Retirement Plans Newsletter

February 10, 2016

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USI Insurance Services, LLC.
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Christian Brothers Services
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Webcasts and Conferences

Are You At Risk? Staying on Top of Your Fiduciary Responsibilities Within Your 401(k) Plan
March 6, 2016 WEBCAST
(Dorsey & Whitney LLP)

ASPPA Philadelphia Regional Conference
May 19, 2016 in PA
(ASPPA [American Society of Pension Professionals & Actuaries])

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[Official Guidance]

Text of IRS Notice of Proposed Rulemaking and Public Hearing: Additional Limitation on Suspension of Benefits Applicable to Certain Pension Plans Under the Multiemployer Pension Reform Act of 2014
16 pages. "One specific limitation governs the application of a suspension of benefits under any plan that includes benefits directly attributable to a participant's service with any employer that has withdrawn from the plan in a complete withdrawal, paid its full withdrawal liability, and, pursuant to a collective bargaining agreement, assumed liability for providing benefits to participants and beneficiaries equal to any benefits for such participants and beneficiaries reduced as a result of the financial status of the plan. This document contains proposed regulations that would provide guidance relating to this specific limitation.... Comments must be received by March 15, 2016. Outlines of topics to be discussed at the public hearing scheduled for March 22, 2016 must be received by March 15, 2016." (Internal Revenue Service [IRS])  


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[Official Guidance]

Text of PBGC Disaster Relief Announcement 16-03, In Response to Severe Storms, Tornadoes, Straight-Line Winds and Flooding in Arkansas
"This Disaster Relief Announcement provides relief relating to PBGC deadlines ... [to] any person responsible for meeting a PBGC deadline (e.g., a plan administrator or contributing sponsor) that is located in the disaster area for which the [IRS] has provided relief in ARK-2016-04, Feb. 8, 2016, in connection with filing extensions for Form 5500 series returns ... The disaster area consists of Benton, Carroll, Crawford, Faulkner, Jackson, Jefferson, Lee, Little River, Perry, Sebastian, and Sevier Counties." (Pension Benefit Guaranty Corporation [PBGC])  

Retirement Security Proposals Included in the President's FY 2017 Budget (PDF)
40 pages. Retirement security proposals begin on page 14, and include: [1] Automatically enroll Americans without access to a workplace retirement plan in an IRA; [2] Provide tax cuts for auto-IRA adoption, and for businesses that choose to offer more generous employer plans or switch to auto-enrollment; [3] Expand retirement savings options for long-term, part-time workers; [4] Encourage state retirement savings initiatives; [5] Increase coverage by supporting new, more flexible benefit models; and [6] Give the PBGC the authority to adjust premiums. (The White House Blog)  

FY 2017 Congressional Budget Justification by the Employee Benefits Security Administration (PDF)
45 pages. "[$6,500,000 is] requested to support multiple pilots to implement new and different approaches to increasing retirement coverage in States, particularly for workers who are traditionally unable to access employment-based retirement benefits. Funds are requested through FY 2018 to allow sufficient time for inter-agency collaboration to craft grant solicitations that meet technical and evaluation requirements; the posting of grant solicitations with time to allow selected States to develop effective grant proposals; providing technical briefings and conducting outreach to better inform potential grantees; and the evaluation of proposals based on solicitation criteria to select grantees." (Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])  

Obama Asks Congress for $100M Proposal on MEPs
"President Barack Obama is asking Congress for a $100 million legislative proposal that would expand access to retirement accounts and 'sow the seeds' for future retirement models that would provide portable benefits coverage through innovations in multiple employer pension plans. Legislation would expand coverage in two ways: through innovation grants to spur the provision of new multiple-employer benefit models and the creation of open multiple employer plans[.]" (Bloomberg BNA)  


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Multiple Employer Plans: What's in It for Participants? (Quite a Lot)
"The President's 2017 Budget proposal ... includes support for the idea of open multiple employer plans (MEPs). The MEP concept has received a lot of attention in recent months: for small employers looking for an easy and effective vehicle to offer workplace-based retirement saving, MEPs may well be a good fit. They could prove to be a good structure for participants, too." (Russell Investments)  

FY 2017 Budget Proposal Would Tax ESOP Dividends Twice
"Since 1985, individuals who work for a company that offers an ESOP have avoided double taxation on the dividends they receive. The Administration's proposal would eliminate that incentive, thereby hurting companies and employees alike." (The ESOP Association)  

More Managed Accounts in 401(k) Plan Lineups, But Client Understanding Lags
"In the past four years, the number of employers offering managed accounts more than tripled but Fidelity found that 49% of individuals don't understand how managed accounts work.... When employees are asked what the biggest benefit is of using managed accounts in their retirement plan, 48% said that managed accounts are constantly monitored by a professional." (Financial Planning)  

Investment Considerations Under ERISA for Defined Contribution Plan Fiduciaries (PDF)
17 pages "While ... a self-directed defined contribution plan carries less fiduciary risk than a traditional defined benefit plan ... too many plan sponsors are underestimating the fiduciary responsibilities -- and thus liability risk -- when offering a defined contribution plan.... [This whitepaper highlights] some of the fiduciary responsibilities faced by plan sponsors of defined contribution plans under ERISA." (Blitman & King, LLP, for Euclid Specialty Managers)  

Small Business Retirement Plan Options: 401(k) Plans vs. SIMPLE and SEP IRAs
"401ks are not the only retirement plan option for small businesses -- IRA-based alternatives exist. These alternatives should be considered when a business does not need the key virtues of a 401k plan -- high contribution limits and design flexibility -- but wants to help employees save for retirement. Like a 401k plan, these alternatives offer automatic payroll deduction, making retirement savings easy." [Charts outline contribution limits and pros/cons for each type of plan.] (Employee Fiduciary)  

Are You Ready for a Cash Balance Plan? (PDF)
"What is a cash balance plan? ... How much can I contribute for myself each year? ... Those contributions are really high -- is this legal? ... Where is the money invested? ... How is the plan funded? ... What happens if I can't afford to fund the plan for a particular year? ... Can I give key employees a higher allocation than the rest of my staff? ... Should I terminate my 401(k) plan and just have a cash balance plan?" (Retirement Management Services)  

Evaluating Auditor Proposals
"Evaluating responses to your plan auditor request for proposals can be done simply and efficiently if you lay out the criteria you consider most critical in advance and assign a weight in terms of importance to each. This approach creates a framework of objectivity before you begin reviewing the proposals.... [The authors] suggest you also determine if there are any 'non-starters' in the criteria that would eliminate a candidate regardless of how it responds in other areas." (Fiduciary Plan Governance, LLC)  

Corrections to CBO's Analysis of Replacement Rates for Social Security
"[R]eplacement rates were defined to be initial benefits as a percentage of average late-career earnings; for those calculations, earnings consisted of the last five years of earnings that were at least half of a worker's average indexed earnings, adjusted for growth in prices. The estimates reported in December inadvertently included years with earnings below those intended amounts.... The corrected version shows substantially lower mean initial replacement rates for retired and disabled workers[.]" (Congressional Budget Office [CBO])  

[Opinion]

Congress Must Take Action on Retirement Income 'Fiduciary Regulation'
"The bipartisan bills would strengthen consumer protections for retirement savers while also maintaining access to quality financial advice for small businesses and low- and middle-income Americans.... The bills would also require advisors to communicate key information -- including full and fair disclosure on compensation and all investment fees to ensure investors are well-informed. And, consistent with the [DOL's] goals, the bills punish advisors who fail to act in their client's best interest by holding them liable for damages and imposing financial penalties." (Securities Industry and Financial Markets Association [SIFMA])  

Benefits in General; Executive Compensation

[Official Guidance]

Text of IRS Disaster Relief Announcement ARK-2016-04, for Victims of Severe Storms, Tornadoes, Straight-line Winds and Flooding in Arkansas
"Victims of the severe storms, tornadoes, straight-line winds and flooding that took place beginning on Dec. 26, 2015, in parts of Arkansas may qualify for tax relief ... Individuals who reside or have a business in Benton, Carroll, Crawford, Faulkner, Jackson, Jefferson, Lee, Little River, Perry, Sebastian, and Sevier Counties may qualify for tax relief.... [C]ertain deadlines falling on or after Dec. 26, and on or before May 16, 2016, have been postponed to May 16, 2016. This includes 2015 income tax returns normally due on April 18." (Internal Revenue Service [IRS])  

[Guidance Overview]

Pension and Health Plans: 2015 Year End Review (PDF)
Topics include: [1] The 'Cadillac Tax'; [2] Delayed ACA reporting; [3] Legal challenges to the ACA; [4] Repeal of automatic enrollment; [5] Expanded preventive care services; [6] Substantial hospital inpatient services and minimum value; [7] Pace Act; [8] ACA fees and penalties; [9] Nondiscrimination for fully insured health plans; [10] IRS determination letter program; [11] Form 5500 filing deadlines remain the same; and [12] NYC Commuter Benefits Law. (Schulte Roth & Zabel LLP)  

2015 in Review: ERISA Civil Enforcement Recoveries Remain Low, Criminal Investigations Continue to Rise
"The DOL reported total monetary recoveries of $696.3 million in FY 2015, an increase of $96.6 million over FY 2014. While this was a significant increase ... the total monetary results for FY 2015 still lagged behind the 15-year average of approximately $1.3 billion in annual recoveries.... In FY 2015, almost half of the $96.6 million improvement -- $46.7 million -- came from the Informal Complaint Resolution System, which has been steadily replacing Prohibited Transactions Corrected and Plan Assets Protected as the largest source of recovery." (Sutherland Asbill & Brennan LLP)  

U.S. Supreme Court Ruling: ERISA Equitable Relief Not So Equitable?
"The moral of the story is that self-insured plans that wish to enforce their subrogation and ... recovery rights must act quickly before the proceeds from any law suit against a third party to recover the medical expenses have been commingled with the plan participant's other assets.... [It] remains to be seen if the same tracing requirement that applies to third party settlements in the subrogation context extends to overpayments from pension and disability plans. Lastly, the Court's ruling could spur legislative initiatives to expand the ERISA remedies available to plan fiduciaries." [Montanile v. Bd. of Trustees of Nat. Elevator Ind. Health Benefit Plan, No. 14-723 (U.S. Jan. 20, 2016)] (Troutman Sanders)  

[Opinion]

ERIC Report Card for Health Care and Retirement Provisions in the President's Proposed 2017 Budget: Needs Improvement
"The ERISA Industry Committee (ERIC) is disappointed President Obama did not use his 2017 fiscal year budget to promote important proposals that would allow the employer-provided health and retirement benefits system to grow. 'The budget is an ideal time to propose measures that improve and support the employer-sponsored retirement and health care system, like full repeal of the 40 percent excise tax and taking PBGC premiums "off-budget",' said Annette Guarisco Fildes, president and CEO, ERIC." (The ERISA Industry Committee [ERIC])  

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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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