The coronavirus (COVID-19) outbreak has scrambled our lives, but that doesn’t mean that your plan sponsor clients get a time out. They must continue to meet fiduciary and regulatory obligations, even as the rules change with the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Here are some resources you might consider sharing with clients to help them manage the changes.
Calculating Plan Loan Limits under the CARES Act: Application of the One-Year Lookback
Christine M. Kong
Faegre Drinker
Excerpt: “The Coronavirus Aid, Relief, and Economic Security (CARES) Act temporarily increases the plan loan limit for loans to qualified individuals (as defined below) from defined contribution plans, such as 401(k) plans and 403(b) plans. This is generally good news for employees, but care should be taken when plan sponsors and plan recordkeepers calculate the loan limit because the one-year 'lookback' continues to apply.”
Coronavirus Check-Up for Retirement Plans
Groom Law Group
Excerpt: “As 401(k) plan and other retirement benefits represent significant assets for most employees and retirees, they may look to their retirement plans for assistance. We have included some considerations for retirement plan sponsors and fiduciaries as they navigate the process of reacting to the changes in the business environment and helping participants.”
Groom Law Group
Excerpt: “This article is intended to make plan sponsors aware of the most common reporting and regulatory issues that arise in an economic downturn and summarize the options for addressing serious pension funding challenges. We also discuss the recently passed pension funding relief and possible future changes to the funding rules under Employee Retirement Income Security Act of 1974, as amended ('ERISA'), and the Internal Revenue code of 1986, as amended (the 'Code').”
Coronavirus Market Volatility and Pension Plan Contributions
Findley
Excerpt: “The Coronavirus (COVID-19) pandemic’s impact on your family, friends and economy continues to unfold daily. Interest rates are down, and the equity markets are depressed and have been highly volatile. This economic situation will cause revenues of many plan sponsors to stagnate, which will drain cash reserves, and likely lead to layoffs. This is another 'perfect storm' for the pension plan, which if the markets don’t normalize, will lead to much higher required pension contributions in the upcoming year.”
ERISA Fiduciaries Must Monitor Market Turbulence
Gregory L. Ash
Spencer Fane LLC
Excerpt: “The recent turmoil in the financial markets, while troubling for individual investors, also has potentially significant implications for ERISA fiduciaries. Individuals and committees who have investment authority over plan assets should reevaluate their portfolios in light of these developments. Circumstances may not require a change in investment strategy, but ERISA’s prudence requirement requires fiduciaries to give immediate, thoughtful consideration to how those circumstances have changed.”
Fiduciary Responsibilities under ERISA in an Uncertain Market
Randy Scherer, Lisa Van Fleet and Steve Evans
Bryan, Cave, Leighton, Paisner
Excerpt: “In this volatile market, it is important for fiduciaries of retirement and other funded plans governed by the Employee Retirement Income Security (ERISA) to keep their fiduciary duties in mind and take appropriate action.”
IRS and PBGC Provide Pension and Other Relief in the Wake of COVID-19
Groom Law Group
Excerpt: “First, the IRS issued anticipated Notice 2020-23, postponing various tax and employee benefit related deadlines under the Code. Specifically, Notice 2020-23 automatically postpones the due date of many tax payments and filings, and extends many deadlines that would otherwise apply with regard to benefit plan administration under Code rules. Any such due date or deadline that would ordinarily fall on or after April 1, 2020 through July 14, 2020, is automatically extended to July 15, 2020. While this relief is welcome amidst the COVID-19 crisis, many Form 5500 filers are left without meaningful relief.”
New in-Service Distribution Event: Coronavirus-Related Distributions
Art Marrapese
Barclay Damon LLP
Excerpt: “Employers should carefully weigh the advantages and disadvantages before choosing to authorize in-service CRD distributions. While this new distribution option can deliver needed assistance to employees adversely impacted by COVID-19, enabling employees to withdraw substantial amounts from their retirement accounts has the potential to severely impact an employee’s retirement security. Further, now is not the ideal time to liquidate account balances invested in assets whose value may be likely to fluctuate on a weekly, if not daily, basis.”
The Coronavirus Crisis: What Plan Sponsors Should Do
Fred Reish and Bruce Ashton
Excerpt: “The Coronavirus pandemic is disrupting everyone’s personal and financial lives. While our health, and that of our families and friends, is paramount, we realize that the sudden and large investment losses in the 401(k) plans that you sponsor – and act as fiduciaries for – present issues more challenging than those typically encountered by employers and plan committees. This article suggests steps that you can take as fiduciaries to address those challenges. The article also applies to advisors because it addresses questions they may get from plan sponsors.”
Thinking Ahead: Retirement Plan Options to Consider During COVID-19 Outbreak
Victoria H. Zerjav, Austin K. Stack and Carrie Roberts
Holland & Knight
Excerpt: “Current retirement plan designs and traditional plan administration and governance rules, as well as potential new legislation under consideration or being recommended to Congress, may present plan sponsors with some choices to make in terms of cost savings measures for companies and access to funds for employees. This Holland & Knight alert describes some of the choices that are available as the consequences of the health crisis become clearer.”