PLANSPONSOR - December 2022-February 2023 - 5

More From Washington and the Courts
SECURE 2.0 Is Here
The widely anticipated legislation known as
SECURE 2.0, which builds on the Setting
Every Community Up for Retirement
Enhancement Act of 2019, was attached to
the federal omnibus spending package that
was passed by Congress in late December.
Among many other items, the final version
of SECURE 2.0 will do the following:
* New 401(k) and 403(b) plans have
to start enrolling participants, with a
deferral of at least 3% of pay but no higher
than 10%, and escalate at 1% per year
of service up to a minimum of 10% and
maximum of 15%.
* Starting in 2027, low-income savers
may receive a tax credit of 50% of their
retirement contributions, up to $2,000.
* 403(b) plans may use collective
investment trusts and participate in
multiple and pooled employer plans.
* The age for
required minimum
distributions will increase from 72 to 73 in
2023 and to 75 in 2033.
* For those ages 60 through 63,
catch-up contribution maximums will
be increased to $10,000 or 150% of the
regular catch-up amount for those 50 and
older, whichever is greater.
* Every state will be eligible for federal
funding to set up education, training and
outreach programs on employee ownership,
plus the Department of Labor will be
required to set new standards for employeestock-ownership-plan
appraisals.
* Starting in 2024, employers may
match student loan payments with retirement
plan contributions.
* Plan participants will be permitted
one emergency distribution per year of
up to $1,000, with the option to repay the
distribution within three years without an
early-withdrawal tax penalty. No further
withdrawals are permissible during the
three-year period unless repayment has
been made.
* Employers may offer
retirementplan-linked
emergency savings accounts
allowing
four penalty-free withdrawals
per year. Employees may contribute up to
$2,500 to such an account.
* Participants may withdraw up to
$22,000 to pay for expenses related to a
natural disaster, and those withdrawals
will be taxed as gross income over three
years without additional penalty.
Starting in 2024,
employers may
match student
loan payments
with plan
contributions.
* The DOL will have two years to create
an online database of retirement plans so
that employees and employers can find
missing retirement accounts and match
them to their corresponding sponsor or
participant.
* Part-time workers will be eligible to
enroll in their employer's 401(k) plan after
two years, instead of the current three.
* A plan provider may transfer a participant's
retirement savings from a previous
employer to the person's new one, unless
the participant elects otherwise.
The DOL Updates Form 5500
The Department of Labor has announced
changes to Forms 5500 and 5500-SF (short
form) and released updated instructions.
The department revisits Form 5500 annually
to keep it consistent with regulatory
changes. Every defined contribution and
pension plan sponsor must file a 5500 with
the IRS and DOL annually. The form is
used to ensure compliance by, and gather
data on, the plan, which supplies information
about its finances and operations.
The form received changes in
five areas: multiple employer plans,
administrative penalties, Schedule MB,
Schedule R and Schedule SB.
Capital One and Booz Allen
Hamilton Suits Dismissed
A judge in the U.S. District Court for the
Eastern District of Virginia has dismissed
lawsuits brought against two plan sponsors
under the Employee Retirement
Income Security Act. The suits had been
filed against Capital One Financial Corp.
and Booz Allen Hamilton Inc. for using a
BlackRock target-date fund series as their
qualified default investment alternative.
Both employers are represented by
Morgan, Lewis and Bockius LLP. They
filed for dismissal in October for failure
to state a claim, and the suits were
dismissed without prejudice this past
December 1. The plaintiffs, represented
by Miller Shah LLP, were given two
weeks to amend their complaint.
Miller
Shah
currently
represents
clients in 11 lawsuits against plan sponsors
that offer the BlackRock LifePath Index
Suite, a series of TDFs, as their QDIA. The
core claims in all the suits are essentially
the same. The plaintiffs argued that their
plan sponsor sought low fees in selecting
the BlackRock TDFs without monitoring
the overall performance of the funds in
relation to other, higher-performing funds
and therefore both violated their ERISA
fiduciary duties of prudence and loyalty
and damaged plan participants' retirement
savings.
The 11 defendants include employers
such as Microsoft Corp., Cisco Systems
Inc.,
CitiGroup
Inc.
and Wintrust
Financial Corp.
As of December 8, James Miller, a
partner in Miller Shah, said the firm and
its clients were still evaluating their option
to refile the Capital One and Booz Allen
cases. The dismissal, he said, was a consequence
of courts that lack a full understanding
of the investment products and
the way advisers and fiduciaries evaluate
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