Not too long ago, we were browsing the California State Controller’s website and were surprised to find a requirement for the filing of a Public Retirement System Financial Transactions Report for each state and local public retirement system on an annual basis. Of...
This post discusses some of the interesting and special rules and laws that govern the retirement plans established by Indian tribal governments (ITGs). Concerns over state and local government sovereignty caused Congress to exempt the plans of state and local...
Like their private sector counterparts, governmental retirement plans (e.g., defined benefit, 401(a), 457(b), and 403(b)) are all subject to the general retirement plan rules pertaining to “required minimum distributions.” The good news is that several recent law...
This post highlights many of the significant law changes affecting governmental retirement plans that are part of the recently adopted Secure 2.0 Act of 2022 (the Act). The table below simply highlights “what” is changed, “when” the change takes effect, and “whether”...
In an earlier post, we explained what “pick-up” contributions are, and how they are used by many governmental employers to convert mandatory after-tax employee contributions into pre-tax contributions. IRS Revenue Ruling 2006-43 contains specific guidance on what the...
Recently, a retirement plan advisor asked whether a “public” charity was “governmental” and eligible to maintain a non-ERISA retirement plan. This post explores some of the terminology that is used by the IRS, and in the retirement industry, and how one does not...
Having more 457(b) or 401(a) plans than you really need can create administrative headaches, cost participants unnecessary fees, and sometimes result in “excessive” participant loan situations. If an employee participates in a 457(b) or 401(a) plan, it is likely that...
In addition to the thousands of private sector 401(k) and 401(a) plans that must be restated by this July 31st, practically all governmental 401(a) plans using recordkeeper-provided plan documents – in other words, pre-approved plan documents – must also be restated....
Sponsors of governmental retirement plans seem to be hiring, firing, or transitioning to new third-party administrators (TPAs) or recordkeepers all the time. The differing roles, duties and legal responsibilities of plan administrators, TPAs, and recordkeepers need to...
Although most public employers are familiar with the concept of a “pick-up” of employee mandatory contributions, many do not appreciate what is required to properly document a “pick-up”. This post reviews the basics of employer pick-ups and the documentation...
As previously discussed, a public agency that does not have a section 218 agreement has a choice of participating in Social Security or providing a Social Security Replacement Plan (SSRP). Although many California local governments rely on CalPERS as their principal...
Because both the Internal Revenue Code (Code) and PEPRA sometimes “conspire” to limit the retirement benefits of public agency employees in ways that make it harder for affected agencies to hire and retain certain individuals, it may become necessary for those...
The vast majority of public agencies already maintain a 457(b), or eligible deferred compensation plan. A much smaller number also maintains one or more 401(a) plans in addition. This post discusses some of the reasons a public agency might want to add a 401(a) plan...
Most public agency defined contribution plan sponsors can easily recall the current amount being contributed to participants in their plan; however, not all can tell you “how” the contribution is being allocated amongst the participants. The distinction between a...
Although financial industry reports reveal that more and more plan sponsors are offering managed account options, it is not clear that public agency 457(b) and 401(a) plan fiduciaries understand their responsibilities to select and monitor these investment options....
Recently announced changes in the IRS-sponsored Voluntary Compliance Program (VCP) may encourage public agencies with known plan compliance problems or defects to apply this calendar year under Anonymous VCP, before that option is replaced in 2022. As part of its...
Quite often, a review of the participant status within an agency’s 401(a) and 457(b) plans will reveal that the plans have a large number of dormant accounts – accounts relating to previously terminated, deceased, or divorced employees (who have divided their accounts...
Previously, we have discussed a number of the do’s and don’ts of switching plan providers, such as investment advisors and recordkeepers. This post focuses on why plan sponsors, plan administrators and plan recordkeepers all should take greater care in reviewing plan...
By Jeff Chang Investment fiduciaries and plan administrators of California public sector 457(b) and 401(a) plans are required by law to act as “prudent experts” for the sole and exclusive purpose of providing benefits and defraying “reasonable expenses” of...
By Jeff Chang In earlier posts, we discussed the plan documents you should keep as well as some of the policies and procedures you will need to properly maintain and administer your governmental 401(a) or 457(b) plan. This post discusses the participant-level records...
By Jeff Chang As we previously explained, most public agencies are not automatically subject to Social Security. They have a choice between voluntarily participating in Social Security pursuant to a section 218 agreement, or they can exempt some or all of their...
By Jeff Chang Ongoing changes in the way the IRS reviews and “approves” qualified retirement plan documents and the need for California public agencies to comply with the Public Employees’ Pension Reform Act (PEPRA) are forcing these agencies to reevaluate the “form”...
By Jeff Chang Whenever you engage a new recordkeeper for your governmental 457(b) or 401(a) plan, the plan sponsor will be asked to complete, sign and return an authorized plan representatives form (APRF). The APRF designates the so-called “contact persons” and the...
By Jeff Chang Having worked with dozens of cities and special districts, we are familiar with the focus and attention placed on memorandums of understanding (MOUs) and management employment contracts – especially provisions relating to retirement benefits and...
By Jeff Chang If you are responsible for the administration of a public agency 457(b) or 401(a) plan, you know that these tax-favored plans are complicated and subject to myriad rules and requirements found in the plan document, the Internal Revenue Code (and related...
By Jeff Chang In California, charter schools are public schools that do not charge tuition or impose special entrance requirements, but are generally operated on an independent basis from local school systems. Because of the “public” nature of these schools and the...
By Jeff Chang Many cities and their retirement plan investment advisors believe that the city must periodically issue an RFP for defined contribution plan recordkeeping or investment advisory services in accordance with the city’s RFP policy or ordinance. Having...
By Jeff Chang In addition to properly identifying your retirement plan fiduciaries, and substituting a knowledgeable administrative committee in place of your governing board or council, California local agencies also need to consider whether the meetings of their...
By Jeff Chang A surprisingly large number of public employees accept appointment as the plan administrator, or a member of the administrative committee, for their agency’s 457(b) or 401(a) plan. An explanation of the typical duties and responsibilities of a plan...
By Jeff Chang A recently issued IRS private letter ruling may provide public agencies and their employees with another way to give employees more control over the types of retirement benefits they will eventually receive. As we previously reported, governmental...
By Jeff Chang Based on numerous requests for plan documents from public agency clients, we know that many cannot find complete sets of their historical and current retirement plan documents that are properly authorized, signed and dated. If this sounds like you,...
By Jeff Chang As the harsh realities of the coronavirus pandemic, along with its widespread impact on all aspects of daily life, continue to shock and numb us all, many cities have already been identified as “high risk” from a financial stability perspective by the...
By Jeff Chang As many California public agencies are forced to furlough employees during the COVID-19 pandemic, questions arise as to how furloughs are treated for retirement plan distribution rules’ purposes. Let’s begin with a bit of terminology: What is a...
By Jeff Chang Although many employers plan to make changes to their retirement plans to take advantage of employee-friendly CARES Act provisions, public agencies should not blindly adopt recommended changes without thinking about the steps involved. The last Focus on...
By Jeff Chang There appears to be some confusion among California municipalities about 401(a) opt-in plans use and an employee’s ability to make a one-time irrevocable election to make pre-tax contributions. Because these plans are designed to give participants...
By Jeff Chang Many governmental 457(b) deferred compensation and 401(a) defined contribution plan sponsors do not take full advantage of the contribution limits for these plans. To do this, you need to understand: the limits, who they apply to, how they coordinate and...
By Jeff Chang There are several fundamental principles and concepts that governmental plan sponsors and fiduciaries need to bear in mind as they select and monitor their plan providers and the fees that these providers charge. Practically all governmental plan...
By Jeff Chang Many cities and special districts in California maintain one or more defined contribution retirement plans (i.e., a 457(b) or 401(a) plan) in which the participants are given investment responsibility over their respective accounts. However, many...
By Jeff Chang There are several tools that can be used to correct or fix governmental plan problems. First, some classification. Practically all the retirement plans we discuss are “tax-advantaged” in one form or another. However, within this group, there are three...
By Jeff Chang Perhaps the biggest news coming out of California’s Legislature this year was the passage of Assembly Bill 5 – the new law that codifies the 2018 Dynamex case and which imposes a new test for determining employee or independent contractor status for...
By Jeff Chang Many of the public agencies we work with have expressed a strong interest in programs and arrangements that will help or encourage their employees to pay off their student loan debts. These programs can be important recruiting, retention and collective...
By: Jeff Chang We all sometimes lose track of things hidden away in the back of the closet or fail to stay in touch with friends we haven’t heard from or seen in a while. These common tendencies can cause inconvenience in our everyday lives — but may lead to...
By Jeff Chang Recently, we have dealt with an "epidemic" of retirement plans, both very large and very small, that all have the same problem – the lack of a proper fiduciary structure. Why? As with so many personnel and benefits-related programs, new managers and new...