DOL releases the final version of its new fiduciary rule

The U.S. Department of Labor has finalized changes to the definition of a "fiduciary" of an employee benefit plan under ERISA as a result of giving investment advice to a plan or its participants or beneficiaries. The final rule also applies to the definition of a "fiduciary" of a plan (including an IRA) under the Internal Revenue Code. Under the new rule, a fiduciary is someone who makes a "recommendation" to a plan, plan fiduciary, plan participant or beneficiary, or IRA owner for a fee or other compensation, direct or indirect, regarding, among other things, the purchase of investment products or services, whether to take a distribution from the plan, and whether a plan distribution should be rolled over to an IRA. A "recommendation" is "a communication that, based on its content, context, and presentation, would reasonably be viewed as a suggestion that the advice recipient engage in or refrain from taking a particular course of action."

If you sponsor a 403(b) and/or a 457(b) plan for public school or municipal employees —i.e., your plan is not subject to ERISA—the new rule will apply to advice given to participants in connection with rollovers to IRAs or ERISA plans.

The new rule will be phased in between April 10, 2017, when the new investment advice standards take effect, and January 1, 2018, when additional conditions apply and all new procedures must be in place. In the meantime, we are analyzing all facets of the new rule and will be posting more detailed updates over the coming months.

PlanConnect shares the DOL's objective of ensuring that high quality and affordable retirement savings education and advice is available to those who need it.


Action items for employees who are eligible for post-employment contributions

Does your 403(b) or 457(b) plan permit post-employment contributions of unused sick leave and vacation pay?

Under the 403(b) regulations a plan can be set up or amended to accept post-retirement employer contributions (ER) and/or post-severance employee elective deferrals (EE). However, under the 457(b) regulations, a plan can only accept post-severance employee elective deferrals (EE).

If your plan includes either feature, make sure your eligible employees know that they must take the following steps before their employment ends (in some cases before the payout is made available) for payroll to process the contributions. For the specific rules click here.

First and foremost, if the employee doesn't have an account set up with a plan approved investment company where they wish the money to be sent, they must establish one. In addition, they will need to complete one or more of the following forms:

  • For 403(b) plans with a mandatory post-retirement employer (ER) contribution feature, eligible employees need to complete our 403(b) Post Retirement Investment Provider Election Form, if they do not have a pre-existing election on file with us or if they wish the money to be sent to another plan approved investment company.
  • For 403(b) plans offering voluntary post-severance elective (EE) deferrals, eligible employees must execute a one-time Salary Reduction Agreement authorizing the deferral amount before any unused sick leave or vacation pay is made available to them.
  • For 457(b) plans offering voluntary post-severance elective(EE) deferrals, eligible employees must enter into a Deferred Compensation Agreement authorizing the deferral amount before the first day of the month in which the unused sick leave or vacation pay is paid.

You can make 403(b) post-retirement employer (ER) contributions on an employee's behalf for up to five years following the year the employee retires (or is no longer employed by you). Employee elective (EE) deferrals to a 403(b) or 457(b) account must be made by end of the calendar year severance occurs or, if later, within 2-1/2 months after severance of employment. Forms are available by logging in through www.planconnect.com.


Keep those monthly census files coming...it helps keep your plan in compliance

Many compliance risks can be reduced, and in some cases avoided, simply by making sure we have up-to-date and complete census data for ALL your employees, including part-time and seasonal workers.

Missing or out-of-date census data affects our ability to distribute IRS-required 403(b) annual meaningful notices and ERISA plan participant fee disclosures. It also prevents us from processing plan contributions, Salary Reduction Agreements and/or transactions in a timely manner. This creates compliance risks—and those risks aren't worth taking.

So be sure to send us monthly census data for all your employees. You can easily and securely upload this information to us through the plan sponsor website at www.planconnect.com.

Visit our ConnectNow page for more information on these and other topics

If you have any questions email us at support@planconnect.com or call us at (800) 923-6669, Monday through Friday from 9:00 am to 5:00 pm ET.
 

PlanConnect, LLC is a wholly owned subsidiary of AXA Distribution Holding Corporation, an indirect subsidiary of AXA Financial, Inc. PlanConnect® Connect2Remit®, Connect2Comply®, Connect2Maintain®, and Connect2Achieve® are registered service marks of AXA Distribution Holding Corporation. PlanConnect may not be available in all states. AXA Financial, Inc. and its family of companies do not provide tax advice. Please consult with your tax advisor regarding your particular circumstances. Each company is affiliated. AXA Distribution Holding Corporation and AXA Financial, Inc. are located at 1345 Avenue of the Americas, New York, NY 10105, (212) 544-1234.

PlanConnect, LLC is located at 100 Madison Street, Syracuse, NY 13202, (800) 923-6669.

This message is not intended to convey legal or tax advice, nor can it be used to avoid the payment of income taxes or penalties assessed by any US tax authority.