Dear DOL: We Need to Know More About…

Following up on a recent meeting with the Department of Labor, the American Retirement Association has outlined a number of items requiring additional guidance under the SECURE Act.

 

In the Feb. 12 letter, ARA recommended that the items listed below be the subject of DOL guidance, in the following order of priority:

Multiple Employer Plans; Pooled Employer Plans (Sec. 101)

 

Exemptive relief for prohibited transactions involving pooled plan providers (PPPs) maintaining pooled employer plans (PEPs). The letter explains that, in addition to the service provider prohibited transactions of ERISA section 406(a), conflicts of interest for many commercial entities which serve as PPPs, may occur. The letter notes that the ARA intends to formally request a prohibited transaction exemption from the DOL with respect to PPPs which are commercial entities, including broker-dealers and investment managers.

 

Guidance regarding the duties and responsibilities of PPPs under ERISA – in particular, on delegation of the PPP’s responsibilities. Guidance is needed regarding what administrative duties, in addition to those required as the ERISA Section 3(16) plan administrator, a PPP must perform itself and which may be allocated among other entities, as well as guidance relating to collecting and remitting employer contributions to PEPs and how the entity designated trustee should carry out this function should be issued.

 

The letter notes that it is not clear whether under a PEP that consists solely of deduction IRA arrangements, ERISA responsibilities apply to the PPP.

 

Stating its belief that employers should be adequately informed regarding the structure of PEPs and how they differ from other pooled arrangements and single employer plans, the ARA requests guidance regarding information that PPPs must provide to employers upon joining a PEP.

 

The ARA seeks clarification of whether a plan would fail to meet the definition of a PEP if the plan terms described in new ERISA section 44(b) are not part of the PEP. 

 

Guidance should be issued, says the letter, regarding how a plan administrator of a multiple employer plan that is in existence as of a plan year beginning after Dec. 31, 2020, makes the election for the plan to be treated as a PEP. 

 

Clarification of “employers” which may participate in PEPs is needed—in particular, the letter notes that it is not clear whether working owners may participate in PEPs.

 

Clarification including fiduciary obligations applicable to employers participating in a PEP, including information the employer must provide to the PPP, would be valuable, the letter says.

 

The ARA seeks guidance regarding the types of arrangements which DOL considers appropriate for transfers of plan assets where an employer fails to meet the requirements for a PEP, as well as clarification as to what are “the best interests of the employees of the noncompliant employer” where the DOL would waive the requirement to transfer assets to another plan or arrangement.

 

 

Guidance is requested regarding the simplified annual reporting provided under the SECURE Act and which groups of plans are eligible (for example, whether this simplified reporting is available for

PEPs covering under 1,000 participants and where no employer has more than 100 employees. In other words, can current rules used for determining whether an employer has 100 employees be relied on for purposes of this new rule?).

 

Fiduciary Safe Harbor for Selection of Lifetime Income Provider (Sec. 204)

 

The letter asks whether, when engaging with annuity providers, the safe harbor eliminates the need to follow Interpretive Bulletin 95-1 or whether a plan sponsor should follow the Interpretive Bulletin in addition to receiving the provider’s assurance of financial stability. It also says that clarification regarding the scope of a fiduciary’s duty under this rule is needed (for example, what information might reasonably cause the fiduciary to question an insurer’s initial representations of financial capability?)

 

 

In that plan sponsors and service providers have been providing participants with tools and other resources to calculate lifetime income for many years, the ARA expressed concern that this new rule could cause plan sponsors to retreat to provide lifetime income disclosures that are based on a one-size-fits-all set of assumptions instead of utilizing a range of assumptions that seek to provide lifetime income disclosures best suited for each particular plan’s unique participant base. As a result, the ARA suggests that DOL issue a request for information to help determine a usable range of permissible assumptions to be prescribed in a forthcoming rulemaking.

 

 

The ARA notes that it would be helpful to clarify if combined reporting is permissible for multiple plans within a controlled group or an affiliated service group, and when there is a master trust with common investment options. Also, how combined reporting affects the audit requirements.

 

 

The ARA suggests modification of the rules for counting employees for purposes of reporting and disclosure obligations, specifically that employers should be permitted to exclude employees who participate in a plan solely because of this new rule for part-time employees. Alternatively, the ARA suggests that the rules for all plans be modified to allow exclusion of participants who do not make salary deferral contributions and those that do not have an account balance in the plan.

 

The American Retirement Association also wrote to the IRS with some additional clarification and guidance needs. See Dear IRS: We Need Some Clarity on…