Retirement Plans Newsletter

September 1, 2015

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Employee Benefits Jobs


Webcasts and Conferences

Living to 100: Keys to Longevity
September 3, 2015 WEBCAST
(International Foundation of Employee Benefit Plans [IFEBP])

Obtaining Actionable Data From Your Carriers and Vendors
September 10, 2015 WEBCAST
(International Foundation of Employee Benefit Plans [IFEBP])

Implementing Your Wellness Program
September 17, 2015 WEBCAST
(International Foundation of Employee Benefit Plans [IFEBP])

Investment Boot Camp for Pension Actuaries
October 14, 2015 in TX
(Society of Actuaries)

Winning with Self-Directed IRAs Conference
October 22, 2015 in NV
(Retirement Industry Trust Association [RITA])

View All Webcasts and Conferences


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[Official Guidance]

Text of IRS Project Questionnaire: Reporting of 4971(a) Excise Tax by 401(k) Plans (PDF)
"Our records indicate you sponsor a 401(k) plan for the benefit of your employees and you filed a Form 5330 (Return of Excise Taxes Related to Employee Benefit Plans) reporting excise tax under Internal Revenue Code (IRC) section 4971(a). This appears to be in error as 401(k) plans are not subject to the minimum funding requirements and, therefore, would not owe this type of excise tax.... It is important to us that you report the correct amount of excise tax due for transactions involving your retirement plan. Please review your records including the information regarding excise taxes and have someone knowledgeable about your above referenced plan provide the following information." (Internal Revenue Service [IRS])  


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Suing to Recover Benefit Overpayments? It May Not Be So Easy
"As plan audits have uncovered more and more payment errors, many plans have acted as if no time limits or other restrictions applied to their repayment demands.... [P]lan fiduciaries can consider the following steps to improve their chances of prevailing in these suits: [1] Make sure that plans have specific provisions for recouping overpayments. [2] Give the payee the opportunity to argue that the payment is correct under ERISA's claims and appeals procedures.... [3] Do self-audits regularly and if a lawsuit seems necessary, file it promptly. [4] Pay attention when retirees call to question whether they are receiving the right payments." [Pharmacia Corp. Supp. Pension Plan v. Weldon, No. 4:14CV1498 (E.D. Mo. Aug. 24, 2015)] (Osler, Hoskin & Harcourt LLP)  

Employee vs. Independent Contractor and Retirement Plan Impact
"Due to the employer tax implications, all employers should work with appropriate counsel to make certain that no employee is ever misclassified as an independent contractor. However, 403(b) plan sponsors should recognize the additional exposure related to the universal availability requirement of such plans, and 457(b) plan sponsors should recognize the special rules regarding such plans." (National Tax-Deferred Savings Association [NTSA])  

EPCU Summary Report: Reporting of 4979 Excise Tax by 401(k) Plans Using Form 5330
"The goal of this project was to verify nondiscrimination compliance was met by requesting and reviewing information to: [1] Determine the plan provisions properly allowed and adopted a 401(k) as part of a CODA. [2] Determine compliance with IRC Section 401(k)(11) for SIMPLE 401(k) plans. [3] Determine compliance with IRC Section 401(k)(12) for Safe Harbor plans. [4] Verify corrective measures were taken to satisfy ADP or ACP tests and any applicable 1099-Rs were issued. [5] Verify reporting and the accuracy of calculations used to determine the amount of excise tax asserted under IRC Section 4979, requesting corrections when errors were identified." (Internal Revenue Service [IRS])  

EPCU Summary Report: Application of 403(b) Universal Availability Rule and Use of Plan Documents by Higher Education Institutions
"The purpose of the project was to educate plan sponsors on aspects of UA that higher education organizations may not understand, and to provide information regarding compliance with the new plan document requirements.... About 40% of the respondents reported one or more issues with possible future impact. The area with the largest possible future impact is the communication of the opportunity to begin regular elective deferrals, 48% of the entities did so only once at hire. In addition, only 30% communicated the opportunity to change regular elective deferrals only once at hire." (Internal Revenue Service [IRS])  

EPCU Summary Report: Application of 403(b) Universal Availability Rule by K-12 Schools
"We discovered... that over ninety percent of schools offer employees the opportunity to defer salary to a 403(b) plan. Most appear to make the plan available with little restriction as to minimum deferral amounts required. The vast majority exclude substitute and part-time teachers as a group ... Some schools allow excludable employees working under 20 hours to participate ... Nearly half offered other deferral options like a 401(k) plan in addition to the 403(b)." (Internal Revenue Service [IRS])  

Passive and Target Date Trends in Defined Contribution Plans
"As plan sponsors seek to balance the forces of fiduciary governance, modern portfolio theory, behavioral finance, and industry trends, plans have reduced exposure to specialty asset classes and overlapping options.... Despite this trend, there are two places where plan menus have expanded: target date fund series and passively managed options. This research brief will illustrate these trends and provide context for plan sponsors evaluating such changes within their plans." (CAPTRUST Financial Advisors)  

Guidelines for Guaranteed Income Touchpoints (PDF)
"The purpose of this standard is to provide a framework to map participant web recordkeeping systems to income product requirements, and to identify gaps necessary for developing solutions specific to their individual recordkeeping systems, desired experience and strategy. This process allows a recordkeeper to eliminate analysis for transactions and services not relevant to their web offering, eliminate, at their discretion, requirements not specific to the income product or products they want to offer, and provides a basic view of the remaining requirements." [Also see SPARK Guaranteed Income Touchpoints Tables (Excel spreadsheet).] (The SPARK Institute)  

Have 'State-of-the-Art' Investment Menus Backfired on Fiduciaries?
"Adding complex investment options that participants don't understand is like asking them to play Russian Roulette with their largest pile of money. Additionally, 52% of participants surveyed said that their 401k investment information is more confusing than their healthcare benefit information.... The confusion is not limited to 'complex' investments. Even traditional asset classes confound many who have little to no education in the field of investments." (Fiduciary News)  

Change in Average 401(k) Account Balances from January 1, 2014 Through September 1, 2015 (PDF)
This report shows the change in average 401(k) account balances, grouped by age and tenure, from January 1, 2014 through September 1, 2015, counting only those participants who had an account balance at the end of 2013. (Employee Benefit Research Institute [EBRI])  

Model Retirement-Saver Portfolios for T. Rowe Price Investors
"Although the temptation to earn a quick buck by rolling out trendy new funds has been too much for many rivals, T. Rowe has generally fielded a utilitarian lineup. And while manager departures have picked up in recent years ... T. Rowe has historically done a good job of retaining its investment personnel. Nor has the firm been reticent to close funds pre-emptively in an effort to preserve performance: As of late August 2015, 10 of the firm's 135 funds were closed to new investors. Yet, those closures present a few challenges for investors building a well-rounded T. Rowe Price portfolio from scratch today." (Morningstar)  

Tables Provide Summary of Multiemployer Actuarial Certifications Received by IRS (PDF)
"The charts [in this document] are comparisons of the certification information received each year by status... The [first] chart reflects a sharp increase in plans in Critical Status occurring in 2009, most likely due to economic issues. Subsequent years show some, but not full recovery.... The [second] chart reflects a sharp increase in plans in Seriously Endangered Status occurring in 2009, most likely due to economic issues. Subsequent years show decreasing percentage with 2013 rates lower than 2008." (Internal Revenue Service [IRS])  

Pension Finance Update, August 2015
"Fears of a slowdown in China rippled through financial markets in August, producing drops in stock markets around the world and erasing most of the 'cushion' pension sponsors had built up during 2015. Both model pension plans we track lost ground in August -- Plan A slipped more than 3% and Plan B lost more than 1% on the month -- but both plans remain up about 2% on the year through August." (October Three Consulting)  

Share Class Offerings Shift with Fiduciary Focus
"Overall ... nearly 60% of asset managers will make changes to share class offerings heading into 2016. In this group, a quarter plans to add share classes, 'primarily cited as R6 or some zero revenue share class,' and a similar number will move away from share classes that generate revenue through commissions or sales fees. The movement away from commissions and revenue sharing reflects regulators' focus on fiduciary care and conflicts of interest." (planadviser)  

[Opinion]

Is the DOL Fiduciary Proposal Really a Big Problem for Smaller Firms? Why Tech Is a Game Changer
"The issue of serving smaller clients and the retirement plans of small businesses comes down to two things: technology and business model. Numerous broker-dealer executives have argued their firm and advisors will not be able to serve smaller accounts if they are no longer able to be compensated through commissions.... Is the proposed fiduciary rule the problem, or is there an issue with current business practices, infrastructure and technology among broker-dealers?" (Financial Planning)  

[Opinion]

CalPERS Looks to Cut Financial Risk?
"If you're already in a pension deficit, taking on more risk investing in stocks, high yield bonds, emerging markets, or even real estate, private equity and hedge funds, you might end up digging an even bigger hole for your pension, one you'll never climb out of. On the investment front, CalPERS is doing what it has to do to reduce risk and stabilize the volatility of its funding level. It wisely nuked its hedge fund program which it never really took seriously and is now looking to reduce risk by increasing its exposure to bonds." (Pension Pulse)  

Benefits in General; Executive Compensation

What Constitutes 'Retaliation' under ERISA?
"[A] viable cause of action under ERISA for retaliation requires, to succeed, a strong linkage between a job action or other harmful decision and the participant's request for benefits or effort to protect those benefits. Most of the typical disputes that go on day after day between participants and plan administrators don't rise to this level, no matter how it feels to the particular participant trapped in the dispute. Instead, a viable ERISA claim for retaliation looks much more like the facts of [Perez v. Brain], in which the [DOL recently] recovered several hundred thousand dollars in back pay and other damages for a trio of employees and plan participants who blew the whistle on malfeasance by a plan fiduciary and cooperated with a federal criminal investigation." (Stephen Rosenberg, The Wagner Law Group)  

International Employers Challenged by National Benefit Plan Mandates
"Employers need to understand which benefits are automatically provided by a foreign government and which are required to be provided by employers for their employees working in that country. For example, paid time off benefits, such as vacation, holidays, maternity and paternity leave, and medical leave, may not be required for employers in the US but are common government-mandated benefits in other countries." (Moss Adams LLP)  

Press Releases

PBGC to Pay Benefits at Standard Register
PBGC [Pension Benefit Guaranty Corporation]

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