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January 29, 2021 logo logo
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IRS Won't Issue Determination Letters for Preapproved PEPs

"Determination letters issued for modified third-cycle preapproved defined contribution plans won't cover amendments adding a pooled employer plan (PEP) feature ... IRS is currently developing model PEP language for employers to use if they want assurance that their amendments satisfy the applicable Internal Revenue Code requirements." Icon to read more


Cybersecurity Is a Plan Sponsor Obligation

"A recently filed lawsuit against a trust company serving as a 401(k) plan trustee, the second of its kind in the last few months, highlights the need for plan sponsor diligence in protecting participant data and accounts in an increasingly electronic world.... [T]he plan sponsor has a fiduciary obligation ... to engage and retain service providers who take cybersecurity seriously, who have systems in place to protect data (for example, dual authentication processes) and who periodically test those systems to check for vulnerabilities and ways to improve." Icon to read more

Faegre Drinker

Guarding and Defending Against Excessive Fee Cases: It's All About Procedure

"It's crucial for plan sponsors to have and follow a good investment policy statement and to carefully document the reasons for all their decisions." Icon to read more

PLANSPONSOR; free registration may be required

Single Employer Pension Funding Relief Introduced in the House of Representatives (PDF)

"House Ways and Means Committee Chairman Richard Neal has introduced HR 409, the Emergency Pension Plan Relief Act of 2021 (EPPRA). Part of that bill would make significant changes to minimum funding requirements for sponsors of single employer defined benefit plans for plan years after December 31, 2019.... [T]he two significant changes are modification of the segment rates used to determine funding requirements (but not PBGC premiums), and a change in amortization of funding shortfalls from 7 years to 15 years." Icon to read more

Cowden Associates, Inc.

DC Plans Making Limited Use of Alternative and ESG Investments

"Only 13% of retirement plans offer alternative investment options as part of their target-date funds (TDFs). Just 5% of plan sponsors say they currently offer or are considering offering hedge funds to their participants via their TDF, while 7% currently offer or are considering offering private equity. Real estate private equity has the support of 11% of plan sponsors." Icon to read more

PLANSPONSOR; free registration may be required

What Is the Rule of 55?

"Many people who retire early use the rule of 55 to avoid the 401(k) early withdrawal penalty.... You must leave your job the year you turn 55 -- or later.... You can only withdraw from your current 401(k).... You can still withdraw early, even if you get another job.... Other ways to avoid the 401(k) withdrawal penalty ... Should you use the rule of 55?" Icon to read more



How to Solve the World's Retirement Crisis

"[R]etrofitting 401(k) profit-sharing plans into vehicles for retirement income tests the Second Law of Thermodynamics. DC atomizes the collective pools of DB savings into individual accounts. To reverse that evaporation process will take a lot of work, imagination, and possibly new types of bonds from the US Treasury." Icon to read more

Retirement Income Journal

Benefits in General

DOL Rescinds Limitation on Agency Guidance

"Although the rescinded rule was intended to ensure that DOL guidance was appropriate, transparent, and accessible to the public, it created potential confusion -- in particular regarding whether items available on the DOL website but not found through the single search portal required by the rule were still in effect." Icon to read more

Thomson Reuters / EBIA

One-Third of American Workers Don't Understand the Benefits They Selected During Open Enrollment

"35% of employed individuals report not fully understanding any of the employee benefits they enrolled in during their most recent open enrollment period.... [M]ore than half (54%) of millennials [report] they don't understand their benefit selections.... Two-thirds of employees (66%) indicated they want their employer to help them better understand their employee benefits throughout the year -- not just at open enrollment.... 78% of millennials [report] they would like more communications about their workplace benefits throughout 2021.... [M]ore than 7-in-10 of employees (73%) are interested in support and guidance tools that help them understand how much money to put aside for retirement, emergency savings and health-care expenses." Icon to read more

VOYA Financial

Executive Compensation
and Nonqualified Plans

Glass Lewis Describes Approach to Executive Compensation During COVID-19

"On January 26, 2021, Glass Lewis issued guidance addressing how it plans to apply its approach to evaluating executive compensation proposals during the COVID-19 pandemic. Glass Lewis emphasizes that the guidance is illustrative and does not change its existing approach. Glass Lewis will continue to support proposals that effectively align executive pay and performance, while also considering: Overall pay quantum. The quality of a company's disclosure. The company's responsiveness to shareholder concerns." Icon to read more

Thomson Reuters Practical Law

Selected Discussions
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Were Payments Under a 100% Joint and Survivor Pension Reduced Due to Incorrectly Assumed Date of Birth of the Survivor?

"My father died with a pension that had been in pay status for 30 years, which will continue to pay my mom the same monthly amount. When we notified the plan administrator of his death, they questioned my mother's date of birth because their system indicates 1948 -- but her actual DOB is 1938. Could this incorrect date have affected the monthly pension my father received for 30 years and the amount my mother will get?" Icon to read more

BenefitsLink Message Boards

Can I Use 5500-EZ for 2020 Even Though My Son Is an Employee?

"I own 100% of an S-Corp. My adult son is my employee and participant. The 2020 Form 5500-EZ instructions for who can file EZ: '[2] Covers only one or more partners (or partners and their spouses) in a business partnership (treating 2% shareholder of an S corporation, as defined in IRC 1372(b), as a partner).' Can I file an EZ when my son owns my stock by attribution?" Icon to read more

BenefitsLink Message Boards

Is Top-Heavy Minimum Required in This Situation?

"We have a new 401k/PSP plan with an effective date of 1/1/2020, but a special effective date of 11/1/2020 for 401k deferrals and safe harbor (3% non-elective) contribs (it was adopted late in the year), so the 401k and SH provisions were just effective for the last two months of the year (from adoption date forward). Note -- the plan will be top-heavy. If the only contribs for the year are the two months of deferrals and the SH 3%, will the plan be deemed to satisfy top-heavy minimum? Or will the employer need to top off all employees at 3% of comp for the entire year?" Icon to read more

BenefitsLink Message Boards

Required Distribution Hierarchy for Designated Roth Withdrawals?

"I know there is no distribution hierarchy for withdrawals from Designated Roth 401(k) plans, unlike for Roth IRAs (contributions, rollovers, then gains). But on a withdrawal from a Designated Roth 401(k), if the Roth is comprised of, say, $10,000 salary deferral, $10,000 gains and $10,000 IRR (Internal Roth Rollover), and then a client does a distribution of $3,000, would the distribution source be required to be $1,000 from the salary deferral, $1,000 from gains, and $1,000 from the IRR even though the IRR has not satisfied the 5-year rule? Or could the distribution source be $1,500 from salary deferral and $1,500 from gain?" Icon to read more

BenefitsLink Message Boards

SEP for Thee But Not for Me?

"I am a small business owner (sole proprietorship/Schedule C) interested in opening a SEP plan for my 2 employees. I understand that I have to contribute a similar percentage of their salaries, but I would prefer not to make contributions for myself as the owner/employer. Would that prevent me from helping my two employees equally with their SEP?" Icon to read more

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View COVID-19 News and Resources, Inc.
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Whittier, North Carolina 28789
(407) 644-4146

Lois Baker, J.D., President
David Rhett Baker, J.D., Editor and Publisher
Holly Horton, Business Manager

BenefitsLink Retirement Plans Newsletter, ISSN no. 1536-9587. Copyright 2021, 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, 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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