PLANSPONSOR - December/January 2021 - 6

RULES & REGULATIONS
Court Dismisses
Rollins Inc. ERISA Suit
The U.S. District Court for the Northern
District of Georgia has ruled in favor of
the defense's motion to dismiss a lawsuit
known as Fleming v. Rollins Inc. The judge
concluded that the plaintiffs failed to
exhaust potential administrative remedies.
The complaint, filed last December,
accused defendants Rollins Inc. and its
subsidiary Western Industries of having
imprudently selected higher-cost actively
managed mutual funds and retail share
classes over the lowest-cost institutional
share classes of the same mutual funds.
Although the complaint noted that the
defendants acted to replace the retail
share classes with institutional share
classes last year, " their action has [done]
nothing to: 1) repair the harm to the thousands
of separated employees that withdrew
millions of dollars, or 2) repair the
accounts of current employees for the
2014 [through] 2018 plan years of prohibited
transactions and trust damages. "
The plaintiffs also alleged the defendants
improperly favored the economic interests
of the plans' recordkeeper-Prudential-
letting it collect excessively high fees from
the plans' participants.
Of the plaintiff's five arguments, the
pro-defense ruling took on just the first-
viz., that the claims raised were barred
by the plaintiffs' failure to exhaust their
potential administrative remedies prior to
filing-due to its overarching importance
to the rest of the case. The ruling states
the following: " According to plaintiffs, the
plans provide grievance procedures for
only two types of claims, " neither of which
provide an " administrative procedure they
could have resorted to. However, the court
finds plaintiffs' reading of the plans incomplete.
As defendants point out, the plans
define a claim as 'any grievance, complaint
or claim concerning any aspect of the
operation or administration of the plan or
trust, including but not limited to claims
for benefits and complaints concerning the
investments of plan assets.' "
Citing a similar complaint in Lanfear
v. Home Depot Inc., the judge wrote,
" The former employees maintained that
exhaustion was not required because the
plan's provisions regarding the review and
appeal process only referred to a 'claim for
benefits.' Ultimately, the 11th Circuit held
that the relevant plan's broad definition
of 'claim'-coupled with the discretion
They alleged
that the plan's
" one-size-fits-all "
default target
allocations were
inappropriate
even for
participants
nearing
retirement ...
granted to the plan administrators-were
'sufficient to establish the availability
of an administrative remedy' for breach
of fiduciary duty. The court finds that
Lanfear is instructive here. "
The IRS Addresses
2 SECURE Act Changes
The IRS has issued Notice 2020-86,
which provides guidance with respect
to Sections 102 and 103 of the Setting
Every Community Up for Retirement
Enhancement (SECURE) Act.
Section 102 increases the 10% cap for
automatic enrollment safe harbor plans.
Section 103 eliminates certain safe harbor
notice requirements for plans that provide
for safe harbor nonelective contributions;
it also adds new provisions for the retroactive
adoption of safe harbor status for
such plans. Affected will be safe harbor
401(k) and 401(m) plans, including 403(b)
plans that apply the 401(m) safe harbor.
The guidance says that, to remain
compliant, a safe harbor 401(k) plan may
choose any percentage of compensation
under a qualified automatic contribution
arrangement (QACA), as long as the
percentage is applied uniformly and does
not exceed 15%, or 10% during the initial
period of automatic elective contributions.
If a plan incorporates the maximum
qualified percentage of 15% by reference
but still applies 10%, it will fail to operate
according to its own terms. It then needs
to adopt an amendment re-establishing
the 10% maximum, by the deadline determined
in the SECURE Act Section 601(b),
as described in IRS Notice 2020-68.
As the guidance explains, to keep
its safe harbor status, a traditional 401(k)
plan that satisfies the safe harbor nonelective
contribution requirement no longer
must supply employees with a safe harbor
notice explaining nonelective contributions
or noting the person's approaching
eligibility; Section 103(a) does not eliminate
the notice requirements for a traditional
safe harbor 401(m) plan.
For example, if a traditional safe
harbor 401(k) plan satisfies the safe harbor
nonelective contribution requirements but
also provides non-safe-harbor matching
contributions that are structured so the
plan is exempt from (ACP) testing, then
the notice requirements still apply. If such
a plan does need to satisfy the ACP test,
sending the notices is now unnecessary.
These were the only changes applicable
to traditional or QACA safe harbor
401(k) plans. " Notice 2020-86 is intended
to assist taxpayers by providing guidance
on particular issues while the Treasury
Department and the IRS develop regulations
to fully implement these provisions
of the SECURE Act, " the IRS stated. -PS
For in-depth coverage of these topics and more, go to PLANSPONSOR.com/compliance.
6 PLANSPONSOR.COM December 2020 - January 2021
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PLANSPONSOR - December/January 2021

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