New Internal Revenue Service (IRS) guidance expands the availability of Coronavirus Aid, Relief and Economic Security Act (CARES Act) distributions and loans under eligible retirement plans, and it provides important clarifications regarding how to administer and report CARES Act distributions and loans. The guidance also provides welcome relief for a participant who receives a CARES Act distribution, allowing the participant to revoke an otherwise irrevocable salary deferral election under a nonqualified deferred compensation plan. Finally, consistent with prior guidance, the new IRS guidance confirms that CARES Act provisions are optional, meaning that plan sponsors may choose whether to implement CARES Act changes.
There are requirements for a qualified domestic relations order (QDRO) that apply whether the QDRO is for splitting up defined contribution (DC) plan assets or defined benefit (DB) plan assets, notes McDermott’s Lisa K. Loesel.
However, the mechanics of setting up QDROs vary between DC and DB plans. Read on to discover the different paths for getting the right benefits to the right people when a plan participant divorces.
Originally published on PLANSPONSOR, January 2020
The Internal Revenue Service (IRS) has again extended the temporary nondiscrimination relief for closed defined benefit plans. This extended relief is intended to enable closed pension plans (defined as pension plans that have been closed to new participants before December 13, 2013 but continue to provide ongoing benefit accruals for certain participants) to more easily satisfy certain nondiscrimination testing requirements. In most cases where the relief applies, the closed defined benefit plan is aggregated with a defined contribution plan to satisfy the nondiscrimination testing requirements. The relief assists the aggregated plan in passing nondiscrimination requirements that apply to accrued benefits and to certain rights and features relating to those benefits.
The original nondiscrimination testing relief for closed pension plans was provided in a 2014 IRS Notice. This relief was already extended on three prior occasions, and the most recent IRS Notice further extends the relief until the end of plan years that begin before 2020, as long as the conditions of the original 2014 IRS Notice continue to be satisfied. In 2019, the IRS also intends to issue final regulations under Section 401(a)(4) of the tax code that address the nondiscrimination requirements for closed pension plans. Until then, the IRS indicated that plan sponsors can rely on the proposed 2016 IRS regulations under Section 401(a)(4) for plan years that begin before 2020.
A lawsuit against Vanderbilt University is moving forward based on allegations that the university and its fiduciaries mismanaged its retirement plan by paying excessive fees and maintaining poor investment options.
In that lawsuit, Cassell v. Vanderbilt et al., plaintiffs filed a 160-page complaint alleging multiple violations of ERISA. Cassell v. Vanderbilt, No. 3:16-cv-02086 (M.D. Tenn. Jan. 5, 2018). Cassell is one of numerous class action lawsuits that have been filed against prominent universities based on similar allegations. The lawsuits allege that Internal Revenue Code Section 403(b) plan fiduciaries breached duties of prudence and loyalty, and engaged in prohibited transactions. Vanderbilt University, like other schools, filed a motion to dismiss the claims. The court granted part of its motion, but allowed the rest of the lawsuit to proceed.
According to U.S. News & World Report, estimates for the cost of Hurricane Harvey’s damage have come in as high as $190 billion, and damage estimates for Hurricane Irma are still rolling in but range up to $100 billion. To assist taxpayers affected by these devastating storms, the Internal Revenue Service, Department of Labor, and Pension Benefit Guaranty Corporation have granted multiple forms of relief to taxpayers impacted by Hurricane Harvey, Hurricane Irma, and other disasters enumerated by the Federal Emergency Management Agency.
Ten short years ago, revenue sharing seemingly presented a “win win” opportunity for third-party administrators (TPAs) and defined contribution plan sponsors. TPAs generally retained all revenue sharing payments received from plans’ investment fund companies in exchange for administrative services provided to the investment funds. In recognition of the revenue sharing received from the investment fund companies, TPAs often provided “free” plan administrative services to plan sponsors. Starting in the mid-2000s, however, more plan sponsors began to question the amount of money received by the TPAs under this arrangement, and plaintiffs’ lawyers and the DOL began to monitor and scrutinize revenue sharing.
This article summarizes the evolution of revenue sharing over the past ten years and examines its future through the lens of the recent U.S. Supreme Court decision in Tibble v. Edison and the subsequent uptick in 401(k) fee litigation.
On February 2, 2015, the White House released its Fiscal Year 2016 Budget, which includes a number of tax reforms targeting retirement savings. The provisions, if enacted as presented, would have a significant effect on current retirement-related tax incentives.
New IRS Rules on Direct Rollovers of Taxable and Non-Taxable Amounts Require Changes to Defined Contribution Plan Administration By January 1, 2015
The Internal Revenue Service recently released guidance allowing participants to allocate the taxable and non-taxable portions of a single distribution from a defined contribution retirement plan into separate accounts. Sponsors of defined contribution retirement plans should consider how their administrative practices and participant communications may need to be changed in light of these new rules.
The U.S. Securities and Exchange Commission recently amended the rules governing money market funds in an effort to increase the stability and liquidity of these funds in times of economic stress. Sponsors of retirement plans should consider how their use of money market funds should be changed in light of these revised rules.
View From McDermott: Having Their Cake and Eating It Too—An Employer’s Guide to Managing Retirement-Eligible Employees Who Want to Start Retirement Beneﬁts and Keep Working
“I would like to start receiving my retirement benefits now, but I would also like to keep working for a bit. Can I do this?” Baby boomers pose this question to their employers on a routine basis.
Unfortunately, there is no stock answer to this common question. The employer response depends on a variety of factors, including the types of retirement benefits payable to the employee and the arrangement under which the employee will continue providing services to the employer.
This article provides employers with a roadmap for analyzing this common employee request.