Pension News in 2018

The following list tracks important guidance that were released during 2018. These items are summarized in detail, with appropriate commentary, in our quarterly newsletter, eRISA Update. See our Newsletters page to sign up for eRISA Update.

Legislative Developments

• Congress provides liberalized distribution, rollover and loan rules, and premature distribution penalty relief for certain taxpayers affected by California Wildfires [Citation: Bipartisan Budget Act of 2018 (“BBA2018”), P.L. 115-123 (February 9, 2018)]
  Text available at http://bit.ly/2EnEhef
• Congress eliminates 6-month suspension rule and requirement to access available plan loans, and permits all contributions sources and earnings on elective deferrals to be available for hardship withdrawal in post-2018 plan years [Citation: Sections 41113 and 41114 of the Bipartisan Budget Act of 2018 (“BBA2018"), P.L. 115-123 (February 9, 2018)]
  Text available at http://bit.ly/2EnEhef
• Congress allows levied money on retirement plan assets that is returned by the IRS to be rolled over [Citation: Section 41104 of the Bipartisan Budget Act of 2018 (“BBA2018"), P.L. 115-123 (February 9, 2018)]
  Text available at http://bit.ly/2EnEhef

Treasury Regulations

• Forfeitures may be used to reduced employer’s contribution liability for QNECs, QMACs and 401(k)(12) safe harbor contributions [Citation: Treas. Reg. §§1.401(k)-1(g)(5), 1.401(k)-6, 1.401(m)-1(d)(4), and 1.401(m)-5, 83 F.R. 34469 (July 20, 2018)]
  Text available at http://bit.ly/2msZdt4
• Proposed regulations address new hardship distribution rules enacted by recent legislation, add safe harbor hardship event for natural disasters [Citation: Prop. Treas. Reg. §§1.401(k)-1(d), 1.401(k)-3(c), 1.401(k)-6, 1.401(m)-3(c)(6)(v), 83 F.R. 56763 (November 14, 2018)]
  Text available at http://bit.ly/2A8uec3

IRS Guidance

• Annual update of Employee Plans determination letter application, user fee, and private letter ruling application procedures [Citation: Rev. Proc. 2018-4, 2018-1 I.R.B. (January 2, 2018)]
  Text available at http://bit.ly/2lUZzJd
• Two-year window to restate defined benefit M&P plans and volume submitter plans for second remedial amendment cycle ends April 30, 2020; determination letter program opens May 1, 2018 [Citation: Announcement 2018-5, 2018-13 I.R.B. (March 26, 2018)]
  Text available at http://bit.ly/2p4u14n
• Procedures for second RAP cycle modified to permit cash balance plans that use actual return on total plan assets as the interest crediting rate; conforming language adopted for second cycle and third cycle procedures [Citation: Rev. Proc. 2018-21, 2018-14 I.R.B. (April 2, 2018) (advance release on March 16, 2018)]
  Text available at http://bit.ly/2tY67NG
• IRS requesting comments on whether to expand the determination letter program for 2019 [Citation: Notice 2018-24, 2018-17 I.R.B. (April 23, 2018)]
  Text available at http://bit.ly/2Iy9Cws
• Verification of compliance with second cycle requirements for existing Pre-Approved Plan providers to submit opinion letter applications for the third cycle [Citation: Applications for Pre-Approved Contribution Plan Opinion Letters (May 23, 2018). at IRS website]
  Text available at http://bit.ly/2saOLZS
• Transfer to State’s unclaimed property fund results in reporting taxation of affected participant or beneficiary [Citation: Rev. Rul. 2018-17, IRB 2018-25 (June 18, 2018) (advance release on May 29, 2018)]
  Text available at http://bit.ly/2IUVS3H
• Submission cycle for third cycle extended for DC Pre-Approved Plans [Citation: Rev. Proc. 2018-42, 2018-36 (September 4, 2018; advance release on August 15, 2018)]
  Text available at http://bit.ly/2NuRjuZ
• IRS issues interim guidance and requests comments regarding calculation of UBTI under IRC §512(c)(6) for exempt organizations engaged in more than one unrelated trade or business [Citation: Notice 2018-67, 2018-36 (September 4, 2018)]
  Text available at http://bit.ly/2LLDlDv
• IRS updates 402(f) notice to reflect the TCJA changes to the rollover deadline for qualified plan loan offsets, self-certification of eligibility for waivers of the 60-day rollover deadline, and other guidance and clarifying changes [Citation: Notice 2018-74, 2018-40 (October 1, 2018)]
  Text available at http://bit.ly/2NpoTGX
• Latest update of the EPCRS Procedure revises the VCP submission procedures to require electronic submissions starting no later than April 1, 2019 [Citation: Rev. Proc. 2018-52,2018-42 I.R.B. (October 15, 2018; advance release on September 28, 2018)]
  Text available at http://bit.ly/2xS5a9h
• IRS extends relief in Announcement 2017-15 to employees affected by Hurricanes Florence and Michael [Preamble to Proposed Regulations on Hardship Distributions, 83 F.R. at 56766 (November 14, 2018)]
  Text available at http://bit.ly/2A8uec3
• Adjusted dollar limits for 2019 [Citation: Notice 2018-83, Notice 2018-83, 2018-47 I.R.B. (November 19, 2018) (advance release on November 1, 2018)]
  Text available at https://www.irs.gov/pub/irs-drop/n-18-83.pdf
• Updated procedure for acts that may be extended on account of a federally-declared disaster [Citation: Rev. Proc. 2018-58, 2018-50 I.R.B. (December 10, 2018) (advance release on November 20, 2018)]
  Text available at http://bit.ly/2Qlka9W
• Relief given to 403(b) plans regarding the “once” lookback rule for applying the part-time employee exclusion under the universal availability test [Citation: Notice 2018-95, 2018-52 I.R.B. (December 24, 2018) (advance release on December 4, 2018)]
  Text available at http://bit.ly/2G0uoZv
• 2018 Required Amendment List issued by the IRS [Citation: Notice 2018-91, I.R.B. (December 26, 2018) (advance release on December 5, 2018)]
  Text available at http://bit.ly/2OWOcvO

IRS General Counsel Memoranda, Field Service Advice, Chief Counsel Advice, Private Letter Rulings and Technical Advice Memoranda

• IRS explains its interpretation of how offset arrangements affect benefiting determinations for 401(a)(4) and 401(a)(26) testing [Citation: Application of Sections 401(a)(4) and 401(a)(26) to a Cash Balance Plan That Offsets Benefits With Benefits Under a Defined Contribution Plan, CCA 201810008 (February 7, 2018; released March 9, 2018)]
  Text available at http://bit.ly/2p5boxj
• IRS examiners told not to challenge 403(b) plans that have not made timely RMDs to missing participants if reasonable search steps have been taken [Citation: TEGE-04-0218-0011 (February 23, 2020)]
  Text available at http://bit.ly/2paGvbm
• Student loan program that provides an employer nonelective contribution to employee who enroll does not violate contingent benefit rule under IRC §401(k)(4)(A) [Citation: PLR 201833012 (August 17, 2018)]
  Text available at http://bit.ly/2MAywBo

DOL Regulations

• Civil penalty adjustments for 2018 [Citation: DOL Federal Civil Penalties Inflation Adjustment Act Annual Adjustments for 2018, DOL Reg. §2575.3, 83 F.R. 7 (January 2, 2018)]
  Text available at http://bit.ly/2CIFDPV
• DOL proposes to relax “commonality” standard to determine if certain multiple employer welfare plans (Association Health Plans) constitute a single-plan in order to expand the market for group health coverage [Citation: Prop. DOL Reg. §2510.3-5, 83 F.R. 614 (January 5, 2018)]
  Text available at http://bit.ly/2quXQyX
• DOL relaxes “commonality” standard to determine if certain multiple employer welfare plans (Association Health Plans) constitute a single-plan in order to expand the market for group health coverage [Citation: DOL Reg. §2510.3-5, 83 F.R. 28912 (June 21, 2018)]
  Text available at http://bit.ly/2IaWrkH
• DOL proposes to relax “commonality” standard to determine if certain multiple employer defined contribution plans constitute a single-plan in order to expand coverage of employees in workplace retirement plans [Citation: Prop. DOL Reg. §2510.3-55, 83 F.R. 53534 (October 25, 2018)]
  Text available at http://bit.ly/2SdGBfb

DOL Formal Guidance/Prohibited Transaction Exemptions

• None

PBGC Regulations and Other Guidance

• Proposed regulations would incorporate PPA 2006 changes to the phase-in rules for guaranteed benefits for majority owners [Citation: Prop. PBGC Reg. §§4001.2, 4022.24-4022.26, 4022.62-4022.63, 4041.2, 4043.2, 4044.10, 4044.14, 83 F.R. 9716 (March 27, 2018)]
  Text available at http://bit.ly/2oSP0YB
• PBGC simplifies procedures for determining whether PBGC relief applies to a disaster; coordination with IRS announcements [Citation: Announcement of PBGC Disaster Relief, 83 F.R. 30991 (July 2, 2018)]
  Text available at http://bit.ly/2zr44En
• Regulations incorporate PPA 2006 changes to the phase-in rules for guaranteed benefits for majority owners [Citation: PBGC Reg. §§4001.2, 4022.24-4022.26, 4022.62-4022.63, 4043.2, 4044.10, 4044.14, 83 F.R. 49799 (October 3, 2018)]
  Text available at http://bit.ly/2RnVdbt

EBSA Advisory Opinions, Field Assistance Bulletins and other informal guidance

• DOL extends temporary enforcement policy on Fiduciary Rule pending further guidance; acknowleges impact of Fifth Circuit opinion vacating the Fiduciary Rule [Citation: Field Assistance Bulletin (FAB) 2018-02 (May 7, 2018)]
  Text available at http://bit.ly/2JZ0t0Ht
• DOL clarifies aspects of Interpretive Bulletins 2016-01 and 2015-01 [Citation: Field Assistance Bulletin 2018-01 (April 23, 2018)]
  Text available at http://bit.ly/2K9yc8G
• DOL opines on fiduciary responsibilities associated with an auto-portability program designed to match former employees’ default IRAs with plans of a subsequent employer [Citation: DOL Advisory Opinion 2018-01A (November 5, 2018)]
  Text available at http://bit.ly/2B4K5uf

ERISA Litigation

• Killer statute determined not to be preempted by ERISA; applicable to person found not guilty by reason of insanity [Citation: Laborers’ Pension Fund v. Miscevic, 880 F.3d 927 (7th Cir. January 29, 2018)]
  Text available at http://bit.ly/2BHAB51
• Fifth Circuit vacates entire fiduciary regulation and related PT exemptions, while Tenth Circuit rules that limiting PTE 84-24 to fixed rate annuities was not an improper exercise of regulatory action [Citation: Chamber of Commerce v. DOL, 885 F.3d 360 (5th Cir. March 15, 2018); Market Synergy Group, Inc. v. DOL, No. 885 F.3d 676 (10th Cir. March 13, 2018)]
  Text available at http://bit.ly/2pjT04o (Chamber of Commerce case); http://bit.ly/2uFlL0B (Market Synergy case)
• Prudence challenge against stable value fund investment option dismissed for failure to state a claim under ERISA [Citation: Barchock v. CVS Health Corporation, 886 F.3d 43 (1st Cir. March 23, 2018)]
  Text available at http://bit.ly/2DWLd0S
• Wire transfer of funds out of plan to participant reasonably interpreted by administrator as paid as of such date, even though funds did not hit transferee account until after participant’s death [Citation: Wengert v. Rajendran, 866 F.3d 725 (8th Cir. April 3, 2018)]
  Text available at http://bit.ly/2GW60nQ
• Amending that assumed future compensation increases with respect to protected traditional-formula benefit did not violate anti-cutback rule [Citation: Teufel v. Northern Trust Company, 887 F.3d 799 (7th Cir. April 11, 2018)]
  Text available at http://bit.ly/2HiIy7G
• Application of state law limitations period depended on the basis of the claim; class certification; doctrine of contra proferentum not applicable under Firestone deference standard [Citation: Clemons v. Norton Healthcare Inc. Retirement Plan, 890 F.3d 254 (6th Cir. 2018)]
  Text available at http://bit.ly/2G4nbSH
• Provisions in health plans that prohibit assignment of the beneficiary’s claim are not prohibited by ERISA [Citation: American Orthopedic & Sports Medicine v. Independence Blue Cross Blue Shield, 890 F.3d 445 (3rd Cir. May 16, 2018)]
  Text available at http://bit.ly/2J6vgNr
• Participant’s death three days before annuity starting date resulted in no death benefit for nonspouse beneficiary because plan only provides spousal preretirement death benefits [Citation: Estate of Jones v. Children’s Hospital and Health Systems Incorporated Pension Plan, 892 F.3d 919 (7th Cir. June 13, 2018)]
  Text available at http://bit.ly/2L7SrDY
• On remand, Fifth Circuit dismisses fiduciary claims regarding retention of publicly-traded stock, illustrating difficulties for plaintiffs in stock drop cases in a post-Dudenhoeffer environment [Citation: Kopp v. Klein, 894 F.3d 214 (5th Cir. June 27, 2018)]
  Text available at http://bit.ly/2LnGAS1
• Financial institution’s engagement in foreign exchange transactions on behalf of client plans did not cause the institution to be an ERISA fiduciary with respect to such plans [Citation: Allen v. Credit Suisse Securities LLC, Nos 16-3327-cv (L) and 16-3571-cv (CON), ___ F.3d ___ (2nd Cir. July 10, 2018)]
  Text available at http://bit.ly/2miMA3I
• Arbitration clause in employment contract did not apply to action under ERISA §502(a)(2) because the suit was brought on behalf of the plan [Citation: Munro v. University of Southern California, ___ F.3d ___ (9th Cir. July 24, 2018)]
  Text available at http://bit.ly/2Jb9h4q
• Court held trust that is in a controlled group with employer was liable to PBGC for funding liabilities because its leasing of land to the employer was a trade or business, and federal common law of successor liability also can be applied [Citation: PBGC v. Findlay Industries, Inc., ___ F.3d ___, No. 17-3520 (6th Cir. September 4, 2018)]
  Text available at http://bit.ly/2wNpCX8
• Ministerial employees’ misinformation about distribution options may amount to a fiduciary breach by the fiduciary for whom the employees work as agents, but accurate information in SPD will foreclose recovery [Citation: DeRogatis v. Board of Trustees of the Central Pension Fund, ___ F.3d ___, No. 16-3549-cv (2nd Cir. September 14, 2018)]
  Text available at http://bit.ly/2xKeEmH
• First Circuit addresses burden of proof issues surrounding fiduciary breach allegations regarding use of proprietary funds and unreasonableness of fees, and the application of PTE 77-3 to in-house mutual fund investments [Citation: Brotherston v. Putnam Investments, LLC, No. 17-1711, ___ F.3d ___ (1st Cir. October 15, 2018)]
  Text available at http://bit.ly/2qv2c6r
• IRA and 401(k) funds obtained in a property settlement were not exempt from bankruptcy estate as retirement funds [Citation: Lerbakken v. Sieloff and Associates, P.A. (In re Lerbakken), ___ F.3d ___, No. 18-6018 (8th Cir. October 16, 2018)]
  Text available at http://bit.ly/2ySORJt
• Second Circuit breathes some life into pleading standards for stock drop cases based on nonpublic information [Citation: Jander v. Retirement Plans Committee of IBM, ___ F.3d ___, No. 17-3518 (2nd Cir. December 10, 2018)]
  Text available at http://bit.ly/2Rlrnrd

Miscellaneous Guidance

• SEC proposes rules to enhance protections for retail investors and to clarify investment professional relationships [Citation: Prop. SEC Reg. §§240.15l-1, 240.17a-3 (“Rule 17a-3"), 240.17a-4(e)(5) (“Rule 17a-4"), 83 F.R. 21574 (May 9, 2018), Prop. SEC Reg. §§§240.17a-14(f), §275.211h–1, and 275.204-5(e), 83 F.R. 21416 (May 9, 2018), Release No. IA–4889, 83 F.R. 21203 (May 9, 2018)]
  Text available at http://bit.ly/2I3pTOa (Best Interest Standard), http://bit.ly/2K5v4tA (Release No. 1A-4889), and http://bit.ly/2jKXhuM (CRS proposal)
• Executive Order directs DOL to expand access to multiple employer plans, make retirement plan disclosures more understandable and useful, and review life expectancy factors for RMD purposes [Executive Order on Strengthening Retirement Security In America (August 31, 2018)]
  Text available at http://bit.ly/2x1Wrkq