Defined contribution plan
Industry & Regulatory NewsWashington Pulse: U.S. House Passes Significant Retirement Bill
The U.S. House of Representatives passed the Securing a Strong Retirement Act of 2022 (SSRA) by a 414-5 vote on March 29, 2022. H.R. 2954 (also commonly referred to as “SECURE 2.0”) contains over 50 retirement plan provisions—nearly double the number as the original Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019. The U.S. Senate is expected to take up a similar bipartisan bill later this year, which could result in the need for a conference committee to reconcile differences between the two bills.
Industry & Regulatory NewsPenalty-Free Distributions for Domestic Abuse Victims Proposed in Senate
Senators Catherine Cortez Masto (D-NV) and John Cornyn (R-TX) have introduced the Savings Access for Escaping and Rebuilding Act of 2022 (SAFER Act). The bill would provide for penalty-free distributions up to the lesser of $10,000 or 50 percent of the nonforfeitable account balance from tax-exempt retirement plans for survivors of domestic abuse. Eligible distributions can be made within a one-year period of the domestic abuse and can be self-certified by the plan participant. The withdrawn funds could be replaced over a three-year period from the date the distribution was received.
Industry & Regulatory NewsComment Period for Prohibited Transaction Exemption Guidance Extended
The Department of Labor’s Employee Benefit Security Administration has announced the extension of the public comment period for proposed amendments to procedures governing the filing and processing of prohibited transaction exemption applications. The comment period was initially set to expire on April 14, 2022, but has been extended an additional 45 days through May 29, 2022.
The agency has received multiple requests from interested parties to grant additional time to develop and submit comments. Details of the proposal were previously announced and can be found here.
Industry & Regulatory NewsProtecting America’s Retirement Security Act Approved by Committee
The House Committee on Education and Labor approved by a 29-21 party line vote to release the Protecting America’s Retirement Security Act without amendments to the House floor for consideration. The bill contains the following retirement plan proposals.
- Requires the Department of Labor, within two years of enactment, to explore how disclosure requirements for participant directed individual account plans can be improved to enhance participants’ understanding of fees and expenses and their cumulative effect on savings over time
- Amends the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code to require spousal consent and notarization for all distributions, with certain exceptions
- Amends ERISA and the Internal Revenue Code to require eligible employees who are not participating in the plan to be re-enrolled at least every 3 years for any automatic contribution arrangement that becomes effective after December 31, 2024
Industry & Regulatory NewsProtecting America’s Retirement Security Act Introduced in House
Representative Lucy McBath (D-GA) and five other Democratic co-sponsors have introduced the Protecting America’s Retirement Security Act in the House of Representatives. The bill proposes fee disclosure improvements, increasing spousal protections, and automatic reenrollment for defined contributions plans. Additionally, the bill would direct the creation of a personal finance education portal as well as a rainy-day refund savings program that would allow taxpayers to elect deferment of 20 percent of their tax refund to an interest-bearing account that would be available for distribution at a later date.
Industry & Regulatory NewsDOL Releases Proposed Rule Updating Davis-Bacon Regulations
The Department of Labor’s (DOL’s) Wage and Hour Division has released a proposed rule Updating the Davis-Bacon and Related Acts Regulations. The DOL indicates that the proposal is the most comprehensive review of the Davis-Bacon Act regulations in 40 years.
The Davis-Bacon Act generally requires payment of locally prevailing wages under direct federal contracts and for covered contractors and their subcontractors. The employer’s obligation can be met by paying the applicable prevailing wage entirely as cash wages or by a combination of cash wages and employer-provided bona fide fringe benefits—including pension and health benefits.
All comments must be received within 60 days of the rule being posted in the Federal Register. While the Wage and Hour Division solicits comments from across the construction industry, it encourages all stakeholders to participate in the process.
Industry & Regulatory NewsDOL Final Rule on SECURE Act Group of Plan Reporting at OMB
Final regulations entitled, Implement SECURE Act and Related Revisions to Employee Benefit Plan Annual Reporting on the Form 5500, issued by the Department of Labor’s Employee Benefits Security Administration (EBSA), have been received by the federal Office of Management and Budget (OMB). The OMB’s Office of Information and Regulatory Affairs (OIRA) provides final review of regulatory guidance before its official release.
The Setting Every Community Up for Retirement Enhancement (SECURE) Act included a provision that would allow employers sponsoring defined contribution plans that have the same trustee, administrator, fiduciaries, plan year, and investment options, to file one common Form 5500 beginning in 2022. Proposed guidance was issued last fall under a larger guidance package, with details shared in a Washington Pulse.
Industry & Regulatory NewsDOL Issues Proposed Rule on Prohibited Transaction Exemption Procedures
The Department of Labor (DOL) has released a proposal that would supersede the Department’s existing procedure governing applications for exemptions from the prohibited transaction provisions of the Employee Retirement Income Security Act of 1974 (ERISA) and the Internal Revenue Code. The Secretary of Labor is authorized to grant such exemptions and provide procedures for relief. Highlights of the proposal suggest substantially stricter standards and additional criteria for obtaining prohibited transaction relief, if implemented.
The DOL emphasizes that it will apply a high level of scrutiny to any retroactive exemption—including ensuring that no participants were harmed—and suggests contacting the agency before engaging in the transaction. Any information provided to the Office of Exemption Determinations, including during the pre-submission process, becomes part of an administrative record that is open for public inspection.
The DOL states that a previously issued exemption is not determinative of whether a future exemption would be approved under the same fact pattern. The DOL also proposes additional requirements in the application for exemption, several of which are highlighted below.
- The reason(s) for engaging in the exemption transaction
- Any material benefit that a party involved in the exemption transaction may receive because of the transaction
- The costs and benefits of the exemption transaction to the affected plan(s), participants, and beneficiaries—including quantification of those costs and benefits, if possible
- A detailed statement that describes possible alternatives to the exemption transaction and why the applicant did not pursue those alternatives
- A description of each conflict of interest or potential instance of self-dealing that would be permitted if the exemption is granted
- A statement that the transaction will be in the best interest of the plan and its participants and beneficiaries
- A statement that all compensation received, directly or indirectly, by a party involved in the exemption transaction will not exceed reasonable compensation within the meaning of ERISA and the Internal Revenue Code
- All statements made to the DOL, the plan, or, if applicable, the qualified independent fiduciary or qualified independent appraiser cannot be materially misleading at the time the statements are made
- A statement whether any prior transactions have occurred between the plan or plan sponsor and a party involved in the exemption transaction
The proposal modifies the definition of a qualified independent appraiser. It also addresses contractual obligations, prohibits indemnifications, and requires detailed information regarding relationships with any party or its affiliates (including past engagements) in an effort to determine independence. Similarly, the proposal expands requirements of qualified independent fiduciaries by prohibiting indemnifications, requiring fiduciary liability insurance sufficient to cover damages resulting by a breach of the independent fiduciary, and certifying that the exemption transaction complies with impartial conduct standards and the independent fiduciary has no conflicts of interest that could affect their judgement.
Under the proposal, applicants would have a duty to promptly notify the DOL of any material changes to representations made during the application process or after approval of the exemption, including disclosing whether a participating party in the exemption is the subject of an investigation or enforcement action. The changes would apply 90 days following receipt of a final rule in the Federal Register. Comments on the proposed rule must be submitted to the DOL by April 14, 2022.
Industry & Regulatory NewsSEC Proposes ESG Reporting for Publicly Traded Companies
The SEC has issued a proposed rule that would require publicly traded companies to include certain climate-related disclosures in their registration statements and periodic reports, such as the annual Form 10-K.
The proposed rule would in part require disclosure about the following.
- The registrant’s governance of climate-related risks and relevant risk management processes.
- How any climate-related risks identified by the registrant have had or are likely to have a material impact on its business and consolidated financial statements.
- How any identified climate-related risks have affected or are likely to affect the registrant’s strategy, business model, and outlook.
- The impact of climate-related events (such as severe weather and other natural conditions) and transition activities on the line items of a registrant’s financial statements and estimates used in financial statements.
The rule would also require disclosures about direct greenhouse gas admissions and indirect emissions from purchased electricity or other forms of energy, as well as disclosure of greenhouse gas emissions from upstream and downstream activities in its value chain if material or if the registrant has set an emissions target. Accelerated filers would be required to include an attestation report from an independent attestation service provider covering emission disclosures.
A fact sheet provides an overview of requirements and the applicable phase-in period—depending on the type of registrant and type of emission disclosure required. The comment period will remain open for the longer of 1) 30 days after publication in the Federal Register, or 2) 60 days after the date of issuance and publication on sec.gov.
Industry & Regulatory NewsEnhancing Emergency and Retirement Savings Act Introduced in House
Representative Brad Wenstrup (R-OH) has introduced the Enhancing Emergency and Retirement Savings Act of 2022 to provide flexibility and access for those who experience unexpected emergencies. The bill is the House companion to S. 1870, introduced by Senator James Lankford (R-OK) and Senator Michael Bennet (D-CO) last year.
The legislation would provide a penalty-free “emergency personal expense distribution” option from employer-sponsored retirement plans and IRAs. The proposal would allow for one emergency distribution per calendar year of up to $1,000 from the individual’s total nonforfeitable accrued benefit under the plan. The bill requires that the withdrawn funds be paid back to the plan before an additional emergency distribution from that same plan is allowed. The amount can be recontributed within a three-year period to any eligible plan to which a rollover contribution can be made.
An emergency personal expense distribution is defined as a distribution for purposes of meeting unforeseeable or immediate financial need relating to necessary personal or family emergency expenses. The plan sponsor of an employer-sponsored retirement plan may rely on an employee’s certification that the conditions are satisfied in determining whether the distribution is an emergency distribution.