DC Plan Sponsors Reacting With Moderation to Coronavirus
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Click here for our resource page on the Coronavirus PandemicIn This Issue
Insight: Studies, Research, and White Papers DC Plan Sponsors Reacting With Moderation to Coronavirus The coronavirus pandemic and its effect on the stock market caused speculation in the retirement plan industry about whether plan sponsors would react with changes to their retirement plans as they did in past market crises. There was also concern about how the market drop and subsequent reaction would affect participants' retirement security. A PLANSPONSOR survey finds relatively few are taking action to suspend or decrease contributions, and they are prudently relying on providers for guidance. Source: Plansponsor.com Recordkeepers Adjust to Pandemic Recordkeepers have acted quickly to incorporate social distancing and follow stay-at-home orders in response to the Coronavirus pandemic, including a whopping 98% of staffers working at home, a new survey finds. That's a huge jump from the 20% reported three months ago, according to a summary of the survey released April 21 by the SPARK Institute. Source: Napa-net.org 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 the 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 »» Click here for More Studies, Research, and White Papers Items of Special Interest to Service Providers The fiduciary rule issued by the Department of Labor during the Obama administration was struck down in the courts, creating uncertainty that still exists. A recent ASPPA webcast discussed federal efforts to regulate fiduciary activity, as well as the demise of the fiduciary rule and what that means. This article highlights of the webcast. Source: Asppa.org Impact of COVID-19 on the Adviser Industry Retirement specialist advisers are helping plan sponsors make tough choices about plan designs, especially the expansion of loan and hardship withdrawal provisions now permitted under the CARES Act. Such work is certainly building loyalty and goodwill among the client base, sources agree, but it is also important for firm leaders to step back from these efforts to take stock of how this situation is affecting their businesses. Not only is this prudent from a client service perspective, but it also can help staff gain an important piece of mind during an incredibly stressful time. Source: Planadviser.com Providers' Responses to COVID-19 From waiving fees to offering additional financial help, retirement plan recordkeepers, third-party administrators and advisers, as well as financial wellness providers are stepping up to assist plan sponsors and employees in many ways during the novel coronavirus pandemic. This is a listing of the latest announcements. Source: Planadviser.com Legislative and Washington DC New Bill Would Triple Retirement Plan Contribution Limits for 2020 Rep. Patrick McHenry has introduced the Securing Additional Value for Every Retirement Saver (SAVERS) Act, legislation that would permit increased annual contributions to tax-qualified retirement savings arrangements for 2020. The legislation would raise the annual contribution limitations to 300 percent of previously announced limits for 2020 (not to exceed applicable compensation). Source: Ascensus.com »» Click here for more on Legislative and Washington Actions Cyber and Plan Security New Lawsuit Could Clarify Fiduciary Responsibility for Cybersecurity Abbott, as the plan sponsor, is a fiduciary and was responsible for supervising Alight's procedures for safeguarding plan assets, yet the complaint provides no information about what Abbot did or did not do to monitor Alight. Abbott may also have breached its duties of loyalty and prudence by its failure to hire a vendor with adequate internal procedures. In that event, Abbott and its fiduciaries would also be required to restore the loss. Source: Cohenbuckmann.com »» Click here for more on Cybersecurity Issues Compliance and Regulatory DOL E-Disclosure Rule Submitted to OMB On April 16th, the Office of Management and Budget received the Department of Labor's long-anticipated final regulation updating and modernizing the rules for using electronic media to furnish ERISA-required disclosures and notices. DOL's existing electronic disclosure rule has been in place for nearly two decades and was developed long before the widespread adoption of many current electronic communications methods. The rule should not only modernize DOL's electronic disclosure standards but also address communication concerns specifically raised by the current health crisis. Source: Groom.com Review COVID-19 Distribution and 401k Loan Forms Carefully The CARES Act authorizes employers to make changes to their qualified retirement plans to increase loan limits, delay loan repayments, and make distributions to plan participants experiencing certain COVID-19 related circumstances. Due to a lack of guidance from the IRS, there's confusion among third-party administrators about how to administer these changes, resulting in potential issues with forms used by TPAs to approve these CARES Act loan and distribution changes. Source: Employeebenefitslawreport.com CARES Act Loan Provision: The "Fly in the Ointment" It turns out that there is a quirk in the CARES Act provisions regarding COVID-19 loans that are giving plan sponsors a reason to pause. This issue is that while the CARES Act allows an increase in the loan limits for borrowers who qualify for a COVID-19 loan ($100,000 or 100% of a participant's vested account balance, if less), it did not extend the repayment terms. Thus, the loan must be repaid over five years, unless used to acquire a primary residence. Source: Cammackretirement.com To address the novel Coronavirus, the CARES Act has created a novel type of distribution from retirement plans: the Coronavirus-Related Distribution. It is a "rolloverable" distribution that is NOT considered an Eligible Rollover Distribution for certain purposes, such as withholding. Although a CRD can be rolled over to another qualified plan or IRA directly or within three years of its distribution, it is only subject to the optional 10% withholding applicable to distributions that are not eligible to be rolled over. Source: Belfint.com Extended Deadlines for Benefit Plans Granted by the IRS Earlier this month, the IRS announced that it had extended deadlines for filing federal income tax returns and making tax payments due to the COVID-19 pandemic, which had a small effect on benefit plans. The IRS has since amplified this relief through Notice 2020-23 and provided additional relief that is more significant for benefit plans. Source: Graydon.law Waiver of Required Minimum Distributions For defined contribution plans and IRAs, the CARES Act provides temporary relief from the required minimum distribution rules. The following chart explains this relief in the context of plans; the rules for IRAs are much the same. Source: Fredreish.com Impact of Furloughs and Layoffs on Corporate DB and DC Plans During this COVID-19 public health emergency and the accompanying financial turmoil, many employers are finding it necessary to furlough or layoff a significant number of employees. These workforce reductions can potentially have some important implications for single-employer DB and DC plans in the private sector that are often overlooked. Source: Segalco.com COVID-19 World: Reducing or Suspending Company Contributions to a 401k or 403b Plan In response to the current economic crisis caused by COVID-19, many companies are considering cost-savings measures to improve their companies' financial stability. One such cost-saving option is the reduction or suspension of company contributions to a company's 401k or 403b plan. The procedure for and the implications of such suspension will depend on the plan terms, including whether the contribution is intended to be a "safe harbor" contribution. Source: Spotlightonbenefits.com »» Click here for more Compliance and Regulatory Material Marketplace News Northwest Plan Services Acquires Venuti & Associates Wells Fargo Adds SECURE Act-Friendly 401k Annuity Service »» Click here for More Marketplace News
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