PLANSPONSOR - August - September 2022 - 8

RULES & REGULATIONS
governmental plan is arrived at as formulated
for other governmental plans.
For governmental plans under
Internal Revenue Code Section 457(b),
the deadline is the later of either the date
reached by applying the above formula
or the first day of the first plan year that
begins at least 181 days after the Secretary
of Labor notifies the plan that it is being
administered in a manner inconsistent
with Section 457(b) requirements.
Private Letter Ruling Allows
DB-to-DC Asset Transfer
The IRS has published a new private
letter ruling that addresses an employer's
request to transfer excess assets from a
terminating pension plan to a set of open
defined contribution plans.
The employer's request asks the IRS
to weigh in on the proper treatment of the
assets under Section 4980 of the Internal
Revenue Code. As the private letter ruling
recounts, the defined benefit pension
plan in question is designed to be a taxqualified
plan under IRC Section 401(a).
It was established in 1987 via the merger
of several DB pension plans.
As of 2004, the employer generally
excluded newly hired employees from
participating in the pension plan. A year
ago September, the employer adopted a
resolution to terminate the plan and aims
to complete the process this year. As the
IRS ruling notes, the pension plan will
have excess assets remaining in its trust
after it satisfies all of its liabilities to its
participants and their beneficiaries.
According to the IRS, the resolution
terminating the plan authorized
the transfer of all or part of the excess to
three qualified replacement plans under
IRC Section 4980(d)(2). " The amount to
be transferred to each of the receiving
plans will be based upon the projected
future funding obligations for nonelective
employer contributions (or other types
of permissible employer contributions
under Section 4980(d)(2) of the [Tax]
Code) in each of the receiving plans, " the
8 PLANSPONSOR.COM August - September 2022
private letter ruling states.
The terms of each receiving plan will
be amended for the creation of a suspense
account, into which the employer will
place the DB plan assets, and from which,
over a seven-plan-year allocation period,
it will ratably dispense the assets to the
new DC plan participants' accounts; each
active participant of the pension plan will
now be an active participant in one of the
receiving plans.
Security Act lawsuits this summer.
Defendants include Citigroup Inc.,
Stanley Black & Decker Inc., Booz Allen
Hamilton Inc., Capital One, Wintrust
Financial Group, Cisco Systems Inc. and
Genworth Financial.
The lawsuits all include nearly identical
ERISA fiduciary breach allegations
against the defendants, but these allegations
contrast sharply with recent ERISA
litigation. Not focused on fees and shareclass
prices, the new suits call out alleged
underperformance of the retirement
plans' target-date funds.
The latest employers to be called to
The total amount of excess pension
plan assets that will be transferred to the
receiving plans will exceed 25% of the
total amount of excess assets under the
pension plan, the IRS ruling explains.
For each of the seven plan years,
the required minimum allocations will
be used to provide nonelective and other
permissible employer contributions under
each receiving plan.
The IRS weighed applicable laws
and regulations pertaining to the above
and several other requests the employer
made-e.g., that the aggregate amount
transferred not be included in the gross
income of the employer as a taxpayer-
and, the letter shows, approved all.
More TDF Underperformance
ERISA Lawsuits Filed
Plaintiff clients of the increasingly active
law firm Miller Shah LLP filed a number
of new Employee Retirement Income
court are Marsh & McLennan Co. Inc.
and Advance Publications. As in prior
cases, the firms offer BlackRock LifePath
Index Funds as the default investments
in their plans. The new plaintiffs say the
BlackRock TDFs are " significantly worseperforming
than many of the mutual fund
alternatives offered by TDF providers and,
throughout the proposed class period,
could not have supported an expectation
by prudent fiduciaries that their retention
in the plan was justifiable. "
Closely echoing the prior suits, the
new complaints allege that it is " apparent,
given the continued presence of the
BlackRock TDFs in the plan's investment
menu,
that defendants failed to scrutinize
the performance of the BlackRock
TDFs against any of the more appropriate
alternatives in the TDF marketplace in
order to determine whether the expected
performance of the BlackRock TDFs
could support their continued retention
in the plan. "
The complaints also allege that the
plans' investment in the TDFs has resulted
in participants " missing out on millions
of dollars in retirement savings growth, "
and they say the defendants failed to enact
such an assessment prudently and loyally.
Neither Marsh & McLennan nor Advance
Publishing have responded to a request
for comment. -PS
For in-depth coverage of these topics and more, go to PLANSPONSOR.com/compliance.
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PLANSPONSOR - August - September 2022

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