Compliance March 14, 2018

IRS Extends Remedial Amendment Cycle for Pre-Approved DB Plans

A plan sponsor using pre-approved plan documents to restate a plan for the plan qualification requirements included on the 2012 Cumulative List will be required to adopt the plan document by April 30, 2020.

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The Internal Revenue Service (IRS) intends to issue opinion and advisory letters for pre-approved master and prototype (M&P) and volume submitter (VS) defined benefit (DB) plans that were restated for changes in plan qualification requirements per the 2012 Cumulative List, and that were filed with the IRS during the submission period for the second six-year remedial amendment cycle on March 30, 2018, or, in some cases, as soon as possible thereafter. 

An employer using these pre-approved plan documents to restate a plan for the plan qualification requirements included on the 2012 Cumulative List will be required to adopt the plan document by April 30, 2020—an extension of the previous January 31, 2019 deadline.  

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An adopting employer whose DB plan is eligible for the six-year remedial amendment cycle system under section 19 of Rev. Proc. 2016-37, and who adopts, by April 30, 2020, an M&P or VS defined benefit plan that was approved based on the 2012 Cumulative List, will be considered to have adopted the plan within the second six-year remedial amendment cycle. 

Section 16.01 of Rev. Proc. 2016-37 provides that the third six-year remedial amendment cycle for DB pre-approved plans begins on February 1, 2019. The IRS says it will announce in future guidance a later starting date for this third six-year remedial amendment cycle.

Compliance March 14, 2018

SunTrust Agrees to Settlement in Long-Running ERISA Suit

In addition to a monetary payment of $4.75 million, the bank agreed to non-monetary terms regarding payment and vesting of matching contributions to its 401(k) plan.

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SunTrust Banks has agreed to settle a long-running Employee Retirement Income Security Act (ERISA) lawsuit for $4.75 million.

According to the settlement agreement, the company denies “any fault, liability or wrongdoing.”

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The case, originally filed in 2008, alleged that SunTrust Banks breached its fiduciary duty by keeping company stock as an investment option in its 401(k) plan after it was no longer prudent. The suit charged that the company said publicly it was tightening its underwriting standards for certain types of mortgages, but actually had substandard procedures in place that allowed it to grant loans to undeserving borrowers. The plaintiffs also alleged the company led investors to believe it had scoured its portfolio and found its loss exposure was “virtually zero” on loans known as “Alt A” transactions when that was untrue. The participants argued they lost money when the company’s share price dropped during the mortgage meltdown as part of the 2008 economic crisis.

Other terms of the settlement agreement include:

  • All participants whose date of hire is on or before December 31, 2010, are 100% vested in matching contributions.
  • Those hired on or after January 1, 2011, or who resume employment after that date and are not fully vested, shall be 100% vested in matching contributions the earlier of the date of completion of two years of vesting service, disability or death.
  • SunTrust will not amend the vesting schedule to a less generous one for a period of three years from the date the settlement agreement is executed unless otherwise required by fiduciary obligations or changes in law.
  • SunTrust currently funds matching contributions in the form of cash or cash equivalents—not shares of SunTrust stock—and agrees not to change this for a period of three years from the date the settlement agreement is executed.
  • SunTrust, at its expense, will provide fiduciary training to the committee responsible for the plan on an annual basis for at least five years from the date the settlement agreement is executed.

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