You may’ve noticed that the SECURE Act introduced yet another new twist to the 403(b) world: the Qualified Plan Distribution Annuity Contract (“QPDAC”-you may want to look at my prior blog related to these lifetime income acronyms). Its not that Congress was singly out 403(b) plans, as 401(a) and 457(b) plansnow also have the ability to distribute QPDAC. But, as in all other things 403(b)s, there are a number of unique twists to the rules which exist solely in the 403(b) world.
Continue Reading The 403(b) “Qualified Plan Distribution Annuity Contract” Under SECURE Section 109

Common PEP problems are barely addressed by  the SECURE Act’s fix to the “one bad apple” rule (called the “unified plan rule” by the IRS, under which a participating employer’s disqualification error will disqualify the entire plan), though there seems to be a common misunderstanding in the industry to the contrary. That new “bad apple” fix actually has very little operational impact on a MEP /PEP whose operations has been affected by that bad actor.   It provides only a narrow remedy to a narrow issue by which a P3 or lead sponsor can get rid of an employer who causes an operational/qualification error in the plan-though it may take up to a year to do so if one is to follow the IRS’s pre-SECURE Act proposed regs.
Continue Reading The Limited Utility of the “One Bad Apple” Rule Fix

The new PEP rules do not add any new services to the marketplace. Rather, PEPs merely reorganize existing services to be provided in a different format, with the one exception is that it now permits unrelated employers to be able to file a consolidated Form 5500. The Department’s issuance of guidance as to the allocation of these different authorities (consistent with in ERISA Section 3(44)(C) which requires the Department to ‘‘(i) to identify the administrative duties and other actions required to be performed by a pooled plan provider…”) is a required condition precedent to the determination of whether any prohibited transaction exemptive relief is necessary in the operation of a PEP.
Continue Reading PEP Comment to DOL Outlines the Structure of PEPs

Normally, all of the players in any ERISA plan’s life cycle operates under any number of these well-established PTEs. However, in that the PEP is a new sort of arrangement, it is not entirely clear that these existing PTEs will be sufficient to pay all of the PEP players. To address this crucial issue, the DOL has issued a Request for Information on June 18 to gather information on what further, if any, PTE relief will be needed to make the PEP work.There are two noteworthy developments related to these efforts, s the ARA/ASPPA letter to EBSA requesting PTE relief for PEP operatives and, is the letter Congressman Neal wrote to the EBSA.
Continue Reading Rep. Neal and ARA/ASPPA Differently Address Fundamental Issues Underlying the DOL’s Pooled Employer Plan “Request For Information”

There is in the SECURE Act a volume of small, odd, technical  details which need to which attention needs to be paid. This statute is a technocrat’s dream. So much in there actually raises fundamental  infrastructure issues of the sort we rarely see. We are all familiar with the 80/20 rule, with the caution of not letting perfection become the enemy of good. Well, these “oddities” raise the exact inverse of the 80/20 rule: through my long years in retirement product development,  the highest risk of failure arise from the lack of understanding of how the smallest of details can tank a multi-million dollar project. The “80” may sound good conceptually and structurally, but it is in the implementation of the detail in the 20 which will determine the success of the project.

Continue Reading Tontines and PEP Late Deferrals Are Among the SECURE Act’s Impactful, Infrastructure Oddities

The one topic which seems to be on the forefront of a significant number of professionals, however, is the attempt to make sense of the new MEP and PEP rules. This is especially so because they follow so closely on the Association Retirement Plan regs finalized by the DOL and the “Unified Plan (“bad apple”) rule proposed by the IRS.  These commentators seem to be taking are common misstep, however:  it seems like (with rare exception) that each of these analyses are missing the assessment of the use of the “Group of Plans,”or “GoP”, in relation to MEPs and PEPs.
Continue Reading A Valid “Multiple Employer Plans”/ “Pooled Employer Plans” Assessment Requires Inclusion of the “Group of Plans”

Section 109 of the SECURE Act enables something called “Portability of Lifetime Income Options.” It  is one of those fundamental building blocks with which -regrettably or not, depending on your view of things-  all benefit professionals and all plan sponsors will have to eventually deal. Given that it is effective now, there is some urgency in understanding this thing. One of the challenges is that annuities within Defined Contribution plans are not generally well understood.
Continue Reading SECURE Act and “Portability of Lifetime Income”: Its the “Sleeper” in the Act of which Document Drafters Need to Be Wary

Under Section 112 of the SECURE Act, sponsors of “cash or deferred arrangements”  arrangements must allow long-term employees working more than 500 but less than 1,000 hours per year to make elective deferrals to their plans. At first glance, one may be under the mistaken impression that this is a rule which applies to all elective deferral plans, whether they be 401(k) plans, 403(b) plans or 457(b) governmental plans.  But impression is likely wrong: the statute, by its terms,  clearly only applies to elective deferrals under 401(k) plans, not 403(b) or other plans.
Continue Reading 403(b) and the SECURE Act: The New 500 Hour, Long Service Rule Does Not Apply to 403(b) Plans