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IRS Issues Interim Guidance on Self-Correction of Plan Failures

"Per [Notice 2023-43], a plan sponsor may self-correct an 'eligible inadvertent failure' if the following conditions are satisfied: [1] The failure was not identified by the Secretary prior to any actions demonstrating a specific commitment to implement a self-correction with respect to the failure. [2] The self-correction is completed within a reasonable period after the failure was identified. [3] The failure is not egregious ... does not directly or indirectly relate to an abusive tax avoidance transaction ... and does not relate to the diversion or misuse of plan assets. [4] The self-correction satisfies all of the provisions applicable to self-correction set forth in Rev. Proc. 2021-30."

How Should 401(k) Plan Contributions Be Handled When There Is a Temporary Liquidity Crisis?

"In the event of missed or delayed payrolls, no issues arise with employee deferral contributions (since no payroll means no deferrals are taken). However, when payrolls resume, an evaluation of the impact of missed payrolls on participant loan repayments is necessary to account for any catch-up payments or re-amortization of future payments that may be required. Furthermore, any employee deferral or loan payment remittances from prior payrolls that may not have yet been contributed to the plan trust should be deposited in the plan trust as soon as possible."

ERISA Civil Penalties Inflation Adjustment Act Annual Adjustments for 2023

"The [DOL's] Civil Penalties Inflation Adjustment Act Annual Adjustment for 2023 final rule was published in the January 13, 2023 Federal Register. [This article includes] a table that reflects the 2023 and 2022 civil money penalty amounts."

Retirement Plan Created for Creditor Protection Does Not Qualify as a Fully Exempt Private Retirement Plan Under California Code of Civil Procedure

"Judgment Creditor AMBS Diagnostics, LLC ('AMBS') originally sought to collect on its money judgment by levying the assets held in judgment debtor Timothy O'Brien's [Individual Retirement Accounts].... O'Brien formed a new limited liability company, had the new LLC form a 401(k) Plan, and then transferred all of the assets previously held in his IRAs into the newly formed 401(k) Plan.... [T]he Court of Appeal ruled that that the 401(k) Plan was not principally or primarily designed and used for retirement purposes, so the plan was not a fully exempt 'private retirement plan'[.]' [O'Brien v. AMBS Diagnostics, LLC, No. B288072 (C.A. 2nd, Aug. 8, 2019)]

Best Practices for ESOP Trustee and ERISA Compliance

"ESOP deals may see increased scrutiny by the [DOL] (DOL) when valuation includes control premiums and controlling sellers that can sell back warrants in the future. The more the ESOP transaction strays from standard ESOP deals, the more the DOL and employee participants may look at the valuation of the company stock." [Brundle v. Wilmington Trust, N.A., Nos. 17-1873, 17-2224, 17-2323, 17-2324, 18-1029 (4th Cir. Mar. 22, 2019)]

Senators Introduce Bill to Expand S-Corp ESOPs

"Senate Bill 177 [would] expand the creation of S Corporation ESOPs.... The Senate bill also claims to provide protection for small businesses by ensuring they are able to qualify for Small Business Administration (SBA) loans, contracting assistance, or business development programs after they transition to ownership to an ESOP. It also allows businesses that qualify for minority-owned, woman-owned, or veteran-owned programs to maintain their status after the ESOP acquires the shares."

EBSA Enforcement for 2019

"EBSA closed 1,329 civil investigations in 2018 with over 64% of those cases resulting in monetary recovery for the plan or other corrective action. The largest share of these recoveries was on behalf of terminated vested plan participants (recovering over $800 million in total for terminated vested participants)."

Can ESOPs Benefit Disadvantaged Communities?

"Real estate investment businesses in these Opportunity Zones could create ESOPs as part of their employees' retirement plans, giving employees in the areas an ownership interest in those property investments. Businesses already existing in Opportunity Zones could be encouraged to create ESOPs that would benefit employees through the growth of the company that could increase capital investment in those businesses.... Qualified Opportunity Zone laws should be amended to allow for a broader range of ESOP conversions to be financed within the Opportunity Zones."

ESOP Workers Have Higher Retirement Savings

"S-Corp ESOP employees ... have an average of $170,326 in retirement savings compared to $80,339 for non-ESOP workers.... ESOP workers making less than $25,000 a year have more than twice the retirement savings compared to non-ESOP workers making under $25,000. Similarly, even hourly ESOP employees making between $10 and $12.85 an hour average more than $6,500 in retirement savings, through the ESOP and other non-ESOP plans."

What Is 'Actual Knowledge' in ERISA Breach of Fiduciary Duty Cases?

"The 9th Circuit court found that because the plaintiff alleged he was unaware of the investments, he did not have actual knowledge that those investments occurred and that they were imprudent. The plaintiff may have had constructive knowledge based on the information available on the website, but he cannot have actual knowledge if he never looked at the documents." [Sulyma v. Intel Corp. Investment Policy Comm., No. 17-15864 (9th Cir. Nov. 28, 2018)]