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Retirement Plans Newsletter December 9, 2020 |
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Newly Posted Voluntary Fiduciary Correction Program
Have We Learned Anything From So Much ERISA Litigation?
Unseen Pitfalls in Employment Agreements from a Benefits Standpoint
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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]
20 pages. "This notice provides guidance in the form of questions and answers with respect to Sections 102 and 103 of [the SECURE Act]. Section 102 ... increases the 10 percent cap for automatic enrollment safe harbor plans. Section 103 ... eliminates certain safe harbor notice requirements for plans that provide for safe harbor nonelective contributions and adds new provisions for the retroactive adoption of safe harbor status for those plans. This notice ... is intended to assist taxpayers by providing guidance on particular issues while the Treasury Department and the IRS develop regulations to fully implement these sections of the SECURE Act." Internal Revenue Service [IRS] |
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[Guidance Overview]
51 pages. "This report first provides background information on IRAs, including a discussion of their tax treatment and relationship with savings behavior, along with data on IRA ownership, contributions, withdrawals, and savings adequacy. It then outlines policy options that might address some of the issues surrounding IRAs." [R46635 Dec. 9, 2020] Congressional Research Service [CRS] |
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[Guidance Overview]
"The DOL has made clear its position that investment funds whose objectives include non-pecuniary goals -- even if selected only on the basis of objective risk-return criteria -- should not be the default investment alternative in an ERISA plan. The prohibition, according to the DOL, is intended to help ensure that the financial interests of plan participants remain paramount by removing non-pecuniary considerations where participants' savings are being automatically invested through a QDIA. But how does one determine whether a fund's objectives, goals, or strategies use non-pecuniary factors?" Boutwell Fay LLP |
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"The biggest difference between PEPs and SEPs is control ... In general, SEPs are more flexible and transparent than PEPs, while PEPs could be a way to lower certain investment and audit fees. Other differences [are outlined in chart form]." Employee Fiduciary |
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"[T]he benefits of these custom solutions have been systematically overstated, often by advisors seeking expanded profits or by asset managers without an off-the-shelf TRD product seeking assets to manage. In this paper, [the authors] discuss flaws in the 'custom is always better' argument as well as six critical 'next steps' to take if your Committee has already implemented a custom TRD strategy." Francis Investment Counsel LLC |
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16 pages. "Between December 2005 and June 2020, the number of defined contribution (DC) retirement plans that offer company stock fell by 36% and the number of plan participants investing in company stock fell by nearly two-thirds.... In an effort to discourage concentrated stock positions, two-thirds of plans with active company stock funds impose some type of restriction on contributions to and/or exchanges into company stock.... Ongoing litigation has underscored the risks that concentrated stock positions may pose for plan fiduciaries." Vanguard |
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Dec. 9, 2020. Testimony from: [1] Scott Barr, Edward Jones; [2] Eric Stevenson, Nationwide; [3] Michael P. Kreps, Groom Law Group; and [4] Joshua Luskin, National Association of Government Defined Contribution Administrators. Committee on Finance, U.S. Senate |
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"[T]he court found that an Illinois corporation that went bankrupt and dissolved under state law in the 1990s was still liable for pension obligations a decade later. You know you're in some uncharted waters when an appellate court ruling opens by explaining that 'from the confluence of bankruptcy, employee benefits, and corporations law comes this most unusual case.' " [PBGC v. 50509 Marine LLC, No. 19-14968 (11th Cir. Nov. 24, 2020)] American Retirement Association [ARA] |
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"An uninformed employer may be tempted to cease participation to avoid the rising costs of employer contributions to these plans.... Even for a relatively small bargaining unit, exiting an underfunded plan can result in a multimillion-dollar assessment. In mergers and acquisitions, multiemployer plan liabilities can jeopardize the deal or cultivate post-closing litigation, unless properly addressed in the asset purchase agreement or stock purchase agreement." Jackson Lewis P.C. |
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"[P]lans invested for asset growth returned 8.1%, while LDI light portfolios also performed well, returning 6.6%. Liabilities were also generally higher in the month, with older frozen and cash balance plans up 2.6%–2.8%. More recently frozen plans and those with ongoing benefit accruals experienced liability increases of 4.1% and 5.5%, respectively. Plans with more of a growth orientation that have been frozen for a while may have experienced an increase in funded status of >5% in the month." Findley |
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"Global equities experienced their strongest performance month of 2020, up over 10% with small cap and international developed markets leading the way. Pension discount rates took one of their bigger monthly dives for the year, down 0.20%-0.30%, bringing the total discount rate decline relative to year-end 2019 to approximately 0.70%. Despite the drop in discount rates, most pension plans will see an increase in funded status for the month, as equity gains more than offset liability increases. Year-to-date, pension plan funded status may actually be recovering to beginning of year levels." River and Mercantile |
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25 pages. "[A] former [Procurement Department (PD)] official steered the contract in the bribery case by including overly restrictive personnel requirements in the solicitation and then increased its value to $3.3 million through out-of-scope modifications. His actions were enabled by internal control weaknesses ... [PBGC OIG] made three recommendations that included the Office of Management and Administration implementing an additional review for PD contracts or outsourcing PD requirements to another agency's contracting function, implementing a mechanism to ensure the legal review process is followed, and providing procurement integrity training to PD staff members on identifying fraud indicators." Office of Inspector General, Pension Benefit Guaranty Corporation [PBGC] |
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Benefits in General |
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[Official Guidance]
"Victims of a severe storm and flooding on September 13, have until January 15, 2021, to file various individual and business tax returns and make tax payments ... Individuals and households who reside or have a business in Arecibo parish qualify for tax relief.... [C]ertain deadlines falling on or after September 13, 2020, and before January 15, 2021, are postponed through January 15, 2021. This includes individual and business tax filers that had a valid extension to file their 2019 return due to run out on October 15, 2020." Internal Revenue Service [IRS] |
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Executive Compensation |
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[Guidance Overview]
"As a result of amendments made to Section 162(m) of the Internal Revenue Code by the Tax Cuts and Jobs Act (TCJA), certain mandatory delayed payment provisions appearing in many nonqualified deferred compensation plans (NQDC) maintained by publicly traded corporations could create a costly payment trap for employers.... In order to take advantage of this relief, however, affected employers must amend their NQDC Plans by December 31, 2020 to remove the mandatory delayed payment provisions." Buchanan Ingersoll & Rooney PC |
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"[1] Core tax rules for stock donations ... [2] How stock donations are valued for tax deductions ... [3] Donation with stock can be bigger than with cash ... [4] Company stock can help bunch donations ... [5] Extra time may be needed to process stock donations ... [6] Must file special IRS form ... [7] Special issues with stock compensation." myStockOptions.com |
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"Company executives invested in Non-Qualified (NQ) plans risk losing a substantial amount in retirement savings due to guidelines set under Section 409A. These guidelines protect NQ plan assets from a change in corporate control but not from a bankruptcy filing, since NQ plan participants are treated as unsecured creditors. [This article discusses] some methods for sheltering NQ plan accounts in the event of employer bankruptcy." Hall Benefits Law |
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Selected Discussions |
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"An ESOP owns 80% of 2 different corporations; the remaining 20% of each corporation is owned by different individuals. Based on the 80% ownership, is there a controlled group, or is the ownership interest by the ESOP disregarded for controlled group purposes?" BenefitsLink Message Boards |
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Press Releases |
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Steidle Pension Solutions Named Best Places to Work 2020
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Most Popular Items in the Previous Issue |
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Text of IRS Final Regs: Rollover Rules for Qualified Plan Loan Offset Amounts (PDF)
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DOL Takes Another Look at Investment Advice (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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