I Just Called to Say…I Have a Benefit Claim

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by Lyn Domenick

ERISA provides that when an individual makes a claim for benefits under an employer’s plan, they are entitled to copies of all documents, records, and other information relevant to the claimant’s claim for benefits. The Department of Labor (DOL) recently issued an information letter that concludes that an audio recording of a telephone conversation (in this case, between the claimant and a representative of the plan’s insurer) must be among the materials provided to a claimant upon request. The DOL letter was provided in response to a request from a representative of a claimant who was denied an audio recording because the plan administrator considered it to be made only for quality assurance purposes, and not “created, maintained or relied upon for claim administration purposes.” Read more

Time Has Come Today…For Form 5500 Season

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By Benjamin Gibbons

Days are getting longer, temperatures are getting warmer, plants are looking greener, schools are letting out, Brood X cicadas are emerging…it can only mean one thing…5500 season is approaching.

However, unlike the cicadas and their 17-year cycle, the Form 5500 filing requirements arise every summer for calendar year-end ERISA covered retirement plans and health and welfare plans that cover at least 100 participants.  While it may be easy enough to file an extension and hit the snooze button until October, now is great time for plan sponsors to start thinking about their 5500 obligations. Read more

Hello. Is It Me You’re Looking For? Missing Participant Best Practices

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by Leslie Thomson

The Employee Benefits Security Administration (EBSA) has developed a list of best practices plan fiduciaries can implement to reduce missing participant issues and ensure participants and beneficiaries receive their plan benefits. According to EBSA, the first step in addressing any problem is knowing there is one. If your plan has one or more of the following “red flags,” you potentially have a missing participant issue:

  • More than a small number of missing or nonresponsive participants.
  • More than a small number of terminated vested participants who have reached normal retirement age but have not started receiving their pension benefits.
  • Missing, inaccurate, or incomplete contact information, census data, or both (e.g., incorrect or out-of-date mail, email, and other contact information, partial social security numbers, missing birthdates, or missing spousal information).
  • Absence of sound policies and procedures for handling mail returned marked “return to sender,” “wrong address,” “addressee unknown,” or otherwise, and undeliverable email.
  • Absence of sound policies and procedures for handling uncashed checks (as reflected for example, by the absence of an accounting journal or similar record of uncashed checks, a substantial number of stale uncashed distribution checks, or failure to reclaim stale uncashed check funds in distribution accounts).

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Matchmaker, Matchmaker, Make Me a Match … Based on my Student Loan Repayments

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by Beth Nedrow

For the last several years, a hot topic for policymakers has been how to address the nation’s massive student loan debt. At the same time, the pressure remains to develop ways to encourage Americans to save for their own retirement. Legislation is in the works that proposes marrying those two goals.

Earlier this week, the U.S. House of Representatives Ways and Means Committee passed a bipartisan retirement reform bill, the Securing a Strong Retirement Act of 2021 (or “SECURE 2.0,” to reflect its role in following in the footsteps of the SECURE Act passed in December 2019). Among other provisions, SECURE 2.0 would permit employers to make matching contributions under a 401(k) plan, 403(b) plan or SIMPLE IRA with respect to “qualified student loan payments.” Such arrangements have been touted as a way to make sure employees burdened with student loans don’t miss out on employer retirement contributions since they may be unable to afford both student loan repayments and elective deferrals to a retirement plan. Read more

In the Darkness at the Edge of Town…Cybersecurity Guidance for Plan Participants, Record-Keepers, and Plan Sponsors From The EBSA

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by John Ludlum

On April 14, 2021, the Employee Benefits Security Administration (“EBSA”) published guidance for plan sponsors, plan fiduciaries, record-keepers, and plan participants on best practices for maintaining cybersecurity. This is the first time that the EBSA has given cybersecurity guidance to the estimated 34 million defined benefit plan and the 106 million defined contribution plan participants with an estimated $9.3 trillion in assets. Read more

I Would Walk 500 Miles … But Thankfully I Don’t Have To Since the IRS Will Still Permit E-Signature

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by Beth Nedrow

The Covid-19 pandemic has created numerous challenges for retirement plan administrators. One such challenge is how to comply with the requirement to obtain a participant’s written signature to get a distribution from a qualified plan. In plans subject to the QJSA rules, the participant must sign in the presence of a notary or a plan representative. The plain language of the IRS regulation – requiring physical presence – would preclude the use of remote notarization. In June 2020, the IRS issued Notice 2020-42 that provided temporary relief from the physical presence requirement. In December, the IRS extended that relief through June 30, 2021 in Notice 2021-3. Read more

The Maximum QACA Automatic Increase Percentage is Movin’ on Up

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A Brief Summary of Recently Issued IRS Safe Harbor 401(k) Plan Guidance

By Benjamin Gibbons

For those of you who have been following along at home (literally these days), you know that the SECURE Act, which was passed only at the end of last year (though it feels like forever ago), instituted a wide range of retirement plan changes, including a number of changes with respect to safe harbor 401(k) plans. On December 9, 2020, the IRS issued guidance on these safe harbor changes in the form of Notice 2020-86.

More specifically, the SECURE Act (in part): (1) increased the maximum automatic contribution percentage for qualified automatic contribution arrangement (QACA) safe harbor 401(k) plans from 10% to 15%; (2) provided plan sponsors the ability to implement a retroactive safe harbor nonelective contribution during a plan year (generally provided the plan is amended at least 30 days before the end of the plan year); and (3) eliminated the safe harbor notice requirement for most plans with safe harbor nonelective contributions. The Notice, in Q&A format, provides additional guidance on each of these SECURE Act changes. A brief summary of the key provisions of the Notice follows. Read more

It’s the Final Countdown . . . PEPs

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By Kevin Selzer 

Starting in January, unaffiliated employers can band together and participate in a new type of collective retirement plan, called a “pooled employer plan” or PEP. PEPs are expected to be attractive to plan sponsors because of the ability to lower plan fees and expenses by leveraging assets, simplifying administration, and shifting fiduciary risk to the PEP provider. We first posted about PEPs back in January. Nearly 11 months and a pandemic later, many questions remain, but PEPs are slowly starting to take shape.

A variety of industry players have already announced an intention to offer PEPs. Ironically, and in true PEP spirit, many unaffiliated service providers have partnered to offer PEPs, with third-party administrators/recordkeepers often partnering with investment advisors/consultants. PEPs will come in many flavors and sizes. Expect to see both national PEPs offered by well-known providers as well as smaller regional PEPs. While the strategy of pooling assets may have been aimed at smaller plans – since those plans seem to have the most to gain from a cost cutting perspective – it appears that PEPs will be marketed to larger plans ($100M+ plans) as well.

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FAME! I’m Gonna Live Forever….and My Retirement Account Might Last That Long, Too!

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by Becky Achten

Section 401(a)(9) requires most retirement plans and individual retirement accounts to make required minimum distributions (“RMDs”) over the lifetime of the individual (or the lifetime of the individual and certain designated beneficiaries) beginning no later than such individual’s required beginning date (generally, April 1 in the year following attainment of age 72).  This minimum amount is determined by dividing the individual’s account balance by the applicable distribution period found in one of the life expectancy and distribution tables (the “Tables”).

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Your [es]Cheating Heart … Might Be Useful to Retirement Plans Dealing With Missing Participants

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by Beth Nedrow

Retirement plan administrators have for years sung the sad lament of what to do with missing participants. Ol’ Hank Williams himself could have written a hit song about the problem. Recent guidance from the IRS may have the retirement community singing a slightly different tune, however.

The hassle of keeping plan accounts open for lost or deceased former employees can be a real problem, especially for terminating plans. When participants go missing, retirement plan administrators have few alternatives. One alternative that has been discussed is the use of state unclaimed property funds (sometimes called by their old-fashioned name, “escheat” law). Plans previously were reluctant to escheat unclaimed retirement accounts to state funds due to concerns over how to report tax and withholding. But recent guidance from the IRS (Revenue Ruling 2020-24) makes clear that if a plan escheats funds to the state, it is appropriate for the plan to treat the payment as being includible in gross income and subject to federal income tax withholding, reportable on a Form 1099-R.

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