Retirement Plans Newsletter

January 16, 2017

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Manager, Office of the Actuary
NYS Teachers' Retirement System
in NY

ESOP Administrator
Swerdlin & Company
in GA

Executive Assistant
Western & Southern Financial Group
in OH

Sr. Document Compliance Consultant
TIAA
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Long Island Employee Benefits Group
in NY

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Webcasts and Conferences

Pension & Welfare Plan Overpayments: What's an Employer to Do?
RECORDED
Practical Law Company

Pension Regulations Explained and Applied
February 22, 2017 WEBCAST
Conference of Consulting Actuaries

2017 Basics of Employee Health & Welfare Plans
April 6, 2017 in MA
New England Employee Benefits Council

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[Official Guidance]

Text of IRS Publication 575: Pension and Annuity Income, for Use in Preparing 2016 Returns (PDF)
43 pages, dated Jan. 4, 2017. "This publication discusses the tax treatment of distributions you receive from pension and annuity plans and also shows you how to report the income on your federal income tax return. How these distributions are taxed depends on whether they are periodic payments (amounts received as an annuity) that are paid at regular intervals over several years or nonperiodic payments (amounts not received as an annuity)."
Internal Revenue Service [IRS]

[Advert.]

Online Learning Course: ERISA

Sponsored by International Foundation of Employee Benefit Plans [IFEBP]

Get the information you need to understand the requirements of ERISA, including penalties, vesting requirements, fiduciary responsibilities, plans covered by the PBGC, and the roles of the various enforcement agencies.


[Official Guidance]

Text of IRS Publication 915: Social Security and Equivalent Railroad Retirement Benefits, for Use in Preparing 2016 Returns (PDF)
30 pages, dated Dec. 30, 2016. "This publication explains the federal income tax rules for social security benefits and equivalent tier 1 railroad retirement benefits.... This publication covers ... [1] Whether any of your benefits are taxable. [2] How much is taxable. [3] How to report taxable benefits. [4] How to treat lump-sum benefit payments. [5] Deductions related to your benefits, including a deduction or credit you can claim if your repayments are more than your gross benefits."
Internal Revenue Service [IRS], Social Security Administration [SSA], and U.S. Railroad Retirement Board [RRB]

[Guidance Overview]

Proposed New IRS Mortality Table May Impact Plan Funding and Benefit Payments (PDF)
"[P]lan sponsors may want to consider taking the following steps in the coming months: [1] Review updated projections of minimum funding and PBGC premium requirements taking into account the proposed mortality table. [2] Evaluate whether the sponsor might be eligible to use a substitute mortality table, and whether doing so would result in savings. [3] Determine the potential impact of the new tables on possible de-risking strategies. [4] Consider how this may impact ongoing plan administration and benefit distribution calculations after the IRS issues the new Code section 417(e) table for minimum lump sum distribution purposes[.]"
Groom Law Group

[Guidance Overview]

Final Rule Allows Large Cities and Other Political Subdivisions to Establish Savings Programs for Private Sector Employees (PDF)
"The final rule defines a qualified political subdivision as any state governmental unit (city, county or similar units) that meets the safe harbor criteria established for states in the August 30, 2016 final rule, as well as additional criteria in the new final rule. The DOL estimates only 51 political subdivisions are eligible for the safe harbor, including three (Seattle, Philadelphia and New York City) that have expressed interest in it."
Segal Consulting

2017 Key Administrative Dates and Deadlines for Calendar-Year DC Plans (PDF)
4-page chart of key administrative dates and deadlines during 2017 for defined contribution retirement plans subject to ERISA and the Internal Revenue Code, such as Form 5300 (Cycle A plans), corrective distributions, quarterly benefit statements, annual benefit statements, money purchase plans contribution deadline, safe harbor notices, automatic enrollment notices, notice to terminated vested employees, QDIA notices, discretionary plan amendments, and 42 more.
Milliman

[Advert.]

Techniques to Enhance Your 401(k) Plans

Sponsored by Lorman and BenefitsLink

Jan. 31 webinar. Fiduciary process and techniques of automatic enrollment, auto escalation, re-enrollment, Qualified Default Investment Alternatives, hiring and monitoring of service providers, benchmarking, investment due diligence, regulatory issues.


New Mortality Assumptions Proposed for Defined Benefit Retirement Plans
"Plan sponsors should not draw any conclusions of the financial impact on actuarial liabilities or possible increases in cash contributions for a specific pension plan. The benefit formulas, plan demographics, status ('frozen,' 'partially frozen,' 'open'), and other complex variables are unique to a given plan and must be carefully evaluated."
Milliman Retirement Town Hall

Mid-Sized Pension Plans: How to Get Back on Track (PDF)
"[M]any DB plan sponsors have yet to formally develop a goal for their retirement programs, nor have they designed a road map for getting there.... Rather than focus on an uncontrollable market environment, designing and implementing a sound fiduciary process can help alleviate market-related concerns by putting you back in control, while helping realign your plan with its intended purpose."
Portfolio Evaluations, Inc.

Plan Terminations: Breaking Up Is Hard to Do (PDF)
"You know the termination process can be lengthy, time consuming, and costly. There are multiple notices to be sent, forms to file, and annuities to purchase. You know your actuary, trust custodian, attorney, trustee, and investment advisor will assist with many of the tasks, but as plan administrator what can you do to be prepared?"
Milliman

Supreme Court's Docket Includes Church Plan ERISA Exemption Cases (PDF)
"A three-year litigation push involved more than two dozen religiously affiliated hospitals. The lawsuits claim more than 300,000 hospital workers face a pension shortfall of about $4 billion because hospitals have wrongly designated their pension plans as exempt.... The court's decision will affect about 30 pending lawsuits against hospitals with similar pension plans."
Bloomberg Law Pension & Benefits Reporter

The DOL Fiduciary Class Action Lawsuit That Will Really Transform Financial Advice
"[The] Best Interests Contract Exemption attaches a fiduciary obligation to the Financial Institution itself, including the potential for a class action lawsuit against the institution for failing to meet its fiduciary obligations. Which means a Financial Institution could face a class action lawsuit not only for systemic breaches of the fiduciary duty of loyalty (e.g., by utilizing too much conflicted compensation), but also by systemically breaching the fiduciary duty of care but not sufficient training their advisors. In other words, Financial Institutions face the risk that they will be sued in a class action lawsuit for failing to put their financial advisors through the training and education (e.g., professional designations) necessary to ensure that the advisor would even know what the 'best' advice for the client was in the first place!"
Michael Kitces in Nerd's Eye View

Considering Part-Time Work after Retirement: Should I Stay or Should I Go?
"[T]he optimal retirement age is very sensitive to ... coefficient of risk version, the leisure rate after retirement, coefficient of survival function (describing the individual's mortality), interest rate and discount rate, and is especially sensitive to the drift of return rate of risky assets invested.... [M]ortality improvements greatly affect all other optimal solutions except optimal retirement age, but have small affect on optimal retirement age."
Hong Mao, James M. Carson, Krzysztof Ostaszewski, and Zhongkai Wen

[Opinion]

A Proposal: One Defined Contribution Account to Rule Them All -- The 'New IRA'
"This proposal for 'New IRAs' or 'NIRAs' will substantially lower the fees and costs of employer-associated retirement plans. It will eliminate tax traps for the unwary. It will prevent employees from taking loans from their NIRA accounts except when absolutely necessary. It will protect employers from undue liability, since only fiduciary investment advisers may provide recommendations to employers, and these fiduciary advisers can be held to account."
Ron Rhoades

Benefits in General

[Official Guidance]

Text of DOL Federal Civil Penalties Inflation Adjustments for 2017
48 pages. "This final rule sets forth the Department's 2017 annual adjustments for inflation to its civil monetary penalties, effective January 13, 2017."
Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL]

ERISA Preemption After Gobeille V. Liberty Mutual: Completing the Retrenchment of Shaw
"In Gobeille, the Court completed the process of reconciling the restrained approach to ERISA preemption announced in New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Insurance Co. with the Court's literal and expansive approach adopted earlier in Shaw v. Delta Air Lines, Inc....The Court reached this conclusion in a way which indicates that, going forward, Traveler's more restrained approach to ERISA preemption exclusively prevails. This is particularly significant for state-sponsored private sector retirement plans, now immune from ERISA preemption challenge, as well as for state taxes as they apply to the investment trusts of ERISA-regulated retirement plans."
Prof. Edward A. Zelinsky, via SSRN

California State Pension Costs Doubled After Rate Increases
"State payments to CalPERS next fiscal year are expected to total $6 billion, nearly double the $3.2 billion paid six years ago before a wave of employer rate increases.... [S]tate payments to CalSTRS for the fiscal year beginning in July are expected to be $2.8 billion, nearly double the $1.5 billion paid three years ago when a rate increase began. Meanwhile, what had been the fastest-growing annual retirement cost in the budget, retiree health care for state workers, only increased by about half during the last six years, going from $1.5 billion in fiscal 2011 to $2.2 billion next year."
Calpensions

Executive Compensation and Nonqualified Plans

2016 Annual Incentive Plan Report (PDF)
21 pages. "This report presents information on annual incentive plan practices in place for executives at the 250 largest U.S. companies in the Standard & Poor's 500 Index."
FW Cook

Incentive Bonus Reporting on Form 8-K
"Annual bonus awards/targets set in 2017, for payout in 2018 (or later), do not need be disclosed if they are consistent with awards/targets in prior years.... Annual bonuses paid in 2017 for 2016 performance do not need be disclosed if they are consistent with awards reported in a prior year."
Winston & Strawn LLP

2017 Proxy Voting Guidelines: What's Really Important?
"ISS introduced new financial metrics to analyze CEO pay for performance to supplement total shareholder return (TSR) analysis.... The 2017 proxy voting guidelines: [1] were silent regarding frequency of say-on-pay votes.... [2] emphasized policies regarding director compensation and associated corporate governance issues.... [3] contained changes regarding the review of equity plans requiring minor action by companies."
Bloomberg BNA

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Lois Baker, J.D., President  loisbaker@benefitslink.com
David Rhett Baker, J.D., Editor and Publisher  davebaker@benefitslink.com
Holly Horton, Business Manager  hollyhorton@benefitslink.com

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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