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Retirement Plans Newsletter

August 23, 2023

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[Guidance Overview]

Is Your ESOP Ready for the Spotlight?

"The IRS cited schemes where a business creates a “management” S corporation whose stock is wholly owned by an ESOP for the sole purpose of diverting taxable business income to the ESOP. The S corporation purports to provide loans to the business owners in the amount of the business income to avoid taxation of that income. These types of arrangements, among others, could be a violation of current tax law and cause the loss of S corporation status."  MORE >>

Bricker Graydon

[Guidance Overview]

Simply Irresistible to Not Seek Recoupment of Overpayments

"SECURE 2.0 provides that for certain overpayment errors a responsible plan fiduciary can now decide not to seek repayment.,,, [M]any plan sponsors will welcome this guidance since it allows them to forego seeking recoupment of overpayment errors.... However, if the participant is 'culpable' for the overpayment, it would be more prudent for the plan fiduciary to recoup such overpayment."  MORE >>

Holland & Hart LLP

[Guidance Overview]

IRS Issues Notice Regarding ESOP Compliance

"[T]he IRS noted that it has identified issues related to the [1] valuation of employer stock, [2] prohibited allocation of shares to disqualified persons, and [3] failure to follow tax law requirements for ESOP loans. The IRS additionally stated that it will take a more aggressive approach to review ESOP transactions to ensure they are consummated in accordance with federal law."  MORE >>

Krieg DeVault

Fourth Circuit Affirms No Breach of ERISA's Fiduciary Duties for 'Cross-Selling' Efforts

"The Fourth Circuit recently ruled that while providing 'investment advice for a fee' implicates those duties, pitching investment services does not. It also clarified that a fiduciary's self-interest alone, without any action taken on behalf of that self-interest, is not a breach.... While the questions raised by Reetz are simple, the answers likely are not." [Reetz v. Aon Hewitt Investment Consulting Inc., No. 21-2267 (4th Cir., July 17, 2023)]   MORE >>

Dorsey ERISA

Exceptional Usefulness and Quality icon Considerations When Establishing a New 401(k)

"Establishing a new 401(k) plan or migrating to a new 401(k) provider is a complex process involving multiple stakeholders.... In addition, this process invites government scrutiny, requires various filings, and (perhaps most importantly) creates ongoing administrative and fiduciary duties even after the plan has been successfully established. This alert will [1] identify some key decision points in the 401(k) plan's design and then [2] explain certain material ongoing obligations for those overseeing the 401(k) plan."  MORE >>

Fenwick & West LLP

BlackRock Voted Against a Record 93% of ESG Shareholder Proposals in 2023 Proxy Season

"That 9% of ESG proposals which BlackRock supported this year is down sharply from 2022, when BlackRock's investment stewardship team (BIS) supported 24% of such proposals, and from 2021, when it supported 43%.... BlackRock's support for management proposals, however -- which accounted for more than 99% of the roughly 172,000 proposals voted on by BIS -- remained high at 88%."  MORE >>

Pensions & Investments

Latest District 403(b) Plan Grade Data

"There are approximately 13,500 public school distircts in the country. [The 403bwise District Plan Rating Project now has] data for 34% of all public school districts. Because [the] database has information on the majority of large districts, [it now covers] more than half of all teachers in the country.... 50% of all teachers can now see how good or bad their plan is, and if they have any quality 403(b) vendors available."  MORE >>


Executive Compensation and Nonqualified Plans

Seventh Circuit Denies Deferred Compensation Deduction in Taxable Asset Sale

"The Seventh Circuit's conclusion differs from what has come to represent the common analysis and interpretation of these timing rules in practice. Given this opinion, it will be important for employers to take a fresh look at the effect of transactions on deferred compensation deductions." [Hoops, LP and Heisley Member, Inc., Tax Matters Partner vs. Comm'r, No. 22-2012 (7th Cir. Aug. 9, 2023)]  MORE >>

Williams Mullen

Employee Benefits Jobs

View job as Bilingual Retirement Plan Consultant
            for FuturePlan, by Ascensus

Bilingual Retirement Plan Consultant

FuturePlan, by Ascensus


View job as Bilingual Retirement Plan Consultant for FuturePlan, by Ascensus

Selected New Discussions

Bonus Pay Earned Before -- But Actually Paid After -- Plan Entry Date

"If a bonus is paid out to a participant after they have already entered the plan, but the period for which the bonus compensation was earned was before they had entered the plan is this eligible compensation to defer?"

BenefitsLink Message Boards

Safe Harbor Hardship Distributions and Definition of Child

"Under the IRS hardship distribution 'safe harbor reasons', one safe harbor reason is for 'Burial or Funeral Expenses'. Payments for burial or funeral expenses for the employee's deceased parent, spouse, children, or dependents. What is the definition of children -- for examine is it limited to biological and legally adopted children. Or would a stepchild qualify. Assume the stepchild is not the primary beneficiary. Is there a distinction between your stepchild and your biological child for this purpose? I am not sure if they are a dependent but I can look into that because it would seem a dependent would qualify."

BenefitsLink Message Boards

Salary Reduction for 401(k) Safe Harbor Match

"I have a client with an enhanced safe-harbor match 401k plan ($1 for $1 up to 6%.) When negotiating salary contracts for new employees, the client wanted to tell some employees (none are excluded) that their negotiated salary will be reduced by the 6% safe-harbor match as well as the 6% deferral if they sign up for the plan. I told them they can not do that, and as there's not rhyme or reason to the employees that the plan sponsor wants this to affect, it can't really be fixed by excluding a class or some other document provision. The client asked me where these rules are written and to provide in writing. I can't seem to find anything that specifically says a plan sponsor can't reduce an employee's pay in order to receive an employer contribution. (Obviously the salary is reduced by employee deferrals.) Any help with written guidance would be appreciated."

BenefitsLink Message Boards

Press Releases

Eight Groom Attorneys Named to 2022 Capital Pro Bono Honor Roll

Groom Law Group

Webcasts and Conferences
(Retirement Plans / Executive Compensation)

SECURE 2.0: The Impacts of Employer Matching for Student Loan Payments

September 12, 2023 WEBINAR


IRA Fundamentals

September 26, 2023 WEBINAR


Demand Stays Strong for Cash Balance Plans

September 27, 2023 WEBINAR

TRA [The Retirement Advantage]

SECURE 2.0: Pension Plans Need Love, Too!

September 27, 2023 WEBINAR

Thompson Hine LLP

Last Issue's Most Popular Items

Common 401(k) Plan Errors and How to Fix Them

Bass, Berry & Sims PLC, via Tennessee CPA Journal

What Does My TPA Do for Me? Top Questions to Ask Your TPA

Benefit Resources Inc.

Executive Compensation Due Diligence in M&A Transactions

Skadden, Arps, Slate, Meagher & Flom, via Bloomberg Law

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BenefitsLink® Retirement Plans Newsletter, ISSN no. 1536-9587.

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