Retirement Plans Newsletter

January 31, 2017

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Employee Benefits Jobs

Defined Contribution Plan / 401k Plan Administrator
N.A. Falcone & Associates, Inc.
in PA

Employee Benefits Associate
Akerman LLP
in FL

Staff Attorney
Groom Law Group
in DC

Senior Pension Administrator
Scholz & Friends Enlightened Retirement Group, Inc.
in TX

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[Official Guidance]

Text of IRS Publication 560: Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans) for Use in Preparing 2016 Returns (PDF)
28 pages; Jan. 26, 2017. "What's New: Compensation limits for 2016 and 2017.... Elective deferral limit for 2016 and 2017.... Defined contribution limit for 2016 and 2017.... SIMPLE plan salary reduction contribution limit for 2016 and 2017.... Catch-up contribution limit for 2016 and 2017.... Mid-year changes to safe harbor plans and notices.... Tax relief for victims of Hurricane Matthew."
Internal Revenue Service [IRS]

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[Guidance Overview]

DOL Fiduciary Rule Compliance: SEC Says Brokers Can Impose Their Own Commissions on Sales of 'Clean' Fund Shares
"Clean Shares appear to be tailor-made for a broker-dealer offering commission-based advice to retirement investors and relying on the regular BIC Exemption. Clean Shares permit this type of broker-dealer to create its own commission and transaction fee schedule based on the services the broker-dealer provides. Because this type of broker-dealer will be able to charge a client similar commissions or transaction fees regardless of the products recommended and would not accept Third-Party Payments, compliance with the DOL's Impartial Conduct Standards is likely to be less burdensome than it would be if, instead, the broker-dealer received variable one-time sales loads/fees."
Ropes & Gray LLP

[Guidance Overview]

Sponsors of Pre-Approved 403(b) Plans Need to Request Opinion or Advisory Letters by March 31, 2020
"[T]he last day of the remedial amendment period for Section 403(b) plans will be March 31, 2020.... While it is unclear when they might again be permitted to file, the cycle for qualified plans is a six-year cycle. If applied to Section 403(b) plans, this would mean that there will not be another opportunity to file until about 2025 or 2026."
Venable LLP

[Guidance Overview]

Attention, California School Districts: You Are Fiduciaries for Your 457(b) Plans
"Since 457(b) plans are deferred compensation plans for state and local governments, 457(b) plans satisfy the definition of public pension and retirement funds for purposes of the California Constitution. This means that the retirement boards, and their members, who are responsible for 457(b) plans ... are fiduciaries subject to the duties and obligations under Article XVI, Section 17."
The Teacher's Advocate

Aon Hewitt Sued Over Fee Arrangement with Investment Advisor for Caterpillar's 401(k) Plan
"Aon Hewitt devised an arrangement with Financial Engines for investment advice services that resulted in collecting unreasonable and excessive fees at the expense of Caterpillar Inc.'s 401(k) plan participants, according to a lawsuit filed Jan. 27 ... The lawsuit seeks class treatment for thousands of participants. Aon Hewitt and its subsidiaries engaged in a kickback scheme with Financial Engines that resulted in millions of dollars in plan losses in violation of [ERISA], the complaint alleges."
Bloomberg BNA

[Advert.]

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Fee Litigation Update: Moving Beyond Allegations of Self-Dealing
"[This article reviews] the alleged bases for these lawsuits and, in particular, the theories by which plan participants seek to satisfy the standards for pleading a viable fiduciary breach claim without the benefit of allegations of self-dealing. [The authors suggest] affirmative steps that plan fiduciaries may take to prevent these types of claims from succeeding."
Proskauer Rose LLP

A Different Kind of Target Date Investor
16 pages. "[Some] target-date investors combine a target-date fund with other plan investment options either by choice or plan sponsor action.... The prevalence of [such] mixed target-date investors has raised concerns about misuse of target-date funds, which have generally been promoted as an 'all-in-one' portfolio approach.... Some participants who have chosen to become mixed investors may be at risk of overdiversifying their portfolios even when including a target-date fund. Sponsors seeking to promote better portfolio diversification may pursue a variety of strategies, including greater use of default investing, managed account advisory services, or reenrollment."
Vanguard

403(b) Rules May Suggest Value as Universal Platform of the Future
"One of the most unusual differences ... between 403(b) plans and 401(k) plans is the striking fact that the 415 limit is an individual limit, not a plan level limit. The reason: 403(b) plans are still fundamentally designed around an individual. It is this sort of design which also should suggest it as a potential design of choice for the future: with the focus growing on individual portability of the retirement benefit, it's easy to forget that these individual contracts were portable between plans."
Business of Benefits

Who Are the Top 10 Small Business 401(k) Providers?
"The top 10 401(k) providers ranking have been stable for the past two years, with only one new provider making it into the top 10 list for defined contribution plans under $10 million in assets ... For mid-sized plans with $10 million to $100 million in assets, the top 401(k) providers list has been even more stable, with most providers staying in the same rank as the previous year, and only one new provider moving into the top 10 provider ranking."
ForUsAll

Retirement Preparations in a New Age of Self-Employment (PDF)
48 pages. "Most countries rely on a three-pillar retirement system: [1] government benefits such as social security; [2] employer-sponsored, or occupational, benefits; and [3] personal savings. The expansion of retirement systems to become more inclusive of the self-employed is increasingly important given the growth in self-employment.... A new template that is based on 'flexicurity' could help retirement systems become more socially inclusive and sustainable, and simultaneously help this highly dynamic segment of the workforce become more prepared for retirement."
Transamerica Center for Retirement Studies

Pension Plan Funded Status Increases Due to Rising Interest Rates in Q4 2016 (PDF)
"During the fourth quarter of 2016, the funded status of the model pension plan ... rose by 5 percentage points: from 77 percent to 82 percent. This increase was the result of a 7 percent liability decrease offsetting a 2 percent asset decrease during the quarter."
Sibson Consulting

Maryland Governor Proposes 401(k)-Style Retirement Plan for State Employees
"Maryland Gov. Larry Hogan (R) ... proposed legislation to allow state employees to pay into a 401(k)-style retirement plan instead of the state's public-pension system ... The plan would give future state employees the option of participating in a 'defined contribution' program in which they and the state would each contribute an amount equal to 5 percent of pay toward individual retirement accounts."
The Washington Post; subscription may be required

[Opinion]

Church Plan Crisis Looming
"Why are these government agencies so anxious to keep these 'church' plans exempt from ERISA? Because they might be the worst funded Defined Benefit plans in the country and ... the only place these church plan liabilities appear is in Schedule D, Part X of the sponsor's 990 form. Without any funding requirement many of these plans may already be in pay-as-you-go mode with massive unfunded liabilities that would stretch the resources of government agencies that could be charged with overseeing their solvency."
Burypensions

[Opinion]

Aspen Institute Comment Letter to Treasury on Transferring myRA Account Balances to Private Sector Roth IRAs (PDF)
"As myRA account balances grow, the question of how assets will be transferred to private sector accounts will take on greater urgency. Ideally, savers will be proactive about selecting their private provider, but we know that many savers are 'passive' and susceptible to status quo bias, which means automatic enrollment will be a reality for some. Evidence indicates that these savers would best served by a single, low-fee private Roth IRA with default Lifecycle Fund investment."
Aspen Institute

Benefits in General

How Much Should a Medicare Beneficiary Save for Health Expenses? Some Couples Need $350,000 (PDF)
"In 2016, a 65-year-old man would need $72,000 in savings and a 65 year-old woman would need $93,000 if each had a goal of having a 50 percent chance of having enough savings to cover health care expenses in retirement.... A couple with median prescription drug expenses would need $165,000 if they had a goal of having a 50 percent chance of having enough savings to cover health care expenses in retirement.... For a couple with drug expenses at the 90th percentile throughout retirement who wanted a 90 percent chance of having enough money saved for health care expenses in retirement by age 65, targeted savings would be $349,000 in 2016."
Employee Benefit Research Institute [EBRI]

Executive Compensation and Nonqualified Plans

[Guidance Overview]

ISO and ESPP Reporting and Disclosure Requirements for Employers
"You must furnish an information statement on Form 3921 (ISO) or Form 3922 (ESPP), as applicable, to each employee (or former employee) by January 31, 2017; you must also file information returns with the [IRS] by February 28, 2017, if filing on paper, or March 31, 2017, if filing electronically."
Hanson Bridgett LLP

Tax Reporting for Stock Compensation: Understanding Form W-2, Form 3922, and Form 3921
"Making sense of Form W-2 when stock compensation is reported ... Form 3922 for ESPPs and Form 3921 for ISOs ... Sell shares in 2016? The fun is just beginning."
myStockOptions.com

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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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