If you have a safe harbor 401(k) plan or plan on adding that provision to your plan, keep in mind that you must hand out notices to plan participants before December 1.
It’s an excellent provision and the last thing you want to do is screw up the ability to have it by not handing out the notices. It’s a big requirement for allowing a safe harbor design.
People complain a lot about life these days, but one fun fact is that people are living longer than they did just 20 years ago. Thankfully, the Internal revenue Service (IRS) noticed too.
The IRS has proposed a new rule regarding the life expectancy and distribution period tables that are used to calculate required minimum distributions (RMDs) from qualified retirement plans, individual retirement accounts (IRAs) and annuities, and certain other tax-favored employer-provided retirement arrangements.
The life expectancy tables and applicable distribution period tables in the proposed regulations reflect longer life expectancies. In the new proposed rules, a 70-year old IRA owner who uses the Uniform Lifetime Table to calculate RMDs has to use a life expectancy of 27.4 years under the existing regulations. Using the proposed, new Uniform Lifetime Table, the IRA owner would now use a life expectancy of 29.1 years to calculate RMDs. That means smaller distributions over a longer period.
The life expectancy tables and Uniform Lifetime Table under these proposed regulations would apply for distribution calendar years beginning on or after January 1, 2021.
My latest article for JDSupra.com can be found here.
There are so many times in business where you may craft the greatest idea out there that will make people money that they’d accept, but they still won’t.
When I was at that semi-prestigious law firm, they had a rule that attorneys who originated a client would be entitled to 50% of the fee, regardless of the practice area. So if the real estate tax attorney got a client for their house tax appeal, he could get 509 cents on the dollar if that client would utilize any other attorney at the firm, regardless of the practice area. So I thought it was a no brainer that I could start a national ERISA practice with our existing clients. I was dead wrong. For some reason, these partners who used to have their practice clung to their client lists for dear life.
Great ideas on paper to generate revenue for someone else is great on paper. The problem is when you’re dealing with human emotions, often it defies logic/common sense. You might be dealing with insecurities or other emotions that get people blinded to great opportunities.
If you’re a closely held business or not, changes do happen. Whether it’s leadership or who serves as your plan’s trustee, change will likely happen. The problem sometimes is when the plan document has been updated to reflect who the current trustees are, yet the plan custodian doesn’t. That could certainly be a problem if one of the trustees left on acrimonious terms and wants to go to business for themselves and take a distribution that they weren’t entitled to.
So if you make a change of trustees, also make sure that your third party administrator and plan custodian know as well, so the records and signings cards are updated. Otherwise, an unhappy trustee may think it’s a 401(k) version of Supermarket Sweep.
I worked at a third-party administration (TPA) where one of our administrators tried to steal money from a participant’s account and transfer it to his Individual Retirement Account (IRA),. The only reason he got caught because he messed up the numbers on his own IRA. So this Estee Lauder theft case reminds me of it.
Despite the lawsuit concerning this Plan and the investigation, keep in mind that these are only allegations.
The Department of Labor is investigating the theft of $99,000 from Naomi Berman, a participant in Estee Lauder’s 401(k) plan, according to the ERISA attorney representing her in a civil claim filed in U.S. District Court for the Northern District of California.
In 2016, Berman received the first of two letters from Estee Lauder, confirming distributions of $37,000 and $50,000 from her 401(k) account. The distributions were sent to accounts at SunTrust Bank and TD Bank. Berman did not have accounts at either institution. Berman left assets in the plan after terminating employment in 2006.
For 3 months, Berman made 23 calls to Estee Lauder’s recordkeeper, Alight. Alight reported to Berman that it would investigate the transactions. Upon completion of that investigation, Berman was told no money was recovered, and that she would not be made whole. There was no report on how the distributions were made and backup to the transactions was never received by Ms. Berman.
I have been through enough transactions where the plan provider (or employee) stole the money or it was a ruse created by a participant, trying to get paid out twice. What happened here is an unsolved mystery and it’s a troubling episode because it’s so public and the answer by the recordkeeper was insufficient for her lawyers
The Department of Labor (DOL) proposed a new rule to allow retirement plan disclosures to be posted online.
The new rule allows plan administrators to post any document that the administrator is required to furnish under ERISA on the plan sponsor’s website, as long as the administrator furnishes a “notice of internet availability” concerning the posted document and complies with certain additional requirements.
A plan administrator has to provide a “notice of internet availability” for each document it intends to post on its website. The administrator must furnish the notice at the time the document is made available on the website.
The notice of internet availability has to include the following contents:
This is a great thing for the retirement plan industry as hundreds of millions of dollars will be saved in printing and mailing costs. It will be bad for the paper industry, but good for the retirement plan industry and plan sponsor because I believe the lower costs will be passed down to plan participants through decreased costs. I’m sure some cynical people will say those plan providers will pocket the difference, but fee transparency and competition won’t allow that.
My latest article for JDSupra.com can be found here.
I’m not a big fan of target-date funds and that bias goes back to the implosion of the stock market in 2008-2010, where I thought older workers didn’t realize that their target-date funds had so much equity exposure. I also question the funds’ glide path, as well as no consistency between funds with the same target year across all the fund families.
A recent study stated that retirement plan participants who invest in target-date funds contribute less to their plans than participants who don’t use them. Quite honestly, the results are skewed when may automatic enrollment options use target-date funds as the qualified default investment alternative (QDIA). So many people that use target-date funds, only use it because they are automatically enrolled.
Ken Fisher of Fisher Investments is facing almost $2 billion of withdrawals from his firm as a result of some sexist comments he made at an industry conference.
I don’t need to mention these comments, as they are all over the Internet. I’ve been in this business so long that locker room talk like this probably wouldn’t have batted an eye. However, in light of the MeToo movement and social media that disseminates such comments quickly, it’s a lesson for all of us on how we conduct business online and through conference appearances. We need to be sensitive to the audience that what we might be amusing to us, maybe discriminatory to others.
