Retirement Plans Newsletter

February 23, 2015

BenefitsLink.com logo EmployeeBenefitsJobs.com logo LinkedIn logo Twitter logo Facebook logo
Get Health & Welfare News  |  Advertise  |  Previous Issues  |  Search

Employee Benefits Jobs

Jr. Pension Administrator / Bookkeeper
JM Pension Advisory, Inc.
in DC, MD

Employee Benefits Compliance Advisor
Northwestern Benefit Corporation of Georgia
in GA

Retirement Services Account Representative
Healthcare Association of New York State
in NY

Retirement Specialist
Nationwide Retirement Services
in TN

ESOP and 401(k) Administrator
Primark Benefits
in CA

Defined Benefit Pension Plan Analyst
The Angell Pension Group, Inc.
in ANY STATE

DC Compliance Analyst
United Retirement Plan Consultants
in NJ

Post Your Job

View All Jobs

RSS feed for jobs RSS Feed: All Jobs


Webcasts and Conferences

Overview of Pre-Approved 403(b) Retirement Plans
RECORDED
(IRS [Internal Revenue Service])

Duties of a Pre-Approved 403(b) Plan Sponsor
RECORDED
(IRS [Internal Revenue Service])

Health Reform: Beyond the Basics - Special Enrollment Periods
RECORDED
(Center on Budget and Policy Priorities)

Likes, Tweets and Clicks: The Do’s and Don’ts of Online Benefits Communication
March 5, 2015 WEBCAST
(Benz Communications)

Fundamental Series 03: Compensation and HCEs
March 9, 2015 WEBCAST
(SunGard Relius)

Strategies for Managing the Employer Mandate
March 12, 2015 in NC
(Hill, Chesson & Woody)

401(k) Advisor Symposium
March 12, 2015 in NC
(401k Rekon)

ADA & FMLA Compliance Update
April 30, 2015 in DC
(National Employment Law Institute)

View All Webcasts and Conferences



[Official Guidance]

Text of SEC No-Action Letter Extending Rule 482 Relief to Certain Investment Information Provided to Participants in Non-ERISA Plans
"[We] agree to treat DOL Required Investment Information furnished, in the manner described [in this letter], to Non-ERISA 403(b) Plans and participants and beneficiaries in such plans, as if it were a communication that satisfies the requirements of Rule 482 under the Securities Act. Our views expressed in this letter also extend to retirement savings plans that similarly are not subject to ERISA and that are governmental 457(b) plans, governmental 401(a) plans, 415(m) plans, church 401(a) plans, non-governmental 457(b) plans, and 409A plans or 457(f) plans of governmental or tax-exempt entities[.]" [Editor's note: Issued in response to a letter dated February 9, 2015, from the American Retirement Association. Hat tip to The SPARK Institute for both documents.] (U.S. Securities and Exchange Commission [SEC])  


[Advert.]

Announcing a Revolutionary New Resource. Free Trial - Sign Up

Sponsored by Burrmont Compliance Labs LLC

ERISApedia.com is a new way to quickly find answers to the tough questions you face every day. Our revolutionary platform combines outstanding search tools and an intuitive interface. Sign-up for a free trial today or email us: sales@ERISApedia.com.



[Guidance Overview]

Modifications to Safe Harbor Matching Contribution Requirements Have Taken Effect
"The Final Regulations allow plan sponsors a measure of breathing room, permitting a mid-year reduction or suspension of otherwise required safe harbor contributions if a plan sponsor is experiencing economic loss or, regardless of its financial situation, the sponsor complies with the preliminary and supplemental notification requirements ... Plan sponsors should take note that ... effective dates for the Final Regulations relating to safe harbor nonelective contributions differ from the effective dates relating to safe harbor matching contributions." (Reid and Riege, P.C.)  

[Guidance Overview]

DOL Publishes Materials on Upcoming Fiduciary Rule
The web page, entitled Are Your Retirement Savings at Risk?, includes a video entitled Conflicts of Interest and links to other retirement plan-related materials, including [1] FAQs: Conflicts of Interest Rulemaking; [2] Fact Sheet: Updating our Retirement Protections; and [3] A Look at 401(k) Plan Fees. Excerpt: "With 401(k)s and IRAs, individual investors are more responsible than ever for making important investment decisions, and most don't have the training they need. That means investors are increasingly reliant on the advice they receive. Ideally, your adviser will have your best interest at heart -- but that's not always the case." (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])  

White House Fact Sheet: Middle Class Economics -- Strengthening Retirement Security by Cracking Down on Backdoor Payments and Hidden Fees
"The definition of retirement investment advice has not been meaningfully changed since 1975, despite the dramatic shift in our private retirement system away from defined benefit plans and into self-directed IRAs and 401(k)s. The Department's proposal will update the definition to better match the needs of today's working and middle class families.... The Department's proposal will continue to allow private firms to set their own compensation practices by proposing a new type of exemption from limits on payments creating conflicts of interest that is more principles-based. This exemption will provide businesses with the flexibility to adopt practices that work for them and adapt those practices to changes we may not anticipate, while ensuring that they put their client's best interest first and disclose any conflicts that may prevent them from doing so.... The Department's proposal will allow advisers to continue to provide general education on retirement saving across employer-sponsored plans and IRAs without triggering fiduciary duties." (The White House Blog)  

The Effects of Conflicted Investment Advice on Retirement Savings (PDF)
"Savers receiving conflicted advice earn returns roughly 1 percentage point lower each year ... An estimated $1.7 trillion of IRA assets are invested in products that generally provide payments that generate conflicts of interest. Thus, we estimate the aggregate annual cost of conflicted advice is about $17 billion each year. A retiree who receives conflicted advice when rolling over a 401(k) balance to an IRA at retirement will lose an estimated 12 percent of the value of his or her savings if drawn down over 30 years. If a retiree receiving conflicted advice takes withdrawals at the rate possible absent conflicted advice, his or her savings would run out more than 5 years earlier. The average IRA rollover for individuals 55 to 64 in 2012 was more than $100,000; losing 12 percent from conflicted advice has the same effect on feasible future withdrawals as if $12,000 [were] lost in the transfer." (White House Council of Economic Advisors)  


[Advert.]

3 Live Workshops – Register Now

Sponsored by SunGard's Relius Education

We scheduled our two new workshops back-to-back in the same city and multi-program discounts are available. Register now! Only a few locations are left. CE credits available. Register here.



Obama Administration to Move Fiduciary Rule Forward
"President Barack Obama is expected to announce the Department of Labor's proposed fiduciary rule is officially under review at the Office of Budget Management on Monday afternoon.... Monday's announcement by the President marks the first step to re-proposing the DOL's rule, which the agency first put forward in 2010. Agencies must first submit to a review by the OMB, a process that could prove lengthy. In the first six months of 2013, it took the OMB an average of 140 days to complete a review ... While no one is certain of what the new rule will look like until after OMB review, it's expected to expand the definition of a fiduciary to anyone who provides advice to retirement plans, including individual retirement accounts and 401(k)s." (WealthManagement.com)  

Lockheed Martin Settles Excessive Fee Lawsuit for $62 Million
"The last of the first wave of excessive fee lawsuits filed on September 11, 2006 in what many dubbed the 'Schlichter Blitzkrieg' has been settled.... Lockheed Martin has agreed to pay $62 million and implement extensive affirmative relief. According to the settlement agreement, Schlichter, Bogard & Denton will request up to $20,666,666 in attorneys' fees and reimbursement of up to $1,850,000 in costs, all to come out of the settlement amount ... The plaintiffs had alleged that the fiduciaries to the Lockheed Martin 401(k) plans cause the plans to pay excessive administrative fees and that the fiduciaries had imprudently managed the money market fund and company stock fund." (Fiduciary Matters Blog)  

Settlement Agreements in 401(k) Fee Suits Offer Lessons for Fiduciaries
"Among various settlements, key issues have included fees, revenue sharing, retail vs. institutional shares, record keepers' proprietary investment options, and DC plan practices for searching and monitoring record keepers and investments. ERISA attorneys say dollar awards usually are only part of the story ... Although defendants don't admit wrongdoing in settlements, ERISA attorneys say these agreements help peers see if their policies are similar to those cited in the settlements and how plaintiffs' lawyers prepare strategies." (Pensions & Investments)  

Best Practices for 401(k) Committees
"Depending on plan size, you might even consider helping your clients form one committee to oversee the administration of the plan, and another to oversee the investment responsibilities required. Some companies will often form a third committee for decisions that are considered 'settlor functions' (company and/or business related decisions which are not subject to a fiduciary standard of care)." (401k Best Practice Blog)  

Middle-Age Blacks Have Less in Their 401(k)s Than Young Whites
"African-American and Hispanic workers are particularly unlikely to derive financial advantage from these arrangements. Median financial wealth is quite low for both groups, especially when compared with non-Hispanic whites. You might think this has a lot to do with access to 401(k)s, but it turns out when the savings accounts are offered to workers at the same company, whites still benefit a lot more than Hispanics and African-Americans." (The Washington Post; subscription may be required)  

Corporate Pension Funds Weigh Derisking vs. Re-Risking
"Re-risking is taking one of two guises: shifting into riskier assets or reducing the hedges on liabilities. But adding risk to the asset allocation can be challenging, with markets trading near all-time highs ... Rather, pension funds might allocate to new subasset classes within their equity allocation, such as international small cap, or add smart beta... And getting riskier assets past a pension fund's board might prove difficult." (Pensions & Investments)  

Agencies Issue Request for Comments Under Multiemployer Pension Reform Act of 2014
"The issues upon which Treasury and IRS requested comments include the following: [1] How should actuarial and other issues relating to determinations and certifications (such as certification of insolvency) be addressed? [2] Issues pertaining to providing notice to participants of the request and the impact on the individual participant. [3] Issues relating to how a vote of plan participants should be conducted, including the timing involved.... If, for example, plan sponsors do not have up-to-date addresses for participants and beneficiaries, especially terminated vested participants, issues can be raised concerning the notice and voting portions of the overall suspension process." (Cheiron)  

When NOT to Convert to a Roth IRA
"Ultimately the decision of whether to bequest a Roth or traditional IRA should be driven by a comparison of the original IRA owner's marginal tax rate and the expected marginal tax rate of the beneficiary in the future. If the beneficiary's tax rates will be higher, it's better for the current IRA owner to go ahead and convert the IRA, paying the taxes now at current rates and leaving the higher-income beneficiary a tax-free account. But if the beneficiary's tax rates will be lower -- for any number of reasons -- then the best thing a wealthy IRA owner can do is leave a traditional IRA, and let the beneficiary pay the taxes at his own lower tax rate." (On Wall Street)  

Why Has the Total Number of ESOPs Gone Down But Participation and Assets Have Gone Up?
"Between 1998 and 2003, there were a number of promoters selling an S corporation ESOP arrangement that claimed to be able to funnel most or all the benefits to a few top managers. [The authors] believe as many as 2,000 of these plans were set up for at least long enough to file a Form 5500 report.... While they were set up as plans, few operated very long if, indeed, they ever actually went past the initial filings stage.... [R]esearch shows that ESOPs companies grow about 2.5% per year faster than would have been expected absent an ESOP. Compounding that number between 2002 and 2012 yields about 2.2 million participants." (National Center for Employee Ownership [NCEO])  

New England States Ponder Income Tax Breaks for Pension Payments
"Proposals in New England neighbors Connecticut and Rhode Island would give their respective residents breaks from state taxes imposed on their pensions. Bills have been introduced in the legislatures of both states that would provide different degrees of relief: some would phase in a tax break; others would give a break to pension and Social Security benefits; and still others would target the relief for veterans' pensions." (American Society of Pension Professionals & Actuaries [ASPPA])  

SEC Chair Sidesteps Direction for Fiduciary Duty
"[SEC] Chairwoman Mary Jo White said Friday she will push the agency this year to make a decision on whether to raise investment advice standards for brokers -- but again declined to provide a timeline for agency action.... Ms. White's mention of fiduciary duty consumed 12 words of a 2,959-word speech. She spent much more time elaborating on other priorities, such as reforming market structure, assessing systemic risk posed by asset managers and finalizing rules to help small businesses raise capital." (InvestmentNews)  

SEC Official Calls White House Memo on Broker Rules 'Propaganda'
"SEC Commissioner Daniel Gallagher blasted a recent memo by White House advisers that said abusive trading practices cost workers billions of dollars in retirement savings. The document favors a [DOL] plan to require brokers to act in the customer's best interest, even when that limits commissions or fees.... 'The White House memo is thinly-veiled propaganda designed to generate support for a widely unpopular rulemaking,' Gallagher said at the annual SEC Speaks conference in Washington." (Bloomberg)  

[Opinion]

Using PTEs to Define a Fiduciary Under ERISA: Threading the Needle with Rope (PDF)
11 pages. "The [DOL] has indicated that it intends to address concerns with its proposal to broaden the definition of fiduciary 'investment advice' by utilizing prohibited transaction exemptions (PTEs) to carve back the rule so that it is appropriate in scope.... [The authors] are very concerned that the DOL -- in the name of investor protection -- is actually taking an approach that will harm the very people it is trying to protect. By definition, a regulatory regime that prohibits every transaction unless it is specifically allowed through a PTE may unnecessarily eliminate choices and make it difficult to find new ways to better serve investors. Despite best efforts by the DOL, we remain concerned that no matter how well-crafted the PTEs are, they will prove to be insufficiently narrow and inflexible to accommodate the many beneficial ways that financial professionals serve the needs of investors today and in the future.... This paper provides several examples where the exemptive process has failed to appropriately limit expansive rules." (U.S. Chamber of Commerce)  

[Opinion]

White House Rule Could Block 401(k) Participants from Advice
"Today the White House launched an attack on advisors and so-called 'hidden fees' and 'backdoor payments' by moving forward with a regulation that has its own hidden backdoor effect -- keeping many Americans from working with the trusted advisor of their choice, even in the critical decision regarding rollovers from their 401(k) and 403(b) plans.... 'The best way to address concerns about 'hidden' fees is through better transparency, not by blocking 401(k) participants from working with the advisor of their choice,' [said Brian Graff, Executive Director of the National Association of Plan Advisors (NAPA)]. 'If the administration moves forward with this proposed rule, American savers will be forced to pay out-of-pocket for their financial advice, or be limited to financial products with identical fees.' " (American Society of Pension Professionals & Actuaries [ASPPA])  

[Opinion]

The Fiduciary Standard and the Economic War Between Wall Street and Main Street
"Given Wall Street's huge economic interest in preserving a product sales mode that many see as a dinosaur, from the extinction event of imposition of fiduciary standards, it is very plausible (and likely) that objections to the fiduciary standard are driven mostly by efforts to preserve a flawed, ancient business model which is neither desired by knowledgeable consumers nor favorable to their financial security. Yet, fiduciary advocates cannot ignore that another reason may exist for those who advocate against fiduciary standards. Perhaps some who oppose fiduciary standards believe that government has no role in imposing standards of conduct." (Ron Rhoades)  

Benefits in General; Executive Compensation

Dodd-Frank Mandated Disclosure of Hedging Policies: The SEC's Proposed Rule (PDF)
"The types of hedging transactions covered by the disclosure rules include not only prepaid variable forward contracts, equity swaps, collars, and exchange funds, but also all transactions that establish 'downside price protection,' such as short sales. If a company permits certain types of hedging transactions, the category of permitted transactions must be described. If all transactions are prohibited, or all are permitted, then a listing of categories covered need not be disclosed. If a company permits some of its employees to engage in hedging transactions, then it must specify those who are permitted and those who are not (i.e., if the policy prohibits hedging by executive officers and directors, but not by other employees)." (Wilkins Finston Friedman Law Group LLP)  

FASB Continues Project to Improve and Simplify Accounting for Stock Compensation Under FASB ASC Topic 718 (PDF)
"The agenda for the February 4 meeting was dominated by the deliberation of transition and disclosure requirements for the proposed changes, which are summarized [in a chart in this article].... [An] Exposure Draft of an Accounting Standards Update (ASU) ... is expected to be issued during the second quarter of 2015 followed by a 60-day public comment period. The FASB decided to hold off on determining an effective date for the ASU until feedback is received from the comment period. However, a tentative date suggested by the FASB's staff was for fiscal years beginning after December 15, 2016, with a 1-year deferral for nonpublic companies." (Frederic W. Cook & Co., Inc.)  

2015 Investor Survey: Deconstructing Proxy Statements -- What Matters to Investors
"Less than half (38 percent) of institutional investors believe that information about executive compensation is clear and effectively disclosed in the corporate proxy. Responses are consistently negative across all elements of compensation disclosure. Sixty-five percent say that the relation between compensation and risk is 'not at all' clear. Forty-eight percent say that it is 'not at all' clear that the size of compensation is appropriate. Forty-three percent believe that it is 'not at all' clear whether performance-based compensation plans are based on rigorous goals." (Stanford Graduate School of Business)  

Employers: Properly Administer Nonqualified Deferred Compensation Plans, or You May Be Held Liable to Participants for Adverse Tax Consequences
"FICA is just one area of federal tax law that often presents issues for (or is otherwise overlooked by) employers in the context of drafting and administering compensation arrangements... where failures in drafting or administration can result in adverse tax consequences to the employee. Among such other areas are the deferred compensation income tax rules of IRC Section 409A and the self-insured health plan nondiscrimination rules of IRC Section 105(h). If an executive is liable to the IRS for unanticipated taxes, penalties, and/or interest, more often than not the employee will look to the employer to be 'made whole,' and, as the Henkel case illustrates, litigation could ensue." (McCarter & English)  

Press Releases

Connect   LinkedIn logo   Twitter logo   Facebook logo

Additional useful links:

BenefitsLink.com, Inc.
1298 Minnesota Avenue, Suite H
Winter Park, Florida 32789
Phone (407) 644-4146
Fax (407) 644-2151

Lois Baker, J.D., President
David Rhett Baker, J.D., Editor and Publisher
Holly Horton, Business Manager

Copyright 2015 BenefitsLink.com, Inc. — but feel free to forward this newsletter without further permission from us, if you do not modify the newsletter in any way (including this lower portion).

All materials contained in this newsletter are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of BenefitsLink.com, Inc., or in the case of third party materials, the owner of that content. You may not alter or remove any trademark, copyright or other notice from copies of the content.

Links to websites other than those owned by BenefitsLink.com, Inc. are offered as a service to readers. The editorial staff of BenefitsLink.com, Inc. was not involved in their production and is not responsible for their content.

We are proud of our Privacy Policy.

Thanks for reading this newsletter!