PLANSPONSOR - June/July 2020 - 5

New app-based solutions and
increased accessibility by smartphone have
revolutionized the industry, as participants
can view their retirement account and
notices with the tap of a button. " Beyond
the conveniences of electronic disclosure,
a major consequence is that we'll have
more participant engagement-people
checking their retirement accounts more
often, " Malik observes.
However, the growth of e-delivery
has long raised concerns about cybersecurity
issues. To minimize the risk, Malik
recommends plan sponsors perform their
due diligence before making any changes,
especially if employees are working
remotely. " For instance, there's an obligation
that the website to which disclosures
are posted protect confidentiality of information, "
he explains. " In the context of
current events, there's now a shift toward
remote work and the idea of doing things
electronically. Things you would traditionally
see being done on paper, such as
notarization, are switching over to electronic
methods. In the context of those
trends, this rule is even more valuable. "
It is important to note that researching
a platform's confidentiality is part of a
plan sponsor's fiduciary duty, says Allison
Itami, a principal at Groom Law Group,
Chartered. " In the [rule's] preamble, the
DOL takes time to highlight that there
are fiduciary duties to protect electronic
disclosures, " she says.
Plan sponsors will also want to
contact their service providers should
they want clarification about either of
the two safe harbor rules or other notice
requirements they currently follow, Itami
says. " They'll want to have that check-in
conversation and see what the provider
relies on: the 2002 safe harbor or the
technical releases that have come out
since then? " she says. " Take stock of what
[guidance] they're using and whether it
will exist 18 months from now. Interim
guidance, like the technical releases, will
be phasing out. " -Amanda Umpierrez
More From Washington
And the Courts
Proposed DOL Rule Puts
Limits on ESG Investing
The Department of Labor (DOL) has
proposed a new rule that would " update
and clarify " that agency's set of investment
duties and requirements enforced under
the Employee Retirement Income Security
Act (ERISA). In a statement published
alongside the new regulation, Secretary
of Labor Eugene Scalia said the rule is
intended to provide " clear regulatory guideposts "
for plan fiduciaries in light of recent
trends involving environmental, social
and governance (ESG) investing. While it
will take some time for industry experts to
understand the proposed regulation, Scalia's
characterization is that this new ESG
framework represents a tightening of what
ERISA permits.
The regulation summary explains
that the rule will modify Title I of ERISA " to
confirm that [the act] requires plan fiduciaries
to select investments and investment
courses of action based solely on financial
considerations relevant to the risk-adjusted
economic value of a particular investment
or investment course of action. "
DOL Proposes
New Fiduciary Rule
The Department of Labor (DOL)
announced, on June 29, that it has sent a
new proposed conflict of interest regulation
to the Office of Management and Budget
(OMB) for review. The proposed rule
creates a new exemption for investment
advice fiduciaries as defined and policed
under the Employee Retirement Income
Security Act (ERISA). The proposed
exemption offers a new prohibited transaction
class exemption for investment advice
fiduciaries, based on an existing temporary
policy adopted after the 5th Circuit
Court of Appeals vacated the DOL's 2016
fiduciary rule package. If finalized as
proposed, the exemption would let investment
advice fiduciaries offer clients more
choices for retirement savings vehicles, by
using so-called " impartial conduct standards. "
According to DOL leadership, these
standards rise to the level of " a best interest
standard. " This is to say that the standards
require reasonable compensation and
that the financial professionals make no
materially misleading statements. As part
of this proposal, the department is also
amending the Code of Federal Regulations
to implement the 5th Circuit's order.
Expanded Eligibility for
Coronavirus-Related Aid
With its newly released Notice 2020-50, the
IRS has expanded the categories of retirement
plan participants eligible to take plan
distributions and loans due to COVID-19,
under the Coronavirus Aid, Relief and
Economic Security (CARES) Act. The
notice includes guidance for filing federal
income tax returns for these distributions
and loans, and gives examples to follow.
To determine qualified individuals,
the IRS now considers factors such as
being quarantined, furloughed or laid
off; having work hours or pay reduced;
having a job offer rescinded or job start
date delayed; being unable to work due to
lack of child care; and having to close or
reduce the hours of a self-owned or -operated
business, thereby losing the person
income. These factors also apply for a
spouse or household member. Further,
qualified individuals may claim the tax
benefits even if their plan does not offer
the provisions, but they must prove they
are qualified by supplying a sample certification.
The notice gives employers a safe
harbor procedure for how to suspend loan
repayments otherwise due this year.
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