Retirement Plans Newsletter

February 18, 2016

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DC Plan Restatement FAQs
February 24, 2016 WEBCAST
(FIS Relius Education)

Rollovers and Conversions from Qualified Plans
March 10, 2016 WEBCAST
(PenServ Plan Services, Inc.)

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[Official Guidance]

Text of IRS Announcement: Plan Sponsors Should Skip New Compliance Questions on the 2015 Form 5500-Series Returns
"Since the proposed 2015 IRS compliance questions on the Forms 5500 and 5500-SF, and Schedules H, I, and R were not approved by the Office of Management and Budget when the 2015 Form 5500 and Form 5500-SF were published on December 7, 2015, the IRS has decided that plan sponsors should not complete these questions for the 2015 plan year." (Internal Revenue Service [IRS])  


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[Guidance Overview]

Refinements Proposed to Multiemployer Suspension Rules (PDF)
"Additional proposed regulations on MPRA benefit suspensions ... address the ordering rule to be used when a plan covers participants who had worked for employers that had withdrawn from the plan prior to December 16, 2014 when the law was enacted. The amount of suspension for such participants will be affected by whether their employer had paid withdrawal liability and agreed to set up a 'make whole' plan." (Xerox HR Services)  

Text of District Court Opinion Applying Dudenhoeffer Pleading Standards to Dismiss J.C. Penney Stock-Drop Claim
14 pages. "The plaintiff's position that Dudenhoeffer is limited to cases in which an 'artificially inflated' stock price is alleged ... ignores the Supreme Court's specific rejection of the argument that a fiduciary should have known from publicly available information alone that a stock's price was 'over- or under[]' -valued, i.e., that the stock was valued either too high or too low.... The Court therefore finds nothing in Dudenhoeffer that supports the plaintiff's contention that the Supreme Court's reasoning is 'only relevant in cases where the stock price is alleged to have been artificially inflated.' ... The plaintiff's decision not to plead special circumstances is fatal to her claim that the defendant should have known, solely from public information, that continued investment in J.C. Penney stock was imprudent." [Coburn v. Evercore Trust Co., No. 15-49 (D.D.C. Feb. 17, 2016)] (U.S. District Court for the District of Columbia)  

Service Providers Continue Winning Streak in 401(k) Fee Disputes
"[This case] marks the third time in a row that a federal appeals court has declined to impose ERISA fiduciary status on 401(k) service providers in the face of strenuous pro-plaintiff arguments in [DOL] amicus briefs.... The court held that even if Principal Life -- rather than the plaintiff -- had winnowed the list [of investment funds], that was not 'the action subject to complaint' because the plaintiff had alleged that all 63 options were laden with excessive fees.... [T]he court also rejected the theory that Principal Life could have become a fiduciary even without exercising control over plan assets." [McCaffree Financial Corp. v. Principal Life Insurance Co., No. 15-1007 (8th Cir. Jan. 8, 2016)] (Sidley Austin LLP, via Lexology)  

Kicking Alfred Hitchcock Out of ERISA Plans
"Hitchcock left your imagination to do the dirty work. He knew that your imagination could fill in expertly placed gaps.... But when there are gaps left in ERISA plans, we end up with much worse than just a start.... [I]t is important to recognize that liability that is already out there cannot be put back in the bottle.... [E]mploy a process to insure that you have done and are doing what you promised you would do.... [E]mploy a system to utilize exemptions in the proposed Department of Labor Fiduciary Rule." (QP Steno Blog)  


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TSP Weighs Its Supermodel Retirement Status
"The board that runs the Thrift Savings Plan, the federal government's 401(k)-style retirement program, is anxiously eyeing a new bill that uses the TSP as a model for a national retirement savings plan for millions of American workers.... 'What people miss is, we are an employer benefit. We're not in existence for any other reason than to provide federal employees with a retirement benefit that they get because they are federal employees.... ' That mission becomes more complicated when the TSP becomes available to everyone, [Kim Weaver, FRTIB director of external affairs] said. 'Once you open it up to all Americans, that focus gets lost, and the ability to keep our costs low completely goes out the window.' " (Government Executive)  

Why a Falling Stock Market Won't Postpone Retirements
"[N]early 403,000 American workers and their spouses were awarded their first Social Security checks in January, the highest monthly total in three years.... A single-year rise or drop in the S&P 500 has no statistically significant effect on retirement rates ... Only huge, long-term moves in the stock market affect retirement timing, the researchers found, and only for well-educated Americans who are most likely to own stocks." (Bloomberg)  

Transition with Confidence: A Gradual Ascent to Retirement (PDF)
"Reaching financial goals isn't the key trigger for retirement. Health and lifestyle are stronger factors. The transition to retirement is a gradual process. Most employees go through three distinct phases of 'pretirement,' which are rooted in life stage, not age[.]" (Fidelity Investments)  

The Role of IRAs in U.S. Household Saving for Retirement, 2015 (PDF)
40 pages. "Nearly one-third of U.S. households owned IRAs in 2015.... Rollovers from employer-sponsored retirement plans have fueled the growth in IRAs.... Although most U.S. households were eligible to make IRA contributions, few did so.... IRA withdrawals were infrequent and mostly retirement related.... The majority of traditional IRA withdrawals were made by retirees.... Traditional IRA-owning households not making withdrawals generally indicated they do not plan to tap their IRAs until age 70-1/2." (Investment Company Institute [ICI])  

CBO and SSA Agree: Social Security Typically Provides 40 Percent Income Replacement
"Social Security benefits replace only about 40 percent of an average retiree's recent earnings, new Congressional Budget Office (CBO) estimates show. The actuaries at the Social Security Administration (SSA) find a similar result using a different technique. By either measure, Social Security benefits are not overly generous.... In addition to showing replacement rates based on career-average earnings for hypothetical workers, the panel advised, the trustees' report should show replacement rates based on late-in-life earnings for actual beneficiaries. The two different approaches turn out to produce essentially the same result." (Paul N. Van de Water, Center on Budget and Policy Priorities)  

[Opinion]

The SPARK Institute Requests Meeting with OMB to Discuss DOL Fiduciary Rule (PDF)
43 pages. "Our goal in meeting with you is to ensure that [OMB] has the information it needs to perform its required function: ensuring the fiduciary regulation proceeds only after a reasoned determination that the benefits justify the costs and that the regulation is not inconsistent, incompatible, or duplicative with other federal rules." [Includes a copy of two previously filed comment letters.] (The SPARK Institute)  

[Opinion]

Reason to Worry About the DOL's 'Reform' of Retirement Investment Advice: We Won't Know What's in the Final Rule Until We Have to Live with It
"This is one of the most ambitious regulations the [DOL] has ever tackled. The stakes are high. Will people be helped or hurt in saving for retirement? Will they get more access to advice or less? It needs to be done right. Unintended consequences hurt small business workers and small-account IRA owners, who already have the hardest time getting advice and saving for retirement." (U.S. Chamber of Commerce)  

[Opinion]

Issues with the Concept of Using 'Risk Tolerance' to Determine Asset Allocation
"Depending upon a great many individual facts, a person's (or couple's) circumstances may dictate a much higher need to take on risk.... [M]uch research demonstrates that an investor's responses to at least some of the questions posed will vary depending upon the investor's recent investment experience.... [S]eldom undertaken is education to the investor about future expected returns." (Ron Rhoades)  

Benefits in General

Montanile, Amgen, Tackett and Moen: Four Important Benefits Cases
"The year 2016 has only just started, and we have already seen several important court decisions related to employee benefit plans and [ERISA]. This [article] provides a brief overview of four of these cases ... These two U.S. Supreme Court cases and two Sixth Circuit cases ... provide important decisions and insight for employers and fiduciaries of ERISA-covered plans." (Pillsbury Winthrop Shaw Pittman LLP)  

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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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