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Pension Plans

“CARES” Act and Defined Benefit Plans

The CARES Act signed by President Trump on March 27, 2020, includes relief for defined contribution plans, but defined benefit plans also received some relief.  In addition, the IRS issued guidance that includes an extension for employers to adopt a pre-approved defined benefit plan.  And, employers should remember their option to decrease the age at which employees may request an in-service withdrawal from defined benefit plans.

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 – Defined Benefit Plans

The Setting Every Community Up for Retirement Enhancement Act of 2019 (the “SECURE” Act) has broad implications for retirement plans.   Although the Act’s primary focus is on defined contribution plans, several provisions of the Act and its sister legislation apply only to defined benefit plans.

This is the fourth in a series of articles describing key provisions of the legislation.  Our focus in this article is on the provisions applicable to defined benefit plans – in-service withdrawals, required minimum distributions, and nondiscrimination testing relief.

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.

Tax Cuts and Jobs Act – Modified Rules for UBTI

For many years tax exempt organizations and retirement plan trusts have been permitted to avoid tax on income generated by unrelated trades or businesses they hold by netting the gains, losses, and deductions among those trades or businesses.  The Tax Cuts and Jobs Act modifies those rules, increasing the likelihood that such entities must report, and pay tax on, UBTI.

Bifurcated Distribution Options Made Easier

Earlier this year, the IRS issued Notice 2017-44. This Notice provides model amendments that plan sponsors may use to amend qualified defined benefit plans to offer a bifurcated distribution option. Because the IRS has terminated its determination letter program (except in limited circumstances), plan sponsors may find the model language helpful as they consider design changes to their defined benefit plans for 2018.

Treatment of “Collateral” Employees Under Retirement Plans

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.

IRS Now Accepting “Cycle E” Determination-Letter Applications

The IRS is now accepting applications for updated determination letters on behalf of individually designed retirement plans falling within “Cycle E” of the determination-letter program. These include plans sponsored by employers having either a “5” or “0” as the last digit of their employer identification number, as well as governmental plans that elected not to file during Cycle C.

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