Ensuring your retirement plan aligns with the latest regulations, legislation and guidance
Compliance Connections: Reprioritizing Retirement Plans

From fostering a supportive workplace culture to ensuring your organization has compliant benefit programs, by effectively protecting your employees' wellbeing, you directly protect the overall wellbeing of your organization. Compliance Connections delivers monthly, actionable guidance designed to help you manage and optimize the connections between the compliance of your benefits and human resources programs to overall organizational wellbeing.

Keeping on top of retirement plan compliance requires constant diligence. In addition to the on-going administrative and fiduciary compliance, it's essential to stay apprised of changes coming from multiple directions, including statutory changes under ERISA and the Internal Revenue Code, regulatory guidance from the Department of Labor (DOL) and the Internal Revenue Service (IRS) and litigation. Recent developments for qualified retirement plans have received significant attention among plan administrators — but some may have flown beneath the radar. When you're an ERISA fiduciary, new developments occur quickly. With information coming to you from many directions, we've highlighted some of the significant developments below, so you can quickly connect the alignment of your existing retirement plan with the most current information, rules, and guidance.

Review your process for finding missing participants and uncashed checks from both defined contribution and defined benefit plans.

Sponsors of qualified retirement plans often need to locate missing or unresponsive participants or beneficiaries. DOL guidance, outlined in Gallagher's article, Missing Participants and Fiduciary Responsibility, provides four types of best practices designed to mitigate the problem of missing participants who have uncashed checks. The new direction from the DOL can be used by any and all types of qualified retirement plans. The guidance intends to help plan administrators with: (1) maintaining accurate census information; (2) implementing effective communication strategies; (3) searching for missing participants; and (4) documenting procedures and actions. In each area, the DOL gives specific steps that plan sponsors should consider. Not every practice described in the DOL guidance is necessarily appropriate for every plan, so the DOL does not require all plans to take each listed step. Fiduciaries should consider the size of a participant's accrued benefit or account balance as well as the cost of any search efforts when determining which steps are appropriate. What search steps are you taking to locate missing participants and the uncashed checks?

Remember that Required Minimum Distributions (RMDs) must be made in 2021.

Qualified retirement plans generally are required to start minimum distributions to participants at age 72 (or retirement, if later). For individuals who turned 70½ in 2019 or earlier, RMDs are triggered at age 70½. But the CARES Act suspended the RMD requirement for defined contribution plans in 2020. Consequently, most defined contribution plans chose not to make 2020 RMD payments to participants. An individual who reached age 70½ before 2020 but retired in 2020 would normally have an RMD due by April 1, 2021. The CARES Act also waived this RMD. Congress has not extended the RMD relief into 2021. As a result, retirement plans must once again ensure that all participants who are subject to the RMD rules will again receive at least their minimum payment amounts during 2021. Prudent plan sponsors will take steps to communicate with plan trustees to ensure that these requirements are met. How are you communicating with plan trustees to make certain that the RMD requirements will be met for the current year?

Follow investment duties according to the DOL's final regulations.

Near the end of 2020, the DOL finalized its investment duties regulations under ERISA. The final regulations require plan fiduciaries to select investments based solely on financial considerations relevant to the value of a particular investment. While the proposed version of the regulations focused specifically on environmental, social, and corporate governance (ESG) investing, the final version removed any reference to ESG terminology. Instead, the final regulations simply require that fiduciaries only consider pecuniary factors in selecting investments. The rule does not strictly prohibit ERISA fiduciaries from investing in funds that consider ESG factors. However, the fiduciary must conclude that any ESG factors considered are pecuniary in nature. The DOL has since announced a nonenforcement policy with regard to the final regulations, leaving their position on ESG investments uncertain. Until the DOL issues further guidance, ERISA fiduciaries should diligently and prudently evaluate all investments — especially ESG funds — and carefully document all investment decisions. For more detail on the final DOL regulations, see our Investment Duties Regulation white paper. What process are you following to diligently and prudently evaluate all investments — especially ESG funds — and how are you documenting your committee's investment decisions?

Attend to proxy voting.

In December 2020, the DOL finalized a regulation addressing an ERISA investment fiduciary's responsibility relating to proxy voting and other shareholder rights. Under the rule, fiduciaries do not have a responsibility to vote every proxy it receives in relation to shares owned by the plan. If the vote will not have a material effect on the value of the investment, or if the size of the plan's holdings are so small that the proxies will not have a material impact on the vote, the fiduciary need not expend plan resources on concluding how the proxies should be voted. The DOL's nonenforcement policy relating to the final investment duties regulations (noted above) also applies the final proxy voting regulation. Based on these final rules and the DOL's nonenforcement announcement, plan investment fiduciaries should consider updating (or adopting) plan procedures relating to proxy voting and other shareholder rights. Plan sponsors should also know which fiduciaries have been delegated responsibilities associated with any shareholder rights. How are you exercising prudence in selecting and monitoring the specific fiduciaries responsible for voting proxies or exercising other types of shareholder rights?

Provide lifetime income disclosures.

The Setting Every Community Up for Retirement Enhancement (SECURE) Act was passed in December 2019 and became a law as of Jan. 1, 2020. Under the SECURE Act, a defined contribution plan must include a demonstration of a participant's account balance converted to a stream of lifetime payments, at least once a year. The DOL has issued an interim final regulation providing model language for the lifetime income disclosure and actuarial assumptions for converting the account into an annuity. The interim rule also contains model language for the disclosure, including a disclaimer that the annuity payment levels are solely for purposes of illustration and are not guaranteed. Service providers are very likely to use the precise model language and assumptions listed in the DOL's rule, in order to secure the highest possible legal protection. The first of these lifetime income disclosures will become necessary in 2022. What steps have you taken to ensure your service providers will be in compliance with the DOL's interim final rules?

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This is a preview edition of Compliance Connections, a monthly publication produced by Gallagher's Compliance Consulting Practice. For five more action steps, contact your Gallagher representative or visit our Compliance Resources page to subscribe and receive the full version of this publication each month.


Compliance is a series of actions, not a final destination. As a trusted advisor, Gallagher has developed this Compliance Connections series to help you pursue a path through employee benefits compliance issues as part of an overall continuing compliance plan. Plan sponsors should carefully evaluate their health and welfare plans to determine if they are in compliance with both federal and state law. If you have any questions about one or more of the compliance requirements listed above, or would like additional information on how Gallagher constantly monitors laws and regulations impacting employee benefits in order to support plan sponsors in their compliance efforts, please contact your Gallagher representative.

Disclosure Statement

Gallagher Fiduciary Advisors, LLC ("GFA") is an SEC Registered Investment Advisor that provides retirement, investment advisory, discretionary/named and independent fiduciary services. GFA is a limited liability company with Gallagher Benefit Services, Inc. as its single member. GFA may pay referral fees or other remuneration to employees of AJG or its affiliates or to independent contractors; such payments do not change our fee. Securities may be offered through Triad Advisors, LLC ("Triad"), member FINRA/SIPC. Triad is separately owned and other entities and/or marketing names, products or services referenced here are independent of Triad. Neither Triad, Arthur J. Gallagher & Co., GFA, their affiliates nor representatives provide accounting, legal or tax advice.

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