Retirement Plans Newsletter

January 11, 2016

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Employee Benefits Jobs


Webcasts and Conferences

General AIR Discussions
January 26, 2016 WEBCAST
(IRS [Internal Revenue Service])

ESOP Exit Option - Benefits and Advantages
January 27, 2016 WEBCAST
(Western Pension & Benefits Council)

Improving Employee Plan Audits - Getting it Right and Avoiding Penalties
January 28, 2016 in NY
(Worldwide Employee Benefits Network [WEB] - New York Chapter)

Introduction to Qualified Retirement Plans
February 9, 2016 WEBCAST
(Ascensus)

RFP Process and Benefit Plans: Considerations and Best Practices
February 18, 2016 in NY
(Worldwide Employee Benefits Network [WEB] - New York Chapter)

Handling IRA Legal Issues
February 25, 2016 WEBCAST
(Ascensus)

2016 ABA Section of Taxation May Meeting
May 5, 2016 in DC
(ABA Joint Committee on Employee Benefits [JCEB])

2016 ABA San Francisco Annual Meeting
August 4, 2016 in CA
(ABA Joint Committee on Employee Benefits [JCEB])

View All Webcasts and Conferences


Discussions


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[Official Guidance]

Text of 2015 IRS Publication 915: Social Security and Equivalent Railroad Retirement Benefits (PDF)
30 pages. "This publication explains the federal income tax rules for social security benefits and equivalent tier 1 railroad retirement benefits. It is prepared through the joint efforts of the Internal Revenue Service (IRS), the Social Security Administration (SSA), and the U.S. Railroad Retirement Board (RRB)." (Internal Revenue Service [IRS])  


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[Official Guidance]

Text of 2016 IRS Instructions for Forms 1099-R and 5498: Distributions from Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, Etc., and IRA Contribution Information (PDF)
24 pages. "What's New: FATCA filing requirement check box ... New early distribution exceptions.... Extension of tax-free distributions from IRAs for charitable purposes." (Internal Revenue Service [IRS])  

[Guidance Overview]

Changes to Voluntary Correction Program Fees, Including Reduced Fees for Most 401(a) and 403(b) Plans
"To encourage employers who sponsor 401(a) qualified retirement plans and 403(b) plans to correct plan failures through VCP, the IRS reduced the general VCP fees for most new submissions made on or after February 1, 2016. The general fee amount for plans with 101 to 500 participants remains unchanged. The general fee table in Revenue Procedure 2013-12, section 12.02(1) will no longer apply." (Internal Revenue Service [IRS])  

[Guidance Overview]

IRS Describes Determination Letter Changes and Encourages Adoption of Pre-Approved Plans
"Elimination of the system of five-year cycles and the new restrictions on determination letter submissions threatened to leave many employers without any formal recognition of their plans' qualification if existing determination letters expired. Making the expiration dates 'no longer operative' will allow those previously issued letters to retain some ongoing value but, as the notice implies, those letters still will not offer any comfort regarding later law changes." (Thomson Reuters / EBIA)  

401(k) Fiduciary & Plan Administrative Support Calendar
"For Plan Year Jan. 2016 through Dec. 2016. An interactive look at the key retirement plan compliance dates." (Fidelity)  

What Does Record Keeper Consolidation Mean for You as a Plan Sponsor?
"Commoditization means that the services that these large record keepers offer are beginning to look more and more alike, and the record keeping companies are now competing on fees.... [E]ach year the average fee charged by record keepers industry wide is dropping. Lower fees create both an opportunity and a risk for plan sponsors and fiduciaries." (Pension Consultants, Inc.)  

Plan Sponsor's Excessive Fee Suit Dismissed
"In support of its affirmation of the district court's dismissal, the appellate court noted that because Principal did not owe plan participants a fiduciary duty while negotiating the fee terms with McCaffree, Principal could not have breached any such duty merely by charging the fees described in the contract that resulted from that bargaining process." [McCaffree Fin. Corp. v. Principal Life Ins. Co., No. 15-1007 (8th Cir. Jan. 8, 2016)] (National Association of Plan Advisors [NAPA])  

Church Plan Update: Third Circuit Upholds Narrow Reading of Exemption; New Law Makes Clarifications
"[T]he Kaplan decision raises significant concerns for religious organizations that, relying on the church plan exemption, have not designed or operated their pension or welfare plans in accordance with ERISA's trust, fiduciary, and other requirements. Although some trial courts have reached the opposite conclusion in similar lawsuits ... this is the first appellate court to address these issues. The decision also raises concerns about relying on IRS determinations of church plan status." (Thomson Reuters / EBIA)  

Target Date Funds May Miss the Mark for Investors
"The most fundamental active decision, common to all target-date funds, is setting the 'glide path.' This refers to the degree and rate that the fund changes from aggressive to conservative as the target year approaches. It is usually depicted as a downward-sloping graph line measuring a diminishing allocation to stocks over time. Determining where to start and stop the stock allocation is the essence of active management.... [T]he choices are varied to say the least." (MarketWatch)  


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TVA Pension Fund Needs ERISA Help
"A group of TVA retirees and active employees is seeking to raise federal and state attention to the worsening funded status of the electric utility's $6.98 billion defined benefit plan. The group is circulating a petition that as of early January has gathered 2,400 signatures, asking congressional leaders and governors in the states served by the TVA to hold the entity accountable for securing pension promises. The TVA defined benefit plan's funding ratio fell to 53% as of Sept. 30, down from 61.2% a year earlier." (Pensions & Investments)  

The Extent and Nature of State and Local Government Pension Problems, and Proposed Solutions (PDF)
28 pages. "Some states and municipalities are in difficult financial straits. Many more have severely underfunded defined benefit pension plans for their past and current employees.... [In] many of these states and municipalities, courts have not allowed changes to the pension plans.... [The authors] propose that all government pension plan participants be given accurate information about the funded status of their pensions.... [They also] propose that, at the discretion of the plan sponsor, retirees and older workers be given the voluntary option to take their pensions as a lump sum, discounted according to the funded status of the plan." (Mercatus Center, George Mason University)  

Pension Index Improves Slightly for 2015
"A significant increase in long bond yields dominated pension plan financial results in 2015. Near-zero portfolio returns, however, suppressed asset growth. The net impact was only a minor uptick in the Willis Towers Watson Pension Index -- it moved up 1.6% for the year, to 73.1." (Willis Towers Watson)  

How Future Expected Long-Term Care Expenses Affect Your Current Retirement Spending Budget
"Long-term care is a generally a larger need (and therefore a higher expected cost) for women than men.... Costs for long-term care vary by geographic region, type of facility and services used, and reasons for care. Generally, the cost of long-term care has risen faster than overall consumer price inflation." (Ken Steiner, FSA Retired)  

[Opinion]

Jumping the 'Paper' Shark: A 21st Century Model of ERISA Attorneys
"In the typical fact pattern, what began in the form of inept legal advice in the design and/or operation of the plan from a nonattorney adviser metastasized into multiple forms of noncompliance, the total remediation of which became increasingly costly over time. The traditional pushback has been that ERISA attorneys interfere with the 'sales' process because they take too long to review documents, are too slow to respond to inquiries and are too expensive.... While there still exists a declining faction in the legal profession that cannot function without age-old paper tools, the data management demands of the modern ERISA attorney make such habits unsustainable ... Stand-alone ERISA practices are sustainable by using the efficiencies technology can offer to moderate cost." (ERISA Fiduciary Administrators LLC)  

[Opinion]

Finally, Someone in Washington Takes Retirement Seriously
"Labor secretary Perez has led the Obama administration to what can honestly be called a policy revolution. There are lots of pluses and minuses, but taken as a whole the administration's actions in 2015 will do more to improve retirement security than anything that any other administration or any Congress has done in decades.... Finally, there is support for state efforts to expand retirement coverage.... DOL is rethinking ERISA regulation to encourage retirement saving.... DOL is working to reduce conflicts in the marketing of retirement plans.... Treasury is putting (at least some) limits on discounted lump-sum cashouts." (Joshua Gotbaum, in Institutional Investor)  

[Opinion]

Letter from American Benefits Council to IRS Requesting Clarification of Prohibited Transaction Excise Tax Applicability to State-Sponsored Payroll Deduction Retirement Plans
"As states move toward performing retirement functions currently performed exclusively by the private sector, it would be helpful for all stakeholders to understand whether states will be provided with special exemptions from rules universally applicable to the private sector. And states need to know their potential liabilities.... [P]articipants in these arrangements, who would no longer have the protections of ERISA under proposed regulations issued by the [DOL], need to know if the Code's protections will be fully applicable. And service providers participating in the state programs need to understand what potential liabilities could arise." (American Benefits Council)  

Benefits in General; Executive Compensation

[Official Guidance]

IRS Notice of Hearing on Definitions of Terms Relating to Marital Status
"This document provides notice of public hearing on proposed regulations relating to the holdings of Obergefell v. Hodges, 2015, Windsor v. United States, 2013, and a revenue ruling that define terms in the Internal Revenue Code describing the marital status of taxpayers. The public hearing is being held on Wednesday, January 27, 2016, at 10:00 a.m. The IRS must receive outlines of the topics to be discussed at the public hearing by Friday, January 15, 2016." (Internal Revenue Service [IRS])  

If You Have a Top Hat Plan, This Court Case Is Worth Watching (PDF)
"The Maryland federal district court in Bond v. Marriott International Inc. ... found the plan in question was a top hat plan and that the statute of limitations didn't apply to the suit, even though the complaint was filed 20 years after the participant left employment. The case is now being appealed by Marriott, and the [DOL] recently filed a friend-of-the-court brief on behalf of the former employees.... Little guidance exists on what constitutes a select group of management or highly compensated employees. It's generally beneficial for plan sponsors to limit these plans as much as possible, to help ensure they have top hat status." (ERISAdiagnostics, Inc.)  

Press Releases

Conestoga Group, Inc. is Certified for Fiduciary Excellence
Centre for Fiduciary Excellence [CEFEX]

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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.

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