PLANADVISER - May/June 2020 - 25

resources (HR) departments and their payroll providers
suddenly working from home, it may be impossible to carry
out established procedures in the same way an employer
has in the past. It is important for plan sponsors to confirm
they have implemented new procedures to ensure all
contributions still get deposited as quickly as possible, says
Ari Sonneberg, an ERISA [Employee Retirement Income
and Security Act] and employee benefits attorney with The
Wagner Law Group in Boynton Beach, Florida.
" Plan sponsors, advisers and recordkeepers have to be
in touch regularly during this time, more than they would
otherwise, to make sure things are running smoothly, "
Sonneberg says. " Things aren't normal. You have employees
who have been laid off who may have been overseeing
part of the plan. You have to make sure those processes go
forward and someone is there to pick up the slack. "
Another contributions-related issue that a plan adviser
should discuss with clients is any staffing cuts. That is, if a
client lays off more than 20% of its workforce, the IRS may
view that as a partial plan termination, which requires immediate,
full vesting of all participants. Furloughs, however,
typically would not trigger a plan termination, Kaleda says.
2) Employee Eligibility for Participation
Plan sponsors must make sure they admit all eligible plan
participants, according to the terms of the plan. Employers
requiring a service period of up to a year prior to eligibility
need to track how long an employee has worked-either
by hours or elapsed time-and communicate with that
employee as soon as he becomes eligible about when and
how he can enroll.
" One thing that's paramount to operating a retirement
plan is knowing what the conditions are for participating
and what happens when people cross certain thresholds, "
says Rachel Faye Smith, a partner in Goodwin's ERISA and
executive compensation practice in Boston. " What happens
when people add hours or lose hours or get put on employermandated
leave? Each of those has an impact on eligibility
to participate in a plan. "
What has changed. There is more room for errors as
companies make changes to their workforce. Furloughed
workers might continue accruing eligibility service, even
though they are unable to contribute to the plan without
receiving compensation, Kaleda says.
" Work reductions, like a reduction in hours, could slow
down eligibility for the plan, depending on how the plan
counts eligibility service, " he adds.
3) Distributions
To remain compliant, plan sponsors must have clear
processes to confirm participant eligibility for loans or
hardship withdrawals, and to make sure their employees
borrow no more than regulations permit. Plan sponsors
must also alert participants to their need, if any, to take
required minimum distributions (RMDs) and then facilitate
those distributions.
planadviser.com May-June 2020 | 25
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PLANADVISER - May/June 2020

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