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SEC Adopts Rulemaking Package – “Solely Incidental” Broker-Dealer Exclusion

On June 5, 2019, the Securities and Exchange Commission adopted a rulemaking package that applies to investment advisers and broker-dealers.

This is the fourth in a series of articles describing the SEC’s rulemaking package.  This article addresses the SEC’s Interpretation of the “Solely Incidental” Broker-Dealer Exclusion.  That exclusion allows broker-dealers to provide certain advisory services without becoming subject to regulation as investment advisers under the Advisers Act, as long as those services are “solely incidental” to the broker-dealers’ core business.  The SEC’s new interpretation of this exclusion provides some helpful guidance for broker-dealers and dually-registered firms.

SEC Adopts Rulemaking Package – Form CRS

On June 5, 2019, the Securities and Exchange Commission adopted a rulemaking package that applies to investment advisers and broker-dealers.  These rules include a new set of disclosure requirements to address retail investor confusion over brokerage and investment advisory services.

This is the third in a series of articles describing the SEC’s rulemaking package.  This article provides an overview of the Form CRS – Relationship Summary portion of the package.

SEC Adopts Rulemaking Package – Investment Adviser Standard of Conduct

On June 5, 2019, the Securities and Exchange Commission adopted a rulemaking package that applies to investment advisers and broker-dealers.  In a series of four articles, Spencer Fane LLP outlines the SEC’s rulemaking package.  Our first article summarized “Regulation Best Interest” a new standard of conduct governing broker-dealers.  In this second article, we describe the SEC’s interpretation of the standard of conduct that applies to investment advisers when they engage with their clients.

SEC Adopts Rulemaking Package – Regulation Best Interest

On June 5, 2019, the Securities and Exchange Commission adopted a rulemaking package that is applicable to investment advisers and broker-dealers.  The package includes two final rules and two interpretations – Regulation Best Interest, Investment Adviser Standard of Conduct Interpretation, Form CRS – Relationship Summary, and Solely Incidental Broker-Dealer Exclusion Interpretation.  The Regulation Best Interest and Form CRS requirements are effective 60 days after they are published in the Federal Register, with a transition period for compliance that ends on June 30, 2020.  The SEC’s interpretations are effective immediately upon publication in the Federal Register.  In a series of four articles, Spencer Fane LLP outlines the SEC’s rulemaking package.  This first article describes the Regulation Best Interest portion of the SEC’s package.

2017 Tax Cuts and Jobs Act Breathes New Life Into Old Trick For Dealing With Participant Loans in Corporate Transactions

One of the more difficult issues in corporate transactions that are structured as asset purchases is how to deal with outstanding participant loans.  In the typical asset purchase scenario – where the purchaser does not assume sponsorship of, or accept a transfer of assets from, the seller’s retirement plan – employees of the seller who become employed by the asset purchaser generally incur a termination of employment with the seller, and therefore a distributable event under the seller’s 401(k) plan.  If a participant has an outstanding loan at the time of the asset sale, then unless the distribution is paid in a direct rollover to another employer plan that is willing to accept a rollover of a participant loan, the participant must either (i) pay off the loan before taking the distribution, or (ii) incur a potentially taxable “plan-loan offset” (where the participant’s account balance is reduced, or offset, by the outstanding loan balance).

IRS (Finally) Answers Questions re: 2019 Hardship Distributions

On November 9, 2018, the IRS issued proposed amendments to the regulations under Code Section 401(k) that describe the circumstances under which participants may take an in-service distribution of elective deferrals (and contributions subject to similar withdrawal restrictions, such as QMACs, QNECs and safe-harbor contributions) on account of financial hardship. The proposed amendments to the regulations reflect several statutory changes to 401(k) plans since the Pension Protection Act of 2006, including the recent changes (that are scheduled to apply to hardship distributions in plan years beginning after December 31, 2018) under the Bipartisan Budget Act (“BBA”) of 2018. Most importantly, the amendments answer several questions that plan sponsors and plan administrators have had with respect to both the BBA and the Tax Cuts and Jobs Act (“TCJA”) of 2017, and provide some much-needed transition relief for hardship distributions made in 2019.

2019 Inflation Adjustments

Following announcements by both the Internal Revenue Service and the Social Security Administration, we know most of the dollar amounts that employers will need to administer their benefit plans for 2019. The key dollar amounts for retirement plans and individual retirement accounts (“IRAs”) are shown on the front side of our 2019 limits card.

The reverse side of the card shows a number of dollar amounts that employers will need to know in order to administer health flexible spending accounts (“FSAs”), health savings accounts (“HSAs”), and high-deductible health plans (“HDHPs”), as well as health plans that are not grandfathered under the Affordable Care Act.

A laminated version of the 2019 limits card is available upon request. To obtain one or more copies, please contact any member of our Employee Benefits Group. You also can contact the Spencer Fane Marketing Department at 816-474-8100 or marketing@spencerfane.com.

IRS Updates Required Tax Notice to Address Plan Loan Offsets and Other Law Changes

The IRS has updated the model notice (sometimes referred to as the “402(f) Notice” or “Special Tax Notice”) that is required to be provided to participants before they receive an “eligible rollover distribution” from a qualified 401(a) plan, a 403(b) tax-sheltered annuity, or a governmental 457(b) plan.  Notice 2018-74, which was published on September 18, 2018, modifies the prior safe-harbor explanations (model notices) that were published in 2014. Like the 2014 guidance, the 2018 Notice includes two separate “model” notices that are deemed to satisfy the requirements of Code Section 402(f):  one for distributions that are not from a designated Roth account, and one for distributions from a designated Roth account. The 2018 Notice also includes an appendix that can be used to modify (rather than replace) existing safe-harbor 402(f) notices. 

Cyber Liability Insurance for Employee Benefit Plans: Hackers and Malware and Phishing – Oh My!

Cyberattacks have managed to invade all walks of life, and employee benefit plans are no exception.  When a plan is attacked, the fallout can be overwhelmingly expensive and burdensome to correct.  Many plan sponsors are purchasing cyber liability insurance coverage to supplement their data security measures.  Understanding those policies – and their exclusions – is important for sponsors who are exploring such coverage.

Federal Appellate Court Decision Highlights Importance of “Firestone” Language

In a recent decision, the Sixth U.S. Circuit Court of Appeals resolved an important question in a way that should put administrators of ERISA plans in a far stronger position vis-à-vis claimants who disagree with the administrators’ plan interpretations.  Essentially, the court in Clemons v. Norton Healthcare Retirement Plan held that the contract-interpretation doctrine of “contra proferentum” has no application once a court has determined that a plan document grants the administrator the type of broad discretion approved by the U.S. Supreme Court in its 1989 Firestone decision.

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