PLANSPONSOR - April/May 2020 - 10

RULES & REGULATIONS
Remedial Amendment
Periods Extended
The IRS has extended the last day of the
initial remedial amendment period for
Section 403(b) plans from March 31 to
June 30. Sponsors now have until the halfyear
point to update their preapproved and
individually designed 403(b) plan documents.
Likewise, the IRS has extended to
July 31 the April 30 deadline for employers
to adopt a preapproved defined benefit
(DB) plan and to submit a determination
letter application under the second six-year
remedial amendment cycle. The April 30
closing date for the second amendment
cycle for preapproved DB plans, as set forth
in Announcement 2018-05, has also been
extended to July 31.
PBGC Extends Deadlines
The Pension Benefit Guaranty Corporation
(PBGC) announced new deadlines
for upcoming defined benefit (DB) plan
premium payments and other filings
with the agency. Every due date for a
filing or action that fell between April 1
and July 15 has been extended to July 15.
The PBGC explains that when the IRS
provides relief to employee benefit plans
because of a major disaster by delaying
the Form 5500 due date, the PBGC's
disaster relief policy provides that many
PBGC due dates are similarly extended.
COVID-19 May Affect
Nondiscrimination Testing
To lessen the economic impact of the
COVID-19 pandemic, defined contribution
(DC) plan sponsors may be
making changes that can affect actual
deferral percentage (ADP) and actual
contribution percentage (ACP) test
results-e.g., laying off or furloughing
employees, reducing employees' salaries,
or reducing or suspending company
matches, says Dave Stinnett, principal
and head of Vanguard Strategic Retirement
Consulting. Due to these changes,
a sponsor may want to take steps to avoid
failed testing. " Sponsors may want to
10 PLANSPONSOR.COM April - May 2020
consider performing mid-year projection
testing to help them gauge whether they
can expect test failures for the 2020 plan
year and determine if they want to limit
the amount that highly compensated
employees [HCEs] may contribute for the
remainder of the year, " says the Fidelity
Investment nondiscrimination testing
team in a joint statement.
" Sponsors may
want to consider
performing midyear
projection
testing to help
them gauge
whether they
can expect test
failures for the
2020 plan year ... "
Northwestern University's
ERISA Suit Win
The 7th U.S. Circuit Court of Appeals
has affirmed a district court's ruling in
a lawsuit alleging breaches of Employee
Retirement Income Security Act (ERISA)
fiduciary duties by two Northwestern
University retirement plans. The Appellate
Court's decision notes that the plaintiffs
alleged Northwestern breached its
fiduciary duty by " allowing TIAA-CREF to
mandate the inclusion of the CREF Stock
Account " in the plans and letting TIAA
serve as fund recordkeeper. However,
the court pointed out, their amended
complaint also says many plan participants
invested in TIAA's Traditional
Annuity-an attractive offering because
it promised a contractually specified
minimum interest rate. Assuming plaintiffs'
allegations are true, the court said,
they fail to show an ERISA violation.
" Under the plans, no participant was
required to invest in the Stock Account or
any other TIAA product " but could choose
from hundreds of additional investment
options. Further, " Participants were not
bound to the terms of any TIAA funds
simply because they were included in the
plans, " the opinion states. " Taken as a
whole, the amended complaint appears to
reflect plaintiffs' own opinions on ERISA
and the investment strategy they believe is
appropriate for people without specialized
knowledge in stocks or mutual funds. "
Conservative Investment of
Profit-Sharing Plan Assets
A federal district court judge has moved
forward a lawsuit alleging that a profitsharing
sponsor invested the plan's
assets too conservatively for its employees
and failed to prudently manage the
plan's investments. In denying a motion
to dismiss, U.S. District Judge Leo T.
Sorokin of the U.S. District Court for
the District of Massachusetts noted the
difference between this case and others
the defense cited in its motion to dismiss:
In those cases, courts had pointed out
that if participants did not like how a
fund was managed, they could choose
a different fund; in this lawsuit, participants
did not have that choice. The plaintiff-a
former participant in the plan
whose account was distributed in 2015-
alleged that the plan's one-size-fits-all
target allocations are inappropriate even
for near-retirees, but especially for young
participants. Sorokin wrote that the
plaintiff not only alleged that fiduciaries,
when choosing the plan's allocation
structure and investments, were imprudent
in their consideration of participants'
varying needs, but these failures
were compounded by a failure to review
and revise those choices. -PS
For in-depth coverage of these topics and more, go to PLANSPONSOR.com/compliance.
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PLANSPONSOR - April/May 2020

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