Retirement Plans Newsletter

December 16, 2020

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[Guidance Overview]

DOL Unwraps New Fiduciary Standard as a PTE

"[The DOL] has taken this opportunity to provide 'important information on its views regarding rollovers from employee benefit plans to IRAs.' Specifically, the [DOL] confirms its belief that advice to take a distribution of assets from an employee benefit plan is, in fact, 'advice to sell, withdraw, or transfer investment assets currently held in the plan, and therefore may be covered by the five-part test.' " Icon to read more

American Retirement Association [ARA]

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[Guidance Overview]

DOL Finalizes New Rules on Proxy Voting

"The final rule generally follows the proposal but, in a number of places substitutes more general requirements for the proposal's more detailed ones. Highlights include elimination of the proposal's: [1] Requirement that voting/not voting a proxy be justified by a determination as to whether the matter to which the proxy related had 'an economic impact on the plan' that outweighed 'the costs of research and voting.' [2] Specific recordkeeping requirements justifying proxy-related decisions. [3] Requirement that proxy voting practices be reviewed every two years." Icon to read more

October Three Consulting

[Guidance Overview]

SECURE Act Update: IRS Issues Guidance with Respect to Safe Harbor Plans (PDF)

"[Notice 2020-86] interprets the SECURE Act's provisions to apply to some, but not all, aspects of the rules regarding safe harbor plans, limiting the applicability of the recent liberalizations to the safe harbor rules." Icon to read more

Patterson Belknap Webb & Tyler LLP

[Guidance Overview]

401(k) Plan Access 'SECUREd' for Long-Term Part-Time Employees

"Plan sponsors need to start tracking the service of nonunion, long-term, part-time employees who have attained age 21 as they must be eligible to make elective deferrals to their employer's 401(k) plan after three consecutive plan years. Plan years beginning prior to January 1, 2021, will not be taken into account for eligibility purposes ... Any year in which a long-term, part-time employee has attained age 18 and completed at least 500 hours of service must be considered for vesting purposes, including years beginning prior to January 1, 2021." Icon to read more

Sidley Austin LLP

[Guidance Overview]

Terminating Custodial 403(b) Plans Get Distribution Relief

"Revenue Ruling 2020-23 [addresses] how employers may terminate 403(b) plans that contain custodial accounts. This guidance gives plan administrators direction on how they can distribute plan assets to participants in order to satisfy plan termination requirements. The revenue ruling also gives the option for plan participants to preserve their accounts -- as 403(b) accounts -- following a plan termination, or to roll them over to an eligible retirement plan." Icon to read more

Ascensus

Distressed Employers Facing Skyrocketing Pension Contributions: A Non-Bankruptcy Solution

"Under the Business Continuation Test, a controlled group member qualifies for distress if it demonstrates 'to the satisfaction of the corporation [PBGC] that, unless a distress termination occurs, such person will be unable to pay such person's debts when due and will be unable to continue in business.' ... The Business Continuation Test is stringent, but for an ongoing employer facing both the economic consequences of the pandemic and dramatically increasing pension contributions, it could provide an avenue of relief from pension costs that are no longer affordable." Icon to read more

Keightley & Ashner LLP

Multiemployer Pensions: Assessing the Financial Challenges (PDF)

"A number of underlying problems face multiemployer pension plans and the historical trends that have exacerbated their current standing.... Several prominent multiemployer pension plans in the United States stand out for their endangered status.... The federal government has historically taken actions through legislation and regulatory efforts to reform multiemployer pension plans. While well-intentioned, these reforms have generally failed to produce meaningful reform to save the largest and most in-need pensions in the country." Icon to read more

Institute for Pension Fund Integrity [IPFI]

ESOP Pass-Through Voting and the New DOL Guidance on Proxy Voting

"The issue of whether trustees can and should override participant directions on offers to buy shares in a proposed acquisition of an ESOP company has been one of the most ambiguous areas of ESOP law and practice.... In practice, it is exceedingly rare for employees to vote no on a good offer, and there is no litigation in closely held companies where this has been an issue. That does not make the issue moot, however." Icon to read more

National Center for Employee Ownership [NCEO]

Financial Situation Has Worsened for 1 in 4 Full-Time Employees

"The pandemic is forcing employees to rethink their retirement plans. One in four employees aged 50 or older (25%) expect to retire later than planned, with more than one third of older employees (35%) planning to retire at age 70 or older. Not surprisingly, financially stressed employees are more likely to delay retirement as a result of the pandemic, with 50% of all employees who are living paycheck to paycheck expecting to delay retirement. Moreover, nearly a third of employees aged 50 or older (31%) admit they will need to save more for their retirement." Icon to read more

Willis Towers Watson

[Opinion]

DOL Issues Investment Advice Rule

"The final rule includes an adjustment to record-keeping requirements to allow only the DOL and the Treasury Department to obtain access to a financial institution's records. Another change from the original proposal allows a senior executive officer to sign a retrospective compliance review instead of the chief operating officer. A third change extends the exemption to allow financial institutions to engage in principal transactions with retirement plans and Individual Retirement Accounts (IRA) in which the financial institution purchases or sells certain investments from its own account." Icon to read more

Insured Retirement Institute [IRI]

Benefits in General

[Guidance Overview]

DOL Issues Final Regs on Voting of Proxies on Securities Held in Employee Benefit Plan Investment Portfolios

"The final regulation applies to ERISA-covered retirement and health and welfare plans that hold shares of corporate stock, whether directly or through ERISA-covered intermediaries like common trusts, master trusts, pooled separate accounts, and 103-12 investment entities. The final rule does not affect employee benefit plans with respect to stock held through registered investment companies. The final regulation provides that the fiduciary duty to manage plan assets consisting of shares of stock includes managing the related shareholder rights." Icon to read more

Thomson Reuters Practical Law

Executive Compensation
and Nonqualified Plans

Bankrupt Company’s Deferred Compensation Plan Funded by a Rabbi Trust – What Could Go Right? Hint: It’s Not 409A

"The participants argued that the Plans' termination due to a change of control effectively divested the company of any legal or equitable interest in the trust assets. The participants also argued that the rabbi trust assets should have been distributed to them on or before March 1, 2020, in accordance with regulations under Sec. 409A, well before the bankruptcy petition was filed.... The bankruptcy court judge held that the company supported its contention that it was insolvent as of March 1, 2020, and was therefore not required to make the payments." [In re RTI Holding Company LLC, No. 20-12456 (Del. Bankr. Nov. 19, 2020)] Icon to read more

Winston & Strawn LLP

Press Releases

Most Popular Items in the Previous Issue

Text of EBSA Prohibited Transaction Exemption 2020-02: Improving Investment Advice for Workers & Retirees (PDF)
Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL]

EBSA Fact Sheet: Improving Investment Advice for Workers & Retirees (PDF)
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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