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May 24, 2017 1:28 PM | Posted by Beth Miller
According to U.S. Labor Secretary Alexander Acosta, the Department of Labor’s (“DOL”) Fiduciary Rule will become effective on June 9th. In Field Assistance Bulletin 2017-02, the DOL has indicated that it will not pursue claims against an adviser or financial institution during the Transition Period of June 9, 2017 through December 31, 2017, as long as such parties are working in good faith to comply with the Rule and related exemptions. In addition, the Bulletin confirms the Treasury Department’s and IRS’s agreement to not assess potential excise taxes for related prohibited transactions. The DOL also released new FAQs to provide guidance to the financial services industry during the Transition Period.
May 22, 2017 8:57 AM | Posted by Steve Rickles
It is common for employers to contract with one or more third parties (sometimes referred to as “leasing companies”) to provide individuals to perform services for the employer. Various issues may arise regarding the treatment of such individuals under a retirement plan maintained by the employer.
May 9, 2017 1:13 PM | Posted by Beth Miller and Greg Ash
For investment advisers and financial institutions, the countdown to compliance with the Department of Labor’s new “conflict of interest” rule ends on June 9, 2017. The Department of Labor (“DOL”) issued a final rule on April 7, 2017, that delays the original applicability date of its conflict of interest regulation (the “Fiduciary Rule”) and its related prohibited transaction exemptions for 60 days, creating a “Transition Period” that starts on June 9, 2017, and ends on December 31, 2017. During the Transition Period, the Fiduciary Rule’s expanded definition of “fiduciary” applies, and advisers and financial institutions providing investment advice as fiduciaries must comply with the Rule’s “impartial conduct” standards. With the June 9 deadline quickly approaching, the financial services industry should be making final preparations for implementing this stage of the Fiduciary Rule.
March 17, 2017 12:17 PM | Posted by Beth Miller
The Department of Labor (“DOL”) has proposed to delay for 60 days the “applicability date” of the Fiduciary Rule (“Rule”), and the new and revised prohibited transaction exemptions related to the Rule. The proposed delay has created confusion within the financial services industry because it is not certain that a final rule implementing the delay can be published (and become effective) before the Rule’s April 10th applicability date. In response to the confusion, the DOL issued Field Assistance Bulletin 2017-01 (“Bulletin”) announcing a temporary enforcement policy that assures advisers and financial institutions that the DOL will not seek to enforce the Rule or the related prohibited transaction exemptions in the event the Rule becomes applicable before it is officially delayed.
March 16, 2017 11:43 AM | Posted by Ken Mason
In recent years, sponsors and administrators of 401(k) and 403(b) plans have received conflicting advice on the steps they should take to substantiate an employee’s entitlement to an in-service withdrawal on account of financial hardship. For instance, an April 2015 IRS newsletter seemed to require that plan sponsors obtain and retain documentary proof of an employee’s entitlement to a hardship withdrawal. However, two recent internal IRS memos outline a permissible approach to this substantiation requirement that need not involve conditioning a hardship withdrawal on an employee’s provision of supporting documents. Plan sponsors should thus consider this new alternative.
March 7, 2017 1:53 PM | Posted by Beth Miller and Greg Ash
The increased popularity of automated digital investment advisory programs (often called “robo-advisers”) has drawn the attention of the Securities and Exchange Commission (“SEC”). On February 23, 2017, the SEC’s Division of Investment Management issued Guidance Update No. 2017-02 (the “Update”). That Update provides guidance to robo-advisers as they seek to satisfy their disclosure, suitability, and compliance obligations under the Investment Advisers Act of 1940 (“Advisers Act”). On the same day, the SEC’s Office of Investor Education and Advocacy issued an Investor Bulletin to educate investors about robo-adviser programs.
March 2, 2017 9:40 AM | Posted by Greg Ash
After nearly a month of regulatory machinations and behind-the-scenes lobbying, the Department of Labor has released a proposed rule that would delay the “applicability date” of its recently enacted “conflict of interest” (or “fiduciary”) regulation (the “Fiduciary Rule”). The 60-day delay in the applicability of the Fiduciary Rule would have only an indirect effect on employers, but is of great interest to investment advisors and other service providers.
February 28, 2017 7:37 AM | Posted by Ken Mason
As explained in our December 19, 2016, article, the 21st Century Cures Act allows small employers (those that are not subject to the Affordable Care Act’s “play-or-pay” requirements because they have fewer than 50 full-time employees, including full-time equivalents) to offer their employees a premium reimbursement arrangement that would otherwise violate the ACA. By establishing a “qualified small employer health reimbursement arrangement” (or “QSEHRA”), such an employer may subsidize its employees’ purchase of individual health insurance coverage. In its recent Notice 2017-20, the IRS has granted these employers additional time to comply with the QSEHRA notification requirement.
February 13, 2017 11:18 AM | Posted by Ken Mason
A recent IRS Chief Counsel Memorandum (AM 2017-01) raises the stakes for employers that fail to apply the proper FICA taxation rules to nonqualified deferred compensation. An option previously available to those employers has been taken off the table. Under this option – which required a formal “Closing Agreement” with the IRS – both employer and employee FICA taxes could be minimized by voluntarily paying those taxes for years as to which IRS assessments were otherwise barred under the Tax Code’s three-year statute of limitations. Without this correction option, employers have an even greater incentive to apply the proper FICA taxation rules to their deferred compensation arrangements.
February 6, 2017 10:08 AM | Posted by Rob Browning
On Friday, February, 3, 2017, President Trump issued a Memorandum directing the Secretary of Labor to “re-examine” the Department of Labor’s final regulation defining “fiduciary” investment advice (sometimes referred to as the “Fiduciary Rule” or the “Conflict of Interest Rule”), and to consider whether the Rule should be revised or rescinded. The Rule, which significantly expands the circumstances under which an individual becomes a “fiduciary” by reason of providing investment advice for a fee, was finalized in April of 2016, and technically became effective last July, but was drafted such that its provisions generally do not become “applicable” to financial advisers until April 10, 2017.
February 3, 2017 10:11 AM | Posted by Laura Fischer and Griffin Bridgers
The Department of Labor has issued final regulations under Section 503 of ERISA that purport to enhance the disability benefit claims and appeals process for plan participants. These regulations amend the DOL’s disability claims procedure regulations issued in 2002. The new regulations generally affect the procedures for filing disability benefit claims, providing notice of adverse benefit determinations, and appealing adverse benefit determinations.
January 23, 2017 12:25 PM | Posted by Pete Mirakian and Beth Miller
In December, the Division of Investment Management of the Securities and Exchange Commission issued Guidance Update No. 2016-06. The Update provides disclosure and procedural guidance to address potential issues for mutual funds responding to the Department of Labor’s adoption of the Conflict of Interest Rule. To address concerns by financial intermediaries that variations in mutual fund sales loads may violate the Rule, Funds are exploring various options, including changing fee structures and creating new share classes. Such changes may impact fiduciary decisions regarding a plan’s investments and compensation arrangements.