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DISCLAIMER: This blog is published for general information only - it is not intended to constitute legal advice and cannot be relied upon by any person as legal advice.  U.S. Treasury Regulations require us to notify you that any tax-related material in this blog (including links and attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding tax penalties, and may not be referred to in any marketing or promotional materials.  While we welcome you to contact our authors, the submission of a comment or question does not create an attorney-client relationship between the Firm and you. 


Stronger Than its Weakest Links: NYU Survives 403(b) Fee Lawsuit

In the first University 403(b) plan fee case to proceed to trial, Sacerdote v. New York University (No. 16-cv-6284 (KBF) (S.D.N.Y. July 31, 2018), the Court found that plaintiffs were unsuccessful in proving that the NYU Retirement Plan Committee breached its fiduciary duties by failing to reduce high recordkeeping fees and failing to remove two underperforming investment options.  Fiduciary obligations are often described in black and white terms.  The Sacerdote opinion is a reminder that practical limitations often interfere with “best practices” for retirement plan fiduciaries – committee members have varied backgrounds and experience, timelines for completing fiduciary objectives are often interrupted, and implementing changes to plan design and operation can be labor intensive and may create disruption for participants.  Sacerdote underscores that sound process and good documentation are key to avoiding trouble when the actions taken by plan fiduciaries are not perfect. 

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New Disability Claims Procedures Affect Retirement Plans and Deferred Compensation Plans Too

Much has been written about the Department of Labor’s final rule regarding disability benefit claims procedures (the “Final Rule”), which took effect on April 2, 2018.  And by now, most employers – and all disability insurance carriers – have taken steps to implement changes in disability plan administrative procedures and plan documents necessary to comply with the Final Rule.  However, many employers have been somewhat slower to react to the implications of the Final Rule for their retirement plans and deferred compensation plans that include a benefit or payment based on disability.  Plan sponsors generally have until December 31, 2018 (for calendar year plans) to adopt amendments that would be retroactively effective to April 2, 2018.  Plan sponsors should take the time now to determine whether their retirement plans and deferred compensation plans may be affected by the Final Rule.

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Voluntary Compliance with ERISA Does Not Preclude Church Plan Status 

The IRS has once again confirmed that an employee benefit plan maintained by a church or church-affiliated organization is not subject to ERISA unless the plan sponsor makes an affirmative written election to have ERISA apply to the plan.  That is the case even if the plan historically has been administered and operated as though it were an ERISA plan.

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401(k) Plan Sponsors – Time to Revisit Your Hardship Withdrawal Provisions

The Bipartisan Budget Act of 2018 (“Budget Act”) includes several changes to the rules governing hardship withdrawals from 401(k) plans.  Because the changes apply to plan years beginning after December 31, 2018, 401(k) plan sponsors should start considering their options now and make decisions regarding which changes, if any, to implement to allow plenty of time to develop and timely distribute participant communications, update procedures and re-program plan administrative systems (including coordination with the plan recordkeeper’s systems), and amend their plan documents.

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IRS Appears Likely to Expand Determination Letter Program in 2019

All signs point to the IRS expanding access to the determination letter (“DL”) program for individually designed plans in 2019.  This would be a welcome move for employers and other plan sponsors, who have been unable to obtain determination letters with respect to most ongoing plans since the DL program as we knew it ended last year.

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