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[Guidance Overview]
Puerto Rico Treasury Department Issues Guidance on Retirement Plan Limits for 2016 (PDF)
"For plans qualified only in Puerto Rico ... and for plans qualified both in Puerto Rico and the U.S., including the U.S. Federal Government Thrift Plan (Dual-Qualified Plans), the limits on elective deferrals, catch-up and after-tax contributions, annual benefits, annual contributions and plan compensation, and the highly compensated employee threshold all remain unchanged for 2016."
(Groom Law Group)
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FedEx May Owe Same-Sex Spouse Pension Benefits
"FedEx Corp. may owe pension benefits to the widow of a worker who died a week before the U.S. Supreme Court struck down bans on same-sex marriage in 2013, a federal judge ruled. The judge found in her Jan. 4 decision that FedEx acted reasonably in interpreting its pension plan -- which, prior to 2013, limited spousal benefits to opposite-sex spouses. But she said the company's denial of benefits may have violated [ERISA], which now bars plans from distinguishing between same- and opposite-sex spouses." [Schuett v. FedEx Corp., No. 15-cv-0189 (N.D. Cal. Jan. 4, 2016)]
(Bloomberg BNA)
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Despite Systemic Problems at PBGC, Advocate Optimistic About Agency Change (PDF)
"Although defined benefit plan sponsors confront persistent and systemic problems in dealing with the PBGC, there are signs of positive change coming from the agency, according to the annual report from the PBGC's liaison ... Among the areas of concern cited in the report were the agency's unnecessarily adversarial tone, its aggressive second-guessing of private business operations and its expansive use of its early warning program and reportable events requirements."
(Keightley & Ashner LLP)
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Another ROBS Gone Wrong: IRS Disqualifies ESOP
"The largest issue appears to relate to a failed rollover from Dr. Fleming's individual retirement account (IRA) in the amount of $408,543.00. Fleming alleged that this was rolled over into the ESOP and that the ESOP used the rollover funds to purchase 48.06 shares in 2005. Unfortunately, the ESOP never established a bank or brokerage account in 2004 or 2005 so there was no evidence of the receipt of a valid rollover from Fleming or his IRA custodian." [Fleming Cardiovascular Inc. v. Comm'r, No. 10776-13R (T.C. Memo Nov. 23, 2015)]
(Stinson Leonard Street)
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TDF Investors Are Not 'Set-It-and-Forget-It' Rotisserie Ovens
"The majority of TDF investors have a healthy understanding of the basic features and objectives of target-date funds. Most TDF investors appreciate that target-date investing comes with investment risk and that the overall level of risk of a TDF automatically declines as investors approach and enter retirement. The preponderance of TDF holders plan to withdraw funds from their TDFs and other tax-deferred assets at a gradual pace in retirement. Far fewer investors anticipate taking large withdrawals to purchase an annuity or otherwise disinvest from the markets all together."
(Vanguard)
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Make Your Retirement Nest Egg Last Longer by Leaving It in Your 401(k)
"Freedom of choice can feel like more of a burden than a benefit when figuring out what to do with a 401(k) after leaving a job or retiring. Do you let it stay at your old company (if an ex-employer lets you), roll it into a new company's plan, or stash it in an IRA? ... A recent study found that defined contribution plans such as 401(k)s had higher long-term investment returns than IRAs [and] had an average geometric return of 3.1 percent from 2000 to 2012 ... A lot of money in 401(k)s ... gets rolled over into IRAs, which had a return of 2.2 percent. Part of the reason for those lower returns is probably due to the 11 percent of assets that traditional IRAs ... had in money market funds; [DC] plans had about 4 percent in the funds."
(Bloomberg)
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Creating a Successful Best Interest Contract Practice (PDF)
"The financial advisor community must decide whether to meet the new requirements by overlaying current practices or by new practices that embrace and take advantage of the new best interest standard. This brief is intended to inform the decisions and the course of action of distributors, product and service providers and financial advisors affected by the regulatory changes requiring the use of a Best Interest Contract Exemption for ERISA plan s and IRAs. The alternative practices, policies and consequences are highlighted for all affected areas"
(Dalbar)
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S&P 1500 Pension Funding Increased by 3% During December
"The estimated aggregate funding level of pension plans sponsored by S&P 1500 companies increased from 79% as of December 31, 2014 to 82% as of December 31, 2015. Decreases in equity and fixed income markets were more than offset by increases in interest rates used to calculate corporate pension plan liabilities, increasing funded status by 3%. The estimated aggregate deficit of $404 billion as of December 31, 2015 is approximately $100 billion less than the $504 billion deficit seen at the end of 2014."
(Mercer)
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New Jersey Business Owners Would Back State Law Creating Retirement Savings Plans
"Just 27 percent of those polled said they offered some form of retirement plan. Those that didn't said they couldn't afford it (38 percent), their company was too small or new (20 percent), or relied on seasonal workers (20 percent). But nearly two-thirds of business owners who don't offer retirement plans said they would participate in a state-run program[.]"
(NJ.com)
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[Opinion]
Is All Financial Advice Conflicted?
"John Rekenthaler's ... column [entitled] 'All Financial Advice Is Conflicted' contrasts two business revenue models for brokers/advisors -- commissions versus asset-based fees -- as a warning to investors that 'those who give financial advice and profess to be conflict free are probably mistaken.' ... The conclusion is that because '[r]evenues motivate behaviors' conflicts of interest are inherent in all investment recommendations ... [But this author asserts there is] a model that resolves the conflicted advice dilemma: It is the fee-for-service or flat-dollar fee model that is standard (and best) practice in our industry."
(Fiduciary Plan Governance, LLC)
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[Opinion]
ERIC Responds to New Guidance on IRS Determination Letter Program
"We are especially appreciative of the extended deadline for employers to apply for a determination letter for a new pre-approved defined contribution plan. ERIC strongly believes the IRS should continue the determination letter program and not eliminate it, as proposed in 2015."
(The ERISA Industry Committee [ERIC])
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BenefitsLink.com, Inc.
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Lois Baker, J.D., President
David Rhett Baker, J.D., Editor and Publisher
Holly Horton, Business Manager
BenefitsLink Retirement Plans Newsletter, ISSN no. 1536-9587. Copyright 2016 BenefitsLink.com, Inc. All materials
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