Compliance May 14, 2021

IRS Clarifies Implementation of Partial Plan Termination Relief

The agency says the relief applies to each plan year which falls inside the relief period, and provisions of the law are not limited to staff reductions caused by the COVID-19 pandemic.

Reported by

The most recent COVID-19 relief bill, attached to the Consolidated Appropriations Act, 2021, included provisions to help retirement plan sponsors avoid a partial plan termination.

The bill states: “A plan shall not be treated as having a partial termination (within the meaning of 411(d)(3) of the Internal Revenue Code of 1986 [IRC]) during any plan year which includes the period beginning on March 13, 2020, and ending on March 31, 2021, if the number of active participants covered by the plan on March 31, 2021, is at least 80% of the number of active participants covered by the plan on March 13, 2020.”

For more stories like this, sign up for the PLANSPONSOR NEWSDash daily newsletter.

Now, the IRS has issued guidance to clarify implementation of the partial plan termination relief. In a Q&A on its website, the agency says “a reasonable, good-faith interpretation of the term ‘active participant covered by the plan,’ applied in a consistent manner, should be used when determining the number of active participants covered by a plan on March 13, 2020, and March 31, 2021.”

It also explains that the active participants counted on March 31, 2021, include all participants who are active on that date, regardless of whether they were active on March, 13, 2020—meaning new participants are included.

The guidance further clarifies that the partial plan termination relief applies regardless of the reason for the reductions in active plan participants. The provision’s terms are not limited to reductions related to the COVID-19 national emergency.

Asked how the relief applies to a plan year if only part of the plan year falls within the period beginning on March 13, 2020, and ending on March 31, 2021, the IRS answers: “If any part of the plan year falls within the period beginning on March 13, 2020, and ending on March 31, 2021, then [the relief] applies to any partial termination determination for that entire plan year.” As an example, the IRS says if a plan has a calendar year plan year, the 80% partial termination test applies to both the January 1 to December 31, 2020, plan year and the January 1 to December 31, 2021, plan year.

Products May 14, 2021

Fiduciary Scorecard From Pentegra Can Help Measure Plan Success

The firm says it gives sponsors a way to document the fiduciary oversight process and provides assurances to senior management and boards that the plan is being managed properly.

Reported by

Pentegra Services has introduced the Fiduciary Scorecard, a tool to help defined contribution (DC) plan sponsors measure plan success.

It enables sponsors to document the fiduciary oversight process, to illustrate the value of their fiduciary oversight and ensure high standards of care.

Get more!  Sign up for PLANSPONSOR newsletters.

As an institutional fiduciary, Pentegra assumes responsibility and liability for key plan tasks. The scorecard details the list of fiduciary tasks being completed for DC plans over the course of the plan year, helping to instill sponsor confidence that a plan is in good standing and meets all fiduciary requirements.

“Fiduciary services are becoming increasingly important to retirement plan sponsors, particularly in today’s environment,” says Pentegra President and CEO John Pinto. “With our new Fiduciary Scorecard, we can offer our clients an even more comprehensive solution. As an institutional fiduciary, our goal is to help our clients minimize risk and ensure that their retirement plans are being managed properly.”

Pentegra says the tool will help sponsors in their dealings with senior management and boards, assuring them that they are taking the right steps when it comes to plan oversight and plan success. Pentegra says the scorecard will also make it easier for sponsors to administer their plans.

«