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COLLECTED WISDOM™ on Compliance and Regulatory Related Issues

This page gathers relevant information for 401k plan managers, sponsors, administrators, recordkeepers and others with plan fiduciary and administrative responsibilities. It covers many aspects of compliance and regulatory related issues.

This archive contains not only the most current material on the topic, but also older items that are still relevant, provide background, perspective or are germane to the topic.

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Use of Plan Forfeitures Not the Slam Dunk It Used to Be

A recent rash of class action lawsuits in California claims that using forfeitures to reduce future employer contributions to tax-qualified retirement plans runs afoul of ERISA. These cases have continued to advance despite their central claim seeming to contradict long-standing IRS guidance for the permitted use of plan forfeitures. Considering these developments, this article reviews how an employer can best use the forfeiture dollars without risking exposure to litigation.

Source: Benefitslawadvisor.com, June 2024

When Does a Corporate Transaction Trigger a 401k Participant's Right to a Distribution?

To accurately answer that question and to avoid potentially costly operation errors, sponsors of 401k plans who intend to participate in corporate transactions should be well-versed in the applicable distribution rules under the Internal Revenue Code and how they apply to various transaction scenarios. This article focuses on the rules applicable to 401k plans.

Source: Reinhartlaw.com, June 2024

Use of 401k Plan Forfeitures Continues to be Scrutinized in Litigation

Forfeitures typically occur when an employee leaves a company before fully vesting in the 401k plan, thus leaving the employer with excess contributions. In a handful of recent lawsuits, plan sponsors have been questioned about their use of forfeitures assets to reduce employer contributions in 401k plans.

Source: Plansponsor.com, June 2024

A Pop Culture Guide to the New Final Amendments to the QPAM Exemption

The DOL recently finalized amendments to the QPAM exemption that will considerably alter the exemption's conditions effective as of June 17, 2024. There are several immediate action items for investment managers and ERISA plan fiduciaries under the revised exemption. Here is a "Pop Culture" guide.

Source: Erisapracticecenter.com, June 2024

SECURE 2.0: IRS Issues Fact Sheet on Disaster Relief Distributions and Plan Loans

The IRS recently issued Fact Sheet 2024-19, which addresses the special rules for distributions and plan loans for certain individuals impacted by major federally declared disasters under the SECURE 2.0 Act. Though not breaking much new ground, the fact sheet provides clear and helpful guidance to plan sponsors choosing to extend all or some of the distribution and/or loan relief to their employees in the wake of disasters.

Source: Morganlewis.com, June 2024

Expanded Abandoned Plan Program Gives Certain Bankruptcy Trustees QTA Eligibility

A new DOL interim final rule expands eligibility to serve as a "qualified termination administrator" to include Chapter 7 bankruptcy trustees and certain parties appointed by such trustees. Beyond expanding QTA eligibility, the interim final rule also makes several technical changes that may impact the administration of abandoned plans. Here is the background and a review of the interim final rule.

Source: Groom.com, June 2024

Chamber of Commerce, ERIC Plead for Fewer Retirement Plan Disclosures

Industry groups have asked the Department of Labor, Internal Revenue Service, and Pension Benefit Guaranty Corporation to simplify and improve retirement plan disclosures with specific recommendations in response to a request for information issued by the DOL in January. The interest groups agree that most participants do not read nor understand many disclosures related to their retirement benefits.

Source: Planadviser.com, June 2024

A Guide to 401k Withdrawal Strategies

Not all employees have the same financial or personal circumstances. There may be times when they may need to make partial or total early withdrawals from their 401k account. What are the 401k withdrawal rules? Is there a penalty for an early 401k withdrawal? How can you withdraw money from a 401k before retirement? InvestmentNews provides answers to these and more in this article.

Source: Investmentnews.com, June 2024

Abandoned Plan Program Expanded

The Employee Benefits Security Administration, Department of Labor issued interim final rules that expand the Abandoned Plan Program to include plan sponsors in Chapter 7 bankruptcy and other technical corrections. The interim final rule is effective July 16, 2024.

Source: Principal.com, May 2024

IRS Releases Guidance on Disaster Relief Distributions and Loans Under 401k Plans

The IRS issued guidance in the form of "frequently asked questions" on disaster relief distributions and expanded loans under qualified retirement plans, including 401k plans, under the SECURE 2.0 Act. This article briefly reviews what's in the FAQ.

Source: Compliancedashboard.net, May 2024

IRS Issues FAQs to Explain Optional Disaster Relief

The SECURE 2.0 Act provides for permanent distribution and loan relief for any federally declared major disasters occurring on or after January 26, 2021. This new relief is intended to facilitate timely disaster distributions from qualified plans and IRAs, without having to wait for any specific IRS relief (as was needed in the past).

Source: Groom.com, May 2024

DOL Revises Abandoned Plan Program, Extends Program Eligibility to Chapter 7 Bankruptcy Trustees

More than a decade after proposing amendments to regulations on abandoned plans, the DOL has issued interim final regulations that, among other things, allow bankruptcy trustees to use the DOL's Abandoned Plan Program to terminate and wind up the plans of sponsors in Chapter 7 bankruptcy. The article provides background and highlights of the regulations for bankruptcy trustee QTAs.

Source: Thomsonreuters.com, May 2024

Avoid RMD Complexity With Force-Out Distributions at Normal Retirement Age

Required minimum distributions may not come up often in retirement plan operations. When they do, it can be a real pain in the administration. The RMD rules can be complicated with exceptions to the exceptions, and recent law changes just added to the complexity. Retirement plans can forgo the RMD chaos altogether by using the plan's force-out provisions and automatic rollover IRAs for terminated participants at normal retirement age.

Source: Penchecks.com, May 2024

IRS Extends Post-Death RMD Relief Under the 10-Year Rule for 2024 Distributions

The Internal Revenue Service recently extended relief concerning certain post-death required minimum distributions under Internal Revenue Code Section 401(a)(9). Here is a short overview.

Source: Morganlewis.com, May 2024

Five Things on the DOL's Radar for Employee Benefit Plans

All qualified retirement plans are subject to a myriad of requirements of ERISA. The DOL is charged with enforcing the requirements of ERISA. This article discusses some of these requirements and related guidance issued by the DOL, the Internal Revenue Service, and the Pension Benefit Guaranty Corporation, as well as some related future guidance to be issued by the DOL as required by SECURE Act 2.0.

Source: Foley.com, May 2024

Unwritten Rules That Must Be Followed

Unlike unwritten rules referring to the social norms, customs, and expectations that guide behavior in various contexts, SECURE 2.0 brings rules that must be followed effective on January 1, 2024, even though the related plan amendments are not due until 2025. For example, SECURE 2.0 requires employers to give Long-Term, Part-Time Employees the opportunity to contribute elective deferrals to retirement plans effective on January 1, 2024.

Source: Belfint.com, May 2024

How to Streamline Your 401k Plan Audit

As a plan sponsor of a 401k plan that requires an annual audit, you've probably wondered in frustration, "Why does it take so long?" Yes, audits can be time-consuming, but they don't have to be. Here are the top industry reasons why your audit takes so long and how you and your auditing team can speed up the process.

Source: Cassellplanaudits.com, May 2024

DOL Opens Abandoned Plan Program to Retirees of Bankrupt Companies

The DOL announced it is expanding its rules and pushing forth an amendment that would better protect the retirement savings of employees who worked for bankrupt companies. Specifically, the changes would make it easier for Chapter 7 bankruptcy retirees to distribute assets from bankrupt companies' retirement plans using the Abandoned Plan Program, a service originally adopted in 2006 that allows trustees to "terminate, wind up, and distribute benefits," the DOL said.

Source: 401kspecialistmag.com, May 2024

New DOL Guidance Extends Abandoned Plan Program to Bankruptcy Trustees

The DOL has released interim final rules and an amendment to a prohibited transaction class exemption to make it easier for Chapter 7 bankruptcy trustees to distribute assets from bankrupt companies' retirement plans. The guidance issued May 16 by the DOL's Employee Benefits Security Administration amends the agency's Abandoned Plan Program to allow these trustees to use the program to terminate, wind up, and distribute benefits.

Source: Asppa-net.org, May 2024

IRS Explains New Disaster Relief Distribution and Loan Rules

The IRS has issued FAQs addressing the disaster relief provisions of the SECURE 2.0 Act of 2022, which gives retirement plan sponsors the option to provide distribution and loan relief in response to a "qualified disaster," which is a major disaster declared by the president and indicated on the Federal Emergency Management Agency website.

Source: Segalco.com, May 2024

Six Steps to a Strong Missing Participant Policy

Missing participants, defined as individuals who have become disconnected from their retirement savings are a significant challenge that has long plagued defined contribution plans. The responsibility for locating these persons falls squarely on the shoulders of plan sponsors. Retirement Clearinghouse's Tom Hawkins shares keys to building a policy that will fulfill a plan sponsor's fiduciary duty.

Source: 401kspecialistmag.com, May 2024

Defining an Employee vs. Independent Contractor: New DOL Guidelines

Do the final DOL regulations defining employee vs. independent contractor affect who can participate in retirement plans? Determining whether a worker is an employee or an independent contractor, particularly for retirement plan coverage purposes can be tricky. The DOL has a new FLSA employee standard. There's also the IRS definition of employee for tax purposes and Supreme Court rulings. All three of these standards may impact whether a worker is an employee who should be covered under an employer-sponsored retirement plan.

Source: Retirementlc.com, May 2024

2024 DOL ERISA Investigation Update: Recent Publications Offer Insight Into Possible Areas of Focus

The DOL maintains a robust investigatory program for auditing employee benefit plans for potential ERISA violations. ERISA plan fiduciaries and service providers can expect the DOL to continue its ever-evolving enforcement program targeting both fiduciaries and nonfiduciary service providers. Recent reporting by the DOL provides insight into its current official and unofficial enforcement priorities and may help plan fiduciaries and in-house counsel seeking to track the DOL's enforcement activities.

Source: Morganlewis.com, May 2024

Retirement Topics - Plan Notices

Plan administrators must give employees certain written information about their retirement plans. Some of this information must be provided regularly and automatically. Other kinds of disclosures are available upon written request, free of charge, or for copying fees. Plan administrators can give notices to participants electronically if they meet certain conditions. This is a review of plan notices.

Source: Irs.gov, May 2024

What Plan Sponsors Need to Know About Proposed IRS Regulations for Long-Term, Part-Time Employees

The Internal Revenue Service issued a Notice of Proposed Rulemaking addressing the "long-term, part-time employees" rules enacted under the Setting Every Community Up for Retirement Enhancement Act of 2019 and the SECURE 2.0 Act of 2022. The proposed regulations provide helpful clarity for plan sponsors required to implement these new rules. This is a four-page review of the new rules including some next steps.

Source: Icemiller.com, May 2024

Sample IRS Plan Amendment Language (via LRMs) Is Here

The IRS recently issued updated LRMs for defined contribution plans that address several plan changes under recent laws. Importantly, this language can be used by both pre-approved and individually designed plans. Due to the complexities of the Internal Revenue Code, and wanting to be sure that the plan document complies with the law, this document is a good starting point. Set forth here is a summary of the key provisions that were updated to reflect recent law.

Source: Groom.com, May 2024

IRS and DOL Release Guidance for PLESA Provisions

In January 2024, the IRS released Notice 2024-22, giving guidance concerning anti-abuse rules for Pension-Linked Emergency Savings Accounts, a new provision created by the SECURE 2.0 Act. Soon after, the DOL issued a set of FAQs intended to provide answers to general compliance questions about the administration of PLESAs. This is a review of the new guidance.

Source: Ascensus.com, May 2024

IRS Provides Relief for Certain 2024 RMDs

The IRS has provided relief for 2024 required minimum distributions from DC plans to beneficiaries of participants who died in 2020, 2021, 2022, or 2023 after their required beginning dates. The IRS issued similar relief for 2022 and 2023 RMD distributions. The extended relief addresses a controversial proposed IRS interpretation of an RMD provision changed by the Setting Every Community Up for Retirement Enhancement Act.

Source: Segalco.com, May 2024

DOL Seeks Voluntary Data for New Lost and Found Registry

The DOL has announced that it intends to obtain the data needed to populate the Lost and Found Registry created by the SECURE 2.0 Act by asking sponsors of private sector retirement plans to provide the information voluntarily. In an information collection request, the DOL describes the data it seeks from plans. The DOL requests comments on the ICR by June 17, 2024.

Source: Segalco.com, May 2024

QACA and EACA: Considerations for Plan Sponsors

Determining if a Qualified Automatic Contribution Arrangement or Eligible Automatic Enrollment Arrangement is right for your plan. This document discusses options available for Cash or Deferral Arrangement plans established before the enactment of SECURE 2.0 (December 29, 2022) that are not required to have an Eligible Automatic Contribution Arrangement.

Source: Fidelity.com, May 2024

Seven Common Plan Errors and How to Avoid Them

Correctly maintaining a retirement plan comes with responsibilities and administrative duties to ensure compliance with the various complex employee benefit plan laws and regulations, making it important to have knowledgeable service providers and strong internal company controls. The IRS expects plan administrators and service providers to catch mistakes and correct them right away. In this article, the author discusses seven common mistakes and provides tips on how to keep them from happening.

Source: Consultrms.com, April 2024

Maintaining Retirement Plan Records

Employers who sponsor a retirement plan are required by law to keep books and records available for the Internal Revenue Service to review. Having these records available is also helpful when determining participant benefits. Records may be kept in either paper or electronic format, as long as they can be readily retrieved. This article reviews what records you should keep and how long you must retain them.

Source: Consultrms.com, April 2024

IRS Extends Relief for Certain Required Minimum Distributions

On April 16, 2024, the IRS issued Notice 2024-35, which extends the relief that the IRS has twice previously granted plan sponsors concerning certain "specified" required minimum distributions taken from qualified retirement plans, including 401k plans. Here is a review.

Source: Compliancedashboard.net, April 2024

DC Plan Forfeitures: Proposed Regulations and Recent Litigation

There have been recent developments from both the IRS and the DOL and pending court cases about how plan forfeitures under defined contribution retirement plans must be handled. The purpose of this article is to summarize what the potential conflicts are and to make sure that employers are aware of them, and that until these potential conflicts are resolved, employers are administering their plans so as not to violate any of the rules.

Source: Kelleydrye.com, April 2024

IRS Extends Required Minimum Distribution Relief Pending Issuance of Final Regulations

On April 16, 2024, the IRS issued Notice 2024-35 which further extends the required minimum distributions relief for the fourth year in a row while plan sponsors, IRA providers, participants/IRA owners, and their beneficiaries await final Code section 401(a)(9) regulations. This Article provides a summary of the notice.

Source: Groom.com, April 2024

IRS Notice 2024-35: (Another) Temporary Waiver for Certain RMDs

On April 16, 2024, the IRS released Notice 2024-35 extending temporary relief for certain required minimum distributions related to the SECURE Act's 10-year distribution rule through 2024. This notice follows similar relief provided by the IRS in Notice 2022-53 and Notice 2023-54 for earlier periods.

Source: Erisapracticecenter.com, April 2024

DOL Issues Proposal for SECURE 2.0 Lost and Found Database

In the proposed procedure, the DOL places the burden of data collection and reporting on plan administrators. Administrators would be required to provide necessary data to the DOL via Form 5500s each year, perhaps starting with the 2023 5500s that are due in 2024. Because, for most plans, the collection of 5500 data is almost always outsourced to a third-party administrator or bundled recordkeeper, these will be the entities that would presumably provide required data to the DOL via the 5500s of the individual plan sponsors.

Source: Captrust.com, April 2024

Too Little, Too Late? Plan Contribution Timing Requirements and How to Correct Delays

One of the most basic duties of a defined contribution plan sponsor is to ensure that that there is no delay and participants' salary deferral elections are correctly and timely deposited into the retirement plan. Not only is this duty necessary for proper administration of the plan, but it is also part of a plan sponsor's fiduciary duties under ERISA. This is a review of the plan contribution timing requirements and how to correct delays.

Source: Brickergraydon.com, April 2024

Retirement Lost and Found: DOL Proposes Voluntary Reporting

The SECURE 2.0 Act of 2022 directed the DOL to establish a database that individuals can search to help locate their retirement benefits. The database was originally intended to leverage existing filing requirements, but the IRS determined it could not legally share Form 8955-SSA data with DOL. Consequently, DOL has issued a proposed procedure to collect data directly from plan administrators voluntarily via a new filing made along with, but not as part of, Form 5500.

Source: Groom.com, April 2024

Revisiting Plan Service Provider Agreements: To Provide or Not to Provide to Plan Participants

In Zavislak v. Netflix, the court held that the plan administrator of a health plan was not required to provide a participant with copies of various service provider agreements. While the Zavislak decision provides a detailed analysis of the topic, the issue of whether service provider agreements must be disclosed remains unsettled across other jurisdictions. Accordingly, plan administrators who receive such requests should consider the extent to which such agreements must be provided based on case law in the applicable jurisdiction.

Source: Erisalitigation.com, April 2024

How IRS Notice 2024-35 Affects Beneficiaries

Under the proposed RMD regulations, if an account owner dies on or after their required beginning date, beneficiaries who are subject to the 10-year rule must take annual life expectancy payments during the first nine years. This applies to beneficiaries of account owners and to successor beneficiaries of eligible designated beneficiaries who died in 2020 or later.

Source: Ascensus.com, April 2024

IRS Provides Guidance Regarding 2024 RMDs

The IRS has issued Notice 2024-35, which guides certain required minimum distributions for 2024. Notice 2024-35 also states that final regulations regarding RMDs will not apply before the 2025 distribution calendar year. Here is a review of the guidance.

Source: Westlaw.com, April 2024

DOL Issues Final Rule Amending QPAM Exemption

On April 3, 2024, the DOL released its final rule amending Prohibited Transaction Exemption 84-14. The inclusion of foreign crimes modernizes PTE 84-14 in light of the increasing globalization of the financial services sector, and the increase in asset management and equity thresholds ensures that the exemption remains limited to large managers.

Source: Shearman.com, April 2024

IRS Issues Guidance on Certain RMDs for 2024

On April 16, the IRS issued guidance on certain specified required minimum distributions for 2024. It adds that the final regulations it plans to issue related to RMDs will apply for purposes of determining RMDs for calendar years beginning on or after Jan. 1, 2025. The guidance is contained in Notice 2024-35 and is outlined here.

Source: Napa-net.org, April 2024

Department of Labor Finalizes QPAM Exemption Amendment

The DOL final amendment to Prohibited Transaction Class Exemption 84-14, the QPAM Exemption is commonly relied upon by investment managers for ERISA-governed employee benefit plans and individual retirement accounts to avoid potential prohibited transaction issues, was published in the Federal Register on April 3, with the changes becoming effective on June 17, 2024. This article reviews the key changes to the exemption.

Source: Morganlewis.com, April 2024

ERISA Reporting Requirements

ERISA reporting requirements, as well as other retirement plan reporting requirements, can be daunting for plan sponsors and administrators new to the process. This article is an introduction to those requirements and responsibilities.

Source: Employeebenefitslawgroup.com, April 2024

DOL Turns to Recordkeepers for Help With Lost and Found Database

The DOL on April 15 released a proposed information collection request to help implement a forthcoming lost-and-found database to assist individuals with locating missing retirement accounts, but the operation appears to have hit a slight bump in the road. As for that bump in the road, the DOL notes that it initially had planned to use data that plan administrators submitted to the IRS on Form 8955-SSA. However, citing concerns under Section 6103 of the Internal Revenue Code, the IRS has now indicated that it will not authorize the release of this data to the DOL.

Source: Asppa.org, April 2024

Participants Prefer SECURE 2.0 PLESA Benefit Over Withdrawal Feature

A new survey by Commonwealth analyzes the impacts of SECURE 2.0 legislation on low to moderate-income employees. Commonwealth worked with five focus groups, for a total of 20 participants, to assess interest and requests for emergency expense provisions under SECURE 2.0. Under SECURE 2.0, employers can implement a PLESA feature that would allow employees to make post-tax contributions towards a rainy-day fund, which can be used during financial hardships.

Source: 401kspecialistmag.com, April 2024

"Lost & Found" Database: DOL Seeks Recordkeeper Help

The Department of Labor is asking for help from retirement industry recordkeepers to establish a SECURE 2.0-mandated online search tool to help America’s workers locate lost retirement accounts. The DOL’s Employee Benefits Security Administration announced it is proposing to collect information from plan administrators voluntarily to build the new tool.

Source: 401kspecialistmag.com, April 2024

DOL Finalizes Tighter Standards for QPAMs

On April 2, 2024, the DOL finalized an amendment to prohibited transaction class exemption 84-14, expanding the categories of disqualifying criminal conduct for qualified professional asset managers, commonly referred to as QPAMs. The final amendment also added new compliance requirements to the Exemption.

Source: Debevoise.com, April 2024

DOL Finalizes Amendment to QPAM Exemption

The DOL has completed a final amendment that would allow parties related to employee benefit plans and individual retirement accounts to engage in transactions involving plan and IRA assets. The final amendment on the Class Prohibited Transaction Exemption 84-14, otherwise known as the Qualified Professional Asset Manager Exemption (QPAM), responds to changes in the financial services industry since the exemption's 1984 establishment.

Source: 401kspecialistmag.com, April 2024

Several New Reasons Employers Should Self-Audit Retirement Plans

Employee benefit plans must be reviewed regularly to determine whether there are compliance errors that need to be corrected before there are major correction costs and penalties. There are many reasons why doing self-audits of both tax and fiduciary compliance makes sense and provides retirement plan fiduciaries with protection. Here are four of them.

Source: Cohenbuckmann.com, March 2024

Counting Participants in a First Year Plan

The 2023 Form 5500 Annual Return/Report of Employee Benefit Plan includes some changes to previous filing requirements. One change is to the participant-counting methodology, specifically for defined contribution plans, to determine the plan filing type. But there is an important caveat for first-plan year filers.

Source: Belfint.com, March 2024

2024 Plan Limits for Puerto Rico

On January 31, 2024, the Puerto Rico Department of the Treasury issued Internal Revenue Circular Letter No. 24-01 (CL IR 24-01) announcing the 2024 limits for Puerto Rico-qualified retirement plans according to Section 1081.01(h) of the Puerto Rico Internal Revenue Code of 2011. Here is a chart of the applicable 2024 limits for qualified defined contribution retirement plans in Puerto Rico.

Source: Belfint.com, March 2024

IRS Issues Favorable Initial PLESA Guidance on Match Restrictions

Notice 2024-22 brings important initial guidance on appropriate matching restrictions for Pension-Linked Emergency Savings Accounts, which was added to the Internal Revenue Code by Section 127 of SECURE 2.0, and is effective this year. In this article, Groom principals Elizabeth Dold and David Levine offer a simplification of the requirements for employers and recordkeepers to offer PLESAs.

Source: Groom.com, March 2024

SECURE 2.0 Act: Catch-up Contributions

Section 603 of the SECURE 2.0 Act of 2022 placed restrictions on catch-up contributions such that individuals having earnings of more than $145,000 in the previous calendar year would be required to make all catch-up contributions as Roth after-tax contributions. In this article, the Public Retirement Research Lab Database is analyzed to assess the impact of this provision on public-sector retirement plans and participants.

Source: Ebri.org, March 2024

SECURE 2.0 DC Retirement Plan Provisions Summary

SECURE 2.0 is a law designed to substantially improve retirement savings options, including 401k and 403b plans. The number of retirement plan provisions in SECURE 2.0 is expansive and can feel overwhelming for a plan sponsor. If you are looking for a summary organized by effective date to help you understand how this relates to your DC plan, this resource can be a useful tool for you.

Source: Multnomahgroup.com, March 2024

Do You Know Where Your "Missing" Retirement Plan Participants Are?

In the laundry list of retirement plan administrative and operational requirements, plan sponsors may sometimes overlook their obligations concerning terminated vested employees. Even though these individuals have left the company, the plan sponsor still retains fiduciary obligations to them. To provide them with their benefits under the plan, you will need to maintain contact information for them. Here are some suggestions for minimizing missing participants in your plan.

Source: Brickergraydon.com, March 2024

The DOL Issues New Guidance on PLESA

PLESAs allow eligible participants to contribute up to $2,500 (as Roth contributions) to an emergency savings account linked to a defined contribution plan. In consultation with the Treasury Department and the IRS, the DOL recently issued guidance regarding PLESAs in the form of FAQs. There are no earth-shattering revelations in the FAQs, but there are a few nuggets to glean from them.

Source: Benefitslawadvisor.com, March 2024

2024 Puerto Rico Retirement Plan Limits

As announced through Circular Letter No. 24-01 (CL IR 24-01), issued by the Puerto Rico Treasury Department, the following chart outlines the 2024 limits for retirement plans qualified under the Puerto Rico Revenue Code of 2011, as amended.

Source: Voya.com, March 2024

New Voluntary Correction Rules Could Be Finalized Soon

The Department of Labor should be finalizing its proposed update to the Voluntary Fiduciary Correction Program in "the next few months," according to a representative of the Employee Benefit Security Administration speaking at a conference on Tuesday.

Source: Planadviser.com, March 2024

Prevent Problems by Using Auto Rollover IRAs for Force-Outs Below $1,000

Have you done something for a long time without really thinking about it, and when you finally do you realize you could be doing it better? Most service providers and plan sponsors continue to pay force-out distributions of less than $1,000 in cash via checks without recognizing there is a more efficient solution.

Source: Penchecks.com, March 2024

IRS Provides Guidance on Hodgepodge of SECURE 2.0 Provisions

The IRS released a notice providing guidance on various provisions of the SECURE 2.0 Act of 2022. This article focuses on the changes most relevant to large plan sponsors with more than 100 participants, i.e., automatic enrollment changes, de minimis financial incentives, an exception to the 10% tax for terminally ill participant withdrawals, an automatic enrollment error correction, the Rothification of employer contributions, and amendment deadlines extensions.

Source: Morganlewis.com, March 2024

What the SECURE Act Requires 401k Sponsors to Do Right Now

The SECURE Act not only imposes significant changes on retirement plans but also offers optional provisions that employers may want to incorporate into their 401k and 403b retirement plans. There has been a lot of media attention on the whole array of SECURE Act changes which are phased in over the next few years. But, what do employers need to do about their retirement plans right now? Here are a few items.

Source: Gct.law, March 2024

Merger and Acquisition Considerations for Employee Benefit Plans

In the context of mergers and acquisitions, an acquisition target's qualified retirement plans, health plans, executive compensation arrangements, and benefit programs can all be a source of significant liabilities. These benefit programs are promises that the target has made to its employees, and the buyer must ascertain whether it is liable to fulfill them and, if so, the dollar value of those promises. To avoid complications and liabilities, the parties need to understand the best deal structure based on the benefit program requirements and perform due diligence to carefully address any issues under both ERISA and the IRS early in the transaction.

Source: Wagnerlawgroup.com, February 2024

Long-Awaited IRS Proposed Regulations for Long-Term Part-Time Employees

On November 24, 2023, the IRS.) released proposed regulations concerning the long-term part-time employee rules beginning in the 2024 plan year. The LTPT employee rules were originally established under the SECURE Act of 2019 and then modified under the recent SECURE 2.0 Act of 2022. SECURE 2.0 made changes to shorten the initial LTPT eligibility requirements and expanded them to include 403b plans. The new guidelines help define LTPT employees and certain eligibility conditions. Here is a review.

Source: Tri-ad.com, February 2024

Prevent Problems by Using Auto Rollover IRAs for Force-Outs Below $1,000

Have you done something for a long time without really thinking about it, and when you finally do you realize you could be doing it better? Most service providers and plan sponsors continue to pay force-out distributions of less than $1,000 in cash via checks without recognizing there is a more efficient solution. Discussed here is why you should be using an automatic rollover IRA for all account balances: from $1 to $7,000.

Source: Penchecks.com, February 2024

DOL Gets Temporary Restraining Order Against TPA

The DOL has gone to court to protect retirement plan assets in a case of alleged embezzlement by a TPA. According to the DOL, RiversEdge is a third-party administrator of at least 240 retirement plans that hold millions of dollars in plan assets and acts as an agent to manage and administer plan assets, at least 229 of these retirement plans are covered by ERISA.

Source: Napa-net.org, February 2024

New Rules Make Tracking Long-Term, Part-Time Employee Service a Full-Time Job

Most employers with impacted plans reviewed their eligibility-tracking processes some time ago in anticipation of the initial effective date of the new LTPT rule. However, with that new rule now effective -- and last-minute guidance available -- employers need to review those processes to determine if further changes are needed or desired. Eventually, it may become easier to think of service tracking under the new rule as a largely set-it-and-forget-it process. However, for now, employers will likely want to continue revisiting, reviewing, and refining their eligibility-tracking processes around the new rule.

Source: Mwe.com, February 2024

PR Treasury Announces Plan Contribution Limits for 2024

On January 30, 2024, the Puerto Rico Treasury Department issued Internal Revenue Circular Letter No. 24-01 notifying the retirement plan limits that will apply to retirement plans qualified for the year 2024, including the cost-of-living adjustments published by the IRS. Here are the retirement plan limits applicable for taxable years beginning on or after January 1, 2024.

Source: Mcvpr.com, February 2024

The IRS's Pre-Examination Pilot Program Enters Phase Two

The IRS announced earlier this month that it is extending its pilot program under which retirement plan sponsors are given 90 days' notice that their plan has been selected for examination, with the opportunity to avoid a full audit by correcting certain errors and demonstrating compliance with the applicable Internal Revenue Code rules by the end of the 90-day pre-examination period. The key features of the pre-examination pilot program remain the same.

Source: Groom.com, February 2024

2024 Highly Compensated Employees: What You Need to Know to Pass Your Non-Discrimination Tests

If you have been offering a company 401k for more than a year, then you know your plan requires a lot of testing to stay compliant. That's because one of the primary duties of employers offering a 401k is to ensure that it's designed to benefit all employees, not just owners and highly paid employees. A series of annual tests is used to decide whether or not a plan discriminates. If the plan fails a test, the company must take corrective action until the plan is no longer discriminatory.

Source: Forusall.com, February 2024

Calculating Earnings for 401k and 403b Plan Corrections: Do Your Best to Do Better

Practitioners tend to use the DOL's online calculator for late deferral deposits since EPCRS permits estimates, but to the extent one is being practical and making participants whole, the cheaper result of the online calculator should not prevail over the participant's, the plan's, or the default investment alternative's actual rate of return. Some other alternatives are presented here.

Source: Belfint.com, February 2024

A More Enlightened Approach to Uncashed Distribution Checks

No retirement plan sponsor likes the idea of dealing with uncashed distribution checks, nor do they wish to draw unwanted regulatory attention or to become embroiled in costly litigation because of their uncashed check policies. Unfortunately, many plan sponsors place themselves in precisely that spot, becoming unnecessarily over-burdened with unresolved uncashed checks, while inviting unwanted regulatory scrutiny and/or legal challenges by embracing flawed uncashed check policies.

Source: 401kspecialistmag.com, February 2024

SPARK Institute Comment Letter on Long-Term, Part-Time Employee Proposal

Their letter includes comments seeking clarification and relief for various issues covered by the proposed regulations including a request to delay the proposal's applicability date and provide good faith relief; a request for changes and/or clarifications concerning the proposal's rules governing eligibility computation periods for LTPT employees; concerns and requests regarding the proposed regulations' impact on the elapsed time method for crediting service; and concerns and requests regarding the proposed definition of "long-term, part-time employee."

Source: Sparkinstitute.org, February 2024

DOL Guidance on Pension-Linked Emergency Savings Accounts

The DOL has provided guidance on pension-linked emergency savings accounts, a special type of short-term savings account within a 401k or 403b account. The SECURE 2.0 Act authorized PLESAs to encourage elective contributions to 401k or 403b accounts because the limited ability to access money from those accounts in the event of an emergency has tended to discourage those who are lower paid from making elective contributions and thereby receiving an employer match.

Source: Segalco.com, February 2024

Input Requested on Retirement Plan Disclosure and Reporting

The SECURE 2.0 Act requires the agencies responsible for administering ERISA to review existing reporting and disclosure requirements under both ERISA and the Internal Revenue Code and subsequently report to Congress on the effectiveness of those requirements. To help them fulfill those mandates, the agencies have published a broad, sweeping appeal for information on the adequacy and problems with current disclosure and reporting requirements for retirement plans, including comprehension, cost, and usefulness.

Source: Segalco.com, February 2024

DOL Proposes Rule on Automatic Portability

SECURE 2.0 Act added a prohibited transaction exemption under which an intermediary -- referred to as an automatic portability provider -- may receive a fee without violating prohibited transaction rules. As required by SECURE 2.0, the DOL has issued guidance on the prohibited transaction exemption in the form of a proposed rule. The DOL welcomes comments on the proposed rule, which are due by March 29, 2024.

Source: Segalco.com, February 2024

EBSA Recovered $1.4B in Retirement, Health Benefits in '23

In an annual fact sheet summarizing recoveries from enforcement actions and complaint resolutions, EBSA, a division of the DOL, reported that $854.7 million in recovery came from 731 civil investigations, with 505 (or 69%) resulting in monetary resolutions or other corrective actions. Another $444.1 million came from resolving complaints, $61.2 million from recovering abandoned plan assets, and $84.5 million from its voluntary fiduciary correction program.

Source: Planadviser.com, February 2024

When It Comes to Vesting, the IRS Says Once a Long-Term, Part-Time Employee, Always a LTPT Employee

Under the SECURE Act and the SECURE 2.0 Act, employers must provide long-term, part-time employees the opportunity to make elective deferrals under their 401k plans and, beginning in 2025, their 403b plans. However, long-term, part-time employees are not required to be eligible for employer matching or profit-sharing contributions until they satisfy the regular plan rules. Despite this fact, one of the most salient issues surrounding the implementation of the new rule is how it impacts -- and complicates -- tracking when employees become vested in such contributions.

Source: Mwe.com, February 2024

IRS Confirms Long-Term, Part-Time Employees Excludible From Certain Nondiscrimination Testing

Under the SECURE Act and the SECURE 2.0 Act, employers must provide long-term, part-time employees the opportunity to make elective deferrals under their 401k plans and, beginning in 2025, their 403b plans. When this occurs, certain special rules apply to such employees that impact whether they must be included in annual nondiscrimination testing or receive required top-heavy vesting and benefits. As a result, employers need to understand these requirements, as they may impact how annual testing is performed and the results.

Source: Mwe.com, February 2024

SECURE 2.0 Grab Bag: 401k's and De Minimis Financial Incentives

On December 20, 2024, the IRS released Notice 2024-2 (the "Grab Bag" guidance), which provided a Q&A format of guidance on certain provisions of the SECURE 2.0 Act of 2022. This article discusses the "de minimis" incentives for employees to defer, as outlined in SECURE 2.0 and for which the IRS just provided guidance in the Grab Bag. Here's how it may apply to your qualified plan.

Source: Ferenczylaw.com, February 2024

IRS Pre-Examination Retirement Compliance Pilot Program Is Extended

On February 7, 2024, the IRS announced the second phase of its Pre-Examination Retirement Compliance Program. Under this program, sponsors will be notified that their plan is selected for examination and will have 90 days to review and correct any plan document or operational errors, similar to the process for phase one. If a plan sponsor receives a letter notifying them of an upcoming examination, it is important to act quickly and loop in benefits counsel as soon as possible.

Source: Erisapracticecenter.com, February 2024

2024 Deadlines and Important Dates for Plan Sponsors

Sponsors of defined benefit and defined contribution retirement plans should keep these deadlines and other important dates in mind as they work toward ensuring compliance with their plans in 2024. Dates assume a calendar year plan. Some deadlines may not apply, or dates may shift based on the plan sponsor's fiscal year.

Source: Berrydunn.com, February 2024

New Guidance on Pension-Linked Emergency Savings Accounts

Over the past several years, there has been a growing interest in enhancing employee benefit programs to help employees save for emergencies. To facilitate this, Congress included a provision in the SECURE 2.0 Act of 2022 intended to provide a framework for integrating emergency savings accounts into defined contribution plans. The IRS and DOL recently released guidance intended to clarify several open legal questions related to pension-linked emergency savings accounts. The guidance is summarized here.

Source: Groom.com, February 2024

Form 5500 Updates: Participant Count Win and Large Plan Filer Warning

The Form 5500 series was recently updated with a key change to the participant counting methodology for determining if the plan is a small plan filer or a large plan filer. Not as widely publicized but affecting all filers, the Department of Labor released adjusted penalty rates effective January 15, 2024, which include an increase of $84 per day for failure to timely file a complete Form 5500. Are you prepared for the changes to the filing requirements?

Source: Newfront.com, February 2024

IRS Confirms Same Hours-Counting Rules Still Add Up for Long-Term, Part-Time Employees

The new long-term, part-time employee rule has generated questions about whether all employers will now be required to track the actual hours all employees work to ensure compliance with this rule. The recently proposed regulations released by the IRS confirm that the answer is no. Employers do not need to change how they count periods of service toward plan eligibility. However, employers should revisit how such service is currently counted under their plans and consider the impact that may have on if and how the long-term, part-time employee rules apply.

Source: Mwe.com, February 2024

IRS Proposes Long-Term, Part-Time Employee Regulations

On November 24, 2023, the IRS proposed long-awaited guidance on the required coverage of long-term, part-time employees under the SECURE 1.0 and the SECURE 2.0. This first piece of guidance to squarely address the LTPTE provisions arrived just weeks before the January 1, 2024, required LTPTE entry date under SECURE 1.0. Here is the background and a review of the guidance.

Source: Morganlewis.com, February 2024

Puerto Rico Announces 2024 Limits on Qualified Retirement Plans

On January 31, 2024, the Puerto Rico Department of the Treasury issued Internal Revenue Circular Letter No. 24-01 announcing the applicable 2024 limits for Puerto Rico qualified retirement plans. Here are the applicable 2024 limits for qualified retirement plans in Puerto Rico.

Source: Littler.com, February 2024

IRS Issues Guidance on Required Inclusion of Long-Term, Part-Time Employees in 401k Plans

SECURE 2.0, among other things, reduced the three-year requirement to two years, effective January 1, 2023, for such eligible long-term, part-time employees. This means, that for plan years beginning on or after January 1, 2025, an LTPT employee's eligibility will only require two consecutive 12-month periods of service of at least 500 hours, but less than 1000 hours and plans must begin counting hours to support this process as of January 1, 2023.

Source: Hansonbridgett.com, February 2024

DOL Guidance: Pension-Linked Emergency Savings Accounts (PLESAs)

On January 17, 2024, the DOL issued guidance in the form of Q&As on PLESAs. Under the SECURE 2.0 Act, employers are permitted (but not required) to offer PLESAs in conjunction with their 401k plans, effective for plan years beginning after December 31, 2023. The DOL separately issued a news release generally describing the Q&As. Among other things, the release discloses that the DOL and the IRS consulted with each other in developing their respective guidance.

Source: Compliancedashboard.net, February 2024

You Don't Have To Go Home, But You Can't Stay Here

It's 2024, which means a new batch of provisions from SECURE Act 2.0 have gone into effect. One of the more significant ones is an increase in the "cashout" limit that a qualified plan can impose to kick former employees with small balances out of their plans. For a while, this limit was $3,500 and was increased to $5,000 by the Taxpayer Relief Act of 1997. SECURE Act 2.0 bumps it up to $7,000 as of January 1, 2024. Plans aren't required to have a force-out provision, but nearly all do, and for good reason.

Source: Benefitslawadvisor.com, February 2024

The Maximum Contribution May Be Lower Than You Thought: ADP and ACP Test Basics for 401k and 403b Plans

Business owners and Highly Compensated Employees are often shocked to hear that they cannot contribute the maximum 401k or 403b deferral because their plan did not pass the discrimination tests. Much to their surprise, through the Actual Deferral Percentage and the Aggregate Contribution Percentage tests, the Internal Revenue Code prevents HCEs from benefiting from tax deferrals significantly more than NHCEs, unless the plan is a safe-harbor plan. Maria T. Hurd, CPA, provides a full review of the issue.

Source: Belfint.com, February 2024

A Long-Term, Part-Time Employee or Not a Long-Term, Part-Time Employee, That Is the Question

Under the SECURE Act and the SECURE 2.0 Act, employers must provide long-term, part-time employees the opportunity to make elective deferrals under their 401k plans and, beginning in 2025, their 403b plans. Because certain special rules apply to employees who enter an employer's plan as long-term, part-time employees, all employers need to understand when an employee is long-term, part-time.

Source: Mwe.com, January 2024

IRS Guidance: Pension-Linked Emergency Savings Accounts

On January 12, 2024, the IRS issued Notice 2024-22, initial guidance on emergency savings accounts linked to 401k plans under the SECURE 2.0 Act. The new provisions, effective for plan years beginning after December 31, 2023, generally permit (but do not require) employers to offer pension-linked emergency savings accounts to non-highly compensated employees as part of their defined contribution plans, subject to several rules and restrictions.

Source: Compliancedashboard.net, January 2024

New DOL Guidance on Pension-Linked Emergency Savings Accounts

On January 17, 2024, the DOL published a list of questions and answers to help plan sponsors administer pension-linked emergency savings accounts. The guidance provides important clarification on the administration of these emergency savings accounts.

Source: Captrust.com, January 2024

"Guiding" Student Loan Matches

One of the optional provisions in the SECURE 2.0 Act that some employers were very excited about is the provision to allow a 401k match based on a participant's student loan payment rather than deferrals. When asked about what guidance from the Treasury Department they would like to see before deciding on this provision or before implementing it, the responses varied from technical questions such as how to track employees' student loan payments, to regulatory questions such as how this would work with safe harbor plans, to not waiting on guidance but just waiting to work out the technical complexities with their providers.

Source: Asppa.org, January 2024

Student Loan 401k Matching: A Case Study

SECURE 2.0 was instrumental in focusing employers' attention on the issue and provided a guidepost as to how they might provide more financial support to address those payments. As a case in point, engineering consultancy Kimley-Horn and Associates Inc., which employs about 8,000 people, is now offering a 401k match based on student loan payments through a program run by SoFi at Work.

Source: Planadviser.com, January 2024

Impractical SECURE 2.0 "Sidecar" Emergency Savings Accounts Should Be Avoided

The DOL has issued guidance clarifying several components of the emergency savings provision of SECURE 2.0. The guidance highlights the complexity of creating and maintaining these accounts and should be enough to make most plan sponsors look for a better option. Here are some of the rules a plan sponsor must follow if considering this option.

Source: Multnomahgroup.com, January 2024

SECURE 2.0 Guidance - Auto Enrollment, SIMPLE, and Roth Provisions

On December 20, 2023, the IRS gave us a nice holiday present with the release of guidance on several provisions of the SECURE 2.0 Act. This article deals with the provisions that the author believe are of the highest interest to plan sponsors, advisors, and CPAs. The article provides a summary of the guidance for auto-enrollment, SIMPLE, and Roth provisions.

Source: Consultrms.com, January 2024

IRS Highlights Changes to Pre-Approved DC Plan Program

There have been significant changes to the IRS Pre-Approved Defined Contribution Plan Program, and two of the IRS officials involved in the thick of it recently provided a refresher on the program rules and recent developments. Central to recent developments is Revenue Procedure 2023-37, which the IRS issued in November 2023. It provided fresh guidance on qualified pre-approved plans and 403b pre-approved plans, and combined, conformed, clarified, and updated rules for those plans outlined in prior revenue procedures.

Source: Asppa.org, January 2024

Pension-Linked Emergency Savings Accounts: Qualified Plans Provide More Than Just Retirement Benefits

Although there are several options available for emergency savings accounts, this is the first one that provides both a way to encourage retirement savings and at the same time a tax-advantaged way to meet immediate financial needs that arise in one's day-to-day activities. This article examines the features of the Pension-Linked Emergency Savings Accounts under Section 127 of SECURE 2.0.

Source: Groom.com, January 2024

Safe-Harbor Leveraging for Small Business, Top-Heavy Retirement Plans - 2024

Many employers are debating how to most efficiently take advantage of the defined contribution limit increase to $69,000. However, few owners of small businesses are aware of the extent to which certain types of "leveraging" are now permitted in qualified retirement plans. The purpose of this article is to illustrate the provisions that allow owners of small businesses to get the most in return for what they are willing to contribute on behalf of their non-owner employees.

Source: Consultrms.com, January 2024

Long Term/Part Time Employees - Revised

SECURE 2.0 made technical corrections to the long-term/part-time rules, including clarifying that (1) long-term/part-time employees may be excluded from a plan's safe harbor provisions and (2) all periods of service before 2021 are excluded for both eligibility and vesting. SECURE 2.0 also clarified that the vesting rules that apply to a long-term/part-time employee continue to apply even if the employee later satisfies the regular service requirements. The provision concerning long-term/part-time employees applies to all 401k plans.

Source: Consultrms.com, January 2024

SECURE 2.0 Guidance Addresses Designated Roth Contributions

Under SECURE 2.0, 401k plans may choose to permit participants to elect to receive employer matching and/or discretionary (non-elective) contributions in the form of Roth (i.e., after-tax) contributions, effective for plan years beginning after December 29, 2022. Here are some details and clarifications.

Source: Compliancedashboard.net, January 2024

2024 Adjusted Penalties for ERISA Violations

On January 11, 2024, the DOL released a final rule that provides new figures reflecting the adjusted civil penalty amounts for 2024, under the Federal Civil Penalties Inflation Adjustment Act Improvements Act of 2015. The chart here shows the increased penalties for ERISA violations; however, please note that penalties under other federal laws are affected as well. The adjustments are effective January 15, 2024.

Source: Groom.com, January 2024

DOL Releases Proposed Auto-Portability Reg

The DOL announced on Jan. 18 that its Employee Benefits Security Administration released a proposed regulation on automatic portability transactions under SECURE 2.0. The DOL said automatic portability transactions aim to help workers keep track of their retirement savings accounts and improve retirement security by reducing cash-outs when they change jobs.

Source: Asppa.org, January 2024

DOL Proposes SECURE 2.0 Auto-Portability Regulation

The Employee Benefit Security Administration has released a proposed regulation on automatic portability transactions under the SECURE 2.0 Act of 2022, the DOL announced. According to an announcement from the federal agency, the regulation seeks to help workers keep track of their retirement savings accounts by reducing cash-outs when employees switch jobs.

Source: 401kspecialistmag.com, January 2024

"Cross-Testing" in Qualified Profit Sharing Plans - 2024

Cross-testing is a method of demonstrating that a defined contribution plan is not discriminatory in favor of Highly Compensated Employees by analyzing the retirement benefit generated by the annual contributions for the HCEs to the retirement benefit generated by the contributions to the non-HCEs (rather than looking at the contribution itself). Here is a brief overview of the 2024 Cross-testing rules.

Source: Consultrms.com, January 2024

New Requirement to Cover Long-Term Part-Time Employees in 401k Plans Enters Into Effect

Some executives may view this change as an issue that does not require their attention and that will be handled by their human resources staff and the 401k plan service providers. However not complying with the rules might be costly for the employer if corrective contributions for long-term, part-time employees who were not allowed to participate are required, along with ancillary costs.

Source: Bdo.com, January 2024


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