Retirement Plans Newsletter

December 15, 2020

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Cerberus Retirement, Inc.
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[Guidance Overview]

Exceptional Usefulness and Quality and Usefulness iconNew SECURE Safe Harbor 401(k) Plan Rules: You Can Do the Safe Harbor Nonelective Hokey Pokey!

"[O]ne of the consequences of the IRS waiting until now to issue [Notice 2020-86] is that, if the plan sponsor wants to retroactively re-adopt a safe harbor nonelective contribution for the 2020 calendar year, we are within 30 days of the year end so the nonelective contribution must be 4% for 2020.... [T]he SECURE-amended Internal Revenue Code prohibits the retroactive safe harbor amendment for a plan that had matching contributions anytime during the plan year. Therefore, this 'hokey pokey' process of going out and then back into the safe harbor for the year is available only if the plan originally provided (and is reinstating) safe harbor nonelective contributions." Icon to read more

Ferenczy Benefits Law Center

[Guidance Overview]

Defaulting 401(k) Plan Borrowers in the Time of COVID

"The CARES Act's favorable treatment of coronavirus-related distributions, including plan loan offsets, will end on December 30, 2020.... [It] remains unclear whether Congress will extend that treatment.... [It] can be anticipated that employees will continue to lose their jobs at an elevated rate into early 2021 and, if they have plan loans, face being taxed on those loans when their employment terminates.... [W]ithout further legislative intervention, their recourse to extend the time period to avoid taxation of their unpaid loans would be to look to the qualified plan loan offset extended rollover period in the TCJA." Icon to read more

Blank Rome LLP

[Guidance Overview]

IRS Issues Final Rules on Rollovers of Qualified Plan Loan Offsets

"A QPLO that is an eligible rollover distribution is not required to be rolled over within the 60-day period ... Under the final rules, a plan loan offset amount is defined as the amount by which the participant's accrued benefit is reduced in order to repay the loan under the plan terms governing such loan. A QPLO amount, on the other hand, is defined as a plan loan offset amount that satisfies two extra conditions[.]" Icon to read more

Sidley Austin LLP

[Guidance Overview]

IRS New Guidance on State Unclaimed Property Laws and IRS Helpful Reminders on Missing Participants

"After years of public commentary, the [IRS] addresses, for the first time, whether a plan should withhold income tax when making a transfer of a participant's accrued benefit to a State unclaimed property fund, and whether, after such a transfer occurs, the participant is barred from making a rollover of those amounts." Icon to read more

The Wagner Law Group

Supreme Court Declines to Address Pleading Standards in Stock-Drop Litigation

"The January 2020 remand clearly signaled the Court's reluctance to address issues concerning the intersecting duties of insider-fiduciaries under ERISA and the securities laws on the record presented then. It was unlikely the Court would decide differently when presented a second time with the same issues on the same record. For now, the 'more harm than good' pleading standard in ERISA stock drop litigation in the Second Circuit will remain a plaintiff-friendly outlier." [Jander v. Ret. Plans Comm. of IBM, No. 17-3518 (2d Cir. Jun. 22, 2020; cert. denied Nov. 9, 2020)] Icon to read more

Verrill Dana LLP

Byeeeeeee 2020: Lessons to Prepare You for 2021

"Along with the rollercoaster of events that 2020 dished out, we got a crash course in disaster recovery.... Here are a few questions to help determine if [working from home] is a feasible long-term solution or merely a means to an end.... How has your office embraced digital marketing to grow your audience, and how are you filling your pipeline? ... If there are areas that need modifications, take these next few weeks and isolate attention on them." Icon to read more

Fiduciary Benchmarks

Suspended 401 (K) Matches Are Being Restored

"Of 260 companies that cut or halted 401(k) matching contributions during the downturn, 75% have now restored them ... Of these, 74%, reinstated matches at prior levels, 23% restored matches at a lower level and 3% boosted them." Icon to read more

MarketWatch

Coming Soon to a TDF Near You: Guaranteed Income, Private Equity

"[T]he majority (92%) of TDF managers said they expect managed payout options and annuity allocations will be incorporated into future TDF series. The market volatility of the first quarter of this year may also serve as a catalyst for guaranteed income adoption by defined contribution (DC) plans, as nearly two-thirds (63%) of TDF managers suggest this period of heightened market volatility will increase client demand for guaranteed investments." Icon to read more

PLANSPONSOR; free registration may be required

Is Student Loan Debt a Barrier to Saving for Retirement?

"Plan sponsors have an opportunity to better align their savings and benefit programs to the financial needs of their employees. The hope is that employees can take advantage of resources that can help them better organize their financial priorities in order to achieve greater financial well‑being and retirement readiness." Icon to read more

T. Rowe Price

The Impact of the COVID-19 Pandemic on Public Pension Plans (PDF)

"The pandemic has the potential to affect plan contributions, investment returns, and demographic experience. The severity of the impact ... is likely to vary significantly from plan to plan depending on the economic disruption in the plan's geographic region and the exposure of the plan's members to COVID-19.... [C]ontinued budgetary pressures -- combined with persistent low interest rates that may force plans to reduce expected investment returns -- could make it even more difficult for plan sponsors to make the needed level of contributions." Icon to read more

American Academy of Actuaries

Protecting Your TSP Investments After Retirement

"When they leave federal government more than half of feds take some or all of their money out of the Thrift Savings Plan. Many think outside IRAs offer them more investment and withdrawal options and active advice they can't get from the TSP -- which they do. The question is: Is that a good thing?" Icon to read more

Federal News Radio

Ways and Means Chairman Neal Releases Automatic Contribution Plan Proposal

"Under the proposal: [1] Employers with more than 10 employees would generally be required to maintain an 'automatic contribution plan'. [2] May be a qualified plan, 403(b) plan, IRA, or SIMPLE IRA. [3] May satisfy with a new, employee contribution-only 401(k) plan, with an $8,000 contribution limit, not subject to nondiscrimination testing. [4] Sponsors with certain pre-Act plans would be grandfathered. [5] Failure to maintain an automatic contribution plan would result in an excise tax -- $10 per employee per day subject to certain limits. [6] Would generally exempt employers from compliance with state plan initiatives other than those adopted prior to enactment." Icon to read more

October Three Consulting

Selected Discussions
on the BenefitsLink Message Boards

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For-Profit Subsidiary Wants to Participate in 403(b) of Parent (a 501(c)(3) Non-Profit)

"The sub is NOT a wholly owned LLC. It's a for-profit corporation. What are the rules concerning whether or not they can adopt a 403(b) Plan sponsored by the parent?" Icon to read more

BenefitsLink Message Boards

Looking for 1099-R Software Recommendations

"We are a small TPA firm that services pooled plans. Now that Relius is no longer sponsoring 1099 software, was wondering if anybody had any recommendations. For 2020, we have between 25-50 1099-R. We also need to print the 945's and 1096's." Icon to read more

BenefitsLink Message Boards

'Become a Party to Sale Agreement' as 409A Payment Trigger?

"I'm reviewing an existing document that so obviously does not comply with 409A that I feel like I have to be missing something. [1] 'Becoming a party to an agreement' providing for the sale of all or substantially all the company's assets is not a permissible payment trigger, right? Doesn't it have to be the actual transaction? The regs read that way. [2] Is it permissible to amend a retention bonus agreement to extend the retention/payment date by 2 years? Not unless the bonus is increased by at least 125%, correct?" Icon to read more

BenefitsLink Message Boards

Phantom Stock Vests Upon Change in Control Unless Grantee Has Been Removed

"I have a client who wants to give phantom stock to a director. The phantom stock will vest and pay out upon a change in control. However, the client wants to be able to remove the director at any time before the liquidity event but the director (now former) will still get paid out upon the change in control provided he hasn't violated his non-compete/non-disparagement, etc. agreement. This feels problematic but I can't really pinpoint why except I don't know how the company can deduct any payment to this guy if he is no longer a director. What am I not seeing?" Icon to read more

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Press Releases

Most Popular Items in the Previous Issue

DOL Fact Sheet: Fiduciary Duties Regarding Proxy Voting and Shareholder Rights
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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