Retirement Plans Archives - Page 4 of 12

Final Changes Announced to Forms 5500 and 5500-SF

The Department of Labor (DOL) announced that it has finalized, together with the Internal Revenue Service (IRS) and Pension Benefit Guarantee Corporation (PBGC), the third and final round of revisions to the Form 5500 Annual Return/Report of Employee Benefit Plan and the 5500-SF Short Form Annual Return/Report of Small Employee Benefit Plan.

These Phase III revisions implement certain elements of a September 2021 regulatory proposal, which included proposed changes to annual reporting requirements under the Employee Retirement Income Security Act of 1974 (ERISA). Some of the changes relate to the Setting Every Community Up for Retirement Enforcement Act (SECURE Act), including items affecting multiple-employer plans (MEPs) and defined contribution group reporting arrangements. As such, the changes mostly impact retirement plans. Phase III revisions are effective for plan years beginning January 1, 2023, with filing beginning in July 2024. The previous Phases I and II adopted changes for plan years 2021 and 2022, respectively.

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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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In Case You Missed It – Winter 2023

Written by members of Faegre Drinker’s benefits and executive compensation team, this blog features analysis and information on matters related to retirement plans, health and welfare plans, ESOPs, ERISA litigation, fiduciary governance, and other benefits issues.

This quarterly digest provides links to our most popular posts during the past few months so that you can catch up on what you missed or re-read them.

Secure 2.0 Adds New Distribution Options for Defined Contribution Plans

By Mark Rosenfeld, Erik Vogt, and Mark M. Brown
SECURE 2.0 introduced several new distribution options and tax reporting rules for defined contribution plan sponsors. In this post, we overview the new provisions and their potential implementation dates.

COVID-19 National Emergency Plan Deadline Extensions Set to End This Summer

By Stephanie L. Gutwein and James E. Crossen
On January 30, 2023, President Biden announced the Administration’s plan to extend the current declarations of the COVID-19 national emergency and public health emergency (PHE) through May 11, 2023, and end both emergencies on that date. The end of the national emergency, which was originally declared in March 2020, will cause certain employee benefit plan-related deadline extensions to conclude this summer.

Multiemployer Pension Plan Alert: Evergreen Clauses May Trump the Bargaining Parties’ Subsequent Agreement

By Gregory Ossi and Caitlin M. Britos
The U.S. Court of Appeals for the Seventh Circuit recently ruled that Central States, Southeast and Southwest Areas Pension Fund may continue its lawsuit against Transervice Logistics, Inc. and Zenith Logistics, Inc. seeking allegedly outstanding pension fund contributions. The case examined two consolidated appeals, each involving a nearly identical collective bargaining agreement (CBA) between each employer and a union, and trust agreements between each employer and the plaintiff fund.

Multiemployer Pension Plan Alert: Evergreen Clauses May Trump the Bargaining Parties’ Subsequent Agreement

The U.S. Court of Appeals for the Seventh Circuit recently ruled that Central States, Southeast and Southwest Areas Pension Fund may continue its lawsuit against Transervice Logistics, Inc. and Zenith Logistics, Inc. seeking allegedly outstanding pension fund contributions. The case examined two consolidated appeals, each involving a nearly identical collective bargaining agreement (CBA) between each employer and a union, and trust agreements between each employer and the plaintiff fund. The court was asked to determine whether the employers were required to maintain contributions to a multiemployer pension plan pursuant to so-called “evergreen clauses” that renewed the CBAs each year unless timely terminated.

Factual Background

The CBAs obligated the employers to make pension fund contributions to plaintiff, making the fund a third-party beneficiary of the agreements. The trust agreements obligated the employers to contribute to the fund for the “entire term of any collective bargaining agreement… (including any extension of a collective bargaining agreement through an evergreen clause…).” The CBAs were set to expire on January 31, 2019 but contained evergreen clauses that renewed the CBAs each year unless terminated with 60 days’ notice.

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SECURE 2.0 Expansion of Self-Correction Program and Plan Loan Error Corrections

The SECURE 2.0 Act of 2022 (SECURE 2.0), the follow-up legislation to the Setting Every Community Up for Retirement Enhancement Act of 2019 (now known as SECURE 1.0) (previously discussed here and here), includes many important legal changes affecting retirement plans. SECURE 2.0 is intended to expand access to retirement plans, encourage additional retirement savings and ease certain administrative burdens on retirement plan sponsors.

In a measure that substantively affects plan sponsors and alters retirement plan correction practices, SECURE 2.0 significantly expands the availability of self-correction by widening the range of operational failures for which self-correction is available, including plan loan errors.

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SECURE 2.0 Adds New Distribution Options for Defined Contribution Plans

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.

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New Kids on the Block: IRS Creates Determination Letter Program for Individually Designed 403(b) 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.

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ERISA Litigation Roundup: Judge Permits Partial Jury Trial in Eversource Energy 401(k) Dispute

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.

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PBGC Announces Proposed Rule on Interest Rate Assumptions for Multiemployer Plan Withdrawal Liability

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.

Background on Withdrawal Liability

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).

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

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.”

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