In late December, US Senator Ron Wyden introduced the Retirement Parity for Student Loans Act (Student Loan Act), which would allow employers to make matching contributions under 401(k), 403(b) and SIMPLE plans with respect to student loan repayments made by employees. If enacted, this legislation would provide powerful new guidance for employers looking to offer student-loan-repayment-related benefits to their employees.

Last year, the Internal Revenue Service (IRS) released a groundbreaking private letter ruling (PLR) that helped to clear the way for employers to begin providing student loan repayment benefits as part of their 401(k) plans. More specifically, the PLR confirmed that, under certain circumstances, employers might be able to link the amount of employer contributions made on an employee’s behalf under a 401(k) plan to the amount of student loan repayments made by the employee outside the plan. However, the PLR only applied to the plan sponsor requesting the ruling and only addressed the specific issue and facts presented by the plan sponsor. As a result, although the PLR provided helpful guidance to employers, it also left many questions unanswered.

In response, many employers and industry groups have pushed for legislation that provides comprehensive guidance on how employers can and should structure student loan repayment benefits under their retirement plans. The Student Loan Act would address a number of the questions raised in response to the PLR and would provide employers more flexibility to offer student loan repayment benefits under their plans. In particular, the Student Loan Act would open the door for student loan repayments to be treated as elective deferrals under an employer’s plan and to qualify for corresponding matching contributions (rather than the special non-elective contributions described in the PLR). In addition, the Student Loan Act would clarify nondiscrimination testing requirements for student loan repayment benefits and address how student loan repayment benefits may be provided under not only traditional 401(k) plans, but also under safe harbor 401(k) plans, 403(b) plans and SIMPLE plans.

The Student Loan Act is part of the broader Retirement Security & Savings Act, which has bipartisan backing. The prospects for enactment of the Student Loan Act and Retirement Security & Savings Act are uncertain. Nevertheless, the release of the Student Loan Act, and its inclusion as part of the Retirement Security & Savings Act, shows that legislators are responding to employer demand and industry group efforts to seek further clarification on how they can provide employees with student loan repayment benefits under their tax-qualified retirement plans.

Late last year, the Ninth Circuit held that in order to trigger ERISA’s three-year statute of limitations a defendant must demonstrate that a plaintiff has actual knowledge of the nature of an alleged breach. Accordingly, the court held that merely having access to documents describing an alleged breach of fiduciary duty is not sufficient to cause ERISA’s statute of limitations to begin to run. Instead, the court rejected the standard embraced by other courts and ruled that participants should not be charged with knowledge of documents they were provided by did not actually read. The Ninth Circuit’s decision underscores circuit split over what is sufficient to demonstrate the existence of actual knowledge for purposes of triggering ERISA’s three-year statute of limitations.

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What to expect in 2019 and how to prepare now. Join McDermott lawyers Judith Wethall, Ted Becker and Rick Pearl for an interactive discussion regarding ERISA litigation trends.

Join our lively 45-minute discussion while we tackle the following items:

  • Plaintiffs’ law firm’s solicitations
  • Health & Welfare Fee Litigation
  • Defined-Benefit Plan Litigation – Actuarial Equivalence lawsuits and greater concern about discretionary decisions
  • Stock-Drop Cases – The Jander decision: Relaxing the Dudenhoeffer standard and the potential impact of a stock market decline
  • 401k/403b – Fee/investment update
  • ESOP transactions – New DOL and plaintiffs’ counsel’s theories

Friday, January 11, 2019
10:00 – 10:45 am PST
11:00 – 11:45 am MST
12:00 – 12:45 pm CST
1:00 – 1:45 pm EST

Register now. 

In certain cases of a facility sale, restructuring or cessation, recently released information by the Pension Benefit Guaranty Corporation (PBGC) leaves many unanswered questions about plan sponsor liability for single-employer defined benefit plans. Given the lack of clarity, these plan sponsors should continue to consult their lawyer in any type of transaction, restructuring or cessation that approaches a 15 percent demographic change in a plan sponsor’s controlled group over a three-year period.

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The IRS recently released Notice 2018-95 to provide transition relief to 403(b) plan sponsors that improperly excluded part-time employees from making elective deferrals under their plans. Employers must begin to operate the part-time employee exclusion under their 403(b) plans correctly for the plan year immediately following the transition relief period, which will mean as soon as January 1, 2019 for many 403(b) plan sponsors. In addition, going forward, many employers will need to amend their 403(b) plans to properly reflect the conditions that must be satisfied to exclude part-time employees from 403(b) plan participation.

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The Employee Retirement Income Security Act of 1974 (ERISA) has long been a source of complex and often-expensive litigation for employers. However, as the number of actions brought by employees under ERISA have surged, employer-defendants have often relied on the so-called top-hat exemption to dismiss certain claims involving executives. Now, several federal courts of appeals have addressed the disputed contention that the presence of employee bargaining power is required for a plan to fall under the top-hat exemption. In this article, Elizabeth Rowe, J. Christian Nemeth and Joseph Urwitz look at recent appeals court decisions and their effects on this exemption.

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Originally published in Benefits Law Journal, Autumn 2018

The IRS recently issued proposed amendments to regulations concerning 401(k) plan hardship distributions. The proposed regulations address changes to hardship distribution rules from the Bipartisan Budget Act of 2018 and other legislation.

Though the regulations are only proposed, 401(k) plan sponsors should promptly consider these changes because decisions should be made on applying certain optional changes, which generally can be effective for plan years beginning after December 31, 2018.

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Todd Solomon and Brian Tiemann presented on alternative investments for pension plans during the Association for Financial Professionals (AFP) Conference in Chicago. They discussed various rules benefit plan investors should consider, including the “look-through” rule and the “significant” investment rule. They also addressed common hedge fund structural and operational issues, and problems if a fund holds ERISA plan assets.

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The US Court of Appeals for the First Circuit has solidified a circuit split on who has burden of proving loss causation in ERISA breach of fiduciary duty cases. The First Circuit joined the Fourth, Fifth and Eighth Circuits holding that once a plaintiff demonstrates a fiduciary breach, the defendant has the burden to negate loss causation. Other circuits, including the Sixth, Ninth, Tenth and Eleventh Circuits, have held that a plaintiff bears to burden to establish loss causation. This issue is ripe for Supreme Court review.

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