Retirement Plans Newsletter

February 2, 2017

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[Official Guidance]

Text of PBGC Disaster Relief 17-03 for Severe Storms in Georgia
"Pension Benefit Guaranty Corporation (PBGC) is waiving certain penalties and extending certain deadlines in response to the Severe Storms, Tornadoes and Straight-Line Winds that began on January 21, 2017, in Georgia.... The disaster area consists of Berrien, Cook, Crisp, Dougherty, Turner, and Wilcox Counties."
Pension Benefit Guaranty Corporation [PBGC]

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[Guidance Overview]

Advice on the BICE (PDF)
8 pages. "This article [provides] practical advice for the financial institution and advisor in order to avoid traps for the unwary.... The DOL's big picture policy goal is to impose a universal 'Best Interest' fiduciary standard on all types of advisors to plan sponsors, participants and IRA owners which is accomplished primarily through the BICE."
The Wagner Law Group, in Practical Compliance and Risk Management for the Securities Industry

PBGC Adds to List of Early Warning Factors
"It now appears that either a lower credit rating or a cash flow (or other financial factor) downturn may subject a DB plan sponsor to a PBGC inquiry ... The PBGC claims that it has always used similar criteria as part of its screening process. While earlier guidance from the agency indicated that it focused on 'financially troubled' companies, that guidance also suggested that the PBGC would not act on that basis alone."
Willis Towers Watson

PBGC Fails in Attempt to Hold Asset Buyer Liable for Seller's Underfunded Single Employer Pension Plan Termination Liabilities
"[S]everal federal courts of appeal have held that a buyer of assets may be held liable as a successor under federal common law for unpaid ERISA multiemployer plan withdrawal liability or contributions if the buyer had notice of the liability and continued the business of seller with substantial continuity of operations. The PBGC ... asked the court to apply the same doctrine in the termination liability context. Finding that ERISA already imposed a specific statutory scheme for the collection of plan termination liabilities under ERISA, the district court declined to apply federal common law in this case." [PBGC v. Findlay Industries, Inc., No. 15-1421 (N.D. Ohio Dec. 29, 2016)]
Paul Hastings LLP

Justice Department Continues to Defend DOL Fiduciary Rule in Court
"The Department of Justice continues to defend a [DOL] investment-advice rule in a lawsuit in a Texas federal court almost two weeks after President Donald Trump was sworn into office. In a Jan. 25 brief, financial industry plaintiffs asserted that a recent DOL proposal to ease compliance for some fixed-indexed annuities providers demonstrated that the advice rule would 'upend' the distribution system and proved it was an example of 'regulatory overreach.' ... In a Jan. 30 reply, DOJ lawyers shot back."
InvestmentNews

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Fiduciary Advocates Prep for Fight to Save DOL Fiduciary Rule
"Sources say that any White House action would likely direct the Labor Department to delay implementation of the fiduciary rule for a period of time -- likely six months -- while the various legal challenges to the regulation work their way through court. At that time, the DOL could then reopen the matter for a notice-and-comment period, after which it could determine whether to revise or repeal the rule altogether."
Financial Planning

Retirement Plan Investment Programs Harbor Newly Revealed Risks for Plan Sponsors
"If your plan's investments are provided by the plan's recordkeeper or its affiliate, commission an independent risk management assessment and have it updated annually.... Ask your vendors to identify any affiliated businesses that offer any retirement plan related services.... If you rely on a 'fee benchmarking' report provided to you by a vendor be wary.... Get help from a specialist in ERISA risk management to uncover any symptoms of trouble."
Roland|Criss

With Change on the Horizon, Some Advice for DC Plan Sponsors in 2017
"DC plan sponsors should take steps ensure that DC plan data is adequately secured.... Sponsors need a prudent process to ensure that they determine the reasonableness of fees on a regular and continuing basis ... It is also critical to have detailed documentation of the process ... Sponsors of participant-directed plans need to ... ensure participants are not being disadvantaged by too many or too few investment choices, or choices that are not aligned with participant demographics.... Online tools can help plan sponsors and their record keepers find 'missing' owners of DC accounts.... Plan sponsors should be sure to monitor the amount and treatment of uncashed checks."
Segal Consulting

Culturally Relevant Program Drives Retirement Savings Among Hispanic Workers
"The program focuses on key elements of engagement that: [1] Address cultural influences that may undermine retirement savings, such as sending money home or moving back to the employee's country of origin; [2] Identify, develop and integrate cultural elements to help simplify more complex financial topics; [3] Incorporate levels of culture and language by analyzing the workforce, picking up on what's culturally unique and making suggestions to plan sponsors so they can customize their plans."
Principal Financial Group

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Foreign Pension Plan Considerations for U.S. Taxpayers
"Foreign pension plan participation is an issue for U.S. citizen employees who reside abroad and foreign nationals temporarily residing in the U.S.... A foreign pension plan may have higher contribution limits than those available under U.S. qualified plans, and certain pensions allow the [in-kind] contribution of shares and partnership interests. Contributions to a foreign pension plan could be made in addition to annual contributions to a U.S. qualified plan, and in some jurisdictions, are unlimited."
Dominion Fiduciary Services Limited

Retirement Transitions in the U.S., U.K., Canada and Australia
20 pages. "The difference in high satisfaction ratings between recent retirees and pre-retirees ranges from 12% to 26%, depending on the country.... [P]re-retirees are up to four times more likely to expect to work and receive work income in retirement.... [I]ndividuals devote most of their retirement planning effort to the timing of claiming government pensions (48% to 69% have planned for this), as well as transitional issues like when to retire (44% to 60%) or the amount of monthly retirement income needed (50% to 64%)."
Vanguard

401(k) Balances, Contributions and IRAs End 2016 at Record Levels
"Increasing contributions and stock market performance drove the average 401(k) balance to an all-time high of $92,500 at the end of Q4, topping the previous high of $92,100 in Q1 2015 and an increase of $4,300 from a year ago.... The average IRA balance of $93,700 is up $3,600 year-over-year.... [T]he average contribution rate to Fidelity 401(k)s reached 8.4 percent in Q4, the highest level since Q2 2008. Over the past 12 months, the [average] total savings amount (employee contributions plus employer match/profit sharing) reached a record $10,200."
Fidelity

Public Pension Funded Ratio Falls Back During Q4, Landing at 70.1% (PDF)
"During the fourth quarter the deficit increased from $1.338 trillion to $1.392 trillion. As of December 31, the funded ratio stood at 70.1%, down from 71.1% at the end of September.... The total pension liability (TPL) increased from $4.620 trillion at the end of Q3 to an estimated $4.659 trillion at the end of Q4."
Milliman

CalSTRS Lowers Earnings Forecast from 7.5% to 7%
"The lower earnings forecast was phased in over two years to ease the impact on about 80,000 teachers hired since 2012 who get lower pensions under a cost-cutting pension reform. Their CalSTRS rate will increase by 1 percent of pay, up from the current 9.21 percent of pay. The rate increase is expected to take $400 a year from the average salary of $40,000 for the new teachers."
Calpensions

[Opinion]

BICE: Financial Advisors Beware
"[The DOL's Best Interests Contract Exemption (BICE)] can result in a misalignment of the interests of the firm and those of its advisors, for the firm can receive more compensation while the advisor's compensation generally must not vary ... Over time, the economic incentives present will result in pressures placed upon advisors by their firms to not act in the best interests of the client ... In the competition for clients, firms that use fee-based accounts will possess a huge marketing advantage over firms that utilize BICE."
Ron Rhoades

[Opinion]

It's Time for 401(k) Plans to Become Part of the Sharing Economy
"This better way has the following objectives: [1] Reduce the employer's exposure to fiduciary liability as much as possible; [2] Put plan administration burdens entirely on a professional administrator with benefit plan expertise; [3] Keep the expenses of the arrangements at economical levels through the aggregation of the plans of unrelated employers.... [T]he Retirement Enhancement & Savings Act or RESA (Senate Bill 3471) ... would achieve the 'better way objectives' ... in a way that is flexible and fair and allows unrelated employers to band together to create economies of scale, reduce their own individual burdens, and limit their own fiduciary responsibilities."
Fiduciary Plan Governance, LLC

Benefits in General

[Official Guidance]

ERISA Form 8955-SSA 2-D Barcode Standards, Plan Years 2009-2016 (PDF)
45 pages, Jan. 13, 2017, version 1.9. "The 2D barcode is intended to represent the information on the paper form. Barcodes for this form are generated from two sources: [1] The IRS Form 8955-SSA Fillable PDF produces a barcode after printing the form in Adobe. [2] The approved software vendors for Form 8955-SSA produce a barcode when printing their forms from their software package." [Contents include: General standard; Approval procedures; Duration of approvals; Barcode specifications; Rules; Form versions and printing notes; Field types; and Form 8955-SSA barcode layout.]
Social Security Administration [SSA]

Press Releases

DCIIA Membership Elects Executive Committee Leadership
Defined Contribution Institutional Investment Association [DCIIA]

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Lois Baker, J.D., President  loisbaker@benefitslink.com
David Rhett Baker, J.D., Editor and Publisher  davebaker@benefitslink.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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