Benefits Law Update

A blog from the attorneys of Verrill

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Category: Retirement Plans

New IRS Guidance Will Help Facilitate 403(b) Plan Terminations

With the publication of Revenue Ruling 2020-23 , the IRS completed a cycle of helpful guidance regarding the termination of 403(b) plans that began with the publication of regulations under Code Section 403(b) in 2007. Revenue Ruling 2020-23, issued pursuant to a direction given to the Secretary of the...
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COVID-19 Extension Guidance Makes the Interplay Between COBRA and Medicare (a Bit) Trickier

The rules concerning the interplay between COBRA and Medicare are a frequent source of confusion for employers. The spike in retirements, layoffs, and furloughs attributable to the coronavirus pandemic has produced an environment where employers may be confronted with these rules more frequently. In addition, guidance extending certain COBRA...
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401(k) Plan Sponsors – Time to Focus on Compliance with the SECURE Act’s Eligibility and Vesting Rules for Long-Term, Part-Time Employees

As noted in our January 7, 2020 Client Advisory , the Setting Every Community Up for Retirement Enhancement Act of 2019 (the “SECURE Act”) requires 401(k) plans to allow certain long-term, part-time employees to make elective deferrals. The SECURE Act also mandates special vesting rules for such employees with...
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IRS Issues New Guidance on CARES Act Retirement Plan Distributions and Loans

The IRS recently issued Notice 2020-50 , which expands relief provided for retirement plan distributions and loans under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Distributions Under the CARES Act, a retirement plan may allow participants affected by COVID-19 to elect cash distributions in an amount...
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DOL E-Disclosure Rule Recognizes Our New (Digital) Reality

The COVID-19 pandemic has forced us to find new ways to work through digital technology. Now, more than ever, an enormous percentage of our communications occur over the phone and online. The Department of Labor’s recent publication of final rules permitting electronic disclosure by retirement plans as a default...
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Employee Layoffs May Vest Retirement Plan Benefits

Increasing numbers of employers are being forced to shutter places of business and lay off workers as the coronavirus pandemic continues. When laid off workers are participants in their employer’s qualified retirement plan, one consequence of the aggregate layoffs may be a partial termination of the plan under ERISA...
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With CARES Act, Congress provides retirement plan relief and group health plan changes

The Coronavirus Aid, Relief, and Economic Security (CARES) Act, signed into law on March 27, 2020, includes a number of provisions that affect retirement plan sponsors and participants. These provisions are designed to provide relief to participants and employers facing financial difficulty as a result of the coronavirus pandemic...
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SECURE Act: Change to RMD Trigger Age Should Trigger Your Attention Now

As summarized in our January 7 Client Advisory , the SECURE Act includes many changes that affect the design and administration of retirement plans. One of those changes is the increase to the trigger age for required minimum distributions (“RMDs”) from age 70½ to age 72. The change is...
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What You Need to Know About the SECURE Act

The Setting Every Community Up for Retirement Enhancement Act of 2019 (the “SECURE Act”) is the most far reaching new law affecting retirement benefits in more than a decade. Due to its importance, we have developed a client advisory highlighting key aspects of the SECURE Act that affect the...
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December 2019 Client Advisory

This Client Advisory, originally distributed in December 2019, highlights important developments in the law governing employee benefit plans and executive compensation over the past year. It offers insight into what these developments mean for employers and plan sponsors and previews developments we expect to see in 2020. The following...
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Final Regulations on 401(k) Hardship Withdrawals

In September, the Treasury Department issued final regulations governing hardship withdrawals from 401(k) plans. The final regulations update the existing 2004 regulations to reflect recent statutory changes made to the hardship withdrawal rules under Section 401(k) of the Internal Revenue Code (“Code”), including: permitting the withdrawal of earnings on...
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DOL Proposes New Electronic Disclosure Rules for Retirement Plans

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At long last, the Department of Labor (DOL) has issued an update to its safe harbor rules governing electronic distributions of retirement plan disclosures. When finalized and adopted, the new safe harbor rules will update guidance that has been in place since 2002. The new rules do not apply...
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403(b) Plans Must Comply with the “Once In, Always In” Rule This Year

Tax-exempt employers whose 403(b) plans have failed to comply with the "once in, always in" eligibility rule in the past should be well on their way to compliance by now. IRS Notice 2018-95 granted limited relief from this common administrative failure. The grace period for non-compliance has ended for...
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Plan Sponsors: You Should Have a Model QDRO

ERISA Section 206(d)(3)(G)(ii) requires sponsors of qualified retirement plans to maintain written procedures for the administration of qualified domestic relations orders ("QDROs"), and the plan administrator has an obligation to ensure that a domestic relations order received by the plan is "qualified" before making the payments or taking other...
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Who is a Highly Compensated Employee?

Identifying an employer's highly compensated employees is crucial to the administration of qualified retirement plans, as well as 403(b) plans that provide employer contributions. This post provides an overview of the rules for determining who is a highly compensated employee. The dollar amount used in this post is the...
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Recap of Change to Retirement Plan Rollover Rules for Plan Loan Offsets

The Tax Cuts and Jobs Act of 2017 ("2017 Tax Act") includes a provision that changed the rollover rules for certain plan loan offset distributions and that may not be well known to retirement plan sponsors and participants. Money purchase, profit sharing, 401(k) and 403(b) plans may make loans...
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Revenue Procedure 2019-19: Enhancements to EPCRS are Great News for Plan Sponsors

Newly published Revenue Procedure 2019-19 modifies and supersedes prior IRS guidance regarding the Employee Plans Compliance Resolution System (EPCRS) to allow plan sponsors to self-correct an expanded number of problems that may affect retirement plan operations or documents. The new guidance, which took effect April 19, 2019, provides a...
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December 2018 Client Advisory

This Client Advisory, originally distributed in December 2018, highlights important developments in the law governing employee benefit plans and executive compensation over the past year. It offers insight into what these developments mean for employers and plan sponsors and previews developments we expect to see in 2019. The following...
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Proposed Regulations on 401(k) Hardship Withdrawals

Last month, the Treasury Department issued highly anticipated proposed regulations governing hardship withdrawals from 401(k) plans. The proposed regulations address recent statutory changes made to the hardship withdrawal rules under Code Section 401(k), including: permitting the withdrawal of earnings on elective deferrals in the event of a hardship; permitting...
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Join Us for Managing 401(k) Plan Fiduciary Risk on 11/8

In today's ever-changing and challenging 401(k) environment, plan sponsors find themselves in a new and seemingly complex environment. Regulations are becoming increasingly complicated, the number of class action lawsuits continues to rise, and employees insist on access to less expensive options with better performance, without understanding what the fees...
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IRS issues updated 402(f) rollover distribution notices

The IRS has issued new model notices for recipients of rollover distributions from qualified retirement plans. The updated notices reflect changes from the 2017 tax reform act, as well as regulatory changes enacted since previous versions of the notices were published. The model notices provide a safe harbor for...
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Stronger Than Its Weakest Links: NYU Survives 403(b) Fee Lawsuit

In the first University 403(b) plan fee case to proceed to trial, Sacerdote v. New York University (No. 16-cv-6284 (KBF) (S.D.N.Y. July 31, 2018), the Court found that plaintiffs were unsuccessful in proving that the NYU Retirement Plan Committee breached its fiduciary duties by failing to reduce high recordkeeping...
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New Disability Claims Procedures Affect Retirement Plans and Deferred Compensation Plans Too

Much has been written about the Department of Labor's final rule regarding disability benefit claims procedures (the "Final Rule"), which took effect on April 2, 2018. And by now, most employers – and all disability insurance carriers – have taken steps to implement changes in disability plan administrative procedures...
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401(k) Plan Sponsors – Time to Revisit Your Hardship Withdrawal Provisions

The Bipartisan Budget Act of 2018 ("Budget Act") includes several changes to the rules governing hardship withdrawals from 401(k) plans. Because the changes apply to plan years beginning after December 31, 2018, 401(k) plan sponsors should start considering their options now and make decisions regarding which changes, if any...
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IRS Appears Likely to Expand Determination Letter Program in 2019

All signs point to the IRS expanding access to the determination letter ("DL") program for individually designed plans in 2019. This would be a welcome move for employers and other plan sponsors, who have been unable to obtain determination letters with respect to most ongoing plans since the DL...
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Socially Responsible Investing and the Plan Fiduciary

In the wake of mass shootings, environmental disasters, industrial accidents, drug and tobacco use pandemics, and other tragedies, retirement plan investors are paying more attention to selecting or rejecting investments based on perceived public policy benefits or detriment. For example, investors are more focused than ever on the larger...
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Controlled Group Rules for Tax Exempt Organizations: A Brief Review

Corporate entities under common control are generally treated as a single employer for purposes of applying the core rules that govern employee benefit plans and executive compensation arrangements. For that reason, a complete and accurate controlled group analysis can be critical in determining and monitoring the legal compliance status...
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Budget Agreement Contains Changes to 401(k) Plan Hardship Distribution Rules

The budget agreement approved by Congress and signed into law on February 9, 2018 includes several changes to the rules governing hardship distributions from 401(k) plans. These changes — which were included in the House version of the tax reform bill, but removed during the reconciliation process — may...
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Noteworthy Federal Cases Relating to Employee Benefit Plans in 2017

Here is a round up of cases decided by the U.S. Supreme Court and the First and Second Circuit Courts of Appeals in 2017 involving ERISA employee benefit plans. While courts decided a number of cases pertinent to benefit plans, we found these to be noteworthy: United States Supreme...
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Practical Guidance for Required Minimum Distributions and Missing Participants

Retirement plan administrators often run into this problem: a participant has reached his or her required beginning date – the date on which distributions must commence under the required minimum distribution (RMD) rules of Code Section 401(a)(9) – and the participant cannot be located. A recent IRS Field Memorandum...
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