Retirement Plans Newsletter

April 15, 2015

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Account Executive
ATPA
in OR

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Beneco
in AZ

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Alerus FInancial
in MN

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Benefit Consultants Group
in NJ

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Chimento & Webb, P.C.
in MA

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Webcasts and Conferences

Application of the Controlled Group Rules
April 21, 2015 in CA
(Western Pension & Benefits Council - San Diego Chapter)

2015 Ethics and Professionalism: Case Studies One
April 23, 2015 WEBCAST
(McKay Hochman Co., Inc.)

FMLA Intermittent Leave Issues: Strategies for Preventing Abuse
April 28, 2015 WEBCAST
(Clear Law Institute)

Spring 15 Retirement, Annuity, and Life Insurance Benefit Planning
April 30, 2015 in NY
(New York State Bar Association)

Legislative Update 2015
April 30, 2015 WEBCAST
(NAGDCA [National Association of Government Defined Contribution Administrators, Inc.])

ERISA Fiduciary Responsibility: Hot Topics, Latest Trends and Confronting The Difficult Issues
April 30, 2015 WEBCAST
(Clear Law Institute)

Case Study: How a Major Insurer Extended Its Legacy System to Thrive on HealthCare.gov
May 5, 2015 WEBCAST
(Atlantic Information Services, Inc.)

Form 5500 Workshop 2015
May 13, 2015 in VA
(SunGard Relius)

Form 5500 Workshop 2015
May 13, 2015 in TX
(SunGard Relius)

View All Webcasts and Conferences



[Guidance Overview]

DOL Proposes New Fiduciary Rule for Retirement Advisors
"[T]he DOL proposal would require conflicts-related disclosures from many advisors who are not currently subject to this requirement, and it would also put pressure on broker-dealers and insurance firms to more closely monitor and limit the levels of variable compensation earned by their registered representatives and agents. If adopted, the DOL proposal may significantly increase compliance costs for these firms and their retirement businesses.... [It] may be difficult for firms to determine if they have adequately mitigated the conflicts arising from the payment of differential compensation to their individual advisors ... [S]ome individual advisors may decide to become RIAs (or investment adviser representative of RIAs), on the grounds that they would be subject to the same fiduciary standard anyway. Those who switch to a RIA service model would, of course, have to forfeit their right to receive any commissions." (The Wagner Law Group)  


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[Guidance Overview]

Game Changer: A First Look at the DOL's 2015 Conflict of Interest Proposal (PDF)
11 pages. "This is an ambitious proposal that makes a genuine attempt to eliminate or mitigate the effects of conflicts of interest in ALL retirement plans, including IRAs. It is too soon to tell if the proposal, in its current form, will actually accomplish this goal, or what t he intended and unintended consequences might be ... We in the retirement industry now have the obligation to find the flaws and unintended consequences in the proposal and work with our partners in government to achieve a final regulation and/or effective legislative alternatives that truly serve the country's best interests. The purpose of this article is to provide a technical, 'first glance' overview of the proposal and some early thoughts about possible ramifications." (Pentegra Retirement Services)  

[Guidance Overview]

IRS Eases Correction Methods for Common 401(k)/403(b) Plan Failures (PDF)
"Revenue Procedure 2015-28 modifies and improves the Employee Plans Compliance Resolution System (EPCRS) by providing a new safe harbor relating to automatic contribution features (including automatic enrollment and automatic escalation of elective deferrals) and a separate new special safe harbor correction method for faulty elective deferrals that occur over a period of limited duration." (Milliman)  

Worried About Fiduciary Rule? Two Options for Brokers
"ERISA Section 601 exempts brokers from fiduciary status as long as they follow investment advice provided by third-party computer models -- a ruling which encompasses what we now know as robo advisors.... The other workaround is to forego a plan fee and instead be named the fiduciary advisor to participants, as also described in ERISA Section 601.... The risk is that all levels of employees may take you up on your offer for advice, since you may not exclude those with lower balances. One emerging option is to encourage the plan sponsor to add a cost-effective financial wellness or education program for those with simple investment issues or those with minimal assets and significant debt and budgetary issues." (Financial Planning)  

A First Look at the DOL's Revised Fiduciary Rule
"The proposed rule creates a new PTE, the 'best interest contract exemption.' This new PTE will allow firms to continue to set their own compensation practices so long as they, among other things, commit to putting their client's best interest first and disclose any conflicts that may prevent them from doing so. Common forms of compensation in use today, such as commissions and revenue sharing, will be permitted under this exemption, whether paid by the client or a third party such as a mutual fund." (401kHelpCenter.com)  


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Brokers Selling IRAs Face Tougher Rules in Obama-Backed Plan
"[B]rokers would have a legal duty to put clients' interests first, a shift that could reshape how they steer clients and collect fees, and potentially create winners and losers among mutual funds and other products.... Brokers won concessions, including a framework that would let them continue selling bonds out of their own inventory.... Compliance costs for the industry would be $2.4 billion to $5.7 billion over 10 years, according to the Labor Department." (Bloomberg)  

The Estopped Fiduciary: When May Participants Rely on Incorrect Calculations?
"[A recent] Ninth Circuit decision clearly states that estoppel is not available where relief ... would contradict the written plan provisions. However, [in] another decision in Michigan ... a retiree named Paul successfully sued to estop a plan from correcting pension overpayments. Why did Paul succeed and should plan fiduciaries be worried about this decision? ... [U]se of clear disclaimers is still a good practice. Regular self-audits should still permit plan sponsors to correct typical honest mistakes. And this whole lawsuit could have been avoided if the elements of Paul's calculation had been carefully checked when he asked about his service." [Paul v. Detroit Edison, No. 13-14256 (E.D. Mich. Mar. 30, 2015)] (Osler, Hoskin & Harcourt LLP)  

[Opinion]

Watering Down the Fiduciary Standard?
"Fiduciary advocates, in particular, will worry that the proposal, unveiled Wednesday, waters down the fiduciary standard currently applicable to fiduciaries under ERISA, and that some of the exemptions provided could be so expansively interpreted that they permit the egregious conduct that bona fide fiduciary standards are designed to constrain.... If enacted, the new proposal could dramatically change the landscape for providers of advice to retirement plan sponsors, retirement plan participants, and IRA account holders. However, enactment of a final version of the rule is far from certain, as the 2015 Proposed Rule will likely receive intense opposition from SIFMA, the American Council of Life Insurers, and many of the players associated with broker-dealer firms and life insurers." (Financial Planning)  

[Opinion]

Pension Rights Center Comment Letter to PBGC on Partitions of Eligible Multiemployer Plans and Facilitated Mergers (PDF)
"[It] is critically important that PBGC guidance ensure that these tools, when they are used, promote the long-term financial security of affected participants and beneficiaries, as well as that of plan sponsors and the PBGC.... [T]his will require that the regulations delineate the scope of the Participant and Plan Sponsor Advocate's authority with respect to partition applications, provide meaningful disclosure to participants in both partitions and facilitated mergers, and ensure that the rights of partitioned participants and beneficiaries will be enforced." (Pension Rights Center)  

Benefits in General; Executive Compensation

[Guidance Overview]

Final Section 162(m) Regs Clarify Transition Rules for Newly Public Companies and the Per Participant Limit Requirement
"The final regulations ... [1] reiterate the IRS's position in the proposed regulations that the transition relief for newly public companies is limited to compensation attributable to options, stock appreciation rights and restricted stock, but not restricted stock units (RSUs) and [2] clarify the rules relating to the equity incentive plan per participant limit necessary for compensation attributable to options and stock appreciation rights to qualify as 'performance-based compensation.' None of the changes made by the final regulations are intended to be substantive changes to the requirements of the Section 162(m) regulations previously in effect." (Wilmer Hale)  

Sixth Circuit: Employer Breached its Fiduciary Duty by Issuing Inaccurate SPD
"The U.S. Court of Appeals for the Sixth Circuit ruled that the employer [1] functioned as an ERISA fiduciary when it prepared and distributed the SPD to participants, and [2] breached its fiduciary duty by furnishing the participant with a misleading SPD. In particular, the SPD provision describing the annual increase in benefits did not refer to the other sections of the SPD on which the employer and the insurer had relied to deny the benefits increase. Also, the insurer's self-serving interpretation of the SPD to deny increased benefits was determined to constitute a breach of the insurer's ERISA fiduciary duty." [Stiso v. Int'l Steel Group, No. 13-3503 (6th Cir. Mar. 25, 2015)] (Haynes and Boone, LLP)  

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