Retirement Plans Newsletter

September 2, 2015

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[Official Guidance]

IRS Form 8950: Application for Voluntary Correction Program (VCP), Rev. September 2015 (PDF)
"Review the attached Procedural Requirements Checklist before mailing this VCP submission to the IRS.... You do not have to use this checklist, but it may help prevent delayed IRS processing caused by an incomplete submission." (Internal Revenue Service [IRS])  


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[Guidance Overview]

IRS Issues Guidance on Participant Voting Requirement for Benefit Suspensions under MPRA
"The Guidance permits the Treasury, in consultation with the PBGC and the DOL, to establish additional policies and procedures to facilitate the vote, such as establishing a process for an eligible voter to challenge the vote.... The MPRA requires a ballot to contain a statement in opposition compiled from comments received during the approval process. The Guidance provides that this statement will be prepared by the DOL. The statement must be written in a manner that is readily understandable to the average plan participant and in a manner to ensure parity with the statement in support of the suspension." (McGuireWoods LLP)  

[Guidance Overview]

IRS Eliminates Five-Year Restatement Cycle for Individually Designed Plans (PDF)
12 pages. "Cycle A plans will be allowed to file for determination letters through January 31, 2017. Apparently, based on the IRS's statement in the announcement, all other [individually designed plans] will not be required to restate their documents until December 31, 2017, at the earliest. How that restatement will be accomplished and what it will contain is yet to be determined." (Bryan, Pendleton, Swats & McAllister, LLC)  

Sample Model Notice to Provide Retirement Education to Plan Participants (PDF)
As presented to ERISA Advisory Council meeting on Model Notices and Plan Sponsor Education on Lifetime Plan Participation. "We need to heighten employees' abilities, by presenting retirement saving as easy to do, and provide an effective and timely trigger ... We believe the notice should: Be simple and clear ... Create a sense of urgency ... Be delivered at meaningful 'trigger' points in employees' careers: ... Be electronically distributed, or delivered in print as a concise, one -- page document ... Point to rich online resources." (Benz Communications)  

How ERISA 404(c) Can Help Your Plan: A Resource for Plan Sponsors (PDF)
18 pages. "Fiduciary risk ... affects companies on many levels -- in your employees' preparation for retirement, in the recruitment and satisfaction of those employees, in the way you manage your plan, and in the help you seek from your advisors.... This brochure will review relevant fiduciary data and suggest actions you can take to help minimize fiduciary risk. This guide includes the following topics: [1] 404(c) protection and considerations for complying; [2] Key requirements needed for 404(c) compliance; [3] Six steps toward compliance." (Deutsche Bank AG)  


[Advert.]

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NASRA Issue Brief: State Hybrid Retirement Plans (PDF)
"Although a hybrid retirement plan may take one of many forms, this brief examines two broad types in use in the public sector. The first is a cash balance plan, which marries elements of traditional pensions with individual accounts into a single plan ... The second type combines a traditional DB plan, usually with a lower level of benefit accrual, with an individual [DC] retirement savings account.... Despite variability among these plans, most contain the core features known to promote retirement security: mandatory participation, shared financing between employers and employees, pooled assets invested by professionals, targeted income replacement with survivor and disability protection, and a benefit that cannot be outlived." (National Association of State Retirement Administrators [NASRA])  

EPCU Project: Terminated Plans with Outstanding Participant Loans
"The EPCU is attempting to determine if outstanding loan balances at the time all plan assets were distributed were treated properly for income tax purposes.... Responses to a questionnaire will be used to determine: [1] identities of participants, beneficiaries and alternate payees who had unpaid loan balances at the time all the plan assets were distributed; [2] amounts of the unpaid loan balances for each of these participants, beneficiaries and alternate payees; and [3] total distributions received by these participants, beneficiaries and alternate payees. The EPCU will analyze the responses and corresponding Forms 1099-R." (Internal Revenue Service [IRS])  

EPCU Project: Non-Governmental 457(b) Plans
"Our project goals are to: [1] learn more about the operation of non-governmental 457(b) plans, [2] verify that the plans comply with the Internal Revenue Code requirements, [3] identify issues of noncompliance, and [4] recommend ways to remove any barriers to compliance. We'll correspond with plan sponsors to solicit information about the characteristics and features of their plans, including contributions and employer and employee eligibility." (Internal Revenue Service [IRS])  

Equity Market Turmoil Pushes Corporate Pension Funding Levels Down in August
"The estimated aggregate funding ratio of pension plans sponsored by S&P 1500 companies fell two percentage points to 81% in August ... The typical discount rate ... rose about 11 basis points to 4.22% as of Aug. 31 ... Likewise, the Wilshire 5000 Total Market index fell 5.95% in August, its worst month since May 2012 ... The estimated aggregate value of pension fund assets of S&P 1500 companies as of Aug. 31 totaled $1.77 trillion, down 3.8% from the previous month, while estimate aggregate liabilities totaled $2.2 trillion, down 1% the previous month." (Pensions & Investments)  

[Opinion]

Testimony to ERISA Advisory Council on Model Notices and Plan Sponsor Education on Lifetime Plan Participation (PDF)
"[P]articipants have an extremely short attention span today, and only focus on information provided with respect to the retirement program when required to make elections or upon an event in their lives, such as a pending retirement, hardship or change in career.... Therefore, it is important to regularly remind participants where they can go to get additional information on the retirement program.... [N]otices should be very short with 'sound bite' approaches taken to communicate information.... [M]ultiple mediums are required in order for the program to be effective ... In a similar manner to that used to communicate model notices to participants, sponsors prefer short succinct summaries of programs that might be appropriate for them to consider.... Educational efforts must ... focus on providing factual information versus one-sided discussions." (Jeffrey Levy, of Cammack Retirement)  

[Opinion]

Statement of Institutional Retirement Income Council to ERISA Advisory Council on Model Notices and Plan Sponsor Education on Lifetime Plan Participation (PDF)
13 pages. "To the extent employees are able to leave their money in their former employer's plan, where they retain the benefit of fiduciary oversight and more favorable pricing, the benefit is apparent. Unfortunately, many employers are reluctant to permit lifetime plan participation for a range of reasons: fear of what seems new, different or unusual; concerns about 'extra' fiduciary liability or responsibility; concerns about added cost; or concerns about added complexity. We believe these fears are unwarranted and that, with adequate education and modest changes in service provider systems, they can be allayed and perhaps even entirely eliminated." (Institutional Retirement Income Council [IIRC])  

Benefits in General; Executive Compensation

DOL Criminal Enforcement Cases, January 2006 through September 2014 (PDF)
24 pages. "The AICPA Employee Benefit Plan Audit Quality Center has developed this summary analysis of [EBSA's] criminal enforcement actions involving employee benefit ... to assist members in their consideration of fraud in employee benefit plan financial statement audits.... This tool includes examples of potential fraudulent activities, followed by summaries of actual fraud that has occurred, presented by plan type." (American Institute of Certified Public Accountants [AICPA])  

Third Circuit: Failure to Disclose Deadline to File Suit in Benefit Denial Letter Warrants Setting Aside Limitations Provision in Plan
"The Third Circuit ...expressed concern that if administrators were not required to disclose the suit deadline in the denial letter, 'plan administrators could easily hide the ball and obstruct access to the courts' by burying the provision in lengthy plan documents, like the 91-page plan document in that case...., it is debatable whether a denial letter must include the plan's limitation period in the first instance. Even the First Circuit acknowledged in [Candelaria v. Orthobiologics] that one 'could arguably read this regulation as setting forth two distinct requirements. That is, it could be argued that notice of the right to sue under ERISA is in addition to, and divorced from, notice of review procedures and the time frame pertaining to such procedures.' " [Mirza v. Ins. Admin. of America, Inc., No. 13-3535 (3d Cir. Aug. 26, 2015)] (Wilson Elser)  

EPCU Project: 5500 Non-Filer/DOL Project
"The [EPCU] will collaborate with the [DOL] Office of the Chief Accountant (OCA) to contact Form 5500 non-filers identified using payroll and plan data in our records. Our primary goal is to ensure compliance with annual filing requirements. Additional goals include identifying the underlying causes for noncompliance and making recommendations for removing impediments to compliance." (Internal Revenue Service [IRS])  

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