Retirement Plans Newsletter

January 4, 2016

BenefitsLink.com logo EmployeeBenefitsJobs.com logo LinkedIn logo Twitter logo Facebook logo
Get Health & Welfare News | Advertise | Previous Issues | Search

Employee Benefits Jobs

Defined Contribution Plan Administrator
N.A. Falcone & Associates, Inc.
in PA

Employee Benefits Producer / Agent - Experienced
Owen-Dunn Insurance Services
in CA

Retirement Plan Services Administrator
Dixon Hughes Goodman, LLP
in VA

401(k) Plan Administrator
Alliance Pension Consultants, LLC
in IL

Post Your Job

View All Jobs

RSS feed for jobs RSS Feed: All Jobs


Webcasts and Conferences

IRA Basics
February 4, 2016 WEBCAST
(Ascensus)

View All Webcasts and Conferences


Discussions


Subscribe Now to This Newsletter (free)

We also publish the BenefitsLink Health & Welfare Plans Newsletter (free): Subscribe Now


[Official Guidance]

Text of IRS Notice 2016-03: Revisions to the Employee Plans Determination Letter Program Regarding Cycle A Elections, Determination Letter Expiration Dates, and Extension of Deadlines for Certain Defined Contribution Pre-Approved Plans (PDF)
"In anticipation of the elimination, effective January 1, 2017, of the 5-year remedial amendment cycle system for individually designed plans under the Employee Plans determination letter program, this notice provides that ... [the IRS] will issue guidance providing that: [1] controlled groups and affiliated service groups that have previously made a Cycle A election are permitted to submit determination letter applications during the Cycle A submission period beginning February 1, 2016, and ending January 31, 2017; [2] expiration dates on determination letters issued prior to January 4, 2016, are no longer operative; and [3] the period during which certain employers may, on or after January 1, 2016, establish or adopt a defined contribution pre-approved plan and, if permissible, apply for a determination letter, is extended from April 30, 2016, to April 30, 2017." (Internal Revenue Service [IRS])  


[Advert.]

Inheriting an IRA or Employer-Sponsored Retirement Plan

Sponsored by Lorman and BenefitsLink

January 26 webinar - Learn how to spot and avoid some of the common mistakes taxpayers make with their inherited IRAs. BenefitsLink discount.



[Guidance Overview]

Church Plan Law Changes as Part of the Omnibus Budget Deal; Church 401(a) and 403(b) Plan Transfers and Mergers Now Permitted (PDF)
"Section 336 of the Protecting Americans from Tax Hikes (PATH) Act (S. 2029) ... contains a number of significant provisions affecting church plans. Though generally technical and narrowly targeted in nature, they are nevertheless important ... As noted in the legislative history to the Act, none of this is intended to have, or appears to have, any impact on the ongoing litigation against church-related hospitals over the church plan definition." (Groom Law Group)  

[Guidance Overview]

New GASB Exposure Draft Addresses Pension Issues
"The proposed change with respect to the measure of payroll will eliminate an unnecessary administrative burden.... The proposed change concerning the deviation from actuarial standards is not surprising as similar language was included in Statements No. 74 and 75 relating to reporting for postemployment benefit plans other than pension plans ... The proposed change with respect to member contributions that are paid by the employer clarifies GASB's intent in response to some preliminary guidance provided by AICPA that would have treated these contributions as employer contributions." (Cheiron)  

No Good Deed Goes Unpunished: Don't Forget the Compensation Ratio Test
"A plan sponsor experiencing financial challenges could choose to pay bonuses only to the NHCEs. Such generosity is commendable, but could end up costing the plan sponsor an additional plan contribution in certain situations. For instance, if the plan document excludes bonuses from the definition of plan compensation, the generous plan sponsor would fail the Compensation Ratio Test, and the previously excluded bonuses would then have to be included when computing the employer contribution in order to eliminate the unexpectedly discriminatory definition of compensation." (Belfint Lyons & Shuman, CPAs)  

401(k) Lawsuit Targets HR Outsourcer and Trustee
"Many 401(k) record keepers offer better pricing in the form of higher revenue sharing to plan sponsors if they use the record keeper's proprietary funds. Though the record keeper is generally not considered a fiduciary because the plan or their advisor selects the investments, it certainly raises questions of that fiduciary making the selections and puts a greater burden on due diligence and monitoring of higher revenue, proprietary funds." (401kTV)  


[Advert.]

403(b) Masters Attend the 2016 403(b) Summit, Jan. 21-23

Sponsored by NTSA

Attention all 403(b) Masters! Soak up the sun in Tucson, AZ by registering for the 2016 403(b) Summit the ONLY conference for those in the 403(b) and 457 marketplaces. Mingle with your fellow masters while earning CE credits from innovative sessions.



Waiting on an In-Plan Income Safe Harbor
"Defined contribution retirement plan sponsors remain cautious and curious about structured withdrawal products.... Primary points of concern include uncertainty around how plan sponsors may be held accountable for the actions of annuity providers once they have turned over participants' assets -- and the challenge of getting a good deal in the current interest rate environment." (planadviser)  

Change in Average 401(k) Account Balances by Age and Tenure for 2015 (PDF)
The report shows the change in average 401(k) account balances during 2015, grouped by age and tenure, counting only those participants who had an account balance at the end of 2013. (Employee Benefit Research Institute [EBRI])  

Monthly Change in Average 401(k) Account Balances January 1, 2014 through January 1, 2016 (PDF)
The report shows the change in average 401(k) account balances, grouped by age and tenure, from January 1, 2014 through January 1, 2016, counting only those participants who had an account balance at the end of 2013. (Employee Benefit Research Institute [EBRI])  

Measuring Economic Preparation for Retirement: Income Versus Consumption
"[The authors] estimate several measures of the income replacement rate ... [and] compare these income replacement rates with a consumption-based measure of economic preparation that takes into account the ultimate consequences for the retirement-to-death consumption path.... [They find] that the income replacement rate is of little use for assessing economic preparation for retirement: the chances that someone with a low income replacement rate is well prepared are not much different from the chances that someone with a high income replacement rate is well prepared." (University of Michigan Retirement Research Center [MRRC])  

Top Issue in 2016 for Advisers: The DOL Fiduciary Rule and the Best Interests Contract
"The rule has the potential to completely reshape the landscape of financial advice, force broker-dealers to reinvent themselves... and force financial services product manufacturers for the first time ever to compete solely on the merits of their products rather than the size of the commissions they can pay.... [T]here seems little doubt that 2016 will be a seminal transition year that sets the stage for how financial advice will be delivered in the coming decades -- a tremendous opportunity for advisors (and the companies serving them) who are prepared for the change, and the beginning of the end for those companies who have not positioned themselves for an advice-centric future." (Michael Kitces in Nerd's Eye View)  

Corporate Pension Plan Funding Levels Show Little Change
"The pension funded status of the nation's largest corporate plan sponsors finished the year unchanged compared with the end of 2014, due in large part to a rise in interest rates mostly offset by a weak global stock market ... [T]he aggregate pension funded status is estimated to be 82% at the end of 2015, which is the same as it was at the end of 2014.... [T]he pension deficit narrowed modestly by $28 billion to $291 billion at the end of 2015, compared to a $319 billion deficit at the end of 2014." (Towers Watson)  

California Labor Relations Board Rules Against San Diego's Pension Cutbacks
"A new state labor board ruling casts doubt on San Diego's aggressive pension cutbacks and orders the city to spend millions creating retroactive pensions for roughly 2,000 employees hired since those cutbacks took effect. City Atty. Jan Goldsmith ... predicted that a state appellate court would nullify the ruling and vindicate the pension cutbacks, which city voters easily approved as Proposition B in 2012. The measure replaced guaranteed pensions with 401(k)-style retirement plans for most new city hires." (Los Angeles Times)  

[Opinion]

The DOL Pokes the Sleeping Bear
"The proposed DOL regulation, if finalized in its current form, will undermine California's current statute which uses formula-based, cash balance-style accounts for the Golden State's private sector retirement savings program. The DOL's proposed regulation requires that participants in state-sponsored retirement savings programs possess the same unrestricted right to withdraw their retirement savings as IRA participants possess. This unrestricted right of withdrawal will create the possibility of a 'run on the bank' if the assets in the proposed California state retirement plan are insufficient to pay larger formula-based claims established by the California statute." (Prof. Edward Zelinsky, OUPblog)  

[Opinion]

A Smarter Plan to Make Retirement Savings Last
"The current system -- a mix of 401(k)s and [IRAs] -- is broken.... In our plan, the more than 95 million workers without a pension plan would each have his or her own G.R.A. managed by an independent federal agency. Workers and employers would each contribute a mandatory minimum of 1.5 percent of the salary or contract. The current tax deduction for retirement savings would be converted to a $600 refundable tax credit to pay for the contributions of households below median income." (Teresa Ghilarducci and Hamilton E. James, in The New York Times; subscription may be required)  

[Opinion]

Number of Workers Per Retiree Declines Worldwide
"In 1950, the world's median age was 23, allowing about 12 people of working age per elderly individual; today the median age is about 30, with eight people of working age per elderly individual. Countries risk economic chaos by not planning ahead to the challenges of aging populations. Options include increased immigration, incentives on fertility, higher retirement ages, and reduced benefits in retirement and health care for the elderly." (YaleGlobal Online)  

Benefits in General; Executive Compensation

Coal Company Gets Bankruptcy Court Approval to Nix CBAs, Retiree Benefits
"In her Dec. 28 opinion, Judge Tamara O. Mitchell of the U.S. Bankruptcy Court for the Northern District of Alabama granted the motion by the company and its subsidiaries requesting authorization to reject their current CBAs and terminate retiree benefits allowing them to continue with a pending sale of their mining operations. This case stems from the decline of the global metallurgical coal industry since 2011, and the court recognized the impact the ruling will have on employees, retirees, creditors, vendors, the city and the state." [In re Walter Energy, Inc., No. 15-02741 (Bankr. N.D. Ala. Dec. 28, 2015)] (Bloomberg BNA)  

Recent Developments in Employee Benefits (PDF)
13 pages. Articles include: [1] Defining and using compensation in defined contribution plans; [2] Year-end health coverage reporting requirements; [3] Bipartisan Budget Act of 2015 includes pension and healthcare changes; [4] A longer life expectancy does have its downside; [5] The BPS&M Pension Liability Index. (Bryan, Pendleton, Swats & McAllister, LLC)  

Exit Interview: EBRI's Dallas Salisbury
"Dallas Salisbury retired in December from his position as president and CEO of the Employee Benefit Research Institute, an organization he helped get off the ground in 1978. [In this interview,] Salisbury, who will maintain ties to EBRI as president emeritus and resident fellow, [talks] about some of the biggest changes he's seen in the employer-sponsored healthcare and retirement benefits landscape over the course of his career." (Employee Benefit News)  

Are You Handling Your FICA Taxes on Deferred Compensation Properly?
"In defined benefit (DB) SERPs and Restoration Plans ... there are multiple ways of handling the FICA situation. Most prominently, the sponsor may calculate (and remit) FICA taxes when they are reasonably ascertainable ... or by early inclusion which essentially means that FICA is calculated and paid annually. Early inclusion is sometimes more beneficial than waiting until retirement, but it is also more administratively complex.... Suppose your plan specifies early inclusion and you've not been doing that, do you have a problem? You might." (Benefits and Compensation with John Lowell)  

Connect   LinkedIn logo   Twitter logo   Facebook logo

BenefitsLink.com, Inc.
1298 Minnesota Avenue, Suite H
Winter Park, Florida 32789
(407) 644-4146

Lois Baker, J.D., President <loisbaker@benefitslink.com>
David Rhett Baker, J.D., Editor and Publisher <davebaker@benefitslink.com>
Holly Horton, Business Manager <hollyhorton@benefitslink.com>

BenefitsLink Retirement Plans Newsletter, ISSN no. 1536-9587. Copyright 2016 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.

Links to web sites other than BenefitsLink.com and EmployeeBenefitsJobs.com are offered as a service to our readers; we were not involved in their production and are not responsible for their content.

Privacy Policy