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403(b) Plans

IRS Creates New “Window” to Suspend 401(k) Safe-Harbor Contributions for 2020

The IRS has granted additional, albeit temporary, COVID-19-related relief for sponsors of “safe-harbor” 401(k) and 403(b) plans (i.e., plans that are exempt from one or both of the ADP and ACP nondiscrimination tests).  Notice 2020-52, which was issued on June 29, 2020, provides temporary relief from the current requirements for mid-year amendments to such plans, and provides additional clarification regarding mid-year amendments to safe-harbor plans that only affect highly compensated employees.   This guidance is welcome relief for plan sponsors who feel the financial need to reduce or suspend employer contributions under these plans, but who may not be able to satisfy the current regulatory requirements for mid-year amendments.

DOL Finalizes Electronic Disclosure Safe Harbor for Retirement Plans

The Department of Labor (DOL) has now finalized its October 2019 proposal (described in our previous blog) to create a new “safe harbor” for the electronic distribution of ERISA-required notices and disclosures.  The final regulation establishes a new, voluntary safe harbor for retirement plan administrators who want to use electronic media, as a default, to furnish covered documents to participants and beneficiaries, rather than providing paper documents through mail or hand delivery.  The new safe harbor permits electronic delivery by either (i) posting covered documents on the plan sponsor’s website, if appropriate notification of internet availability is furnished to the participant’s electronic address, or (ii) sending the documents directly to the participant’s electronic address, with the covered document either in the body of the e-mail or as an attachment thereto.  Although the final rule is not effective until 60 days after its publication in the Federal Register, the DOL has indicated that it will not take any enforcement action against a plan administrator that relies on the safe harbor before that date.

DOL Disaster Relief Notice Extends Deadlines, Enables COBRA Gamesmanship

The Department of Labor’s Employee Benefits Security Administration issued guidance on April 28, 2020, providing temporary, coronavirus-related relief from many deadlines and requirements under ERISA.  Notably, the guidance relaxes the standards for employers to provide notices electronically, and affords significant latitude to COBRA qualified beneficiaries for electing, and paying for, COBRA continuation coverage.

“CARES” Act Requires Immediate Decisions by Retirement Plan Sponsors

A third round of relief from the coronavirus pandemic has made its way through the Senate and House and has been signed by President Trump. The Coronavirus Aid, Relief and Economic Security (or “CARES”) Act provides over $2 trillion in relief for businesses and individuals. It also offers new avenues for defined contribution retirement plan participants to withdraw funds from their accounts in order to pay COVID-19-related expenses, if their employer elects to open those avenues. Some of the largest 401(k) and 403(b) plan record keepers are forcing employers to make that choice on just a few days’ notice.

ERISA Fiduciaries Must Monitor Market Turbulence

The recent turmoil in the financial markets, while troubling for individual investors, also has potentially significant implications for ERISA fiduciaries. Individuals and committees who have investment authority over plan assets should reevaluate their portfolios in light of these developments.  Circumstances may not require a change in investment strategy, but ERISA’s prudence requirement requires fiduciaries to give immediate, thoughtful consideration to how those circumstances have changed.

SECURE ACT – Provisions Unique to
403(b) Plans, Governmental 457(b) Plans, and IRAs

On December 20, 2019, President Trump signed into law the Further Consolidated Appropriations Act, 2020, which includes the Setting Every Community Up for Retirement Enhancement Act (the “SECURE” Act).   The SECURE Act represents the most significant retirement legislation in more than a decade (i.e., since the Pension Protection Act of 2006).

This is the third in a series of articles describing key provisions of the SECURE Act.  Our focus in this article is on the provisions that are unique to Section 403(b) tax-sheltered annuity plans, governmental Section 457(b) plans, and Individual Retirement Accounts/Annuities (IRAs).  Many of the SECURE Act provisions that are broadly applicable to retirement plans (such as the increase in the age at which required minimum distributions must begin, and the new rules curtailing the ability to “stretch” post-death minimum distributions under defined contribution plans over the life expectancy of the participant’s designated beneficiary) also apply to 403(b) plans, 457(b) plans, and IRAs.  Because we addressed those provisions in the second article in this series, we will not do so again here.

SECURE Act – Broad Implications for Retirement Plans

On December 20, 2019, President Trump signed into law the Further Consolidated Appropriations Act, 2020, which includes the Setting Every Community Up for Retirement Enhancement Act (the “SECURE” Act). The SECURE Act amounts to the most significant retirement legislation in more than a decade.  Our focus in this article is on the legislation’s effect on retirement plans generally, including provisions broadly applicable to defined contribution, defined benefit, 401(k), 403(b), and certain 457(b) plans.

SECURE Act Generates Changes and Opportunities for Retirement Plans

In the waning days of 2019, President Trump signed into law the most significant retirement legislation in more than a decade.  The Setting Every Community Up for Retirement Enhancement – or “SECURE” – Act includes far-reaching changes that affect qualified retirement plans, 403(b) and 457(b) plans, IRAs, and other employee benefits.  In a series of articles, we will describe key provisions of the Act.  Our first article provides an overview of the Act’s key provisions and their effective dates.  Some of the changes under the SECURE Act are effective immediately, while others are effective for plan or tax years beginning on or after January 1, 2020.  Although the Act generally provides sufficient time to amend plan documents, employers must modify certain aspects of plan administration (and potentially financial planning decisions) now to align with the SECURE Act’s more immediate requirements.

Department of Labor Proposes New Safe Harbor for Electronic Disclosures

The U.S. Department of Labor (DOL) has proposed a  new “safe harbor” rule to allow retirement plan disclosures to be posted online (assuming certain notice requirements are satisfied) to reduce printing and mailing expenses for plan sponsors and to make the disclosures more readily accessible and useful for plan participants.

IRS Finalizes Hardship Distribution Rules

The IRS has issued final regulations modifying and clarifying the rules for in-service hardship distributions from 401(k) and 403(b) plans.  The final regulations are substantially similar to the proposed regulations issued in November of 2018, but they contain a few changes of which plan sponsors should be aware.

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