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Browsing Defined Contribution

Retirement proposals in the Administration’s FY2024 budget

On March 9, 2023, the Administration released its Fiscal Year 2024 Budget. The related General Explanations of the Administration’s Fiscal Year 2024 Revenue Proposals included a description of “modifications to rules relating to retirement plans” consistent with, for the most part, proposals that were, at one point, part of the Administration’s 2021 “Build Back Better” proposal. In this note, we very briefly review two of the Administration’s proposals: a $10-$20 million cap on account-based accumulations, and the elimination of certain “Roth conversions,” for certain high-income taxpayers.

Retirement income, inflation, and retirement finance at 2022 year-end

The year-end 2022 saw a steady rise in the Consumer Price Index (CPI), with prices increasing by 6.5% over the prior 12 months, reducing the buying power of a (nominal) dollar since the beginning of the year. This rise in inflation has significant implications for retirees and those saving for retirement, with retirement income and finance taking a hit. In this article, we discuss the effect of inflation on retirement income and how it affects participants and retirees in both defined benefit (DB) and defined contribution (DC) plans. We highlight the different risks associated with retirement finance, including asset performance, interest rate performance, and inflation, and how they affect each other. Traditional DB plan participants and those with fixed or frozen annuity benefits have lost ground in 2022 due to inflation, whereas DC participants have been more resilient due to gains from increased interest rates. We recommend that sponsors of DC plans consider providing a hedge against inflation losses and offer investment education with respect to inflation risk. Overall, it’s essential to consider the implications of inflation in retirement planning and make informed decisions about retirement finance.

Themes in 401(k) prudence litigation: standing and “meaningful benchmarks for comparison”

Two recent decisions – in Singh v. Deloitte and Locasio v. Fluor Corporation – granting defendants’ motions to dismiss in ERISA prudence litigation illustrate emerging themes in these cases: challenges to the standing of plaintiffs who have not actually invested in the funds (or in one case, were not participants in the plan) being targeted; and challenges to the adequacy of the comparators whose allegedly superior performance (or lower cost) is used to “infer” imprudence. In this article we briefly review these cases.

IRS proposes regulation making electronic spousal consent rules permanent

On December 30, 2022, IRS published a proposed amendment to current spousal consent regulations that would make that temporary remote/electronic spousal consent relief (with certain modifications) permanent. Sponsors/plan administrators may rely on the proposed rules until final regulations are effective. In this article we review the proposal.

Congress Opens the Door for the Retirement Program of the Future

As happens late every year, Congress has passed a spending bill, this time called the Consolidated Appropriations Act, 2023 (CAA 2023). As anticipated, the bill includes a wealth of retirement provisions often referred to as SECURE 2.0. Most of the provisions in SECURE 2.0 are 401(k)- or 403(b)-related, as expected.

Multiemployer Plan Withdrawal Liability: DC Circuit Says Discount Rate Used for Withdrawal Liability Must be Similar to Discount Rate Used for Funding

On July 8, 2022, a three-judge panel of the DC Circuit Court of Appeals reversed the decision of a lower court in United Mine Workers of America 1974 Pension Plan v. Energy West Mining Company, ordering that the discount rate used to calculate multiemployer pension plan withdrawal liability must be similar to the discount rate the Enrolled Actuary uses in performing funding calculations for the plan. In doing so, the DC Circuit joins the Sixth Circuit (see our article Multiemployer plan withdrawal liability: Sixth Circuit strikes down “Segal Blend”) in coming to this conclusion. This is welcome news for contributing employers that withdraw from multiemployer pension plans.

July 2022 legislative update – review of key bipartisan retirement policy reform proposals

On March 29, 2022, the House of Representatives, by a 414-5 vote, approved the Securing a Strong Retirement Act of 2022 (SECURE 2.0), a synthesis of the Ways and Means Committee’s Securing a Strong Retirement Act of 2021 and the Education and Labor Committee’s RISE Act. On June 14, 2022, the Senate Health, Education, Labor, and Pensions (HELP) Committee, by a voice vote, passed the Retirement Improvement and Savings Enhancement to Supplement Healthy Investments for the Nest Egg Act (the RISE & SHINE Act). And, on June 22, 2022, the Senate Finance Committee unanimously approved the Enhancing American Retirement Now (EARN) Act. In what follows we provide a brief summary of certain key provisions of these three bills.

Which participants can sue?

A number of recent cases have addressed the issue of which participants have “standing” to bring an ERISA fiduciary action against plan fiduciaries. The cases generally focus on the issue of whether the participant-plaintiffs have a “concrete stake” in the dispute. In what follows, we discuss two recent cases involving participant-plaintiffs in defined contribution plans…Read More

IRS proposes new regulations/mortality tables for DB valuations

On April 28, 2022, the IRS published proposed regulations/mortality tables for determining the present value of benefits under defined benefit plans for purposes of determining the plan’s ERISA minimum funding requirements, Pension Benefit Guaranty Corporation variable-rate premiums, and lump-sum valuations.