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The IRS has issued proposed regulations on the treatment of forfeitures under defined benefit and defined contribution plans.  The proposed guidance, which would amend Treasury Regulation 1.401-7, synthesizes (and updates the existing regulation to reflect) guidance previously found in Revenue Rulings, an IRS newsletter, and certain changes to the Internal Revenue Code (the “Code”), made during the last 35 years or so.  The proposed regulation would also generally clarify and extend what had been previously understood to be the deadline for “zeroing out” forfeiture accounts under defined contribution plans. Continue Reading IRS Issues Proposed Forfeiture Regulations

Phishing, entrapment, piggy bank stealing...

With more and more retirement plan services moving online, a recent case arising in  the U.S. District Court for the Southern District of New York, Giannini v. Transamerica Retirement Solutions, LLC (“Giannini”),[1] highlights the importance of cybersecurity and anti-fraud considerations for plan fiduciaries and service providers alike. 

In Giannini, the plaintiff was a retirement plan participant who filed suit in a proposed class action against Transamerica Retirement Solutions, a third party administrator/recordkeeper, after the company notified him of a data breach exposing the plaintiff’s personally identifiable information (“PII”). The plaintiff alleged that the breach occurred because unauthorized parties were able to access PII due to a Transamerica system configuration change, which left sensitive information such as social security numbers and retirement fund contribution amounts exposed. The plaintiff also alleged this data breach affected over 11,000 retirement plan beneficiaries and caused spam emails, spam calls, fraudulent credit card and bank account inquiries, and fraudulent purchases made in his name. Continue Reading A Cautionary Tale for Plan Fiduciaries and Service Providers: Cybertheft, Fraud, and Potential Liability

People sending and receiving money wirelessly

Among the many changes to laws governing retirement plans in SECURE 2.0—the long-awaited follow-up to the 2019 SECURE Act that passed as part of the 2023 Consolidated Appropriations Act—is a provision that may benefit sponsors of over-funded pension plans.  Under Section 420 of the Internal Revenue Code (“Code”), as amended by SECURE 2.0, and subject to certain conditions, pension plans that are at least 110% funded may transfer a portion of their assets to cover costs for their retiree medical or life insurance plan.Continue Reading SECURE 2.0 Facilitates Funding Retiree Medical and Life Insurance Accounts

IRA, Roth, 401(k)

With just days to go before the new year, President Biden signed the Consolidated Appropriations Act, 2023, into law on December 29, 2022, which includes the SECURE 2.0 Act of 2022 (“SECURE 2.0”). SECURE 2.0 expands on and, in some cases, modifies changes to the laws governing retirement plans brought about by the Setting Every Community Up for Retirement Act of 2019 (the “2019 SECURE Act”). Key provisions of SECURE 2.0 that amend the Employee Retirement Income Security Act (“ERISA”) and Internal Revenue Code (the “Code”) include a mandatory automatic enrollment and escalation feature for new Section 401(k) and 403(b) plans starting in 2025, updated required beginning dates for taking required minimum distributions, an expansion of the Internal Revenue Service (“IRS”) Employee Plans Compliance Resolution System (“EPCRS”), and more “Rothification” of savings opportunities for retirement plan participants. Plan amendments under SECURE 2.0 are generally required by the last day of the first plan year beginning on or after January 1, 2025 for single-employer plans. SECURE 2.0 also directs the Department of Labor (“DOL”) and IRS to issue various new regulations in accordance with its provisions. This blog post summarizes some of the key features of SECURE 2.0.  Continue Reading SECURE 2.0 – Changes for Retirement Plans

On October 14, 2021, the U.S. Department of Labor (the “DOL”) published a proposed regulation entitled “Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights” (the “Proposed Rule”).  The Proposed Rule is the latest in a series of DOL guidance and regulations regarding a plan fiduciary’s consideration of environmental, social and governance (“ESG”) factors when making investment decisions for ERISA plans and the exercise of shareholder rights by such plans. The Proposed Rule follows prior regulations issued by the DOL under President Trump in 2020 regarding both ESG (the “2020 ESG Rule”) and proxy voting (the “2020 Proxy Rule,” together with the 2020 ESG Rule, the “2020 Rules”). The 2020 Rules themselves followed a series of sub-regulatory guidance by the DOL, which issued guidance on these topics under each of the Clinton[1], Bush[2], Obama[3] and Trump[4] administrations. While the bedrock principals under the guidance largely remained unchanged, the gloss and tenor of the guidance has shifted, depending upon the political views of the White House’s then-current occupant.

ESG investing is increasingly popular and the importance that the Biden administration places on the topic is evident. In fact, on President Biden’s first day in office, he signed an executive order which
Continue Reading DOL Shifts Toward Favorable View on ESG Investing and the Exercise of Shareholder Rights in New Regulation

All too often, retirement plan administrators and benefits attorneys encounter situations with missing participants or uncashed checks that result in head scratching and exasperation.  It is difficult to believe that trying to deliver money to someone could produce such frustration, but it happens more than one would think.  In an attempt to alleviate some of these woes and help ensure that participants and their beneficiaries receive the retirement benefits due to them, the Department of Labor’s (DOL) Employee Benefits Security Administration (EBSA) came out with three related pieces of guidance on January 12, 2021: (1) a set of Best Practices for Pension Plans (the “Best Practices”), describing steps that plan fiduciaries can take to reduce missing participant issues; (2) Compliance Assistance Release No. 2021-01, outlining the investigative approach that guides the DOL’s regional offices under its Terminated Vested Participants Project; and (3) Field Assistance Bulletin 2021-01, authorizing fiduciaries of terminating defined contribution plans to transfer missing participants’ account balances to the Pension Benefit Guaranty Corporation’s (PBGC) Missing Participants Program as a matter of temporary enforcement policy.  This blog post highlights key points from the Best Practices and focuses on practical tips plan fiduciaries can take away from the DOL guidance.
Continue Reading Key Takeaways From The DOL’s “Best Practices” Missing Participant Guidance

This is the second of two installments on the American Rescue Plan Act of 2021 (ARPA). Mayer Brown’s first installment describes provisions of ARPA relating to COBRA premium subsidies, changes to the cap on pre-tax dependent care assistance benefits, changes to section 162(m) of the Internal Revenue Code relating to a corporation’s deduction for executive compensation, and updates to the employee retention credit (initially implemented as a part of the Coronavirus Aid, Relief, and Economic Security Act, also known as the CARES Act).

This installment focuses on the provisions of ARPA that provide relief to multiemployer and single employer defined benefit plans.Continue Reading Multiemployer and Single Employer Plan Provisions of the American Rescue Plan Act: Help is on the way!

Plan sponsors and fiduciaries may have spent 2020 scrambling to amend their plans and operating procedures to accommodate breaking COVID-19 guidance, but the Department of Labor’s (“DOL”) and federal courts’ wheels continued to turn, churning out decisions and guidance on a variety of ERISA issues—and plan sponsors and fiduciaries should take note. Included in recent DOL guidance are rules for reviewing and selecting retirement plan investments, voting proxies, and distributing retirement plan notices. Meanwhile, various federal appellate court decisions should lead fiduciaries to review summary plan descriptions (“SPDs”) and the inclusion of single-stock fund investment options in defined contribution plan lineups. The following checklist sets out 2020 developments for plan sponsors and fiduciaries to consider in the new year.
Continue Reading 2021 Plan Sponsor/Fiduciary Compliance Checklist

Pooled plan providers hoping to start operating pooled employer plans in 2021 will finally have the ability to register to do so, under regulations finalized by the Department of Labor (“DOL”) on November 16, 2020.

As described in detail in our prior alert, the SECURE Act created a new type of retirement vehicle called a “Pooled Employer Plan,” or PEP, in which multiple unrelated employers may participate and which may be sponsored by entities including financial services companies, such as banks, insurance companies and third-party administrators.  The sponsors, referred to as “Pooled Plan Providers” or PPPs, are responsible for most fiduciary and administrative duties related to the PEPs they sponsor.  The SECURE Act permits a PPP to begin sponsoring PEPs as soon as January 1, 2021, provided the PPP meets the SECURE Act’s requirements, including registration with the DOL and IRS before commencing operations.  The DOL issued proposed regulations on August 20, and in its November 16 final regulations, softened some of the requirements it had originally proposed.
Continue Reading Diving into the Pooled Plan Provider Deep End? It’s Time to Register!

On October 30, 2020, the U.S. Department of Labor (“DOL”) released its final regulation (“Final Rule”) relating to a fiduciary’s consideration of environmental, social and governance (“ESG”) factors when making investment decisions for plans subject to the Employee Retirement Income Security Act of 1974, as amended (“ERISA”). In response to the proposed rule (the “Proposal”), the DOL received several thousand comments, the vast majority of which opposed the new rule. Many plan sponsors and investment professionals voiced objection to the Proposal’s antipathy towards the consideration of ESG factors. In the Final Rule, the DOL generally softened its stance toward the consideration of economic ESG factors, but
Continue Reading The Department of Labor’s ESG-less Final ESG Rule