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June 2020 Digest

This digest contains a wide variety of the freshest source material dealing with current trends, opinion, news, legislative action, investments, marketing, sales, consulting, and legal issues regarding 401k, 403(b) and other retirement plans. Each listing contains a headline (hyperlinked to the source document), description, source of the item, and the month and year posted to this digest.

Use the SEARCH feature to located specific items from this digest and from our ARCHIVE.


Best Practices for Plan Sponsors to Address Cybersecurity Concerns

The increased flow of electronic communications risks the potential exposure of participants' confidential and personal data to cybercriminals and, in turn, creates a new liability source for the plan and its service providers. The procedures many plan sponsors, third-party administrators, and recordkeepers currently have in place to exchange data or manage and verify participant withdrawals may no longer be prudent or feasible. Because of the urgency in dealing with this problem, the time is now for plan sponsors, plan fiduciaries, and plan service providers to address and reevaluate cybersecurity concerns, to ensure they and their participants will not fall victim to fraud, hacking or phishing schemes.

Source: Wagnerlawgroup.com, June 2020

IRS Issues Limited 401k Safe Harbor Plan Relief for COVID-19

The IRS created a limited window during which plan sponsors will have some additional opportunities to make changes to their safe harbor 401k plans. This article is a summary of the specific relief.

Source: Sgrlaw.com, June 2020

Report Featuring Latest Trends in 401k Participant Behavior and Plan Design

T. Rowe Price Retirement Plan Services has released its annual benchmarking report featuring data and analysis related to 401k participant behavior and plan design, based on the firm's full-service recordkeeping client data for 2019. While 2020 could influence or even reverse some of the retirement plan trends identified in the 2019 report, the company summarized the following findings related to participant behavior and plan design.

Source: Prnewswire.com, June 2020

IRS Grants 401k Safe Harbor Suspension Relief

The IRS released Notice 2020-52 which grants certain COVID-19 related relief to retirement plan sponsors who employ a safe harbor 401k plan design feature. The majority of the guidance is temporary relief which expires on August 31, 2020. However, the IRS Notice also includes a clarification that shall remain effective after August 31, 2020.

Source: Legacyrsllc.com, June 2020

DOL Proposes New Standard to Replace Vacated Fiduciary Rule

The DOL is proposing a new regulation to govern investment advice in retirement accounts to replace a rule that was vacated more than two years ago by a federal appeals court. The proposed regulation would provide exemptions under federal retirement law that would allow fiduciaries to receive compensation for advice that would otherwise be prohibited, such as third party payments, as long as they act in a retirement savers' best interests.

Source: Investmentnews.com (registration may be required), June 2020

The IRS Expands Who is a Qualified Individual for Retirement Provisions of the CARES Act

The CARES Act permitted plan sponsors to make several discretionary amendments, giving participants greater access to their retirement savings, including the special coronavirus-related distributions, increased plan loan limits, and delayed plan loan repayments. The relief provided by these three discretionary amendments was only available for "qualified individuals." The IRS has recently amended the definition of a qualified individual through Notice 2020-50, expanding the relief to cover more individuals.

Source: Graydon.law, June 2020

Fifth Circuit Upholds Dismissal in Single Stock Fund 401k Case

The Fifth Circuit in Schweitzer v. Inv. Comm. of Phillips 66 Sav. Plan dismissed claims against 401k plan fiduciaries related to allowing plan participants to hold a single stock that was not an employer security as a plan investment alternative. As discussed here, the Court's decision offers meaningful guidance to fiduciaries of participant-directed plans and, more specifically, to those evaluating what to do with a company stock fund after a spinoff or divestiture.

Source: Erisapracticecenter.com, June 2020

DOL Proposed Regulations on Selecting Socially Responsible Plan Investments

The DOL has issued proposed regulations to revise the DOL's existing investment duties regulation regarding environmental, social, and governance investments. The proposed regulation incorporates some prior guidance and adds new recordkeeping requirements for plan fiduciaries considering ESG investments.

Source: Bradley.com, June 2020

Canadians Reducing Retirement Savings Due To Coronavirus

More than a third (40%) of pre-retirees have a negative outlook on their life in retirement, the highest rates of negative retirement perception among survey respondents since 2014, according to the latest annual survey by Fidelity Investments Canada. The same percentage said their salary or earnings have decreased due to the coronavirus pandemic. Among those negatively impacted, 50% are reducing the amount of money they’re able to save and the amount they’re able to invest, compared to last year.

Source: Benefitscanada.com, June 2020

DOL Unveils New Fiduciary Rule Proposal

The DOL has finally unveiled its much anticipated fiduciary rule, though it's a mixed bag and has a certain "back to the future" feel, along with some new implications for recordkeepers, Pooled Employer Plans, and rollover advice. Titled "Improving Investment Advice for Workers & Retirees," the proposal -- and it's just that at this point -- proposes a new prohibited transaction class exemption that would be available for investment advice fiduciaries.

Source: Asppa.org, June 2020

DOL Proposes Exemption, New Compensation for Fiduciaries

The DOL has proposed an exemption allowing investment professionals acting in their clients' best interest to receive compensation for advice that would otherwise be prohibited, such as rollover recommendations. Under ERISA, investment fiduciaries are generally prohibited from receiving compensation for transactions involving employee benefit plans and IRAs, according to the proposal. But the proposal released on Monday would change that.

Source: Ai-cio.com, June 2020

Department of Labor Proposes New Fiduciary Rule

The DOL said that it will propose a new fiduciary standard based on a temporary policy put in place after the 5th Circuit Court of Appeals vacated the DOL's previous rule in March 2018, and it will now allow investment advice fiduciaries to receive certain forms of compensation once prohibited. The proposal would also allow investment advice fiduciaries to give "more choices for retirement using Impartial Conduct Standards."

Source: 401kspecialistmag.com, June 2020

Investments in ESG Funds: The DOL Tightens the Fiduciary Standards

The DOL stated that ERISA's duty of loyalty prohibits a plan fiduciary from investing in ESG vehicles if that investment subordinates return or increases the risk for non-pecuniary objectives. The significant growth of plan investments in these vehicles raises concerns that fiduciaries may be violating this duty of loyalty. The DOL is expanding its audit guidelines to focus on ESG investments.

Source: Sgrlaw.com, June 2020*

A Framework for Key Recordkeeping Fee Decisions

Several key recordkeeping fee decisions are important for prudent plan fiduciaries to analyze carefully. More often than in the past, when plan sponsors benchmark their plan fees, they often use the opportunity to evaluate the way fees are allocated to participants and to make changes to the way fees are paid. Three key recordkeeping fee decisions that go directly to the heart of the question of how fees should be allocated across participants are discussed in this article. First is the decision as to the type of recordkeeping fee structure. Second is the decision around using a lowest-cost share class strategy for the investment menu versus a revenue-sharing model. Last is the decision of how to apply revenue sharing when there is an active decision to use that model or when it is unavoidable.

Source: Porteval.com, June 2020

Another Risk for Retirement Savings: Divorce

Americans who went through a divorce or job loss are more likely to tap into their retirement accounts early, studies find. According to a working paper by economists Frank Stafford of the University of Michigan and Thomas Bridges of the University of Delaware, divorced households are 9.5% more likely to attain "fast cash" by drawing from their retirement accounts, and they're 11.8% less likely to continue saving for retirement. Divorced women are especially vulnerable.

Source: Plansponsor.com, June 2020

Estee Lauder Faces 401k Plan Excessive Fee Lawsuit

The lawsuit argues that while the TDFs in the plan are CITs, they are private label CITs with much higher expense ratios than the typical CITs offered by JPMorgan.

Source: Planadviser.com, June 2020

Puerto Rico Extends Due Date for Coronavirus-Related Distributions From Qualified Retirement Plans

The Puerto Rico Department of the Treasury issued Circular Letter of Internal Revenue No. 20-29, which extends the due date from June 30, 2020, to December 31, 2020, for the completion of coronavirus-related distributions from retirement plans qualified in Puerto Rico. The rules on CRDs remain exactly as described in Circular Letter of Internal Revenue No. 20-23, except for two items described here.

Source: Ogletree.com, June 2020

DOL Proposes Rule to Crack Down on ESG

The Proposed Rule embodies some of the prior guidance and adds new recordkeeping requirements setting forth how plan fiduciaries can meet their fiduciary obligations when making ESG investments. The Proposed Rule, in conjunction with recent enforcement activity, demonstrates a renewed interest and skepticism by DOL about ERISA plans' ESG investing practices.

Source: Groom.com, June 2020

How Restaurant Menus Can Impact Retirement Savings Rates

One downside to automatic enrollment is that it can cause average deferral rates to go down when the default is set too low. Research has shown people who enroll on their own tend to select higher deferral percentages than when automatically enrolled. By presenting actively enrolled participants with three options to choose from that are higher than the default rate, you can almost guarantee they will enter the plan at a much higher percentage. Interestingly, this is true no matter what percentages are presented. This is because people have all sorts of cognitive biases that impact how they make decisions, often negatively.

Source: Greenspringadvisors.com, June 2020

CARES Act Gets Needed Expansion and Clarification

The IRS has significantly expanded the categories of "qualified individuals" who can receive distributions and loans with favorable tax treatment to include individuals who have suffered a pay cut and those whose spouses and household members have suffered an economic impact due to COVID-19. It also confirmed how to treat loans when qualified individuals have deferred payments during 2020 and explained how plans and individuals should report distributions for tax purposes.

Source: Dwt.com, June 2020

IRS Expands and Clarifies CARES Act Distribution Rules

The IRS clarified several eligibility, administrative, and tax reporting rules in IRS Notice 2020-50. The Notice provides safe harbors, a model certification, and information reporting codes. It is a must-read for those responsible for administering employer-sponsored retirement plans.

Source: Benefitslawadvisor.com, June 2020

DOL Proposes New Regulations on ESG Investments in Retirement Plans

The DOL has issued a new set of proposed regulations guiding plan fiduciaries about investing plan assets in investment vehicles that have environmental, social, and/or corporate governance goals. Over the last several years, retirement plan fiduciaries have been under pressure to consider ESG investment vehicles for retirement plan assets, particularly in the 401k and 403b plan lineups. The DOL proposed regulations would provide some helpful guidance for fiduciaries in evaluating ESG investment vehicles.

Source: Ballardspahr.com, June 2020

Considerations for Plan Sponsors Looking to Keep Participants After Retirement

DC plan participants are increasingly keeping their retirement balances in the plan after they retire, but plan sponsors interested in retaining those balances must overcome some misperceptions, according to a recent paper by T. Rowe Price.

Source: Asppa.org, June 2020

Fiduciary Exception to Attorney-Client Privilege for ERISA Plans

This paper explains the doctrine commonly referred to as the fiduciary exception to the attorney-client privilege. It is important for plan sponsors, fiduciaries, and their legal advisors to understand the rules regarding when the fiduciary exception doctrine can result in communications between a plan fiduciary and an attorney not to be privileged and become susceptible to being produced in litigation. This paper also explains how the fiduciary exception doctrine has been used to try to obtain communications ordinarily protected by the attorney work product doctrine. The principles outlined in this paper can help employee benefits counsel and their clients better understand how best to protect the privacy of their communications and how to anticipate when these communications may be open to examination by plan participants.

Source: Amazonaws.com, June 2020

Bridging the Gap Between Accumulation and Decumulation for Participants

Defined contribution plan participants are increasingly keeping retirement balances in the plan, and a growing number of plan sponsors are interested in retaining these balances. Information gleaned from focus groups suggests that participants have misperceptions about the value of staying in plan. Some participants do not even know that staying in a plan is an option after retirement. If plan sponsors want to maintain retirees in the plan, they should not keep it a secret. They must engage with participants early and often.

Source: Troweprice.com, June 2020

IRS Eases Spousal Consent Rules During 2020

Nothing in the CARES Act or other emergency legislation modified the permanent IRS consent rules, which require that the consent be given in the physical presence of a notary public or plan representative. However, individuals affected by COVID-19 because of lockdowns, quarantines, and illness, or who are vulnerable and need to limit social contact, have found it impossible to satisfy the physical presence requirement. To help those participants, the IRS has issued a notice easing the usual requirements for spousal consent for all of 2020.

Source: Plansponsor.com, June 2020

Costco Sued Over 401k Plan Investment, Recordkeeping Fees

A participant in the Costco 401k Retirement Plan has filed a lawsuit against the company alleging violations of ERISA. The complaint calls out the warehouse club's use of "more costly 'actively managed funds' rather than 'index funds' that offered equal or better performance at substantially lower cost."

Source: Planadviser.com, June 2020

DOL Proposal Could Chill the Use of ESG in Retirement Funds

The DOL published for public comment a proposal to update and clarify its investment duties regulation for employer-sponsored retirement plans, such as 401ks, that are governed by ERISA. It emphasizes that a retirement plan must focus on financial returns for participants. The DOL proposal could chill the use of socially responsible investments in retirement plans, experts say.

Source: Investmentnews.com (registration may be required), June 2020

IRS Issues CARES Act Guidance for Retirement Plans

This IRS guidance expands the definition of "qualified individual" for receiving a tax-favored coronavirus-related distribution from a retirement plan and other plan changes under the CARES Act. The guidance also confirms that plan changes under the CARES Act are optional, including the loan repayment delay, and provides a safe harbor method for implementing the loan repayment delay.

Source: Hansonbridgett.com, June 2020

IRS Issues Anticipated CARES Act Guidance On Plan Loans and Distributions

On June 19, 2020, the IRS issued Notice 2020-50, which provides clarity to plan administrators and participants on coronavirus-related loans and distributions following the passage of the CARES Act. This article provides a review of the guidance and plan sponsor next steps.

Source: Groom.com, June 2020

Document Restatements Required

Many retirement plans are written using the IRS preapproved documents. Preapproved plans must be restated every six years to add language for any new rules and regulations that have been enacted since the previous restatement. The upcoming cycle, known as Cycle 3, will run from August 1, 2020, to July 31, 2022. This is a 2-year window during which all preapproved plans must be restated.

Source: Consultrms.com, June 2020

Electronic Document Delivery: What Plan Sponsors Need to Know

After much anticipation, the DOL published their final rule on electronic disclosure. The rule allows for plans to transition to an electronic environment for the delivery of required disclosures and most other plan communications to participants, eliminating a significant waste of time, money, and paper. While the ruling may appear obvious, it will have a significant impact on retirement plan communication.

Source: Cammackretirement.com, June 2020

DOL Asks for Suggestions on MEP and PEP Guidance

A key component of the SECURE Act, passed at the end of 2019, was the expansion of opportunities to combine the 401k plan assets of multiple unrelated employers. The SECURE Act relaxed the rules on multiple employer plans and created a new vehicle, the pooled employer plan to allow employers to come together under a single 401k plan. By providing additional pooling opportunities, Congress hoped to allow smaller employers to enjoy economies of scale available only to very large employers, and thereby reduce participant fees and enhance services. The DOL is now looking for suggestions on what guidance may help create additional MEP and PEP opportunities.

Source: Beneficiallyyours.com, June 2020

More Details on CARES Act Eligibility and Plan Loan Guidance

The retirement industry eagerly received the IRS guidance on applying provisions of the CARES Act with the issuance of Notice 2020-50 on June 19. It has provided important details on compliance with this legislation, which offers financial and tax relief to millions of Americans affected by the coronavirus pandemic.

Source: Ascensus.com, June 2020

Coronavirus May Shake Up DC Plan Participant Benefits

The COVID-19 crisis poses a big challenge for employers to rationalize the benefits they offer to employees. With budgets stretched and every dollar scrutinized, tough choices loom on DC plan offerings, in addition to programs like financial wellness.

Source: Alliancebernstein.com, June 2020

DOL Takes Strong ERISA 401k, ESG Fiduciary Stance

It might be harder to "invest in your values" if a proposed rule form the Department of Labor goes through. The regulatory body announced Tuesday that ERISA plan fiduciaries may not invest in environmental, social and governance vehicles when an underlying investment strategy decreases return or increases risk to achieve non-financial objectives.

Source: 401kspecialistmag.com, June 2020

Avoiding Pitfalls in Retirement Plan Forfeitures

This 7-page paper will help defined contribution plan sponsors consider the administration of forfeitures within their plans. It also outlines the timing and approved uses of forfeitures and provides additional considerations for forfeiture-related events.

Source: Vanguard.com, June 2020

Are Two Employers Better than One? An Empirical Assessment of Multiple-Employer Retirement Plans

This Article shows that the bipartisan enthusiasm for expanding multiple-employer arrangements rests on shaky theoretical and empirical considerations. Drawing on newly hand-collected data for multiple-employer plans in effect before 2019, it argues that overlooked agency costs, market opacity, and the limits of the fiduciary governance regime have undermined the gains from asset pooling and centralized plan administration in existing multiple-employer plans.

Source: Ssrn.com, June 2020

Do TDF Standard Glide Path Illustrations Obscure Key Information?

This paper argues that target-date fund risk profiles should align with evolving participant objectives along the retirement savings journey.

Source: Plansponsor.com, June 2020

Clearing Up Confusion About Retirement Timing

The pandemic may put a wrench in some participants' plans to retire, but others may be more prepared than they think. How can plan sponsors help them decide?

Source: Plansponsor.com, June 2020

Lessons Learned From a Litigation Settlement

The recent $17 million settlement involving Neuberger Berman stands out because, while those case citations remain, the narrative provides a kind of checklist for fiduciaries who might want to make their plans more secure from random litigation. Consider the points this settlement agreement said might arise, and be decided against the plaintiffs' case, and pointers to take from them.

Source: Napa-net.org, June 2020

2nd Circuit Bounces 401k Stock-Drop Case Back to District Court

A long-running 401k plan stock-drop case that could set a new standard on where the line between the obligations of corporate officials and ERISA plan fiduciaries has been remanded again to a lower court.

Source: Napa-net.org, June 2020

What Happens If You Contribute Too Much to 401k?

Most plan participants never have to worry about overcontributing. The plan administrator tasked with account maintenance will likely keep you from putting too much money into the account each year. However, you might run into a problem of overcontributing if you switch jobs during the year and start a new 401k plan, work multiple jobs with more than one 401k, or you received a pay raise or bonus, which included automatic 401k deductions.

Source: Myubiquity.com, June 2020

Rethinking the Role of Fixed Income Along the Retirement Savings Journey: From Theory to Practice

This paper takes the retirement savings journey from theory to practice by sharing views on how fixed income should evolve across a TDF glide path, exploring both the absolute level of the fixed income allocation and its composition in terms of fixed income sub-asset classes.

Source: Mfs.com, June 2020

Guidance on Waiver of 2020 Required Minimum Distributions

This notice provides guidance relating to the waiver of 2020 required minimum distributions from certain retirement plans under section 2203 of the CARES Act. In particular, this notice: permits rollovers of waived required minimum distributions and certain related payments, including an extension of the 60-day rollover period for certain distributions to August 31, 2020; answers questions relating to the waiver of 2020 RMDs; and provides a sample plan amendment that, if adopted, would provide participants a choice whether to receive waived RMDs and certain related payments.

Source: Irs.gov, June 2020

The Push to Allow CITs in 403bs

Fees in 401k plans have been falling for years, in part as a result of lower investment costs in mutual fund alternatives such as collective investment trusts, an option that is legally prohibited for most 403b plans. Some members of Congress are trying to change that, and the initiative could get more attention soon.

Source: Investmentnews.com (registration may be required), June 2020

Discretionary 401k Match Contributions

One important offering is a 401k retirement plan for employees to invest in. Ideally, a small- to mid-size employer would be in a financial situation to make some type of company match for employee's contributions. However, if the company's financials can't support ongoing matching contributions, there are other options.

Source: Humaninterest.com, June 2020

Do MEPs Really Reduce Fees?

MEPs loom as the elephant in the retirement industry room. With the SECURE Act allowing open Multiple-Employer Retirement Plans beginning in January of 2021, service providers cannot ignore this beast. It has the potential to become a behemoth, swallowing existing business models. An academic conclusion, like any credible science, must be careful with its words. Some may view this as hedging, but a scientist would call this exacting. It not surprising then that several academic paper's conclusions offered a mixed review of the 401k MEP.

Source: Fiduciarynews.com, June 2020

401k Plan Issues in the Current Environment

This article is intended to address 401k plan issues and concerns that develop during periods of economic uncertainty and market volatility, such as the current coronavirus pandemic. The author endeavors to keep CPAs informed of the types of practical problems and legal challenges likely to occur in the current environment.

Source: Cpajournal.com, June 2020

IRS Expands Definition of Qualified Individuals for Purposes of CARES Act Plan Distributions and Loans

On June 19, 2020, the Internal Revenue Service released Notice 2020-50 to help retirement plan participants affected by COVID-19 take advantage of the CARES Act provisions providing enhanced access to plan distributions and plan loans. Among other provisions, Notice 2020-50 expands the categories of individuals eligible for CARES Act distributions and loan treatment.

Source: Clarkhill.com, June 2020

How Exposed Are Retirement Savings to Market Risk?

As the COVID-19 pandemic emerged in early 2020, the stock market declined by 35 percent between its February peak and March trough. While the market has largely recovered since then, it remains very volatile and exposes household savings to continued market risk. This 10-page paper documents where the declines occurred and the extent to which retirement accounts are exposed to equity market risk. The first section looks at overall trends in the stock market and household exposure. The second section breaks down the decline in equity values by source. And the third section focuses specifically on retirement assets.

Source: Bc.edu, June 2020

What to Do If You Lose Your 401k Employer Match

In the wake of all the economic carnage unleashed by the coronavirus, many companies are cutting jobs and benefits such as the company match on 401k plans. If you're among the fortunate ones still employed, you may still have to deal with reduced benefits, too. Here's what to do if you lose your 401k employer match and what alternatives you may have.

Source: Bankrate.com, June 2020

Auto Features Push Plan Participation, Contribution Rates to Highest in a Decade

Capped by a strong 2019, the 2010s by many measures was the decade of the defined contribution investor, according to Alight's 2020 Universe Benchmarks report. Thanks in large part to employers adopting automatic features, more workers were participating in plans, the average savings rate was up, more portfolios were diversified and loan use was lower compared to the beginning of the decade, according to the firm's annual report, which shows how the DC world has changed over the past decade.

Source: Asppa.org, June 2020

IRS Issues More CARES Act Eligibility and Plan Loan Guidance

The IRS has issued Notice 2020-50, providing additional guidance on several aspects of the CARES Act. A "qualified individual" who has experienced health or financial effects from the COVID-19 pandemic is eligible for certain retirement plan distribution, penalty exemption, plan loan and loan repayment, taxation, and repayment benefits.

Source: Ascensus.com, June 2020

401k Plan Sued for COVID-19-Related Missteps

If you were wondering how long it would take someone to file suit regarding events related to the COVID-19 pandemic, wonder no more. In what seems to be the first suit filed against a 401k plan post-COVID-19 outbreak, the suit was brought by plaintiffs and former participants against the Behan Bros, Inc. Retirement Plan. Behan Brothers is a construction company located in Middletown, RI. The plan all participated in was a profit-sharing 401k plan, albeit one without participant direction.

Source: Napa-net.org, June 2020*

Private Equity in 401k Plans: More Smoke Than Fire

Private equity fund executives convinced the Department of Labor to issue a letter, dated June 3, 2020, approving the use of private equity investments within 401k plans. The decision pleased few outside the private equity industry. When the author wrote last year that the Labor Department was evaluating if private equity funds belonged in 401k plans, reader response was uniformly negative. The press reaction to the Labor Department's June release has been similar.

Source: Morningstar.com, June 2020

401k Plans: The Push for Lifetime Income Options is About to Begin

Very few 401k plans provide true lifetime income options, such as the monthly lifetime retirement benefit in a pension plan or a plan design feature in which the accumulated account is used to purchase an annuity contract providing a guaranteed monthly retirement income benefit. And, there currently is no legal requirement that a 401k plan includes annuity or similar lifetime income options. However, the federal government has expressed an interest in this subject, as evidenced in the recently enacted SECURE Act.

Source: Jdsupra.com, June 2020

Guidance for Coronavirus-Related Distributions and Loans From Retirement Plans Under the CARES Act

This IRS notice provides guidance relating to the application of section 2202 of the CARES Act for qualified individuals and eligible retirement plans. The guidance in this notice is intended to assist employers and plan administrators, trustees and custodians, and qualified individuals in applying section 2202 of the CARES Act, including guidance on how plans may report coronavirus-related distributions.

Source: Irs.gov, June 2020

Coping With the Increase in 401k Cyberattacks and Fraudulent Plan Distributions

Plan sponsor employers and employees participating in 401k or other retirement plans should be aware of cybersecurity breaches and unauthorized plan distributions. The heightened level of plan distributions coupled with the security risks associated with electronic communications and the "new normal" of working remotely, sometimes on personal computers, may increase the exposure of participants' confidential and personal data to cybercriminals. While employees may envision their 401k plans as safely tucked away for retirement, their accounts may be vulnerable to cyber fraud.

Source: Gtlaw.com, June 2020

IRS Determination Letter Program: Upcoming Deadlines and Recent Developments

The retirement plan community got a shock five years ago when the IRS dramatically cut back its 60-year-old program of providing employers with the comfort of a determination letter on the tax qualification of their plans. With the IRS's limited re-opening of its determination letter program, this summary highlights upcoming deadlines and recent developments.

Source: Groom.com, June 2020

IRS Permits Remote Notarization of Participant Elections

The economic and societal lockdowns that have been imposed in an attempt to slow the spread of the coronavirus have presented unique challenges, including some that may not have been contemplated when the lockdowns were instituted. Congress was quick to pass the CARES Act, which gave retirement plan participants greater access to their plan balances through expanded loan and hardship distribution provisions. However, a stumbling block quickly became apparent when plan provisions required spousal consent for some distributions or loans.

Source: Strategicbenefitservices.com, June 2020

Podcast Explores Retirement Plan Implications of CARES Act

The CARES Act has many provisions that will affect both defined benefit plans and defined contribution plans. In this podcast, Milliman's Charles Clark and Ginny Boggs talk about the CARES Act and its implications for retirement plans.

Source: Retirementtownhall.com, June 2020

Retirement Tier Widely Recommended for DC Plans

As more Americans shift from saving to spending in retirement, the majority of consultants of large 401k plans say plan sponsors should add a retirement tier and retiree-focused investment options to retain retirees and to help them manage their assets in retirement. A retirement tier is a range of products, solutions, tools, and services to support participants who are near, entering or in retirement.

Source: Plansponsor.com, June 2020

What Constitutes Retirement Plan Leakage

Previous studies substantially overestimate leakage from retirement accounts, according to a new analysis of tax data by Investment Company Institute economists Peter Brady and Steven Bass. The economists define "leakage" as early withdrawals from retirement accounts used for non-retirement purposes. While this is good news, the analysis still reveals that retirement account leakage is a big problem. And the types of retirement plan distributions weeded out for the economists' definition of leakage raise a question.

Source: Planadviser.com, June 2020

TPA Embezzlers Plead Guilty

Vantage Benefits Administrators co-owner Jeffery Richie, 55, and his wife (and co-owner) Wendy Richie, 59, have pled guilty to several counts in federal court for their role in a $15 million embezzlement scheme.

Source: Napa-net.org, June 2020

Retirement Assets Total $28.7 Trillion in First Quarter 2020

Total US retirement assets were $28.7 trillion as of March 31, 2020, down 11.9 percent from December 31, 2019. Retirement assets accounted for 33 percent of all household financial assets in the United States at the end of March 2020.

Source: Ici.org, June 2020

Is a 401k Match Contribution Tax Deductible?

Many employers match a portion of the employee's contribution, giving them an extra boost toward their retirements. This offers tax advantages to both the employees and the employers, and we'll discuss the details below. However, this is where the tax implications get a little murky: can employees deduct employer contributions alongside their own? Can companies reduce their tax bills by matching contributions? This article explores the tax implications of matched 401ks from the employee and employer perspective to make sure that 401k tax deductions are as clear as they can be.

Source: Humaninterest.com, June 2020

Retirement Plan Providers Failing to Deliver Needed Guidance Amid Heightened Volatility and Complexity, Survey

There has never been a more challenging time to invest for retirement. A combination of unprecedented market volatility and complex new rules involving contributions, withdrawals, and tax implications have exposed a need for increased guidance and advice on the part of retirement plan providers. Additionally, with record job losses in recent months, much of the money accumulated in these plans may potentially be lost if participants choose another provider for a rollover. According to the J.D. Power 2020 U.S. Retirement Plan Participant Satisfaction Study few providers are successfully addressing this growing need.

Source: Businesswire.com, June 2020

Are 401k Menus Out of Balance?

Amid historic market volatility, a new survey of retirement plan sponsors and retirement plan advisors reveals gaps in focus and perception about the role of fixed-income investments in a fully diversified 401k menu. The new survey found that equity options outnumber fixed income by approximately 3:1 on plan menus, regardless of plan size.

Source: Asppa.org, June 2020

DOL Publishes RFI on PTEs Involving PEPs

The DOL has just announced its Request for Information on Prohibited Transactions involving Pooled Employer Plans under the SECURE Act and other multiple employer plans. According to a press release, the RFI is "an opportunity for the public to provide data and information that may be used to evaluate whether the Department's Employee Benefits Security Administration (EBSA) should propose a new prohibited transaction class exemption."

Source: Asppa.org, June 2020

New Research Collaboration Combines 401k and Spending Data on a Large Scale for the First Time

In a first for the industry, EBRI is working with J.P. Morgan Asset Management to extract detailed insights into people's behaviors around spending and saving to help policymakers, plan sponsors, and plan providers improve retirement outcomes, utilizing their various databases. The effort leverages 22 million Chase households and 27 million 401k plan participant records, offering the first truly holistic view of how U.S. households spend and save.

Source: Prnewswire.com, June 2020

Increase Employee Participation in Your Retirement Plan

A retirement savings account is one of the most sought-after benefits an employer can offer. However, plan sponsors can sometimes struggle to effectively communicate a plan's benefits to employees in ways that boost engagement and enrollment. Don't let your plan wither on the vine. Follow these seven key steps plan sponsors can take to increase employee participation in your retirement plan.

Source: Planpilot.com, June 2020

Fiduciary Obligations With Respect to a Brokerage Window

This article reviews two recent cases that considered claims by participants in 401k participant-directed investment plans that plan fiduciaries failed to prudently monitor investments in what fiduciaries claimed were brokerage windows or "similar plan arrangements." The article starts with a summary of what we know and what we don’t know about the legal status of brokerage windows and similar plan arrangements.

Source: Octoberthree.com, June 2020

Fiduciary Oversight of 401k Plans Is Vital During Uncertain Times

Plan Sponsors and those charged with the oversight of their 401k plan need to remain diligent in ensuring the safety of their participant's 401k accounts. Here are 11 items you need to make sure you're doing.

Source: Linkedin.com, June 2020

How Much Does a 401k Cost Employers?

Although many small businesses may want to provide this benefit to recruit and retain employees, financial fears often get in the way of taking action. Those fears aren't unfounded. In the past 401k plans were focused on -- and priced for -- corporations with a lot of employees. However, in recent years, 401k providers have designed internet-based, low-expense, and easily-administered 401k plans for small businesses. These new plans allow owners to provide employees (and themselves) a way to save for retirement at an affordable price.

Source: Humaninterest.com, June 2020

Are 401k Menus Out of Balance?

Amid historic market volatility, a new survey of retirement plan sponsors and financial professionals reveals gaps in focus and perception about the role of fixed-income investments in a fully diversified 401k menu. Plan fiduciaries have long understood the need for a diversified portfolio. However, survey data consistently show that fixed income options have received neither the attention nor prominence of equity alternatives in most DC plan menus.

Source: Businesswire.com, June 2020

DOL Offers Guidance to Fiduciaries Considering Private Equity Investments in DC Plans

While the guidance does not establish any new fiduciary rules or exemptions, it is nonetheless quite helpful in providing factors to be considered by fiduciaries in determining whether investment vehicles with private equity components belong in their plan investment menu. The Information Letter considers facts relevant to private equity investments, but the guidance can be applied more broadly to consideration of any alternative investment vehicle with similar characteristics.

Source: Wagnerlawgroup.com, June 2020*

Simple Steps Toward Retirement Certainty in Uncertain Times

While the coronavirus pandemic has put the retirement security of all Americans at risk, there are actions they can take to put themselves in a better position, retirement plan experts say. Many people don’t know as much as they should about retirement and investments. There is no time like the present to learn.

Source: Planadviser.com, June 2020

Actual Knowledge: Can the DOL's New Electronic Disclosure Regulations Bridge the Divide?

The Supreme Court held that a participant must have a genuine subjective awareness of information, and, therefore, the mere availability of plan disclosures will not, in itself, establish "actual knowledge" of a potential breach of fiduciary duty under ERISA. In light of this decision and the DOL's recent issuance of a final rule on the new safe harbor for the electronic delivery of retirement plan notices, plan sponsors will want to consider how this safe harbor might help them satisfy the actual knowledge standard.

Source: Huntonlaborblog.com, June 2020

Determining the Qualification of a Domestic Relations Order

ERISA requires that all plans have a written procedure to determine whether a DRO is qualified. Because the rules for QDROs are sparse compared to the governance of other areas affecting qualified plans, they are vulnerable to ambiguity. They benefit from a methodical approach developed through specific plan procedures.

Source: Ferenczylaw.com, June 2020

Neuberger Berman 401k Committee Reaches $17 Million Settlement

A committee overseeing Neuberger Berman's 401k retirement plan reached a $17 million settlement to resolve claims it breached its fiduciary duties to employees by letting them invest large sums in a fund that suffered from high fees and "abysmal performance."

Source: Reuters.com, June 2020

Why Plan Sponsors Should Hire a Retirement Plan Consultant

Many plan sponsors lack the expertise to effectively manage their retirement plan and fulfill their fiduciary obligations to plan participants without some outside assistance. This is where a retirement plan consultant can be invaluable. Plan sponsors rely on consultants to provide knowledge and expertise. No two plans are alike and the same can be said of retirement plan consultants. Learn more about why plan sponsors choose to hire a retirement plan consultant, as well as a few of the questions you'll want to ask when you determined that you need one.

Source: Planpilot.com, June 2020

Recordkeeping Fee Structure Questioned in KeyCorp ERISA Lawsuit

A new ERISA fiduciary breach lawsuit has been filed in the U.S. District Court for the Northern District of Ohio, naming KeyCorp as the primary defendant, along with the trust committee tasked with overseeing the company's DC retirement plan. The plaintiffs accuse KeyCorp of causing plan participants to pay excessive recordkeeping and related administrative expenses during the class period.

Source: Planadviser.com, June 2020

401k Lawsuits Keep Piling Up

Despite the slowdown that the COVID-19 pandemic has caused in many parts of the country, 401k litigation appears largely unaffected. The two recent lawsuits follow other claims filed weeks earlier against Land O' Lakes and Schneider Electric over their 401k plans. Cleveland-based KeyCorp, the parent of KeyBank National Association, was sued last Thursday in the U.S. District Court in the Northern District of Ohio. The plaintiffs accuse the plan sponsor of failing to rein in the plan's recordkeeping fees.

Source: Investmentnews.com (registration may be required), June 2020

The Online Evolution of Retirement Plan Practices

Retirement plan advisers who resume their practice as if nothing has changed after the strict social distancing rules and travel restrictions are lifted will miss out on significant opportunities and be left behind. The COVID-19 crisis will accelerate many trends that were percolating before the crisis, like industry consolidation and a focus on participants. This will create new opportunities and challenges. Here's how RPAs may want to evolve their 401k and 403b practices as the virtual world becomes a reality.

Source: Investmentnews.com (registration may be required), June 2020

Few Use CARES Act to Tap Retirement Savings

After the CARES Act was signed into law at the end of March, retirement plan sponsors prepared for an onslaught of COVID-19-related distributions and loans to employees hard hit by the pandemic. But few plan participants have exercised their options to tap retirement plan savings under the new relaxed rules, according to two new reports.

Source: Investmentnews.com (registration may be required), June 2020

More Companies May Cut 401k Matches

The pandemic is affecting one of the best perks of workplace retirement-savings plans: company matches to employee 401k contributions. Many firms in the hard-hit hospitality and retail industries have already suspended, reduced, or deferred matches. As of late April, 12% of 816 companies with a total of 12 million workers had suspended matching contributions, according to a Willis Towers Watson survey. An additional 23% said they will or may halt them this year. Companies see suspensions as a way to boost cash flow and avoid or limit job cuts.

Source: Investmentnews.com (registration may be required), June 2020

Ten Things Employers Need to Know About the 401k Employer Match

From game tables in the office and flexible work schedules to paid time off for passion projects, employers are continually coming to the table with new and exciting ways to keep workers happy and, ultimately, loyal to a company. However, one traditional benefit remains at the top of many employees' must-have lists, the 401k. One key piece here that determines the value of the 401k to employees is an employer match.

Source: Humaninterest.com, June 2020

Cybersecurity Considerations for Plan Sponsors

Across the retirement industry, technology and digitization are delivering significant enhancements for participants and plan sponsors. Benefits include personalization, automation, and data analytics. But the increasing usage and reliance on technology come at an additional cost, cybersecurity. A recently filed ERISA lawsuit underscores the importance that cybersecurity plays in the fiduciary process, both for plan sponsors and service providers, and could serve as a harbinger of things to come.

Source: Greenspringadvisors.com, June 2020

How Do Layoffs Affect Your Retirement Plan?

A significant reduction of employees can have a widespread impact on many aspects of a business, and can even impact an employer's retirement plan if the reduction has led to a "partial termination." Retirement plans that have experienced a partial termination are required to make all of the accounts of employees affected by a partial termination nonforfeitable. Failure to comply can result in a costly correction for the employer, and can even result in the loss of the plan's tax preferential status.

Source: Graydon.law, June 2020

Comparing Seven Defined Contribution Plan Designs - 2020

This chart shows the results of an analysis prepared for one company that wanted a defined contribution plan. There were 10 people eligible for the retirement plan, including one owner. Employers and their advisors should recognize that there is much more room for design enhancement than there was 10 to 20 years ago. Don't assume that the simplest design is always the best.

Source: Consultrms.com, June 2020

DOL Issues Guidance on 401k Plan Investments in Private Equity

The DOL seeks to alleviate ERISA fiduciary liability concerns, first by limiting the use of private equity monies to investment components within larger, heavily diversified funds and, second, by focusing on the prudence of the private equity investment selection process itself. By following these precepts, the DOL believes that fiduciaries "may offer an asset allocation fund with a private equity component...in a manner consistent with the requirements of Title I of ERISA."

Source: Compliancedashboard.net, June 2020

Replacing Mandatory Employee Contributions With Automatic Enrollment

403b plan sponsors should do their homework to review participant data to ascertain how many individuals are indeed "maxing out" over and above their mandatory contribution. If there are a lot of employees who fit this description, perhaps automatic enrollment is not the right decision. This might also be a sign that employees are bumping up against their 415 limits on total contributions, which may warrant consideration of alternative designs. However, for the majority of 403b plan sponsors currently utilizing a mandatory contribution formula, auto-enrolment is likely a viable option.

Source: Cammackretirement.com, June 2020

401ks Are a Source of Cash in Pandemic

The U.S. retirement savings system has always been a little leaky. But the leaks seem to be getting bigger. Some Americans are eyeing withdrawals from their 401k plans as the best of a few bad options for paying their rent or solving other cash-flow problems. As of May 8, 1.5 percent of retirement plan participants had taken some money out of their 401k plans under new federal legislation permitting penalty-free withdrawals, The Wall Street Journal reported. An April survey by the non-profit Transamerica Institute put the number of savers responding to the pandemic much higher, about one in five.

Source: Bc.edu, June 2020

What Is a Safe Harbor 401k?

A safe harbor 401k is a retirement plan that allows a company to avoid the regulations and expenses associated with nondiscrimination tests typically required of a 401k or other retirement account. A safe harbor 401k can simplify the process for a company looking to roll out a retirement plan to its employees if the company is willing to follow certain rules. Here's how a safe harbor 401k is set up and what problems it can solve for companies.

Source: Bankrate.com, June 2020

DOL Provides a Road Map for Offering Private Equity Investments in 401k Plans

The DOL issued guidance stating its view that a plan sponsor of 401k and other DC plans may offer participants access to alternative assets (including private equity funds) through broadly diversified investment options such as target-date funds. Although this guidance does not change the law, it may encourage plan sponsors who have been hesitant to offer such products to incorporate alternative assets into their plans.

Source: Ropesgray.com, June 2020

Minimizing Retirement Plan Loans and Defaults

Retirement plan loans can be both an opportunity and a burden to participants. Loans come with the risk of default and penalties which can have a significant impact on the borrower. However, through a smart retirement plan design, participant education, and knowledge of recent legislation, plan sponsors can help to minimize loan usage and defaults. Here are some tips for designing lower-risk retirement plans.

Source: Pnc.com, June 2020

Analysis Finds Nearly Three Decades of Retirement Savings Growth

A recent analysis that draws on data from two sources offers insights on retirement savings over nearly 30 years and prospects for the future that bode well. In "Changes to Household Retirement Savings Since 1989," American Enterprise Institute Resident Scholar Andrew Biggs concludes that by more than one measure, retirement savings have been -- and will continue to be -- on a positive trajectory.

Source: Napa-net.org, June 2020

Decoding Retirement: A Detailed Look at Retirement Distributions Reported on Tax Returns

This 83-page paper addresses the question of how leakage should be defined when using tax data. The analysis indicates that penalized distributions, which represent only about half of the taxable distributions received by individuals younger than 55, are a reasonable approximation for leakage. The paper also examines retirement distributions more generally, looking across all age groups.

Source: Irs.gov, June 2020

Analysis Shows Prior Estimate Vastly Overstates Retirement Plan "Leakage"

The term "leakage" refers to early withdrawals from retirement accounts used for non-retirement purposes. Previous studies substantially overestimate leakage from retirement accounts according to a new analysis of tax data. The new analysis finds that a reasonable estimate of leakage is the amount of distributions subject to penalty for early distributions under the tax code and that such penalized distributions account for only around half of taxable distributions received by taxpayers younger than age 55.

Source: Ici.org, June 2020

What Triggers a Partial Plan Termination?

When your workforce undergoes significant changes -- due to layoffs, turnover, or furloughs -- your retirement plan could suffer a partial plan termination. Learn what measurements indicate your plan is at risk and what to do in the event a termination takes place.

Source: Francisinvco.com, June 2020

DOL Information Letter Outlines Fiduciary Considerations for Including Private Equity in DC Plan Investments

The Letter emphasizes that selection and monitoring of an investment option with private equity are subject to the same fiduciary considerations as other investments (including the duties to be prudent and loyal, and the duty to avoid prohibited transactions). At a high level, this includes evaluating whether the potential upside from the investment justifies the added risk, fees, complexity, and valuation and liquidity issues. The Letter lists specific considerations.

Source: Erisapracticecenter.com, June 2020

DOL Finalizes New Electronic Disclosure Safe Harbor

The final rule sanctions a "notice and access" disclosure method, whereby the administrator notifies the participant by email or text message that an important document is available on a designated website. The final rule also permits administrators to send documents to participants directly via email. This safe harbor could significantly reduce the costs of furnishing required disclosures.

Source: Bsk.com, June 2020

Retirement Plan Notice Delivery Requirements

The DOL's new rule allowing for electronic delivery only applies to those notices and disclosures that the DOL requires. Most retirement plan notices and disclosures are described here and those covered by this new rule are marked with an asterisk. The IRS has also indicated they intend to provide more guidance in the future about the electronic disclosure of the notices they oversee.

Source: Benefit-Resources.com, June 2020

IRS Now Permits Remote Witnessing of Participant Elections

In response to immediate requests from participants for tax-favored coronavirus-related distributions and loans, the IRS has issued Notice 2020-42, which provides temporary relief from the physical presence requirement for any participant election that needs to be witnessed by a notary public or a plan representative. The Notice gives plans and participants greater flexibility for participant elections, including spousal consents, that must be signed in person and witnessed by a notary or plan representative to be valid.

Source: Beneficiallyyours.com, June 2020

A Checklist to Avoid Form 5500 Errors

While Third Party Administrators prepare the form and often submit it on behalf of employers, it is the sponsors who are plan fiduciaries and responsible for accurate and timely filing of the Form 5500. Here are some suggestions for carefully reviewing the Form 5500 before signing.

Source: Alliant401k.com, June 2020

Sixth Circuit: Chapter 13 Debtor May Exclude 401k Plan Contributions From Disposable Income

In a case of first impression, the US Court of Appeals for the Sixth Circuit held that a Chapter 13 debtor may exclude from her bankruptcy petition disposable income the post-petition 401k plan contribution dollar amount if she contributed that amount to her plan before her bankruptcy.

Source: Westlaw.com, June 2020*

Court Decision Highlights the Dangers of Cybersecurity Breaches for Both Plan Sponsors and Plan Service Providers

The Leventhal decision comes against the backdrop of our current economic climate that, to be sure, raises the stakes for retirement plan cybersecurity. Plan sponsors are operating in a novel environment, where more employees are working remotely than ever before, many of their participants might be furloughed or unemployed, and the CARES Act makes it more accessible and attractive for employees to withdraw from their 401k plans. The collision of these factors makes securing participant retirement accounts all the more vital. The Leventhal case highlights the importance of protecting against cybersecurity breaches amid these unusual times.

Source: Wagnerlawgroup.com, June 2020

Retirement Security for Women Amid COVID-19

A woman's path to a secure retirement is filled with obstacles. Amid the COVID-19 pandemic, the challenges faced by women have further intensified with layoffs, furloughs, or extended periods working from home and balancing job responsibilities with homeschooling children and, possibly, caregiving for an aging parent or loved one. The goal of this research is two-fold: 1) to raise awareness of the retirement risks that women face, and 2) to highlight opportunities for women to take greater control of their finances and their futures.

Source: Transamericacenter.org, June 2020

Employers Cutting 401k Matching Contributions

The pandemic, which has changed the way millions of people work, is also starting to change the way they save, and not in a good way. Some 12% of employers have suspended matching contributions to their 401k plans, and an additional 23% were planning to cut their match or were considering it, according to a survey conducted in late April by Willis Towers Watson.

Source: Nasdaq.com, June 2020

IRS Allows Remote Notarization of Participant Elections for 2020

The IRS issued Notice 2020-42 to provide temporary relief for certain participant elections required to be witnessed in the "physical presence" of a plan representative or notary public, including spousal consents. The Notice is a welcomed response to the major challenges posed by the social distancing measures put in place due to the COVID-19 pandemic, and it provides plan administrators with additional flexibility to use remote notarization and similar services for all of 2020.

Source: Groom.com, June 2020

Five Things You Need to Know if You're Considering a 401k Loan

Borrowing money from a 401k is a common strategy used to get through hard times. If you've weighed your options during the novel coronavirus crisis and decided that a 401k loan is a right choice for you, there are five things you need to know before you borrow, as the rules have changed for 2020.

Source: Fool.com, June 2020

New DOL Fiduciary Rule Keeps IRA Market Under the IRS, Allow Some Conflicted Advice

The famous DOL fiduciary rule died in 2018 and stayed dead. Now suddenly the DOL is sending a new version to OMB for a final look. What sparked its Lazarus-like reappearance is a mystery. There's less mystery about what the document contains, though nobody has seen it. This article catches us up on two lost years for the DOL rule and removes most of the mystery cloaking the sudden change, and why it'll look much like what Wall Street wants, with a key exception.

Source: Riabiz.com, June 2020

The Next Evolution in 403b Plans: Investments

While 403b plans have made great strides, lifting restrictions on the types of investments the plans can offer and considering more diverse investment types could further improve participant retirement outcomes.

Source: Plansponsor.com, June 2020

What Plan Sponsors Should Know About the Plan Document

ERISA requires all retirement plan sponsors to have a written plan document to formalize how their unique plan will operate. Operating a retirement plan without this key document can open up your business to significant liability. Why is the plan document so important, and what elements should be included in your organization's plan document?

Source: Planpilot.com, June 2020

DOL Sends Revised Fiduciary Rule to OMB

A long-awaited rewrite of a DOL rule that would raise investment advice standards for retirement accounts has taken the first step toward public release. On Monday, the DOL sent the proposed revision of its fiduciary rule to the Office of Management and Budget. The measure was supposed to be released in December, according to the DOL regulatory calendar.

Source: Investmentnews.com (registration may be required), June 2020

DOL Guidance on Private Equity Adds Flexibility for DC Plans

Department's views on the use of private equity investments within 401k and other DC plans. The Information Letter was issued to Groom Law Group on behalf of two of its clients and makes clear that 401k fiduciaries can prudently include private equity as a component of an ERISA plan's diversified investment option, such as a target-date fund. The letter provides a framework of important factors for plan fiduciaries to consider to demonstrate the prudence of such investments.

Source: Groom.com, June 2020

Private Equity in ERISA DC Plans: DOL Issues Guidance

The DOL released new guidance that will likely facilitate the inclusion of private equity exposure in participant-directed defined contribution plans subject to ERISA. The guidance concerns the viability of multi-asset target-date, target-risk, and balanced funds made available on a plan lineup, including as a designated investment alternative under a Section 404(c) plan and/or as a qualified default investment alternative, with a PE component.

Source: Fiduciarygovernanceblog.com, June 2020

One Problem Solved: Notice 2020-42 Provides Temporary Relief for Witnessing Spousal Consents

The IRS has issued Notice 2020-42, ending the uncertainty surrounding spousal consents to retirement plan distributions and loans in the socially distanced COVID-19 world.

Source: Erisapracticecenter.com, June 2020

Small Business Retirement Plan Options - 2020

This chart compares 4 common types of plan designs often utilized by small employers.

Source: Consultrms.com, June 2020

DOL Finalizes New Electronic Disclosure Option for Retirement Plans

On May 27, 2020, the DOL issued a new safe harbor for electronic retirement plan disclosures that supplement existing regulations to allow an additional method to electronically deliver certain disclosures to plan participants, beneficiaries, and other individuals.

Source: Buck.com, June 2020

Temporary Relief Regarding Spousal Consent under Qualified Retirement Plans

In response to the COVID-19 pandemic, the IRS has issued a notice providing temporary relief from the physical presence requirement for participant elections required to be witnessed by a Plan representative or a notary public. Notice 2020-42 provides relief for participant elections made from January 1, 2020, through December 31, 2020.

Source: Bradley.com, June 2020

Expanding the Safe Harbor for (Certain) Electronic Disclosures

Plan administrators have long bemoaned the narrow parameters of the DOL's current safe harbor for electronic delivery. The new rule establishes another voluntary safe harbor for retirement plan administrators who wish to furnish "Covered Documents" to "Covered Individuals" electronically as the default means of delivery.

Source: Benefitslawadvisor.com, June 2020

Just Push SEND: The DOL Issues its Final E-Delivery Regulations

Following up on proposed rules issued in October 2019, the DOL just issued final regulations addressing an employer's or plan administrator's ability to send certain retirement plan notices to participants electronically. These methods have generally included email or posting to an employer or plan intranet site, but now can include text messaging or other electronic delivery to smartphones.

Source: Beneficiallyyours.com, June 2020

New DOL Guidance on Private Equity Adds Flexibility for DC Plans

The DOL issued important new guidance for 401k plan investment committees on June 3 that want to include private equity as a component of a target-date fund or other diversified investment fund offered within a 401k plan. The Information Letter marks the first time DOL has addressed the use of private equity in defined contribution retirement plans.

Source: 401kspecialistmag.com, June 2020

Chapter 13 Debtors Can Shield Ongoing 401k Contributions From Creditors, 6th Circuit

Wage-earners who contribute to an employer-sponsored retirement plan can continue to do so at the same rate after filing for Chapter 13 bankruptcy protection, a federal appeals court held Monday in a case of first impression nationwide.

Source: Reuters.com, June 2020

Participant Communications Specific to the Pandemic

A recent Buck survey showed that 62% of defined contribution plan sponsors plan to increase their financial education communications. And there is certainly an increased need. Elizabeth Woodburn, with Buck, describes what elements DC plan sponsors may consider including in participant communications during the COVID-19 pandemic.

Source: Plansponsor.com, June 2020

First Hints of Potential New DOL Fiduciary Rule Emerge

The DOL has filed for review a draft regulation with the Office of Management and Budget. The actual language of the proposed rule is not yet available, as it must first be analyzed by OMB, but sources are speculating that this proposal likely represents the DOL's new fiduciary rule and that the "exemption" referenced in the title of the rule will be related to the Regulation Best Interest package currently being implemented by the SEC.

Source: Planadviser.com, June 2020

Appeals Court Upholds Dismissal of Phillips 66 401k Stock Case

A federal appeals court in New Orleans has upheld a lower court's dismissal of a complaint by participants in a Phillips 66 Co. 401k plan that fiduciaries violated their ERISA duties in managing a stock investment within the plan. "Plaintiffs claim that holding a single-stock fund is imprudent per se because of the risk inherent in holding an undiversified asset," the three-judge panel wrote on May 22. "But ERISA contains no prohibition on individual account plans' offering single-stock funds."

Source: Pionline.com, June 2020

Revamped DOL Investment Advice Rule Undergoing OMB Review

If you were wondering what the DOL was planning to do about its reported revision of the fiduciary rule, wonder no more. A proposal has just been submitted to the Office of Management and Budget for review. While the text of the proposal is not yet available, the title, "Improving Investment Advice for Workers & Retirees Exemption," suggests that it involves a prohibited transaction exemption that could potentially replace the Best Interest Contract Exemption (BICE) that was thrown out by the 5th U.S. Circuit Court of Appeals' in June 2018.

Source: Ntsa-net.org, June 2020

Is DOL Making an ESG "Investment"?

The DOL dropped off a proposed rule titled "Financial Factors in Selecting Plan Investments." It's not immediately clear what the focus of the rule is (other than the obvious), though it is flagged as not "economically significant." There's a suspicion that it might have something to do with ESG investing, a topic on which the Labor Department has previously provided some perspective, albeit in the form of Field Assistance Bulletins.

Source: Napa-net.org, June 2020

Tips to Prepare for Your Upcoming 401k Plan Audit

Audit request lists are going out to plan sponsors for the annual audits of their 401k plans. While the receipt of these request lists can cause blood pressure to rise at the plan sponsor, there are some simple tasks the plan sponsor can perform to prepare for the annual audit of their 401k plan. Here are some tips for plan sponsors which will help to make the audit process go smoother.

Source: Linkedin.com, June 2020

DOL Finalizes an e-Option for Delivering Plan Disclosures for Covered Retirement Plans

According to the DOL, there are approximately 137 million participants in approximately 700,000 retirement plans covered by ERISA. Since 2002, plan administrators could rely on a regulatory safe harbor to deliver printed disclosures. The DOL finally agrees it is expensive, a burden, and involves a lot of paper, printing, and mailing costs to comply with the old safe harbor.

Source: Lindquistcpa.com, June 2020

Fifth Circuit Holds That Offering Single Stock Investments in a 401k Plan is Not Per-Se Imprudent

The Fifth Circuit held that although the stock of the former parent was not statutorily exempt from ERISA's diversification because it was no longer a "qualifying employer security," there was no obligation for the plan fiduciaries to force plan participants to divest from the funds. The court explained that ERISA contains no per se prohibition on individual account plans offering single-stock funds.

Source: Haynesboone.com, June 2020

How the Coronavirus Pandemic Is Shaking Retirement Confidence Across Generations

It's no secret that Americans are feeling financially vulnerable in the wake of the coronavirus pandemic. And a survey shows how much their confidence has been hurt when it comes to one long-term goal: retirement. Transamerica Center for Retirement Studies found that 23% of workers who are employed or recently unemployed said their confidence that they will be able to retire comfortably has gone down.

Source: Cnbc.com, June 2020

Feds Double Down on ERISA Disclosure Argument After SCOTUS Look

Nothing in federal benefits law requires corporate insiders to make public disclosures beyond those required by securities law, the DOL and the SEC told the Second Circuit in letters that doubled down on their earlier position. The agencies' letters, filed Monday, come five months after the U.S. Supreme Court ordered the Second Circuit to reconsider a dispute involving a 7% drop in the IBM stock held by IBM's 401k plan.

Source: Bloomberglaw.com, June 2020

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