PLANSPONSOR - December 2018/January 2019 - 14

Rules & Regulations
Court has repeatedly recognized, and
granted certiorari to vindicate, the " liberal
federal policy favoring arbitration "
embodied in the Federal Arbitration Act
(FAA). That policy requires, among other
things, that " ambiguities as to the scope
of [an] arbitration clause " be " resolved in
favor of arbitration. "
According to USC, in accordance
with the FAA's statutory objectives, federal
courts of appeals apply a presumption in
favor of arbitrability and compel arbitration
unless it can be said with positive assurance
that the dispute is not encompassed
by the parties' agreement to arbitrate.
USC alleges that the 9th Circuit has transformed
the FAA's policy that favors arbitration
into a presumption against arbitration.
In amicus briefs filed with the 9th Circuit,
the Charles Schwab Corp. and the U.S.
Chamber of Commerce also cited Supreme
Court precedent in favor of arbitration.
Fiduciary Roles in
Auto-Portability Solution
The Department of Labor (DOL) has issued
an advisory opinion letter in response
to a request by J. Spencer Williams,
founder, president and CEO of Retirement
Clearinghouse (RCH). Williams was
seeking the department's opinion on the
status of certain parties as " fiduciaries "
within the meaning of Section 3(21)(A) of
the Employee Retirement Income Security
Act (ERISA) and Section 4975(e)(3) of the
Internal Revenue Code (IRC); he made
the request because of actions undertaken
as part of RCH's Auto[matic]-Portability
Program. The RCH program portability
services mentioned in the request involve
automatic rollovers of mandatory distributions
and account balances from terminated
workers' defined contribution (DC)
plans into default individual retirement
accounts (IRAs), and the subsequent automatic
roll-in of funds in the default IRA
to an individual account plan maintained
USC says the
Supreme Court
has repeatedly
recognized, and
granted certiorari
to vindicate, the
" liberal federal
policy favoring
arbitration "
embodied in the
Federal Arbitration
Act (FAA).
by a new employer when the IRA owner
changes jobs.
According to the DOL, when plan
sponsors or other responsible fiduciaries
choose to have a plan participate in
the RCH program, they act in a fiduciary
capacity and would be subject to the general
fiduciary standards and prohibited transaction
provisions of ERISA for selecting and
monitoring the program. Further, plan
fiduciaries considering the RCH program
are responsible to ensure that it is a necessary
service and a reasonable arrangement;
the latter means that compensation paid
to RCH is no more than reasonable within
the meaning of ERISA Section 408(b)(2)
and IRC Section 4975(d)(2)-including the
DOL's implementing regulations.
The department adds that the
responsible plan fiduciaries must also
monitor the arrangement and periodically
ensure that the plan's continued participation
in the program is consistent with
ERISA standards. Still, the DOL notes,
a plan sponsor that may be a fiduciary
with respect to certain activities relating
For further coverage of these topics and more, go to plansponsor.com/compliance.
12 PLANSPONSOR.com December 2018 - January 2019
to the RCH program is not necessarily
a fiduciary with respect to all aspects of
the program. (For more on this topic, see
Saxon Angle, page 55.)
403(b) Plans' 'Once-In,
Always-In' Condition
The IRS has issued Notice 2018-95, which
provides transition relief for 403(b) plans
that have failed to adopt the " once-inalways-in "
(OIAI) condition in relation to
excluding part-time employees from plan
eligibility under Treasury Regulations,
Section 1.403(b)-5(b)(4)(iii)(B). The IRS
explained that, when it announced the
opening of document submissions for its
403(b) preapproved plan program, it had
issued a Listing of Required Modifications
(LRM), which included the OIAI condition.
Commenters then had requested transition
relief with respect to the OIAI condition,
stating that many employers were unaware
that the part-time exclusion included it.
The relief from the OIAI condition
includes: relief as to plan operations for a
transition period, which ends on April 1,
2020; relief regarding plan language;
and a fresh-start opportunity after the
relief period ends. The period starts with
taxable years beginning after December
31, 2008-the general effective date for
the 403(b) regulations.
For plans with exclusion years based
on plan years, the period ends for all
employees on the last day of the last exclusion
year that ends before December 31,
2019. For plans with exclusion years based
on employee anniversary years, the period
ends, with respect to any employee, on the
last day of that employee's last exclusion
year that ends before December 31, 2019.
The notice offers examples of the relief
provided. 403(b) plan sponsors have until
March 31, 2020, to adopt a preapproved
plan document and to make sure their plan
has been operating in accordance with the
terms of their own plan documents. -PS
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