There is no “vesting on partial termination” for 403(b) plans, and no need to track the “20%” rule for vesting on partial terminations for a 403(b) plan. That rule simply does not apply. This his true for both ERISA and non-ERISA 403(b) plans.
As a practice note, if you have mistakenly applied that “partial termination” vesting rule to a 403(b) plan, you may have an operational error.
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PEP Comment to DOL Outlines the Structure of PEPs
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.
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The DOL’s Fiduciary Rule Prohibited Transaction Exemption May Only Be Needed In Limited Plan Circumstances
The ERISA marketplace is complex, with a plethora of different sorts of arrangements which will be affected in a variety of different ways by the new Fiduciary Prohibited Transaction Exemption. In general, however, I would be little surprised if it ending up being that not many parties will have the need to take advantage of this new exemption.
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Rep. Neal and ARA/ASPPA Differently Address Fundamental Issues Underlying the DOL’s Pooled Employer Plan “Request For Information”
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.
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What Happens To Participants’ Covid-Related Distributions When An Employer Chooses Not To Treat Them As Such?
What I thought may be useful to discuss is what happens when an employer chooses NOT to offer the CRD relief under the CARES Act. A surprising number of employers have taken this approach. But the employer’s decision is not the final word on this matter, because the statute grants participants specific tax benefits regardless of the sponsor’s choice. So what does this actually mean for participants?
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Impact of CARES on Volunteer First Responder’s 457(e)(11) LOSAP Plans
The typical LOSAP will permit a withdrawal for “unforeseen emergencies.” Yet the new CARES Act distribution rules provides no relief for these distributions. The CARES Act does not allow the tax on LOSAP distributions to be spread over three years, like it does for the tax on distributions from other kinds of retirement plans. There is also no ability for the firefighter to repay the amount of those distributions back to the plan, as the CARES Act allows to be done for other types of retirement plans.
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The Fiduciary Angle to the Participant COVID Certification Because of Spousal Employment Loss
Here’s where the problem seems to come in under the determination of a participants COVID status: there is a bit of ambiguity in the third condition of eligibility: nowhere does it specifically mention the impact of the loss of employment or reduction in hours o of the spouse of the participant in the calculation of what are the causes of the participant’s adverse financial circumstances.
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CARE Act Suspension of Loan Repayments: Is it the Employer’s or the Participant’s Choice?
Robert Richter, now of ARA and chief editor of the EOB, has weighed ion my posting on the suspension of the due date of loan repayment. I had posited that it is effectively is the participants choice, as the specific language of the statute declares that “such due date shall be delayed for 1 year” -when combined with the need of the participant to certify COVID stays-effectively means an employee has the right to continue payments or not. I also suggested that the language of the statute means that the employer has no authority to impose a due date. He pointed out that the IRS may end up not agreeing, if past is prescient.
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The CARES Act Participant Loan Payment Suspension Rules Take an Unusual Approach in Making the Change; 403(b) Policy Loans Affected Differently
The structure and the language used by the drafters of the CARE Act in their crafting of the new participant loan repayment suspension rules seem to be both rare and stunningly broad: it appears to mandate, as a matter of federal law, that each loan repayment due through December 31, 2020 by COVID qualifying participants are suspended for one year.
This is actually a big deal. Section 2202(b)(2) of the CARES act, which mandates the suspension, did fool with the amortization schedules, or the timing and taxation of defaults under Section 72(p) of the Tax Code, which is the section which governs the tax aspects of loans. In fact, it did not amend Section 72(p) at all. Nor did it amend any part of ERISA Section 408(b)(1), which hold the ERISA rules governing loans.
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The Immediate COVID-19 Retirement Fix Which Congress Missed in the Great Recession: Temporarily Suspend the 10% Early Distribution Penalty Tax
It seems that if policy makers want to have an impactful effect, suspend this tax during this crisis. I would not disagree with my economist friends who may now caution against this seemingly rash move; to consider its long term impact; and to be concerned about the depletion of long term retirement savings. I am particularly sensitive to these concerns, of course, and they are valid.It becomes a question of how to balance competing economic interests, but I suspect the widespread impact of that 10% penalty may weigh in favor of its temporary suspension.
Continue Reading The Immediate COVID-19 Retirement Fix Which Congress Missed in the Great Recession: Temporarily Suspend the 10% Early Distribution Penalty Tax