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The Flurry Associated with Form 5500 Filings Is a Good Thing (PDF)
"Proper filing is perhaps even more important than ever ... [E]arlier this year, [EBSA] issued a lengthy report ... [which] criticizes the quality of many employee benefit plan audit reports ... [and] calls for changes in the process, and the laws, regarding audit report preparation.... [This] will undoubtedly bring increased focus and attention to the audit reports that plan sponsors file with their Form 5500s ... [and] lead to scrutiny of overall plan matters for plan sponsors who file sloppy audit reports. Second, the IRS recently announced that it is teaming up with DOL to identify employers who are required to file Form 5500s, but failed to do so.... The nonfiling issue raises an interesting question, which is whether a Form 5500 that is filed might be incomplete to such an extent that the IRS or DOL considers it to be delinquent, and thus subject to nonfiler penalties."
(The ERISA Law Group)
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Central States Pension Fund Prepares to Slash Hundreds of Thousands of Workers' Pensions
"The cuts in monthly payments to workers covered by Central States will vary from nothing (for about one-third of the group) to more than 60 percent (the highest losses will be suffered by many in a group of about 28,400 Teamsters whose employers had abandoned their employees, usually via bankruptcy and closure). The average loss for all participants will be 22.6 percent of retirement pay on which they had counted, according to the summary prepared by the fund trustees."
(In These Times)
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Most Retirees Leave Ex-Employer's Plan Within Five Years
"The overwhelming majority of defined contribution plan participants at retirement age roll their retirement savings over from their employer's plan to an individual retirement account within five years of leaving the company ... With the knowledge that so many retirement-age participants plan to move their retirement savings from the employer's account upon leaving the company and park the money for a while, plan sponsors may want to reconsider whether their plan should use a conservative 'to retirement' approach that assumes assets are going to be used immediately[.]"
(Thompson SmartHR Manager)
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Experts Watching U.S. Supreme Court Session
"One of the earliest [ERISA] cases to be argued ... asks the [U.S. Supreme Court] whether laws passed by Congress allow for lawsuits over violations of statutes such as [ERISA] if there is not 'real and material' harm.... To be argued on Nov. 9 is whether ERISA fiduciaries can recover overpayments to participants... Another case ... questions whether members of a class action who were not harmed can still join the class and be entitled to damages."
(Pensions & Investments)
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GAO Says Clearer QDIA Guidelines Would Help Ease Sponsors' Fiduciary Concerns
"Plan sponsors, according to the [U.S. Government Accountability Office (GAO)], generally monitor default plan investments to periodically ensure alignment with plan objectives and investment strategies. However, at times they may be reluctant to change options in a QDIA from fear of generating additional fiduciary liability.... According to the GAO, part of the confusion for plan sponsors has been the lack of clear guidance from the DOL."
(fi360)
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Proposed DOL Fiduciary Rule May Not Stop Investor Losses as Claimed
"While the DOL has, in the past, focused on variable compensation, the academic studies that have been used by journalists to identify the billion dollar losses do not make a distinction between variable and non-variable compensation. Instead, they highlight specific conflict-of-interest fees.... Braden Perry, partner in the Kansas City, Missouri based law firm Kennyhertz Perry, says, 'The BICE allows brokers and advisors to receive otherwise prohibited compensation (12b-1 fees, commissions, trailing commission) if the Best Interest Terms are met.' Under the wording now used for the DOL's Fiduciary Rule, this loophole may allow for these conflict-of-interest fees and, as a result, nullify the claims that the Rule will help retirement savers avoid losses."
(Fiduciary News)
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ERISA Plans Must Heed New Money Fund Rules
"[An SEC] regulation designed to help prevent runs on U.S. money market mutual funds will require pension plan fiduciaries to evaluate such funds in a new light ... [S]witching to stable value funds may not be needed for many plans, but ... each fund needs to consider the effect of the rules on the needs of the plan and on the characteristics, demographics and behavior of the plan's participant population."
(Bloomberg BNA)
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Using Behavioral Finance to Shape Financial Planning (PDF)
13 pages. "Emotions can have a powerful impact on financial decisions and can lead to errors resulting in losses or missed opportunities over a lifetime of investing. Understanding how many of us make decisions can help individuals avoid errors and instill the discipline needed to build and maintain wealth. Plan sponsors can also use this knowledge to design retirement plans to help reduce mistakes by plan participants and maximize long term outcomes."
(Bronfman E.L. Rothschild)
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The Auto Savings Generation: Steering Millennials to Better Retirement Outcomes (PDF)
16 pages. "Automatic enrollment and the rise of target-date funds are reshaping retirement plan outcomes for all generations.... In 2013, two-thirds of millennial plan participants had been subjected to automatic enrollment compared with 4 in 10 early boomers in 2013.... Millennials are twice as likely to have been using professionally managed allocations, including target-date funds, than the early boomer cohort in 2013. Half of the millennial generation held a single target-date fund at the end of 2013."
(Vanguard)
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Lifetime Retirement Income: A New Framework from the U.K.
"Their proposed approach is based on three building blocks... [1] An income drawdown fund. This is retirement income as we usually think of it. [2] A cash lump sum fund. This fund would be used to meet unexpected cash requirements, without taking from the income drawdown fund. [3] A later life retirement income fund. This fund is used to protect against living longer than expected (the longevity tail).... What does this tell us about the U.S.?"
(Russell Investments)
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Going Global: The Growing International Market for Pension Risk (PDF)
"The global pension risk transfer marketplace is growing dramatically, with more than $240 billion in transactions completed since 2007. In the United Kingdom, the United States and Canada, hundreds of companies have transferred pension risk to insurers and reinsurers, with at least 35 pension funds executing transactions over $1 billion."
(The Actuary, a publication of the Society of Actuaries)
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[Opinion]
Groom Law Group Comment Letter to IRS on Curtailment of the Determination Letter Program (PDF)
11 pages. "The elimination of the existing DL Program for individually designed retirement plans undermines the current retirement system by negatively impacting plan participants and unduly burdening employers and plan administrators. Since DLs were first issued some 70 years ago, an entire framework has been established that relies on the IRS determination letter as prima facie evidence of a plan's qualified status. Many thousands of transactions that effectively rely on a plan's determination letter occur every single day ... Undermining this system by eliminating the periodic determination letters for individually designed plans will harm participants, whose rollover contributions can no longer be processed as efficiently (or perhaps participant bankruptcies and other efforts to reach benefits protected by the anti- assignment rule."
(Groom Law Group)
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[Opinion]
Let's Not Forget About the Pension Crisis in Illinois
"When the Illinois Supreme Court in May issued its decision throwing out a 2013 pension reform law, it made one thing abundantly clear: State government can't wiggle out of paying the pension liability it has accrued. That means the state needs to figure out how to get $105 billion into its pension funds between now and 2045."
(The Huffington Post)
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Benefits in General; Executive Compensation
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[Guidance Overview]
IRS Proposes Eliminating Requirement That Section 83(b) Elections Be Filed with Federal Income Tax Returns
"The IRS makes a notable observation in the preamble to the proposed regulations about the service provider's obligation to maintain documents, stating that taxpayers have a duty to maintain sufficient documents to establish the tax basis in property, and that this duty extends until the expiration of the period of limitations following the date of the disposition of the property (i.e., the taxable disposition of the property subject to the 83(b) election, which could occur years after the date of the 83(b) election itself). Current recordkeeping practice may not correspond to the IRS' view."
(Morgan Lewis)
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Court Rules in Favor of Employer Paying Nonqualified Plan Benefits as Lump Sum on Plan Termination (PDF)
"A federal district court recently granted an employer's motion to dismiss a claim for benefits on the ground that the satisfaction of annuity benefits under a nonqualified retirement plan with a lump sum payment does not adversely affect a participant's benefit.... [T]he employer terminated its nonqualified retirement plan and replaced the participant's monthly benefit payable as a joint and survivor annuity with a single, actuarial equivalent lump sum payment. In its decision, the court agreed with the employer that the tax consequences of benefit payments are not part of the accrued benefit protected by ERISA." [Taylor v. NCR Corp., No. 1:14-cv-2217-WSD (N.D. Ga. Sept. 23, 2015)]
(Groom Law Group)
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SEC Clawback Rules Have Executive Tax Consequences
"The first issue arises if a company's recovery policy were to provide for clawback from nonqualified deferred compensation before it becomes payable, which could result in a significant tax penalty on an affected executive under Section 409A of the Internal Revenue Code. The second issue arises when an executive has already paid taxes on the IBC, as the rule requires the clawback be equal to the bonus amount pre-tax, not the amount that the executive netted from the bonus."
(Husch Blackwell)
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