With 2018 coming to a close, retirement plan sponsors should make sure they have addressed any required year-end plan amendments, are preparing any required year-end participant notices, and are looking ahead to any changes in 2019 that may impact their plans. This post focuses on the 2019 changes, while Part 1: Closing Out 2018 concentrated on 2018 year-end obligations.

As 2018 comes to a close, it’s time for retirement plan sponsors to make sure they have addressed any required year-end plan amendments, are preparing any required year-end participant notices, and are looking ahead to any changes in 2019 that may impact their plans. This Part 1 focuses on the 2018 year-end obligations, while the forthcoming Part 2: Getting Ready for 2019 will concentrate on changes for next year.

The US Internal Revenue Service has released proposed regulations requiring retirement plans to eliminate the six-month suspension for hardship withdrawals made on and after January 1, 2020, with the option to eliminate it earlier, and providing important clarifications for plan sponsors on other hardship requirements. Please see our LawFlash for more information about these proposed regulations, including next steps. If you have questions about the proposed regulations, please feel free to reach out to the authors or your Morgan Lewis contact.

Drafting and negotiating data protection provisions in services agreements is critical, but it can also be one of the trickier and more time-consuming aspects of the contracting process. Tech & Sourcing @ Morgan Lewis addresses data safeguards in services agreements in this comprehensive four-part series: Part 1, Part 2, Part 3, and Part 4. If you have questions on how to best protect data in your service provider relationships, please feel free to reach out to the author or your Morgan Lewis contact.

On September 14, 2018, the Pension Benefit Guaranty Corporation (PBGC) published final regulations intended to facilitate plan mergers and transfers between multiemployer pension plans under ERISA Section 4231. These regulations become effective October 15, 2018. 

ERISA Section 4231, as amended by the Multiemployer Pension Reform Act of 2014 (MPRA), permits the PBGC to facilitate mergers of multiemployer pension plans and to provide financial assistance for such mergers where at least one of the participating plans is in critical and declining status. Generally, a critical and declining plan is projected to become insolvent within 15 to 20 years.

The Internal Revenue Service (IRS) issued guidance on September 18 that modifies its safe harbor explanations that may be (and typically are) used to satisfy Section 402(f) of the Internal Revenue Code (IRC). IRC Section 402(f) requires plan administrators of 401(a) qualified plans to provide a written explanation of an individual’s rollover rights (of eligible rollover distributions) within a reasonable period of time (i.e., no fewer than 30 days and no more than 180 days) before the date a plan distribution is to be made.

The modifications, described in Notice 2018-74, reflect changes made under the Tax Cut and Jobs Act of 2017 (TCJA) relating to the rollover of qualified plan loan offset amounts and guidance issued in IRS Revenue Procedure 2016-47 (Rev. Proc. 2016-47) on self-certification of eligibility for a waiver of the 60-day deadline for completing a rollover.

There are several qualification requirements for an employer’s cash or deferred arrangement under Section 401(k) of the Internal Revenue Code of 1986, as amended (Code). One such requirement is that benefits may not be contingent (either directly or indirectly) on an employee’s election to make (or not make) elective contributions to the employer’s arrangement. This requirement is frequently referred to as the “contingent benefit rule.”[1] The Code includes an express exception to the contingent benefit rule for employer matching contributions. Matching contributions may be conditioned upon an employee’s election to make elective contributions.

Many participant-directed 401(k) plans these days include a self-directed brokerage window option as a way to supplement the plan’s menu of designated investment options. While the plan’s menu may be limited to 10–25 investment alternatives, depending on the particular plan (for this purpose, counting a target-date fund suite as a single alternative), a brokerage window can provide access to several thousand mutual funds as well as—depending on the particular arrangement—the ability to trade in individual stocks, bonds, options, or other securities.

The end of summer doesn’t always mean the end of employment for seasonal employees. Employers often rely on the pool of talent they have developed through seasonal hiring when it comes time to fill new or newly vacated ongoing positions. Here are several things to keep in mind when hiring or rehiring a seasonal employee into a year-round, benefits-eligible role.

In recent weeks, there have been a number of reports that the US Department of Labor (DOL) has been taking a more aggressive approach in enforcement actions involving late participant contributions and loan repayments and other errors self-reported by ERISA plans on their Forms 5500. These reports underscore the importance of timely, full correction when a plan discovers such late contributions and loan repayments, and other fiduciary breaches.

Under applicable DOL rules, participant contributions and loan repayments must be remitted to the plan’s trust as soon as the money can reasonably be segregated from the employer’s assets (and no later than 15 days, unless the plan qualifies for a small plan exception). The DOL’s view is that it is a breach of fiduciary duty when the payments are made into the plan’s trust later than that. The delay is treated as an unauthorized loan of plan assets and, therefore, a nonexempt prohibited transaction. The DOL has treated these breaches as an enforcement priority and regularly reviews this issue during its plan investigations (the DOL having primary investigatory authority of ERISA’s fiduciary duty provisions, and a robust investigatory program). The DOL frequently cites ERISA plan fiduciaries for fiduciary breaches due to such late contributions and loan repayments.