Retirement Plans Newsletter

July 21, 2015

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Fundamentals of 401(k) and Other Qualified Plans - Chicago
August 18, 2015 in IL
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IRA Basics
September 17, 2015 WEBCAST
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[Official Guidance]

Text of IRS Announcement 2015-19: Major Revisions to the Employee Plans Determination Letter Program (PDF)
"[E]ffective January 1, 2017, these changes will eliminate the staggered 5-year determination letter remedial amendment cycles for individually designed plans and will limit the scope of the determination letter program for individually designed plans to initial plan qualification and qualification upon plan termination. This announcement also provides a transition rule with respect to the remedial amendment period for certain plans currently on the 5-year cycle ... [E]ffective July 21, 2015, the IRS will no longer accept determination letter applications that are submitted off-cycle, except as otherwise described [in this Announcement]." (Internal Revenue Service [IRS])  


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The Latest Tussey v. ABB Decision: Fiduciary Lessons Aplenty
"If you are faced with the opportunity to reduce costs by using proprietary investments, consider documenting your reasons to adopt proprietary funds by answering the following questions: [1] Are we using proprietary funds? [2] Are we replacing an existing fund with a proprietary fund? [3] Have we selected proprietary funds based on the standards and criteria established in the [investment policy statement (IPS)]? [4] If an exception is necessary to use a proprietary fund, should we change the IPS standards and criteria permanently? [5] Are we using a proprietary fund because it is in the best interests of participants or because it reduces the cost to the Plan Sponsor? [6] How are we accounting for any additional revenue sharing from the use of the proprietary funds?" [Tussey v. ABB Inc., No. 2:06-CV-04305 (W.D. Mo. July 9, 2015)] (Fiduciary Matters Blog)  

A Caveat for Fiduciaries Who 'Document, Document, Document'
"[W]hile some documentation serves to explain decisions, and to demonstrate due process, not all documentation has that effect. Consider for example the statement that 'we will review X at least once a year.' ... Far from strengthening a legal defense, such a statement can cause problems if, for some reason, the promised review does not occur. So there's a difference between the documentation of actions and the documentation of aspirations." (Russell Investments)  

Legal Considerations When Engaging an Investment Professional for a Participant-Directed Defined Contribution Plan (PDF)
"In establishing and maintaining the plan's investment lineup, fiduciaries often engage a panoply of service providers ... Doing so is often desirable to give the fiduciaries protection both with the overall prudence of the lineup and for compliance with the highly technical liability-reducing Section 404(c) of ERISA. However, the amount of fiduciary protection that these service providers give the plan fiduciaries can vary greatly depending on the technical status of the provider under ERISA and the structure of the arrangement." (Blitman & King LLP, via Bloomberg BNA Pension & Benefits Daily)  

Law Firm Awarded $22M in Fees for Lockheed 401(k) Case
"Attorneys who obtained a $62 million settlement from Lockheed Martin Corp. for participants in the company's 401(k) plan are entitled to $22.3 million in fees and costs as part of the settlement, a federal court in Illinois has ruled.... This is the second multimillion-dollar fee award in a week for Schlichter, which was awarded $9.9 million by a federal judge in Minnesota on July 13 for the firm's role in a settled case involving the Ameriprise Financial Inc. 401(k) plan." (Bloomberg BNA)  


[Advert.]

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Join us in beautiful downtown Chicago to get insights from our ERISA educators on the latest updates and get your questions answered. Concurrent sessions to customize your education - Ask the Experts, Pension Jeopardy, and more. Register online by 7/27, save $150!



Health Care Providers Very Attuned to Retirement Readiness for Their Employees
"Sixty-eight percent of health care providers say 'helping employees accumulate income for retirement' is the primary goal of their plan, up from 65% in 2014. Asked about the best indicator of plan success, employees' retirement readiness now surpasses participation rates, with 41% citing retirement readiness, up from 35% in 2014, and 39% pointing to participation rates, down from 48% in 2014." (PLANSPONSOR)  

MetLife Enters the Individual QLAC Market
"Next year will prove to be a watershed moment for RMDs from retirement plans as Americans born in 1946 -- the first year of the baby boom -- will be required to begin withdrawing from their retirement accounts.... 'We're encouraged in the industry that the Treasury sees value of these types of annuities and the opportunity for individuals to create a pension for themselves and get tax incentives to do so,' [Liz Forget, executive vice president of Retail Retirement & Wealth Solutions at MetLife] said. 'That's encouraging, particularly with the all the noise around variable annuities[.]' " (InsuranceNewsNet.com)  

Chamber of Commerce Calls for Negotiated Fiduciary Rule
"Chamber officials warned ... that the 'unduly complicated' proposal will discourage retirement investment advice, particularly to employers and employees of smaller businesses. 'We feel this does more harm to retirement savings than it does good,' said Aliya Wong, the chamber's executive director of retirement policy." (Pensions & Investments)  

[Opinion]

American Retirement Association Comment Letter to DOL on Proposed Fiduciary Regs and PTEs (PDF)
29 pages. "In order to foster relationships between advisers and investors whose interests are aligned, the [American Retirement Association (ARA)] suggests that the Department adopt a separate exemption for advisers who provide 'levelized compensation advice.' By definition, this compensation arrangement aligns the interests of advisers with the best interests of their client.... [If] the policy goal is to foster more aligned advice, the rule should make the provision of such advice less complicated and expensive." (American Retirement Association [ARA])  

[Opinion]

SIFMA Comment Letter to DOL on Its Fiduciary Rule Proposal
"The Department has greatly expanded the scope of service providers subject to the fiduciary requirements of ERISA and the Code ... while creating very limited, inflexible, and prescriptive exceptions and exemptions that do not work and will not be in the best interest of American retirement investors. The net effect is that this proposal, if enacted, would limit the ability of Americans to continue to receive personalized investment guidance for retirement plan accounts, which would result in a less secure retirement for many Americans already seeking to save and invest for their financial future." (Securities Industry and Financial Markets Association [SIFMA])  

[Opinion]

Comments by American Academy of Actuaries to DOL on Proposed Fiduciary Regs (PDF)
"[An] adviser should be required to advise on a broad range of decumulation strategies and products when providing any advice to individuals as may be relevant to [their] goals, requirements, and current circumstances. This requirement to discuss a broad range of options should exist regardless of the adviser's ability or inability (through licensing or other limitations) to provide any specific strategy or sell any specific product." (Lifetime Income Task Force of the American Academy of Actuaries)  

Benefits in General; Executive Compensation

[Guidance Overview]

IRS Proposes Regs to Ease Filing of Section 83(b) Elections
"The proposed regulations would eliminate the requirement ... that a copy of the section 83(b) election be submitted with an individual's tax return for the year the property is transferred. Section 83(b)(2) still will require that the executive file the 83(b) election with the IRS no later than 30 days after the date that the property is transferred to the executive. However, if the proposed regulation is finalized, beginning with property transferred on and after January 1, 2016, after the individual files his or her original 83(b) election, the IRS will scan and save it." (Winston & Strawn LLP)  

Pension/OPEB 2015 Assumption and Disclosure Survey (PDF)
"The 2014 median discount rate for pension plans in the survey decreased 80 basis points since 2013 and has decreased 225 basis points since 2007.... Median plan funding levels decreased since 2013, with pension plan assets equal to approximately 83% of the projected benefit obligation (PBO) in 2014 as compared to 90% in 2013.... The 2014 median discount rate for OPEB plans in the survey decreased 75 basis points since 2013 and has decreased 235 basis points since 2007.... The percentage of funded OPEB plans in the survey has remained constant since 2013 with 51% of plans being funded in both 2014 and 2013." (PricewaterhouseCoopers)  

IRS Updates Guide to Auditing Nonqualified Deferred Compensation Plans
"The [Nonqualified Deferred Compensation Audit Techniques Guide (June 2014)] notes that a NQDC plan that references the employer's 401(k) plan may contain a provision that could cause disqualification of the 401(k) plan. Code Section 401(k)(4)(A) provides that a 401(k) plan may not condition any other benefit (including participation in a NQDC) upon the employee's participation or nonparticipation in the 401(k) plan. The IRS will also review NQDC plans looking for a provision that limits the total amount that can be deferred between the NQDC plan and the 401(k) plan; it will look for a provision which states that participation is limited to employees who elect not to participate in the 401(k) plan." (Bradley Arant Boult Cummings LLP)  

What Skeletons Are Hanging in Your Closet? How to Ensure Good Plan Governance
"Consider establishing separate committees for plan design (settlor), plan administration (fiduciary), and plan investments (fiduciary), and ensure that each committee has a written charter approved by the board of directors.... [E]nsure that one entity is responsible for each specified duty. Review delegations of authority and committee appointments at least annually.... Preserve attorney-client privilege by ensuring that in-house counsel does not serve on a committee that will serve as a plan fiduciary.... [If] a plan includes employer stock in its investment lineup, avoid including senior executives with inside information about the employer on the plan investment committee." (Morgan Lewis & Bockius LLP, via Lexology)  

Press Releases

Lawsuit Returns More than $1M to Workers in Health Care Company’s Employee Stock Ownership Plan
Employee Benefits Security Administration [EBSA], U.S. Department of Labor

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