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Ret plans - admin

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[Discussion] Spouse's Entitlement to 100% of Death Benefit Under a Plan Not Subject to Joint-and-50%-Survivor Rules
"Under a DC plan that's not subject to the J&S rules, a participant designated his wife and two children as equal 1/3rd beneficiaries. The wife did not consent to the 2/3 designation of the children. The participant has died, and the spouse wants the designation of the children to be honored. Would this cause a tax qualification problem? If she must be the sole beneficiary of the account, could she spouse use a state-law "disclaimer" of 2/3rds of her benefit without causing a tax qualification problem?" (BenefitsLink Message Boards)
[Discussion]HSA Employee contributions and 415 compensation
"Are employee and employer contributions to an HSA grossed up for 415 plan compensation purposes? I am not too familiar how contributions to these arrangements affect plan compensation. It looks like they can be run through the cafeteria plan - if so then I assume they would be considered Section 125 pre-tax amounts and then gross up the 415 compensation? Another way to set up an HSA is like an IRA and then take the deduction on your 1040. In this way, I assume the compensation is also included as 415 compensation in the employee's 401(k) plan? If an employer wants to exclude them, I think they have to be excluded under the plan compensation definition in the document?" (BenefitsLink Message Boards)
[Discussion]HSA - 415 Compensation
"From the W-2 instructions, I learned that an employer's contribution (including an employee's contributions through a cafeteria plan) to an employee's HSA is not subject to federal income tax withholding or social security, Medicare, or railroad retirement taxes (or FUTA tax) but are these amounts included in the definition of 415 comp? Plan sponsor contributes an employer contribution to the HSA on behalf of the employee but does not want to include this employer contribution in the definition of plan compensation (SH and ER). Total Comp is defined as W-2 Comp and Plan Comp does not currently exclude deferrals / cafeteria. To exclude the employer contribution to the HSA from Plan Comp, is an amendment to the plan necessary?" (BenefitsLink Message Boards)
[Discussion]Terminating Qualified Replacement Plan
"Mr. Smith had a one-participant DB Plan which was over funded. The DB Plan was terminated in 2014; all assets were transferred into a 401(k) Plan as a qualified replacement plan. The over-funded amount was credited to a suspense account. In 2015, a portion of the suspense account was allocated to Mr. Smith with the intent of allocating all of the suspense account within 7 plan years. Mr. Smith only paid himself each year on 12/31. Contributions and suspense account allocations were based on that single pay date. Mr. Smith dies in 2016. He had not taken any pay, therefore no allocation from the suspense account could be made. Therefore any remaining amounts in the suspense account will now be subject to the 50% Reversion Tax. Is this correct?" (BenefitsLink Message Boards)
'Auto' Features Beat Inertia But May Generate Exhaust
"Beneficiary designations -- improperly completed or not made at all -- can be a consequence of automatic enrollment ... The plan document should provide guidance regarding how to resolve beneficiary disputes, so plan sponsors are encouraged to proactively review issues relating to beneficiary designations ... Consider amending plan to have contesting parties first use the plan's administrative claims procedures.... Consider enhancing participant communication campaigns, using real life examples of how their intended beneficiaries might incur legal challenges." (American Society of Pension Professionals & Actuaries [ASPPA])
[Discussion] Are Retirement Plan Contributions Subject to FOIA?
"I work for a governmental entity (at the municipal level). My salary information is public information and subject to any citizen's Freedom of Information Act request. Are my contributions to my employer's retirement plans (403(b), 401(a), and 457(b) plans) considered 'FOIA-able' information?" (BenefitsLink Message Boards)
Financial Communications and Asset Allocation Decisions
"Communication media and format have large effects on reading style, which can affect comprehension. Print encourages a more systematic, deeper reading style compared to an online format. Charts attract visual attention. Comprehension and individual differences (especially risk tolerance and financial self-confidence) have large effects on asset mix decisions." (TIAA Institute)
How Do Distributions from Retirement Accounts Respond to Early Withdrawal Penalties?
"Crossing the age 59-1/2 threshold leads to a $1,600 increase in annual distributions from IRAs. People with birthdays that result in fewer months of penalty-free withdrawal in the calendar year in which they turn 59-1/2 have a much smaller increase in annual distributions between the years in which they turn 58-1/2 and 59-1/2. In contrast, those who turn 59-1/2 early in the calendar year see much sharper increases." (TIAA Institute)
[Opinion] ARA Letter to EBSA Requesting Interpretative Guidance Under ERISA Section 408(b)(2) (PDF)
"ARA recommends that [the] Department issue interpretative, sub-regulatory guidance that recognizes ... the associated uncertainty as to the final parameters of the Rule and related exemptions, and the potential for confusion by plan sponsors, are extraordinary circumstances beyond the control of covered service providers which would preclude the immediate distribution of an updated 408(b)(2) notice ... ARA further recommends that the Department's guidance indicate that as a result of these extraordinary circumstances, a covered service provider who provides an updated 408(b)(2) notice no later than the first calendar quarter of 2018 will be deemed to have provided the notice as soon as practicable[.]" (American Retirement Association [ARA])
Oregon Retirement Savings Program Amends Enrollment Language
"The temporary rule inserts language to clarify that if an employee has not established an IRA after being notified and having been given an opportunity to opt out of the program, an IRA will be established for that employee under directives and procedures the ORSP Board establishes." (National Tax-Deferred Savings Association [NTSA])
Ninth Circuit: ERISA Does Not Preempt California Law Voiding Discretionary Clauses
"The court's conclusion that the law reaches discretionary clauses in plan documents -- not just insurance contracts -- might seem problematic for self-insured plans. But because this case involved an insured plan, the court did not discuss the 'deemer' clause of ERISA's preemption provision, under which an ERISA plan cannot be deemed to be an insurer for purposes of state insurance laws. Accordingly, the law's applicability to self-insured plans remains an open issue." [Orzechowski v. The Boeing Co. Non-Union Long-Term Disability Plan, No. 14-55919 (9th Cir. May 11, 2017)] (Thomson Reuters / EBIA)
[Discussion] How to Report Hedge Fund on Form 5500 Schedule H
"On what line of Schedule H of Form 5500 would you report the value of a private hedge fund? The investors are not partners, the fund is not a registered investment, and it's not a trust. Should it be reported as a joint venture?" (BenefitsLink Message Boards)
[Discussion] DOL Handling of a 401(k) Participant's Claim
"Participant contacts DOL, says he's deferred more than the 401(k) plan has credited to his account. DOL starts an inquiry, which is handled by the plan sponsor's accountant. Accountant claims DOL has finished its inquiry, but DOL has not sent any correspondence accepting what the accountant submitted. Accountant says DOL only sends correspondence when there is an audit, NOT when a participant makes a claim. Is accountant correct?" (BenefitsLink Message Boards)
[Discussion] Fixing a Failure to Issue Form 1099 Due to Defaulted Loan
"Employee defaults on loan in 2016. No Form 1099 was issued for the resulting deemed distribution. Participant didn't realize the default caused a deemed distribution for income tax purposes, so his 2016 tax return was filed incorrectly. Should the employer/plan administrator/TPA/guilty party pony up the expense of refiling the 2016 return and reimburse the employee for any interest or penalty charges?" (BenefitsLink Message Boards)
[Official Guidance] IRS Now Accepting Renewal Applications for ITINs Set to Expire by End of 2017
"The agency urges taxpayers affected by changes to the [Individual Taxpayer Identification Number (ITIN)] program to submit their renewal applications as soon as possible to avoid the rush. In the second year of the renewal program, the IRS has made changes to make the process smoother for taxpayers. The renewal process for 2018 is beginning now, more than three months earlier than last year." [Also available: 2017 Form W-12, Preparer Tax Identification Number (PTIN) Application and Renewal] (Internal Revenue Service [IRS])
Witness Statements to ERISA Advisory Council: 'Mandated Disclosures for Retirement Plans -- Enhancing Effectiveness for Participants and Sponsors'
Testimony submitted for June 7, 2017 meeting: (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])
Task Force Develops Small Plan RFP Template
"[A] special joint NAPA/CIkR task force has developed a template designed to make it easier to obtain a consistent, apples-to-apples comparison of service features from 401(k) recordkeepers.... The NAPA Recordkeeping Platform Assessment Template deals with three key service aspects: [1] Administration Fee Detail (including per-participant, asset-based, and participant and document services); [2] Plan Service Highlights (including data submission, reporting and testing, and call center services); [3] Investment Program Overview (including fund menu requirements, and revenue-sharing methodology)." (American Society of Pension Professionals & Actuaries [ASPPA])
[Opinion] ARA Recommendations for the 2017-2018 IRS Priority Guidance Plan (PDF)
"ARA recommends that the IRS: [1] [A]ddress issues related to mid-year changes to safe harbor plans.... [2] Provide guidance on the determination of affiliated service groups and management groups.... [3] Provide a method to obtain a ruling on affiliated service group status by reopening the determination letter process for this purpose.... [4] [A]ddress issues related to the changes to the determination letter program for individually designed plans.... [5] [F]inalize the expansion of the pre-approved plan document program as indicated in IRS Announcement 2014-41 to permit pre-approved cash balance plan and ESOP documents." (American Retirement Association [ARA])
Tide Is Turning Against Discretionary Authority and the Abuse-of-Discretion Standard of Review (PDF)
"[L]egislators, courts, and regulators have all moved to severely limit the discretion of plan administrators and walk back the deference traditionally afforded their decisions under the deferential, abuse -of-discretion standard of review.... Because of the Orzechowski decision, ERISA plans in California, and maybe elsewhere in the Ninth Circuit, that rely on a 'policy, contract, certificate, or agreement' have now lost the benefit of deferential judicial review.... The Second Circuit has abandoned the 'substantial compliance' doctrine and held that even minor violations of the [DOL] claim regulations deprive a plan administrator of the abuse-of-discretion standard of review." (Groom Law Group)
Tenth Circuit: Plaintiff Bears the Burden of Proving Causation in ERISA Breach of Fiduciary Duty Cases
"The Tenth Circuit reasoned that the statute limits liability to losses 'resulting from' a breach of fiduciary duty, which dictates that the burden remains with the plaintiff at all times, since the plain language of the statute makes causation an element of the claim. This holding is in line with Second, Sixth, Ninth, and Eleventh Circuit Courts of Appeals." [Pioneer Centres Holding Co. Employee Stock Ownership Trust v. Alerus Financial, N.A., No. 15-1227 (10th Cir. June 5, 2017] (Littler)
Identifying Plan Assets Is Not as Easy as It Seems
"[T]he DOL has indicated that plan assets are to be identified on the basis of ordinary notions of property rights under non-ERISA law and to include any property -- tangible or intangible -- in which a plan has a beneficial ownership interest ... Federal courts have accepted this definition as a reasonable one ... although it may still be difficult to apply -- for example, in determining whether the data of participants that plans obtain is a plan asset, an issue that is relevant in determining the presence of fiduciary obligations in the context of cybersecurity. Recent court cases illustrate this principle." (Marcia Wagner, via planadviser)
The Importance of Retirement Plan Record Retention: Whose Job Is It Anyway? (PDF)
"The IRS and federal tax regulations require that records be retained as long as their contents may become material in the administration of any internal revenue law. As a result, records for retirement plans should be kept until all benefits have been paid, the trust has been dissolved and sufficient time has passed such that the plan will not be the subject of an audit." (ERISAdiagnostics, Inc.)
[Official Guidance] Text of EBSA Request for Nominations to the 2018 ERISA Advisory Council
"The terms of five members of the [Advisory Council on Employee Welfare and Pension Benefit Plans (the ERISA Advisory Council)] expire at the end of this year. The groups or fields they represent are as follows: [1] employee organizations; [2] employers; [3] corporate trust; [4] investment management; and [5] the general public.... [N]otice is hereby given that any person or organization desiring to nominate one or more individuals for appointment to the [ERISA Advisory Council] to represent any of [these] groups or fields ... may submit nominations [which] must be received on or before August 1, 2017." (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])
[Discussion] Mid-Year Change to Compensation Definition Under Safe Harbor Plan
"Client has a safe harbor plan using a nonelective 3% contribution, and wants to amend the plan mid-year to exclude certain compensation categories. Can this be done, with appropriate advance notice of 30 to 90 days?" (BenefitsLink Message Boards)
[Official Guidance] PBGC Monthly Interest Rate Summary, June 2017
Listed and described are rates that change each month (lump sum interest rates under ERISA section 4022 and the spot segment rates used to determine variable-rate premiums), and rates that change each calendar quarter (for annuity valuation under ERISA section 4044, late premium payments and late withdrawal liability payments). (Pension Benefit Guaranty Corporation [PBGC])
[Discussion] How to Notify IRS of a Duplicate Filing of the Form 8955-SSA
"I recently made a duplicate 8955-SSA filing on the IRS' FIRE system by mistake. The message the system gives is " ... If your file was submitted in error (it was a duplicate filing), this file will not be passed forward to SSA, however you must notify IRS to close the file." But I can't find any instructions as to how to notify the IRS. Could anybody help?" (BenefitsLink Message Boards)
[Official Guidance] Text of PBGC Disaster Relief Number 17-06, In Response to Severe Storms in Arkansas
"[PBGC] is waiving certain penalties and extending certain deadlines in response to Severe Storms, Tornadoes, Straight-Line Winds and Flooding that began on April 26, 2017, in Arkansas.... The disaster area consists of Benton, Boone, Carroll, Clay, Faulkner, Fulton, Jackson, Lawrence, Pulaski, Randolph, Saline, Washington, and Yell Counties." (Pension Benefit Guaranty Corporation [PBGC])
[Official Guidance] Text of IRS Disaster Relief Notice AR-2017-01, for Victims of Severe Storms in Arkansas
"Victims of the Severe Storms, Tornadoes, Straight-line Winds, and Flooding that took place beginning on April 26, 2017 in parts of Arkansas may qualify for tax relief from the [IRS].... Individuals who reside or have a business in Benton, Boone, Carroll, Clay, Faulkner, Fulton, Jackson, Lawrence, Pulaski, Randolph, Saline, Washington, and Yell Counties may qualify for tax relief." (Internal Revenue Service [IRS])
[Discussion] Mandatory Employee Contributions to Private College's Money Purchase Plan
"Non-profit organization, non-governmental (a private college) has a qualified money purchase plan under which, as a condition of employment, the employee MUST contribute 5% of pay. Employer then matches anywhere from 5 to 10% of pay, depending upon service, etc. But the SPD and the plan audit notes for the Form 5500 indicate these mandatory contributions are pre-tax. Aren't they supposed to be after-tax?" (BenefitsLink Message Boards)
[Discussion] Withhold on Death Benefit Paid to Charitable Not-for-Profit Org?
"I've got a participant who died at age 69 back in December 2016. Her beneficiary designation form says to pay her account balance to a charitable NFP. She was not married at the date of death. Should any withholding be taken from the payment?" (BenefitsLink Message Boards)
S Corporation Denied Deduction for Amount Payable to ESOP Participants
"On June 13, the Tax Court concluded that an S corporation and its employees who participate in an [ESOP] are considered to be related parties, meaning that, an accrual basis S corporation could only deduct amounts payable to those employees in the year the amounts were actually paid.... This decision is not surprising. It is a good reminder, however, that S corporations with an ESOP owner must be diligent about scrubbing their year-end accruals for amounts that are payable to ESOP participants." [Petersen v. Comm., Nos. 15184-14, 15185-14 (148 T.C. 22 June 13, 2017)] (RSM US)
Fiduciary Obligations to Safeguard Plan Participants' Data
"Because benefit data includes participants' names, Social Security numbers, account information and PII, it is increasingly important for ERISA plan fiduciaries to acknowledge and act on their inherent responsibilities to secure online plan data from cyberattacks. Failure to do so would almost certainly be counter to the prudence standard by which ERISA fiduciaries are required to abide.... Given the broad scope of an ERISA fiduciary's obligation to act with prudence, it is in the best interest of all parties involved with ERISA plans to begin developing systems and procedures for properly handling and securing PII." (Trucker Huss)
[Discussion] 408(b)(2) Disclosures and the Fiduciary Rule
"Is the fact that the fiduciary rule is now in effect changing your approach to your 408(b)(2) disclosures (or lack of them)? Or do you do 408(b)(2) disclosures for all clients regardless of covered service provider status?" (BenefitsLink Message Boards)
Considerations for ESG Policy Development (PDF)
"At the highest level, investors with policies considered to be effective and broadly supported share some common traits. They have articulated their purpose, priorities, and principles, and integrated these pillars within their investment policies and decision criteria. One key to arriving at this point is the investment of time. Effective ESG policy creation requires a process of stakeholder engagement that includes education about and exploration of the sustainable investing thesis and opportunity set." [Also available: Sample Language for Integrating the Goals of the Paris Climate Agreement into an Investment Policy Statement.] (Cambridge Associates)
Warning, Employers: Liability Lurks in Your 401(k) Plan and the New DOL Rule Won't Protect You
"[A] business owner has a legal fiduciary obligation to make sure the plan is set up, monitored and managed for the 'sole benefit' of the employees. For most business owners, this is shocking news, as they often think that the provider or local broker is responsible to make sure things run smoothly. Not so." (Entrepreneur)
[Discussion] Defaulted Loan Amounts or Distributed Real Estate -- Countable as an RMD?
"A safe harbor 401(k) plan is terminating. One of the more-than-5-percent owners over age 70-1/2 needs to take his Required Minimum Distribution for 2017. He has an outstanding loan. If he decides to default on the loan, can the outstanding balance be used as part of the RMD? The plan's assets also include real estate. If this same participant wants to take a distribution of the real estate, could its value be used as part of the RMD?" (BenefitsLink Message Boards)
[Discussion] Calculation of Earnings on Late Deposits
"If corrected by filing Form 5330 and paying an excise tax, can the DOL calculator be used to determine the earnings? What are people using to determine earnings on late deposits?" (BenefitsLink Message Boards)
The Economics of Providing 401(k) Plans: Services, Fees, and Expenses, 2016 (PDF)
32 pages. "401(k) plan participants investing in mutual funds tend to hold lower-cost funds.... The expense ratios that 401(k) plan participants incur for investing in mutual funds have declined substantially since 2000 ... The downward trend in the expense ratios that 401(k) plan participants incur for investing in mutual funds continued in 2016." [Also available: Supplemental Tables.] (Investment Company Institute [ICI])
Alternate Fee Calculation/Allocation Models
"[M]ost retirement plan sponsors have an understanding of the two primary methods used by recordkeepers to charge fees to plans and participants: As a percentage of plan assets ... As a flat dollar amount per participant account balance ... While a number of alternative models have been proposed by recordkeepers, the ones that appear to attract the most plan sponsor attention are: Modified flat fee ... Basis point allocation of flat dollar fee ... [and] Percentage of assets/basis point fee with a per-head cap[.]" (Cammack Retirement Group)
[Discussion] Top Heavy Test for a Terminating Plan
"I have a plan that is terminating as of 8/31/2017. It's a calendar year plan. It was top heavy at the 12/31/2016 determination date so the employer must make a top heavy contribution based on comp as of 8/31/2017, correct? Do I need to do a top heavy test for the 8/3/2017 short plan year determination date even though the company and the plan won't be in existence during 2018?" (BenefitsLink Message Boards)
[Official Guidance] Text of PBGC Interest Rate Update for Benefits Payable in Terminated Single-Employer Plans, July and Third Quarter 2017
"The third quarter 2017 interest assumptions under the allocation regulation will be 2.44 percent for the first 20 years following the valuation date and 2.74 percent thereafter.... The July 2017 interest assumptions under the benefit payments regulation will be 1.00 percent for the period during which a benefit is in pay status and 4.00 percent during any years preceding the benefit's placement in pay status." (Pension Benefit Guaranty Corporation [PBGC])
Claim of Miscalculated Military Leave Pension Contributions Can Go to Trial
"[T]he appellate court found that FedEx may have miscalculated [the employee's] contributions.... [He] claimed on appeal that FedEx should have calculated his military leave hours using the average of the hours he worked during the 12-month look-back period. The appellate court ruled that Savage had stated a legitimate issue that a jury would have to decide and reversed the judgment of the district court." [Savage v. Federal Express Corp. dba FedEx Express, No. 16-5244 (6th Cir. May 10, 2017)] (Society for Human Resource Management [SHRM])
Closing the Retirement Income Gender Gap: The Opportunity Is Now (PDF)
12 pages. "Plan sponsors increasingly have the ability to leverage data to determine when participants are facing important milestones in their lives. The ability to use data to fuel proactive engagement regarding key savings and planning opportunities can also help make closing the gap an achievable reality. This paper will explore some key challenges faced by women and the ways in which plan sponsors can help." (Prudential)
PBGC Reverses Expansion of Early Warning Factors
"Plan sponsors and others had criticized the new additions to the list as too vague. There were also concerns that these factors could result in more forcefully sought financial concessions from plan sponsors that could ill afford them. The PBGC initially claimed that it had always used similar criteria in its screening process." (Willis Towers Watson)
[Opinion] Statement of the Pension Rights Center to the ERISA Advisory Council on Mandated Disclosures for Retirement Plans (PDF)
"The importance of clear language disclosures cannot be overemphasized. If the Pension Rights Center is receiving many calls about confusing notices, it is probably true that employers are receiving more calls ab out the same disclosures. Well written disclosures benefit plan sponsors and employers, as well as the participants and beneficiaries who receive them." (Pension Rights Center)
[Official Guidance] Text of PBGC Final Regs: Examination and Copying of Pension Benefit Guaranty Corporation Records
"This rule provides for an electronic reading room for records, expands the categories of records in the reading room, updates the standard for disclosure, requires additional notice to requesters about FOIA resources, extends the appeal deadline, and places restrictions on fees." (Pension Benefit Guaranty Corporation [PBGC])
[Discussion] Need Aspirin for a Plan Loans Headache
"We have a plan with a few (3 or less) missed payments on loans that are otherwise in compliance with IRC 72(p). The Plan sponsor did not start up payroll deduction payments on time, or there was a short lay-off at the time that payments were to commence. We are well inside the cure period. We would like to reamortize the loans rather than doubling up payments to get them current or demanding a lump sum. Is this really a loan refinance (meaning the loan program must permit refinancing)? Or is it just a reamortization (keeping the terms otherwise the same)? And is something that is eligible for SCP, or does it require VCP?" (BenefitsLink Message Boards)
[Official Guidance] Text of IRS Notice 2017-34: Weighted Average Interest Rates, Yield Curves, and Segment Rates Applicable for June 2017 (PDF)
"This notice provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under Section 417(e)(3), and the 24-month average segment rates under Section 430(h)(2) ... In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under Section 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008 and the 30-year Treasury weighted average rate under Section 431(c)(6)(E)(ii)(I)." (Internal Revenue Service [IRS])
[Discussion] Fiduciary Rule as Applied to Rollover IRA Service Providers
"Does the new Fiduciary Rule includes a duty to monitor IRA service providers that might take rollovers from plan participants?" (BenefitsLink Message Boards)
[Guidance Overview] DOL Withdraws Independent Contractor and Joint Employer Guidance
"The rescinded [Administrator's Interpretations (AIs)] -- a 2015 AI addressing the tests for employee/independent contractor classification and a 2016 AI addressing joint employment liability -- deliberately pushed the envelope in favor of expanding liability under the [FLSA]. The DOL's independent contractor AI, for example, concluded that 'most workers are employees' and advocated for a revised 'economic realities test' for employee/contractor status that tipped the scales decidedly in favor of employee status. Later in 2016, the DOL similarly articulated a broad view of joint employer coverage -- even in situations where little or no traditional indicia of control exists between two entities. Both AIs were withdrawn, effective immediately upon the DOL's June 7 announcement." (Morgan Lewis)
[Opinion] ARA Comments to IRS on Mid-Year Amendments to Safe Harbor 401(k) and 403(b) Plans (PDF)
"ARA recommends the expansion of the guidance contained in IRS Notice 2016-16 to include ... [1] Clarify a plan sponsor involved in a IRC 410(b)(6)(c) transaction may amend a safe harbor 401(k) plan to cover other members of the newly formed group and retain all the protections and benefits of the safe harbor 401(k) plan. [2] Clarify the plan can be amended to increase non-safe harbor contributions, other than matching contributions, at any time during the year. [3] Provide the restrictions in Notice section III.D.4 apply only to the safe harbor matching contributions and not to other matching contributions subject to non-discrimination testing." (American Retirement Association [ARA])
[Official Guidance] IRS List of Pre-Approved 403(b) Plans (PDF)
18 pages. List of 403(b) plan documents pre-approved as of May 28, 2017; published online June 8, 2017. (Internal Revenue Service [IRS])
[Guidance Overview] Identifying Highly Compensated Employees in an Initial or Short Plan Year
"Identifying a plan's highly compensated employees (HCEs) is critical to the operation of a qualified retirement plan. The definition of an HCE is set forth in IRC Section 414(q). This Snapshot discusses how to identify HCEs in a plan's initial plan year or in a short plan year." (Internal Revenue Service [IRS])
[Discussion] Bottom-Up QNECs
"I have a question about bottom-up QNECs. Let's say the employer wants to give a 5% QNEC to the employees because of a failed ADP test. Does the employer have to give the first contribution to the lowest-paid employee, then to the 2nd-lowest-paid employee, etc. until the test is passed, OR is the employer permitted to give the QNEC to anyone?" (BenefitsLink Message Boards)
[Guidance Overview] AICPA Proposal Would Require Auditors to Perform More Tests and Provide More Information in Reports on ERISA Plans (PDF)
"[T]his requirement could result in the auditor reporting information that the plan sponsor has no obligation to report in the financial statements or the annual Form 5500 the plan files with the DOL. Because the auditor's report is attached to the Form 5500, plan participants and regulators would have access to it. As a result, regulators could learn about plan errors before the plan administrator has a chance to correct them ... This requirement could result in more work for the auditor, the plan sponsor and the plan's ERISA counsel ... If this requirement is included in any final standard, plan sponsors may want to consider performing internal compliance reviews to prepare for their annual financial statement audits." (EY)
Church Plan Sponsors Should Take Action to Shore Up Exemption
"Any church-affiliated organization that has not established a formal governance structure for plans that it intends to treat as church plans should do so.... A church-affiliated employer that has already established a formal governance structure for its church plans may wish to consider a 'rebranding' ... of its plan administrative committee in a way that would help support the current and historic status of such committee as a principal-purpose organization.... Finally, any plan that is intended to be maintained as a church plan should be reviewed, and amended if necessary, to assure that it does not contain terms and provisions that invoke ERISA." [Advocate Health Care Network v. Stapleton, No. 16-74 (U.S. June 3, 2017)] (Verrill Dana LLP)
Benefits Enrollment Communication Errors to Avoid
"Underestimating the value of a strong visual identity, including a benefit program name ... Using long emails with multiple attachments to share benefit information ... Communicating with employees only before, during and immediately after the open enrollment window ... Sending enrollment packets that include contract-like carrier materials and legal notices ... Relying on a single communication channel to convey benefit information." (Willis Towers Watson)
[Opinion] ERIC Testimony to ERISA Advisory Council on Mandated Disclosures for Retirement Plans (PDF)
"Prior to this position in human resources, as a lawyer and policymaker in Washington, DC, I was na´ve to the impact laws and regulations can have on plan sponsors and participants.... I now firmly believe that the decades of laws, regulations, and court decisions since the enactment of ERISA in 1974, coupled with a decrease in financial education programs in schools and communities, have caused the retirement industry to be overly complex and intimidating for a large segment of plan participants.... [E]mployers can only do so much when in place are laws, regulations, and legal precedence that impede their ability to educate their employees." (Will Hansen, for The ERISA Industry Committee [ERIC])
[Discussion] Distribution Accidentally Paid by Employer, Not by Plan
"While preparing the 12/31/2016 accounting for a pooled profit sharing plan, I found out that the employer used its corporate checking account to pay a terminated participant her vested balance of $684 in April 2016. Her account is in safe harbor non-elective funds, so she was 100% vested. Because it wasn't paid from the plan's account, no taxes were withheld and no 1099-R was issued. The employer did not include the amount on the former employee's W-2. I know the plan cannot reimburse the employer, but I'm not sure how to fix this. Can the plan pay her the $684 and she then write a check back to the employer?" (BenefitsLink Message Boards)
Federal Court Strikes Down PTIN Fees, Upholds PTINs
"According to the court, because the court in Loving found that Congress did not authorize a license requirement for tax return preparers, there are no longer any restrictions on who may obtain a PTIN. As a result, there is no 'special benefit' of being able to prepare tax returns for compensation (slip op. at 15). Therefore, PTINs are not a 'service or thing of value' and the IRS cannot charge a fee for issuing them. In a separate order accompanying the opinion, the court ordered the IRS to 'provide each class member with a full refund of all PTIN fees paid.' " [Steele v. U.S., No. 14-1523 (D.D.C. June 1, 2017)] (Journal of Accountancy)

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