Vacation, All I Ever Wanted – But Don’t Forget Your July Compliance Deadlines

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by Benjamin Gibbons

Congratulations! You made it to summer, that wonderful time of year when things at work (hopefully) slow down a bit and you’re able to take some well-deserved time off. Though before you Go-Go(‘s) (do you see what I did there?), be sure your July employee benefits compliance deadlines are covered.

July 29 – Summary of Material Modifications (SMM) – Were any of your organization’s plans materially amended last year? If so, you may be required to furnish an SMM to participants (or a revised summary plan description). Those SMMs must be provided no later than 210 days after the end of the plan year in which the change was adopted. So, for a 2023 change, the SMM deadline would fall on July 29 (you get an extra day this year because 210 days falls on July 28, a weekend). Read more

Just Because I’m Missing, Doesn’t Mean I’m Lost: Should Plan Sponsors Provide Data for the DOL’s Missing Participant Database?

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by Brenda Berg

“Missing participants” have long been a thorn in the side of plan sponsors and administrators, as they are owed a retirement benefit, but are unable to be found or unresponsive to plan communications. As a partial solution, Congress directed the DOL in the SECURE 2.0 Act of 2022 to create a “Retirement Savings Lost and Found”—an online searchable database that would connect missing participants with their retirement benefits—by December 29, 2024. The DOL had contemplated populating the database with information from Form 8955-SSA, which plans already submit to the IRS. However,  the IRS has refused to provide the information to the DOL, citing privacy concerns regarding confidential tax information. This has caused the DOL to look to sponsors of ERISA plans to voluntarily provide participant information to populate the database. While this may be a good idea in principle, it creates many obstacles. Read more

Oceans Rise, Empires Fall, It’s Much Harder When It’s All Your Call … SECURE 2.0—What Comes Next?

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By Kevin Selzer

We have now had a couple of months to review and digest SECURE 2.0 (and its roughly 90 provisions impacting retirement plans). If plan sponsors haven’t done so already, it is time to roll up their sleeves and put a triage list together on these law changes. Below are some suggestions on where to start: Read more

Easy Money…Self-Certify Your Hardships Away

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by Leslie Thomson

If a 401(k) or 403(b) plan permits employees to take in-service hardship withdrawals in the event of an immediate and heavy financial need, new legislation provides that, effective for plan years beginning in 2023, employers may rely on an employee’s self-certification of the hardship. Prior to this change, an employee was required to substantiate such hardship expenses to receive a distribution on account of financial hardship. Read more

You’re So Far Away From Me … But You Can Still Sign This Retirement Plan Distribution Form

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by Elizabeth Nedrow

During the pandemic, the IRS on multiple occasions provided relief from the requirement that a person be physically present for certain paperwork associated with retirement plan distributions. (See our blog posts of June 4, 2020 and January 25, 2021, and also IRS Notices 2020-42, 2021-3, 2021-40 and 2022-27.) Apparently acknowledging that the new remote procedures are sufficiently reliable, the IRS is proposing to make them permanent. Read more

The Times They Are A-Changin’…IRS Provides Further Retirement Plan Amendment Deadline Relief

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by Benjamin Gibbons

The IRS has picked up where it left off last month with additional retirement plan amendment deadline extensions. As you may recall from our August 5, 2022 blog post, Time Is On My Side: Some Retirement Plan Amendment Deadlines Pushed Back, the IRS recently extended certain SECURE Act, Miner’s Act, and CARES Act amendment deadlines for retirement plans but notably did not extend the deadline for coronavirus-related distributions and loan plan loan relief under the CARES Act. While it is unclear whether those omissions were intentional or an oversight, the IRS has rendered that question moot in IRS Notice 2022-45. Read more

Time Is On My Side: Some Retirement Plan Amendment Deadlines Pushed Back

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by Brenda Berg

The IRS has given plan sponsors more time to adopt some – but apparently not all – retirement plan amendments reflecting law changes in the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), the Bipartisan Miners Act of 2019 (Miners Act), and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Notice 2022-23, issued August 3, 2022, generally provides that the deadline to adopt these amendments is extended to December 31, 2025. This is the deadline for qualified plans regardless of the plan year, and this deadline also applies to 403(b) plans and collectively bargained plans. Governmental plans generally have until 90 days after the third regular legislative session of the body with the authority to amend the plan that begins after December 31, 2023. Read more

How Much is that (Investment) in the Window…A Higher Level of Fiduciary Oversight Could be Required for 401(k) Plan Brokerage Windows

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by Brenda Berg

Fiduciaries of 401(k) plans and other retirement plans know that they must prudently monitor the investment options available to participants in the plan, but are they monitoring participants’ investments made through a plan’s brokerage window? Recent commentary from the Department of Labor (DOL) on cryptocurrency investments suggests maybe fiduciaries should be – and that the DOL may check in on that soon.[i]

A “brokerage window” or “self-directed brokerage account” can allow participants access to a broad array of investments beyond the regular investment menu under the plan. Most plan fiduciaries have not paid much attention to the actual brokerage window investments. This is not surprising given the DOL’s relative lack of focus on the matter. The DOL had issued guidance in 2012 that the investment disclosure portion of the fee disclosure rules could apply to brokerage window investments in certain cases but after pushback due to the administrative burdens, the DOL withdrew that guidance. In 2014 the DOL issued a Request for Information about brokerage window practices but no further guidance was issued. Read more

The Tide is High…Keep Holding On For More Retirement Plan Fee Litigation

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by Brenda Berg

The U.S. Supreme Court’s ruling this week in Hughes v. Northwestern University will do nothing to stem the rising tide of retirement plan fee litigation. But the ruling doesn’t mean fiduciary breach claims are more likely to be successful either. Instead, the Court kept its ruling very narrow: a broad investment menu with some prudent funds will not automatically mean the fiduciaries are off the hook for offering imprudent funds.

 

The plaintiffs in Hughes were participants in two 403(b) retirement plans sponsored by Northwestern University. The participants brought claims for breach of fiduciary duty against the University, the retirement plan committee, and the individuals who administered the plans. The participants alleged the fiduciaries breached their duty of prudence by: (1) allowing recordkeeping fees that were too high; (2) allowing plan investments with excessive investment fees; and (3) providing participants too many investment options (over 400!) which resulted in participant confusion and poor investment decisions. Read more

Write This Down … Participants Have to Follow the Plan’s Beneficiary Designation Procedures

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by Elizabeth Nedrow

The principles governing how ERISA plans determine a participant’s beneficiary haven’t changed much since the country singer George Strait sang “Write this down” in 1999. In short, the participant has to write it down … on the forms and following the procedures established by the plan.

Recently we’ve seen several examples of family members of deceased employees who are surprised by the plan’s record of who was designated as beneficiary. They have tried to argue that the deceased employee’s will should be allowed to designate a beneficiary, or that the plan should look to state laws regarding estates. However, the courts have clearly established that those extraneous sources do not affect the plan’s process. (Most famous are the U.S. Supreme Court’s 2001 Egelhoff decision, and its 2009 Kennedy v. DuPont decision.) Read more