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.”
Continue reading “Department of Labor Confirms It Will Not Enforce Controversial “Pecuniary Factors” Rule for ERISA Plan Investments”
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.
Continue reading “Biden Administration Permits Trump-Era Investment Advice Exemption, Rollover Guidance, to Come Into Effect”
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.
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.
Continue reading “IRS Releases Coronavirus-Related FAQs for Retirement Plans and IRAs – Some Guidance Still Forthcoming”
After a delay of several months, Congress passed the Setting Every Community Up for Retirement Enhancement (SECURE) Act, clearing the way for one of the most substantial pieces of retirement plan legislation in years to become law.
The House of Representatives initially passed the SECURE Act in May by an overwhelming 417−3 vote. Although the Act was set for easy bipartisan passage, it foundered in the Senate. The bill found new life at the eleventh hour of the 2019 legislative session as an attachment to the must-pass $1.4 trillion spending bill, which passed by significant margins.
Continue reading “Congress (Finally) Passes the SECURE Act”
On October 23, 2019, the Department of Labor (DOL) published a proposed rule that would ease retirement plan administration by allowing broader use of electronic disclosure. This proposed rule was foreshadowed by an Executive Order issued in August 2018 directing the DOL to review actions that could be taken to improve the effectiveness of retirement plan disclosures under ERISA and to reduce the costs to employers.
Currently, plan sponsors can rely on a 2002 safe harbor for electronic delivery of documents and other information required under ERISA. However, the 2002 safe harbor is limited; notice can be provided electronically only to participants and beneficiaries who either (1) have work-related computer access or (2) provide affirmative consent to receive documents electronically (in addition to meeting certain other requirements). Anyone not falling within one of those categories must receive a hard copy.
Continue reading “The Future of Retirement Plan Disclosures?”
On September 1, 2019, the IRS reopened its determination letter program for two types of individually designed retirement plans: statutory hybrid plans and merged plans. For a detailed review of this limited expansion of the determination letter program, see our client alert, “IRS Announces Limited Expansion of the Determination Letter Program for Individually Designed Plans.”
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The DOL’s newly released final regulation on “Association Retirement Plans” (ARPs) will make it easier for groups and associations of employers to jointly sponsor a combined 401(k) or other defined contribution plan. (These plans are also referred to as multiple employer plans or “MEPs.”) In recent years, there has been a push to permit service providers to create “Open MEPs,” which are plans of unrelated employers having no business connection, or what the DOL refers to as “commonality” (i.e., a relationship unrelated to employee benefits). The hope is that these plans will provide small businesses with a cost-efficient and minimally burdensome avenue for offering retirement savings opportunities to workers.
Continue reading “DOL’s Final Rule on Association Retirement Plans: What It Means for the Retirement Industry”