My latest article on JDSupra.com can be found here.
A restatement process isn’t required by the Internal Revenue Service so that ERISA attorney can bill for drafting new plan documents. It’s required so that a retirement plan has a document that is current with the law.
As we start a new process, it’s a great time for a plan sponsor to review terms of the plan to make sure it’s still applicable to the employer. Perhaps eligibility needs to be changed, perhaps Roth 401(k) should be added. It’s a perfect to see what provisions of the plan still work and what needs changed.
I have spoken to many third-party administrators (TPAs) regarding Pooled Employer Plans (PEPs) and many are hesitant to offer them. Rather than offering them, they are considering offering better pricing on the micro or small plan market.
By focusing on more competitive pricing, they may avoid some of the disappointment in creating PEPS, where hopes don’t equate substantive plan assets.
Articles about presidential nominees and their 401(k) proposals are always amusing because all they are, are proposals. Political reality always gets in the way of proposals.
There was much discussion that Joe Biden would try to jettison salary deferrals in favor of some type of tax credit.
Thanks to Republican gains in the house and likely control of the senate, it’s unlikely that Biden could get that proposal off the ground.
Expect any changes through a Biden controlled Department of Labor that may issue a stronger fiduciary rule and the likely end of that ESG investing proposal.
The Department of Labor (DOL) announced a final rule for fiduciaries of private-sector retirement plans regarding environmental, social, and governance (ESG) investing.
The final rule amends the department’s longstanding investment duties regulation, first issued in 1979, to codify a clear regulatory structure for considering investments for ERISA plans.
The new rules require that plan fiduciaries select investments based on “pecuniary factors,” or those that the fiduciary determines is expected to have a material effect on risk and/or return of an investment, not its social and environmental impact.
The rule will be effective 60 days after publication in the Federal Register. However, plans will have until April 30, 2022, to make any changes to certain qualified default investment alternatives, where necessary to comply with the final rule.
With a change in the White House, don’t be surprised if this new rule dies quickly.
The Department of Labor’s Employee Benefits Security Administration (EBSA) had a banner year in fiscal 2020, having recovered over $3.1 billion in direct payment to plans, participants, and beneficiaries. $2.6 billion of that was recovered in their investigations. EBSA closed 1,122 civil investigations with 754 of those cases (67%) resulting in monetary results for plans “or other corrective action.” EBSA closed 230 criminal investigations which led to the indictment of 70 individuals.
My latest post on JDSupra.com can be found here.
My favorite comedian was George Carlin and George had a great act on euphemisms and how toilet paper became bathroom tissue and how a used car became a pre-owned automobile. All George was saying that euphemisms can cloud meanings of words and confuse people.
Of course, the retirement plan industry has euphemisms and loves to package simple products into some intricate wrapping and make it sound more important that it is or denote that this product offered by countless plan providers is somehow exclusive.
I was at a conference once and a third party administrator (TPA) was touting their proprietary volume submitter retirement plan document with special allocation groups with a group for each employee. A colleague asked me about this unique proprietary plan and I told him what it was, a 401(k) plan with a new comparability formula. There is nothing unique about it as countless ERISA attorneys and TPAs offer these plan documents.
I remember a former TPA competitor touting a retirement plan that was specifically tailored for medical practices and law firms. All they were offering was a cash balance plan that was participant-directed (before the cash balance regulations disallowed them).
We, of course, have bundled providers offering fiduciary warranties that sometimes aren’t worth the paper it’s written on and we have several plan providers touting their co-fiduciary services which kind of reminds me of when my mother was touting how well my brother in law folded clothes, so what?
Plan sponsors should concentrate more on substance than on flash and if they love flash, understand whether what the plan provider offering is unique or something no different from what every other plan provider is offering.
People with solo 401(k) plans and other smaller plans tend to get very little services. Most don’t have the assets for a retirement plan advisor, so they got it alone. Going it alone for investments and plan administration could be a bad idea for many, especially those with solo 401(k) plans.
So that is why using Pooled Employer Plans (PEP) may be an effective way of offering professional-level guidance and support to small business owners that couldn’t ordinarily afford such a type of plan. Administration on solo plans is easy because there is no compliance testing and recordkeeping is only an issue if the solo 401(k) plans cover the owner and their spouse.
Perhaps PEPs can be used as an effective way to offer retirement plan guidance to those who wouldn’t have it.
The Department of Labor (DOL) is interested in the concerns about cybersecurity, so expect some guidance.
Tim Hauser, Deputy Assistant Secretary for National Office Operations at DOL’s Employee Benefits Security Administration (EBSA), says that we will likely see more focus in the DOL’s investigations on the adequacy of various cybersecurity programs, especially for large plans in terms of making sure the providers they hire are observing good cybersecurity practices. Hauser has indicated that the guidance would be informal, and not a formal notice and comment rulemaking.
I expect means that in audits, DOL will ask plan sponsors about cybersecurity concerns and whether they raise that with their plan providers. Regardless of the guidance, you need more focus on cybersecurity if the DOL does as well.