Retirement Plans Newsletter

February 11, 2015

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Employee Benefits Jobs

Senior Counsel
Great-West Financial
in CO, MA

Director of Client Service
Verisight
in AL

Retirement Plan Communication/Investment Specialist
Benefit Plans Administrative Services, Inc. [BPAS]
in PA

Application Support Specialist
The Newport Group
in NC

Administration Specialist
Administration Partners, L.L.C.
in AL

Sr. Retirement Plan Specialist/ERISA Attorney or Paralegal
New York Life Retirement Plan Services
in MA

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Webcasts and Conferences

Pension De-Risking
February 12, 2015 WEBCAST
(Mayer Brown)

Using ESOPs to Structure an Acquisition
February 17, 2015 WEBCAST
(National Center for Employee Ownership)

Fiduciary Standards: A Look Forward
February 20, 2015 in DC
(U.S. Chamber of Commerce)

Market Poised For Accelerated Risk Transfer Activity
February 24, 2015 WEBCAST
(Mercer)

View All Webcasts and Conferences



[Guidance Overview]

Text of IRS Publication 4484: Choose a Retirement Plan for Employees of Tax-Exempt and Government Entities (Rev. 2-2015) (PDF)
"Plan Feature Comparison Chart ... Highlights of eight types of retirement plans -- noting latest tax laws specific to each plan... What is the maximum annual contribution? Which plans offer catch-up contributions? What are the minimum employee coverage requirements? When do distributions begin?" (Internal Revenue Service [IRS])  


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Evaluating 401(k) Providers: Separating Commodity from Value-Added Services
"Custody and recordkeeping are 'commodity' services. Like any commodity, given equal quality, the key benchmark for these services is price. The cheaper you can find competent custody and recordkeeping services, the better for participants.... Investment Advice and TPA services are 'value-added' services -- the expertise of the service provider can significantly impact a plan's value to participants (or the plan sponsor). That means it can be reasonable to pay more for these services if the marginal cost of a more expensive provider is outweighed by their value.... Choose a benchmark for each service -- not the provider as a whole -- and evaluate each service against a benchmark." (Employee Fiduciary)  

Mitigating Risk in Sponsoring a DC Retirement Plan: The Time to Act Is Now
"One of the reasons many organizations have adopted defined contribution (DC) plans in recent years is the widespread belief that because the investment risk is shifted to the plan's participants, the employers are largely off the hook. Nothing could be further from the truth. Plan sponsors are still subject to many other risks, including vendor-management risk, financial risk, administration and compliance risk, plan design risk and reputational risk. Moreover, several of these five risks are interrelated, and a failure in one area can lead to trouble in others." (Sibson Consulting)  

Who Are You Calling a Fiduciary?
"[T]he percentage of those who didn't realize they were fiduciaries has risen from 30% in 2011 to 37% in 2014.... And yet, four out of five plan sponsors (82%) ... said fiduciary matters were important or very important, and 70% believed that all individuals who served in a fiduciary capacity at their plan were aware of their status.... Human resources/benefits professionals were more likely to say they were not fiduciaries (42%) than either senior executives (35%) or treasury/finance representatives (32%). Also, respondents who said they were part of a plan's administrative committee were twice as likely as other respondents to be unaware of their fiduciary status." (AllianceBernstein L.P.)  

Eliminating Small RMDs and Killing the 'Backdoor Roth' -- Key Retirement Proposals Under the Administration's FY2016 Budget
"While the tax proposals in this year's budget span a wide range of categories and topics, the proposed retirement changes are significant, and include some good, some bad, and some that are downright ugly. This [article reviews] some of the good (eliminating RMDs for those with less than $100,000 of retirement assets and allowing inherited IRA rollovers for non-spouse beneficiaries) and the bad (Roth crackdowns including no more backdoor Roth contributions and new Roth RMDs after age 70-1/2)." (Michael Kitces in Nerd's Eye View)  


[Advert.]

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Download this special report to understand the impacts of the DOL Amicus Brief Program, whether it will expand the definition of fiduciary and the implications to providers.



DC Plan Participant Activity During the First Three Quarters of 2014 (PDF)
"Defined contribution (DC) plan withdrawal activity in the first three quarters of 2014 remained low and was similar to the activity observed in the first three quarters of 2013.... The commitment to contribution activity in the first three quarters of 2014 continued at the high rate observed in the first three quarters of 2013 ... Most DC plan participants stayed the course with their asset allocations as stock values generally rose over the first nine months of the year ... DC plan participants' loan activity remains elevated compared with six years ago." (Investment Company Institute [ICI])  

Will Employer Contributions to State-Run Retirement Programs be Exempt from ERISA?
"Whether state programs, like the ones in Illinois and California, are subject to ERISA -- either ERISA's substantive rules (e.g., ERISA fiduciary rules) or ERISA's preemption provision -- is one of the basic questions yet to be answered. If they are, it is likely that these programs will not be implemented. If, however, DOL (following its reasoning in the myRA letter) is prepared to say that, because these programs are established, sponsored, and administered by a state government, they are not subject to ERISA, the effort to implement state private-sector retirement plans is likely to gain momentum." (October Three Consulting)  

Intergovernmental (Dis)incentives, Free-Riding, Teacher Salaries and Teacher Pensions
"[The author] documents evidence that intergovernmental incentives inherent in public sector defined benefit pension systems distort the amount and timing of income for public school teachers. This intergovernmental incentive stems from the fact that, in many states, local school districts are responsible for setting the compensation that determines the size of pensions, but are not required to make contributions to cover the resulting pension fund liabilities." (Upjohn Institute)  

[Opinion]

Will the Supreme Court's Affinity for Sweeping ERISA Decisions Continue in Tibble?
"The parties disagree on a different issue, one that isn't really about the six-year period at all: whether, on the facts of the case, the monitoring fiduciaries should have recognized the imprudent selection and altered the investment in question.... The Court's typical practice would counsel in favor of dismissing the case and awaiting a future case in which the applicability of the statute of repose is truly in dispute. But if the Court decides, instead, to engage the parties' factual dispute, it may signal that the Justices have a broader vision for ERISA and that they want more of a direct say as to the building blocks of fiduciary law." (Fisher & Phillips LLP, via Inside Counsel)  

[Opinion]

The Impact of Assumptions on the Impact of 'Leakage'
"Among participants with outstanding 401(k) loans at the end of 2013, the average unpaid balance was a mere $7,421, and the median loan balance outstanding was $3,973.... So, how did [a recent] Boston College [report] manage to come up with a 25% reduction in retirement wealth? Quite simply, they started by deriving an estimate based on a 'host of simplifying assumptions' ... Under these assumptions, the leakages result in accumulated 401(k) wealth of $203,000 at age 60 compared with $272,000 with no leakage.... They go on to clarify: 'This estimate represents the overall impact for the whole population, averaged across both those who tap their savings before retirement and those who do not.' That's right -- averaged across everyone, not just those who actually dip into those savings prior to retirement." (Nevin Adams)  

Benefits in General; Executive Compensation

[Official Guidance]

Text of IRS Announcement 2015-8: Application of Quality Stores Supreme Court Decision to Claims for Refund of Employment Taxes (PDF)
"As a result of the Supreme Court's holding in Quality Stores and the consistent position of the Federal Circuit in CSX, the Service will disallow all claims for refund of FICA or RRTA taxes paid with respect to severance payments that do not satisfy the narrow exclusion contained in Revenue Ruling 90-72. This includes all claims for refund that were held in suspense pending the resolution of Quality Stores and claims filed by taxpayers located within the Sixth Circuit's jurisdiction. Since the definition of wages contained in section 3121(a) of the Internal Revenue Code is generally the same as the definition of wages in section 3306(b) with respect to the FUTA, the Service will also continue to disallow claims for refund of FUTA taxes paid with respect to such severance payments ... The Service will take no further action on the appeal requests that were suspended pending the resolution of Quality Stores." (Internal Revenue Service [IRS])  

[Official Guidance]

Text of ISS Frequently Asked Questions: 2015 U.S. Compensation Policies (PDF)
104 questions and answers published February 9, effective for meetings on or after February 1, 2015. Topics include equity plans, issues arising from change of control, definition of a peer company, pay-for-performance, and say-on-pay. (Institutional Shareholder Services)  

[Guidance Overview]

Text of IRS Fact Sheet 2015-09: 2014 Tax Changes -- Health Care Law Brings Updates to Tax Forms; Other Benefits Renewed
"This year, there are some changes to tax forms related to the Affordable Care Act. Along with a few new lines on existing forms, there are two new forms that will need to be included with some tax returns.... To help navigate these changes, taxpayers and their tax professionals should consider filing their returns electronically.... [Other items include:] Tax Benefits Renewed... One-Rollover-Per-Year Limit for IRA Owners... Form 8891 Filing Requirement Eliminated... New Way to Make Tax Payments." [Editor's note: Page includes top-level summary of reporting requirements, with links to relevant IRS forms and publications.] (Internal Revenue Service [IRS])  

[Guidance Overview]

2014 Q&As: DOL Meeting with ABA Joint Committee on Employee Benefits, May 7, 2014 (PDF)
31 pages. Includes 48 questions and answers, including: Definition of Governmental Plan, Spouse, and Party in Interest; Plan Expense; Reasonable Fees; Indemnification; Plan Assets; Expense Ratios; DOL Model COBRA Notice; Missing Participant; Medical Reimbursement Accounts; Fund Benchmarking; Annuity Conversion; Fee Disclosure; Separate SPD for Group Health Plan; Self-Correction of Late Employee Contributions; and Termination Lump Sum Distributions. (Joint Committee on Employee Benefits [JCEB], American Bar Association)  

Benefits for Domestic Partners: What Does Your Plan Actually Say?
"Many plans started by defining domestic partners as same-sex couples who legally could not get married. 37 states now recognize same-sex marriage, so in many ways, the necessity for this type of eligibility may be falling away.... Some plans want to provide coverage for domestic partners regardless of the gender of the employee.... [W]hether you decide to leave [provisions specific to] 'domestic partners' in, or decide to take them out, make sure you know how you have defined them, how you verify the status and how you apply the plan terms. If you decide to take them out, make sure you provide proper notice to plan participants and properly amend the plan documents, including any summaries that explain eligibility." (Fox Rothschild LLP)  

Proposed SEC Regs Would Require Disclosure of Company Hedging Policies for Employees, Officers and Directors
"[P]roposed Item 407(i) would require disclosure, in any proxy or information statement relating to the election of directors, of whether any employee or director, or any of their designees, is permitted to purchase any financial instruments or otherwise engage in transactions that are designed to, or have the effect of, hedging or offsetting any decrease in the market value of equity securities that are granted to the employee or director by the company as compensation or held, directly or indirectly, by the employee or director. Notably, the rule proposal does not require companies to prohibit hedging by employees or directors." (Sidley Austin LLP)  

SEC Announces Half-Million Dollar Clawback from CFOs of Silicon Valley Company That Committed Accounting Fraud
" 'During any period when a company materially misrepresents its financial results, even executives who were not complicit in the fraud have an obligation to return their bonuses and stock sale profits to the company for the benefit of the shareholders who were misled,' said Jina L. Choi, Director of the SEC's San Francisco Regional Office." (U.S. Securities and Exchange Commission [SEC])  

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