Whether due to an upcoming contract expiration, change in leadership, decline in service quality, regulatory issues, or any of the other many events that occur during an outsourcing engagement, invariably, the original agreement with the service provider must be modified. Please read this post from our Tech&Sourcing @ Morgan Lewis blog to learn about issues that should be considered before entering into such renegotiations.

Join Morgan Lewis in May 2018 for these programs on a variety of topics in employee benefits and executive compensation, including investment related matters.

We’d also encourage you to attend the firm’s Global Public Company Academy series:

Visit the Morgan Lewis events page for more of our latest programs.


The Internal Revenue Service (IRS) recently updated the Examination Steps for General Hardship in the Internal Revenue Manual (IRM) to incorporate the summary substantiation method for safe-harbor hardship distributions. Plan sponsors should consider whether they want to adopt this method of substantiating hardship withdrawals, rather than requiring participants to provide documentation supporting the existence of an “immediate and heavy financial need.”


The IRS issued internal guidance in February 2017 to its employees conducting plan audits, setting forth guidelines for what 401(k) plan sponsors and administrators are required to show as substantiation to support that a hardship withdrawal was due to an immediate and heavy financial need under the safe-harbor standards for a hardship distribution under Treas. Reg. Section 1.401(k)-1(d)(3)(iii)(B).

The Internal Revenue Service (IRS) recently announced that it is requesting comments on the possible expansion of its favorable determination letter program for individually designed plans. Specifically, the IRS is interested in public input on circumstances it should consider in its decision to accept applications for favorable determination involving amended plans, or types of plan amendments, during calendar year 2019. Currently, the IRS only accepts applications for rulings on initial plan qualification or qualification on termination.


Effective January 1, 2017, the IRS eliminated the staggered approach to accepting applications for favorable determination where such applications were accepted in a calendar year for plans in that year’s filing cycle. A plan’s filing cycle was based on the last digit of its sponsor’s employer identification number, and the cycles were identified as Cycles A through E. This elimination effectively terminated the favorable determination letter program for ongoing plans, though the program continued for plans where initial qualification or qualification on termination was sought.

Join Morgan Lewis in April 2018 for these programs on a variety of topics in employee benefits and executive compensation.

We’d also encourage you to attend the firm’s Global Public Company Academy series:

And, don’t forget to visit our resource center on Navigating US Tax Reform, which lists our upcoming tax reform events, including:

Visit the Morgan Lewis events page for more of our latest programs.

In a 2-1 decision, the US Court of Appeals for the Fifth Circuit struck down the US Department of Labor’s fiduciary rule. To learn about the court’s reasoning, the impact of this decision, and what financial institutions should be thinking about, please read our LawFlash.

The tax reform legislation commonly referred to as the Tax Cuts and Jobs Act (Act), signed into law on December 22, 2017, modifies the Internal Revenue Code (Code) in a way that impacts many qualified plan (and 403(b) plan) hardship withdrawal provisions. The Act adds a paragraph to Section 165 of the Code restricting the deduction for casualty losses to those losses that are attributable to a federally declared disaster. A withdrawal from a plan by a plan participant to pay certain expenses that qualify for the Section 165 casualty deduction is one of a few withdrawals that meet the “deemed immediate and heavy financial need” standard under the Section 401(k) Treasury regulations. This “safe harbor” standard allows plan sponsors to consider withdrawals necessary due to hardship without having to take on the more burdensome evaluation of a participant’s need based on relevant facts and circumstances.

Restricting the casualty loss deduction to losses attributable to a federally declared disaster means that only withdrawals to pay expenses to repair damage caused by a disaster determined by the president as warranting assistance by the federal government under the Robert T. Stafford Disaster Relief and Emergency Assistance Act will satisfy the deemed immediate and heavy financial need standard. This change is effective for taxable years beginning after December 31, 2017, which, for most employees, means it is effective now.

Join Morgan Lewis in March 2018 for these programs on a variety of topics in employee benefits and executive compensation.

For the last couple of years, the US Department of Labor (DOL) regional offices around the country have been investigating or auditing a number of large employer defined benefit pension plans (for background on the DOL’s activity, please see here and here). Ostensibly, the DOL investigations cover most aspects of plan documentation and administration. But ultimately, the investigations nearly always focus on deferred vested participants who are eligible to receive, but are not receiving, pension distributions. Typically, the DOL investigator will request lists of these participants from which s/he will develop random samples whom s/he will attempt to locate, contact, and steer into pay status. To a greater or lesser degree, and for various reasons, the investigator is often somewhat more successful than the plan administrator had been. These investigations have tended to be rather protracted, but it appears as if a handful may be nearing their conclusions.

We are aware that a few plan administrators have received “compliance” or “findings” letters from DOL regional directors. The letters outline the enforcement steps available to the DOL and participants, as well as the penalties, under ERISA. In accordance with its standard letter template, DOL offers to refrain from such actions only if the plan administrator takes necessary corrective action that will be set forth in a settlement agreement with the DOL. Unfortunately, nowhere do these letters articulate the specific standards or prudent processes to which the fiduciary is being held, nor do they correlate the required corrective actions with standards or processes that the DOL believes would satisfy ERISA’s fiduciary requirements. Instead, it appears that the DOL overlooks the longstanding and well-established hallmark of fiduciary compliance—a prudent process—by focusing instead on the outcomes of the plan’s administration, with the benefit of hindsight.

Join Morgan Lewis in February 2018 for these programs addressing business developments that impact employee benefits and executive compensation.

Our outsourcing practice is hosting two upcoming webcasts: