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Pension News in 2019

The following list tracks important guidance that was released during 2019. 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

  • SECURE Act and other sections of the Further Consolidated Appropriations Act comprise comprehensive legislation affecting retirement plans, including more flexible safe harbor 401(k) rules, increased tax credit for small employers, more time to adopt plans, lower in-service distribution age for pension plans, expanded 401(k) availability to long-term part-time employees, deferral of required minimum distributions and restrictions on post-death distributions from defined contribution plans, facilitation of lifetime income options, expanded multiple employer plan options, increased penalties for certain reporting failures, rules for terminated 403(b) custodial account plans, expanded IRA availability, permanent relief for closed defined benefit plans, and additional disaster relief [Citation: Further Consolidation Appropriations Act: Division O (SECURE Act), §104 of Division M, and Division Q, P.L. 116-94 (December 20, 2019)]
    Text available at: https://www.congress.gov/bill/116th-congress/house-bill/1865/text?q=%7B%22search%22%3A%5B%22further+consolidation%22%5D%7D&r=1&s=3

Treasury Regulations

  • Treasury obsoletes outdated regulations [Citation: Treas. Reg. §§1.72-15, 1.72-17A, 1.72-18, 1.401-3, 1.401-4, 1.401-5, 1.401-6, 1.401-8, 1.401-10, 1.401-11 through 1.401-13, 1.401(e)-1 through 1.401(e)-6, 1.401(f)-1, 1.402(a)-1, 1.402(e)-1, 1.403(a)-1, 1.404(a)-1, 1.404(a)-2, 1.404(a)-2A, 1.404(a)-3, 1.404(a)-4 through 1.404(a)-7, 1.404(a)-8, 1.404(a)-9, 1.404(a)-10, 1.404(a)(8)-1T, 1.404(e)-1, 1.404(e)-1, 1.404(e)-1A, 1.405-1 through 1.405-3, 1.410(a)-1, 1.410(b)-0, 1.410(b)-1, 1.411(a)-1, 1.411(a)-5, 1.411(a)-9, 1.411(d)-2, 1.411(d)-5, 1.412(b)-5, 1.412(c)(1)-3T, 1.412(l)(7)-1, 1.414(r)-8, and 1.416-1, 84 F.R. 9231 (March 14, 2019)]
    Text available at https://www.govinfo.gov/content/pkg/FR-2019-03-14/pdf/2019-03474.pdf
  • Regulations under IRC §6707A amend the calculation of the penalty for failure to disclose a reportable transaction to reflect changes made by the Small Business Job Act of 2010 [Citation: Treas. Reg. §301.6707A-1, 84 F.R. 11217 (March 26, 2019)]
    Text at https://www.govinfo.gov/content/pkg/FR-2019-03-26/pdf/2019-05546.pdf
  • Treatment of disregarded entity as corporation for employment tax purposes does not change character of compensation for owner(s) of disregarded entity [Citation: Treas. Reg. §301.7701-2(c)(2)(iv)(C)(2), 84 F.R. 31478 (July 3, 2019)]
    Text available at https://www.govinfo.gov/content/pkg/FR-2019-07-02/pdf/2019-14121.pdf
  • Proposed regulations would provide qualification protection for MEPs where a participating employer’s actions might otherwise disqualify the entire plan [Citation: Treas. Reg. §1.413-2(g), 84 F.R. 31777 (July 3, 2019)]
    Text available at https://www.govinfo.gov/content/pkg/FR-2019-07-03/pdf/2019-14123.pdf
  • Regulations addressing new hardship distribution rules enacted by recent legislation, adding a safe harbor hardship event for natural disasters, and prescribing uniform determinations for financial need adopted by the Treasury [Citation: Treas. Reg. §§1.401(k)-1(d), 1.401(k)-3(c)(6) and (7), 1.401(k)-3(j), 1.401(k)-6 (eligible employee, QMACs, and QNECs definitions), 1.401(m)-3(c)(6)(v), 84 F.R. 49651 (September 23, 2019)]
    Text available at https://www.govinfo.gov/content/pkg/FR-2019-09-23/pdf/2019-20511.pdf

IRS Guidance

  • Annual update of general procedures for obtaining Employee Plans private letter rulings, determination letters, and user fees pertaining to rulings, determination letters and VCP submissions[Citation: Rev. Proc. 2019-4, 2019-1 I.R.B. (January 2, 2019)]
    Text available at http://bit.ly/2SIxJyk
  • “De-risking” programs that allow retirees in pay status to convert annuity stream to lump sum payment will no longer be permitted under many circumstances [Citation: Notice 2019-18 I.R.B. 2019-13 (March 25, 2019; advance release on March 6, 2019)
    Text available at https://www.irs.gov/pub/irs-drop/n-19-18.pdf
  • IRS issues 2019 covered compensation table [Citation: Rev. Rul. 2019-08, 2019-14 I.R.B. (April 1, 2019); advance publication on March 15, 2019)]
    Text available at https://www.irs.gov/pub/irs-drop/rr-19-06.pdf
  • Static mortality tables for IRC §430(h)(3) funding calculations for 2020 valuation dates; applicable mortality tables for IRC §417(e) determinations for annuity starting dates that occur in stability periods beginning in 2020; mortality improvement rates for 2020 valuation dates [Citation: Notice 2019-26, 2019-25 I.R.B. (April 8, 2019) (advance release on March 22, 2019)]
    Text available https://www.irs.gov/pub/irs-drop/n-19-26.pdf
  • IRS updates Operational Compliance Checklist to include rules taking affect in 2018 and 2019 [Citation: Operational Compliance Checklist, as updated on March 26, 2019]
    Text available at https://www.irs.gov/retirement-plans/operational-compliance-list
  • Latest update of EPCRS procedure allows for certain loan failures to be self-corrected, expands self-correction options for certain document failures [Citation: Rev. Proc. 2019-19, 2019-19 I.R.B. (May 6,2019) (advance release on April 19, 2019)]
    Text available at https://www.irs.gov/pub/irs-drop/rp-19-19.pdf
  • IRS expands determination letter options for individually-designed plans - one temporary the other open-ended [Citation: Rev. Proc. 2019-20, 2019-20 I.R.B. (May 13, 2019); advance release on May 1, 2019]
    Text available at https://www.irs.gov/pub/irs-drop/rp-19-20.pdf
  • Proposed regulations under IRC §3405(e)(13) regarding withholding on periodic payments and nonperiodic distributions (other than eligible rollover distributions) to payments outside of the U.S. [Citation: Prop. Treas. Reg. §31.3405(e)-1, 84 F.R. 25209 (May 31, 2019)]
    Text available at https://www.govinfo.gov/content/pkg/FR-2019-05-31/pdf/2019-11292.pdf
  • Distributee’s receipt of distribution check triggers taxation regardless of whether distributee cashes it [Citation: Rev. Rul. 2019-19, 2019-36 I.R.B. (September 3, 2019)]
    Text available at https://www.irs.gov/pub/irs-drop/rr-19-19.pdf
  • Extension of temporary relief for certain DB/DC combo plans involving a “closed” DB plan to pre-2021 plan years [Citation: Notice 2019-49, 2019-38 I.R.B. (September 16, 2017)]
    Text available at http://bit.ly/2xUySbc
  • IRS establishes cyclical remedial amendment cycles for 403(b) plans [Citation: Rev. Proc. 2019-39, 2019-42 I.R.B. (October 14, 2019); advance release on September 30, 2019]
    Text available at https://www.irs.gov/pub/irs-drop/rp-19-39.pdf
  • Adjusted dollar limits for 2020 [Citation: Notice 2019-59, 2019-47 I.R.B. (November 18, 2019)]
    Text available at https://www.irs.gov/pub/irs-drop/n-19-59.pdf
  • Provision of BRF testing relief under Notice 2014-5 [Citation: Notice 2019-60, 2019-49 I.R.B. (December 2, 2019)]
    Text available at https://www.irs.gov/pub/irs-drop/n-19-60.pdf
  • Static mortality tables for IRC §430(h)(3) funding calculations for 2021 valuation dates; applicable mortality tables for IRC §417(e) determinations for annuity starting dates that occur in stability periods beginning in 2021; mortality improvement rates for 2021 valuation dates [Citation: Notice 2019-67, 2019-52 I.R.B. (December 23, 2019)]
    Text available https://www.irs.gov/pub/irs-drop/n-19-67.pdf
  • 2019 remedial amendment list includes final 401(k) hardship regulations [Citation: Notice 2019-64, 2019-52 (December 23, 2019)]
    Text available at https://www.irs.gov/pub/irs-drop/n-19-64.pdf

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
  • Audio recording rights under IRC §7521 do not apply to discussions pertaining to determination letter proceedings [Citation: Chief Counsel Memorandum (Procedure & Administration), dated October 18, 2019]
    Text available at https://www.irs.gov/pub/lanoa/pmta-2019-12.pdf
  • IRS will continue to pursue disqualification where plan sponsor cannot produce evidence of a signed written document [Citation: : General Legal Advice Memorandum (GLAM) AM-2019-002 (December 9, 2019)]
    Text available at https://www.irs.gov/pub/foia/am-2019-002.pdf
  • Treatment of certain additional payments to recipients of ESOP stock distributions under rollover rules [Citation: General Legal Advice Memorandum (GLAM) AM-2019-003 (December 20, 2019)]
    Text available at https://www.irs.gov/pub/foia/am-2019-003.pdf

DOL Regulations

  • Civil penalty adjustments for 2019 [Citation: DOL Federal Civil Penalties Inflation Adjustment Act Annual Adjustments for 2018, DOL Reg. §2575.3, 84 F.R. 213 (January 23, 2019)]
    Text available at http://bit.ly/2DuyB4e
  • Regulations require registration statements filed for top hat plans to be filed electronically at DOL website; same requirements for apprenticeship and training welfare benefit plans [Citation: DOL Reg. §§2520.104-22(c) and 2520.104-23(c), 84 F.R. 27952 (June 17, 2019)]
    Text available at https://www.govinfo.gov/content/pkg/FR-2019-06-17/pdf/2019-12653.pdf
  • DOL relaxes “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: DOL Reg. §2510.3-55, 84 F.R. 37508 (July 31, 2019)]
    Text available at https://www.govinfo.gov/content/pkg/FR-2019-07-31/pdf/2019-16074.pdf
  • Proposed regulations would allow for automatic disclosure of Title I documents through website availability if notice requirement satisfied and opt-out and paper request are available [Citation: Prop. DOL Reg. §2520.104b-31, 84 F.R. 56894 (October 23, 2019)]
    Text available at https://www.govinfo.gov/content/pkg/FR-2019-10-23/pdf/2019-22901.pdf

DOL Formal Guidance/Prohibited Transaction Exemptions

  • None

PBGC Regulations and Other Guidance

  • PBGC proposes regulatory amendments to provide more flexibility for reporting controlled group information, and to clarify plan actuarial assumptions to be used by cash balance plans, the use of consolidated financial statements, and the application of waiver rules [Citation: Prop. PBGC Reg. §§4010.2, 4010.4(e), 4010.7(a), 4010.8(d)(2) and (3), 4010.9, and 4010.11, 84. F.R. 30666 (June 27, 2019)]
    Text available at https://www.govinfo.gov/content/pkg/FR-2019-06-27/pdf/2019-13419.pdf
  • PBGC proposes regulatory amendments to eliminate potential duplicative reporting with respect to active participant reductions and liquidation and insolvency reporting, simplify the active participant reduction determination, and clarify aspects of the reportable events relating to active participant reductions, inability to pay benefits when due, change in contributing sponsor or controlled group, and liquidation [Citation: Prop. PBGC Reg. §§4043.2, 4043.3, 4043.9, 4043.23, 4043.26, 4043.29, 4043.30, 4043.35, and 4043.81, 84. F.R. 30666 (June 27, 2019)]
    Text available at https://www.govinfo.gov/content/pkg/FR-2019-06-27/pdf/2019-13419.pdf
  • PBGC proposes regulatory amendments to clarify the exemptions from the VRP for plans completing a standard termination and the participant count rules for certain transfers and mergers [Citation: Prop. PBGC Reg. §§4006.4 and 4006.5, 84. F.R. 30666 (June 27, 2019)]
    Text available at https://www.govinfo.gov/content/pkg/FR-2019-06-27/pdf/2019-13419.pdf
  • PBGC proposes regulatory amendment to provide more time to complete post-distribution reporting after a standard termination [Citation: Prop. PBGC Reg. §4041.29, 84. F.R. 30666 (June 27, 2019)]
    Text available at https://www.govinfo.gov/content/pkg/FR-2019-06-27/pdf/2019-13419.pdf
  • PBGC proposes to adopt IRC §417(e)(3) interest and mortality assumptions [Citation: Prop. PBGC Reg. §4022.7, Appendixes A, B and C of Part 4022, 84 F.R. 51490 (September 30, 2019)]
    Text available at https://www.govinfo.gov/content/pkg/FR-2019-09-30/pdf/2019-21087.pdf
  • PBGC proposes clarifications and codification of existing practices in the payment of benefits under PBGC-trusteed plans [Citation: Prop. PBGC Reg. §§4022.7-4022.9, 4022.23, 4022.93, 4044.10, 4044.41, 4062.4, 84 F.R. 51494 (September 30, 2019)]
    Text available at https://www.govinfo.gov/content/pkg/FR-2019-09-30/pdf/2019-21088.pdf
  • PBGC proposes to reorganize regulations pertaining to review of agency decisions and to clarify certain procedures [Prop. PBGC Reg. §§4003.1, 4003.3-4003.4, 4003.7, 4003.21-4003.22, 4003.31, 4003.33-4003.35, 4003.55, 4033.57-4003.59, 84 F.R. 53084 (October 4, 2019)]
    Text available at https://www.govinfo.gov/content/pkg/FR-2019-10-04/pdf/2019-21495.pdf
  • Detailed separate reporting on certain controlled group members waived pending finalization of proposed regulations that would adopt this change [Citation: PBGC Technical Update 19-1 (October 16, 2019)]
    Text available at https://www.pbgc.gov/prac/other-guidance/4010-financial-information-reporting-waiver

EBSA Advisory Opinions, Field Assistance Bulletins and other informal guidance from the DOL

ERISA Litigation

  • Equitable reformation resolved ambiguous plan provision regarding calculation of benefits for rehired employees [Frommert v. Conkwright, Nos. 17 114 cv(L), 17 738 cv(CON), ___ F.3d ___ (2nd Cir. January 14, 2019)]
    Text available at http://bit.ly/2BmqJ3d
  • Sixth Circuit favors more nuanced standard of review of Darden factors used to establish employee or independent contractor status; gives substantial weight to independent contractor agreement entered into by parties [Citation: Jammal v. American Family Insurance Company, No. 17-4125, ___ F.3d ___ (6th Cir. January 29, 2019)]
    Text available at http://bit.ly/2DW0Qb8
  • Ninth Circuit rejects claims for restitution and disgorgement because they were not equitable in nature; service provider not acting as fiduciary when selling its product even if fees excessive; ERISA doesn’t preempt state law regarding fraudulent sales practices [Citation: The Depot, Inc. v. Caring For Montanans, Inc., No. 17-35597, ___ F.3d ___ (9th Cir. February 6, 2019)]
    Text available at http://bit.ly/2TusKEX
  • Financial service provider was not a fiduciary merely because it had the authority to change the credited rate on stable value product since, after any such change, the plan fiduciary could eliminate the investment and participants could direct out of that investment [Citation: Teets v. Great-Wrst Life & Annuity Insurance Company, No. 18-1019, ___ F.3d ___ (10th Cir. March 27, 2019)]
    Text available at https://www.ca10.uscourts.gov/opinions/18/18-1019.pdf
  • Sale of company stock to ESOP was a prohibited transaction because ESOP overpaid for stock; ERISA §408(e)(1) exemption not applicable because overpayment by ESOP fails “adequate consideration” requirement [Citation: Brundle v. Wilmington Trust, N.A., No. 17-1873, ___ F.3d ___ (4th Cir. March 27, 2019)]
    Text available at http://www.ca4.uscourts.gov/Opinions/171873.P.pdf
  • Court upholds validity of QDRO issued after participant’s death where final partition entered less than 18 months before compliant QDRO was issued [Citation: Miletello v. RMR Mechanical, Inc., No.18-30942, ___ F.3d. ___ (5th Cir. April 16, 2019)]
    Text available at http://www.ca5.uscourts.gov/opinions/pub/18/18-30942-CV0.pdf
  • Fiduciary bank failed to meet its burden to prove the amount of recordkeeping fees collected from plan were related to direct expenses; reasonable compensation exemption not applicable to self-dealing [Citation: Acosta v. City National Corporation, No. 17-55421, ___ F.3d ___ (9th Cir. April 23, 2019)]
    Text available at: http://cdn.ca9.uscourts.gov/datastore/opinions/2019/04/23/17-55421.pdf
  • Fiduciary breach suit against large 403(b) plan for excessive fees relating to investment options allowed to proceed to trial; allegations must focus on deficiencies in fiduciary’s process [Citation: Sweda v. University of Pennsylvania, No. 17-3244, ___ F.3d ___ (3rd Cir. May 2, 2019)]
    Text available at https://www2.ca3.uscourts.gov/opinarch/173244p.pdf
  • S corporation stock held by ESOP attributed to participating employees to determine if they were related persons within the meaning of IRC §267 [ Citation: Peterson v. Commissioner, No. 17-9003, ___ F.3d ___ (10th Cir. May 15, 2019)]
    Text available at https://www.ca10.uscourts.gov/opinions/17/17-9003.pdf
  • Plaintiffs continue to struggle with the Dudenhoeffer pleading standards regarding allegedly overvalued publicly-traded employer securities [Citation: Usenko v. MEMC LLC, No. 18-1626, ___ F.3d ___ (8th Cir. June 4, 2019)]
    Text available at https://ecf.ca8.uscourts.gov/opndir/19/06/181626P.pdf
  • “Substantial compliance doctrine” does not apply to administrator’s failure to meet deadlines, resulting de novo review of administrator’s decision to deny disability benefits [Fessenden v. Reliance Standard Life Ins. Co. and Oracle USA, Inc., Group Long Term Disability Plan, No. 18-1346, ___ F.3d ___ (7th Cir. June 25, 2019)]
    Text available at http://media.ca7.uscourts.gov/cgi-bin/rssExec.pl?Submit=Display&Path=Y2019/D06-25/
    C:18-1346:J:Barrett:aut:T:fnOp:N:2360501:S:0
  • In the absence of a plan document, a summary plan description could constitute a plan to determine health plan’s right to reimbursement for participant’s third party recovery for injuries [MBI Energy Services v. Hoch, No. 18-1539, ___ F.3d __ (8th Cir. July 3, 2019)]
    Text available at https://ecf.ca8.uscourts.gov/opndir/19/07/181539P.pdf
  • Multiemployer fund could bring ERISA §515 action against employer for exit contribution because trust documents clear provided that such contribution survived the collective-bargaining agreement [Citation: Board of Trustees, International Training Institute for the Sheet Metal and Air Conditioning Industry v. Four-C-Aire, Inc., No. 17-2295, ___ F.3d ___ (4th Cir. July 3, 2019]
    Text available at: http://www.ca4.uscourts.gov/Opinions/172295.P.pdf
  • Person identified as named fiduciary is an ERISA fiduciary regardless of whether such person would meet the functional fiduciary test [Citation: Dawson-Murdock v. National Counseling Group, Inc., No. 18-1989, ___ F.3d ___ (4th Cir. July 24, 2019)]
    Text available at http://www.ca4.uscourts.gov/Opinions/181989.P.pdf
  • ERISA §502(c)(1) penalty for failure to provide requested information can be imposed only on the plan administrator; court rejects concept of de facto administrator for this purpose [Citation: Bergamatto v. Board of Trustees of the NYSA-ILA Pension Fund, No. 18-2811, ___ F.3d ___ (3rd Cir. August 6, 2019)]
    Text available at https://www2.ca3.uscourts.gov/opinarch/182811p.pdf
  • Ninth Circuit reverses its earlier case law that ERISA claims are not arbitrable in light of a more recent Supreme Court case [Citation: Dorman v. Charles Schwab Corp., No. 18-15281, ___ F.3d ___ (9th Cir. August 20, 2019)]
    Text available at http://cdn.ca9.uscourts.gov/datastore/opinions/2019/08/20/18-15281.pdf
  • Insurance savings clause under ERISA §514 resulted in state law preventing insurer from obtaining reimbursement of health plan participant’s medical payments covered by tort settlement [Citation: Rudel v. Hawai’i Management Alliance Association, Nos. 17-17395 and 17-17460, ___ F.3d ___ (9th Cir. September 11, 2019)]
    Text available at http://cdn.ca9.uscourts.gov/datastore/opinions/2019/09/11/17-17395.pdf
  • Multiemployer fund trustees had right to audit employer’s payroll records, including those of nonunion employees [Citation: Electrical Construction Industry Prefunding Credit Reimbursement Program v. Veterans Electric, LLC, No. 19-1051, ___ F.3d ___ (7th Cir. October 24, 2019)]
    Text available at: http://media.ca7.uscourts.gov/cgi-bin/rssExec.pl?Submit=Display&Path=Y2019/D10-24/C:18-3703:J:Bauer:aut:T:fnOp:N:2419501:S:0
  • Two private equity firms that owned a manufacturing company at the time it went bankrupt were held not to be liable for MPPAA withdrawal liability imposed on the manufacturing company [Citation: Sun Capital Partners III, LP v. New England Teamsters & Trucking Industry Pension Fund, No. 16-1376, ___ F.3d ___ (1st Cir. November 22, 2019)]
    Text available at http://media.ca1.uscourts.gov/pdf.opinions/16-1376P-01A.pdf
  • Equitable reformation of a plan document is appropriate to correct a plan provision that violates ERISA, even if there is no fraud involved; once reformed, a claim for benefits may be made against the reformed document [Citation: Laurent v. PricewaterhouseCoopers LLP, No. 18-487-cv, ___ F.3d ___ (2nd Cir. December 23, 2019)]
    Text available at http://bit.ly/2vstCiS [truncated URL]
    http://www.ca2.uscourts.gov/decisions/isysquery/ce62093a-30a2-4591-8025-1d4a10125ec5/1/doc/18-487_opn.pdf#xml=http://www.ca2.uscourts.gov/decisions/isysquery/
    ce62093a-30a2-4591-8025-1d4a10125ec5/1/hilite
    / [long URL]

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