authority, and provided that when the plan and SPD conflict, the plan controls. Because the committee was 'bound to follow the plan's procedures,' and failed to do so, the court concluded there was no effective delegation of authority. Therefore, the court held that the adverse benefit determination was subject to the nondeferential (de novo) standard of review." [Hampton v. Nat’l Union Fire Ins. Co., No. 18-6725 (N.D. Ill. Oct. 7, 2020)] Icon to
read more

Thomson Reuters / EBIA

Plan Sponsors Will Be Affected by New Audit Standard for Large ERISA Plan Financial Audits

"Here are five key changes: [1] A new name and new type of audit opinion! ... [2] Maintaining a current plan instrument.... [3] Properly administering the Plan and verifying that the ERISA financial statements are in accordance with the Plan's provisions, including maintaining sufficient participant records.... [4] The plan sponsor is required to determine whether an ERISA Section 103(a)(3)(c) audit is permissible, if the certification is appropriate, and if the certified information is correctly measured, presented, and disclosed in accordance with the applicable financial reporting framework.... [5] Providing the auditor with a substantially complete draft of the Form 5500 prior to the date of the auditor's report." Icon to read more

Bradley J. Bartells, CPA, via LinkedIn

Selected Discussions
on the BenefitsLink Message Boards

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Foreign Company-Sponsored 401(k)

"A foreign company sponsors a 401(k) plan for some of its employees who are US citizens living in a separate foreign country. 415 limit deadlines are based on when a company's US tax return is due, correct? So how does one determine the deadline for non-safe harbor contributions if the company sponsoring the 401(k) doesn't have a US business tax return to file? I'm hoping to avoid looking through treaties. But it is 2020..." Icon to read more

BenefitsLink Message Boards

Mandatory Cash-Out: 'Step Away from the Plan, and Nobody Gets Hurt'

"Plan calls for mandatory distributions under $5,000. It says it will be done without participant consent. Do they have to send out distribution forms to those they want to force out first? If so, what is the cite?" Icon to read more

BenefitsLink Message Boards

Can H-2A Employees Be Excluded as a Class?

"Suppose an employer has a plan with 100 otherwise eligible employees, including 10 H-2A employees. Can the employer exclude the H-2A employees as a class (will easily pass coverage testing). I'm seeing conflicting information on this -- some indicating that under IRCA you cannot exclude them as a class, other information indicating you can." Icon to read more

BenefitsLink Message Boards

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Press Releases

Most Popular Items in the Previous Issue

Text of DOL Final Regs: Registration Requirements for Pooled Plan Providers (PDF)
Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL]

How Much Taxes Will Retirees Owe on Their Retirement Income?
Center for Retirement Research at Boston College

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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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