Retirement Plans Newsletter

January 3, 2017

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[Official Guidance]

Text of Treasury Department FAQs on Participant Voting Procedures for Iron Workers Local 17 Application to Reduce Benefits (PDF)
"Ballots and explanatory materials are being mailed to all eligible voters on December 30, 2016. Voting ... closes at 5 p.m. EST on Friday, January 20, 2017.... If you vote by paper ballot, that ballot must be received by the vote administrator by January 20, 2017.... What is the effect of the vote? ... What do I do if I think that my post-reduction benefit estimate is incorrect? ... What are contact telephone numbers if I need help? ... How do I vote by telephone or internet ? ... How do I vote by paper ballot? ... What if I don't receive a paper ballot? ... After the votes are counted, Treasury must certify the results of the vote no later than January 27, 2017."
U.S. Department of the Treasury

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2016 Annual Report of the PBGC Participant and Plan Sponsor Advocate (PDF)
25 pages. "[N]otable themes emerge in the challenges participants and plan sponsors encounter with PBGC such as: [1] Interactions with PBGC are adversarial and defensive, rather than collaborative and businesslike, in working toward a mutually agreeable resolution; [2] There is a lack of transparency in working with PBGC to understand the corporation's assumptions, resulting in costly and time-consuming interactions with the agency which can go on for months and even years; [3] PBGC is unwilling to exercise judgment and discretion with participant claims and sponsor penalties, relying almost exclusively on automatic and mechanical-like approaches; and [4] PBGC demands documentation, costly analysis, and historical records that businesses, governmental entities, or participants rarely, if ever, retain."
Pension Benefit Guaranty Corporation [PBGC]

Text of D.C. Court of Appeals Decision Affirming Dismissal of J.C. Penney Stock Drop Suit (PDF)
"Throughout the entire period that the value of J.C. Penney common stock dipped ever lower, Evercore [Trust Company] stood resolute.... The shares in the Penney Stock Fund that [plaintiff and plan participant Donna Marie Coburn] and other investors owned took the full force of the hit.... [T]he district court granted Evercore's motion to dismiss the complaint for failure to state a claim ... [primarily] relying on the United States Supreme Court's opinion in Dudenhoeffer ... [B]ecause a stock price on an efficient market reflects all publicly available information, Dudenhoeffer requires additional allegations of 'special circumstances' when a plaintiff brings a breach of the duty of prudence claim against a fiduciary based on that information.... Applying Dudenhoeffer here, we believe Coburn's claim falls far short." [Coburn v. Evercore, No. 16-7029 (D.C. Cir. Dec. 30, 2016)]
U.S. Court of Appeals for the District of Columbia Circuit

Looking Back at ERISA Litigation in 2016
"Church plans go to the Supreme Court ... Elite universities get the excessive fee treatment ... The [DOL] fiduciary rule litigation ... 'Stock drop' litigation after Dudenhoeffer ... Continued litigation over 401(k) plans."
Stephen Rosenberg, The Wagner Law Group

Size Matters: Do Your Fiduciaries Negotiate for Lower 401(k) Plan Fees?
"Fiduciaries of very large plans who wouldn't think of not haggling with a dealer over the price of a new car or a hotly negotiating a business deal have sometimes neglected to leverage their plan's size to negotiate lower 401(k) fees. The result is a sharply increased risk of being sued.... One of the biggest mistakes fiduciaries can make is starting off by simply accepting the service provider's form service agreements. Not only the fees, but other provisions of these agreements are negotiable."
Cohen & Buckmann, P.C.

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Are Individually Designed Retirement Plans an Endangered Species?
"As a result of the IRS' changes to its determination letter program, [plan sponsors should]: [1] Ensure that an annual review is performed for all retirement plans to confirm compliance with the IRS' Required Amendment List and Operational Compliance List. Document the annual review in the plan administrator minutes; amend the plans as required, and conduct operational audits to document your diligence.... [2] Carefully scrutinize all proposed amendments to the plan for potential issues. You will no longer be able to clean up problematic language during the determination letter process.... [3] Consider whether a pre-approved plan can satisfy the plan's design and legal requirements."
Vorys, Sater, Seymour and Pease LLP

Features of the 20 Best Retirement Plans from Google, Apple and Other Major Companies
"Google ... matches 100 percent of employee contributions up to $3,000. Apple ... is also in the upper echelon with a 6-percent match of eligible employee pay. Its 401k consists of 14 funds.... Oracle matches 50 percent of up to 6 percent of employees' savings.... The ConocoPhillips retirement plan matches 900 percent of 1 percent contributions.... Boeing ranks second with a 75 percent match of up to 8 percent. Amgen ... matches 100 percent of employee contributions of up to 5 percent.... Citigroup matches 100 percent of up to 6 percent of employee contributions."
AOL Finance

The Champions of the 401(k) Lament the Revolution They Started
"Herbert Whitehouse was one of the first in the U.S. to suggest workers use a 401(k). His hope in 1981 was that the retirement-savings plan would supplement a company pension that guaranteed payouts for life. Thirty-five years later, the former Johnson & Johnson human resources executive has misgivings about what he helped start. What Mr. Whitehouse and other proponents didn't anticipate was that the tax-deferred savings tool would largely replace pensions as big employers looked for ways to cut expenses. Just 13% of all private-sector workers have a traditional pension, compared with 38% in 1979."
The Wall Street Journal; subscription may be required

74 Percent of Private Industry Workers Participated in Saving and Thrift Plans in 2015
"19 percent of workers participated in deferred profit sharing plans and 16 percent participated in money purchase plans.... In 2015, worker participation was lowest in employee stock ownership plans (4 percent) and savings incentive match plans (3 percent) among defined contribution plans."
U.S. Bureau of Labor Statistics [BLS]

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How 401(k) Advisers Can Make Financial Wellness Programs More Effective
"[A]dvisers shouldn't be lured into a false sense of security by simply implementing a service for clients; they should also subsequently help clients measure the success of those programs ... [One approach offers] an initial, anonymous wellness assessment for employees ... [which] shows individuals their particular focus areas, and demonstrates to employers vulnerabilities across their employee population ... Advisers are then able to provide workshops, which supplement online resources, based on the largest areas of need. An assessment the following year shows areas in which there's been improvement and those where more guidance may be necessary."
InvestmentNews

Age-Banding Provides a Better Baseline for Retirement Planning
"Rather than assuming a stable standard of living throughout retirement, [a] growing volume of research looks more directly at not just the composition of a retiree's spending goals, but also at how expenses change as the retiree moves through different age bands. Projecting retirement expenses using an age-banding approach may allow for a more nuanced and accurate representation of how spending will change over time.... [R]etirees may not actually need to save as much or accumulate as large of a nest egg to retire in the first place."
Financial Planning

When City Retirement Pays Better Than the Job
"[A] coterie of former El Monte civil servants [receive] one taxpayer-funded pension through [CalPERS] -- and a second through a 'supplemental' plan approved by the city council in 2000. The extra pensions, along with other sweeteners granted to El Monte employees over the years, have created one of the heaviest public pension burdens of any city in California ... El Monte's retirement costs totaled $16.5 million this year. That's equal to 28% of the city's general fund."
Los Angeles Times

California Court Upholds 2013 Law That Cut Buying Pension Credits
"The lawmakers' action in eliminating the right of public employees to buy additional retirement credits was 'wholly reasonable' and did not violate any binding promises made to the employees, the [court said] ... A lawyer for a firefighters union that challenged the law said it would probably seek review by the state Supreme Court, which has already agreed to consider another case cutting back on public pensions.... [The] case affects a pension system for 1.6 million state and local employees, although the ruling deals only with those who were employed when the law took effect in 2013[.]" [Cal Fire Local 2881 v. California Public Employees' Retirement System, No. A142793 (Cal. Ct. App. Dec. 30, 2016)]
San Francisco Chronicle

Pennsylvania Governor Proposes New Retirement System Compromise
"The proposed plan includes a mandatory, 401(k)-style plan for all new employees making at least $75,000 annual income. In addition, all employees could be given the option to participate only in a defined contribution plan at their time of hire. The plan also features a risk-sharing component for all new employees.... The $51.7 billion Pennsylvania Public School Employees' Retirement System and $27.6 billion Pennsylvania State Employees' Retirement System ... together have an unfunded liability of $60.1 billion."
Pensions & Investments

[Opinion]

Setting the Stage for 2017: Failing Multiemployer Pension Plans
"[Multiemployer pension plans will] come up politically this year, because there are a couple plans in really bad shape and Congress punted last year. Unlike public pensions, where they at least have some power to tax people to keep the cash flowing, many multiemployer plans have gone from lots-and-lots-of-employers to only-a-few-employers-in-a-dying-industry. The guarantees for [multiemployer plans] are extremely skimpy, so when these plans fail, it's a lot worse when single employer plans fail ... Supposedly, having multiple employers involved was supposed to make the guarantee more stable than if there were only a single employer sponsoring the pension. This doesn't work so well in struggling industries, like mining."
STUMP

Benefits in General

[Official Guidance]

Text of IRS Form 5434-A: Joint Board for the Enrollment of Actuaries -- Application for Renewal of Enrollment (PDF)
"All individuals enrolled before January 1, 2017, are required by 20 CFR 901.11(d) to renew their enrollment in order to maintain active enrollment to perform actuarial services. To file and pay electronically, visit www.pay.gov. As an alternative to filing and paying electronically, you may enclose with this form your check or money order for $250 payable to the [IRS]." [Rev. Jan. 2017]
Internal Revenue Service [IRS]

[Official Guidance]

Text of IRS Publication 15 (Circular E): Employer's Tax Guide, for Use in 2017 (PDF)
69 pages. "What's New: ... New certification program for professional employer organizations ... Leave-based donation programs to aid victims of the severe storms and flooding in Louisiana ... Leave-based donation programs to aid victims of Hurricane Matthew ... Reminders: ... [T]he credit for COBRA premium assistance payments can't be claimed on Form 941, Employer's QUARTERLY Federal Tax Return (or Form 944, Employer's ANNUAL Federal Tax Return). Instead, after filing your Form 941 (or Form 944), file Form 941-X, Adjusted Employer's QUARTERLY Federal Tax Return or Claim for Refund (or Form 944-X, Adjusted Employer's ANNUAL Federal Tax Return or Claim for Refund), respectively, to claim the COBRA premium assistance credit."
Internal Revenue Service [IRS]

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BenefitsLink Retirement Plans Newsletter, ISSN no. 1536-9587. Copyright 2017 BenefitsLink.com, Inc. All materials contained in this newsletter are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of BenefitsLink.com, Inc., or in the case of third party materials, the owner of those materials. You may not alter or remove any trademark, copyright or other notices from copies of the content.

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