Retirement Plans Newsletter

October 28, 2014

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Employee Benefits Jobs

DC Plan Administrator
The Benefit Advantage
in ANY STATE

Senior Pension Administrator
Jack A. Cross & Associates, Inc.
in CA

Operations Associate
Alta Trust Company
in CO, SD

TPA Development Manager (Southern Region)
Transamerica
in AL, FL, GA, LA, MS, SC

Defined Contribution Consultant
Aon
in ANY STATE, CA, CO, CT, DC, GA, IL, MD, MN, MO, NC, NJ, NY, OH, TX

Implementation Account Manager
Fifth Third Bank Institutional Retirement Plans
in IN, KY, OH

Documentation Coordinator
Fifth Third Bank Institutional Retirement Plans
in IN, KY, OH

Senior Plan Consultant
Advanced Benefits Consulting
in MO

Benefit Group: Sales Manager
Northwestern Benefit Corporation of Georgia
in GA

Consultant
Continental Benefits Group, Inc.
in NJ

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Webcasts and Conferences

Top-heavy Plans and Coverage Testing
RECORDED
(ASPPA [American Society of Pension Professionals & Actuaries])

Transforming Healthcare From a Top Three Cost to a Strategic Advantage
October 29, 2014 WEBCAST
(Castlight Health)

Advanced Top Heavy Plan Testing and Plan Design
November 18, 2014 WEBCAST
(McKay Hochman Co., Inc.)

Professional ESOP Forum
February 26, 2015 in LA
(ESOP Association)

View All Webcasts and Conferences



[Official Guidance]

Table of PBGC Maximum Monthly Annuity Guarantees, Pension Benefits
"Your maximum guaranteed amount is based, in part, on your age on the plan termination date (or the date the sponsor entered bankruptcy, if applicable) or, if you were not in pay status on that date, the date you begin receiving benefits from PBGC. Your maximum guaranteed amount also will reflect the age of your designated beneficiary if your benefit provides payments to a survivor. The age reduction does not apply for certain disabled participants (see Guarantees for Disabled Participants). The tables show the maximum guarantee, by age, for a participant receiving a straight-life annuity (one with no survivor benefits) and for one who receives a joint and 50% survivor annuity." (Pension Benefit Guaranty Corporation [PBGC])  


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[Official Guidance]

PBGC Announces Maximum Insurance Benefit Level for 2015
"The Pension Benefit Guaranty Corporation announced [on Monday, Oct. 25] that the annual maximum guaranteed benefit for a 65-year-old retiree in a single-employer plan has increased to $60,136 for 2015, up from $59,318 for 2014. The increase is not retroactive; payments to retirees whose plans terminated before 2015 will not change. The guarantee for multiemployer plans has not changed.... The limits ... represent the cap on what PBGC guarantees, not on what PBGC pays. In some cases, PBGC pays benefits above the guaranteed amount. Whether that happens depends on the retiree's age and how much money was in the plan when it terminated." (Pension Benefit Guaranty Corporation [PBGC])  

[Guidance Overview]

IRS and DOL Issue Favorable Guidance on Lifetime Income Provided Through Target Date Funds in Retirement Plans
"Other than with respect to [guaranteed lifetime withdrawal benefits or guaranteed minimum withdrawal benefits (GLWBs or GMWBs)], about which the Treasury is still considering guidance, and employer securities, presumably to avoid familiar issues when plans hold untraded employer securities, the Notice does not appear prescriptive with respect to the form of the annuities or the TDFs, which would need to comport with applicable ERISA, banking, insurance, securities or other requirements. The tax guidance contemplates that the TDFs may be either a default or a regular investment option under the plan." (Sutherland Asbill & Brennan LLP)  

[Guidance Overview]

Lifetime Income Guidance on Target Date Funds Issued by IRS and DOL
"IRS Notice 2014-66 provides a special rule that, if certain conditions are satisfied, a series of TDFs in a defined contribution plan that includes investments in unallocated deferred annuity contracts for older participants is treated as a single right or feature for purposes of the nondiscrimination requirements of Internal Revenue Code (IRC) Section 401(a)(4). The accompanying DOL Information Letter ... provides that this same type of series of TDFs: [1] May qualify as qualified default investment alternatives (QDIAs) within the meaning of [ERISA] Section 404(c) ... and DOL Regulation Section 2550.404c-5 [and] [2] May satisfy the requirements of ERISA Section 404(a)(1)(B) ... if the conditions of the DOL's annuity selection safe harbor of DOL Regulation 2550.404a-4 are satisfied." (Practical Law Company)  

[Guidance Overview]

Treasury, DOL Provide Guidance to Encourage Employers to Offer Annuity Options in DC Plans (PDF)
"Except for one new design feature, the Funds are described as operating in a manner generally consistent with the description of lifecycle or target date funds in ... the [DOL] QDIA regulation .... The new design feature involves the Funds' use of unallocated deferred annuity accounts, the manner in which those contracts are used, and the imposition of actuarially-based age restrictions on participants' investments in the Funds.... Under this particular arrangement, each Fund within the target date series is made available only to participants who will attain normal retirement age within a limited number of years around the Fund's target date. A Fund that is available to participants age 55 or older will invest a portion of its fixed income allocation in the unallocated deferred annuity accounts. Upon attaining its target date, the Fund will dissolve." (Groom Law Group)  

[Guidance Overview]

Turning TDFs Into an Income Stream (PDF)
"[IRS Notice 2014-66] offers the retirement industry the first set of functional guidelines and the regulatory framework to build investment solutions that begins to incorporate lifetime income to plan participants. The Notice also provides plan sponsors with the basic parameters and guidance to replace existing QDIAs with TDFs that addresses post retirement longevity and investment risks.... The application of fiduciary standards on investment managers will push these fiduciaries to adhere to the DOL safe harbor rule for selection of annuity providers. Further, this will systematically place pricing pressure on insurance companies and intermediaries so that the costs and terms of annuity will continue to improve through market competition." (Chao & Company, Ltd.)  

[Guidance Overview]

IRS Employee Plans News, Issue 2014-17, October 27, 2014 (PDF)
Topics include: [1] 2015 COLA limits; [2] January 31, 2015 deadline for plan sponsors with individually-designed plans and EINs ending in 4 or 9, or multiemployer plans to amend their plans for the 2013 Cumulative List and apply for a determination letter; and, [3] Renew Your 2015 PTIN before Dec. 31 if you plan to prepare any federal tax returns for compensation or are an enrolled agent. [Editor's note: the target PDF document contains clickable links. A web page version also is available.] (Internal Revenue Service [IRS])  

IRS Publishes Draft of New Form 5500-SUP for 2015 to Track Certain Plan Information
"The IRS has issued a draft of a new form it intends to release for 2015 -- Form 5500-SUP, Annual Return of Employee Benefit Plan Supplemental Information.... This form asks specific questions regarding nondiscrimination, coverage, amendments, deductions, unrelated business taxable income, in-service distributions, and U.S. territory." (Ascensus)  

Text of RP-2014 Mortality Tables
"The Society of Actuaries' (SOA's) Retirement Plans Experience Committee (RPEC) has released the final report of the RP-2014 Mortality Tables. The primary focus of this study was a comprehensive review of recent mortality experience of uninsured private retirement plans in the United States. The RP-2014 mortality tables presented in this report and the Mortality Improvement Scale MP-2014 presented in the companion report form a new basis for the measurement of retirement program obligations in the United States." (Society of Actuaries)  

SOA Finalizes Updated Mortality Tables (PDF)
"The Society of Actuaries has released updated mortality tables to reflect recent improvements in longevity. The final tables are unchanged from the drafts exposed earlier this year ... [A]ccounting firms will want sponsors to consider these new tables for accounting purposes for year-end 2014 financial statement disclosure. All available information should be taken into account when setting assumptions for disclosure and next year's expense, and the new tables will now be in that mix. Plan auditors will want to hear about the actuary's evaluation of the use of these tables for the plan's population. [The authors] do not expect IRS or PBGC to implement any changes in mortality assumptions required for minimum funding, minimum lump sums, AFTAP certifications, deductions, variable rate premiums, plan termination calculations, or plan document purposes any sooner than 2016." (Buck Consultants at Xerox)  

Rising U.S. Life Spans Spell Likely Pain for Pension Funds
"New mortality estimates released Monday by the nonprofit Society of Actuaries show the average 65-year-old U.S. woman is expected to live 88.8 years, up from 86.4 in 2000. Men age 65 are expected to live 86.6 years, up from 84.6 in 2000. Longer lives for retirees may add to a squeeze at many pension funds already struggling to plug funding gaps and force companies to contribute more to cover future obligations." (The Wall Street Journal; subscription may be required)  

Conference of Consulting Actuaries Releases White Paper on Public Pension Funding Policy
"The paper is intended to address the principle elements of an actuarial funding policy in most situations, including: [1] actuarial cost method; [2] asset smoothing method; and [3] amortization policy. After a discussion of each element, the paper categorizes practices and provides guidance for each element according to: [i] Level Cost Allocation Model (LCAM); [ii] Model practices; [iii] Acceptable practices; [iv] Acceptable practices, with conditions; [v] Non-recommended practices; [vi] Unacceptable practices." (Gabriel Roeder Smith & Company)  

Majority of Parents Provide Financial Support to Their Adult Children -- Less Available for Retirement Piggy Bank?
"A new LIMRA Secure Retirement Institute study finds that 6 in 10 American parents provide financial support to their adult children, which could undermine their retirement readiness.... 7 in 10 U.S. households with adult children have at least one adult child living at home. Nearly three quarters of households with adult children ages 18-22 have at least one adult child residing in their home." (LIMRA)  

401(k) Plan Sponsors Not Only Ones Affected by Adviser/Advisor Terminology
"'The distinction is more than just a letter. An "advisor" who offers investment advice under the Investment Advisers Act of 1940 is an "adviser." A broker who does not serve in a fiduciary capacity can only be called an "advisor." Someone who designates themselves as an "adviser" is essentially offering services under the Investment Advisers Act of 1940, the SEC, and FINRA because they are offering investment advice to their clients which means they are serving in a fiduciary capacity. It's the beauty and the richness of the English language that one letter can mean so much. The problem is that plan sponsors don't know the difference,' says Ary Rosenbaum, an ERISA attorney at The Rosenbaum Law Firm located in Garden City, New York." (Fiduciary News)  

Employment-Based Retirement Plan Participation: Geographic Differences and Trends, 2013
"The percentage of workers participating in an employment-based retirement plan rose in 2013, increasing for the first time since 2010 among all workers and private-sector workers.... Among all American workers in 2013, 51.3 percent worked for an employer or union that sponsored a retirement plan ... while 40.8 percent participated in a plan." (Employee Benefit Research Institute [EBRI])  

The Death of Active Investment Management?
"[T]he active/passive debate tends to get framed as a moral parable, in which investors have had their moment of revelation and clarity. By this telling, it's all over for actively managed funds. Put a fork in 'em. They're goners. Here's the thing, though: The data doesn't unequivocally support the notion that investors have gotten religion about costs or totally lost their faith in active investing. In fact, when we burrow into the data, we find a number of trends that raise questions about, if not contradict, those assertions." (Morningstar)  

ERISA at 40: Stewards Reflect on Good, Bad
"[ERISA] made some great advances in retirement security since its passage in 1974, but missed some opportunities as well, like structuring the [PBGC] and keeping the focus on fiduciary duty, said past and present Labor Department officials who gathered in Washington to celebrate the law's anniversary.... Not having the reporting and disclosure requirements of ERISA apply to state and local governments also was a mistake, former officials said, particularly as many public plans and taxpayers face serious underfunding demands." (Pensions & Investments)  

For ERISA to Have a Future, Return It to Its Roots
"Forty years after ERISA, we don't have more retirement security -- we have less. Experts quibble whether this is a 'crisis,' but today more people worry about their retirement than their health care. In the late 1970s, only 25% were concerned about their retirement; today it's 61% -- and rising. Many fear they can never retire at all.... [T]he original law allowed far more flexibility than is currently allowed after its many amendments and after the thousands of pages of regulations and interpretive guidance that have been issued by the DOL and the Internal Revenue Service. Each time a company plan sponsor or two engaged in questionable behavior, the response was to reduce the flexibility of everyone else: regulating the many instead of enforcement against the few." (Former PBGC Directory Joshua Gotbaum, in Pensions & Investments)  

[Opinion]

The United States of Pension Poverty?
"Let's take a closer look at the Wells Fargo survey which finds saving for retirement is not happening for a third of the middle class ... If you read the Wells Fargo survey, it extolls the virtues of 401(k)s as a savings plan but neglects to mention America's 401(k) nightmare which is actually still going on even if the stock market bounced back since the crisis.... [The author's] solution is to bolster defined-benefit plans for all Americans, not just public sector workers, and have the money managed by well-governed public pension funds at a state level." (Pension Pulse)  

Benefits in General; Executive Compensation

2015 PTIN Renewal Period Underway for Tax Professionals
"All current PTINs will expire Dec. 31, 2014. Anyone who prepares or helps prepare any federal tax return or claim for refund, for compensation, must have a valid PTIN from the IRS. The PTIN must be used as the identifying number on returns prepared.... For those who already have a 2014 PTIN, the renewal process can be completed online and only takes a few moments. The renewal fee is $63." (Internal Revenue Service [IRS])  

Press Releases

NBCH Adds New Member Coalitions
National Business Coalition on Health

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