Retirement Plans Newsletter

December 31, 2015

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ERISA Attorney
Kraw Law Group, a Professional Corporation
in CA

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R.J.L. Pension Services, Inc.
in FL

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BENETECH, INC.
in CA

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Third Circuit Grants Victory to Participants Challenging Church Plan Status
"Stated simply, this ruling holds the plan should have been complying with ERISA the entire time, but wasn't. The consequences are staggering considering state law, which applied in the absence of ERISA, usually has little or no requirements related to funding.... An even more concerning issue for sponsors of church plans where a church established the plan, but a church agency is maintaining it, is the court's footnote on who can properly be considered a church agency ... If this interpretation would be enforced, it would seriously undermine the use of the church plan exemption in almost all instances except those involving plans sponsored by actual churches or plans maintained by traditional church pension board[.]" [Kaplan v. St. Peter's Healthcare System, No. 15-1172 (3d Cir. Dec. 29, 2015)] (Fiduciary Matters Blog)  


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Appellate Court Sets Precedent for Church Plan Cases
"Prior to 1980, a plan had to be established and maintained by a church. After 1980, a plan had to be established by a church, but could be maintained by a church agency. For church plan exemption, there are two requirements -- establishment and maintenance -- and only the maintenance requirement is expanded by the use of the word 'includes,' the court said." [Kaplan v. St. Peter's Healthcare System, No. 15-1172 (3d Cir. Dec. 29, 2015)] (PLANSPONSOR)  

IRS Correction Methods for Missed Deferrals Under 401(k) and 403(b) Plans
"[Rev. Proc. 2015-28 provides] guidance on how to make corrections when employers accidentally fail to start or escalate deferrals for employees in a 401(k) or 403(b) plan. If an employer can comply with the rules, the guidance is very favorable.... [The article summarizes the new procedures for correction of] Failure to automatically enroll an eligible employee or escalate an automatically enrolled employee ... Failure to enroll an eligible employee and corrected within 3 months of the failure ... Failure to enroll an eligible employee and corrected after 3 months but on or before the allowable correction period." (TRI-AD)  

De-Risking Your Pension Plan: Do New Regs Make 2016 the Best Time to Offer Lump-Sum Distributions? (PDF)
"This article offers a brief review of the rationale for de-risking and the major strategies that DB plan sponsors typically use. Next, it describes how lump-sum windows work, including the major pros and cons for both plan sponsors and employees. The regulatory issues that are the chief reason why 2016 stands out as a ripe year for offering a lump-sum window are summarized. It concludes with a big picture view of how these issues might affect DB plan sponsors' thinking about their fiduciary responsibilities." (Zorast Wadia of Milliman, in Benefits Law Journal)  

401(k) Plan Participants Have Good Understanding of How TDFs Work
"[When survey participants were asked] how they planned to use their accumulated TDF assets in terms of other sources of retirement income, only a tiny percentage of participants said they expected to disinvest from the market at retirement and purchase annuities or put their assets into a money market fund.... [T]he majority of investors expect their employer-sponsored retirement plan to be the primary source of their income in retirement. Most people don't plan to withdraw their assets or buy an annuity at retirement. Instead they plan to take systematic withdrawals or spend their savings as needed in retirement, a mindset jibes well with a 'through' glide path." (Employee Benefit News)  

Rising Individual Debt Could Put Retirement Planning at Risk
"[In one study,] 59 percent of ... investors told researchers that retirement planning is their top personal financial objective for year 2016.... Some of these investors did include paying off debt on their list, but those investors comprised only 14 percent of the total.... [Another study] found that 'get out of debt' is the top New Year's resolution for 2016. This was named by 32 percent of those surveyed. Retirement saving and planning did make [this study's] list, but only in eighth place." (InsuranceNewsNet.com)  

DOL Fiduciary Rule Could Take $2.4 Billion Bite Out of Financial Services Industry
"The $2.4 billion number is Morningstar's low-end estimate of prohibited mutual fund front-end load commissions and mutual fund 12b-1 fees paid to full-service wealth management firms for commission-based IRAs. It is a revenue number, according to Morningstar. Some industry groups have interpreted the lost revenue to financial advisory firms as a cost of the proposed regulation." (InvestmentNews)  

Benefits in General; Executive Compensation

Nonqualified Plan Sponsor Settles FICA Taxes Lawsuit for $3.35 Million
"The settlement amount is $3,350,000, and includes attorneys' costs, any award to the lead plaintiff in the case and litigation expenses. The settlement also provides that retirees will receive a 40% gross up of benefit distributions to cover their tax expenses." [Davidson v. Henkel Corp., No. 12-cv-14103 (E.D. Mich. Jan. 6, 2015; settlement approved Dec. 8, 2015)] (PLANSPONSOR)  

ISS's Equity Plan Scorecard: A New Era in Public Company Equity Compensation Plans (PDF)
8 pages. "[The ISS Equity Plan Scorecard] is predicated on detailed guidelines used by ISS when determining if it will recommend that shareholders vote for approval of an equity compensation plan and should be considered by publicly-traded companies when designing or amending their equity compensation plans. The plans subject to the Scorecard include stock option plans, restricted stock plans, omnibus equity plans, and stock-settled stock appreciation rights plans." (Holland & Knight)  

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BenefitsLink Retirement Plans Newsletter, ISSN no. 1536-9587. Copyright 2015 BenefitsLink.com, Inc. All materials contained in this newsletter are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of BenefitsLink.com, Inc., or in the case of third party materials, the owner of that content. You may not alter or remove any trademark, copyright or other notice from copies of the content.

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