Defined contribution plan

NAPA Names Two Ascensus Regional Vice Presidents to 2019 Top 100 Defined Contribution Wholesalers List

Jeff Simes and Matt Spicer, AIF®, PPC™ Recognized as Leading DC Wholesalers, as Voted on by Thousands of Retirement Plan Advisors

Dresher, PAAscensus—whose technology and expertise help millions of people save for retirement, education, and healthcare—announced that two regional vice presidents, Jeff Simes and Matt Spicer, AIF®, PPC™, have been named to the sixth annual list of NAPA Top 100 Defined Contribution (DC) Wholesalers by the National Association of Plan Advisors (NAPA). This represents a second win for Spicer, who was previously named to the 2017 edition of the list. 

The finalists for this year’s list, which recognizes the top recordkeeping and Defined Contribution Investment Only (DCIO) external wholesalers, were selected by thousands of retirement plan advisors from a list of more than 600 wholesalers nominated by NAPA Firm Partner recordkeepers and DCIOs.

According to NAPA, the award winners—referred to as the “Wingmen” for consistently having the backs of their advisor clients—represent the top 7% of an estimated 1,400 recordkeeping and DCIO external wholesalers throughout the country.

“Being named among NAPA’s Top 100 DC wholesalers is a huge accomplishment and a well-deserved recognition of Jeff and Matt’s efforts to go above and beyond for our partners and their retirement plan clients,” said Jason Crane, head of retirement distribution at Ascensus. “Congratulations to them both from the whole Ascensus team. Their work is an excellent example of the value and expertise we strive to deliver to all those saving for their future retirement, and representative of the talent we have across the broader organization.”

The complete 2019 Top 100 DC Wholesalers list is available on NAPA Net and will be published in the fall issue of NAPA Net the Magazine.


About Ascensus

Ascensus is the largest independent recordkeeping services provider, third-party administrator, and government savings facilitator in the United States. The firm delivers technology and expertise to help millions of people save for what matters most—retirement, education, and healthcare. For more information about Ascensus, visit View career opportunities at

Second Lawsuit Filed Against SEC Investment Advice Rule

On September 11, 2019, XY Planning Network filed a lawsuit against the United States Securities and Exchange Commission (SEC) to invalidate its new fiduciary standards, known as the Regulation Best Interest Rule. The plaintiffs argue that the regulation fails to meet standards imposed under the Investment Advisers Act of 1940, and frustrates the intent of the Dodd-Frank Act.

The lawsuit argues that the SEC rule imposes a different standard of fiduciary responsibility for broker dealers than it does for financial advisers who might be selling the same or similar products. Financial advisers are held to a standard that the advice they provide to clients must be in the client’s best interests, but broker-dealers are not held to this same standard when providing advice. This is because broker-dealers are considered to be in the business of selling financial products rather than financial advice. The plaintiff claims that the new rule makes this distinction less clear, and as a result, “the rule thus circumvents a key goal of Dodd-Frank—leveling the playing field—and increases investor confusion.” The plaintiff claims it will be financially harmed as a result of the rule. The plaintiff represents over 1,000 financial advisers who expect to lose business to broker-dealers who are subject to the less stringent standards.

The lawsuit comes shortly after seven states and the District of Columbia filed a similar case seeking to invalidate the SEC rule. The SEC has yet to file a response in either case.

States File Lawsuit to Invalidate SEC Investment Advice Rule

On September, 9, 2019, seven states and the District of Columbia filed a lawsuit seeking to invalidate the recently announced Securities and Exchange Commission (SEC) investment advice rule. The Regulation Best Interest Rule, which is currently scheduled to be implemented by June 30, 2020, increases disclosures that must be provided to investors, but preserves many existing industry practices, such as the ability for brokers to use a commission-based sales model.

The plaintiffs contend that the rule undermines existing consumer protections because it will permit brokers to market themselves as trusted advisers while actually engaging in conflicts of interest that may harm their clients. The plaintiffs contend that practices such as sales contests, which they argue represent an obvious conflict of interest, are still permissible in many circumstances under the regulations.

Additionally, the plaintiffs argue that the rule causes confusion about which standards might apply when consumers are seeking investment advice. The regulations allow for different standards of advice to apply to investment advisers than those standards that apply to broker-dealers. The plaintiffs cite evidence from an SEC study that retail investors do not understand the difference between these two classifications, and the separate standards to which they are held.

The Dodd-Frank Act required the SEC to study where regulations are weak, and enact necessary changes to improve regulations to protect retail investors where necessary. The legislation also authorized the SEC to create regulations which would ensure uniform standards of investment advice applied to broker-dealers and investment advisers. The plaintiffs argue that the SEC ignored the conclusions of its own study, which demonstrated the need for a more robust regulation than what was actually proposed, and for rules which apply equally to both broker-dealers and investment advisers. For these reasons, the plaintiffs are asking the U.S. District Court for the Southern District of New York to hold the SEC regulation invalid.

IRS Extends Nondiscrimination Relief for Certain Closed Defined Benefit Plans

The IRS has issued Notice 2019-49, guidance that extends existing nondiscrimination testing relief available to certain defined benefit (DB) pension plans that are closed to new participants. The guidance is intended to aid sponsoring employers that are maintaining a DB plan for certain current employees, but commonly offer only a defined contribution (DC) plan—such as a profit sharing-401(k) plan—to new employees. In the absence of such relief, these DB plans could fail nondiscrimination testing because of the limitations on participation. Notice 2019-49 extends the current relief to cover plan years that begin before 2021. (Permanent relief has been proposed in retirement enhancement legislation that has not yet been enacted.)

OMB to Review Proposed DOL Guidance on Retirement Plan Disclosures

The Office of Management and Budget (OMB) has received for review Department of Labor (DOL) new proposed regulations on procedures for satisfying retirement plan disclosure requirements. These regulations are the DOL’s response to an Executive Order issued by President Trump in August 2018, in which the President asked the agency to seek regulatory means of simplifying compliance with retirement plan disclosure obligations.

Based on comments attributed to DOL sources, many expect these regulations to address the potential for greater use of electronic delivery of required plan disclosures, something that has been a longstanding initiative of retirement plan service providers.

While no legal deadline for completing review of this guidance is noted in the OMB website posting, it is generally expected that OMB’s review would be completed within 30–90 days, after which the guidance will be published in the Federal Register.

IRS Publishes Corrections to MEP “Bad Apple” Proposed Regulations

Several corrections to IRS proposed regulations on multiple employer plans (MEPs) were published in the Federal Register. Originally published on July 3, 2019, this proposed guidance would revise 1979 IRS final regulations on MEPs—arrangements under which several employers elect to participate in a common plan.

A key revision being proposed in these regulations addresses the so-called “bad apple” rule, under which an entire MEP could fail to meet qualification requirements because of a compliance failure by one employer. This is known formally as the “unified plan rule.” These regulations propose an exception to the unified plan rule and—if certain requirements are met—compliance failures by individual participating employers need not jeopardize the entire MEP.

Most of the corrections published in the Federal Register are of a grammatical or punctuation nature, or a minor omission, such as failing to precede an Internal Revenue Code citation with the word “Section.” However, one substantive change corrects an omission in the preamble (page 31788) to these proposed regulations. Added by the correction is the parenthetical reference “(and their beneficiaries”) to a proposed notification requirement.

Specifically—in the event of a compliance failure by a participating MEP employer—a notification must be sent by the MEP plan administrator to participants if that participating employer has proven unresponsive. The proposed regulation states that such notices must be provided to beneficiaries, as well. However, the preamble as published did not include a reference to beneficiaries. The correction now being made aligns the preamble with the regulation itself.

OMB to Review Proposal to Revise RMD and Beneficiary Life Expectancy Tables

The Office of Management and Budget (OMB) has received for review proposed Treasury/IRS regulations that would update life expectancy and distribution period tables used when calculating required minimum distributions (RMDs) from retirement savings arrangements, including required distributions to beneficiaries. According to its website, the OMB reviewed the proposal on August 13. While no legal deadline for completing review of the guidance is listed, it is generally expected that OMB’s review would be completed within 60–90 days, after which the guidance would be expected to be published in the Federal Register.

This proposed update to the life expectancy and distribution period tables is in response to an Executive Order issued by President Trump in August 2018. In that Executive Order, the President directed the Treasury Department and the Department of Labor to seek regulatory avenues for enhancing retirement saving opportunities. Specifically recommended were updating the above-described distribution tables to reflect longer life expectancies (tables last updated in 2002), enhancing opportunities for employers to participate in multiple employer plans (MEPs), and simplifying retirement plan disclosure processes.

IRS Guidance Addresses Retirement Plan UnCashed Check Withholding, Reporting

The IRS has issued Revenue Ruling 2019-19, which addresses the responsibilities of retirement plan administrators when a distribution check that represents a taxable amount is issued to a plan participant, but remains uncashed. The facts and circumstances described in the guidance define the distribution as not including designated Roth account (e.g., Roth 401(k)) amounts—which are potentially tax-exempt—or other amounts not subject to normal taxation.

The guidance notes the following.

  • The check amount is taxable in the year received by the recipient, whether cashed or not.
  • Plan administrator obligations for withholding—and remitting of withholding—are not altered by whether the check is cashed.
  • The recipient’s failure to cash the check does not alter the plan administrator’s requirement to report the distribution on IRS Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. (reporting is required for distributions of $10 or more).

Washington Pulse: Final Regulations Expand MEP Options

In 2018, roughly 38 million private-sector employees did not have access to a retirement plan*. This troubling statistic led the Trump Administration to issue an Executive Order, directing the Department of Labor (DOL) and the Treasury Department to issue guidance that would help increase participation levels in employer-sponsored retirement plans.

On July 31, 2019, the DOL fulfilled this directive by releasing final regulations on association retirement plans (ARPs)—also known as multiple employer plans, or MEPs. A MEP typically allows multiple employers to participate in a single retirement plan, which may—among other things—help reduce plan administrative and fiduciary responsibilities for participating employers. The final regulations are substantially similar to the proposed regulations, which were covered in detail in a previous Washington Pulse.


Why the Final Regulations are Important

One of the most important outcomes of the final regulations is the expanded interpretation of the term “employer.” The current definition of “employer” under ERISA Section 3(5) is unclear because the term “group or association of employers” is not defined. As a result, many in the retirement industry have relied on various DOL advisory opinions that seemed unnecessarily narrow.

The final regulations clarify that a “bona fide group or association of employers,” and a “bona fide professional employer organization” that satisfy certain criteria are deemed to be able to act in the interest of an employer for MEP purposes. Although the final regulations expand the term “employer,” the guidance does not create “open MEPs,” under which multiple participating employers share no common characteristic, affiliation, or purpose (as has been proposed in pending legislation).


Commonality of Interest Requirement Remains

To qualify as a “bona fide group or association of employers,” the group or association of employers must meet seven requirements—one of which is the “commonality of interest” requirement. To meet this requirement, the employers within the group or association must

  • be in the same industry, trade, line-of-business, or profession; or
  • have a business in the same region.

The DOL is taking a “middle-of-the-road” approach toward expanding or restricting the commonality requirement. Responding to the proposed regulations, some commenters asked the DOL to impose a less restrictive test by eliminating the commonality of interest requirement. The elimination of this requirement would essentially allow groups or associations of employers to form open MEPs. The DOL, however, decided to keep the commonality of interest requirement. Although this provision is not required by statute, the DOL believes that keeping this requirement is important for several reasons—one of which is that it aligns the final ARP regulations with the final association health plan (AHP) regulations.

In the preamble to the final ARP regulations, the DOL stated that it would “construe[ ] broadly” what constitutes an industry, trade, line-of-business, or profession. The DOL believes that this broad interpretation will help expand access to MEPs. The DOL also indicated that, in general, it will not challenge

  • any “reasonable and good faith” industry classification or categorization of employers, or
  • the inclusion of businesses that share an economic or representational interest with other members of the group or association.


Special Rules for Owner-Employees

The 2018 Executive Order directed the DOL to consider how working owners (e.g., sole proprietors without employees) might be included in MEP arrangements. The final regulations clarify that working owners without common law employees may consider themselves to be both an employer and an employee, and therefore eligible to participate in a MEP. To qualify for MEP participation, an owner-employee must 1) have an ownership interest in the trade or business, 2) have income from providing personal services to the trade or business, and 3) meet minimum work hours or earnings tests.


New PEO Requirements
Under the final regulations, a professional employer organization (PEO) must meet four requirements in order to qualify as a “bona fide PEO.” A bona fide PEO may act as an “employer” for purposes of sponsoring a MEP that covers the employees of its client employers. To qualify as a bona fide PEO, a PEO must

  • perform substantial employment functions for its client employers;
  • have substantial control over the MEP’s functions and activities and continue to have employee-benefit-plan obligations to MEP participants after the contract between the PEO and its client employers ends;
  • ensure that each client employer has at least one participant covered under the MEP; and
  • limit MEP participation only to current and former employees of the PEO and the PEO’s client employers, to former client employers, and to beneficiaries.

Whether a PEO performs “substantial employment functions” on behalf of its client employers is generally based on the facts and circumstances. But PEOs needing more regulatory certainty can take advantage of a new safe harbor, which is separate from the facts-and-circumstances test. (The proposed regulations contained a complicated regimen of safe harbors; the final regulations contain a single, simplified safe harbor with four conditions that PEOs must meet.)


Miscellaneous Provisions


Severability Provision Provides Safety Net
The final ARP regulations include a severability clause. Under this clause, if any provisions are found to be unenforceable, or stayed by court action, the remaining provisions of the regulations would remain operative and enforceable. (The regulations include examples of how this severability provision would be applied.)

The severability clause is similar to the one found in the final AHP regulations, which were released in June 2018. Since then, the final AHP regulations have encountered legal obstacles—including having certain provisions vacated by the U.S. District Court for the District of Columbia. Whether the ARP guidance generates similar concerns remains to be seen.


States Can Still Establish MEPs

The DOL received numerous comments questioning how the final regulations would affect other guidance—including DOL Interpretive Bulletin 2015-02, which gives states the authority to establish state-facilitated MEPs. The DOL clarified that, although the final regulations do supersede other preexisting DOL guidance, the regulations do not supersede this interpretive bulletin.


Open MEPs Still a Possibility

Although the final regulations don’t allow for open MEPs, the DOL has not ruled out future rulemaking that may permit them. Following the release of the proposed regulations, the DOL received approximately 60 comments; more than half of those comments addressed this issue, and the majority supported the creation of open MEPs or pooled employer plans.

Because of the comments received, the DOL has issued a request for information (RFI) that asks for responses on several questions addressing such issues as 1) the cost and complexity of open MEPs, 2) whether the DOL should allow financial institutions to sponsor open MEPs for unrelated employers, and 3) whether the DOL should expand its regulatory definition of employer to include “corporate MEPs” and affiliated service groups.

Although not officially defined, a corporate MEP typically consists of a plan that covers a group of employers related by some level of common ownership—but not enough ownership to constitute a controlled group or affiliated service group. There were three reasons the DOL included corporate MEP questions in the RFI.

  • To obtain information on the level of common ownership that would indicate enough genuine interests to permit members to act in the interests of other group members for purposes of sponsoring a MEP.
  • To determine whether the DOL should consider other facts and circumstances in addition to the level of common ownership between employers.
  • To determine what criteria two or more tax-exempt organizations or a tax-exempt organization and another organization must meet to be considered an employer under ERISA Section 3(5).


No Additional Reporting Requirements

The proposed regulations solicited comments on whether it should modify the current reporting and disclosure requirements. Because of the comments received, the DOL decided not to modify the current reporting and disclosure requirements. It also clarified that the MEP plan administrator is responsible for meeting these requirements.


The Pros and Cons of Joining a MEP

Some employers may benefit from joining a MEP—especially smaller employers that may not have the time or money to offer their own retirement plan. For example, participating employers may benefit by delegating plan duties to the MEP plan sponsor, incurring less fiduciary liability and sharing reporting responsibilities. But MEPs may not provide a substantial benefit to all who join. For example, proponents claim that participating employers could file one Form 5500 information return collectively. While this is true, many small employers don’t have to file this form, so this benefit could be minimal at best. Cost savings is another commonly perceived benefit. But because plan administration fees and investment fees have lessened in recent years, employers may not incur substantial cost savings after joining a MEP.


More to Come . . .

This year has seen a substantial increase in MEP-related activity. In addition to the DOL’s final regulations, the IRS released proposed regulations eliminating the “one bad apple rule,” which would provide an important improvement for MEPs. And earlier this year the U.S. House of Representatives passed the Setting Every Community Up for Retirement Enhancement (SECURE) Act of 2019. If enacted, this proposed legislation would eliminate the current commonality requirement—resulting in open MEPs.

While the final ARP regulations may not go as far as some in the industry would like, the regulations do give employers participating in MEPs more certainty about their status under ERISA. And based on the information contained in the RFI, it appears that the DOL is at least preparing for the possibility of open MEPs sometime in the future.

The final ARP regulations are effective September 30, 2019. Those looking for additional information may refer to the DOL’s fact sheet. And, as always, visit for any new developments.

* “National Compensation Survey: Employee Benefits in the United States”, The U.S. Department of Labor’s Employee Benefits Security Administration, March 2018


Click here for a printable version of this edition of the Washington Pulse.

Service Provider’s Auto-Portability Proposal Receives DOL Blessing

The Department of Labor’s Employee Benefit Security Administration (EBSA) has published in the Federal Register a prohibited transaction exemption (PTE) granted to a service provider that has proposed what it describes as an automatic portability program for retirement plan assets.

This exemption—PTE 2019-02—was considered necessary so that Retirement Clearinghouse (RCH) could receive fee compensation in connection with the services it intends to provide in this automatic portability program. In general, receipt of such fees would be considered a prohibited transaction, but the EBSA will approve individual applications for exemptions when they meet certain criteria. PTE 2019-02 is granted to RCH for a period of five years.

The RCH program contains essentially two elements.

  • Based on agreements between RCH, participating employer plans, and participating third-party recordkeepers, certain retirement plan small balance cash-out amounts and terminating plan accounts would be automatically rolled over to an “RCH default IRA,” or to a “default IRA” of a participating recordkeeper; this would occur unless the plan participant affirmatively elected otherwise.
  • Subsequently, RCH would—by means of data matching searches—determine whether the IRA owner is participating in another employer plan that accepts rollovers. If the default IRA owner does not affirmatively consent or object, the IRA balance would be automatically rolled over to that new employer’s plan.


Process Began With EBSA Advisory Opinion

In November 2018, RCH applied to EBSA for an advisory opinion that would address not the receipt of fees, but instead asked EBSA to address the fiduciary status of RCH and other parties to the auto-rollover program.

The EBSA answered RCH’s inquiry on fiduciary status in Advisory Opinion 2018-01A, published in the November 5, 2018, Federal Register. EBSA simultaneously published in the Federal Register a notice of proposed prohibited transaction exemption (PTE), and invited comments on this PTE request, which it accepted through December 24, 2018.

In its granting of PTE 2019-02 now to RCH, the EBSA noted that there were several commenters who objected to an exemption, these stating that there are multiple reasons why such asset transfers should be done only as affirmative actions on the part of an account owner.

In explaining its decision to grant PTE 2019-02, the EBSA noted that its regulations permit fiduciaries to transfer small account balances to default IRAs “only if protective conditions are met,” and that the exemption now being granted contains “additional conditions applicable for [such] transfers … under the RCH program.”

PTE 2019-02 also prescribes the following.

  • A plan fiduciary that is independent of RCH must review the terms of the RCH program and determine, consistent with its duties under Section 404 of ERISA, that the plan’s participation in the RCH program is prudent.
  • All fees must be approved by the responsible plan fiduciary of the old employer plan.
  • RCH has no authority to unilaterally change these fees, and all fees under the RCH program must not exceed reasonable compensation.