Retirement Plans Newsletter

August 10, 2015

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Experienced Pension Administrator
KB Pension Services, Inc.
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Well-established Retirement Plan TPA
in WI

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National Employee Benefits Boutique
in ANY STATE, MA

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Verisight
in IL

Group Benefits Account Manager
Marsh & McLennan Agency
in MI

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SunGard
in FL

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Webcasts and Conferences

Cadillac Tax Round Two: IRS Notice 2015-52 Addresses More Issues
September 16, 2015 WEBCAST
(Thomson Reuters / EBIA)

2015 Retirement Plan Regulatory Update
September 30, 2015 WEBCAST
(Multnomah Group)

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[Official Guidance]

Text of IRS Notice 2015-55: Weighted Average Interest Rates, Yield Curves, and Segment Rate Applicable for August 2015 (PDF)
"This notice provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under Section 417(e)(3), and the 24-month average segment rates under Section 430(h)(2) of the Internal Revenue Code. In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under Section 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008 and the 30-year Treasury weighted average rate under Section 431(c)(6)(E)(ii)(I)." (Internal Revenue Service [IRS])  


[Advert.]

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Sponsored by ASPPA

This October the nation's retirement industry elite will converge in our nation's capital to get "Ahead of the Curve" with insights from industry insiders, regulators, pundits and the nation's leading voices. It's ASPPA Annual. Join us.



[Official Guidance]

Draft of 2015 IRS Form 8955-SSA: Annual Registration Statement Identifying Separated Participants with Deferred Vested Benefits
Draft dated August 7, 2015. Filing of the form by certain retirement plans is required by Code section 6057. (Internal Revenue Service [IRS])  

[Guidance Overview]

DOL Live Broadcast of Public Hearing on Conflicts of Interest Proposed Rule
"Members of the public deliver testimony on the department's proposal to reduce conflicts of interest in the retirement advice marketplace. Aug. 10-12, 9 a.m.-5:15 p.m.; Aug. 13, 9 a.m.-2:15 p.m." (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])  

[Guidance Overview]

Money Market Reforms Are Coming: Is Your Plan Ready? (PDF)
"DB plans commonly use MMFs to maintain proper levels of liquidity, enabling benefit payments. Liquidity gates could impair the plan's ability to make these payments ... Many DC plans hold forfeiture accounts [in MMFs] ... Gates may suspend the plan's access to these assets and prevent timely use... Liquidity fees or redemption gates may pose problems in the 90-day period following a participant's default investment into a MMF intended for QDIA relief.... Paying out required minimum distributions and distributing refunds on a timely basis could also be a problem." (Lockton)  

[Guidance Overview]

DOL Clarifies Annuity Selection Safe Harbor Regulation for DC Plans
"An employer's fiduciary duty to monitor an insurer's solvency ends when the insurer's annuities are no longer a distribution option in the DC plan. The guidance is intended to encourage employers to offer lifetime income annuities as distribution options in their 401(k)-type plans. [FAB 2015-02] cites two circumstances that necessitate an immediate review of an insurer." (Towers Watson)  


[Advert.]

SPARK Forum - November 8-10, 2015 -- The Breakers, Palm Beach, FL

Sponsored by SPARK

Join us at the retirement services industry's leading event for top marketing, sales, administration and record keeping professionals. Comprehensive agenda to meet the needs of 401(k) Plan Providers, Financial Advisors and Third Party Administrators.



[Guidance Overview]

DOL Proposes Definition of Investment Advice (PDF)
"The proposed definition of 'investment advice' is sweeping, particularly when compared to the current regulation and its five-part test. The proposed definition specifically states that making a recommendation regarding whether to take a distribution or rollover assets from a plan to an IRA or other plan will be investment advice.... In addition, the proposed definition provides that recommendations regarding investment managers results in fiduciary status[.]" (Groom Law Group, via The Investment Lawyer)  

Mergers and Acquisitions and the Death of the IRS Determination Letter Program (PDF)
"In planning for a transaction: [1] Determine what the target 401(k) plan's most recent determination letter covers -- how recent is it; [2] consider whether the target's 401(k) plan should be terminated in order to obtain an IRS determination letter; and [3] review with your legal counsel whether an opinion of seller's legal counsel should be required regarding the plan's qualified status." (Wilkins Finston Friedman Law Group LLP)  

Follow the Money: What Happens to the Proceeds of Class Action Settlements
"When you read in the paper about a large settlement in an excessive fee case or other claim involving a 401(k), ESOP or other ERISA governed plan, do you think about what happens next, and about how to distribute the money among the plan participants? ... If the parties and the court really focus on the definition, its terms can provide a great deal of guidance to the administrator with regard to exactly which current and former plan participants should receive distributions. Often, though, the class may have been superficially defined, in a manner that the lawyers feel will be sufficient to win court approval, but which may not, in fact, be precise enough to guide distribution of the proceeds and provide real guidance in that regard to the plan administrator." (Stephen Rosenberg, The Wagner Law Group)  

For Retirement Income, Wheels of Change Turn S-L-O-W-L-Y
"Among the prominent findings: In 1982, 44% of the total income paid to older households was from annuity-based sources, namely Social Security and traditional pensions; and in 2009, after nearly three decades, the same figure was 46%. Basically unchanged. This result won't surprise many retirement professionals. The initial wave of DB freezes often involved new entrants or shorter-tenured workers. So the idea that DB pension income would suddenly disappear never seemed likely.... But there's also evidence in the new paper that the DB to DC shift is indeed underway." (Vanguard)  

Beyond Auto-Enrollment: Decumulation and Retirement Income
"For plan sponsors with a long view -- one stretching beyond saving, down the lengthening span of retirement years -- helping participants plan for decumulation seems increasingly important. But having to choose from the array of products now targeting this trend is only complicated by the dearth of clear regulations detailing how to use them.... For all the variables, two things are definite: Good options are available, both product-driven and not, and participants need good education to understand them." (PLANSPONSOR)  

It's Early Days for Most Robos Eyeing the 401(k) Market
"Retirement planning is perhaps one of the hottest areas of specialization in the industry right now as U.S. retirement assets total nearly $25 trillion, including $7.6 trillion in IRAs and $6.8 trillion in defined contribution accounts, according to an Investment Company Institute report. However, there isn't much competition in the space yet, as most robo-advisers are focused on winning business from retail investors and advisers.... There is plenty of opportunity in the space, as many 401(k) participants who aren't auto-enrolled in a target-date fund need investment guidance." (Investment News)  

TDFs Continue Growth as Target-Risk Funds Lose Assets
"In the second quarter, target-date funds (TDFs) experienced $19.3 billion in positive inflows. Total assets under management (AUM) surpassed $760 billion at the end of the quarter. Target-risk funds saw aggregate outflows of $2.9 billion during the quarter. Total AUM at the end of second quarter was nearly $752 billion[.]" (PLANSPONSOR)  

An Analysis of Variable Annuity Surrender Fees (PDF)
"For this sample of contracts, the average surrender fee paid on any withdrawal is less than 1% of the surrendered amount. The median surrender fee paid as a percentage of the amount withdrawn was zero. The account at the 75th percentile also paid zero surrender fees. The average surrender charge on any surrender (partial or full) is 0.8%.... Of the accounts with surrenders, approximately ... 70% are IRA accounts." (American Council of Life Insurers [ACLI])  

American Families Highly Value Professional Help With Retirement Planning
"More than nine out of 10 (92%) respondents who indicated they have used a financial professional in the past said they believe the relationship is helping them achieve their financial goals, and 86% note that financial professionals can relieve the pressure of trying to plan for their family's financial future by themselves.... Half of the respondents who indicated they have worked with a financial professional in the past said that the relationship motivated them to achieve a comfortable retirement." (Allianz Life Insurance Company of North America)  

You Only Get One Shot at Retirement, So Plan Accordingly
"Some of the regrets may surprise you. Others are just common sense: [1] Not contributing enough to your 401(k) -- or borrowing from it.... [2] Failure to have a plan ... [3] Not planning for unexpected or catastrophic events ... [4] Retiring without considering how you'll spend your time ... [5] Not retiring earlier." (The Washington Post; subscription may be required)  

[Opinion]

SIFMA Raises Concerns with Proposed Fiduciary Standard at DOL Hearing
"SIFMA's members have long called for the implementation of a best interest or uniform fiduciary standard of care for brokers and advisors when providing personalized investment advice. On that the record is quite clear. Rather, we disagree with the process whereby one agency is developing yet another standard that will apply to only one sector of the retail investment market.... The bifurcation of standards will create confusion both for investors and the providers who must comply." (Securities Industry and Financial Markets Association [SIFMA])  

[Opinion]

Fee Disclosure: The Riddle Wrapped in a Mystery Inside an Enigma
"That's how [the author regards] disclosures of conflicts of interest made by many providers of financial services. You know, those providers with yawning conflicts that they seek to paper over with a (relatively) few confusing words of disclosure. Their attempts to bridge with disclosures the unbridgeable -- vast inherent conflicts in their business models -- beg the question whether the unbridgeable should ever be allowed anywhere near retirement plans and their participants in the first place." (Morningstar Advisor)  

Benefits in General; Executive Compensation

[Guidance Overview]

New Law Impacts Form 5500 Deadlines
"[Effective for taxable years beginning on or after January 1, 2016,] ... [t]he extension available for filing Forms 5500, 5500-SF ... and 5500-EZ ... has been lengthened from 2-1/2 months to 3-1/2 months beyond the general deadline of the last day of the 7th month after plan year end (e.g., November 15 instead of October 15 for calendar year plans). Not directly addressed was whether the filing deadline has been modified for Form 8955-SSA, Annual Registration Statement Identifying Separated Participants With Deferred Vested Benefits.... It appears that the deadline for providing a plan's Summary Annual Report (SAR) to participants and beneficiaries would be affected by the change to the filing extension for Form 5500." (Ascensus)  

[Guidance Overview]

SEC Adopts CEO Pay Ratio Disclosure Rule Required by Dodd-Frank
"The new rule requires companies to disclose, for the first time, the median employee's annual total compensation. Once this is disclosed, 50 percent of each company's workforce will learn that they are in the bottom half of pay at their company. Employees will also have greater visibility into how their compensation stacks up against compensation at competitors and peers. All of this has the potential to create workforce morale issues[.]" (Sidley Austin LLP)  

[Guidance Overview]

What The CEO Pay Ratio Rules Require, What to Do and What's Next
"Compliance is likely to be time-consuming and expensive.... The rules allow for the identification of the median employee only once every three years -- maybe.... There is some flexibility in selecting a snapshot date to measure the number of employees.... No exclusions or adjustments allowed for part-time, temporary and seasonal employees.... Limited relief for public companies with operations outside of the United States.... Transition rule for mergers-and-acquisitions (M&A) transactions.... Supplemental pay disclosure and alternative ratios are permitted." (McDermott Will & Emery)  

[Guidance Overview]

To-Do List for CEO Pay Ratio Disclosure Rules, Part 2
"The rules ... allow companies the option to make cost-of-living adjustments to the compensation of their employees in jurisdictions other than the jurisdiction in which the CEO resides when identifying the median employee ... provided that the adjustment is applied to all such employees included in the calculation." (Winston & Strawn LLP)  

Prominent Benefits Attorney Morton ('Mort') Harris, 81, Dies
"Morton Harris, 81, died Monday August 3, 2015 at St. Joseph's Hospital in Atlanta, Ga.... Morton was a partner in the law firm of Hatcher, Stubbs, Land, Hollis & Rothschild, LLP and practiced law in Columbus [Georgia] for over 50 years specializing in tax, business, employee benefits, estate and trust law. He received numerous honors and awards throughout his career [including] ... Fellow, American College of Tax Counsel, Fellow, American College of Trust and Estate Counsel, [and] Fellow, American College of Employee Benefits Counsel[.] ... An active participant in community affairs, Morton served as a Trustee of the City of Columbus Pension Board[.]" (Columbus Ledger-Inquirer)  

CFO Pay Up Nearly 7% in 2014
"Mercer's latest analysis of compensation for CFOs at 159 companies in the S&P 500 shows that total direct compensation (TDC) increased a median 6.7% in 2014 compared to 5.6% in 2013. All pay elements increased in 2014: short-term incentives (STI) led the way with a median increase of 8.0% followed by long-term incentives (LTI) and base salary at 7.2% and 3.2%, respectively. While these pay elements increased in 2013 as well, growth rates were generally lower across the board." (Mercer)  

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