August 2020

The Headliner


A periodic round-up of what’s happening in the Retirement Plan Industry


Upcoming Deadlines for calendar-year Plans

September

15th – Required contribution to Money Purchase Pension and Target Benefit Pension.

15th – Contribution deadline for deducting 2019 employer contributions for those sponsors who filed a tax extension for Partnership or S-Corporation returns for the March 15, 2020 deadline.

15th – Single employer DB plans were provided relief under the CARES Act to extend any required contributions due during 2020 (both quarterly and year-end contributions) to January 1, 2021.

30th – Deadline for certification of the Annual Funding Target Attainment Percentage (AFTAP) for DB plans for the 2020 plan year.

October

1st – 401(k) Plan Safe Harbor Notice must be provided between October 1 and December 1 for plans with a 12/31 plan year-end.

15th – Contribution deadline for deducting 2019 employer contributions for those sponsors who filed a tax extension for C-Corporation or Sole-Proprietor returns for the April 15, 2020 deadline.

15th – Extended due date for the filing of Form 5500 and Form 8955.

15th – Due date for filing 2020 PBGC Comprehensive Premium Filing.


Cash Balance Plan Spotlight

This time of year, we often find ourselves especially intentional about retirement Plan design consulting – businesses may be contemplating the discontinuation of their SIMPLE in favor of a 401(k), those with an existing Plan may be amending a Safe Harbor provision or considering profit sharing…but nearly all Plan Sponsors we encounter are [already] thinking about their tax bill.

It’s not surprising, then, that in 2016, Cash Balance Plan popularity outpaced that of traditional 401(k) Plans 15 to 1! According to the same 2018 Kravitz study, companies with Cash Balance Plans contribute nearly 50% more to their employee’s retirement when compared to those with a 401(k) Plan alone – so not only can this advanced strategy provide a business owner with up to 4x more tax deduction and savings opportunity, it might just help their employees retire on time, too! Sounds like a win-win to us…

Still, quantifying the value is important – for most, it’s not a “win-win” until its proven in dollars and cents. (We think that’s the fun part!) And since now may be the perfect time to consider graduating from a SIMPLE or SEP arrangement, we’ve included a case study highlighting the value-for-cost of an advanced Plan option.

(This study is summarized with totals. The full version is available upon request.)


  SIMPLE with 3% Match 401(k) Safe Harbor Match & Profit
Sharing Plan + Cash Balance Plan
Owner’s Maximum Annual Savings: $19,588 $373,500
Owner’s Deductible Deferral Contributions: $16,000 $26,000
Deductible Employer Contributions to Owner: $3,588 $347,500
Deductible Employer Contributions to Staff: $10,063 $87,999
Total Deductible Employer Contributions: $13,651 $435,499
Grand Total of all Deductible Contributions by Owner: $29,651 $461,499
Hypothetical Tax Savings on Deductible Dollars at 38%: $11,267 $175,370
Less contributions required to Staff: ($10,063) ($87,999)
Net Position: $1,204 $87,371
Plan Design Efficiency: 66.06% 80.93%
  New Dollars Contributed: $431,848
  New Dollars to Owner: $353,912
  Efficiency of New Dollars: 81.95%

Here, the owner can accelerate annual retirement accumulation by a whopping 1,800%+. And, while required staff funding does increase roughly $78,000, the over $164,000 realized as additional tax savings covers that and leaves the owner in a net positive position north of $85,000.

Remembering the SECURE Act: Move over SEPS!

Courtesy of the SECURE Act, it is now permissible for new/start-up retirement Plans to be set-up after the end of the year. What was once reserved for SEPS is no more! Other types of qualified Plans can now be adopted by an employer at any time up until their tax return deadline, plus extension.
IMPORTANT: Other qualified Plan deadlines did not change, so it’s important to be aware that timely compliance with all deadlines is still required!


Electronic Delivery Could Save Billions


On May 21, 2020, the U.S. Department of Labor and the Employee Benefits Security Administration (EBSA) announced the publication of a final rule that will allow employers to communicate the required retirement plan disclosures and other plan information electronically.

The rule finishes a 2018 DOL initiative aimed at reducing administrative burdens and costs associated with the delivery of retirement plan disclosures. EBSA projects that electronic delivery could save retirement plan sponsors an estimated $3.2 billion over the next 10 years by eliminating significant materials, printing, and mailing costs associated with furnishing printed disclosures.

As businesses face economic and logistical challenges due to the COVID-19 National Emergency, the rule brings much needed relief to plan sponsors and service providers while making disclosures more readily accessible and useful for America’s workers.

New Voluntary Safe Harbor


The final rule, which was effective July 26, 2020, establishes a voluntary safe harbor for retirement plan administrators who elect to use electronic media to furnish retirement plan disclosures to “covered individuals.” For plan sponsors interested in taking advantage of the new safe harbor, there are three rules to which they must comply:

  1. The safe harbor only applies to retirement plan disclosures and does not include any document that must be furnished only if it is requested.
  2. Covered individuals must provide an electronic delivery address suck as an email address or smartphone number. AN employer assigned email address, such as a company email address, may be treated as provided by the individual if the email address has a separate employment related purpose.
  3. The initial notification of electronic delivery must be on paper. For those plans that would like to rely on the new safe harbor, the plan administrator must distribute a paper notice to covered individuals advising them of the intended electronic delivery and providing an opportunity for the individual to opt out.

Documents Eligible for Electronic Delivery

Under the final rule, documents that may be provided electronically include:

  • Annual disclosure notices such as safe harbor, Qualified Default Investment Alternative (QDIA), Fee Disclosures, and automatic enrollment.
  • Summary Plan Descriptions (SPDs)
  • Summaries of Material Modifications (SMMs)
  • Summary Annual Reports (SARs)
  • Notice of blackout period for participant investment direction
  • Notices relating to Qualified Domestic Relations Orders (QDROs) Individual benefit statements required by the Pension Protection Act

IMPORTANT: The rules do not apply to any document that must be furnished only if it is requested.

“A 2018 study concluded that 93% of households owning defined contribution accounts had access to, and used, the internet in 2016.”

Peter Swire and Debra Kennedy‐May, “Delivering ERISA Disclosure for Defined Contribution Plans: Why the Time has Come to Prefer Electronic Delivery – 2018 Update (April 2018)

The rule allows two methods for delivering retirement plan disclosures electronically:

  1. Website posting. Referred to as the Notice and Access model, administrators may post participant disclosures on a website if an appropriate Notice of Internet Availability (NOIA) is furnished to the electronic addresses of covered individuals. These documents must remain on a website until superseded by a subsequent version but never for less than one year. The NOIA must include a description of the covered document(s), the electronic address (or hyperlink to the address) where the individual can access the document, and a required statement that advises individuals of their right to opt out of electronic delivery and to receive free paper copies along with the administrator’s or a designated representative’s phone number. The NOIA must generally be provided each time a new covered document is available for review on the website. However, the final rule permits an annual NOIA to include information about multiple covered documents instead of requiring that plan sponsors provide multiple NOIAs throughout the year.
  2. Email delivery. Alternatively, administrators may send required disclosures directly to the email addresses of plan participants. Required documents must be sent to participants’ email addresses no later than the date by which the document must be furnished under ERISA.

“A 2019 survey found that 90% of U.S. adults use the internet, representing a substantial increase from 2000 when 52% of adults reported using the internet.”

Pew Research Center, “10% of Americans don’t use the internet. Who are they?” (April 22, 2019)

Covered Individuals

The final rule allows the use of electronic media to furnish retirement plan disclosures to “covered individuals.” Covered individuals include plan participants (employees or former employees covered by the plan), beneficiaries (e.g., spouses and dependents covered by the plan), and other persons entitled to documents under Title I of ERISA who have provided the plan administrator or other appropriate designee with an email address or smartphone number. Electronic addresses previously provided to the plan administrator may be used without verifying the address if such reliance is in good faith and otherwise complies with the new safe harbor rule.

Covered individuals must be able to globally opt out of electronic delivery and receive paper copies at no cost to the individual. For administrative ease, the plan sponsor may continue to provide electronic copies in tandem with paper delivery. When a participant who has elected electronic delivery terminates employment, administrators must “take measures reasonably calculated to ensure the continued accuracy and availability” of electronic addresses used to deliver required documents, or take steps to obtain new, valid electronic addresses from plan participants.”

Additionally, the plan administrator must have a system for identifying bounce backs or delivery attempts to a covered individual that have been returned as “undeliverable.” If a bounce back is received, the plan administrator must promptly take reasonable steps to cure the problem by sending the NOIA or email to a secondary electronic address on file, obtaining a new valid and operable electronic address, or treating the covered individual as having globally opted out of electronic disclosures and distributing paper notices from that point forward.

Pre‐existing Electronic Delivery Rule

The new safe harbor is an additional option for electronic disclosure and does not replace the prior DOL e-disclosure rule that allowed for electronic delivery to those employees that were “wired at work.” The new safe harbor rule only applies to retirement plans (and is voluntary) and not employee welfare benefit plans, such as plans providing group health or disability benefits.

IRS Issues Additional Pandemic Relief

On June 29, 2020, the IRS issued Notice 2020-52 in response to the COVID-19 pandemic providing welcome relief to plan sponsors who are considering suspending safe harbor contributions and also to those who may already have regardless of whether the employer is suffering an economic loss. The notice is significant in that it permits employers who sponsor 401(k) plans to reduce or suspend their safe harbor contributions and redirect those funds to other, more urgent needs.

As a general rule, regulations require a plan’s safe harbor provisions to remain in effect for an entire 12-month plan year and prohibit mid-year plan amendments to those provisions that would reduce or suspend contributions. However, there are two exceptions:

  1. If the employer is operating at an economic loss, or
  2. If the plan’s safe harbor notice (due 30 days prior to the beginning of the plan year) includes a statement that the plan may be amended during the plan year to suspend or reduce safe harbor contributions (sometimes referred to as a “safe harbor maybe” notice).

In either event, a supplemental notice must be provided to all participants at least 30 days in advance of the effective date of the reduction/suspension. The plan then becomes subject to the normal non-discrimination testing for the year.

Notice 2020‐52 provides guidance in three main areas.

First, it provides relief related to COVID-19, allowing plan sponsors to adopt mid-year amendments between March 13, 2020 and August 31, 2020 to eliminate safe harbor matching contributions or mid-year nonelective contributions for the remainder of the year and be deemed to have satisfied the threshold for “operating at an economic loss” or providing the “safe harbor maybe” notice. The amendment must be adopted no later than the date that the reduction/suspension occurred. It is important to note that this special relief regarding the suspension of safe harbor contributions does not eliminate the requirement that the plan will become subject to non-discrimination testing for the entire plan year.

Secondly, it provides helpful clarification that sponsors can eliminate safe harbor 401(k) contributions for highly compensated employees (HCEs) only and retain the plan’s safe harbor status provided that the safe harbor 401(k) contributions continue to be made for non-highly compensated employees (NHCEs). A revised safe harbor notice should be delivered to the affected HCEs.

Finally, the Notice provides temporary relief to the 30-day advance notice requirement for suspensions or reductions to safe harbor nonelective contributions as long as the updated safe harbor notice is provided no later than August 31, 2020 and the plan amendment is adopted prior to the effective date of the suspension. Plan sponsors should keep in mind that the IRS continues to require at least 30 days advance notice for mid-year suspensions or reductions to safe harbor matching contributions; whether or not these contributions are provided can influence the employee’s decision to make elective deferrals.

Emily C.

Client Service Manager

Education:

Kaplan University – Bachelors in Business Management

Hometown:

Donahue, Iowa

Best food ever?

Tacos, chips & salsa, carnitas…really anything Mexican!

What inspires you?

My boys, Scottie and Jackson. They are smart, creative, funny, and kind and I want to make them proud. 

First concert?

Miami Sound Machine at our county fair

Jim H.

Principal, CFO

Education:

University of Akron

Hometown:

Cleveland, OH

Hobbies?

Golf

Favorite part of your job?

Satisfactorily resolving client issues

Coffee or tea?

Coffee

Liza B.

Senior Client Service Manager

Education:

Bachelor of Science, Physical Education

Hometown:

Santa Fe Springs, CA

Best food ever?

Tonkatsu ramen

First concert?

Rolling Stones

Biggest fear?

Sinkholes

Zak K.

Principal, Consulting Actuary

Education:

BA in Mathematics, Minor in Business Admin and Philosophy/Religion

Hometown:

Port Clinton, Ohio

Best part of your day?

First cup of coffee in the morning!

First concert?

Starship

Favorite part of your job?

Teaching

Sandra D.

Senior Client Service Manager

Education:

Virginia Western Community College

Hometown:

Roanoke, VA 

Where do you donate?

I work in the food pantry at my church

What’s on your nightstand?

Alarm clock

Coffee or tea?

Both 

Sandy G.

Sr. Client Service Manager

Education:

Institute of Arts and Sciences, Fine Arts, Hesser College

Hometown:

Swansboro NC

Where do you donate?

In memory of my daughter, I have Random Acts of Kindness cards. There are 250 in the box. My goal every year is to empty the box. So in short I donate everywhere there is a need or just to do something kind to anyone. 

Any hobbies?

So many… Art projects, Photography, Nature walks, Fishing, swimming, traveling….

Coffee or tea?

Coffee, Coffee and more Coffee

Stephen R.

Senior Actuarial Consultant

Education:

Bachelor’s Degree in Actuarial Science

Hometown:

Plain City, OH (Columbus, OH)

What are you really good at?

Piano – I began lessons at 3 years old after my older sister heard me play “You are not alone” by Michael Jackson while she was watching the music video on MTV

Best part of the day?

Breakfast, Lunch and Dinner (and the snacks in between)

Hobbies?

Sports and fitness – I coach group fitness a couple days a week. I can’t think of a better way to prepare for a long, prosperous retirement!

Tom B.

Actuarial Consultant

Education:

Master’s Degree; MDiv

Hometown:

Tampa Bay

Favorite thing to do in Charlotte?

Spending time with my family at a park or on a nature trail hike

What inspires you?

Interacting with others who are always seeking to grow, improve, and take on challenges

First concert?

Beach Boys

Shelley D.

Client Service Manager

Education:

CPCC

Hometown:

Mount Holly 

Best part of your day?

Dinner time with my family.

Best food ever?

Anything Pasta

First concert?

New Kids On The Block

Aaron H.

IT Manager

Education:

North Carolina State University, BS Mathematics and Computer Science

Hometown:

Charlotte, NC

Best Food?

Tacos

Most-used productivity hack:

Put everything onto a list with a date and time.

Coffee or tea?

Coffee all the way.

Jasmin W.

Internal Sales Consultant

Education:

Bachelor of Arts in Communication

Hometown:

Military brat, the US is my hometown!

Best food ever?

Anything Jamaican!!! 

What are you really good at?

Motivating others to see their potential & surpass it! 

Favorite part of your job?

Learning something new every single day!

 

Tracey G.

Compliance Analyst

Education:

Stark State College

Hometown:

Minerva, Ohio

Best part of the day?

5 o’clock. Lol

First concert?

Tom Petty

Coffee or tea?

Coffee, of course.

Morgan C.

Compliance Analyst

Education:

Bachelor of Science in Finance

Hometown:

Spanish Fort, AL

First concert?

Incubus

Coffee or tea?

Coffee

Best part of the day?

Being with my husband and little girl

Renee A.

Compliance Analyst

Education:

B.S. in Accounting, B.S. in Psychology

Hometown:

Mobile, Al

Hobbies?

Reading

First concert?

Rascal Flatts

Coffee or tea?

Coffee

Julie M.

Senior Actuarial Consultant

Education:

Undergraduate Degree in Business Administration from John Carroll University / Graduate MBA Degree from Cleveland State University

Hometown:

Solon, Ohio

Best food ever?

For me, nothing compares to the comfort food feeling of the Eastern European cuisine – spatchcocked roast chicken with boiled small yellow potatoes that are glazed with butter, garlic and dill sauce. The side dish is a salad consisting of fresh tomatoes / cucumbers / sweet onions with dill and sour cream. One does not go without the other so it’s all one dish.

Favorite books?

Alexander Dumas’ The Count of Monte Cristo

What inspires you?

It’s not original but I’ve always been inspired by acts of kindness, selflessness and perseverance. It’s very easy to be focused on your own life, problems, wants and needs. It’s much harder to put other people ahead of yourself and also not get discouraged when your journey is not as smooth as you’ve anticipated. 

Kristi D.

Director of Actuarial Services

Education:

Bachelors in Applied Mathematics and Bachelors in Applied Statistics, Actuarial Science

Hometown:

Akron, Ohio

Where do you donate?

We are frequently making drop offs to the Salvation Army and give to the Cleveland APL 

Best part of your day?

At the end of the workday every day, rain or shine, my husband and I take a walk with our English Bulldog Frank (and now our precious Naomi too!) and chat about our day.  It’s the favorite part of my day.

Best food ever?

Anything Thai

Coffee or tea?

Coffee in the morning, herbal tea after 3pm

Nick N.

Principal, CEO

Education:

BA, Interdisciplinary Studies

Hometown:

Akron, Ohio

Where do you donate?

Charity Water

What’s your most-used productivity hack?

Listening to podcasts and audiobooks at 1.5x to 2x speed.  Only problem is now normal speed seems so slow!

Best food ever?

Chipotle burritos.  Prove me wrong.