Newsletter for January 27, 2020
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In This Issue
Fiduciary and Plan Governance
Fiduciary Duties: Tips for Managing Your 401k Plan
If you're a decision-maker for your retirement plan, then you're a plan fiduciary. Some basic fiduciary duties include acting only in the interests of the plan participants and beneficiaries, acting prudently, paying reasonable and necessary plan expenses, following the plan documents, and diversifying plan investments. What do these duties look like from a practical standpoint, and how can you ensure you are meeting your obligations to the plan and its participants? Here are a few suggestions.
Pressure Is Building to Consider Climate Change When Investing
Recent news reports say an environmental scientist in Australia is suing his pension fund for not adequately disclosing or assessing the effect of climate change on its investments. The participant is only 24 years old and won't be retiring any time soon. But, the news reports say, he is acting now because he is "concerned about what the world may look like then." There is no doubt, whether you believe it is happening or not, climate change is the subject of a strong activist movement. Retirement plan fiduciaries, for now, should at least consider the role climate change will have on plan investments and vice versa.
You Can't Afford to Neglect These Parts of Your 401k Plan
We all know from your health, that if you neglect certain things, that it will hurt you later down the line. The same can be said about being a 401k plan sponsor, there are certain things you might be neglecting that will negatively impact your plan and may cause you some pecuniary liability. This article is all about plan tasks that you may be ignoring.
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For Plan Sponsors With Choice: Is a 403b or 401k Plan Right?
Some organizations, like 501(c)(3) tax-exempts, have a choice in the type of retirement plan they offer. For many of these plan sponsors, a 403b plan makes the most sense; but for some, a 401k may be the right choice. Here are some of the primary factors that may help determine which type of retirement plan is best.
Insight: Studies, Research, and White Papers
From Saving to Income: The Next Evolution of Defined Contribution Plans
The last two years have seen a surge in the adoption of financial wellness programs by employers eager to help employees improve their financial wellbeing. But many employers have yet to evolve one of their core employee benefits -- their retirement savings plan -- to help workers address their greatest financial wellness challenge: generating an adequate and sustainable amount of lifetime income in retirement. While retirement savings plans have undergone two significant evolutions over the last four decades, they still fall short in providing workers with lifetime retirement security. This is an important gap now that DC plans generally are a primary source of participants' retirement income.
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SECURE Act: The New 500 Hour, Long Service Rule Does Not Apply to 403b Plans
The new rule amends Section 401(k)(2)(D) of the Code. At first glance, one may be under the mistaken impression that this is a rule which applies to all elective deferral plans, whether they be 401k plans, 403b plans or 457b governmental plans. But this impression is likely wrong: the statute, by its terms, clearly only applies to elective deferrals under 401k plans, not 403b plans.
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Court and Legal
Excessive Fee Suit Treads New Ground
A new excessive fee suit makes some of the same claims, but relies on different arguments, turning not only to government filings, but also making very precise arguments about plan expenses and portfolio diversification. This most recent suit targets both the Rollins 401k Savings Plan and the Western Industries Retirement Savings Plan with some 13,300 participants and approximately $730 million in assets.
ERISA Cases to Watch in 2020: All Eyes on the High Court
2020 is shaping up to be a banner year for benefits law, with three ERISA cases already on the US Supreme Court's docket and a number of other high-profile lawsuits at the circuit court level that could attract the justices' attention. While waiting on the high court's ERISA decisions, lawyers are watching litigation trends develop in the lower courts and waiting to see if the high court picks up another two ERISA cases.
'Astronomical' RK Fees, Investment Choices Draw Suit
Think the last multibillion-dollar 401k plan had been sued? Guess again. The latest to find itself served with a suit is health technology firm Cerner Corp., whose $2 billion plan has been accused of the assortment of fiduciary miscues typical of this case genre.
»» Click here for more Court and Other Legal Issues
Compliance and Regulatory
401k Testing: Deadlines Employers Should Know
To meet IRS qualification requirements, 401k plans must pass nondiscrimination testing annually to ensure plan contributions do not disproportionately benefit Highly Compensated Employees or exceed legal limits. While most employers hire a professional third-party administrator to complete this work, all employers should understand the deadlines that apply to the process, which generally relate to failed testing and contribution funding. This basic knowledge can help avoid the often-painful consequences of late testing, including missed tax deductions, IRS penalties, and plan disqualification.
Definition of Compensation: More Complicated Than You Would Think
One of the most fundamental definitions for a qualified retirement plan is eligible compensation for plan purposes. The definition of compensation, as detailed in the plan's adoption agreement, determines many things. Employees may think that Box 1 of the Form W-2 or the gross wages line item on their pay stub defines their compensation. However, these amounts are not necessarily defined as compensation by the plan's adoption agreement. It's more complicated than you would think.
IRS Issues 2019 Form 5500-EZ, Instructions
The IRS has issued the Form 5500-EZ to be used in reporting concerning 2019, as well as the instructions for the Form 5500-EZ. The IRS notes that there is one change in the form since last year.
Details of the SECURE Act: Withdrawals for Birth or Adoption
Section 72(t) of the Internal Revenue Code provides that withdrawals from a qualified retirement plan are subject to a 10% tax on early distributions, with certain exceptions. Included in the list of exceptions are distributions made after attainment of age 59 1/2; distributions on account of disability; distributions after separation from service after age 55; distributions for certain medical expenses; and distributions made to an individual called to active military duty. The SECURE Act amends the tax code to add an additional exception from the 10% early distribution tax: any qualified birth or adoption distribution.
How Will the SECURE Act Affect Plan Distributions? New Rules Challenge Sponsors and Recordkeepers in 2020
Many provisions of the SECURE Act passed at the end of last year will change the way qualified plans are run. Among the most significant changes are provisions creating new distribution options and new death distribution restrictions for qualified plans. Since these changes are effective now, plans should be preparing to comply in operation even though formal amendments are not yet required. However, this will be a challenge due to the need for guidance to answer many questions about how the statutory language is intended to work.
How to Stay Prepared for Department of Labor Audits
When a company hears of a Department of Labor audit, they typically tend to panic. The best way to stay prepared for DOL audits is to ensure that you are handling your benefit plans appropriately on a regular basis. Here is a DOL audit guide to help ensure your plans are administered appropriately, as well as some questions to ask yourself throughout the process.
Participant Notices for Retirement Plans
Notice requirements for retirement plans can be daunting. It may seem that, between the Department of Labor, Internal Revenue Service, and Pension Benefit Guaranty Corporation, there is an unlimited array of notices that need to be provided. Luckily, many notices only need to be provided annually and many will not apply to a plan at all. Even better, if notices are missed, this can be corrected.
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TRA Continues Expansion With Acquisition of Fred S. Shapiro & Associate
ERISApedia Announces Benchmark Reporting For 403b Plans
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