One Way or Another … Forfeitures Will Have to Be Administered Under Your Retirement Plan, and the IRS Just Proposed New Regulations That Provide Simplified Guidance

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by Becky Achten

On February 27, 2023, the Treasury issued proposed regulations intended to simplify and clarify the rules relating to forfeitures within qualified retirement plans.

Defined Benefit Plans

Similar to defined contribution plans, defined benefit plans may use forfeitures to pay eligible plan expenses. However, unlike defined contribution plans, defined benefit plans are prohibited from using forfeitures to reduce required employer contributions. In addition, forfeitures must be used as soon as possible. The proposed regulations eliminate this timing requirement because it conflicts with the minimum funding requirements. Instead, reasonable actuarial assumptions are to be used to determine how expected forfeitures will affect the present value of plan liabilities. The difference between expected and actual forfeitures will then increase or decrease the plan’s minimum funding requirement in future years. Read more

What Happens In A Small Town Stays In A Small Town … Until The Tenth Circuit Rejects ERISA Arbitration Provision

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by Alex Smith

While case law regarding the enforceability of arbitration provisions in ERISA retirement plans has been mixed, since the Ninth Circuit’s 2019 decision in Dorman v. Charles Schwab Corp. enforcing a 401(k) plan’s arbitration provision, some employers and plan sponsors have given increased consideration to adding arbitration provisions to their retirement plans based on that decision and the proliferation of class action ERISA lawsuits.  However, following the Tenth Circuit’s February 9 decision in Harrison v. Envision Management Holding, Inc. Board, which appears to be the first time the Tenth Circuit considered the issue, employers based in the Tenth Circuit’s jurisdiction (Colorado, Kansas, New Mexico, Oklahoma, Utah and Wyoming) may want to think twice before adding an arbitration provision to their plans.

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Closing Time…for the COVID-19 National Emergency and Public Health Emergency

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by Benjamin Gibbons

The Biden administration announced on January 30 that the COVID-19 national emergency and the public health emergency will be coming to an end after May 11, 2023. The national emergency is currently set to expire on March 1, while the public health emergency is set to expire on April 11. The President intends to extend both of these emergency declarations through May 11, at which point in time he will issue a declaration to end the emergencies. Read more

Money’s Too Tight to Mention…But Maybe a Student Loan Match Would Help

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by Lyn Domenick

By now you have probably seen countless summaries of the recently enacted legislation that includes what is commonly known as SECURE 2.0. One of the new features that has been brewing for a while is the concept of a 401(k) plan match based on qualified student loan payments for its eligible employees. Because this is effective January 1, 2024, interested plan sponsors should begin now evaluating the merits of adding such a program. The student loan match provision permits (but does not require) a plan to contribute matching contributions based on the amount of qualified student loan payments made by its employees who are otherwise eligible to make deferrals under the 401(k) plan. The plan must match qualified student loan payments on the same basis as elective deferrals under the plan, including the application of any plan or IRS limits on the amount that is matched and on the match itself. If a participant is making both elective deferrals and paying on a student loan, the matching formula would be applied to both (subject to applicable limits). Eligible participants would self-certify that they are making qualified student loan payments, which avoids the need for the sponsor to verify payment. Student loan matching contributions may also be implemented in a 403(b) plan or governmental 457(b) plan. Read more

You’re So Far Away From Me … But You Can Still Sign This Retirement Plan Distribution Form

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by Elizabeth Nedrow

During the pandemic, the IRS on multiple occasions provided relief from the requirement that a person be physically present for certain paperwork associated with retirement plan distributions. (See our blog posts of June 4, 2020 and January 25, 2021, and also IRS Notices 2020-42, 2021-3, 2021-40 and 2022-27.) Apparently acknowledging that the new remote procedures are sufficiently reliable, the IRS is proposing to make them permanent. Read more

I Want a New Drug…Prescription Drug Data Collection Reporting is Due December 27th

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by Becky Achten

Plan sponsors are ultimately responsible for compliance with the Prescription Drug Data Collection (RxDC) required reporting for their group health plans—and there’s no time to waste since the reporting is due by December 27, 2022. But information to complete one of the data files, the D1 (premium/cost information), may not be available to the Third Party Administrator (TPA) filing the report and, thus, may be incomplete. What’s a plan sponsor to do?

As background, the Consolidated Appropriations Act, 2021 (CAA) requires group health plans and health insurance issuers to submit certain information about health care and prescription drug spending to the Department of Health and Human Services, Department of Labor, and Department of the Treasury (collectively, the Departments) annually. The reporting consists of a plan identifier file, eight separate data files, and a narrative response. Read more

Gimme, Gimme, Gimme, My Required Notices

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by Leslie Thomson

Sponsors of self-funded group health plans are required to notify enrollees about the availability of the plan’s notice of privacy practices and how enrollees can obtain a copy of such notice. This must be done at least once every three years. However, many sponsors satisfy this obligation on behalf of their group health plans by including information regarding the availability of the notice in their plan’s annual enrollment materials. Read more

The Times They Are A-Changin’…IRS Provides Further Retirement Plan Amendment Deadline Relief

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by Benjamin Gibbons

The IRS has picked up where it left off last month with additional retirement plan amendment deadline extensions. As you may recall from our August 5, 2022 blog post, Time Is On My Side: Some Retirement Plan Amendment Deadlines Pushed Back, the IRS recently extended certain SECURE Act, Miner’s Act, and CARES Act amendment deadlines for retirement plans but notably did not extend the deadline for coronavirus-related distributions and loan plan loan relief under the CARES Act. While it is unclear whether those omissions were intentional or an oversight, the IRS has rendered that question moot in IRS Notice 2022-45. Read more

Hole in the Bottle … Protecting Against 401(k) Cybersecurity Leakage

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by Alex Smith

Both the Department of Labor (DOL) and plaintiffs’ lawyers have taken an interest in retirement plans’ cybersecurity in recent years. Last year, the DOL issued guidance on the cybersecurity considerations plan fiduciaries should be mindful of. In addition, cyber theft in recent years has led to multiple lawsuits. A specific recordkeeper involved in many of these lawsuits is currently being investigated by the DOL with respect to cybersecurity incidents that have impacted certain of its retirement plan clients. Read more

You Spin Me QPAM Baby QPAM: DOL’s Proposed QPAM Rule May Mean Changes to Collective Trust Agreements for Plan Sponsors

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by Bret F. Busacker

The DOL published on July 27, 2022 a proposed change to the QPAM Exemption (“Proposed QPAM Amendment”) that may require retirement plan sponsors to update their collective trust agreements in order to satisfy the new DOL requirements.  Collective trusts have become an increasingly common way for qualified retirement plan committees/plan sponsors to achieve lower investment expenses for some of the investment options in their plans.

These collective trusts are managed by investment managers who often engage other financial institutions to execute trades involving the pension assets held by the collective trust. These trades involving retirement plan assets may at times be executed by a financial institution that is also providing services (such as recordkeeping services) to the same retirement plan.  Absent an exemption, these sorts of related party transactions may violate the ERISA prohibited transaction rules.   Read more