PLANSPONSOR - October/November 2019 - 13

glaring unresolved issue. Can individual
arbitration of fiduciary breach claims be
brought on behalf of a plan? Until this
issue is resolved, I am not rushing out
to encourage my plan sponsor clients to
adopt mandatory arbitration provisions
for fiduciary breach claims. "
While, " generally, plan sponsors
prefer arbitration to going to court, " there
are some downsides to arbitration, notes
Tad Devlin, a partner with Kaufman
Dolowich & Voluck LLP. " For nonexperienced
practitioners, the ERISA statute can
be a labyrinth, so this would weigh some
plan sponsors in favor of going before a
federal judge who has heard these types
of claims, " he says.
" Another disadvantage to arbitration
is that it is confined to a limited review,
and the arbitration award likely would be
final and binding and can be very difficult
to challenge or overturn, " Devlin
continues. " It can be almost impossible to
challenge at the judicial level on a petition
to vacate the award. To do so, the sponsor
would essentially have to show the award
decision was fraudulent or corrupt. On
the other hand, in a judicial setting, you
have at your disposal the district court,
the court of appeals and the highest court
in the land. "
Ross says, should a plan sponsor go
the arbitration route to try to avoid classaction
lawsuits, this could lead to " thousands
of individual arbitrations, and some
of these decisions could be inconsistent
with one another. So, while on the surface
the Dorman decision seems like a tremendous
panacea for class actions, that's not
necessarily the case. "
Nonetheless, should a plan sponsor
decide it wants to include an arbitration
clause in its plan document, Neri recommends
" it follow the Dorman approach,
namely, it should require that the claims
be arbitrated on an individual basis
rather than a class action basis, and it
should include a class action waiver. "
-Lee Barney
From Washington
And the Courts
IRS Finalizes Hardship
Withdrawal Rules
The IRS' final regulations concerning
plan participants taking hardship withdrawals
reflect statutory changes,
including changes made by the Bipartisan
Budget Act of 2018. The act called for the
secretary of the Treasury to amend regulations
by deleting the six-month prohibition
on contributions to a retirement plan
after a hardship withdrawal.
The rules now permit those taking
a withdrawal to continue making profitsharing
or stock bonus plan contributions.
In addition, hardship withdrawals
from qualified nonelective contributions
(QNECs) and qualified matching contributions
(QMACs), as well as earnings on
the contributions are now allowed.
The bill also said, " A distribution is
not treated as failing to be made upon the
hardship of an employee solely because [he]
does not take any available loan under the
plan. " The IRS proposed the amendments
last November. It also has since issued a
Snapshot publication explaining the new
mechanics of hardship withdrawals.
Remedial Amendment
Periods for 403(b) Plans
In April 2013, the IRS issued Revenue
Procedure 2013-22, establishing a preapproved
plan program for 403(b) plans and
offering a remedial amendment period for
403(b) plan documents. The last day of the
remedial amendment period is March 31,
2020. Now, the IRS has issued Revenue
Procedure 2019-39, which sets forth a
system providing for recurring remedial
amendment periods for correcting form
defects in 403(b) individually designed
plans and preapproved plans occurring
after the initial period ends this coming
March. It also provides a limited extension
of that initial period for certain form
defects. The IRS says issues that cannot be
retroactively amended may be corrected
under its Employee Plans Compliance
Resolution System (EPCRS).
According to Revenue Procedure
2013-22, the IRS expects future guidance
to require the restatement of 403(b) preapproved
plans every six years. This new
procedure establishes a system of 403(b)
preapproved plan cycles under which
entities offering preapproved 403(b) plan
documents may submit them to the IRS
for review and approval. Once approved,
these plans may be made available for
adoption by eligible employers.
Revenue Procedure 2019-39 also
provides deadlines for 403(b) individually
designed plans and preapproved plans
to adopt plan amendments. In it, the
Treasury Department and IRS announce
they plan to issue further guidance before
the date 403(b) preapproved plans may
next be submitted for review.
SCOTUS May Review
Annuity Contract Case
The plaintiff in a case alleging that GreatWest
Financial engaged in self-dealing
transactions and caused his retirement
plan to engage in prohibited transactions
with a party in interest, both allegations
in violation of the Employee Retirement
Income Security Act (ERISA), has petitioned
the U.S. Supreme Court (SCOTUS).
According to his complaint, Great-West had
breached its general duty of loyalty under
ERISA Section 404 by: setting the credited
rate of its Key Guaranteed Portfolio
Fund-an annuity-for its own benefit
over the plan's and participants' benefit;
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