Congress Provides Retirement Plan Relief
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Click Here for Our Resource Page on Retirement Plans and the Coronavirus PandemicIn This Issue
Legislative and Washington DC Congress Provides Retirement Plan Relief Congress passed, and the President signed, the Consolidated Appropriations Act, 2021. This bill contains over seventy new tax policies, extensions, refinements, and other tax-law clarifications. Within its over 5000 pages is The Taxpayer Certainty and Disaster Tax Relief Act. The TCDT Act provides that the 10% early withdrawal penalty does not apply to qualified disaster distributions; that special rules apply to retirement plan distributions used for qualified disaster area home purchases; and for increases in the limit for retirement plan loans made because of a disaster. Source: Graydon.law Consolidated Appropriations Act, 2021: Employer-Sponsored Retirement Plans The Act relaxes several normally rigid health, welfare, and retirement plan rules in light of the on-going COVID-19 pandemic, easing the financial impact of pandemic-caused employment changes while instituting new rules related to surprise medical billing. This article covers the Act's effects on employer-sponsored retirement plans. Source: Jacksonlewis.com »» Click here for more on Legislative and Washington Actions General Items 2021's Best Mutual Funds in 401k Retirement Plans On December 18, 2020, the DOL adopted with limited changes its Proposal 3.0 regarding ERISA fiduciary investment advice, focused on the fiduciary status of rollover advice and a "best interest" prohibited transaction exemption for conflicted advice aligned with the primary regulation of various types of financial services providers. While the final guidance broadly retains the structure and approach of Proposal 3.0, the DOL incorporated some important changes in response to comments. Source: Kiplinger.com Four Retirement Planning Tips for the Self-Employed Like their traditionally employed counterparts, self-employed workers need to prepare for retirement, but they have more obstacles to saving. Workers with unstable income streams are more reluctant to lock up money in qualified accounts forget about an employer match or auto-enrollment. With those barriers in mind, here are four factors self-employed workers need to consider to protect their retirements. Source: 401kspecialistmag.com Fiduciary and Plan Governance DOL Reconsiders Who Can Be Considered a Fiduciary Attorneys with Groom Law Group explain how the DOL has extended the reach of its "five-part test" for determining fiduciary status under ERISA. This makes its new prohibited transaction exemption all the more important, according to attorneys. Source: Planadviser.com Understanding Private Equity Investments in DC Plans The DOL recently released an "information letter" in response to inquiries from the private equity industry as to whether private equity investments can be offered to defined contribution plans. In giving its green light to such investments, the DOL laid out several factors that plan sponsors should keep in mind, given potentially problematic features of private equity investing for some plan participants. These include the typical multiyear holding period for portfolio companies and the challenge in providing an accurate stock valuation before a sale. Source: Orba.com »» Click here for more Fiduciary and Plan Governance Material Insight: Studies, Research, and White Papers Mutual Fund Revenue Sharing in 401k Plans Recordkeepers in DC plans are often paid indirectly in the form of revenue sharing from third-party funds on the menu. We show that these arrangements affect the investment menu of 401k plans. Revenue-sharing funds are more likely to be added to the menu and are less likely to be deleted. Overall, revenue-sharing plans are more expensive as higher expense ratios are not offset by lower direct fees or by superior performance. Rebates increase with the market power of the recordkeeper suggesting that third-party funds may revenue share to gain access to retirement assets. Source: Ssrn.com »» Click here for More Studies, Research, and White Papers Items of Special Interest to Service Providers Key DOL Prohibited Transaction Exemption Considerations A recent webinar emphasized a few important points about the new prohibited transaction exemption recently finalized by the DOL. It was explained that everyone is initially eligible for the DOL's new prohibited transaction exemption, but the regulator reserves the right to suspend eligibility for up to 10 years after certain violations. Source: Planadviser.com DOL's Fiduciary Rule 3.0 -- Exemption and Investment Advice Fiduciary Definition On December 18, 2020, the DOL adopted with limited changes its Proposal 3.0 regarding ERISA fiduciary investment advice, focused on the fiduciary status of rollover advice and a "best interest" prohibited transaction exemption for conflicted advice aligned with the primary regulation of various types of financial services providers. While the final guidance broadly retains the structure and approach of Proposal 3.0, the DOL incorporated some important changes in response to comments. Source: Eversheds-Sutherland.com Cyber and Plan Security Cybersecurity for the Plan Sponsor From a Plan Auditor Perspective Plan sponsors should now have on their priority list for 2021 the development of cybersecurity policies and procedures for both the company and the plan. Here are a few key items plan sponsors should consider including as they develop or update their company cybersecurity policy. Source: Linkedin.com »» Click here for more on Cybersecurity Issues Multiple Employer Plans (MEP) The New Pooled Employer 401k Plan and the Hazards of Advisor-Led PEPs Ultimately, while the PEP may become a valuable tool for small business owners to be able to offer employees competitive retirement plan options, RIAs will need to carefully consider whether to choose to take on the role of a PPP for their small business clients plans and the associated ramifications if they do choose to do so. Including asking the question of whether branching out into plan administration would result in more business anyway, or if it will be better to find a third-party administrator to partner with instead? Source: Kitces.com »» Click here for more on Multiple Employer Plans Compliance and Regulatory 2021 ERISA Plan Compliance Calendar Being a retirement plan sponsor involves juggling many tasks, one of the more important is to make sure your plan complies with all pertinent federal and local regulations. A compliance calendar keeps track of your company’s required filings, their due dates, and related details so you can avoid incurring any fines or other penalties for late filings or missing information. This schedule will help plan sponsors track important due dates for their plan. Source: Plansponsor.com IRS Guidance on SECURE Act Provides More Detail on Changes to Safe Harbor Plans The SECURE Act made several changes to the rules for certain safe harbor 401k plans. One change increased the cap on automatic enrollment safe harbor plans to 15%. Another eliminated certain safe harbor notice requirements for plans that make safe harbor nonelective contributions and added new provisions for the retroactive adoption of safe harbor plans that make nonelective contributions. On December 9, the IRS issued Notice 2020-86 to elaborate on these changes as summarized here. Source: Groom.com IRS' Version of Missing Participant Guidance The IRS issued two new pieces of guidance that work together to address missing participants in a qualified plan. Specifically, the IRS issued Rev. Rul. 2020-24 and Rev. Proc. 2020-46 to add to their existing portfolio on missing participant guidance. This guidance focuses on the treatment of escheatment to the state unclaimed property funds for reporting and withholding requirements and indirect rollover relief. Source: Groom.com Partial Plan Termination Relief Provided in New Stimulus Bill The latest COVID-19 relief bill, attached to the Consolidated Appropriations Act, 2021, enables certain retirement plan sponsors that laid off or furloughed employees due to the economic effects of the pandemic to avoid a partial plan termination. Source: Plansponsor.com »» Click here for more Compliance and Regulatory Material
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