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Retirement Plans Newsletter October 20, 2020 |
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[Official Guidance] Oct. 13, 2020. “[1] Qualified disaster or coronavirus-related distributions…. [2] Maximum age for traditional IRA contributions…. [3] Withdrawals in the case of a birth or adoption of a child…. [4] Increase in age for mandatory distributions…. [5] Temporary waiver of minimum required distributions.” [Also available: 2020 IRS Form 5329] Internal Revenue Service [IRS] |
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[Official Guidance] Oct. 19, 2020. “What’s new … [1] Coronavirus-related distributions…. [2] Tax relief for qualified 2018, 2019, and 2020 disaster distributions…. [3] Form 1040-NR…. [4] Modified AGI limit for Roth IRA contributions increased…. [5] Due date for contributions. ” [Also available: Draft 2020 IRS Form 8606] Internal Revenue Service [IRS] |
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14 pages, Oct. 2020. “8.0 percent of PBGC-covered plans performed [Risk Transfer Activity (RTA)] during the 2015-2018 study period. 44.8 percent of large plans (greater than 1,000 participants) performed an RTA during the study period…. 2.4 million participants received either a lump sum distribution or an annuity as part of a risk transfer transaction during the study period, and thus are no longer participating in their pension plan or covered by PBGC insurance.” Pension Benefit Guaranty Corporation [PBGC] |
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34 pages, Oct. 2020. “This supplement to PBGC’s Databook provides a detailed study of the plan provisions available to active workers in multiemployer defined benefit pension plans based on data compiled from [2016] Form 5500 filings for 582 multiemployer defined benefit pension plans which, in aggregate, cover approximately 90% of the total universe of active workers covered by all multiemployer defined benefit plans…. This study analyzes benefit provisions … by industry classification, by plan funding ‘zone status’ and by amount of current liability. The primary focus is on the structure and amount of the plans’ main benefit accrual formula.” Pension Benefit Guaranty Corporation [PBGC] |
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“An amount as described in the Revenue Ruling 2020-24 example is a ‘designated distribution’ (not wages, not a payment to a nonresident alien or corporation, or dividends on employer securities), and is therefore subject to withholding under Internal Revenue Code § 3405.” Ascensus |
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“[M]any do not realize that there is a specific ‘anti-kickback’ rule applying to ERISA plans that is NOT found in ERISA, but instead under criminal law…. The language of the statute is broad, and looks at first glance to be able to cover a number of poorly designed compensation schemes or service arrangements. We all know that doing something as foolish as buying a plan sponsor a car in order to keep its 401(k) business would clearly step over the line. But there are some other, maybe more familiar, arrangements which could raise some issues.” Business of Benefits |
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“[1] Inadequate ERISA bond coverage … [2] No clear purpose for the plan … [3] Access issues … [4] Monolithic investment advice … [5] Definition of compensation.” Fiduciary News; free registration required |
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“Assessing the potential for a prohibited transaction requires a thorough analysis of the facts and circumstances to determine the existence of any disqualified person(s) and whether the transaction falls within a prohibited category. Whether a prohibited transaction will occur is not always obvious, especially if it is not clear whether a conflict of interest exists (or could exist) or whether an IRA owner will receive a benefit from the transaction.” Davis Wright Tremaine LLP |
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“Historically, retirement plan industry experts have been concerned that employees who have access to a 401(k) and an employee stock purchase plan (ESPP) are faced with an ‘either/or’ decision … [New] data demonstrates that when employees have access to both plans, in an integrated environment, combined participation is associated with better retirement savings behaviors and greater overall financial wellness.” PLANSPONSOR; free registration may be required |
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“While the majority of participants are planning to use their equity compensation for retirement (51%), there was a slight uptick overall this year in those turning to their equity compensation to help meet immediate financial needs, like paying off debt (9%, up from 5% in 2019) and short-term emergencies (7%, up from 5% in 2019). Notably, Millennials have experienced a more pronounced impact compared to other generations and may be in more need of help in developing a financial plan. Ninety-five percent (95%) of Millennials who recently exercised or sold equity compensation report that the pandemic influenced their decision, and almost a third (27%) of this group did so because they were under financial stress.” Charles Schwab |
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[Opinion] “For pension beneficiaries across the country, this proposal by the [DOL] is a positive step toward ensuring that accountability and fiscal responsibility take precedent…. The proxy system has long been taken advantage of by those without fiduciary responsibilities, preventing sound advice from reaching the nation’s pension and investment funds … [M]ore should be done by the Department to counter the unaccountable practice of ‘robo-voting,’ in which some fund managers have simply accepted the voting recommendations of proxy advisors automatically without considering the broader fiduciary impact of the proposals.” Institute for Pension Fund Integrity [IPFI] |
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[Opinion] “This proposed rule is timely and needed, and ought… |