June 2021

The Headliner


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


Upcoming Deadlines for calendar-year Plans


15th – Quarterly Benefit Statement
Deadline for participant-directed Plans to provide participants their quarterly benefit/disclosure statement, including a statement of Plan fees and expenses charged to individual Plan accounts during the quarter.


30th – EACA ADP/ACP Corrections
Deadline to process corrective distributions for failed ADP/ACP tests without a 10% excise tax for Plans with an Eligible Automatic Contribution Arrangement (EACA).


29th – Summary of Material Modifications (SMM)
Unless included in an updated Summary Plan Description (SPD), an SMM is due to participants no later than 210 days after the end of the Plan Year in which a Plan amendment was adopted. 


2nd – IRS Form 5500 and 8955-SSA
Due date to file Forms 5500 and 8955-SSA without extension.

2nd – IRS Form 5558
Due date to file Form 5558 requesting an extension of time to file Form 5500

14th – Quarterly Benefit Statement
Deadline for participant-directed Plans to provide participants their quarterly benefit/disclosure statement, including a statement of Plan fees and expenses charged to individual Plan accounts during the quarter. 

Cash Balance Plan Spotlight

The “All or Nothing” Conundrum

It’s not uncommon for multi-owner businesses to have owners with differing objectives or appetites for Plan funding. Partners may be in different life stages and personal cash flow needs may vary, yet these differences should not be the sole deterrent when it comes to considering a Cash Balance Plan. To say or assume an advanced design solution is “all or nothing” isn’t exactly true…

It’s important, first, to know that a Highly Compensated Employee (HCE) can be explicitly excluded from receiving a certain benefit via the Plan document. Nothing precludes the exclusion of an HCE because non-discrimination rules are about protecting non-HCEs. 

From there, we can debunk this myth’s rigidity by better understanding how a Cash Balance Plan may impact a specific entity:  


All employer contributions into a qualified Plan are deducted before the business return and owner K-1 distributions occur after.

Naturally, then, all employer contributions going into the Plan (including Cash Balance) will have a direct impact on the income ultimately distributed by owner percentage. But not all is lost…with the help of a CPA, owners can explore solutions that may ultimately satisfy both, including: 

  • adjustments of owner compensation – adjusting W-2 levels to offset potential changes in pass-through income.
  • allocations by ownership percentage – giving consideration to the ownership breakdown and variance in objectives, co-owners may opt to have their employer contributions allocated by ownership percentage, creating a more organic and proportionate impact on pass-through income.
  • “no impact” options – if already sponsoring a Plan and making employer contributions, a business may be able to integrate a Cash Balance Plan without increasing required staff contributions; in this case, the owner(s) receiving a net Cash Balance benefit may consider an “exchange” of W-2 compensation for the Plan contribution.


Partnerships have a different flexibility due to the hierarchy of their deductions and distributable income – only employer contributions made for employees are deducted with the business return (Form 1065) and so partner K-1 does not change solely because a supplemental Plan, like Cash Balance, is introduced.  

Plan contributions made for oneself (including 401(k) deferrals) are not deducted until the partner files their individual return (Form 1040). 

This allows partners to make completely different decisions regarding their interest in the Cash Balance Plan. Still, it’s important for partners to discuss (and agree upon) other considerations, including:  

  • increase in required staff contributions, like Profit Sharing, which is deducted on the business return (“no impact” design consulting can help!) 
  • impact on administrative costs  

The above is not inclusive of all consideration or options. We’d be glad to consult with you personally on your unique situation.

Retirement Planning is a Team Sport

Some would say that retirement Plan administration is a team sport!
Putting together technical and compliance competence with ongoing investment and fiduciary expertise is key to keeping your Plan healthy, and participants happy. So, what roles and responsibilities should you look to fill for your firm to have a successful and compliant Plan? 

Key Team Players 

Beyond the sponsorship and ultimate oversight of the Plan, the following are key roles which are vital to a well-run Plan: 

Third Party Administrator (TPA) 

Not to be confused with the named Plan Administrator, the TPA plays a critical role in the maintenance of the Plan and the coordination of the team. The TPA is typically the “go-to” resource for HR personnel for questions regarding the Plan’s day-to-day operation and can be the coordinator among other service providers in the Plan’s ecosystem. TPAs are trained professionals that provide technical expertise to ensure compliance with current regulations that govern retirement Plans. ERISA, DOL regulations, and case law are complex and frequently change. Compliance is daunting and penalties and back taxes can be significant – it’s important to engage a dedicated TPA to help. Common duties include:

  • Providing guidance on Plan design. 
  • Preparing and maintaining legal Plan documents. 
  • Performing compliance and non-discrimination testing. 
  • Preparing annual valuations and benefit statements. 
  • Preparing all required government filings. 

Financial Advisor

An equally important counterpart is the Plan’s financial advisor. In tandem with the TPA, advisors help Plan Sponsors decide the goals for the retirement Plan. These goals are then translated into a Plan design and ultimately, with the help of the TPA, written in the Plan’s document that guides its operations from year to year. The financial advisor also helps the Plan Sponsor select and monitor the Plan’s investments. In a Plan where participants direct the investment of their account balances, the advisor will assist the Plan Sponsor in selecting a recordkeeping platform and a line-up of investment options from which the participants will make their choices. The advisor may also: 

  • Oversee investment committee meetings. 
  • Assist/educate participants through the initial enrollment process and via subsequent enrollment/education meetings. 
  • Serve as a co-fiduciary to the Plan.


The recordkeeping platform in a participant-directed Plan keeps track of the participant’s investment selections and account balances. The Plan’s custodian holds the assets and facilitates the buying and selling of investments for contributions, investment exchanges, and distributions. These services can be provided as a bundle, or independently offered. 

Other Important Members of the Team:  

  • Payroll Providers: Payroll providers play a key role by recording participant salary deferral percentages and calculating the deductions and appropriate taxes on the Plan contributions. 
  • Plan Auditors: For Large-Plan Filers, a financial statement audit is performed by a Certified Public Accountant.  
  • Retirement Plan Investment Fiduciaries: Though not a requirement, many advisors have migrated to taking on a fiduciary role by acting in a 3(21) or 3(38) capacity. 
  • ERISA Attorneys: ERISA attorneys may assist Plan Sponsors and TPAs in certain areas of Plan administration such as QDROs, voluntary compliance programs, Plan failure correction, or in the event of a legal action against the Plan. 
  • 3(16) Fiduciaries: A Plan Sponsor may hire a firm to fill the role of the named Plan Administrator, as stated in the Plan document. Though not a requirement, many TPA firms have begun offering this enhanced level of co-fiduciary administration.  
  • CPAs/Accountants: Because of their often close relationship to the business, CPAs and accountants can be key in helping the TPA and advisor thoughtfully structure the right Plan design based on the Plan Sponsor’s objectives.  

Bundled vs. Unbundled

As with most things in life, there is no perfect answer that fits everyone in every situation. Many of the services mentioned in this article can be linked together and offered in “bundles”. While this may seem the easier route on the surface, bundling services does not give the Plan Sponsor the ability to individually evaluate each “key player” component, and can result in trade-offs between service and expertise. 

An unbundled model offers a more a-la-carte approach to the services a Plan Sponsor may want to use, and often offers greater flexibility when designing their Plan. And one or the other is not always indicative of associated costs – i.e. more parties involved versus less does not automatically equate to more cost. Instead, it’s important to be aware of how the fees are structured – a bundled provider may offer cheaper billable costs because they are being offset elsewhere…like through investment management fees. 

The set-up that works best will meet both the objectives of the Plan Sponsor and the needs of Plan participants/employees, and with good TPA and advisor relationships, the Plan Sponsor can easily navigate the selection process.  

Ultimate Oversight 

Ultimately, the Plan Administrator and Plan Sponsor must ensure that the service providers are fulfilling their duties. Relying on their relationship with competent TPA and advisor partners can help the Plan Sponsor feel confident that they are creating a Plan that will serve the retirement needs of their employees and steer clear of any issues with governing entities.

“What happens to the retirement Plan?” – The Impact of a Business Sale

You’ve sold your business and are now asking the question: “What happens to the retirement Plan?” You are not alone – and it’s not uncommon for retirement Plans to be overlooked in the world of mergers and acquisitions. The available options will depend on the timing (has the transaction already occurred or is it set for a prospective date?) and the type of transaction taking place, which is typically classified under one of two categories: an asset sale or a stock sale. We will explore each of these below. 

Asset Sale  

The buyer purchases (only) the assets of an entity.
(Examples of assets include equipment, licenses, goodwill, customer lists, and inventory.) 

  • While the seller’s assets have been purchased, the seller’s entity will continue to exist until properly closed.  
  • In this scenario, the buyer generally does not acquire the seller’s liabilities (which include the retirement Plan), therefore once the sale takes place, the seller can:
    1. terminate the retirement Plan and distribute all assets, or  
    2. can continue operating the Plan as long as the sponsoring entity continues to exist.  
  • Employees transitioning to the buyer are considered terminated under the seller’s entity and newly hired by the buyer’s entity. (In most cases, these employees will have the option to roll over their account balances to the retirement Plan of the buyer, if they have one. Although not required, the buyer may also amend their Plan to allow for immediate eligibility for the new employees. If it is not amended, the new employees must satisfy the eligibility requirements defined under the buyer’s Plan.)

Stock Sale   

The buyer purchases the stock of the seller’s company.
(The company is absorbed by the buyer and becomes part of the buyer’s company.)   

  • The buyer becomes the employer and assumes all liabilities tied to the seller, including the retirement Plan unless specifically addressed in the purchase agreement. In this scenario, there are generally 3 options available for the seller’s retirement Plan:
    1. the buyer can require the seller terminate the Plan prior to the effective date of the sale set forth in the purchase agreement,  
    2. the buyer can maintain the Plan (which may result in maintaining multiple Plans if they already sponsor another Plan), or 
    3. the buyer can merge the seller’s Plan into an existing Plan that they sponsor.  

Let’s look at each in more detail:

1.  Terminate Prior to Transaction  

  • Via proper Board Resolution, the seller would be responsible for completing the termination of the Plan according to the process set forth by the IRS so as not to violate successor Plan rules

Every transaction is unique and advanced planning can save you from headaches down the road. Take the time to consult with your advisor(s), CPA, attorney, etc. when considering buying or selling a business!

2.  Maintain the Seller’s Plan 

  • Even if the buyer sponsors an existing Plan they can opt to maintain both.  
  • The Plans must be tested together to satisfy coverage and non-discrimination rules, but there may be a permissible transition period that allows  temporary co-existence without combined testing.  
  • If both Plans satisfy coverage immediately before the transaction and there are no significant changes in the terms or coverage of the Plan, the sponsor may rely on the transition rule, allowing them to separately maintain the Plans through the end of the year following the year in which the transaction occurred.  

3.  Merge into the Buyer’s Plan  

  • The most common option.  
  • The seller’s Plan is merged into the Plan of the buyer via a resolution and amendment of the surviving Plan (the buyer’s Plan).  
  • The buyer should review the seller’s Plan to ensure that protected benefits (like vesting and eligibility) are not eliminated or reduced.  
  • Because the surviving Plan inherits any outstanding compliance matters or failures, it’s important that the buyer complete due diligence before going this route. Any deficiencies should be identified, corrected, and documented in case the seller’s Plan is selected for audit.

The DOL Issues Cybersecurity Guidance 

On April 14, 2021, the DOL’s Employee Benefits Security Administration (EBSA) issued long-awaited guidance designed to protect participants from both internal and external cybersecurity threats. The guidance, which is set forth in three parts, is far-reaching and is directed at Plan Sponsors, fiduciaries, recordkeepers, and participants. This is the first time the DOL has issued guidance on cybersecurity for employee benefit plans and is a welcome step forward, providing best practices and tips to help mitigate cybersecurity risks.

1. Hiring Service Providers – Tips

  • Ask about information security standards, practices, and policies, as well as audit results, and compare them to the industry standards adopted by other financial institutions. 
  • Ask how they validate their practices, and what levels of security standards it has met and implemented. (Look for contract provisions that give you the right to review audit results demonstrating compliance with the standard.) 
  • Evaluate their track record in the industry, including public information regarding information security incidents, other litigation, and legal proceedings related to vendors’ services. 
  • Ask whether they have experienced past security breaches and if so, what happened, and how did they respond? 
  • Find out about any insurance policies that would cover losses caused by cybersecurity and identity theft breaches (including breaches caused by internal threats, such as misconduct by the service provider’s own employees or contractors, and breaches caused by external threats, such as a third-party hijacking a Plan participant’s account). 
  • Make sure that your contracts with service providers require ongoing compliance with cybersecurity and information security standards and beware of contract provisions that limit their responsibility for IT security breaches. (Try and include terms that would enhance cybersecurity protection for the Plan and its participants.) 

2. Cybersecurity Program – Best Practices

  • Have a formal, well documented cybersecurity program. 
  • Conduct prudent annual risk assessments, update training to reflect any risks identified. 
  • Have a reliable annual third-party audit of security controls. 
  • Have clearly defined and assigned information security roles and responsibilities. 
  • Have strong access control procedures. 
  • Ensure that assets or data stored in the cloud or managed by a third-party service provider are subject to appropriate security reviews and independent security assessments. 
  • Conduct cybersecurity awareness training at least annually for all personnel. 
  • Implement a Secure System Development Life Cycle Program (SDLC). 
  • Have a business resiliency program that addresses business continuity, disaster recovery, and incident response. 
  • Encrypt sensitive data stored and in transit. 
  • Have strong technical controls implementing best practices. 
  • Take appropriate action to respond to cybersecurity incidents and breaches. 

 Online Security Tips 

  • Register, set-up, and routinely monitor your online account. 
  • Use strong and unique passwords. 
  • Use multi-factor authentication. 
  • Keep personal contact information current. 
  • Close or delete unused accounts. 
  • Be wary of free Wi-Fi. 
  • Beware of phishing attacks. 
  • Use anti-virus software and keep apps and software current. 
  • Know how to report identity theft and cybersecurity incidents. 

Additional info on the tips and best practices summarized above can be found in these 3 documents provided by the DOL.