2019 year in review

In this article we review some of the significant retirement policy developments of 2019, including Congress’s consideration of broad bipartisan legislation (the SECURE Act), DOL’s electronic participant communications proposal, and the Supreme Court putting three ERISA retirement plan cases on its docket.


Retirement policy-related legislative activity focused on passage of the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019.

Paths forward for SECURE – On May 23, 2019, the House passed SECURE by an overwhelming bipartisan 417-3 vote. There was hope that the Senate would move quickly on SECURE, but passage as a standalone bill in 2019, via unanimous consent, was frustrated by the objections of at least two Senators. There is, however, still a possibility that SECURE – or significant parts of it – will pass in 2019 or early 2020, either as part of budget legislation or a bill to address the multiemployer plan funding crisis.

Critical elements of SECURE include: a DC annuity fiduciary safe harbor; closed group nondiscrimination relief; authorization of DC “open” multiple employer plans; mandatory lifetime income disclosure; and mandatory coverage of long-term part-time employees.

SECURE 2.0 – Work continues on possible follow-on legislation to SECURE – “SECURE 2.0” and legislation proposed by Senators Portman (R-OH) and Cardin (D-MD) – possibly including: a new automatic enrollment safe harbor; treatment of student loan repayments as elective deferrals for purposes of matching contributions in 401(k) plans (solving one current issue with 401(k) student loan/matching contribution programs); and expansion of the Saver’s Credit. More controversially, some are considering a federal automatic retirement plan proposal, that would require employers that have not adopted a plan to at least adopt a bare bones “automatic contribution plan,” and possible financial relief for multiemployer plans.


Both the Department of Labor and IRS made some progress on the current retirement policy regulatory agenda, including:

At DOL –

Proposed revision of DOL electronic participant disclosure rules – On October 22, 2019, DOL released a proposed amendment to current disclosure rules that would provide a new “notice and access” safe harbor for the use of electronic communications to satisfy required participant disclosures in retirement plans. The proposal would dramatically liberalize DOL’s electronic communication rules, which (with certain exceptions) currently require that the individual receiving the electronic communication either has access to the employer/sponsor electronic information system as an integral part of her duties (aka is “wired at work”) or has affirmatively consented to electronic receipt. Under the new rule, all required communications may be posted to a website, provided the affected individual receives an (electronic) notice at his “electronic address” directing him to the website and has the right to request a paper copy or opt out of the electronic communications program.

Expansion of MEPs – On July 22, 2019, DOL published a final regulation on the definition of “employer” under ERISA, intended to (among other things) marginally expand the sorts of organizations that may sponsor a “multiple employer plan” (MEP). A MEP is a plan for employees of unrelated employers (other than a plan maintained pursuant to a collective bargaining agreement). In recent years, there has been a movement in support of an expansion of the availability of MEPs and in support of (in effect) provider-based “Open MEPs” – multiple employer plans that are operated by, e.g., financial services institutions or recordkeepers, providing a retirement plan “solution” for adopting employers.

DOL’s final regulation does not, however, authorize Open MEPs. Instead, it adopts a set of rules for when a (non-provider-based) “bona fide group or association of employers” can offer a defined contribution MEP to its members. In expanding (marginally) the critical “commonality of interest” requirement, the new rule would allow a MEP that is limited to a single State or metropolitan area. The rule, however, explicitly prohibits financial services companies, recordkeepers, and third-party administrators from sponsoring MEPs. At the same time that it published this new rule, DOL also requested comments on issues related to Open MEPs that could possibly form the basis of future rulemaking in this area.

With respect to another MEP issue – IRS’s “one bad apple” rule under which a qualification failure of one employer in a multiple employer plan disqualifies the entire plan – on July 3, 2019 IRS proposed a regulation that would allow the MEP to (oversimplifying) spin off the nonqualifying plan if certain conditions are met.

Scalia appointed Secretary of Labor – Finally, we note that, during 2019, Secretary Alexander Acosta resigned as Secretary of Labor and was replaced by Eugene Scalia. Mr. Scalia (the son of late Supreme Court Justice Antonin Scalia) was Solicitor of DOL for 12 months during the George W. Bush Administration. More recently, he represented the Chamber of Commerce in the lawsuit against DOL Secretary Acosta, successfully challenging the legality of DOL’s Fiduciary Regulation before the Fifth Circuit Court of Appeals.

At IRS –

New hardship withdrawal rules – On September 19, 2019, IRS finalized amendments to current 401(k) hardship withdrawal rules, implementing changes made by the Bipartisan Budget Act of 2018 (BBA 2018), providing a new and more flexible hardship withdrawal “safe harbor” and expanding the amounts that may be withdrawn from a 401(k) plan in a hardship withdrawal. The new rules are generally effective in 2020 although plans may apply some of them as early as 2019.

RMD mortality tables updated – As instructed by President Trump in his 2018 Executive Order on Strengthening Retirement Security in America, on November 7, 2019, IRS proposed changes to the required minimum distribution (RMD) rules, updating the life expectancy tables to be used in calculating required distributions. The new tables significantly increase the applicable life expectancy assumptions and, consequently, reduce required distribution amounts.

IRS backs off issuing rule prohibiting offering retirees lump sums – In March 2019 IRS issued Notice 2019-18, stating that it no longer intends to amend current RMD regulations to prohibit the payment, as part of a “lump-sum window program,” of a lump-sum to a retiree currently receiving an annuity. The new Notice has been interpreted to authorize offering a lump-sum option to retirees in de-risking transactions – something that had been effectively prohibited since 2015 (under Notice 2015-49). The move by IRS was controversial – but some employers have undertaken these sorts of transactions in 2019.

SEC issues Reg BI – 

On June 5, 2019, the SEC, by a 3-1 vote, finalized its “Regulation Best Interest” (Reg BI), providing new conduct standards for broker-dealers making recommendations to retail customers. The new rule may affect retirement plan sponsors in two ways: First, brokers and their affiliates may serve as plan service providers, e.g., call center operators and participant advice and education providers affiliated with financial services firms. Reg BI will significantly change the standard of conduct rules for brokers and thus is likely to change how brokers and their affiliates interact with plan participants. Second, sponsor retirement plan fiduciaries generally have a legal obligation under ERISA to monitor the conduct of plan service providers. That duty to monitor may extend to monitoring compliance with federal securities laws. Connecting the dots: under the Reg BI, the federal securities law requirements applicable to these retirement plan service providers (e.g., brokers/broker affiliates acting as call center operators) are significantly changed (indeed, increased); as a result, what plan fiduciaries must monitor may also change (and conceivably be increased).

Reg BI is less comprehensive than the “impartial conduct” standard and the contract, disclosure, and pay policy standards under DOL’s Fiduciary Rule and related Best Interest Contract Exemption (BIC). Nevertheless, its provisions in many respects address similar issues – disclosure, standard of care and elimination or mitigation of conflicts – in a way similar to the approach taken by the DOL in the Fiduciary Rule and (especially) the BIC.


Supreme Court docket includes three ERISA retirement plan cases – The Supreme Court has decided to review (1) Sulyma v. Intel, addressing ERISA’s three-year statute of limitation and what constitutes “actual knowledge”, (2) Jander v. IBM, a stock drop case that (among other things) raises the question of whether ERISA imposes an inside information disclosure regime that is separate from the securities laws, and (3) Thole v. U.S. Bank, dealing with whether a plan participant can bring an ERISA claim against a defined benefit plan sponsor-fiduciary where the plan is overfunded.

Also being considered for Supreme Court review is Putnam Investments, LLC v. Brotherston, an in-house plan 401(k) fee case. In Putnam, the district court found that “even assuming a fiduciary breach, [plaintiffs] had failed to establish loss causation.” The First Circuit vacated this holding, finding that “loss” had been established by comparing the return on Putnam in-house funds included in the plan fund menu to returns on two “passive comparators” (a Vanguard index fund and a bank collective investment trust). The court further held that “once an ERISA plaintiff has shown a breach of fiduciary duty and loss to the plan, the burden shifts to the fiduciary to prove that such loss was not caused by its breach, that is, to prove that the resulting investment decision was objectively prudent.” 

A particularly concerning element of the First Circuit’s decision was its suggestion that plan fiduciaries could avoid this sort of 401(k) fee litigation, in which courts in effect second guess fiduciary plan menu construction choices, by preferring passive investments: “any fiduciary of a plan such as the Plan in this case can easily insulate itself [against these sorts of claims] by selecting well-established, low-fee and diversified market index funds.”

On November 27, 2019, the Solicitor General submitted its brief (requested by the Court), recommending that Putnam’s petition for a writ of certiorari be denied.

Performance-based prudence litigation – We note also that in 2019 401(k) ERISA fiduciary prudence litigation has emerged – including Anderson v. IntelReetz v. Lowe’s Companies, and Pizarro v. The Home Depot – that focuses not on fees (or not just on fees), but on the underperformance of specific funds, especially (in each of these cases) the plan’s default target date fund. It is too early to tell where this litigation is headed, but plaintiffs have prevailed on a series of defendants’ motions to dismiss.

Interest rate volatility, DB liability valuation, effect on DC participants’ retirement income – Medium- and long-term interest rates have declined 75-100 basis points since the beginning of the year. That decline is likely to significantly increase the cost of defined benefit plans. That cost will show up not just on sponsor financials but will also affect (1) minimum funding requirements, (2) PBGC variable-rate premiums, and (3) the cost of lump sums (e.g., in “de-risking” transactions).

Also with respect to DB plan valuations, in October 2019, the Society of Actuaries published (1) a new Mortality Improvement Scale MP-2019 and (2) new base Pri-2012 Mortality Tables. Both MP-2019 and Pri-2012 reflect decrements in age 65 life expectancy which, when adopted by sponsors and regulators, will generally reduce (marginally) DB plan liability valuations.

We also note that, for DC participants, the interest rate declines will increase the cost of retirement income – something that many participants may not have factored into their retirement plans.

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We will continue to follow these issues.