Retirement Plans Newsletter

June 12, 2015

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Employee Benefits Jobs

Pension Administrator
Actuaries Unlimited, Inc.
in CA

Client Executive EM
Transamerica
in IL, MN

Business Analyst
Charles Schwab
in TX

Employee Benefits Account Specialist
Chadler Solutions
in NJ

Benefits Analyst 3
University of California Office of the President
in CA

Senior Retirement Analyst
Vista Outdoor
in UT

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Webcasts and Conferences

Cash Balance and Defined-Benefit Plan Designs
August 11, 2015 in NY
(ASPPA Benefits Council [ABC] of New York)

2016 Annual National Health Benefits Conference and Expo
January 25, 2016 in FL
(Health Benefits Conference & Expo)

View All Webcasts and Conferences



[Official Guidance]

IRS Explanation, Worksheet (Alert Guidelines), and Deficiency Checksheet: Employee Leasing (Rev. 4-2015) (PDF)
7 pages; this single PDF document contains three items: Publication 7003, Form 8386, and Form 8398. Excerpt: "Worksheet Number 8 (Form 8386) and this explanation are designed to aid the specialist in deciding whether any qualification issue arising by reason of section 414(n) of the Code needs to be covered and, if so, whether the requirements of that section are met. The worksheet and explanation ... are based on the statute itself and on various questions and answers in Notice 84-11 ... and Rev. Proc. 2002-21 ... as amplified by Rev. Proc. 2003-86 ... Until applicable regulations are published, the guidance provided by these questions and answers and procedures may be relied upon to comply with the provisions of section 414(n)." (Internal Revenue Service [IRS])  


[Advert.]

16th Annual Hawaii ERISA Seminar -- Nov. 18-20

Sponsored by TRI Pension Services

A unique seminar, mixing learning and CE with fun -- ERISA update with a focus on "hot" pension topics and current developments. Early registration ends June 30 -- substantial discount! CE approved. Outrigger Reef Hotel, Honolulu, Hawaii



[Official Guidance]

IRS Explanation, Worksheet (Alert Guidelines), and Deficiency Checksheet: Safe Harbor Nondiscrimination Requirements for DB Plans (Rev. 4-2015) (PDF)
10 pages; this single PDF document contains three items: Publication 4965, Form 9638, and Form 9640. Excerpt: "The purpose of Form 9638, Worksheet Number 5A, and this explanation is to determine whether a defined benefit plan satisfies the nondiscrimination safe harbor requirements of section 1.401(a)(4)-3(b)(3) of the Regulations and associated requirements such as the nondiscriminatory compensation requirements of section 414(s)." (Internal Revenue Service [IRS])  

[Official Guidance]

IRS Explanation, Worksheet (Alert Guidelines), and Deficiency Checksheet: Safe Harbor Nondiscrimination Requirements for DC Plans (Rev. 4-2015) (PDF)
6 pages; this single PDF document contains three items: Publication 6393, Form 5627, and Form 6045. Excerpt: "The purpose of Form 5627, Worksheet Number 5, and this explanation is to determine whether a defined contribution plan satisfies the nondiscrimination safe harbor requirements of section 1.401(a)(4)-2(b) of the Regulations and associated requirements such as the nondiscriminatory compensation requirements of section 414(s)." (Internal Revenue Service [IRS])  

[Official Guidance]

IRS Explanation, Worksheet (Alert Guidelines), and Deficiency Checksheet: Limitations on Contributions and Benefits (Rev. 4-2015) (PDF)
18 pages; this single PDF document contains three items: Publication 7001, Form 8384, and Form 6044. Excerpt: "The purpose of Form 8384, Worksheet Number 6, is to assist in determining if a plan meets the major requirements of section 415. However, there may be section 415 issues not mentioned in the worksheet that could affect the plan's qualification." (Internal Revenue Service [IRS])  

[Official Guidance]

IRS Explanation, Worksheet (Alert Guidelines), and Deficiency Checksheet: Permitted Disparity (Rev. 4-2015) (PDF)
9 pages; this single PDF document contains three items: Publication 4964, Form 9639, and Form 9637. Excerpt: "The purpose of Form 9639, Worksheet Number 5B, is to identify major problems relating to permitted disparity requirements of section 401(l) of the Code. This worksheet is to be used in reviewing plans that are intended to satisfy a design-based safe harbor and that provide for a disparity in the rate of employer contributions (in the case of a defined contribution plan) or employer-provided benefits (in the case of a defined benefit plan) that favors highly compensated employees." (Internal Revenue Service [IRS])  

[Official Guidance]

Text of PBGC Monthly Interest Update for July and Third Quarter 2015
"The third quarter 2015 interest assumptions under the allocation regulation will be 2.32 percent for the first 20 years following the valuation date and 2.37 percent thereafter. In comparison with the interest assumptions in effect for the second quarter of 2015, these interest assumptions represent no change in the select period ..., a decrease of 0.39 percent in the select rate, and a decrease of 0.41 percent in the ultimate rate ... The July 2015 interest assumptions under the benefit payments regulation will be 1.25 percent for the period during which a benefit is in pay status and 4.00 percent during any years preceding the benefit's placement in pay status. In comparison with the interest assumptions in effect for June 2015, these interest assumptions represent an increase of 0.50 percent in the immediate annuity rate and are otherwise unchanged." (Pension Benefit Guaranty Corporation [PBGC])  

[Guidance Overview]

IRS 403(b) Fix-It Guide (PDF)
45 pages. Charts and explanations address potential issues in plan administration. Includes how to find, fix and avoid common plan errors, with hypertext links to online forms and guidance. Updated June 9, 2015. (Internal Revenue Service [IRS])  

Customized Models for ERISA 3(16) Fiduciaries (PPT)
35 PowerPoint slides; most include narrative text. "[This] presentation [includes] an in-depth discussion of 3(16) fiduciaries and their various service models. [Topics include:] [T]he business need and the substantial client interest in 3(16) fiduciaries.... [T]he legal definition, or what it means, exactly, for a third party firm to serve as a 3(16) fiduciary.... [T]he potential risks associated with serving in a fiduciary capacity, and how you can mitigate this risk.... [T]he various types of 3(16) services that may be offered by a firm to its plan clients.... [S]uggested best practices for TPA firms that are actually decide to serve as 3(16) fiduciaries." (The Wagner Law Group)  

Employee Sues Over Retirement Plan Losses as Arch Coal Stumbles
"A former Arch Coal employee is suing the trustees of the company's retirement plan, alleging they invested retirement savings in Arch stock though they should have known it was a risky investment.... The suit comes as Arch, like other coal companies, is dealing with the effects of a depressed coal market; it reported a first-quarter loss of $113.2 million on revenue of $677 million and was recently warned by the New York Stock Exchange that it is out of compliance with the market's rule requiring an average price of $1 per share of common stock for 30 consecutive trading days." (The Business Journals)  

DOL Unhappy With Plan Audit Quality (PDF)
"DOL said the result of the unacceptable audits was 'putting $653 billion dollars and 22.5 million plan participants and beneficiaries at risk.' Their report correlated an increasing deficiency rate shown by this and prior studies with an increasing number of plans using the limited scope audit exemption. The deficiency rate in their 1988 study found defects in 23% compared to the 39% finding in the current study. The limited scope audit exemption was used by 48% of plans in 2001 and by 2013, 83% of plans." (Buck Consultants at Xerox)  

Deficient Plan Audits Tied to Auditors' Size, Experience
"The agency found a nearly 76-percent deficiency rate for yearly audits of plans' financial statements conducted by independent qualified public accountants that had just one or two benefit plan clients; the rate dropped to 12-percent deficiency among a firm's plan clients when it handled 750 or more of these audits. As a whole, 61 percent of the audits reviewed fully complied with professional auditing standards or had only minor deficiencies under professional standards." (Thompson SmartHR Manager)  

Re-employing Company Retirees? Avoid Problems with Your Retirement Plan
"As the workforce ages and retires, employers often seek to fill in gaps by hiring their own retirees as independent contractors or temporary or part-time employees.... [B]efore hiring a retiree: [1] Check your plan document.... [2] Prohibit any understandings with retirees before retirement that they will be re-hired in any capacity. [3] Require a minimum period of time before a retiree can be re-hired.... [4] If you re-hire the retiree as an independent contractor, make the position sufficiently different to support independent contractor status.... [5] If the retiree is safely re-hired, review the future effect of re-employment under the retirement plans." (Warner Norcross & Judd LLP)  

Take the Money and Run? Understanding Participant Behavior in Lump Sum Cashout Windows (PDF)
6 pages. "In 2014 many plan sponsors offered vested terminated participants (VTs) the option of electing a lump sum distribution in lieu of waiting until retirement to collect their pension benefit....The VTs must be given the option of taking their distributions in cash; they cannot be compelled to roll over their lump sum to an IRA or another qualified plan. Sponsors set up these plans to provide for their employees' retirement not to fund mid-life needs... This article explores several lessons we can learn from participant behavior when offered a lump sum cashout. Understanding the behavior of VTs will help sponsors make better decisions on whether to make these offers and how to communicate with their VTs." (P-Solve LLC)  

Helping Retirees Stay on the Upside of Drawdowns
"Regardless of whether they remain in an employer's plan or roll over their savings, many pre-retirees need help assessing their financial position to understand their retirement income options.... One way plan sponsors can help retirees create a steady stream of income is by ensuring that their plans offer flexible installment and withdrawal options so that participants can set up systematic withdrawals from their plan accounts if they wish." (Vanguard)  

The Risk of Retiring (or Being Retired) Early
"[A]lthough no healthy person knows how long he or she will live, retiring early increases the expected length of retirement and the number of years we spend in retirement is the greatest unpredictable determinant of retirement cost.... [R]etiring early ends savings contributions when they will typically be greatest.... [R]etiring early means drawing down savings until Social Security benefits or pension income kicks in. This places additional stress on savings early in retirement that increases the risk of outliving your savings." (The Retirement Cafe)  

BrightScope Takes a Whirl at Mutual Fund Data
"BrightScope launched Fund Pages, which provides inflow and outflow information. But in addition, and ... unlike Morningstar, it will list the retirement plans that are most heavily invested in each mutual fund. Which retirement plans are invested in which funds is important information that's not been available to advisors for free before ... BrightScope's new offering is a scorecard laying out each fund's flows, manager turnover, fees and additional information[.]" (RIABiz)  

Judge Gives Final Approval to Rhode Island Pension Lawsuit Settlement
"The settlement includes two one-time stipends payable to all current retirees; an increased cost-of-living adjustment cap for current retirees; and lowering the retirement age, which varies among participants depending on years of service." [Rhode Island Pub. Emp. Retiree Coalition v. Raimondo, No. PC 2015-1468 (R.I. June 9, 2015)] (Pensions & Investments)  

[Opinion]

New Jersey's Pension War?
"There is only one solution to this pension mess, introduce a shared risk plan and improve the governance of the state pension fund, which has far-reaching implications. Unfortunately, New Jersey is just one of many delusional U.S. pension funds that thinks it will invest its way out of this mess." (Pension Pulse)  

Benefits in General; Executive Compensation

Third Circuit Opinion May Change the Way ERISA Plans Approach Settlement
"[T]he 3rd Circuit held that '[t]o succeed under a catalyst theory of recovery, evidence that judicial activity encouraged the defendant to settle is not necessary. All that is necessary is that litigation activity pressured a defendants to settle or render a plaintiff the requested relief.' ... ERISA plans may [now] become less likely to settle marginal claims out of concern that even a nuisance value settlement may open the doors to a fee award. While some ERISA plans routinely settle smaller cases because it makes business sense to do so, that may no longer be the case when attorney's fees are factored into the equation. In addition, ERISA plans may become less likely to increase early settlement offers in order to minimize the likelihood of being accused of having 'changed position.' " [Templin v. Independence Blue Cross, No. 13-4493 (3d Cir. May 8, 2015)] (InsideCounsel)  

Eleventh Circuit Finds Claimant Has 'Duty to Investigate' When Asserting Equitable Tolling of a Contractual Limitations Provision
"[W]hen does the court apply 'equitable tolling' to extend the time by which a claimant may file suit beyond the contractual limitations provision? Rarely. And, what happens if the claim denial letter fails to set out the date by which a claimant must file suit? The contractual limitations provision still may be enforceable." [Wilson v. Standard Ins. Co., No. 14-10825 (11th Cir. June 3, 2015; unpub.)] (Lane Powell PC)  

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