Retirement Plans Newsletter

August 29, 2014

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Webcasts and Conferences



[Official Guidance]

Revised User Fee Forms for IRS Determination, Opinion and Advisory Letters
"The user fee forms for requesting a retirement plan determination, opinion or advisory letter have been updated to reflect new user fees that were effective February 1, 2014. Please use these revised forms with your submission: Form 8717 (Rev. 8-2014), User Fee for Employee Plan Determination Letter Request; Form 8717-A (Rev. 8-2014), User Fee for Employee Plan Opinion or Advisory Letter Request." (Internal Revenue Service [IRS])  


[Advert.]

ASPPA Annual Conference on October 26-29 in Washington DC

Sponsored by ASPPA

We don't just set the bar, we're constantly raising the bar for America's Retirement. And we unleash that tenacity at every ASPPA Annual Conference.



[Guidance Overview]

Same-Gender Spouses and 401(k) and Pension Plans: Does Your Plan Need to Be Amended by December 31, 2014?
"First, the plan sponsor should confirm that it has operationally complied with the requirements of the Windsor decision and the IRS rulings addressing [same-gender] spouses since June 26, 2013 (or, where appropriate and applicable, the Delayed Effective Date). Second, to the extent it hasn't done so already, the plan sponsor should review its qualified plans to determine whether any of the plans have a definition of spouse that is inconsistent with Windsor and the IRS rulings. If so, the plan will need to be amended by December 31, 2014 ... Third, when drafting the plan amendment, the plan sponsor will need to determine whether the plan relied upon the Delayed Effective Date[.]" (Baker Botts LLP)  

[Guidance Overview]

Upcoming IRS Webinar: Retirement Plan Hot Topics, September 11, 2014
Learn about the myRA program, IRA tax-free rollovers, the Windsor Supreme Court ruling, invalid Social Security numbers, Form 5500-EP filing pitfalls and relief program, and tips for self-employed plan sponsors. Takes place on September 11, 2014 at 2:00 p.m. Eastern time. Register at link. (Internal Revenue Service [IRS])  

Would've, Could've, Should've: RJR Nabisco Fiduciaries at Disadvantage for Failure to Follow Procedural Prudence
"The majority and dissent's sharply conflicting views regarding the standard for whether a fiduciary decision is objectively prudent provide great material for theoretical discussion among lawyers. Plan fiduciaries should assure, however, that they never become part of the debate. Had the RJR fiduciaries simply (i) performed a thorough investigation of the alternatives, (ii) made a reasoned decision based on their investigation, and (iii) documented the basis for their decision, no breach of duty would have occurred in the first place even though, with hindsight, the decision may have been different." [Tatum v. RJR Pension Investment Committee, No. 13-1360 (4th Cir. Aug. 4, 2014)] (Benefits Bryan Cave)  

Understanding ADP and ACP Testing
"Changing family relationships related to divorce or adoption, ownership details like stock options, and the correct application of the top-paid 20% group can all pose challenges when making the determination of HCEs for any given year.... The interaction of the ADP/ACP testing with other required nondiscrimination tests means that all of the plan's testing must be performed in a specific order and excess amounts refunded or forfeited because of failure from one test must be coordinated in performing the other tests. In the event of test failure, the calculation of the returns can be complicated, depending on how many HCEs are affected and whether or not the affected HCEs have already contributed the maximum 'catch-up' amount allowed for participants over age 50." (Retirement Management Services)  


[Advert.]

PSCA's 67th Annual National Conference, Sept 15-18,Turnberry Isle, Miami

Sponsored by PSCA [Plan Sponsor Council of America]

Attend PSCA's 67th Annual National Conference, Expanding Perspectives - Adapting to your changing landscape September 15-18, at Turnberry Isle, Miami. Join plans sponsors and industry leaders in General Sessions, Workshops and Roundtables centered around you and your plan. Register NOW!



Foreign Corrupt Practices Act (FCPA) and Institutional Investors
"[I]nstitutional investors likewise have a need to know whether a company in which they plan to invest or have already invested is exposed to potentially expensive FCPA liabilities that could destroy shareholder value.... This section addresses the core elements of the FCPA and offers action steps for any organization that does business outside the United States." (Good Risk Governance Pays)  

Cost of Pension Withdrawal Liability Might Drop, Based on Recent District Court Ruling (PDF)
"[This case] is a departure from how withdrawal liability has been calculated since the PPA, and it may open the door for new challenges that could reduce the amounts owed by withdrawing employers.... However, employers seeking to reduce their withdrawal liability based on the arguments presented in this case must still be careful to heed ERISA's strict timing and notice requirements for disputing the multiemployer plan's calculation of the amount of withdrawal liability." [Board of Trustees of the IBT Local 863 Pension Fund v. C&S Wholesale Grocers Inc./Woodbridge Logistics LLC, No. 12-7823 (D.N.J. Mar. 19, 2014)] (Alston & Bird, LLP)  

Phased Retirement: Case Studies
"With all the news lately about the upcoming phased retirement option for federal employees, many people are considering whether it makes sense for them. To help clarify the issues at stake, let's look at a couple of case studies, one for an employee under the Federal Employees Retirement System and another for someone covered by the Civil Service Retirement System." (Government Executive)  

Planning for a Comfortable Retirement
"After you've completed the planning stage, your next step should be to determine your portfolio allocation. This step is all about choosing the right mix of investments once your plan is in place. Here's a guide for how to approach portfolio allocation in retirement. [1] Set aside one year of cash ... [2] Create a short-term reserve ... [3] Invest the rest of your portfolio ... [4] Adapt your strategy over time." (Charles Schwab)  

Age of Decision: Pension Savings Withdrawal and Consumption and Debt Response
"This paper uses a unique panel of consumer financial transactions to examine how aging consumers respond to the option to cash out retirement savings.... We find a large and highly significant increase in bank account balances when an individual turns 55, suggesting that the average consumer in our sample withdraws a large portion of their eligible retirement savings.... We do not find any evidence that the average consumer responds by excessively increasing present consumption at the expense of future financial security. Nevertheless, consumers leave a sizeable portion of their withdrawn savings in low-interest accruing bank accounts for at least a year after withdrawal." (Sumit Agarwal, Jessica Pan, and Wenlan Qian via SSRN)  

Benefits in General; Executive Compensation

District Court Denies Plaintiff's Attorney Fees: Filing of Lawsuit Was Not Reason Why Benefits Were Granted
"'[T]he facts do not demonstrate that the suit was [a catalyst] or linked to the decision to approve plaintiff's benefits....Plaintiff's counsel was informed that benefits would be paid before the litigation was initiated.'" [Koloff v. Metropolitan Life Ins. Co., No. 1:13-cv-02060 (E.D. Cal. July 14, 2014)] (Lane Powell PC)  

Earthquake in the Independent Contractor Misclassification Field: Changed Landscape Following Serious Legal Blow to FedEx by Ninth Circuit
"The impact of these new Ninth Circuit decisions is likely to reinvigorate the crackdown against companies using an [independent contractor (IC)] business model that is not structured, documented, or implemented in a manner that demonstrates compliance with state or federal IC laws. As noted below, those companies that have enhanced their IC compliance consistent with the thrust of the Ninth Circuit decisions and applicable state and federal laws will have a far lesser risk for IC misclassification liability than those companies that use ICs but knowingly or unwittingly fail to do so in a compliant manner." [Alexander v. FedEx Ground Package System, Inc., No. 12-17458 (9th Cir. Aug. 27, 2014) and Slayman v. FedEx Ground Package System, Inc., No. 12-35525 (9th Cir. Aug. 27, 2014)] (Pepper Hamilton LLP)  

Healthcare Reform in the U.S. Territories; Prepayment of Taxes for Puerto Rico Retirement Plans
"[1] [M]any mandates of the ACA may still apply to issuers and employers [in the U.S. Territories]. The recent letter from HHS has no impact on: [a] the requirements of the ACA that were incorporated into the Internal Revenue Code and [ERISA], or [b] the requirements of ... the ACA that apply to non-federal governmental plans.... [2] As a practical matter, retirement plans that are dual-qualified (i.e., qualified not only under the Puerto Rico Internal Revenue Code but also under the U.S. Internal Revenue Code) cannot permit prepayment of taxes through distribution from the plan because prepayment of Puerto Rican taxes is not a distributable event under the U.S. Code." (Ogletree Deakins)  

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David Rhett Baker, J.D., Editor and Publisher
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