PLANSPONSOR - February/March 2020 - 7

More From
Washington
And the
Courts
Retain Signed Documents
The Office of Chief Counsel of the IRS
has issued a memorandum saying a retirement
plan " is considered adopted only if
proof of adoption of the plan is provided. "
The IRS adds: " Upon failure to produce
an executed plan, the employer has the
burden to prove that it executed a plan
document as required. " The agency was
asked whether a sponsor must retain a
validly executed plan document, in light of
a tax court decision in Val Lanes Recreation
Center Corp. v. Commissioner. In the case,
the tax court originally decided Val Lanes'
plan was disqualified because an unsigned
plan document was presented on audit.
However, after finding additional testimony
credible, the court reversed its decision.
The individual serving as sole director
of the company testified that the failure
of a roof at his facility resulted in water
damage that destroyed documents. The
agency says, in normal circumstances, it is
unlikely a sponsor could meet its burden of
proof without a signed document.
Mortality Assumptions
A U.S. district judge's decision suggests
pension plan sponsors should periodically
review the reasonableness of actuarial
assumptions used to calculate benefits.
The U.S. District Court for the Eastern
District of Wisconsin denied dismissal of
a would-be class action complaint, rejecting
Rockwell Automation's allegation that
a retired pension plan participant failed
to adequately state a claim. The plaintiff
in the lawsuit alleged Rockwell had
harmed participants, in violation of the
Employee Retirement Income Security Act
(ERISA), by incorporating outdated actuarial
assumptions that resulted in certain
alternative pension payments being less
than the actuarial equivalent of the normal
default pension benefit. Rockwell moved
to have the complaint dismissed for failing
to state a claim, as is essentially standard
procedures in such cases, but the court has
agreed to at least allow the case to move
forward to the discovery phase.
SCOTUS Rules for Plaintiffs
In Intel ERISA Lawsuit
The Supreme Court of the U.S. (SCOTUS)
ruled unanimously for plan participants
in Intel Corp. Investment Policy Committee
v. Sulyma. The ruling clarifies what establishes
" actual knowledge " of a potential
fiduciary breach. In short, SCOTUS
affirmed that actual knowledge is established
only by subjective awareness of
information, not by the mere provision
of documents. This distinction matters
because of the three-year statute of limitations
period, which begins when plaintiffs
can be shown to have gained actual knowledge
of an alleged fiduciary breach.
Revenue Sharing
Challenge Is Dismissed
The U.S. District Court for the District
of Massachusetts has ruled in favor of
Fidelity Investments' motion to dismiss
a consolidated lawsuit that alleged it is
receiving " secret " or " kickback " payments
from mutual fund providers on its
FundsNetwork platform. The ruling
comes about eight months after Fidelity
filed its dismissal motion; this successfully
argued that the firm is entitled to negotiate
and collect revenue-sharing fees from
mutual fund companies in exchange for
access to its " mutual fund supermarket, "
as well as for its administrative services.
Plaintiffs in the case argued, unsuccessfully,
that Fidelity's ability to influence
its own compensation collected via the
FundsNetwork platform makes the firm
a fiduciary to plans investing in funds via
the platform-therefore, the types of fees
it collects should be restricted.
Delta's Pension Benefit
Offset Suit
A federal judge found that Delta Air Lines'
pension plan committee did not reasonably
interpret its plan for contract workers,
the Northwest Airlines Pension Plan for
Contract Employees, when it offset pension
benefits for retirees who had received a
workers' compensation settlement. The
plaintiffs had suffered workplace injuries
and filed claims for workers' compensation
benefits. Delta settled these claims, paying
each plaintiff a lump sum. However, the
airline reduced each plaintiff's monthly
pension by an amount calculated in that
person's settlement agreement. The judge
noted that the plaintiffs' entitlement to
workers' compensation actually was never
determined, as Delta settled, and the
retirees did not receive an income stream
that would supplement their pension.
IRS Provides RMD Relief
The IRS has extended regulatory relief to
financial institutions that were expected
to provide required minimum distribution
(RMD) statements to owners of individual
retirement accounts (IRAs) by this
January 31. The relief is tied to the passage
of the Setting Every Community Up for
Retirement Enhancement (SECURE) Act,
which increased the age at which RMDs
take effect from 70.5 to 72. The regulatory
relief is detailed in IRS Notice 2020-6,
which acknowledges " the short amount of
time after the enactment of the SECURE
Act that financial institutions have had "
to update their systems. Technically, if an
RMD statement is errantly provided for
2020 to an IRA owner who turns 70.5 this
year, the IRS will not fault the institution.
The institution must, however, notify the
IRA owner no later than April 15 as to the
RMD date extension. -PS
For in-depth coverage of these topics and more, go to plansponsor.com/compliance.
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