ERISA, ERISA…Just an Old Sweet Song Keeps ERISA on my Mind

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by Becky Achten

“Georgia” on your mind? As we look towards the upcoming Masters golf tournament weekend, our minds turn to the condition of the greens (exquisite), the players tee off order (does afternoon help or hinder Tiger on an expected rainy day?), and who will make that amazing chip shot out of the bunker to save par. It may not get quite the level of TV viewership of other sporting events, but benefit plan administration is a lot like golf: a series of pars, birdies and bogies, and—oh my, not a double bogie!

If you’re hitting par with your benefit plans, they’re operating smoothly, participants are happy with the offerings, and you’re in compliance with the most obvious regulations. All is good, but you probably won’t earn a green jacket. Read more

You Live, You Learn… Correcting “Qualification Failures” under the Self-Correction Program

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by Leslie Thomson

 The Employee Plans Compliance Resolution System (“EPCRS”), as set forth in Revenue Procedure 2021-30, allows plan sponsors to correct “Qualification Failures,” which are defined as any plan document, operational, demographic or employer eligibility failures. Failure to follow the terms of a plan constitutes an operational failure.

Operational Failures can be corrected without IRS supervision under the Self-Correction Program (“SCP”) of EPCRS without paying a fee or sanction in two circumstances: (1) insignificant operational defects can be corrected at any time, even if the plan is under an IRS audit; and (2) significant operational defects can be corrected by the end of the third plan year following the plan year in which the defect arose. EPCRS summarizes the factors a plan sponsor may use to determine if a failure is insignificant or not. Moreover, SCP is only available if the plan sponsor has established practices and procedures reasonably designed to promote and facilitate overall compliance with applicable Internal Revenue Code requirements, and the failure occurred through an oversight or mistake in applying the procedures or because the procedures were not sufficient to prevent the occurrence of the failure. Read more

Take the Power Back . . . Negotiating Provider Contracts for Benefit Plans

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By Kevin Selzer

Disputes between plan sponsors and plan service providers are not new. As with any contractual relationship, things don’t always go according to “plan” or at least, as the sponsor expects. When that happens, one of the first things sponsors (and their attorneys) will do is review the provider’s contract. Some sponsors will be surprised to find some very provider-friendly provisions, such as:

  • a provision specifying that the provider is permitted by the contract to act negligently (as long as the conduct does not rise to gross negligence or intentional misconduct), or
  • a provision indicating that the sponsor has contractually waived its right to participate in a class against the provider.

Unfortunately for sponsors, a provider’s willingness to fix an error often comes down to how much the provider wants to continue working with the sponsor on a go forward basis. Read more

Don’t Think Twice, It’s All Right to Ignore That Late Form 8955-SSA Notice

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by Benjamin Gibbons

I have heard from a couple of clients recently who have received a penalty notice from the IRS for purportedly filing a late or incomplete 2022 Form 8955-SSA (the IRS form that plan sponsors use to report terminated participants with vested benefits), despite having timely filed Form 8955-SSA earlier this summer. While initially causing some concern, the IRS recently announced that due to a programming error, the IRS’s system automatically sent out Form 8955-SSA penalty notices to those plan sponsors who had already timely filed their 2022 Form 8955-SSA. Read more

You Make My Dreams Come True! IRS Delays Roth Catch-Ups

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by Elizabeth Nedrow

You don’t have to be a connoisseur of 1980s pop (we see you, Hall & Oates fans!) to appreciate the relief the IRS granted the retirement industry. In Notice 2023-62, the IRS announced a two-year delay on the Roth catch-up requirements for those earning more than $145,000. All eligible participants – regardless of income – may make catch-up contributions on a pre-tax basis (or Roth basis, at participant election but not required) until January 1, 2026. Read more

You Can Count On Me…But Check Your Math When Counting Participants for the 5500 Audit Rule!

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by Becky Achten

Bruno Mars may be crooning “Count on me,” but make sure you don’t overcount your retirement plan participants! New rules may allow you to leave some employees out of the count, which could save you the expense of the annual audit.

If your retirement plan is considered “large” – generally 100 or more participants – you’re probably in the middle of the Department of Labor required annual independent audit of the financial statements that must accompany the Form 5500. There are a few exceptions to the audit requirement – plans that have less than 100 participants at the beginning of the year and those with between 80 and 120 who filed as a small plan in the prior year. If your plan is just over that 100-participant level, there may be relief on the horizon from the required audit and another reason to keep track of those separated participants. 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

Should I Pay Or Should I No(t) Now: Which Expenses Can be Paid with Plan Assets?

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by Brenda Berg

One question that often comes up is whether an expense related to an ERISA plan can be paid with plan assets. The decision of whether to use ERISA plan assets to pay an expense is an ERISA fiduciary decision. With the recent IRS guidance clarifying the timing of use of forfeitures, this question may come up even more.[1] Using plan assets inappropriately is a fiduciary breach and subject to possible DOL and IRS penalties. It is important to have a fiduciary process in place for reviewing expenses and determining whether a payment is proper. Read more

One Way or Another … Forfeitures Will Have to Be Administered Under Your Retirement Plan, and the IRS Just Proposed New Regulations That Provide Simplified Guidance

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by Becky Achten

On February 27, 2023, the Treasury issued proposed regulations intended to simplify and clarify the rules relating to forfeitures within qualified retirement plans.

Defined Benefit Plans

Similar to defined contribution plans, defined benefit plans may use forfeitures to pay eligible plan expenses. However, unlike defined contribution plans, defined benefit plans are prohibited from using forfeitures to reduce required employer contributions. In addition, forfeitures must be used as soon as possible. The proposed regulations eliminate this timing requirement because it conflicts with the minimum funding requirements. Instead, reasonable actuarial assumptions are to be used to determine how expected forfeitures will affect the present value of plan liabilities. The difference between expected and actual forfeitures will then increase or decrease the plan’s minimum funding requirement in future years. Read more

What Happens In A Small Town Stays In A Small Town … Until The Tenth Circuit Rejects ERISA Arbitration Provision

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by Alex Smith

While case law regarding the enforceability of arbitration provisions in ERISA retirement plans has been mixed, since the Ninth Circuit’s 2019 decision in Dorman v. Charles Schwab Corp. enforcing a 401(k) plan’s arbitration provision, some employers and plan sponsors have given increased consideration to adding arbitration provisions to their retirement plans based on that decision and the proliferation of class action ERISA lawsuits.  However, following the Tenth Circuit’s February 9 decision in Harrison v. Envision Management Holding, Inc. Board, which appears to be the first time the Tenth Circuit considered the issue, employers based in the Tenth Circuit’s jurisdiction (Colorado, Kansas, New Mexico, Oklahoma, Utah and Wyoming) may want to think twice before adding an arbitration provision to their plans.

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