Newsletter for April 12, 2021
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In This Issue
Compliance and Regulatory
IRS Lists Solo 401k Plans as Audit Target
If your business sponsors a "solo 401k" plan, it may be in the crosshairs of the Internal Revenue Service. The Service's TE/GE division has identified one-participant 401k plans as among its current audit initiatives. In its web posting announcing the initiative, TE/GE states: "[t]he focus of this strategy is to review one-participant 401k plans to determine if there are operational or qualification failures, income and excise tax adjustments, or plan document violations."
Source: Eforerisa.com
Effects of Extended Tax Filing on Benefit Plans
Similar to the relief granted in 2020, the IRS has again announced special filing and payment relief deadlines for individuals in response to COVID-19 through Notice 2021-21. The Notice postpones the Federal income tax return and payment due dates from April 15, 2021, to May 17, 2021. The IRS guidance also affects the world of benefit plans and will result in the changes reviewed here.
Source: Graydon.law
DOL to Hold Online VFCP Events
The Department of Labor's Employee Benefits Security Administration has announced that it will be holding online events concerning the DOL's Voluntary Fiduciary Correction Program.
Source: Asppa.org
Meaning Well Is Not Always Enough: Watch Your VCP Submission
The IRS's Voluntary Correction Program provides a means by which filers can correct errors before they are told to do so, but the good intentions entailed in using it do not guarantee that there will not be errors in the filings intended to correct mistakes. The IRS has outlined the top mistakes made by those who use it.
Source: Asppa.org
DOL Approves PBGC Missing Participant Program for Defined Contribution Plans
FAB 2021-01 now provides that until the DOL updates its safe harbor rules, the agency will not pursue fiduciary violations when missing participants' balances are transferred to the PBGC instead of to IRAs. However, the bulletin does not provide complete protection against enforcement.
Source: Hallbenefitslaw.com
»» Click here for more Compliance and Regulatory Material
General Items
Like Saving, Retirement Spending Requires a Plan
You save diligently for retirement, but how do you create a plan to strategically spend those savings? Francis Investment Counsel's Mike Francis provides tips for establishing your retirement spending plan in this article recently featured in the Star Tribune.
Source: Francisinvco.com
Five Drawbacks of Using Only a 401k for Retirement
A 401k plan is an excellent tool to help employees save for retirement. Many employers offer a company match, which is basically extra compensation. Not only that, but you also usually get a tax break for your contributions in the year you make them. But if you're only saving for retirement in a 401k, it could end up hurting you when you're ready to start living on your savings. Here are five drawbacks of only using a 401k for retirement.
Source: Fool.com
Fiduciary and Plan Governance
What to Know Before Adding an SDBA to Your Plan
As more participants engage with their investments and take a more hands-on approach, sources say self-directed brokerage accounts are becoming increasingly popular. But there are pros and cons of allowing retirement plan participants to use them.
Source: Plansponsor.com
»» Click here for more Fiduciary and Plan Governance Material
Insight: Studies, Research, and White Papers
Millions Speed Up Retirement in Pandemic
More than 3.1 million Americans age 55 or older plan to apply for Social Security benefits earlier than they once thought because of the pandemic, according to the Census Bureau. That's offset by 1.4 million people in the same age group who anticipate working longer due to the impact of Covid-19, according to the bureau's latest Household Pulse survey conducted between March 3 and 15.
Source: Treasuryandrisk.com
»» Click here for More Studies, Research, and White Papers
Items of Special Interest to Service Providers
Are You Sure You Can Use the QPAM Exemption?
For many investment managers, the ability to act as QPAM is essential to managing retirement account assets. But the QPAM Exemption is subject to myriad conditions, the failure to meet only one of which can wreak havoc on a compliance strategy. In a Q&A format, this article provides an overview and highlights potential trap doors.
Source: Fiduciarygovernanceblog.com
Court and Legal
Ninth Circuit Enforces Forum Selection Clause in 401k Plan
On April 1, 2021, the Ninth Circuit became the third circuit court to conclude that a forum-selection clause in an ERISA 401k plan is enforceable. The Ninth Circuit thus denied a petition for mandamus seeking to overturn a district court decision transferring an ERISA action from the Northern District of California to the District of Minnesota.
Source: Erisapracticecenter.com
Lawsuit Says Retirement Plan Fiduciaries Failed to Monitor and Limit Revenue Sharing
According to the lawsuit, from 2015 through 2019, plan participants paid a portion of the fees for retirement plan services provided by the plan's recordkeeper directly through deductions from their accounts. Also, RPS fees were paid indirectly through revenue sharing. "Based upon a review of the plan's Forms 5500, and upon information and belief, the plan did not rebate any of the monies received from the revenue sharing back to plan participants to offset the RPS fees paid by the participants," the complaint says.
Source: Planadviser.com
Is Data a Plan Asset: Another Court Says No
Last week marked a key development in the nascent and still evolving body of case law addressing the status of 401k plan participant data as an ERISA "plan asset." The U.S. District Court for Southern District of Texas granted Fidelity Investments' dismissal motion in Harmon v. Shell Oil, based on the Court's inability to conclude that plan participant data is a "plan asset," the exercise of control over which would give rise to fiduciary responsibility (and potential liability) under ERISA.
Source: Groom.com
»» Click here for more Court and Other Legal Issues
Cyber and Plan Security
DOL Urged to Give Retirement Plans Cybersecurity Guidance
DOL officials told GAO that they believe cybersecurity is a serious problem for retirement plans, and the department plans to post sub-regulatory compliance assistance materials addressing related issues for plan sponsors and administrators. But the timing of DOL's coming cybersecurity guidance is uncertain. GAO's report did not recommend legislation, but lawmakers will likely assess the need for action after reviewing the DOL guidance.
Source: Mercer.com
Employer 401k Cybersecurity Responsibilities
Protection of 401k plan participant balances against theft has become a major concern for all employer plan sponsors. What do plan sponsors need to do to meet 401k cybersecurity challenges? Read this to find out.
Source: Lawtonrpc.com
»» Click here for more on Cybersecurity Issues
Multiple Employer Plans (MEP)
Pooled Employer Plans: The Benefits and Considerations for Employers
The SECURE Act introduced an entirely new retirement plan fiduciary structure called the Pooled Employer Plan. PEPs allow unrelated employers to pool resources to help achieve economies of scale and administrative efficiencies. As with any retirement plan strategy, PEPs come with benefits, limitations, and risks that should all factor into an employer's decision to join. This is a review of the benefits, limitations, and risks.
Source: Lockton.com
»» Click here for more on Multiple Employer Plans
Marketplace News
NAPA Welcomes Alex Assaley as President
RightBRIDGE Rollover Analysis Integrated With Retirement Learning Center
2022 ARA Board of Directors Nomination Period Opens
Lockton Expands Pooled Employer Plan Choice for Small Businesses
isolved Launches a Range of 401k Plans as a Comprehensive New Benefits Service
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