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On August 18, the US Department of Labor issued an Interim Final Rule regarding the parameters and disclosures required to implement “lifetime income illustrations,” which must be provided to defined contribution plan participants pursuant to the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act).

For a summary of the key provisions of the rule and some preliminary observations, read our LawFlash.

Amid the current climate of individuals engaging in protests for racial justice and other causes, some employers are looking for ways to help employees arrested in connection with exercising their first amendment rights to speech and assembly. One way to do so is an ERISA plan for prepaid legal services.

The IRS issued proposed regulations and new frequently asked questions regarding the extension of the normal 60-day rollover period to roll over a qualified plan loan offset (QPLO), which was provided for under the Tax Cuts and Jobs Act of 2017 (TCJA). While the proposed regulations will primarily affect the recordkeepers of qualified plans (which will need to administer the extension), plan sponsors should be aware of the proposed regulations and discuss compliance with their recordkeepers and other paying agents for their qualified retirement plans that allow loans.

As background, when a qualified retirement plan loan becomes immediately due and payable—which most often occurs upon default, but could also happen if the plan’s terms require immediate repayment upon a termination of employment—and the loan is not repaid, the loan is either treated as a “deemed distribution” or a “loan offset,” depending on whether the participant has had a distributable event. If the participant has had a distributable event—for example, a termination of employment or reaching age 59½ where the plan allows for an in-service distribution at that age—then failure to repay the loan is treated as a loan offset. Otherwise, it is treated as a deemed distribution.

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Coronavirus COVID-19 Task Force

For our clients, we have formed a multidisciplinary Coronavirus COVID-19 Task Force to help guide you through the broad scope of legal issues brought on by this public health challenge. Find resources on how to cope with the post-pandemic reality on our NOW. NORMAL. NEXT. page and our COVID-19 page to help keep you on top of developments as they unfold. If you would like to receive a daily digest of all new updates to the page, please subscribe now to receive our COVID-19 alerts, and download our biweekly COVID-19 Legal Issue Compendium.

Recent LawFlash publications include:

  • IRS Releases New Guidance for Distributions and Loans from Retirement Plans under Cares Act. The Internal Revenue Service recently published additional guidance on the coronavirus-related distributions and loans provisions of Section 2202 of the CARES Act. Notice 2020-50 is intended to assist employers and plan administrators, trustees and custodians, and qualified individuals in applying Section 2202 to take advantage of greater access to plan distributions and plan loans. Read more in our LawFlash.
  • Recent Developments in ERISA Plan Investment Regulation. The US Department of Labor has issued guidance on private equity in 401(k) plan designated investment alternatives and a proposed regulation on environmental, social, and governance investing. Read our LawFlash for an analysis.
  • COVID-19: Two New Stops on the Roadmap to Relief For IRA Owners and Providers. The Internal Revenue Service (IRS) recently released new guidance in IRS Notice 2020-50 and Notice 2020-51 to help owners and beneficiaries of individual retirement accounts and individual retirement annuities (IRAs) and IRA providers navigate the relief provided under the Coronavirus Aid, Relief, and Economic Security Act (CARES Act). Read our LawFlash to learn more.

Coronavirus COVID-19 Task Force

For our clients, we have formed a multidisciplinary Coronavirus COVID-19 Task Force to help guide you through the broad scope of legal issues brought on by this public health challenge. Find resources on how to cope with the post-pandemic reality on our NOW. NORMAL. NEXT. page and our COVID-19 page to help keep you on top of developments as they unfold. If you would like to receive a daily digest of all new updates to the page, please subscribe now to receive our COVID-19 alerts, and download our biweekly COVID-19 Legal Issue Compendium.

Congratulations to Morgan Lewis partner Handy Hevener, who has been honored with a Lifetime Achievement Award by the New York Law Journal as part of its 2020 New York Legal Awards. The Lifetime Achievement Award is given to lawyers who have made a significant impact on the legal community throughout their career. Handy has made significant contributions throughout her 42 years of practice, particularly in relation to critical payroll tax, fringe benefit, executive compensation, and contingent workforce issues. Handy and the other winners are set to be recognized at an October 27 ceremony in New York.

IRS Notice 2020-51, released last week, provides additional guidance on the waiver in 2020 of required minimum distributions (RMDs) from defined contribution retirement plans and IRAs, and the interaction of this waiver with Section 114 of the SECURE Act. The SECURE Act changed the required beginning date for an employee or IRA owner to begin taking required minimum distributions to April 1 of the calendar year following the calendar year in which the individual attains age 72 (rather than April 1 of the calendar year following the calendar year in which the individual attains age 70½), for individuals who attain age 70½ after December 31, 2019.

The Notice clarifies that the 2020 suspension also applies to individuals with a 2019 RMD who have a required beginning date of April 1, 2020, that was not paid in 2019 (and therefore would have been due to be paid between January 1, 2020 and April 1, 2020). In April, the IRS issued a notice that said those who took an RMD between February 1 and May 15 could put the money back into a plan or IRA by July 15. The new guidance expands the relief to include those who took an RMD between January 1 and February 1, and also extends the deadline for rolling the funds back into a plan or IRA to August 31. For example, if a participant received a single-sum distribution in January 2020, part of which was treated as ineligible for rollover because it was considered an RMD, that participant will have until August 31, 2020, to roll over that part of the distribution.

IRS Notice 2020-52 provides welcome relief to plan sponsors considering suspending safe harbor matching contributions or safe harbor nonelective contributions (or who already suspended safe harbor contributions during 2020) in response to the coronavirus (COVID-19) pandemic.

On June 29, the Internal Revenue Service issued guidance providing new COVID-19-related relief and other clarifications for sponsors considering mid-year changes to their safe harbor 401(k) plans. The guidance, set out in Notice 2020-52 (the Notice), provides helpful clarification that sponsors can eliminate safe harbor 401(k) contributions for “highly compensated employees” (HCEs) only and retain the plan’s safe harbor status, provided that the safe harbor 401(k) contributions continue to be made for non-highly compensated employees (NHCEs).

Under IRS Notice 2020-50, employers sponsoring nonqualified deferred compensation plans (NQCD plans) may now allow employees to suspend their deferral elections without having to determine whether the employee has had an unforeseeable emergency for purposes of Section 409A or otherwise qualifies for a hardship under Section 401(k) if the employee received a coronavirus-related distribution from an eligible retirement plan.

The ongoing coronavirus (COVID-19) pandemic has greatly affected many employers and their employees. Employers sponsoring NQCD Plans are seeing an increase in requests from NQDC Plan participants to suspend deferral elections in order to deal with financial hardships resulting from COVID-19.