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Missing Plan Participants: Best Practices in Light of Increased DOL Scrutiny
November 15, 2018 WEBCAST
Vorys

Annual Holiday Social
December 6, 2018 in GA
Worldwide Employee Benefits Network [WEB] - Atlanta Chapter

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DOL Proposes New Multiple Employer Plan Rules (PDF)

"[T]he DOL issued proposed regulations ... that would allow for the limited expansion of MEPs.... [T]he new regulations do not apply to employers with common ownership not in a controlled group, nor do they apply to completely unrelated employers in the open MEP concept. It is also important to note that the regulations are only applicable to defined contribution plans such as 401(k) or 403(b) plans. The regulations essentially provide for two MEP types, association MEPs and PEO MEPs."
Lockton

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Are you an experienced attorney who can handle issues involving private and government retirement plans? Join our no-fee National Pension Lawyers Network ! There is no obligation to take any case we refer to you. Join our network!

Proving Loss Causation When Pension Plan Investment Results Disappoint

"While the Brotherston court was convinced that ERISA fiduciaries can 'easily insulate' themselves from liability by following a prudent process or offering a diverse selection of low-cost funds, that is cold comfort to most plan sponsors, who see significant litigation risk in the burden-shifting approach.... ERISA fiduciaries in circuits that follow the burden-shifting rule adopted in Brotherston should consider offering expert analysis demonstrating the objective reasonableness of the challenged funds, or at least demonstrating a measure of damages that establishes less losses than the model offered by the plaintiffs' expert." [ Brotherston v. Putnam Investments, LLC , No. 17-1711 (1st Cir. Oct. 15, 2018)]
King & Spalding

Qualified Retirement Plan Considerations and 2018 Year-End Action Items (PDF)

"Discretionary amendments ... 2017 Disaster Relief ... Tax reform changes to hardship distributions ... Required amendments for certain plans ... DOL fiduciary rule repeal ... Cybersecurity and data privacy agreements ... Arbitration clauses in plan documents." Alston & Bird

SEC Advisory Committee Calls for Reg BI Fiduciary Requirement

"An SEC advisory committee asked the commission to set new rules that would explicitly codify a requirement that advisors follow a fiduciary standard -- a guideline that the commission's chairman assiduously tried to avoid. A majority of the Investor Advisory Committee voted [Nov. 7] to adopt four recommendations that backers say will strengthen the proposed Regulation Best Interest, along with a new disclosure document."
Financial Planning

Investor Testing of Form CRS Relationship Summary (PDF)

122 pages. "RAND researchers designed and fielded the survey ... to collect information on the opinions, preferences, attitudes, and level of self-assessed comprehension of the U.S. adult population with regard to a sample Relationship Summary.... [T]he RAND team also conducted qualitative interviews to obtain further insights related to the reasoning and beliefs behind individuals' attitudes toward the Relationship Summary. This report presents the results of those data collection efforts.... [T]he most common recommendation for each section is to keep the length 'as is,' ranging from 43 percent to 62 percent of respondents." RAND Corporation, for U.S. Securities and Exchange Commission [SEC]

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Retirement Plan Funding Update, October 2018

"October saw some of the worst equity market performance in recent years, although there has been some recovery into November. The negative impact on funded status due to equities would have been offset to a degree by rising interest rates throughout the month." River and Mercantile Solutions

Top Five Post-Election Retirement Policy Observations (PDF)

"[1] Retirement policy may take center stage in the House Ways and Means Committee in 2019.... [2] The prospects for bipartisan retirement legislation are good.... [3] Congress will continue to grapple with the crisis facing the multiemployer pension system.... [4] There is a growing momentum in the Democratic caucus for Social Security expansion.... [5] The Administration is poised to move retirement policy by regulation and guidance." Groom Law Group, via Bloomberg Law Benefits and Executive Compensation News

Impediments to Saving for Retirement, Part 2: The Right Kind of Liquidity

"[W]ithout liquidity, many won't save. Others will only save what they believe they can afford to earmark for retirement, what is not needed to defray existing and near-term financial obligations and needs. Limit access and most simply won't save enough to financially prepare for retirement.... [A]round 80 percent of participants have loan access but don't have a loan outstanding." Plan Sponsor Council of America [PSCA]

Text of Treasury Department Priority Guidance Plan, 2017-2018 (PDF)

28 pages. Starting on page 13 are 23 items relating to Retirement Benefits, followed by 16 items for Executive Compensation, Health Care and Other Benefits, and Employment Taxes. Internal Revenue Service [IRS]

Fifth Circuit Opines on Claim for Benefits vs. Claim for Equitable Relief under ERISA

"In this wide-ranging opinion, the Fifth Circuit highlighted the importance of identifying the underlying purported injury to understand whether an ERISA Section 502(a)(3) claim (a claim for equitable relief) is duplicative of a claim that could have been brought under ERISA Section 502(a)(1)(B) (a claim to recover benefits or enforce a right under the terms of a plan), in which case it should be dismissed." [ Manuel v. Turner Industries Group, LLC , No. 17-30835 (5th Cir. Oct. 1, 2018)]
Littler

Federal Court Argues for Right to Jury to Pursue ERISA Claims

"Although Cunningham involved a claim for breach of fiduciary duty in relation to excessive investment fees imposed on participants in retirement plans, rather than a benefit claim, the court's expansive discussion of the right to trial by jury is instructive in relation to all ERISA cases.... The justification generally used to deny jury trials is the assertion that ERISA claims ... are equitable in nature. However, the claims themselves are contractual and the remedy sought is always a legal remedy ... Were it not for ERISA, the identical claims, if brought either in state or federal court, would unquestionably be actions for breach of contract that juries hear and decide every day." [ Cunningham v. Cornell Univ. , No. 16-6525 (S.D.N.Y. Oct. 11, 2018)]
DeBofsky, Sherman & Casciari, PC

Plaintiffs Must Do More Than Claim a Breach of Fiduciary Duty to State an ERISA Claim

"[W]ithout deciding whether plaintiffs' allegations regarding the misappropriation of funds constituted a breach of fiduciary duty, the court found that plaintiffs had not alleged sufficient facts to show the involvement of a plan covered by ERISA, which was necessary to make an ERISA claim plausible." [ Dixon v. Washington , No. 18-2838 (E.D. Pa. Oct. 17, 2018)]
Seyfarth Shaw LLP

Year 2 of the CEO Pay Ratio Requirement

"Many companies should be able to use the same median employee in 2019 as they used in 2018.... Investors observed that they found lengthy explanations of the ratio and alternative ratios to be confusing. Resist the urge to explain or provide supplemental disclosure." Winston & Strawn LLP

Correcting Coverage Testing -- Can We Distribute Small Accounts?

We recently corrected for coverage testing failure by making QNECs to the plan (401(k)). Many of the QNECs went to people who otherwise had no account balance, so their accounts are now very small. Our plan has a $75 fee for distributions. So for people with less than $75 in the plan, they won't be able to get their money out anyway, since the entirety will be used to pay the distribution fee. What are our options? Should we inform these people that they have an account balance but will never see the money? Should we just erase the accounts worth $75 or less? Is that an appropriate way to correct coverage testing failures? How should are decisions be affected by those who are still employed versus those who are not? BenefitsLink Message Boards

Correcting 401(a)(26) Problem in a Frozen DB Plan

A frozen DB Plan (hard freeze) that is not covering enough active employees to pass 401(a)(26) can add a new participant (if all that is needed is one more participant to satisfy 40%) and give a 0.5% accrual for the current year. I have seen this solution being advised on numerous occasions. Can someone please help me understand this method? If the plan is frozen, how is this (minimal) accrual being given to a new participant (and all current participants are not given an accrual for the current year)? Is it allowed as a special corrective measure? If yes, is an amendment required stating that "an accrual of 0.5% will be given to a new participant to comply with 401(a)(26)"?
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Most Popular Items in the Previous Issue

IRS and DOL Auditors Focus on Missing Participants (PDF) Milliman

Democrats Win Control of the House of Representatives -- Implications for Retirement Policy October Three Consulting

A Top Hat Plan Checklist for Employers Thompson Coburn