Capitol News | PLANADVISER March/April 2017

Compliance News

By PA Staff | March/April 2017

IRS Updates Reporting Disclosure Guide
Administrators and sponsors of retirement plans are generally required by law to report certain information to the Internal Revenue Service (IRS), the Department of Labor (DOL) and the Pension Benefit Guarantee Corporation (PBGC). Keeping it all straight is no small task.

Sponsors who need help can reference the newly updated “Reporting and Disclosure Guide for Employee Benefit Plans,” prepared by the IRS as a “quick reference tool for certain basic reporting and disclosure requirements for retirement plans under the Internal Revenue Code [IRC] and provisions of Employee Retirement Income Security Act of 1974 [ERISA] administered by the IRS.”

Covered in the guide are such subjects as Form 5500, annual zone status certifications, various forms related to distributions paid, Form 5330, safe harbor notices, etc. The IRS warns that the guide is “not intended to be an exhaustive list of possible civil penalties and other consequences for reporting and disclosure violations.”

Kickback Lawsuit Calls Out Aon Hewitt
Another recent example of Employee Retirement Income Security Act (ERISA) industry litigation targets Aon Hewitt for, in the words of plaintiffs, permitting excessive fees to be paid and then taking kickbacks.

The challenge was filed in the U.S. District Court for the Northern District of Illinois, Eastern Division. Lead plaintiff Cheryl Scott began the action on behalf of herself and similarly situated participants in the Caterpillar 401(k) Retirement Plan. Named as defendants are a number of Aon Hewitt companies, including Aon Hewitt Financial Advisors, Hewitt Financial Services and Hewitt Associates.

According to the complaint, Scott is a retiree and a participant in the Caterpillar plan, while defendant Hewitt Associates serves and has served as the recordkeeper. Another provider, Financial Engines, is also named in the text of the suit but is not actually challenged as a defendant.

The central claims in the proposed class action suggest plaintiffs feel they overpaid significantly for the services provided by Financial Engines, with the excess payments essentially amounting to kickbacks returned to defendant Aon Hewitt.

Lawmakers Move to Ban State-Run Plans
Representative Tim Walberg, R-Michigan, chairman of the U.S. House Subcommittee on Health, Employment, Labor and Pensions, and Representative Francis Rooney, R-Florida, have introduced two resolutions of disapproval to block regulations issued by the Department of Labor (DOL) regarding the setup of state-run retirement plans for private-sector employees.

Their concerns are that small businesses will be discouraged from offering retirement plans to employees, also that employees put into state-run plans will lack the protections of the Employee Retirement Income Security Act (ERISA) and will have limited control over their retirement savings.

The Walberg resolution (H. J. Res 66) would roll back the regulatory safe harbor created by the Obama administration that will cause private-sector workers to be forced into government-run individual retirement accounts (IRAs) managed by states. Rooney’s resolution (H. J. Res 67) would block a second regulation that extended the safe harbor to include cities and counties.

Tussey Decisions Not Over
In the long-running case of Tussey v. ABB, Inc., the 8th U.S. Circuit Court of Appeals has found that a district court mistook the appellate court’s direction for a definitive ruling on how to measure plan losses and, as a result, entered judgment in favor of the ABB fiduciaries, despite finding they did breach their duties.

In the back-and-forth on the case, on previous remand, the U.S. District Court for the Western District of Missouri found that the fiduciaries to the 401(k) plan abused their discretion when making an investment lineup change, but, because plaintiffs in the case failed to prove damages using the appropriate calculation, judgment was entered in favor of the fiduciaries.