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<< Older News   |  October 22, 2017

Benefits in the News

Text of IRS Chief Counsel Memo 201742022: Application of Rule Prohibiting Loans to the Employer from a Section 403(b)(9) Retirement Income Account (PDF)
Internal Revenue Service [IRS]
[Official Guidance]
Oct. 20, 2017
"A direct loan from the plan to the employer results in a loan or other extension of credit from assets in a participant's retirement income account to the employer. In the case of an indirect loan, such as is described in Situation 1 and Situation 2, an arrangement has been structured so that the employer receives a substantially similar loan or other extension of credit using the assets of the retirement income account as it would have under a direct loan. Accordingly, for purposes of Section 1.403(b)-9(a)(2)(i)(C), both direct and indirect loans are loans or other extensions of credit from assets in a participant's retirement income account to the employer, which cause assets in the retirement income account to be treated as diverted to the employer, violating the exclusive benefit requirement of Section 1.403(b)-9(a)(2)(i)(C)."
What's the Impact of 2018 IRS Retirement Plan Limits?
Van Iwaarden Associates
[Guidance Overview]
Oct. 20, 2017
"Highly-paid participants will now have more of their compensation 'counted' towards qualified plan benefits and less towards non-qualified plans. This could also help plans' nondiscrimination testing if the ratio of benefits to compensation decreases.... This is the fourth year in a row that the HCE compensation limit has been stuck at $120,000.... [E]mployers may find that more of their employees become classified as HCEs.... Plans may see marginally worse nondiscrimination testing results (including ADP results) if more employees with large deferrals or benefits become HCEs. It could make a big difference for plans that were previously close to failing the tests.... [I]ndividuals who have very large DB benefits (say, shareholders in a professional firm cash balance plan) could see a deduction increase if their benefits were previously constrained by the 415 dollar limit."
ESOPs: An Alternative Exit Strategy for Family-Owned Businesses
Family Business Advocates
Oct. 20, 2017
"Employee stock ownership plans (ESOPs) can be an attractive and tax-favored alternative for a family-owned business looking for an exit strategy. For the owner of a C corporation, proceeds on the gain from the sale of stock to the ESOP can be tax-deferred by reinvesting them in the securities (including both stocks and bonds) of other domestic companies, subject to certain requirements. If such replacement securities are not sold prior to the owner's death, no capital gains tax is ever due on the gain recognized by the sale of the company stock to the ESOP."
Multiemployer Pension Funded Status Improved in First Six Months of 2017 (PDF)
Oct. 20, 2017
"Multiemployer plan funding as of June 30, 2017, is nearing its best position since the market collapse of 2008. The aggregate funded percentage for multiemployer plans is estimated to have improved to 81% as of June 30, 2017, compared with 77% as of December 31, 2016, reducing the system's shortfall by $21 billion. The estimated investment return for our simplified portfolio for the first six months of 2017 was about 7.6%, far outpacing plans' investment return assumptions. The gap between the funded percentages of critical versus noncritical plans continues to widen."
Workers Willing to Compromise on Salary for the Right Benefits, Culture, and Growth Opportunities
HR Daily Advisor
Oct. 20, 2017
"Benefits are almost as important as culture when considering a job offer, with a signing bonus and financial support for training topping the 'most wanted' list. Employers who offer health and dental, 401k contributions, and paid vacation time are probably not standing out from the crowd. Three-quarters of employers offer health and dental and two-thirds offer 401k and 3+ weeks of paid vacation."
Employee Benefits Cases in the Supreme Court Since ERISA's Enactment
Eversheds Sutherland
Oct. 20, 2017
32 pages. "[In] the Court's last 42 terms [since ERISA's 1975 effective date] ... the Court has issued merits opinions in 125 argued cases and one unargued case directly involving employee benefit arrangements including IRAs, and two additional argued cases substantially implicating these arrangements ... for an astonishing total of 128 decisions.... [T]he Court has been concerned with who can bring claims involving employee benefits, what kind of claims can they bring, what kind of remedies can they seek ... and whether State laws implicating employee benefits will be enforced, as frequently as it has considered substantive issues affecting employee benefits."
ERISA Preempts State Law Revoking Beneficiary Designation Upon Divorce
Thomson Reuters / EBIA
Oct. 20, 2017
"The court determined that the state law at issue here 'related to' an ERISA plan in that it required the plan administrator to look to state law to determine the recipient of plan payments, rather than to the plan itself. The court concluded that the state law implicates an area of core ERISA concern by abrogating ERISA's requirements that a plan must specify the basis on which payments are to be made, and that plan fiduciaries must make payments to beneficiaries designated by participants or by the terms of the plan." [Jackson v. Parks, No. 17-14 (D. Mont. Sept. 14, 2017)]
Extreme Loss Aversion Is Not a Retirement Strategy
Oct. 20, 2017
"Someone who is risk averse should be in favor of investments that guarantee a lifetime income. Annuities offer this.... [R]etirees should learn about the various types of investments ... and the various vehicles ... and what the purpose is of each.... Extremely risk averse retirees should avoid companies they don't recognize.... Buy some short-term corporate bonds of companies they are familiar with.... Let them see successes.... Having a road map to the future can alleviate many of the unknowns."
DOL Proposes 90-Day Delay of Disability Claims Procedures Rules
Michael Best
Oct. 20, 2017
"Some retirement plans may consider making amendments to avoid having to comply with the special rules for disability claims procedures altogether. Where a plan provides a benefit conditioned on an independent disability finding made by a party other than the plan, such as the Social Security Administration or the employer's long-term disability plan, the claim is not treated as a disability claim. As such, the plan would not have to comply with special disability claims procedure rules."
Liability-Driven Investment Portfolios: Keep Them Bundled
Oct. 20, 2017
"[P]lan sponsors must decide whether their credit and government allocations will be combined in bundled LDI portfolios or managed separately in unbundled LDI portfolios. Once we consider how an unbundled approach may create opportunity costs as well as challenges related to rebalancing and diminished excess return potential, [the authors] believe the bundled approach offers the better long-term solution."
Alaska Ironworkers Pension Trust Withdraws Application fo MPRA Benefit Suspension (PDF)
U.S. Department of the Treasury
Oct. 20, 2017
"[T]he Plan hereby withdraws its Application filed on March 30, 2017 for approval of benefit suspension under [MPRA]. The Plan fully intends to file with the Treasury Department a new application for approval of suspension of benefits under the MPRA on or before December 29, 2017."
IRS Work Plan Provides Focus for Examination of Multiemployer Plans
Oct. 20, 2017
"The work plan states that for multiemployer plans the IRS will 'continue to examine plans that failed to properly calculate retirement benefits affecting service crediting and/or allocation/accruals, failed to make required minimum distributions, and/or failed to adjust benefits when retirement is delayed beyond the Normal Retirement Age' ... Late retirements pose several complex issues, the resolution of which depends on the plan's provisions and the age at which a participant retires."
The IRS Employee Plans Work Plan for 2018: A 'Compliance Checklist' for Plan Sponsors
Fiduciary Plan Governance, LLC
Oct. 19, 2017
"With the knowledge the Work Plan provides, plan sponsors and their service providers can work to ward off potential problems likely to draw the attention of the IRS.... These are means the IRS will be using to find problems and to ultimately pursue correction and impose taxes and penalties for noncompliance.... These are the ways the IRS has found to work smarter in 2018: Continuing IRS effort to make plan sponsors smarter & reduce non-compliance.... Making the Voluntary Compliance Program (VCP) more efficient.... Data driven approaches to plan examinations are being refined.... Reliance on referrals continues."
Text of IRS Notice 2017-64: 2018 Limitations, Adjusted as Provided in Section 415(d), etc. (PDF)
Internal Revenue Service [IRS]
[Official Guidance]
Oct. 19, 2017
"Effective January 1, 2018, the limitation on the annual benefit under a [DB] plan ... is increased from $215,000 to $220,000.... The limitation for [DC] plans ... is increased in 2018 from $54,000 to $55,000.... The limitation ... on the exclusion for elective deferrals described in Section 402(g)(3) is increased from $18,000 to $18,500. The annual compensation limit ... is increased from $270,000 to $275,000. The dollar limitation ... concerning the definition of 'key employee' in a top- heavy plan remains unchanged at $175,000... The limitation used in the definition of 'highly compensated employee' ... remains unchanged at $120,000.... The limitation on deferrals under Section 457(e)(15) concerning deferred compensation plans of state and local governments and tax-exempt organizations is increased from $18,000 to $18,500."
New IRS Mortality Tables for 2018 Bring Host of Concerns for DB Plan Sponsors
HR Daily Advisor
Oct. 19, 2017
"Plans with primarily white-collar populations with longer average longevity may understate their liabilities ... while medium and small plans that have generally lower life expectancy among participants may be locked in to rates that, on average, overstate their plan liabilities.... In order to delay use of the new tables for 1 year, a plan sponsor must conclude that for 2018 use of the new tables would be administratively impracticable or would result in an adverse business impact that is 'greater than de minimis,' and it must notify the plan's actuary of its intent to use the prior mortality tables."
GAO Report on the Nation's Retirement System: A Comprehensive Re-Evaluation Is Needed to Better Promote Future Retirement Security
U.S. Government Accountability Office [GAO]
Oct. 19, 2017
"The U.S. retirement system, and the workers and retirees it was designed to help, face major challenges. Traditional pensions have become much less common, and individuals are increasingly responsible for planning and managing their own retirement savings accounts, such as 401(k) plans. Yet research shows that many households are ill-equipped for this task and have little or no retirement savings. In this special report, GAO examines these challenges, drawing from prior work and others' research, as well as insights from a panel of retirement experts on how to better ensure a secure and adequate retirement, with dignity, for all." [The special report is GAO-18-111SP, Oct 18, 2017 (173 pages). See also a video entitled 'Retirement Security Challenges']
ERISA Provides No Means for Employer to Challenge Multiemployer Plan Changes
Bloomberg BNA
Oct. 19, 2017
"The case raises a rarely litigated legal question: Can an employer use [ERISA] to challenge changes made to an underfunded multiemployer pension fund's rehabilitation plan? The judge Oct. 17 said no, explaining that ERISA only allows employers to bring a narrow subset of claims against the union benefit funds covering their workers." [Keyes Fibre Corp. v. Pace Indus. Union-Management Pension Fund, No. 17-613 (M.D. Tenn. Oct. 17, 2017)]
District Court Halts Some Portions of Challenge to MIT DC Plan
Oct. 19, 2017
"[P]laintiffs allege breaches of the ERISA duties of loyalty and prudence arising out of the plan's inclusion of retail class options instead of institutional class options in the funds provided by Fidelity Investments. In addition, plaintiffs allege that Fidelity was paid excessive compensation for its recordkeeping services and that MIT never engaged in a competitive bidding process for those services.... The district court decision spells out a number of key caveats impacting this type of ERISA litigation, explaining why it is dismissing some aspects of the various claims while permitting others to go to a full trial." [Tracey v. Mass. Inst. of Technology, No. 16-11620 (D. Mass. Oct. 4, 2017)]
Saving for the Future: Profiles of Current Business Practices (PDF)
U.S. Chamber of Commerce
Oct. 19, 2017
18 pages. "66% of American workers had access to a retirement plan from their employer ... in 2016.... [O]nly 48% of American workers were offered a retirement plan in 1999.... 62% of employees (more than 95 million participants) were eligible to participate in [DC] plans in 2016.... [A]mong employers that made both profit-sharing and 401(k) contributions, the average employer contribution was 5.5% of employee pay. [DB] plans are also still prevalent among workers, with over 41 million private sector participants in the U.S."
Workers Want Lifetime Income But Aren't Sure How to Get It
Bloomberg BNA
Oct. 19, 2017
"When it comes to retirement income, 62 percent of Americans say they would pick $2,700 a month for the rest of their lives and 30 percent say they would prefer $500,000 all at once... [O]nly 16 percent say they're very familiar with annuities and 51 percent say they're not familiar with them.... Employers offering retirement plans should be aware of this disparity and try to use it to inform how they talk about saving for retirement and spending money in retirement[.]"
Five Important Ages for Retirement Planning
Oct. 19, 2017
"At age 50, your employees will become eligible to save more the standard amount in their 401(k) and IRA accounts ... By waiting until the age of 59-1/2 to take a withdrawal, your employees will get to keep an additional 10% of their money.... Your employees will be able to sign up for Medicare during a seven-month period starting three months prior to their 65th birthday.... Baby boomers born between 1943 and 1954 will be eligible to begin claiming the full Social Security benefit they've earned at age 66.... Whether it's needed or not, they'll be required to take distributions from their traditional IRAs, traditional 401(k)s and Roth 401(k)s after age 70-1/2."
Kentucky Pension Crisis: Governor's Proposal Would Move Workers to 401(k) Plans
The Courier-Journal
Oct. 19, 2017
"The plan protects the benefits of current retirees ... But it cuts benefits of current employees and teachers in some ways. And many leaders of employee and retiree groups raised the prospect that if the changes become law they would be challenged in court -- particularly over a plan that would move current teachers and most public employees into 401(k)-type plans after 27 years of service."
Financial Literacy among U.S. Hispanics (PDF)
TIAA Institute
Oct. 19, 2017
20 pages. "Financial literacy programs that separately address U.S.-born and foreign-born Hispanics are likely to experience better results for both groups. As growth in the U.S. Hispanic population is increasingly driven by births, the gap in Hispanic financial literacy relative to the general population will likely decrease.... [E]qualization at a higher overall level of financial literacy for all should be the objective."
Pension Rights Center Comments to IRS on 2017 Instructions for Form 8955-SSA (PDF)
Pension Rights Center
Oct. 19, 2017
"[T]he requirement that plans furnish a single statement to vested participants leaving employment that includes all of the information required by IRC Section 6057(a) is a vitally important protection that helps ensure that participants receive the benefits they have earned. For this reason the Pension Rights Center recommends that Question 21 of the Form 8955-SSA FAQs be withdrawn and that the instructions to the Form 8955-SSA be modified to inform plan administrators about this change."
Top Technology Takeaways for Benefit Pros
Oct. 19, 2017
"Tools to help employees answer the question 'What benefits does someone like me need?' are becoming increasingly crucial to making sure employees aren't exposed to more risk than they can handle.... [Y]ou have an opportunity to use new technologies to take a more strategic approach to benefits.... [D]ata visualization and smart reporting tools are so important, because you can't spend your entire day poring over spreadsheets trying to figure out what's going on. You need clear, immediate answers."

<< Older News   |  October 22, 2017

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