SECURE 2.0 introduced several new distribution options and tax reporting rules for defined contribution plan sponsors. Below is an overview of the new provisions and their potential implementation dates. (For an overview of SECURE 2.0 for defined contribution plan sponsors, click here.)
Here is a quick summary of the new distribution changes in SECURE 2.0.
Continue reading “SECURE 2.0 Adds New Distribution Options for Defined Contribution Plans”
The Internal Revenue Service (IRS) has announced that beginning June 1, 2023, it will accept determination letter applications for individually designed 403(b) retirement plans. As background, 403(b) plans are a distinct type of retirement plan for employees of 501(c)(3) tax-exempt organizations and public schools (including colleges and universities). Despite the formal distinction, though, in many respects modern 403(b) plans often resemble 401(k) plans.
In an unusual decision, a federal judge last month refused to strike a plaintiff class’ demand for a jury trial in an ERISA 401(k) class action.
In Garthwait v. Eversource Energy Co., a class of former and current participants in the Eversource 401(k) Plan (the Plan) filed an action against Eversource Energy Company and Plan fiduciaries seeking to recover plan losses caused by alleged breaches of fiduciary duty and requesting other equitable or remedial relief.
On October 14, 2022, the Pension Benefit Guaranty Corporation (PBGC) proposed a new regulation under ERISA Section 4213(a)(2) setting forth actuarial assumptions that a multiemployer pension plan may use in calculating an employer’s withdrawal liability. A PDF of the proposed rule can be found here.
Under ERISA § 4213(c), an employer withdrawing from a multiemployer pension plan must pay the plan its proportional share of the plan’s unfunded vested benefits, which is the difference between the present value of the plan’s nonforfeitable vested benefits and the value of the plan’s assets. The plan’s actuary must employ a variety of assumptions to calculate the withdrawing employer’s liability, such as how long employees will work and how long retirees will live (both of which affect the value of the benefits the plan must pay in the future).
Congress included “SECURE 2.0 of 2022” in the Consolidated Appropriations Act, 2023, the $1.7-trillion omnibus spending bill, which was signed by President Biden on December 29, 2022 (the date of enactment). Secure 2.0 is a follow-up to the Setting Every Community Up for Retirement Enhancement Act passed in 2019, now known as “SECURE 1.0.”
Continue reading “SECURE Act 2.0: What Defined Contribution Plan Sponsors Need to Know”
The IRS recently announced the 2023 cost-of-living adjustments to various benefit and contribution limits applicable to retirement plans. The IRS significantly increased the applicable limits for 2023 due to the high rate of inflation in 2022. The following limits apply to retirement plans in 2023:
Continue reading “IRS Announces 2023 Retirement Plan Limits”
On September 26, 2022, the IRS published Notice 2022-45, extending the deadline for required retirement plan amendments associated with qualifying coronavirus-related and disaster-relief distributions under Section 2202 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and Section 302 of Title III of the Taxpayer Certainty and Disaster Tax Relief Act of 2020 (Relief Act).
Notice 2022-45 follows Notice 2022-33, released in August, which extended the deadline for plan amendments under Section 2203 the CARES Act, the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act), and Section 104 of the Bipartisan American Miners Act of 2019 (Miners Act). Information on Notice 2022-33 can be found here.
Continue reading “Relief All Around: IRS Expands Required Plan Amendment Deadline Extensions”
The Internal Revenue Service recently granted plan sponsors additional time to amend retirement plans to reflect changes in law under: (i) Section 2203 of the Coronavirus Aid, Relief, and Economic Security Act (CARES Act); (ii) the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act); and (iii) Section 104 of the Bipartisan American Miners Act of 2019 (Miners Act).
Sponsors of qualified plans and non-governmental Section 403(b) plans (including collectively bargained plans) now have until December 31, 2025, to adopt certain plan amendments required by these recent changes in law or to conform the written plan to operational changes permitted by these laws.
A string of ERISA lawsuits has emerged in recent weeks against companies who offer BlackRock Target-Date Funds (“TDFs”) as 401k investment options to their employees. The lawsuits allege the companies, in their capacities as plan sponsors, breached their fiduciary duty by choosing the low fee investment options offered by BlackRock Inc., despite their funds’ underperformance. This new litigation sparks concern amongst 401k plan sponsors who may now have to worry about lawsuits involving investment fees from all sides-for choosing the high fee options and for choosing the low fee options.
The lawsuits focus on the LifePath Index Funds of BlackRock, a suite of 10 target-date funds. TDFs have increased in popularity over the past couple of years because they offer participants a lower fee but managed investment option based on target retirement years. Although BlackRock isn’t a party to the litigation, these lawsuits shine a spotlight on the performance of these funds.
Continue reading “ERISA Litigation Roundup: Damned if You Do, Damned if You Don’t”
The IRS recently issued Notice 2022-27, providing a six-month extension of the temporary relief from the physical presence requirement for certain plan elections (including spousal consents) required to be witnessed by a plan representative or notary public. Issued in response to the COVID-19 pandemic, the IRS provided initial relief from the physical presence requirement for the period January 1through December 1, 2020, provided initial extended relief through June 30, 2021, and extended relief for a second time through June 30, 2022. Most recently, Notice 2022-27 extends the relief through December 31, 2022.
The temporary relief from the physical presence requirement applies to any participant election witnessed by a notary public of a state that permits remote electronic notarization or by a plan representative, if certain requirements are satisfied. We discussed those requirements in a prior blog post on this topic.
