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[Guidance Overview]

IRS Reverses Course: 'Please Don't Answer Our New 5500 Compliance Questions'
"Our understanding is that EFAST will accept returns with the answers. The answers would appear with the return on the DOL website and will be furnished to the IRS. But there is no reason to answer the questions and the official instructions now advise employers to skip the questions. We strongly encourage plan sponsors and practitioners to follow the new instructions." (FIS Relius)  


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Text of Federal District Court Opinion: No Breach of Fiduciary Duty in Removing Employer Stock Fund from 401(k) Plan (PDF)
65 pages; on remand from the Fourth Circuit. "After a careful weighing of the evidence and a review of all of the circumstances prevailing at the time, it is determined that RJR has shown by a preponderance of the evidence that a fiduciary acting with prudence would have divested the Nabisco Funds at the time and in the manner that RJR did." [Tatum v. R.J. Reynolds Tobacco Company, No. 1:02CV00373 (M.D.N.C. Feb. 18, 2016)] (U.S. District Court for the Middle District of North Carolina)  

District Court in Colorado Expands Church Plan Exemption Under ERISA But Others Join Third Circuit in Narrow Interpretation
"The [Colorado Federal District Court] found that a plan does not need to be established by a church to qualify as a church plan; rather, such plans can also qualify as church plans if they are maintained by a tax-exempt organization controlled by or associated with a church whose principal purpose or function is the administration or funding of the benefits plan.... [In contrast, the] Third Circuit stated that, as of 2012, religiously affiliated hospitals accounted for seven of the nation's ten largest nonprofit healthcare systems and that applying the church plan exemption to these hospitals would defeat the purpose of ERISA." (Jackson Lewis P.C.)  

Supreme Court Decisions Help Employers Avoid Frivolous 401(k) Stock-Drop Suits
"Based on Dudenhoeffer and Amgen, it is clear that the Supreme Court believes that requiring specific, plausible allegations in the plaintiff's complaint will help avoid frivolous 401(k) stock-drop suits from surviving beyond a motion to dismiss. However, it is likely that future plaintiffs will use the road map provided in those cases to craft complaints that are likelier to survive a motion to dismiss in hopes of reaching a settlement or receiving a favorable judgment." (Dentons)  

Chevron Hit with Lawsuit Over 401(k) Plan Fees
"The lawsuit, filed Feb. 17 by St. Louis-based Schlichter, Bogard & Denton, attacks Chevron's decision to include a Vanguard-sponsored money market fund in its 401(k) plan instead of a lower-cost and better-performing stable value fund. The suit also argues that Chevron should have considered separate accounts, collective trusts and lower-fee versions of the same Vanguard funds it included in the plan." (Bloomberg BNA)  


ERISA: A Comprehensive Guide, Fourth Edition

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No Wait and See for DOL's Fiduciary Rule
"[T]he core provisions of the DOL's framework are unlikely to change, which will pose advisors with a set of decisions to make regarding how to structure their practices ... [One professional] referred to the fiduciary proposal as 'the next Affordable Care Act,' explaining that the changes to ERISA ... will likely come with years of advisory opinions and interpretive bulletins as firms struggle to comply with the new regulatory framework." (On Wall Street)  

Not Just the DOL: Investment Advisers Must Prepare for Increased Scrutiny by SEC
"In June 2015, [the SEC's Office of Compliance Inspections and Examination (OCIE)] ... launched a multi-year targeted examination program.... Shortly thereafter, examination letters from OCIE to RIA firms began to arrive.... [E]xaminers will review the extent to which the advisory firm explored all five rollover options: keeping the current plan account, transferring assets to a new employer's plan, rolling over to an IRA or taking a lump sum distribution. Documentation of the due diligence process naturally comes into focus, with OCIE requesting written disclosures and scripts used in discussing tax implications, availability of penalty-free withdrawals ... protection of assets from lawsuits and estate planning." (InvestmentNews)  

Fortune 500 Companies Continue to Shift Retirement Offerings
"Between 1998 and 2015, the percentage of employers still offering a traditional DB plan to most newly hired employees fell from roughly half to 5%. There has been an uptick in plan freezes and closings since the 2008 financial crisis. As more workers delay retirement, the ramifications of the shift in retirement offerings will continue." (Willis Towers Watson)  

Proposed 'Exit Premium' Upon Withdrawal from an Underfunded Multiemployer Plan Would Penalize Employers Who Play by the Rules
"The Obama administration's fiscal year 2017 budget ... proposes that the [PBGC] impose an exit premium on employers that withdraw from unfunded multiemployer plans. This exit premium, along with a proposed variable-rate premium for underfunded multiemployer plans, is part of the administration's effort to increase revenue to the PBGC by $15 billion over the next decade." (Ogletree Deakins)  

Making State Pension Investments More Transparent
"Better and more consistent disclosure rules would help those with a stake in these systems discern how well investments are being managed and provide data that could be compared more easily from state to state.... States and funds should: [1] Adopt comprehensive fee-reporting standards ... [2] Make investment policy statements transparent and accessible. [3] Disclose bottom-line performance, both net and gross of fees. [4] Expand reporting to include longer-term performance results. [5] Report results by asset class, net and gross of fees." (The Pew Charitable Trusts)  

California Pension Fix Leads to Risk as Market Volatility Soars
"Under the plan, California, school districts and teachers will gradually increase their contributions to make the second-biggest U.S. public pension fully funded in 30 years. The catch: the state's share depends on whether the fund hits its 7.5 percent annual investment target, meaning it could jump in bad years or plummet in good ones, according to the Legislative Analyst's Office. Three decades from now, the difference between market winning and losing streaks could mean as much as $5 billion." (Bloomberg)  

Boeing, SPEEA Ratify Deal to Freeze Pension Fund at End of 2018
"The new contract [with the Society of Professional Engineering Employees in Aerospace (SPEEA)] provides for Boeing to make special contributions to the 401(k) plan for professional and technical union members moving from the defined benefit plan. Boeing will contribute 9% of a participants eligible pay in 2019, 8% in 2020 and 7% in 2021. Afterward, the company will contribute 3% to 5% based on age." (Pensions & Investments)  


ACOPA Comments to American Academy of Actuaries on Exposure Draft of Public Policy Practice Note on Variable Annuity Plans (PDF)
13 pages. "The scope of the Exposure Draft should be expanded to discuss the application of Code Section 411 (a)(9) and Section 415 to VAPs.... The Exposure Draft should include empirical data and analysis supporting the use of a 'pure' VAP as the baseline for discussion of liability measurement and lump sum determination for a VAP.... The Exposure Draft should encourage actuaries to disclose benefit determination and regulatory uncertainties known to the actuary, the financial implications of such uncertainties, and if the actuary is relying on outside counsel or the plan administrator for plan document and/ or regulatory interpretations." (ASPPA College of Pension Actuaries [ACOPA])  


The Truth About Cash Balance Pension Plans for Public Employees
"Cash balance plans offer the false promise of a more 'fair' retirement plan for public employees. Traditional defined benefit pensions are better than cash balance plans at pooling and managing risk since cash balance plans shift more of the risk to the employee, just like 401(k)-style plans. In a cash balance plan, it is harder for a worker to know how much retirement income she is earning." (National Public Pension Coalition)  

Benefits in General

Text of First Circuit Opinion: Plan Language Was Not Sufficient to Grant Discretionary Authority to Claims Administrator (PDF)
19 pages. "[A] grant of discretionary decisionmaking authority in an ERISA plan must be couched in terms that unambiguously indicate that the claims administrator has discretion to construe the terms of the plan and determine whether benefits are due in particular instances.... The phraseology that BCBS chose to use in the Certificate to describe its decisionmaking authority is capable of supporting reasonable differences of opinion as to the nature and extent of the authority reserved to BCBS.... [T]hat phraseology is insufficiently distinct to constitute a clear grant of discretionary decisionmaking authority." [Stephanie C. v. Blue Cross Blue Shield of Massachusetts HMO Blue, Inc., No. 15-1531 (1st Cir. Feb. 17, 2016)] (U.S. Court of Appeals for the First Circuit)  

Scalia Brought Wit and Color to Court Opinions, Even About Tax Litigation
"[At] no time was [his] personality more on display to the public than when Justice Scalia wrote a dissenting or concurring opinion. It was while writing outside of the Court's majority opinion that Justice Scalia seemed to feel the most freedom ... And it was while displaying this freedom that Justice Scalia managed even to bring color to opinions on issues affecting federal taxation. Some of these opinions concerned critical issues, such as whether the constitution guarantees a right to same-sex marriage or the validity of the Affordable Care Act. Others concerned more mundane tax issues, such as the deductibility of an estate's administrative expenses. [This article quotes] some excerpts from these opinions." (Bloomberg BNA)  

Executive Compensation and Nonqualified Plans

SEC Brings $11,000 Sarbanes-Oxley Clawback Action
"The SEC alleges the CFO received bonuses during the 12-month periods following the filings containing financial results that MBI was required to restate.... The SEC did not allege that the former CFO participated in the misconduct giving rise to the restatement.... According to the SEC, Section 304 does not require that a chief executive officer or chief financial officer engage in misconduct to trigger the reimbursement requirement. According to the SEC the former CFO violated [the Sarbanes-Oxley Act of 2002] by not voluntarily tendering a check to MBI." (, a blog by Stinson Leonard Street)  

Press Releases

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BenefitsLink Retirement Plans Newsletter, ISSN no. 1536-9587. Copyright 2016, 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, 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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