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Congress Eases Restrictions on Hardship Withdrawals

Buried in Sections 41113 and 41114 of the recent Bipartisan Budget Act of 2018 are provisions designed to facilitate hardship withdrawals from 401(k) and 403(b) plans.  Because these provisions take effect for plan years beginning after December 31, 2018, sponsors of these plans will want to consider whether to broaden their hardship withdrawal provisions – or even add such provisions.

Tax Cuts and Jobs Act – New Rules for Retirement Plans and IRAs

Although the main feature of the Tax Cuts and Jobs Act is a significant reduction in the corporate federal income tax rate, the Act also makes a number of significant changes to the rules governing employer-sponsored retirement plans and individual retirement accounts.  From plan loans to hardship withdrawals and Roth recharacterizations, employers should make sure that they understand how these new rules might affect them.

IRS Further Extends Deadline for Defined Benefit Plan Amendments

In what has become something of a ritual, the IRS is once again extending the deadline by which single-employer defined benefit plans must be amended to implement the regime of funding-based benefit restrictions imposed by the Pension Protection Act of 2006 (“PPA”). Notice 2012-70, issued last week, pushes the general deadline back one more year, to the end of the 2013 plan year. As explained below, this most recent postponement seems to originate in confusion generated by the IRS itself.

Critical Amendment Deadline Approaching for Defined Benefit Plans

Sponsors of single-employer defined benefit pension plans will need to amend those plans by the end of the 2012 plan year to comply with a new regime of distribution restrictions imposed by the Pension Protection Act of 2006 (the “PPA”). As explained more fully in this article, meeting this deadline is crucial because the IRS has conditioned anti-cutback relief on a timely amendment. If the cutbacks required under the PPA are implemented without a timely amendment, the plan risks disqualification, and the plan sponsor may be liable to participants and beneficiaries.

IRS Cautions Against “Sham” Retirements

In a recent ruling, the IRS reiterated its long-standing position that a “pension plan” may not allow active employees to obtain a distribution from the plan – at least, not before their attainment of the plan’s normal retirement age (or, if earlier, age 62).  Sponsors of pension plans (both defined benefit and “money purchase”) should therefore take steps to prevent “sham” retirements by employees who want to begin receiving a pension but then immediately return to work for the plan sponsor.

IRS Guidance Facilitates Lifetime Income Options

The IRS has issued a package of proposed regulations and revenue rulings dealing with “lifetime income options.”  These regulations and rulings apply to both defined contribution and defined benefit plans, and to a variety of life situations.  What they share in common is an intent to encourage employers to help their employees more prudently manage their retirement assets during the “drawdown” phase of their retirement.

November 30 Deadline For Determining How To Handle 2009 Required Minimum Distributions

Under recent IRS guidance, sponsors of many defined contribution plans must decide, by November 30, 2009, how to handle required minimum distributions (“RMDs”) for the 2009 calendar year. Participants who have already received 2009 distributions that consisted of (or included) a 2009 RMD have until this same date to roll that RMD into an IRA or eligible retirement plan in a tax-free rollover.

Required Minimum Distribution Relief: A Nightmare for Employers

In an effort to cushion the blow to retirement savings inflicted by the stock market crash, former President Bush signed the Worker, Retiree and Employer Recovery Act of 2008 (“WRERA” or the “Act”) on December 23, 2008. Although the Act provides some much-needed funding relief for sponsors of defined benefit plans, its attempt to help retirees under defined contribution plans will leave the sponsors of those plans reaching for a bottle of aspirin.

THE FIDUCIARY CORNER: Rollovers to Plan Service Providers Present Fiduciary Concerns

Plan sponsors and retirement plan service providers each have reason to be concerned about a recent decision in an ERISA lawsuit pending before a federal court in Iowa. That decision allowed former participants in two separate 401(k) plans to proceed with their claims that the Principal Financial Group, the third-party service provider for each plan, breached its fiduciary duties by encouraging retired participants to roll their plan accounts into high-cost IRA products affiliated with Principal. (Young v. Principal Financial Group, Inc.) Although the court rejected one of the participants’ theories of relief on the grounds that they did not have standing to pursue it, a second theory survived.

IRS Finalizes Guidance on Roth 401(k) Distributions

When the Economic Growth and Tax Relief Reconciliation Act of 2001 (“EGTRRA”)created the concept of a “Roth 401(k) contribution,” things got off to a slow start. For one thing, it was not at all clear how the Roth IRA concept, which has been around for some time, would be transplanted to an employer-sponsored plan.

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