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[Official Guidance]
Text of IRS Final Regs: Transitional Amendments to Satisfy the Market Rate of Return Rules for Hybrid Retirement Plans
31 pages. "These final regulations relate to previously issued final regulations that specify permitted interest crediting rates for purposes of the requirement that an applicable defined benefit plan not provide for interest credits (or equivalent amounts) at an effective rate that is greater than a market rate of return. These final regulations permit a plan sponsor of an applicable defined benefit plan that does not comply with the market rate of return requirement to amend the plan in order to change to an interest crediting rate that is permitted under the previously issued final hybrid plan regulations without violating the anti-cutback rules of section 411(d)(6)."
(Internal Revenue Service [IRS])
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[Guidance Overview]
Bipartisan Budget Act of 2015 Affects DB Plans in Several Ways (PDF)
"In [one] illustration, premiums would increase slightly even though the plan becomes significantly better funded over the period.... Planning ahead for these premium increases is crucial for plan sponsors. Sponsors must consider ways to reduce these costs including additional pension funding and consideration of annuity or lump sum buyouts. However, annuity and lump sum buyouts, which reduce PBGC per participant premiums but not variable premiums, are still costly given the continued low level of interest rates."
(Ekon Benefits)
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Five Questions Every DC Sponsor Should Ask (PDF)
"[1] What is the objective of our DC Plan? ... [2] What are the demographics and behaviors of our employee population? ... [3] Do we want our employees to remain in our plan after they have retired? ... [4] If we choose to offer a retirement income option, does it need to provide 'guaranteed' income to participants?"
(SEI)
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Guide to Safe Harbor Plans
"What type of safe harbor should you have? ... What notices must the employees receive? ... Who is eligible for the safe harbor contribution? ... How are contributions to a safe harbor plan calculated? ... Can an additional match be made in addition to the safe harbor? ... What about adding a profit sharing or employer contribution to a safe harbor plan? ... When must a safe harbor plan be adopted? ... Can safe harbor contributions be subject to a vesting schedule? ... May safe harbor contributions be withdrawn at any time? ... Can the plan sponsor change the safe harbor mid-year?"
(Benefit Resources, Inc.)
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No More IRS Determination Letters Can Make Some Nervous
"Without a current favorable IRS letter, there is increased risk that the IRS might determine upon audit that the plan document is not qualified in form ... Starting in 2017, alternative evidence of plan qualification will need to be developed so sponsors and their participants can resolve issues such as: Mergers and acquisitions ... Audited financial statements.... Collective trusts ... Individual bankruptcy."
(Vanguard)
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The Lost Generation: Engaging Millennials in Saving for Retirement (PDF)
24 pages. "46% of Millennials do not get any information on financial matters through their workplace or educational establishment.... 77% want to be told the stark reality of their post-retirement finances and health, demanding more shocking messaging from insurers and other financial services providers.... Millennials would allocate an average of 42% of their portfolio to Social Finance products.... 63% of Millennials would save more if their pension account allowed multiple withdrawals throughout their lifetime."
(BNY Mellon)
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Helping America Plan for Retirement: Brookings and Government Reps Discuss Strategy
An audio recording of the event is available for download, on the target web page. "Despite the wide availability of information about savings vehicles and financial calculators, relatively few people plan for their golden years until it's too late to do much about it. Both public policymakers and private firms have worked to engage individuals to plan in the decades before their retirement, with only mixed success. On November 12, the Retirement Security Project at the Brookings Institution hosted an event with the Consumer Financial Protection Bureau (CFPB) and Social Security Administration (SSA) to explore these issues."
(The Brookings Institution)
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Aon Hewitt 401(k) Index and Observations, October 2015
"October was a slow month for trades in defined contribution plans as participants transferred an average of 0.018% of total balances per day -- the lowest monthly trading level in three years since June 2014. When participants made trades, they favored fixed income over equities, with 77 percent of the trading days showing more inflows to fixed income.... When combining contributions, trades, and market activity, participants' overall allocation to equities increased to 65.5% at the end of October up from 64.6% at the end of September."
(Aon Hewitt)
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Sixth Circuit: Use of Prudent Process by ESOP Fiduciaries Satisfies Duty of Prudence
"In its analysis, the court noted the Modern Portfolio Theory, which assumes that securities markets incorporate all information that is known or knowable about the future prospects of a security and that the current market price is a reliable estimate of the value of the stock. Citing Dudenhoeffer, the Sixth Circuit went on to hold that, without a showing of some special circumstances, it is prudent for an ESOP fiduciary to rely on a security's market price in its decision-making process and that a fiduciary's process is not imprudent simply for failing to recognize that the market was over or undervaluing the stock." [Pfeil v. State Street, No. 14-1491 (6th Cir. Nov. 10, 2015)]
(Practical Law Company)
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Congress Working to Dismantle DOL Fiduciary Proposal
"The Retirement Choice Protection Act of 2015 (H.R. 3922) ... would transfer DOL authority for oversight of [IRAs] to the Treasury Department. The bill also includes a 'best interest standard for advice fiduciaries' to IRAs and retirement plans not subject to ERISA. Under the standard, advisers could make recommendations on a limited range of products, including proprietary products, so long as the adviser makes proper disclosures. The bill also would allow advisers to receive compensation that varies based on the transaction, services or products involved, also dependent on proper disclosures."
(Bloomberg BNA)
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More Fiduciary Rule Questions Answered, Part 3
"[1] What's going on with ERISA in regards to rollover abuses with cross-selling and capturing rollover assets? ... [2] Under BICE, doesn't the advisor have to report the [investment performance] returns to the SEC? ... [3] How do you feel the BICE exemption is going to impact professional trusted advisors that represent a captive insurance carrier who must sell proprietary products that are commission-based? ... [4] Would complex annuities or structured notes be [included in the] complex products ban? ... [5] How can you execute a contract before any of the services are discussed? Did you mean delivered?"
(fi360)
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Regulators May Put Robo Firms Under Fiduciary Microscope
"Following industry suggestions that robo advisors may be violating investment laws, SEC Commissioner Kara Stein is publicly questioning whether a fiduciary duty applies to automated advice -- and whether existing laws should be revised to account for the digital wealth management platforms.... [Stein's] questions touched upon [a recent report's] main thrust: that robos do not provide personalized investment advice, do not minimize investment costs, are not free from conflicts of interest, do not meet a high standard of care, do not act in a client's best interest, exclude ERISA accounts and do not meet the Department of Labor's proposed best interest contract as part of a fiduciary standard."
(On Wall Street)
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Cypen & Cypen Newsletter for November 12, 2015
Topics include: [1] New York City's pension managers were paid over $700 million in 2015; [2] Military members oppose pension reform; [3] The most terrifying retirement statistic yet? [4] The future of Social Security: answers to key questions; [5] Survey of employees without workplace retirement plans; [6] Law firms have highest average retirement account balances (surprise); and [7] Retirement age is a magic number.
(Cypen & Cypen)
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Creditors Can Reach Inherited IRA Under Kansas Law
"The court rejected [the IRA owner's] argument that the inherited IRA was originally a qualifying 'retirement plan,' finding that 'such a backward-looking interpretation would render meaningless the requirement that the funds presently be in a "retirement plan" (and not merely that they be in an account qualified under the particular sections of the tax code).' " [Mosby v. Clark, No. 15-915 (D. Kans. Oct. 30, 2015)]
(Bloomberg BNA)
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[Opinion]
Bill Would Protect Multiemployer Plan Participants from Benefit Cuts
"The Teamsters Union has been working with several members of Congress to develop legislation that would prevent massive cuts to some pension beneficiaries.... S.1631 and House Resolution 2844, the Keep Our Pension Promises Act, sponsored by Sanders in the Senate and Kaptur in the House, not only would restore the anti-cutback rule but also would help prevent multiemployer pension plans from failing by making pension obligations a higher priority in bankruptcy proceedings, which would reduce the number of plans that become 'orphaned.' The bill also creates a legacy fund within the Pension Benefit
Guaranty Corporation by closing two tax loopholes that only benefit the wealthiest members of society."
(The Columbus Dispatch)
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Benefits in General; Executive Compensation
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Is a Severance Policy More Like an ERISA Plan, a Writing Desk, or a Raven?
"[If] the administration of a severance policy requires a measurable amount of discretion, you can bank on it being treated as an ERISA plan.... Having a severance policy governed by ERISA is not a crisis, but an opportunity. Instead of waiting for a court to apply those factors and decide for you, why not just go ahead and make sure that your severance policy is an ERISA plan? Yes, it's true that ERISA requires administrative hurdles, but these are relatively straight-forward ... These administrative requirements are outweighed by ERISA's advantages."
(DLA Piper LLP via Lexology)
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[Opinion]
Your HR/Benefits/Payroll is Leaking -- and Your Broker May be Causing Some of the Leaks
"Think about the number of vendors an employer may have in the HR/Benefits/Payroll areas.... Technology Solutions ... Advisors ... Service Providers ... Now we are seeing all kinds of additional products entering the market including financial wellness programs, employee discount programs, employee gifting programs, college planning services and many more types of companies hoping employers will offer their services to the employees. Many of the programs, when rolled out, fail, because the employers are already overwhelmed and for the employee there is information overload."
(Joe Markland)
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Press Releases
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David Rhett Baker, J.D., Editor and Publisher
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