PLANSPONSOR - August/September 2018 - 11

(SBA) in facilitating ESOPs by allowing it
to make loans to companies to re-loan to
the plans. It also allows ESOP loans to be
made under the SBA's preferred lender
program and updated the definition for
ESOPs so they no longer need full voting
rights to qualify to be covered.
IRS Finalizes QMAC and
QNEC Definitions
The IRS has issued final regulations
on the definition of qualified matching
contributions (QMACs) and of qualified
nonelective contributions (QNECs). Under
these regulations, an employer contribution
to a plan may be a QMAC or QNEC
if it satisfies applicable nonforfeitability
requirements and distribution limitations
when allocated to a participant's account;
it need not meet these requirements or
limitations, however, when contributed
to the plan. In the final regulations, the
agency addressed commenters' concerns
that the definitions would preclude them
from using forfeiture accounts to fund
the contributions as, the commenters had
pointed out, the amounts would have been
allocated to the forfeiture accounts only
after a participant incurred a forfeiture of
benefits and, thus, generally would have
been subject to a vesting schedule when
first contributed to the plan. Commenters
requested that QMAC and QNEC requirements
not be interpreted to prevent the use
of plan forfeitures to fund these contributions.
The IRS clarified that forfeitures
would be permitted.
ERIC Calls Foul in DOL's
Missing Participant Push
The ERISA [Employee Retirement Income
Security Act] Industry Committee (ERIC)
sent a comment letter to Assistant
Secretary of Labor Preston Rutledge,
encouraging the Department of Labor
(DOL) to develop more guidance related
to the challenge of employers locating
missing retirement plan participants.
ERIC joins the Plan Sponsor Council
of America and other advocacy groups
in urging the DOL to act quickly. The
ERIC letter asks that, until the DOL
provides guidance, it stop issuing letters
that allege an employer has committed a
breach of fiduciary duty in its methods to
locate these individuals. The letter also
spells out what it says are " examples of
missteps " by the agency.
Dismissal of Wells Fargo
Self-Dealing Suit
A federal appellate court has affirmed
dismissal of a lawsuit against Wells Fargo
alleging that it engaged in self-dealing
and imprudent investing of its own 401(k)
plan's assets by funneling billions of
dollars of those assets into its proprietary
target-date funds (TDFs). John Meiners, a
participant, filed the suit last November,
also accusing Wells Fargo of using a
quick enroll option to default participants
into the TDFs to seed the funds and
make more money. The appellate court
agreed with the U.S. District Court judge
that Meiners' allegations that the bank
breached its fiduciary duty by continuing
to invest in its own TDFs when betterperforming
funds were available at a
lower cost were insufficient.
Plaintiff Asks for
Committee Members
To Be Removed
The plaintiff in lawsuit Sacerdote v.
New York University (NYU), recently
won by the defendants, has filed a
motion to amend the court's decision
by ordering the removal of two plan
committee members. In her decision, a
U.S. District judge of the U.S. District
Court for the Southern District of New
York said, " plaintiffs have not proven
that the committee acted imprudently
or that plans suffered losses as a result. "
However, she also noted " deficiencies in
the committee's processes-including
that NYU's 403(b) members displayed a
concerning lack of knowledge relevant to
the committee's mandate. " The plaintiff's
motion says, " Thus, to protect the plans'
participants from the significant risk of
future losses if imprudent and unqualified
fiduciaries remain on the committee,
the court should supplement its findings
to order that [they] be removed and barred
from serving as fiduciaries to the plans,
and amend the judgment accordingly. "
Duke University Charged
In Second Plan Lawsuit
A second lawsuit regarding Duke
University's 403(b) plan alleges that the
plan suffered more than $1 million in
losses due to the university's breach of
fiduciary duties under the Employee
Retirement Income Security Act (ERISA).
Focusing specifically on the university's
practices with regard to revenue sharing,
the lawsuit alleges the plaintiffs suffered
an injury as their accounts in the plan
would have increased had Duke not taken
revenue sharing for its own benefit. Rather
than return it to the plan, the school used
it to pay salaries and fringe benefits of
employees in its human resources (HR)
department, plaintiffs claim. This lawsuit,
like the previous, was filed on behalf of
participants in Duke's 403(b) plan by the
law firm Schlichter, Bogard & Denton.
IRS Extends Temporary
Nondiscrimination Relief
The IRS has published an additional
extension of temporary nondiscrimination
relief for closed defined benefit (DB) plans
through 2019. As stipulated in IRS Notice
2018-69, the relief for closed defined
benefit plans that is being extended here
stems from the previous Notice 2014-5.
The new extension makes nondiscrimination
relief available for plan years beginning
before 2020, assuming the conditions
of Notice 2014-5 are satisfied. -PS
For in-depth coverage of these topics and more, go to plansponsor.com/compliance.
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