Author: Joshua Waldbeser

Joshua Waldbeser counsels retirement plan sponsors, asset managers and funds, and financial services providers on their fiduciary responsibilities under ERISA, and keeps them on course with regulatory compliance matters. Formerly with the Department of Labor (DOL) Employee Benefits Security Administration, Joshua has an insider’s view of the regulatory challenges faced by employers with respect to their own plans, and by insurance companies, investment advisers, broker-dealers, recordkeepers, banks and trust companies with respect to their services to plans and IRAs. He provides practical, business-oriented advice that reflects the interplay between ERISA, securities and other sources of law, and focuses on compliance and risk mitigation.

New DOL Fiduciary Rule Stayed: What Advisors and Insurance Agents Recommending Rollovers Should Do Now

The stay of the new DOL fiduciary rule will remain in effect until the lawsuits challenging the rule are decided and appeals are resolved. This litigation process is likely to take several years. In the meantime, the fiduciary status of advisors and agents will be measured under the current regulation’s five-part test. However, in some cases the application of that test could result, as this article explains, in apparent one-time recommendations being deemed to satisfy the five-part test. As a result, advisors, agents and their firms should carefully consider where fiduciary status for retirement accounts may apply and, in those cases, should consider complying with the conditions of an applicable prohibited transaction exemption.

To view the full alert, visit the Faegre Drinker website.

DOL Finalizes Changes to the Qualified Professional Asset Manager (QPAM) Exemption: What Investment Managers Need to Know

The changes will primarily impact registered investment advisers, banks, and insurance companies who manage retirement plan or IRA assets directly, or who manage certain types of funds or other vehicles for which the underlying assets are deemed to constitute “plan assets” under the look-through rules in ERISA and DOL regulations.

To view the full alert, visit the Faegre Drinker website.

IRS Issues Interim Guidance on SECURE 2.0 Self-Correction Expansion

The IRS recently issued Notice 2023-43 (Notice) to provide interim guidance on Section 305 of SECURE 2.0 Act of 2022 (SECURE 2.0), which significantly expanded self-correction under the Employee Plans Compliance Resolution System (EPCRS). The Treasury Department was directed under SECURE 2.0 Section 305 to issue an updated version of EPCRS (most recently set forth in Rev. Proc. 2021-30) by December 29, 2024. The Notice is intended to provide some answers to plan sponsors in advance of the update to Rev. Proc. 2021-30.

In general, Section 305 of SECURE 2.0 broadened the scope of self-correction by permitting any eligible inadvertent failures (EIFs) to be self-corrected within a reasonable period after the failure is identified. SECURE 2.0 defines the self-correction period as indefinite, with no last day, so long as the IRS does not identify the failure before the plan sponsor takes action demonstrating a specific commitment to implement a self-correction to the failure.

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SECURE 2.0 Includes Several Changes Intended to Encourage the Use of Retirement Annuities

SECURE 2.0, which was included as part of the Consolidated Appropriations Act of 2023, was signed into law in late December 2022. The statute contains 92 substantive sections making reforms to a broad array of retirement-related provisions in ERISA, the Internal Revenue Code (the Code) and certain other laws. Of these 92 sections, four make changes to various aspects of the required minimum distribution (RMD) rules set forth under the Code that apply to annuities in various situations.

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Department of Labor Proposal Would Encourage Consideration of ESG Factors for Plan Investments

On October 13, 2021, the Department of Labor (DOL) released a new proposed regulation under ERISA that would replace the previous administration’s “pecuniary factors” rule – which is widely viewed as discouraging the use of environmental, social, and governance (ESG) factors when selecting plan investments – with one that would encourage their consideration and provide a clearer pathway for plan fiduciaries to do so.

Background

Over the years, the DOL’s stated position on the consideration of ESG and other “social” factors when selecting plan investments has toggled back and forth, largely along party lines.

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SECURE Act 2.0: What Defined Contribution Plan Sponsors Need to Know

Please see our updated blog post on this topic here.

With SECURE Act 1.0 (officially titled “Setting Every Community Up for Retirement Enhancement Act”) still being implemented by many plan sponsors, Congress is now considering a new package of laws designed to help close the nation’s retirement savings gap, referred to as SECURE Act 2.0 (officially titled “Securing a Strong Retirement Act”).

While the House of Representatives’ Ways and Means Committee unanimously approved SECURE Act 2.0, it has still not been voted on by the full House, and certain representatives may want changes implemented. And it has likewise not been approved by the Senate. Thus while SECURE Act 2.0 appears to have bi-partisan support, passage in its current form is not a sure thing.

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Department of Labor Confirms It Will Not Enforce Controversial “Pecuniary Factors” Rule for ERISA Plan Investments

On March 10, 2021, the Department of Labor’s Employee Benefits Security Administration (EBSA), the agency charged with interpreting and enforcing ERISA, announced that it will not enforce the Trump-era “Financial Factors in Selecting Plan Investments” rule, which has been perceived as potentially discouraging retirement plan fiduciaries from selecting investment alternatives which emphasize environmental, social, and governance factors (commonly referred to as “ESG investments”).

The rule, which was finalized in November 2020 and technically became effective on January 12, 2021, does not prohibit ESG investments. However, it has been widely criticized as fostering a misapprehension that ESG investments may be subjected to a higher degree of fiduciary scrutiny than others. Following the election, EBSA’s announcement of its non-enforcement policy comes as no surprise, as the Biden administration had already identified the rule on its “List of Agency Actions for Review.”

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Biden Administration Permits Trump-Era Investment Advice Exemption, Rollover Guidance, to Come Into Effect

The Department of Labor issued a press release on February 12 confirming that Prohibited Transaction Exemption 2020-02, titled “Improving Investment Advice for Workers & Retirees” (the “Exemption”), would go into effect as scheduled. The Exemption was finalized and published by the Trump administration in December 2020, and came into effect on February 16.

The newly available Exemption is intended to fill a void left by the loss of the “Best Interest Contract” or “BIC” Exemption, which was struck down along with the rest of the Obama-era Fiduciary Rule in a March 2018 Fifth Circuit ruling.

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Department of Labor Publishes Request for Information on Pooled Employer Plans

The Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019 created a new type of plan that may begin operating in 2021 called a pooled employer plan (PEP). A PEP is a plan in which multiple unrelated employers will be able to participate. A PEP will have to be maintained by a pooled plan provider (PPP) which must act as a named fiduciary and take on substantially all of the PEP’s administrative duties. Though the statute is fairly detailed, it leaves open a variety of questions, including a number of prohibited transaction issues, that need to be addressed by the Department of Labor (DOL).

For the full alert, visit the Faegre Drinker website.

IRS Releases Coronavirus-Related FAQs for Retirement Plans and IRAs – Some Guidance Still Forthcoming

On March 27, Congress enacted the Coronavirus Aid, Relief and Economic Security (CARES) Act, a massive stimulus package in response to the global coronavirus pandemic. Section 2202 of the CARES Act provides certain individuals who are affected by the pandemic – referred to as “qualified individuals” – with special distribution options from 401(k), 403(b) and governmental 457(b) plans and IRAs, and expands permissible retirement plan loans.

On Monday, May 4, the Internal Revenue Service published answers to commonly asked questions regarding section 2202.

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