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<< Older News Items  |  August 20, 2018

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.

Former Lehman Brothers Investor Believes Blockchain Technology Can Fix Broken Pension System
Aug. 17, 2018
"According to [Anastasia Andrianova, a former Lehman Brothers private equity investor and Founder and CEO of Akropolis], a lack of transparency is at the heart of the many problems facing current pension systems.... Akropolis is working on building a protocol to provide a blockchain-based infrastructure to decentralize pensions. The platform aims to gather fund managers, institutional users, individual users and developers under a single ecosystem to provide increased transparency for pension funds.... [T]aking a blockchain based approach to the pension system also means that no single entity is in control of the ledger, ensuring that transparency can be built-in at the protocol level."
Tips to Enliven Your Open Enrollment Communication (PDF)
Willis Towers Watson
Aug. 17, 2018
"[1] [I]nterject some humor ... [2] Freshness can be inviting and says 'Read me!' to your employees.... [3] Have a goal to work toward and to be specific about what you want to achieve ... [4] Is your current enrollment guide a little bit like the old phone book? Too many pages? In a format few people value? Every year? ... [5] [Develop] a narrative that links the employee experience to the organization's purpose and position in the market."
Testimony of American Academy of Actuaries to ERISA Advisory Council on Lifetime Income Solutions as a QDIA (PDF)
American Academy of Actuaries
Aug. 17, 2018
"Steps can be taken to improve the util ization of QLACs: [1] Through regulations or legislation, allow variable/index-based returns; eliminate unisex pricing; allow aggregation among DC plans for 25 percent rule. [2] Modify annuity selection safe harbors in order to remove fiduciary concerns. [3] Consumer education, starting with efforts by the DOL."
Editor's Pick Text of IRS PLR 201833012 Permitting 401(k) Employer Nonelective Contributions Conditioned on Student Loan Repayments (PDF)
Internal Revenue Service [IRS]
[Official Guidance]
Aug. 17, 2018
"Taxpayer would make an employer nonelective contribution on behalf of an employee conditioned on that employee making student loan repayments ('SLR nonelective contribution').... If an employee participates in the program, the employee would still be eligible to make elective contributions to the plan but would not be eligible to receive regular matching contributions with respect to those elective contributions while the employee participates in the program.... [The] proposal to amend the Plan to provide SLR nonelective contributions under the program will not violate the 'contingent benefit' prohibition of section 401(k)(4)(A) and section 1.401(k)-1(e)(6). This ruling is based on the assumption that Taxpayer will not extend any student loans to employees that will be eligible for the program." [Issued May 22, 2018; released Aug. 17, 2018.]
Text of PBGC Submission for OMB Review and Request for Public Comments on Proposed Revisions to Form 5500 Annual Reporting (PDF)
Pension Benefit Guaranty Corporation [PBGC]
[Official Guidance]
Aug. 17, 2018
"PBGC is proposing modifications to the 2019 Schedule R (Retirement Plan Information), Form 5500-SF, and Schedule SB (Single-Employer Defined Benefit Plan Actuarial Information), and their related instructions.... PBGC also is proposing minor modifications to the Form 5500 Series to improve the accuracy of reported information.... PBGC is proposing to modify Schedule R to obtain information from single-employer plans related to unpaid minimum required contributions.... Because many small PBGC-insured plans are not required to complete Schedule R (i.e., plans that file Form 5500-SF), PBGC also is proposing to add a similar question about missed contributions to Form 5500-SF.... With regard to the Schedule SB form and instructions, PBGC is proposing to modify line 23 to eliminate three boxes representing mortality tables that are no longer applicable."
IRS Announces Submission Extension for Cycle 3 Pre-Approved Defined Contribution Plans (PDF)
[Guidance Overview]
Aug. 17, 2018
"Among the issues that the IRS [still] needs to address are: [1] Clarifications on the extent of reliance on an opinion letter; [2] The new requirement to exclude the trust provisions from a pre-approved plan document; [3] Issues relating to interim amendments; [4] The need for updated submission forms; [5] Guidance on Church Plan provisions. Without clarification from the IRS, these issues will make Cycle 3 plan document submissions uncertain and more time consuming for document drafters and adopters."
Analyzing the Duty of Loyalty in Stock Drop Cases
October Three Consulting
Aug. 17, 2018
"The standards to be applied with respect to a prudence claim are objective, e.g., 'could a prudent fiduciary in the defendant's position not have concluded that publicly disclosing negative information would do more harm than good.' The standards to be applied with respect to a loyalty claim are, however, subjective -- did the fiduciary act out of a conflicting motive? The court provided [a] (simple and useful) illustration of this distinction[.]" [In re: Wells Fargo ERISA 401(k) Litigation, No. 16-3405 (D. Minn. July 19, 2018)]
Washington Metro Misses Out on Chance to Switch to 401(k) for New Hires
Pensions & Investments
Aug. 17, 2018
"After failing to reach a new agreement, a three-member arbitration board stepped in. The board ordered Metro to provide $82 million in wage increases and for employees to pay a larger share of their health-care costs, but it did not address the larger issue of $2.8 billion in unfunded liabilities for pensions and retiree health care. The order also did not include an overtime cap for pension calculations that was sought by Metro officials."
Testimony of Institutional Retirement Income Council to ERISA Advisory Council on Lifetime Income Solutions as a QDIA (PDF)
Institutional Retirement Income Council [IRIC]
Aug. 17, 2018
12 pages. "[O]ur DC system already has a plethora of lifetime income solutions -- but adoption and take [up] rates lag.... RESA will provide the legislative catalyst needed to increase adoption and market acceptance. Service providers will then have a marketplace and incentives to continue investing in development and refinement of institutional income products."
More Americans Are Going Bankrupt in Retirement
National Public Pension Coalition
Aug. 17, 2018
"Seniors now account for 12.2 percent of all bankruptcy filers, a significant increase from 2.1 percent in 1991.... The increase has been so dramatic, it cannot just be attributed to a larger senior population."
Benefits Considerations for Seasonal Employees Transitioning to Ongoing Positions
Morgan Lewis
Aug. 17, 2018
"Here are several things to keep in mind when hiring or rehiring a seasonal employee into a year-round, benefits-eligible role. [1] Age of participation.... [2] Credit for retirement plan eligibility service.... [3] Health plan measurement periods.... [4] Disclosures."
Using Social Media for Employee Benefits Communication
Willis Towers Watson
Aug. 17, 2018
"[1] Survey your employees.... [2] Select the platform(s) that make the most sense for your employees and create a strategy for how you'll use it, including a communications plan for rolling it out.... [3] Craft a company social media policy that defines appropriate content and conduct.... [4] Consult with your legal team to draft a terms of agreement and privacy policy ... [5] [A]ssign a human resources staff member or marketing employee to monitor and respond to employee questions and concerns in a timely manner.... [6] Develop a monthly communication calendar to keep your content organized and build in dates to ensure you don't miss key opportunities to post timely content."
Account Balances Rebound, While Auto Enrollment Continues to Drive Positive Savings Behavior
Aug. 16, 2018
"Average individual 401(k), 403(b) and IRA account balances bounce back from dip in Q1, show solid year-over-year growth.... Percentage of employees with a 401(k) loan drops to lowest level since 2009.... More millennials using IRAs for retirement savings.... Number of 401(k) and IRA millionaires continues to increase.... Employers are increasing the default savings rate in 401(k) plans.... Employees who are automatically enrolled stay in their plan.... Employees who are automatically enrolled tend to save more."
California Public Pension Funds Reviewing Investments Tied to Border Enforcement
Bloomberg BNA
Aug. 16, 2018
"California's two largest public pensions are reviewing their investments in hedge funds and companies that have ties to the Trump administration's immigration enforcement efforts at the U.S.-Mexico border. Some of those companies include General Dynamics Corp ., GEO Group, and CoreCivic Inc. All three own or provide services to private prisons that have been used to detain immigrants.... Both pensions are considering their position, but generally favor engagement over divestment."
The DOL's 'Plan Investment Conflicts Project' Is Showing Up in Its Plan Audits
Business of Benefits
Aug. 16, 2018
"[The EBSA] 'Plan Investment Conflicts Project' ... appears to be using standard, plan level investigations to instigate reviews of selected practices of large financial service companies, as opposed to having to open large service provider investigations to get to the answers being sought.... This Project is actually consistent with the growing notion that retirement plan investment platforms have become commodities, and sophisticated ones at that, for which the platform should bear greater responsibilities instead of the sponsor."
Ninth Circuit: ERISA Breach of Fiduciary Duty Claim Is Not Subject to Mandatory Arbitration Clause in an Employment Contract
Robinson & Cole LLP
Aug. 16, 2018
"[The court of appeals] held that employees alleging an ERISA breach of fiduciary duty claim against their employer based on the employer's administration of defined-contribution plans may not be compelled to arbitrate their collective claims under the terms of the arbitration clause in their employment contracts because their claims were brought on behalf of the plans and not on their own behalf." [Munro v. Univ. of Southern Calif., No. 17-55550 (9th Cir. July 24, 2018)]
Editor's Pick Automatic Enrollment Is Cost-Effective Way to Boost Plan Participation
The Pew Charitable Trusts
Aug. 16, 2018
"Large majorities said they would not opt out if automatically enrolled, illustrating the power of automatic enrollment -- regardless of the change they identified as most likely to motivate them to contribute to a plan. In fact, there was no statistically significant difference among those who said they would remain enrolled, no matter the motivator, implying that automatic enrollment is a cost-effective approach to increasing participation regardless of the pressures workers faced or inducements from which they thought they would benefit."
Illinois Governor Makes Secure Choice Retirement Program Optional for Employers
Pensions & Investments
Aug. 16, 2018
"Illinois Gov. Bruce Rauner issued an amendatory veto ... making it optional for employers to participate in the state's Secure Choice program. There now are three possible actions. Legislators could: approve the change; let die the technical changes bill to which Mr. Rauner's action applies; or override the amendatory veto."
Number of 401(k) Millionaires Hits Record High
Aug. 16, 2018
"At the end of the second quarter, 168,000 people with 401(k)s managed by Fidelity Investments had at least $1 million in their accounts, a rise of 50,000 people from a year earlier when there were 118,000 ... While gaining, that exclusive group of savers is still just a fraction of the 16.1 million people who have a 401(k) account managed by the fund company."
Testimony of American Benefits Council to ERISA Advisory Council on Lifetime Income Solutions as a QDIA
American Benefits Council
Aug. 16, 2018
"Almost two-thirds (64.47 percent) of plan sponsors not currently offering any kind of lifetime income in their defined contribution plan might consider lifetime income options in the future. So why aren't they offering it now? The most popular answer, with almost 60 percent selecting it, was potential fiduciary liability.... Other popular answers ... include [1] lack of demand from participants, [2] the need for education and communication to help participants understand and compare the options, and [3] the cost of providing lifetime income."
Text of IRS Rev. Proc. 2018-42: Modification of Revenue Procedure 2017-41 to Extend Deadline to Submit Opinion Letter Applications for Pre-Approved Defined Contribution Plans for the Third Six-Year Remedial Amendment Cycle (PDF)
Internal Revenue Service [IRS]
[Official Guidance]
Aug. 15, 2018
"This revenue procedure modifies Rev. Proc. 2017-41 ... to extend the deadline for submitting on-cycle applications for opinion letters for pre-approved defined contribution plans for the third six-year remedial amendment cycle to December 31, 2018. Under Rev. Proc. 2017-41, this submission period is scheduled to expire on October 1, 2018."
Editor's Pick Testimony of Investment Company Institute to ERISA Advisory Council on Lifetime Income Solutions as a QDIA (PDF)
Investment Company Institute [ICI]
Aug. 15, 2018
45 pages. "Part I of this testimony focuses on research that can shed light on the Council's underlying premise that Americans are under-annuitized and that promoting annuities in DC plans is a necessary policy initiative. To address these issues, this testimony provides a review of the research on the question of annuitization ... Part II of this testimony examines two ideas that have been heavily promoted by proponents of increased annuitization in DC plans: a proposal to modify the [Qualified Default Investment Alternative (QDIA)] safe harbor to permit limits on rights of transferability ... and a proposal to require benefit statements to include a lifetime income illustration based on an annuity calculation. Part II also considers whether implementing the ideas would serve the interests of plan participants and beneficiaries."
Handling Taxed Uncashed Retirement Checks: The Common Practice and the Better Practice (PDF)
PenChecks, via Journal of Pension Benefits
Aug. 15, 2018
"When financial institutions and plan sponsors transfer uncashed check assets into an Auto Rollover IRA account, it offers several benefits ... The bad news is that this approach does not solve several problems associated with uncashed checks that have been taxed. In spite of this fact, it seems to be a widely used practice ... Even without clear guidance from the IRS, we can still do the right thing. We can still adjust our Forms 945, petition the IRS to restore the taxes, make the account whole, and roll it into an IRA account. Or, if the account balance exceeds $5,000, restore the funds back to the plan."
How to Find a Lost Retirement Account
Financial Finesse
Aug. 15, 2018
"[1] If you remember the name of your 401(k) provider (Vanguard, Fidelity, TIAA, Voya, etc.), first contact them to see if your money is still there. [2] You can also contact the old employer. Look for the company online, and if it still exists, contact the HR department either by phone or email and ask them for your balance and account information.... [3] Your account may have been reported as 'abandoned.' To search that, visit the US [DOL] abandoned retirement plan database.... [4] Each state has an unclaimed property web site that is searchable as well."
Assessing the Choices for the 'Distribution Phase' of DC Plans
Aug. 15, 2018
"[This article describes] some of the options plan sponsors can offer participants for the distribution phase, if they wish to retain retiree/terminated participant assets. Sponsors should evaluate the breadth of choices they wish to offer retirees, alongside the level of fees and complexity, in making a determination of which choices to offer."

<< Older News Items  |  August 20, 2018

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