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<< Older News Items  |  February 17, 2020

News Items

Editor's Note: This page is an archive of news items that appear in our daily email newsletters. To automatically receive the latest news items -- plus links to the latest jobs, press releases, webcasts and events -- subscribe to our daily email newsletters.

Social Security: The Windfall Elimination Provision (PDF)
Congressional Research Service [CRS]
Feb. 17, 2020

17 pages. "The windfall elimination provision (WEP) is a modified benefit formula that reduces the Social Security benefits of certain retired or disabled workers who are also entitled to pension benefits based on earnings from jobs that were not covered by Social Security and thus not subject to the Social Security payroll tax.... WEP's supporters argue that the formula is a reasonable means to prevent overgenerous payments and unintended benefits to people who have earnings not covered by Social Security and receive pensions from noncovered work. Opponents argue that the provision substantially reduces a benefit that workers may have included in their retirement plans, and it reduces benefits disproportionately for lower-earning households." [Report 98-35, updated Feb. 10, 2020]

SECURE Act Provisions Affecting Defined Benefit Plans
Spencer Fane
[Guidance Overview]
Feb. 17, 2020

"Although the Act's primary focus is on defined contribution plans, several provisions of the Act and its sister legislation apply only to defined benefit plans.... [1] Earlier in-service withdrawal age ... [2] Increased required beginning date age  ... [3] Nondiscrimination testing and participation relief ... Both soft-frozen and hard-frozen plans can experience compliance testing issues over time as the participant population becomes older or decreases in size. The SECURE Act provides nondiscrimination and participation testing relief for such plans, subject to specific requirements."

The SECURE Act -- So, What Is a 'Lifetime Income Stream Equivalent' of Your 401(k) Account Balance?
Ken Steiner, FSA Retired
Feb. 17, 2020

"This post will set forth ... concerns about the new requirements and will highlight some of the open issues that the forthcoming guidance from the DOL is expected to address, including: [1] Assumptions for: commencement date of [lifetime income stream equivalent (LISE)] monthly payments; pre-commencement date investment return; post-commencement date investment return; mortality; future inflation; [2] whether LISE payments at assumed commencement are to be expressed in future dollars (unadjusted for inflation) or in today's dollars (inflation-adjusted); [3] whether LISE payments after assumed commencement are expected to remain fixed or are expected to increase with inflation like Social Security benefits or increase with some other index."

Millennials Have More Roth IRA Retirement Savings Than Ever
The Washington Post; subscription may be required
Feb. 17, 2020

"Millennials, also known as Gen Y, contributed $373 million to IRAs in the fourth quarter, a 46 percent increase over the total amount contributed for the same period in 2018.... Millennials are overwhelmingly putting their money into Roth IRAs[.]"

Text of IRS Form 2848, Power of Attorney and Declaration of Representative (PDF)
Internal Revenue Service [IRS]
[Official Guidance]
Feb. 17, 2020

Revised Feb. 2020. "A separate Form 2848 must be completed for each taxpayer. Form 2848 will not be honored for any purpose other than representation before the IRS."

Virginia House Passes Legislation to Establish State-Run MEP for Private Sector
Virginia General Assembly
Feb. 17, 2020

"The bill allows all self-employed individuals, sole proprietors, and nongovernmental employers to allow their employees to participate in the Plan. It provides for automatic enrollment of an employer's employees if such employer chooses to participate in the Plan.... The Plan shall allow an enrollee to contribute to an account at a default rate and modify his contributions within the parameters of the Internal Revenue Code. The Plan allows but does not require a participating employer to contribute to the account of any enrollee."

SECURE Act Makes Significant Changes to Benefit Plans
Williams Mullen
[Guidance Overview]
Feb. 17, 2020

"[The article includes a link to] a detailed analysis of the Act based upon the type of Plan, e.g., defined contribution, defined benefit, IRA, health and welfare plan ...[and] a chart showing the effective date of all provisions of the Act, whether the changes are mandatory or discretionary, and whether the change requires a plan amendment."

New Jersey Pension Reform 2020: Proposed Implementation of Cash Balance Plan
Burypensions
[Opinion]
Feb. 17, 2020

"When people ignorant of the workings of defined benefit plans propose reforms to save money they come up with SCR170 in the last legislative session and SCR38 this time which creates a cash balance plan for new participants and those with less than 5 years of service ... What needs to be understood is that a cash balance plan IS a defined benefit plan with funding rules and investment risk shouldered by the plan sponsor and can be just as expensive as a plan with a benefit formula based on a percentage of salary and service."

Comments of American Retirement Association to Treasury and IRS on Guidance Issues Under the SECURE Act (PDF)
American Retirement Association [ARA]
[Opinion]
Feb. 17, 2020

[1] [It] is not clear how the elimination of the safe harbor notice for nonelective 401(k) safe harbor plans impacts the current regulatory requirements that in order to either eliminate or add a safe harbor in the middle of the plan year, certain information must be included in the safe harbor notice and/or follow-up notices provided.... [2] [U]nder current regulations a plan must be using the current year testing method in order to add a safe harbor provision to the plan during the year. It is not clear how this requirement would apply in light of the statutory change permitting a plan to add a safe harbor provision up to 12 months after the end of the plan year.... [3] [U]nder current regulations under IRC section 401(m), a plan that uses safe harbor nonelective contributions, complies with the limitations on matching contributions, and complies with the notice requirement ... satisfies the ACP safe harbor provisions of IRC section 401(m)(11). It is not clear how this ACP safe harbor for matching contributions made to a nonelective 401(k) safe harbor plan is impacted by the elimination of the safe harbor notice for nonelective 401(k) safe harbor plans."

Comments of American Retirement Association to DOL on Guidance Issues Under the SECURE Act (PDF)
American Retirement Association [ARA]
[Opinion]
Feb. 17, 2020

Topics include: [1] Multiple Employer Plans; Pooled Employer Plans; [2] Fiduciary safe harbor for selection of lifetime income provider; [3] Disclosure regarding lifetime income; [4] Combined annual report for Group of Plans; [5] Inclusion of long-term part-time employees.

Text of Draft Instructions for 2020 IRS 1099-R and 5498: Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. (PDF)
Internal Revenue Service [IRS]
[Official Guidance]
Feb. 17, 2020

26 pages; rev. Feb. 14, 2020. "What's New: [1] Form 1099-R ... Section 113 of the [SECURE Act] ... added section 72(t)(2)(H). This new section provides for a distribution of up to $5,000 for a qualified birth or adoption that is exempt from the 10% early distribution tax and that can be repaid.... [2] Form 5498 ... We have added code 'BA' for reporting a repayment of a qualified birth or adoption distribution.... The SECURE Act, section 114, has increased the RMD age from 70-1/2 to 72 for taxpayers turning 70-1/2 after December 31, 2019." [Also available: Draft 2020 IRS Form 5498 and Instructions: IRA Contribution Information and Draft of 2020 IRS Form 1099-R]

Text of Draft Revised Instructions for 2018 IRS Form 5329: Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts (PDF)
Internal Revenue Service [IRS]
[Official Guidance]
Feb. 17, 2020

10 pages; rev. Feb. 6, 2020. "What's New: ... These instructions have been revised to reflect the changes made by the Taxpayer Certainty and Disaster Tax Relief Act of 2019. The form has also been revised to reflect changes due to this act. Use these instructions with the 2018 version of the form." [Also available: Draft Revised 2018 IRS Form 5329: Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts

Text of 2020 IRS Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities (PDF)
Internal Revenue Service [IRS]
[Official Guidance]
Feb. 17, 2020

55 pages. "In most cases, you must withhold tax on the gross amount of pensions and annuities that you pay that are from sources within the United States.... Most tax treaties provide an exemption from tax on non-government pensions and annuities.... The exemption may not apply to lump-sum payments.... The withholding rules that apply to payments to foreign persons generally take precedence over any other withholding rules that would apply to distributions from qualified plans and other qualified retirement arrangements."

Text of FRTIB Proposed Regs: Automatic Enrollment Program -- Increasing Percentage from 3% to 5%
Federal Retirement Thrift Investment Board [FRTIC]
[Official Guidance]
Feb. 17, 2020

"The Federal Retirement Thrift Investment Board (FRTIB) is proposing to amend its regulations to increase the automatic enrollment percentage from 3 percent to 5 percent of basic pay for all participants who are automatically enrolled in the Thrift Savings Plan (TSP) on or after October 1, 2020 and for Blended Retirement Service (BRS) participants who are automatically re-enrolled in the TSP on or after January 1, 2021."

Text of SEC FAQs on Regulation Best Interest
U.S. Securities and Exchange Commission [SEC]
[Official Guidance]
Feb. 14, 2020

21 Q&As. Topics: [1] Retail Customer; [2] Recommendation; [3] Disclosure Obligation; [4] Care Obligation; [5] Conflict of Interest Obligation; [6] Compliance Obligation.

Text of FRTIB Proposed Regs: Hardship Withdrawals for Expenses Related to Natural Disasters
Federal Retirement Thrift Investment Board [FRTIB]
[Official Guidance]
Feb. 14, 2020

"Because the [Thrift Savings Plan (TSP)] has relied on the IRS' disaster relief announcements to authorize hardship withdrawals for expenses and lost income relating to natural disasters, and because those announcements will no longer be made by the IRS in light of its amended regulation, the FRTIB proposes to add to its list of authorized hardship expenses, the expenses and losses (including loss of income) resulting from a natural disaster as declared by the FEMA in order to allow TSP participants to make financial hardship withdrawals for such natural disaster expenses."

Editor's Pick Section 403(b) Plan Remedial Amendment Periods: Out with the Old, in with the New
Morgan Lewis
[Guidance Overview]
Feb. 14, 2020

"[Rev. Proc. 2019-39] established a system of recurring 'Remedial Amendment Periods' to correct defects in the form of individually designed and preapproved 403(b) plan documents that occur after March 31, 2020.... [E]mployers should be aware of the corresponding March 31 deadline to adopt corrective amendments or a preapproved plan to ensure the compliance of 403(b) plan documents retroactive to January 1, 2010."

The SECURE Act: Know the Mandatory Provisions Affecting Retirement Plans and IRAs
McDonald Hopkins
[Guidance Overview]
Feb. 14, 2020

"[1] Covering part-time workers ... [2] Safe harbor notices ... [3] Lifetime income disclosure ... [4] Plan loans using credit cards ... [5] Closed defined benefit plans ... [6] Stretch IRAs eliminated ... [7] Late fees for Form 5500 and other retirement plan returns."

The SEC Trading and Markets Reg BI FAQ and the SEC's and FINRA's Plans for Reg BI Exams
Faegre Drinker
[Guidance Overview]
Feb. 14, 2020

"While much of the coverage of Reg BI has been historical and focused on analyzing and summarizing the final rule package, this alert looks to the future regarding how the Division of Trading and Markets, OCIE and FINRA are interpreting and planning to examine for Reg BI compliance. The Reg BI FAQ provides helpful guidance to the brokerage industry. Unlike the first Form CRS FAQ released last fall, which was very brief, the Reg BI FAQ provides specific guidance on a variety of important topics covered by Reg BI, specifically recommendations, the disclosure obligation, the care obligation and the conflict of interest obligation."

The SECURE Act: A World of Opportunities for Annuity Carriers
Milliman
Feb. 14, 2020

"In the third quarter of 2019 ... $5.9 trillion was held in 401(k) plans, $1.1 trillion in 403(b) plans, and $342 billion in 457 plans.... All have been explicitly modified by the recently enacted [SECURE] Act. Offering annuities in retirement plans may now be more attractive for consumers, plan sponsors, and annuity writers. This article looks at key changes and opportunities."

NAIC Finalizes 'Best Interest' Annuity Sales Model Law
InsuranceNewsNet.com
Feb. 14, 2020

"The model articulates a best-interest standard through the following four obligations: care, disclosure, conflict of interest and documentation.... The rule specifically does not establish a fiduciary duty, nor does it ban agents from recommending products with a higher compensation structure."

The 2019 Current Population Survey: New Questions, Improved Results? (PDF)
Employee Benefit Research Institute [EBRI]
Feb. 14, 2020

"Since a 2014 redesign, the Current Population Survey (CPS) retirement plan participation estimates have been much lower and trended downward, contradicting other data sources. New questions added in 2019 on income in retirement accounts give hope for a better and more accurate read on employment-based retirement plan participation."

McClatchy Files for Chapter 11 Protection While PBGC Talks Continue
Pensions & Investments
Feb. 14, 2020

"McClatchy disclosed in November that it was discussing having the PBGC take over its qualified defined benefit plan that was closed to new participants in 2009.... As of March 31, the plan was underfunded by $535 million. McClatchy will seek court permission to terminate the pension plan, transferring responsibility to the PBGC. The company has proposed settling its pension liabilities by paying PBGC $3.3 million annually for 10 years and giving it 3% of equity ownership."

$2.6 Million for Puerto Rico's Pension Fund Went to Hackers Instead
The New York Times; subscription may be required
Feb. 14, 2020

"[A] senior official told the police on Wednesday that the island's government had unwittingly handed over $2.6 million to thieves after being fooled by a bogus email message.... Rubén Rivera, the finance director of the government-sponsored Puerto Rico Industrial Development Company, said ... that the email message contained instructions to transfer money intended for the public pension system to a different bank account than had been used before.... Whose bank account that was, and what happened to the money, is under investigation."

Emergency-Fund-Focused Employers: Goals, Motivations, and Challenges
Employee Benefit Research Institute [EBRI]
Feb. 14, 2020

"More than 4 in 10 employers that expressed at least some interest in offering financial wellness programs said they offer (28.2 percent) or plan to offer (15.3 percent) an emergency fund/employee hardship assistance as a financial wellness initiative.... Emergency-fund-focused employers were more likely than all employer respondents to favor education-based financial wellbeing or debt assistance benefits to employees over product-based benefits, which might include insurance, retirement plans, or employee assistance programs[.]"


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