Industry & Regulatory News

Industry & Regulatory News
PBGC Updates Expected Retirement Table for 2023

The Pension Benefit Guarantee Corporation has issued a final rule updating the table used to determine the expected retirement age for participants in pension plans undergoing distress or involuntary termination with valuation dates falling in 2023. This table is needed to compute the value of early retirement benefits and the total value of benefits under a plan. The new table is effective January 1, 2023.

December 06 2022
Industry & Regulatory News
Physical Presence Relief for Retirement Plan Consents Set to Expire

Earlier this year (and announced), the IRS issued Notice 2022-27, further extending temporary relief from the physical presence requirements for certain elections that are made by participants and beneficiaries in qualified retirement plans and other tax favored arrangements. This included signatures of those making an election ordinarily needing to be witnessed in the physical presence of a plan representative or notary public, including spousal consent and certain forms of distribution from retirement plans.

Barring further guidance from the IRS in the next few weeks, this relief ends after December 31, 2022. Participant elections, including spousal consents, after this time that are required to be witnessed by a plan representative or a notary public under Treasury Regulation § 1.401(a)-21(d)(6) will no longer be available for relief from these requirements.

December 05 2022
Industry & Regulatory News
IRS Announces Deadline Relief for New York Severe Winter Storm and Snowstorm

The IRS has announced the postponement of certain tax-related deadlines for victims of severe winter storm and snowstorm in New York. The tax relief postpones various tax filing deadlines that began on November 18, 2022. Affected individuals and households who reside or have a business in Cattaraugus, Chautauqua, Erie, Genesee, Jefferson, Lewis, Niagara, Oneida, Oswego, St. Lawrence, and Wyoming counties, as well as taxpayers with records located in the covered area that are needed to meet covered deadlines, qualify for relief.

In addition to extending certain tax filing and tax payment deadlines, the relief includes completion of many time-sensitive, tax-related acts described in IRS Revenue Procedure 2018-58 and Treasury Regulation 301.7508A-1(c)(1). Affected taxpayers with a covered deadline on or after November 18, 2022, and before March 15, 2023, will have until March 15, 2023, to complete the acts. This includes filing Form 5500 series returns that are required to be filed on or after November 18, 2022, and before March 15, 2023.

“Affected taxpayer” automatically includes any individuals who live, and businesses whose principal place of business is located, in the covered disaster area. Those who reside or have a business located outside the covered disaster area, but have been affected by the disaster, may contact the IRS to request relief.

December 05 2022
Industry & Regulatory News
Class Certification in Lawsuit Against TIAA Overturned

On December 1, 2022, the U.S. Court of Appeals for the Second Circuit has overturned a lower court decision to certify a class action complaint against Teachers
Insurance and Annuity Association of America (TIAA) asserting that it engaged in prohibited transactions and facilitated fiduciary breaches by servicing collateralized plan loans to participants for approximately 8,000 qualified retirement plans. The plaintiffs argue that TIAA improperly receives certain earnings on the investment of the collateral assets.

The lower court had previously certified participants who received approximately 500,000 loans. The Second Circuit ruled that the lower court had not properly evaluated whether the transactions were too individualized to be combined into a class action case. The case was remanded to the lower court for a ruling on this issue.

Industry observers are closely watching this case as it presents a new approach to retirement plan litigation.

December 02 2022
Industry & Regulatory News
ESG Final Rule Published in Federal Register

The Department of Labor’s final rule titled Prudence and Loyalty in Selecting Plan Investments and Exercising Shareholder Rights, which was previously announced, has been published in the Federal Register. Today’s publication establishes a January 30, 2023, effective date. Certain provisions related to proxy voting, however, will not be applicable until December 1, 2023.

December 01 2022
Industry & Regulatory News
Hardship Distributions May Be Permitted for West Virginia Severe Storms

The Federal Emergency Management Agency (FEMA) has issued a disaster declaration for severe storms, flooding, landslides, and mudslides in West Virginia, for the periods of July 12, 2022 – July 13, 2022, and August 14, 2022 – August 15, 2022.

Employers with qualified retirement plans may allow participants to take hardship distributions if

  • they have incurred expenses and losses because of a FEMA-declared disaster, and
  • their principal residence or place of employment at the time of the disaster is located in an area designated by FEMA as eligible for individual disaster assistance.

If the employer permits hardship distributions for expenses and losses related to a federally declared disaster, participants can check fema.gov/locations to determine if they are located in a disaster area designated for individual assistance.

The IRS may also issue relief related to this disaster for certain tax-related deadlines. Additional information can be found at irs.gov/newsroom/tax-relief-in-disaster-situations.

November 30 2022
Industry & Regulatory News
Court Dismisses Recordkeeping Fee Lawsuit

The U.S. District Court for the Eastern District of Pennsylvania has dismissed an ERISA fiduciary lawsuit against electronics manufacturer, Ricoh USA. The plaintiffs had claimed that the employer breached its fiduciary duty to a 401(k) plan it sponsors when it selected the plan’s recordkeeper. As evidence, the plaintiffs pointed to a dozen recordkeepers offering similar services at lower costs than what the fiduciaries selected for the plan. The court dismissed the lawsuit because it found that the plaintiffs did not provide enough detail in their complaint about the lower-cost competitor services to demonstrate that those services were actually comparable to those the plan employed. The court said in the absence of this detail, it was unable to determine whether the comparison between the plan’s service provider and the competitors is actually an “apples to oranges” comparison rather than an “apples to apples” comparison. The plaintiffs were given an opportunity to amend their complaint to address this issue.

November 28 2022
Industry & Regulatory News
Bill Proposed to Amend Family Attribution Rules

Senator Mark Kelly (D-AZ) and co-sponsor Senator Bill Cassidy (R-LA) have introduced S. 5125 the Family Attribution Modernization Act. The proposal would modify controlled group rules under IRC 414(b) pertaining to family attribution as follows:

  • Community property laws shall be disregarded for purposes of determining ownership
  • Stock owned by minor children of the spouse under IRC 1563(e)(6) is not attributed when the exception to spousal attribution also applies under IRC 1563(e)(5). This generally occurs if the spouse – 1) does not directly own stock, 2) is not a director or employee, 3) no more than 50% of company earnings are derived from royalties, rent, dividends, etc., and 4) spousal rights to dispose of stock are not restricted or run in favor of minor children
  • Stock owned in different corporations that is attributed to a child under section 1563(e)(6)(A) from each parent, and is not attributed to such parents as spouses under section 1563(e)(5), shall not by itself result in the corporations being a controlled group

To the extent these proposed changes result in a change in controlled group status, the transition rules under IRC 410(b)(6)(C) would apply. The disregarding of community property laws would apply under IRC 414(m) for affiliated service groups as well.

 

November 28 2022
Industry & Regulatory News
Hardship Distributions May Be Permitted for South Carolina Hurricane Ian

The Federal Emergency Management Agency (FEMA) has issued a disaster declaration for Hurricane Ian in South Carolina, beginning September 25, 2022, and ending October 4, 2022.

Employers with qualified retirement plans may allow participants to take hardship distributions if

  • they have incurred expenses and losses because of a FEMA-declared disaster, and
  • their principal residence or place of employment at the time of the disaster is located in an area designated by FEMA as eligible for individual disaster assistance.

If the employer permits hardship distributions for expenses and losses related to a federally declared disaster, participants can check fema.gov/locations to determine if they are located in a disaster area designated for individual assistance.

The IRS may also issue relief related to this disaster for certain tax-related deadlines. Additional information can be found at irs.gov/newsroom/tax-relief-in-disaster-situations.

November 25 2022
Industry & Regulatory News
Additional Form 5500 Guidance Under SECURE Act at OMB

The Office of Management and Budget has received a final rule from the Department of Labor titled “Implement SECURE Act and Related Revisions to Employee Benefit Plan Annual Reporting on the Form 5500.”

According to a description of the rule, it is likely to include guidance on the implementation of group of plans reporting pursuant to Section 202 of the SECURE Act. The DOL released certain form revisions earlier in the year but indicated that it was evaluating public comments on elements of the September 2021 proposal related to 1) DCG reporting under the SECURE Act and related audit issues, 2) Schedule MEP reporting requirements, 3) financial improvements to the Schedule H, 4) changes in participant counts related to plan audit requirements, 5) reporting for multiple employer welfare arrangements (MEWAs) that file Form M-1, and 6) questions on pension plan compliance.

November 22 2022