PLANSPONSOR - April/May 2021 - 7

for protecting personally identifiable information
(PII) and plan assets.
The GAO report examined cybersecurity
administration in private-sector
defined contribution retirement plans and
explored how federal guidance can mitigate
cybersecurity risks.
The report began by reiterating that
DC plans, plan sponsors and their service
providers, such as recordkeepers, thirdparty
administrators (TPAs), custodians
and payroll providers, share PII and plan
asset data, and therefore increase their
risks of cyberhacks.
The first piece
is tips for hiring
a service
provider
with strong
cybersecurity
practices and
monitoring
its activities.
The PII contains highly confidential
plan information, including participants'
names, Social Security numbers,
dates of birth, addresses and usernames/
passwords, while plan asset data contains
numbers for retirement and bank accounts.
The shift to remote work last year
in response to the coronavirus pandemic
raised concerns for plan advisers and plan
sponsors about cyberattacks, as well as
questions about whose responsibility it
is to protect participant and plan data. In
response, those in the financial advisory
industry have increased their cybersecurity
measures, especially as more firms
have faced lawsuits. Plan sponsors have
also been warned of a rise in retirement
plan litigation related to cyberhacks.
-Lee Barney, Amanda Umpierrez
More From Washington
And the Courts
IRS Retirement Plan
Compliance Initiatives
The IRS Tax Exempt and Government
Entities Division (TE/GE) has released
a new 2021 program letter to update its
compliance initiatives for its fiscal year. It
says it will continue to pursue the compliance
program described in its 2020
program letter.
The agency revealed, for example, the
following examination initiatives:
Small exempt organizations that
sponsor retirement plans. The IRS says
it will review retirement plans of small
exempt organizations to determine
whether their plan investments are properly
administered, whether there are any
party-in-interest transactions in the plan
trust and whether any participant loans
violate Internal Revenue Code (IRC)
Section 72(p).
Worker classification. This strategy
will focus on retirement plans of
employers that were determined to have
misclassified employees as independent
contractors. These retirement plans will
be reviewed to determine if IRC coverage
requirements are satisfied.
Required minimum distributions
(RMDs) in large defined benefit (DB)
plans. The IRS says it will perform examinations
to ensure retirement plan sponsors
comply with IRC Section 401(a)(9)
to begin distribution of benefits by April
1 following the calendar year when an
employee reaches the required age.
Participant loans. This strategy is to
ensure that participant loans comply with
IRC Section 72(p) rules on maximum
loan balances and IRC Section 72(t)
repayment rules for early distributions
before age 59.5. The IRS says it will verify
whether participant loans from retirement
plans that hold a high percentage of
such loans to total trust assets are being
repaid in a timely manner-e.g., if loan
balances remain consistent or increase for
more than one year.
The IRS also announced compliance
checks it plans to initiate, including
one about partial plan termination and
partial vesting. The agency has identified
employers whose Form 5500 indicates
their plan has had a significant decrease
in plan participants.
EBSA's Fiduciary
Investment Guidance
The Department of Labor (DOL)'s Employee
Benefits Security Administration (EBSA)
has released guidance concerning fiduciary
investment advice for retirement
plan investors, employee benefit plans and
investment advice providers.
This follows on the DOL's final
fiduciary prohibited transaction exemption
(PTE) rule, " Improving Investment
Advice for Workers and Retirees, " taking
effect on February 16. When the PTE was
announced, officials said it " allowed for
important investor protections, including
a stringent 'best interest' standard of care
for fiduciary recommendations of rollovers
from ERISA [Employee Retirement
Income Security Act]-protected retirement
accounts. "
The new guidance consists of two
documents, the first being " Choosing
the Right Person to Give You Investment
Advice: Information for Investors in
Retirement Plans. " It sets forth questions
an investor can ask potential advice
providers, information to help them understand
the purpose of each question and
frequently asked questions (FAQ) about the
exemption. The second document provides
guidance for investment advice providers
who want to rely on the exemption.
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