Retirement Plans Newsletter

January 19, 2016 logo logo LinkedIn logo Twitter logo Facebook logo
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Webcasts and Conferences

Legislative Outlook for 2016
January 28, 2016 WEBCAST
(Xerox Corporation)

2016 City Event
April 4, 2016 in FL
(PSCA [Plan Sponsor Council of America])

2016 City Event
April 5, 2016 in MA
(PSCA [Plan Sponsor Council of America])

35th Annual ISCEBS Employee Benefits Symposium
September 18, 2016 in MD
(ISCEBS [International Society of Certified Employee Benefit Specialists])

View All Webcasts and Conferences


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[Guidance Overview]

Tax Code Will Permit Merger of 403(b) and 401(a) Church Plans
"One of the questions that the IRS will need to answer in guidance is how Rev. Proc. 2007-71 applies. That revenue procedure permitted employers to exclude from its plan certain pre-2005 contracts (and, under certain circumstance, certain pre-2009 contracts) ... [T]here will be some serious complications under ERISA for those 'electing church plans,' which have elected to be covered by ERISA. What really makes the new rules work so well is that the typical 414(e)(3) church will not be governed by ERISA, which will make the merger/transfer much simpler." (Business of Benefits)  


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[Guidance Overview]

IRS Lets LLCs Adopt ESOPs
"The ruling is a PLR and as such is applicable only to the taxpayer that requested it. If you wish to have [a Limited Liability Company (LLC)] adopt an ESOP for purposes of acquiring the LLC's membership units, you are best advised to request your own private letter ruling. In addition, if an existing LLC has been taxed like a partnership, checking the box to be taxed as a corporation could result in adverse tax consequences. Since there may be tax issues for the members, it is important to carefully analyze and factor check the box and being taxed as a C-Corporation into the decision-making process before you choose to use an ESOP." (McDonald Hopkins)  

401(k) Mutual Funds Fail Fiduciary Prudence Test
"[A] recent analysis of the top ten mutual funds in 401(k) plans revealed that 7 of the 10 funds failed to pass [a] simple fiduciary prudence test. The funds were evaluated based on their five-year performance between 2011-2015." (The Prudent Investment Adviser Rules)  

Using the PIMCO Glide Path Analyzer to Rank by Level of Prudence (PDF)
13 pages. "[The authors] provide a detailed examination of target date fund glide paths ... [with a focus] on fiduciary responsibility and the characteristics of a glide path that make it Prudent.... A glide path does not have to produce high returns to be Prudent. In fact, high returns can be an indication of imprudent risk taking." (Target Date Solutions)  

Great-West, Empower Targeted in Latest 401(k) Fee Suit
"According to the complaint, filed Jan. 14 in the U.S. District Court for the District of Colorado, Great-West's retirement plan business -- branded Empower Retirement -- receives kickbacks from the mutual funds it offers to 401(k) plans as part of an impermissible 'pay-to-play scheme' that drains money from plan participants' retirement savings.... If recent appellate court decisions are any indication, the participants bringing this suit may face an uphill battle in their quest to treat Great-West as a fiduciary under [ERISA]." (Bloomberg BNA)  


What's Your Opinion about the Elimination of Most Determination Letters?

The Employee Plans subgroup of the IRS Advisory Committee on Tax Exempt and Government Entities has prepared a short, confidential online survey to solicit retirement practitioner/service provider feedback on the elimination of determination letters for individually designed plans, and to determine the choices plan sponsors are likely to make and how the IRS can minimize the impact of the change. Responses are needed by February 1. Respondents need not identify themselves, and all responses go directly to the ACT members, not to the IRS. Take the survey here.

2016 401(k) ERISA Retirement Plan Compliance Calendar
"[T]he 2016 401(k) ERISA Retirement Plan Compliance Calendar [highlights] critical compliance deadlines for defined contribution retirement plans. Some of the deadlines apply only to particular plan types and are noted accordingly." (Cammack Retirement Group)  

What Behavioral Finance Teaches About Retirement Planning
"When it comes to investment, the rational economic agent prefers more options to fully optimize and diversify. For the average investor, however, too many choices can produce information overload, taxing their cognitive resources and leading to indecision. Another reaction to complex investment menus is naive diversification -- investing evenly in all available options. Behavioral finance can help identify the most efficient combination of options and tier them according to participants' financial sophistication and desire for involvement." (Institutional Investor)  

Roth IRA Conversions and the Pro-Rata Rule
"The pro-rata calculation is not based on the balances in your IRAs on the date of the conversion. The account balance used is as of year-end of the year of the transaction. This means that you generally should not roll over employer retirement plan balances in the same year you do a Roth conversion. They will be included in the pro-rata calculation and will skew the results." (Slott Report)  

Illinois Unfunded Pension Liability Increases to $113 Billion
"Taxpayers are now on the hook for nearly $113 billion dollars in unfunded liability for the state's five pension funds ... The most recent Auditor General report of the state's various pension funds highlights a $1.7 billion increased unfunded liability over the past year." (Illinois News Network)  


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Chief Retirement Officer Redux
"Applied to ERISA plans, the temptation to hoard information is ill-advised. If true that corporate power grabs exist and impede the ability for investment fiduciaries to carry out their duties, a Chief Retirement Officer might not have the clout to coalesce competing interests. Unlike a Chief Risk Officer who reports to a corporate board to ensure her authority and independence, a Chief Retirement Officer would likely wear the hat of fiduciary and have to put participants' interests ahead of those of shareholders." (Pension Risk Matters)  

Benefits in General; Executive Compensation

Tax Reporting for Stock Compensation: Understanding Form W-2, Form 3922, and Form 3921
"The vesting of restricted stock, the share delivery from restricted stock units (RSUs), and the vesting of performance shares all prompt W-2 reporting of the income received. The treatment on the W-2 is essentially the same for all three grant types.... If you exercised nonqualified stock options last year, the income you recognized at exercise will be reported on your W-2.... The W-2 reporting for ESPP income depends on whether your company's ESPP is tax-qualified or not and, if it is tax-qualified, how long you hold the shares.... If you sold shares from stock compensation or an ESPP last year, you will need guidance to report the sale proceeds on your tax return." (  

Press Releases

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