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Treasury Inspector General Report: IRS Should Notify and Educate Taxpayers About Required Minimum Distributions from IRAs
"TIGTA recommended ... [1] directly communicating with taxpayers required to take a distribution and informing them about the distribution rules, using easily understood language; and [2] if the notice program is expanded, modifying the methodology for the required minimum distribution notices to identify additional noncompliant individuals.... IRS officials partially agreed ... However, due to budget limitations, the IRS is not expanding its use of notices. In addition, the IRS agreed that direct communication with taxpayers reaching the age of 70-1/2 would be helpful, but it is not implementing this program due to budget constraints. The IRS did not agree to inform estates of distribution rules associated with IRA inheritances." [Dated May 29, 2015; released July 15, 2015.]
(Treasury Inspector General for Tax Administration [TIGTA])
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IRA Withdrawals in 2013 and Longitudinal Results, 2010-2013
"Just over 22 percent of individuals who owned a Traditional or Roth [IRA] took a withdrawal in 2013. The overall IRA withdrawal percentage was largely driven by activity among individuals ages 70-1/2 or older owning a Traditional IRA ... [A]mong individuals under age 60, 10 percent or fewer had a withdrawal. For those at the RMD age, the withdrawal rates at the median appeared close to the amount that was required to be withdrawn, though some were significantly more.... Among those ages 70 or older, withdrawal rates over a four-year period showed that most individuals were withdrawing at a rate that was likely to be able to sustain some level of post-retirement income from IRAs as the individual continued to age."
(Employee Benefit Research Institute [EBRI])
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Fiduciary Risks Involved in Transferring Assets from a Seller's 401(k) Plan to the Buyer's Plan
"Fiduciaries of 401(k) plans considering accepting asset transfers of former employer stock have often been advised to engage counsel to evaluate the prudence of holding the former employer stock in the buyer's plan as an investment alternative (even if 'frozen' to new investment) and establish a timeline for requiring that plan participants divest the former employer stock within one to two years of the asset transfer from the seller's plan.... In Tatum, the plan was not properly amended to require the divestiture of former employer stock. This failure to properly amend the plan converted a plan design decision, which was a non-fiduciary or 'settlor' decision, into a fiduciary act." [Tatum v. RJR Pension Investment Comm., No. 13-1360
(4th Cir. Aug. 4, 2014; cert. denied June 29, 2015)]
(McDermott Will & Emery, via Lexology)
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Fixing Plan Operational Failures with a Retroactive Amendment
"[T]he IRS normally needs to see some convincing documentary evidence indicating that the way the plan was actually operated was the way the sponsor, participants and any relevant TPAs or vendors assumed the plan was written. A summary plan description (SPD) that provides for the particular event or practice that occurred is usually considered the best evidence. However, other good evidence might be emails, internal memoranda or correspondence that reflect the way some or all parties thought the plan actually read."
(Jackson Lewis P.C.)
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Notice of Meeting of the Advisory Council on Employee Welfare and Pension Benefit Plans
"[T]he 177th meeting of the Advisory Council on Employee Welfare and Pension Benefit Plans (also known as the ERISA Advisory Council) will be held on August 18-20, 2015 ... The Advisory Council will study the following issues: [1] Model Notices and Disclosures for Pension Risk Transfers and [2] Model Notices and Plan Sponsor Education on Lifetime Plan Participation.... Organizations or members of the public wishing to submit a written statement may do so by submitting 40 copies on or before August 11, 2015[.]"
(Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])
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New IRS Notice on Lump Sum Buyouts Causes Confusion
"[Notice 2015-49] applies only to individuals who are already receiving annuity distributions.... Unfortunately, the notice led some employees vested in a defined benefit pension plan to think that the IRS is preventing pension lump-sum payouts as an option at all, which is not the case."
(Society for Human Resource Management [SHRM])
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Retirement Plans At Every Employer! Is Your State Next?
"Doesn't anyone with earned income already have the ability to save for retirement in a traditional Individual Retirement Accounts and/or Roth IRA? Yes. But that takes effort. What really gets workers to save is the availability of a workplace retirement plan with payroll deduction ... and automatic enrollment ... [T]here are 55 million workers who don't have a way to save for retirement at their workplace, and of those, only 5% take the steps to open an IRA."
(Forbes)
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The ESG Advantage in Fixed Income Investments
"In the aftermath of the 2008 financial crisis, consideration of corporate environmental, social, and governance (ESG) factors has gained increasing traction among investors ... [This study] grouped the universe of companies by endtiles (top and bottom half) based on their individual, annual ESG scores ... [C]ompanies in the top endtiles (ESG scores in the top 50%) outperformed companies in the bottom endtiles in all six simulations, demonstrating that ESG factors can add measurable value in portfolio construction."
(Calvert Investments)
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Financial Services Institute Says DOL Conflict of Interest Rule Would Deter Clients
"The Department of Labor's fiduciary rule proposal would force broker-dealers to have small savers sign a contract 'virtually upon entering the office,' Financial Services Institute officials said ... The onerous administrative tasks would likely offend small savers, [David Bellaire, FSI's executive vice president/general counsel] said, who are apt to 'shop around' and visit with several different advisors before deciding where to place their money. The fiduciary rule would require a disclosure contract upfront."
(InsuranceNewsNet.com)
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Deathbed Roth Conversions and the IRD Deduction
"[W]hile the [income in respect of a decedent (IRD)] deduction does shelter against Federal estate taxes, deathbed Roth conversions can still be relevant to protect against state estate taxes. Though in either case, the greatest driver of the outcome is not actually the IRD deduction or minimizing state estate taxes at all, but trying to shift the timing of when the IRA is recognized for tax purposes, so that the income taxes are paid at whichever rate is lower -- either the IRA owner now, or the rate the beneficiaries would pay by simply inheriting the pre-tax IRA and stretching it out in the future!"
(Michael Kitces in Nerd's Eye View)
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Dealing with Foreign Persons and Retirement Accounts in the Global Economy
"[F]oreign beneficiaries have the same options as any other beneficiary. They can stretch distributions or take a distribution in full. Spouse beneficiaries can move inherited funds into an IRA in their own name. What account owners and beneficiaries cannot do is move foreign retirement accounts to U.S. retirement accounts and vice versa."
(Slott Report)
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[Opinion]
A Common Sense 401(k) Reform
"According to a National Association of Retirement Plan Participants (NARPP) survey of 4,368 active retirement plan participants, 58% said they didn't know if they're paying account fees.... The Center for American Progress proposed that all 401k investments have a clear, understandable label -- like the nutrition labels found on our foods -- that provides consumers with relevant, concise, and accessible information about fees. They also proposed an easy-to-read annual receipt detailing how much investors spent that year on 401k fees.... [T]hese proposals would be more effective in educating investors about 401k fees than the DOL's fee disclosure regulation."
(Employee Fiduciary)
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[Opinion]
Obama Acts to Help States Expand Retirement Coverage
"[At] the White House Conference on Aging, the President ... directed the [DOL] to start helping state programs that increase retirement coverage. It's an important change because DOL has historically opposed state efforts to expand coverage for private sector workers, viewing them as an effort to evade the consumer protections of [ERISA]. If the state efforts are encouraged, rather than discouraged, tens of millions of uncovered Americans could have more secure retirements"
(Joshua Gotbaum, former PBGC Director, for The Brookings Institution)
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Benefits in General; Executive Compensation
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[Official Guidance]
Text of FLSA Administrator's Interpretation 2015-1: Application of the FLSA's 'Suffer or Permit' Standard in the Identification of Employees Who Are Misclassified as Independent Contractors (PDF)
"The FLSA's definition of employ as 'to suffer or permit to work' and the later-developed 'economic realities' test provide a broader scope of employment than the common law control test.... A worker who is economically dependent on an employer is suffered or permitted to work by the employer. Thus, applying the economic realities test in view of the expansive definition of 'employ' under the Act, most workers are employees under the FLSA ... When determining whether a worker is an employee or independent contractor, the application of the economic realities factors should be guided by the FLSA's statutory directive that the scope of the employment relationship is very broad. This Administrator's Interpretation then addresses each of the factors, providing citations to case law and examples."
(Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])
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