Fidelity Investments recently announced that it will offer its 401(k) plan clients the opportunity to offer bitcoin as a 401(k) plan investment option later this year. While this may sound intriguing to some plan fiduciaries and participants, plan fiduciaries should proceed with extreme caution.
Based on the Department of Labor’s (DOL) public pronouncements, it appears the DOL has serious doubts about whether 401(k) plan fiduciaries who include cryptocurrency among their 401(k) plan’s investment options comply with their ERISA fiduciary duties. In March, the DOL issued Compliance Assistance Release No. 2022-01, in which it expressed “serious concerns” about the prudence of 401(k) plan fiduciaries including cryptocurrency as a 401(k) plan investment option and announced it plans to conduct an investigative program related to cryptocurrency investments by 401(k) plans. For more information on Compliance Assistance Release No. 2022-01, please see our prior blog post Can’t Touch This … DOL Discourages Plans From Investing in Cryptocurrency. Following Fidelity’s announcement, a DOL official expressed “grave concerns” about the offering and indicated that the DOL intends to meet with Fidelity to discuss its concerns in comments to the Wall Street Journal. Read more
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2022-05-11 13:27:422022-05-11 13:27:42Every Little Thing … Considerations Before Adding Crypto to a 401(k) Plan
In these times of high M&A activity, we see a lot of questions about Code Section 280G (“Section 280G”) which we discussed generally on this blog a few weeks ago. One fine point issue that comes up relates to whether Section 280G applies in the first place.
Section 280G denies a deduction and imposes an additional 20% excise tax on “excess parachute payments” which are payments beyond a certain threshold that are made contingent on a change in ownership or effective control of a “corporation.” The definition of corporation includes all of the normal corporate entities, as well as publicly traded partnerships and foreign corporations, among others. But the Section 280G rules do not apply to partnerships or S-Corporations. Read more
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2022-05-04 09:42:252022-05-04 09:42:25In These Headlights Beams, Beyond My Wildest Dreams – An “Affiliated Group” for Section 280G?
Early stage companies that are strapped for cash often turn to long-term incentive compensation plans to attract and retain key employees and service providers. Many of these companies opt to put in place arrangements that grant actual equity interests (e.g., stock options or, in partnership-taxed entity, profits interests). While these arrangements may be a good match for certain companies and situations, I find that phantom plans often fit better with early stage company/ownership goals. Read more
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2022-04-29 12:49:442022-04-29 12:49:44The Music of the Night . . . Phantom Plans for Early Stage Companies
Fiduciaries of 401(k) plans and other retirement plans know that they must prudently monitor the investment options available to participants in the plan, but are they monitoring participants’ investments made through a plan’s brokerage window? Recent commentary from the Department of Labor (DOL) on cryptocurrency investments suggests maybe fiduciaries should be – and that the DOL may check in on that soon.[i]
A “brokerage window” or “self-directed brokerage account” can allow participants access to a broad array of investments beyond the regular investment menu under the plan. Most plan fiduciaries have not paid much attention to the actual brokerage window investments. This is not surprising given the DOL’s relative lack of focus on the matter. The DOL had issued guidance in 2012 that the investment disclosure portion of the fee disclosure rules could apply to brokerage window investments in certain cases but after pushback due to the administrative burdens, the DOL withdrew that guidance. In 2014 the DOL issued a Request for Information about brokerage window practices but no further guidance was issued. Read more
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2022-04-14 12:16:422022-04-14 13:25:48How Much is that (Investment) in the Window…A Higher Level of Fiduciary Oversight Could be Required for 401(k) Plan Brokerage Windows
Among the many phrases of ERISA, one that is familiar to investment fiduciaries is the requirement to choose investments with the care, skill, prudence, and diligence that a prudent person who is familiar with such matters would use. Recently the Department of Labor (DOL) issued guidance on how this prudence standard applies to fiduciaries who offer cryptocurrency investment alternatives to participants.
In Compliance Assistance Release 2022-01, the DOL reminds fiduciaries of their important role in selecting investments for participant direction. Plan fiduciaries must evaluate each investment option made available to participants to ensure they are prudent. Failure to remove an imprudent investment is a breach of duty. Read more
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2022-04-05 11:02:162022-04-05 11:02:16Can’t Touch This … DOL Discourages Plans From Investing in Cryptocurrency
Whether you’re a fan of the Buddy Holly version or Linda Ronstadt’s, you’ve got to admit “It’s so easy to fall in love” is a catchy tune. Just as it’s easy to get that song stuck in your head, it’s also easy to put your employee’s health savings accounts (HSAs) at risk!
HSAs are one of the many “consumer directed” programs that are touted as putting employee’s health care within their own control. The idea is that if consumers have an amount of money to spend on their own healthcare, they’ll be savvy about what services they seek and how much they spend on them, with the ultimate goal of making the healthcare marketplace more efficient. Congress gives tax advantages to accounts that qualify as HSAs in order to encourage employers to offer and employees to maintain them. Read more
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2022-04-01 13:37:352022-04-01 13:37:35It’s So Easy To … Put Your Employees’ HSAs at Risk
For many retirement plan sponsors, Form 5500 preparation season is underway. Plan sponsors should be aware that things have changed with the Form 5500 audit requirements and procedures. These changes push more responsibility to plan sponsors and require plan sponsors to better understand the representations they are making to the auditors as part of the 2021 plan audit (and beyond). So what has changed?
https://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.png00adminhttps://www.employeebenefitslawblog.com/wp-content/uploads/2022/10/logo_vertical-v2.pngadmin2022-03-22 08:19:312022-03-22 08:19:31What Doesn’t Kill You Makes You Stronger… New Audit Requirements for Retirement Plans
Every Little Thing … Considerations Before Adding Crypto to a 401(k) Plan
/in 401(k) Plans, Corporate Governance in Benefits, DOL, ERISA, Fiduciary Duties, Investments, Litigation, Retirement Plansby Alex Smith
Fidelity Investments recently announced that it will offer its 401(k) plan clients the opportunity to offer bitcoin as a 401(k) plan investment option later this year. While this may sound intriguing to some plan fiduciaries and participants, plan fiduciaries should proceed with extreme caution.
Based on the Department of Labor’s (DOL) public pronouncements, it appears the DOL has serious doubts about whether 401(k) plan fiduciaries who include cryptocurrency among their 401(k) plan’s investment options comply with their ERISA fiduciary duties. In March, the DOL issued Compliance Assistance Release No. 2022-01, in which it expressed “serious concerns” about the prudence of 401(k) plan fiduciaries including cryptocurrency as a 401(k) plan investment option and announced it plans to conduct an investigative program related to cryptocurrency investments by 401(k) plans. For more information on Compliance Assistance Release No. 2022-01, please see our prior blog post Can’t Touch This … DOL Discourages Plans From Investing in Cryptocurrency. Following Fidelity’s announcement, a DOL official expressed “grave concerns” about the offering and indicated that the DOL intends to meet with Fidelity to discuss its concerns in comments to the Wall Street Journal. Read more
In These Headlights Beams, Beyond My Wildest Dreams – An “Affiliated Group” for Section 280G?
/in Equity Compensation, Executive Compensationby John Ludlum
In these times of high M&A activity, we see a lot of questions about Code Section 280G (“Section 280G”) which we discussed generally on this blog a few weeks ago. One fine point issue that comes up relates to whether Section 280G applies in the first place.
Section 280G denies a deduction and imposes an additional 20% excise tax on “excess parachute payments” which are payments beyond a certain threshold that are made contingent on a change in ownership or effective control of a “corporation.” The definition of corporation includes all of the normal corporate entities, as well as publicly traded partnerships and foreign corporations, among others. But the Section 280G rules do not apply to partnerships or S-Corporations. Read more
The Music of the Night . . . Phantom Plans for Early Stage Companies
/in Equity Compensation, Executive CompensationBy Kevin Selzer
Early stage companies that are strapped for cash often turn to long-term incentive compensation plans to attract and retain key employees and service providers. Many of these companies opt to put in place arrangements that grant actual equity interests (e.g., stock options or, in partnership-taxed entity, profits interests). While these arrangements may be a good match for certain companies and situations, I find that phantom plans often fit better with early stage company/ownership goals. Read more
How Much is that (Investment) in the Window…A Higher Level of Fiduciary Oversight Could be Required for 401(k) Plan Brokerage Windows
/in 401(k) Plans, 403(b) plans, 457(b) plans, DOL, ERISA, Fees, Fiduciary Duties, Investments, Litigation, Retirement Plansby Brenda Berg
Fiduciaries of 401(k) plans and other retirement plans know that they must prudently monitor the investment options available to participants in the plan, but are they monitoring participants’ investments made through a plan’s brokerage window? Recent commentary from the Department of Labor (DOL) on cryptocurrency investments suggests maybe fiduciaries should be – and that the DOL may check in on that soon.[i]
A “brokerage window” or “self-directed brokerage account” can allow participants access to a broad array of investments beyond the regular investment menu under the plan. Most plan fiduciaries have not paid much attention to the actual brokerage window investments. This is not surprising given the DOL’s relative lack of focus on the matter. The DOL had issued guidance in 2012 that the investment disclosure portion of the fee disclosure rules could apply to brokerage window investments in certain cases but after pushback due to the administrative burdens, the DOL withdrew that guidance. In 2014 the DOL issued a Request for Information about brokerage window practices but no further guidance was issued. Read more
Can’t Touch This … DOL Discourages Plans From Investing in Cryptocurrency
/in 401(k) Plans, Defined Benefit Plans, DOL, ERISA, Fiduciary Duties, Investments, Retirement Plansby Becky Achten
Among the many phrases of ERISA, one that is familiar to investment fiduciaries is the requirement to choose investments with the care, skill, prudence, and diligence that a prudent person who is familiar with such matters would use. Recently the Department of Labor (DOL) issued guidance on how this prudence standard applies to fiduciaries who offer cryptocurrency investment alternatives to participants.
In Compliance Assistance Release 2022-01, the DOL reminds fiduciaries of their important role in selecting investments for participant direction. Plan fiduciaries must evaluate each investment option made available to participants to ensure they are prudent. Failure to remove an imprudent investment is a breach of duty. Read more
It’s So Easy To … Put Your Employees’ HSAs at Risk
/in Health & Welfare Plans, IRSby Elizabeth Nedrow
Whether you’re a fan of the Buddy Holly version or Linda Ronstadt’s, you’ve got to admit “It’s so easy to fall in love” is a catchy tune. Just as it’s easy to get that song stuck in your head, it’s also easy to put your employee’s health savings accounts (HSAs) at risk!
HSAs are one of the many “consumer directed” programs that are touted as putting employee’s health care within their own control. The idea is that if consumers have an amount of money to spend on their own healthcare, they’ll be savvy about what services they seek and how much they spend on them, with the ultimate goal of making the healthcare marketplace more efficient. Congress gives tax advantages to accounts that qualify as HSAs in order to encourage employers to offer and employees to maintain them. Read more
What Doesn’t Kill You Makes You Stronger… New Audit Requirements for Retirement Plans
/in 401(k) Plans, Corporate Governance in Benefits, DOL, ERISA, Fiduciary Duties, Retirement Plansby Bret F. Busacker
For many retirement plan sponsors, Form 5500 preparation season is underway. Plan sponsors should be aware that things have changed with the Form 5500 audit requirements and procedures. These changes push more responsibility to plan sponsors and require plan sponsors to better understand the representations they are making to the auditors as part of the 2021 plan audit (and beyond). So what has changed?
Read more