For those employers that sponsor a self-insured health plan, it’s important to be aware that the deadline for your 2021 PCORI filing is August 2, 2021. This deadline applies for plan years ending on December 31, 2020 (or any others between October 1, 2020 and October 1, 2021). If you haven’t yet made your PCORI filing on IRS Form 720, we recommend doing so as soon as possible. Read more
by Brenda Berg
One of the employee benefits items tucked into the recently-passed Consolidated Appropriations Act, 2021 (the “Act”) will soon require group health plan service providers to issue fee disclosures.
Service providers to retirement plans have been required to provide fee disclosures – the ERISA 408(b)(2) disclosures – to plan sponsors for the past 10 years. The disclosures are part of the “reasonable compensation” exemption that keeps the arrangement from being a prohibited transaction. Until now, the 408(b)(2) fee disclosure rules have not applied to health and welfare plans; the “No Surprises Act” portion of the Act changes that next year. Read more
The Department of Labor has returned to the Fiduciary Rule once again with its third attempt to provide a regulatory framework that protects retirement investors while not imposing unnecessary burdens on investment advisors and consultants.
Plan sponsors of 401(k) plans should be aware that the DOL will once again apply the historical “five-part-test” in evaluating whether 401(k) advisors are plan fiduciaries. The return of the five-part-test is the result of the Fifth Circuit invalidating the DOL’s 2016 version of the fiduciary rule, which had temporarily replaced the five-part-test. Under the “new-again” five-part-test, an investment advisor to a 401(k) plan or plan participant is deemed to be a plan fiduciary if the advisor makes investment recommendations on a regular basis pursuant to an agreement or understanding with the 401(k) plan or plan participant and the advisor’s recommendations serve as the primary basis for making the decision to invest in specific investment options. A 401(k) plan advisor determined to be a fiduciary under the five-part-test cannot receive variable compensation tied to a 401(k) participant’s investment decision (generally, referred to as conflicted compensation).
Read moreby Kevin Selzer
We interrupt our usual Benefits Dial programming – to take a closer look at developments affecting multiple employer plans (MEPs) as part of our series of posts on the recently enacted benefit plan legislation, including the SECURE Act (background here). The reform to MEPs is seen by many as the biggest disruptor to the retirement plan industry. Why? It facilitates the banding together of retirement plan assets from unrelated employers, helping employers punch above their weight. By combining together to form a larger plan, smaller employers can leverage assets with regard to plan services, and maybe most importantly, investment fees paid by participants.
MEPs have long been permitted but many employers have been unwilling to participate in those plans. The biggest deterrent has been the “one bad apple rule.” That rule provides that a defect in any participating employer’s portion of the MEP can impact the tax qualification of the entire MEP for other participating employers. In other words, if one participating employer in the MEP is unwilling (or maybe unable) to correct an error, the whole plan can be disqualified by the IRS. The SECURE Act helps solve this issue with a special kind of MEP called a pooled employer plan (PEP). PEPs have a specific procedure for dealing with tax qualification defects. In short, a participating employer in a PEP who refuses to correct the error, can be discharged (spun off) from the PEP to isolate the disqualification impact. The SECURE Act grants relief under ERISA to boot. Historically, MEPs were treated as a collection of separate plans unless the underlying employers met a commonality standard. A PEP (called a “Group of Plans” under ERISA) is also treated as a single plan for ERISA purposes under the SECURE Act. This means, for example, that such plans would be allowed to file a single Form 5500.
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