The recently enacted coronavirus economic relief package, the American Rescue Plan of 2021 (“ARPA”), contains the most significant changes in fifteen years to the funding rules of single employer pension plans.  These changes have largely has fallen under the radar of the national press – an outcome disappointing perhaps only to ERISA nerds.  The little press addressing the pension provisions of ARPA mostly has been focused on the financial relief the legislation provides to troubled multiemployer pension plans — which, as we discuss elsewhere, have major implications for employers that participate, or are considering whether to participate, in a multiemployer plan.

Nevertheless, the significant changes to the single-employer plan funding rules warrant the attention of any employer that sponsors a single-employer defined benefit plan.  While the new law may significantly reduce the amount of contributions to pension plans that are required by law, reducing contributions may have other consequences that employers may wish to weigh.


Continue Reading To Fund or Not To Fund: Considerations for Employers Impacted by Recent Changes to Pension Plan Funding Rules

On January 12, 2021, the Employee Benefits Security Administration (“EBSA”) of the Department of Labor (“DOL”) announced new guidance on a range of issues related to missing participants:

  • In Missing Participants – Best Practices for Pension Plans, EBSA has provided examples of best practices that it has identified as being effective at minimizing and mitigating the problem of missing or nonresponsive participants.
  • This new guidance also includes Compliance Assistance Release No. 2021-01, which provides a roadmap of investigative processes and case-closing practices of EBSA investigators who conduct Terminated Vested Participants Project (“TVPP”) audits of defined benefit pension plans. One purpose of these audits is to assess whether defined benefit plans have taken appropriate steps to locate missing participants and beneficiaries.
  • EBSA also issued Field Assistance Bulletin No. 2021-01, which announced the DOL’s temporary enforcement policy on a terminated defined contribution plans’ use of the Pension Benefit Guaranty Corporation’s expanded missing participants program.

This article focuses on the guidance for ongoing plans (and not Field Assistance Bulletin 2021-01 for terminated plans).


Continue Reading Five New Ways That Plan Fiduciaries May Locate Missing Participants

The IRS recently published new guidance on the tax withholding and reporting consequences associated with qualified retirement plan distributions to state unclaimed property funds.  In Revenue Ruling 2020-24, the IRS clarified that distributions from qualified retirement plans to state unclaimed property funds are subject to both federal income tax withholding and 1099-R reporting requirements.  In a companion revenue procedure, Rev. Proc. 2020-46, the IRS permitted taxpayers to self-certify for a waiver of the 60-day deadline for rolling over funds between qualified plans when the funds had been distributed to a state unclaimed property fund.

Continue Reading IRS Updates Guidance on Qualified Plan Distributions to State Unclaimed Property Funds

The IRS recently released Notice 2020-62, which updates the safe harbor explanations that may be used to satisfy the  notice requirement for eligible rollover distributions, also referred to as the “Safe Harbor Notices.”  These changes to the Safe Harbor Notices take into account recent statutory changes brought about by the Setting Every Community Up for Retirement Enhancement (“SECURE”) Act of 2019 and the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act.

What are the § 402(f) Safe Harbor Notices?

Under § 402(f) of the Code, plan administrators of certain retirement plans are required to provide a written explanation to any recipient of an eligible rollover distribution.  This notice must be provided by 401(k) plans and other qualified plans, 403(b) plans and 457(b) governmental plans within a reasonable period of time before the distribution is to made — generally at least 30 days unless otherwise elected by the recipient.  To assist plan administrators in satisfying this notice requirement, the IRS has published and continues to update two versions of its Safe Harbor Notice, one for distributions from a designated Roth account, and one for distributions from non-Roth accounts.

Plan administrators may satisfy the § 402(f) notice requirement by relying on the Safe Harbor Notices, although they are not required to do so.

What Changes Have Been Incorporated Into the New § 402(f) Safe Harbor Notices?

The Safe Harbor Notices have been revised to reflect the following statutory changes adopted by the SECURE Act and by the CARES Act:


Continue Reading What You Need to Know About the New SECURE Act and CARES Act Updates to the § 402(f) Safe Harbor Rollover Notice

The extent to which a participant in a tax-qualified defined benefit plan has standing to sue the plan’s fiduciaries for mismanagement of plan assets has long been unclear. The argument against standing is that the participant has not suffered any injury because the participant would receive the same benefit from the plan regardless of the outcome of the lawsuit.

Continue Reading Supreme Court Closes Door to Participant Challenges to Defined Benefit Plan Investments

On May 27, 2020, the Department of Labor (“DOL” or “Department”) published a final rule providing an alternative safe harbor for furnishing ERISA pension plan disclosures electronically on a website or via email.  We previously blogged about the proposed rule here.  This post provides an overview of the final rule and highlights some key changes from the proposed rule.

As we previously noted, electronic disclosure has been permitted since 2002 under a safe harbor that allows plan administrators to electronically disclose ERISA documents to individuals who are “wired at work” or individuals who have affirmatively consented to electronic delivery.  This new safe harbor is an alternative to the 2002 safe harbor.  Plan administrators of pension plans may rely on either the new safe harbor, the 2002 safe harbor, both, or neither.  Significantly, however, the new safe harbor is limited to pension plans.  The 2002 safe harbor remains available for welfare plans.


Continue Reading Electronic Disclosure Rule for Pension Plans Finalized

Under Revenue Procedure 2019-20, sponsors of individually designed statutory hybrid plans, including cash balance plans, have a short window of opportunity to file determination letter applications with the IRS by August 31, 2020.  In addition, sponsors of merged plans have an ongoing opportunity to file determination letter applications within certain periods of time after the corporate transaction and plan merger. Plan sponsors should strongly consider taking advantage of these opportunities, since other opportunities for filing determination letter applications are limited.  This post discusses key highlights of the expansion of the determination letter application program under this Revenue Procedure.

Continue Reading Don’t Miss Your Window: Upcoming Deadlines for Determination Letter Applications

In October, the U.S. Department of Labor released a proposed rule that would increase plan administrators’ ability to make certain required ERISA pension disclosures through electronic, rather than paper, delivery.  Below is a summary of the proposed rule with some highlights on aspects of the proposal that have been questioned by interested parties and might be changed.

Continue Reading DOL Proposal for Electronic Disclosure of ERISA Pension Documents

On September 3, 2019, the IRS issued Revenue Ruling 2019-19, which discusses participants’ and beneficiaries’ inclusion of income and qualified retirement plans’ withholding and reporting obligations for uncashed distribution checks.  Although the Revenue Ruling describes only a qualified retirement plan under Code section 401(a), the same reasoning would most likely also apply to a Code section 403(b) plan.  Under the facts of this Revenue Ruling, a qualified retirement plan must make a distribution of $900 to a participant in 2019.  The participant receives the check from the plan but chooses not to cash it in 2019.  The IRS ruled that the participant’s failure to cash the check did not relieve her of the obligation to include the amount of the distribution in her gross income in 2019.  Similarly, the employer, as plan administrator, was obligated to withhold tax on the distribution that was required to be withheld under Code section 3405.  Finally, the employer was required to report the distribution amount on Form 1099‑R, and the participant’s failure to cash the distribution check did not affect this obligation.

These rulings are unsurprising based on existing law, particularly the doctrine of constructive receipt that is codified at Code section 451.  The IRS already ruled on a similar factual situation in Revenue Ruling 68-126, for example.  In that Revenue Ruling, a taxpayer could have received a retirement benefit check in one taxable year by appearing in person and claiming it but instead waited for the check to arrive in the mail in the following taxable year.  The IRS held that “the income is constructively received in the year preceding the year of actual receipt,” and that the retiree therefore had to include the amount of the check in income in the earlier year.  A rule that a participant could choose to delay inclusion in income of a distribution until a later year by simply failing to cash a distribution check in the year the plan issued it would also undermine the requirements to take required minimum distributions under Code section 401(a)(9).


Continue Reading IRS Issues Ruling on Uncashed Distribution Checks from Qualified Plans

The most recent decision in the ongoing Sun Capital saga provides no relief from pension withdrawal liability for private equity funds.  The federal district court for the District of Massachusetts recently reaffirmed its 2016 ruling that two private equity funds were responsible for the unfunded pension liabilities of a bankrupt portfolio company.  Consequently, private equity funds should continue to carefully evaluate investments in companies with pension liabilities.

Continue Reading Court Reaffirms that Private Investment Funds Are Responsible for Portfolio Company’s Pension Liability