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[Official Guidance]
Text of IRS Instructions for 2015 Form 5500-EZ (PDF)
Dated Feb. 18, 2016. "What's New: ... Questions on line 6 have been split and added for active participants and number of participants that terminated employment during the plan year with accrued benefits that were less than 100% vested.... New IRS compliance questions were added to lines 13 through 16. The IRS has decided not to require plan sponsors to complete these questions for the 2015 plan year, and plan sponsors should skip these questions when completing the form." [Also available: 2015 Form 5500-EZ.]
(Internal Revenue Service [IRS])
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The DOL Fiduciary Rule: How a Flawed Process Could Hurt Retirement Savers
40 pages. "[1] Despite public assurances that the [DOL] had collaborated with the SEC, emails between a [DOL] employee and an SEC expert reveal discord between the agencies about the rulemaking.... [1] Career, non-partisan SEC staff identified at least 26 items of concern related to the substantive content of the proposed rule, and the [DOL] declined to fully resolve all of the concerns ... [3] The [DOL] rejected the SEC's recommendation and ignored the requirements of Executive Orders 12866 and 13563 to quantify the costs and benefits of alternative approaches.... [4] Treasury officials voiced concerns that the [DOL] 's proposal, by attempting to regulate IRAs through the proposed rule, 'fl[ies] in the face of logic' and was contrary to Congressional intent.... [6] The Administration was predetermined to regulate the industry and sought evidence to justify its
preferred action."
(Majority Staff of the Committee on Homeland Security and Governmental Affairs, U.S. Senate)
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Form 5500 Compliance Questions May Be Useful for Plan Sponsors Even Though Not Required by IRS
"[T]he IRS has recently stated that the new questions should not be completed for the 2015 plan year. Nonetheless, reviewing and answering them now, even if only internally and informally, ... can serve as a 'mini-audit' which may identify issues that can be addressed either through self-correction or through a formal submission to the IRS Employee Plans Compliance Resolution System prior to any IRS-initiated enforcement action."
(Caplin & Drysdale)
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Comments on Tibble v. Edison: Practical Applications for Plan Sponsor Committees and Advisors
"Monitoring is applicable to not just investments, but all decisions the fiduciary makes that have ongoing consequences, for example, hiring a TPA, and so on. The Tibble case really tells us that plan fiduciaries must have a prudent process in place that is always focused on the best interest of plan participants. It is only what is in the best interest of plan participants that matters. Likewise, it is vitally important for fiduciaries to keep detailed minutes of how decisions were made. It should be possible to re-create the decision making process years later by reviewing the minutes. Without documentation you might as well assume the process never happened."
(Unified Trust Company, N.A.)
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District Court Finds Plan Fiduciaries' Decision to Divest Nabisco Stock Fund Was Prudent
"[This] decision provides helpful information to plan fiduciaries considering a divestment of employer stock from their participant-directed 401(k) plans. It also provides comfort that, at least within the Fourth Circuit, a plan fiduciary's decision to divest a frozen employer stock may be considered to be prudent, even in light of a failure to abide by the procedural prudence requirements of ERISA, if a hypothetical plan fiduciary would have made the same decision based on the totality of the circumstances." [Tatum v. R.J. Reynolds Tobacco Co., No. 1:02CV00373 (M.D.N.C. Feb. 18, 2016)]
(Practical Law Company)
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[Advert.]
2015 SPARK National Conference -- June 19-21, Washington DC
The retirement services industry's leading event for top marketing, sales, administration and record keeping professionals. Comprehensive agenda is designed to meet the needs of 401(k) Plan Providers, Financial Advisors and Third Party Administrators.
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Service Providers Can Make a Better Sales Pitch
"[T]he AICPA's Service Organization Control (SOC) Reports [provide] an independent evaluation of the accuracy and adequacy of a service provider's financial and operational controls.... SOC reports [provide] highly relevant qualitative data ... that facilitate direct comparisons of the financial and operational controls of service provider candidates.... SOC reports should always be part of the mix of information reviewed by responsible fiduciaries in making a selection/retention decision."
(ERISA Fiduciary Administrators LLC)
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An Overview of Cybersecurity Issues Affecting Retirement Plans
"An effective cyber risk management strategy requires a retirement plan sponsor to: [1] thoroughly diligence its third-party administrators and vendors (TPAs); [2] implement and periodically review contractual protections and insurance requirements in arrangements with its TPAs; [3] periodically monitor the TPAs' cybersecurity compliance and related risks, and [4] consider and, if appropriate, utilize the SAFETY Act and purchase cyber and privacy insurance."
(Pillsbury Winthrop Shaw Pittman LLP)
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Uniting DB Plan Documents and Administration in Perfect Harmony (PDF)
"This article reviews a few common provisions found in DB plans that at the very least can produce frustration for administrators and, at the worst, create scenarios where the plan no longer operates in accordance with the document. Suggestions are offered as to how plan sponsors can keep their plan documents in tempo with their administration as well as the IRS rules."
(Milliman)
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Strategic Asset Allocation Reviews for DB Plan Sponsors (PDF)
"One of the most important choices defined benefit plan investment committees will make is deciding the type and amount invested in asset classes over the long term.... Sponsors ought to be mindful of the following: [1] The plan's specific liability characteristics, existing policies, capital market outlook, and plan sponsor goals and risk tolerance all play a significant role in the strategic review. [2] Strategic reviews ought to be completed every three years or more often if there has been a significant change to plan or sponsor circumstances. [3] The main decision points in the strategic review are the split of liability-hedging and return-seeking assets, then the composition within each of those categories."
(Russell Investments)
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Pension Funds Globally Increased Hedge Fund Allocations in 2015
"The median allocation by European pension funds rose ... to 7% from 4%, while the median allocation by North American (including Latin America) pension funds increased by two percentage points to 10%, and the median allocation by Asia-Pacific plans rose to 5% from 3% the previous year.... [On] a global basis, pension funds' median allocation to the broad alternatives investment category was 18%, and 8% in hedge funds specifically."
(Pensions & Investments)
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Defined Contribution Plan Participants' Activities, First Three Quarters of 2015 (PDF)
12 pages. "In the first three quarters of 2015, 2.9 percent of DC plan participants took withdrawals, compared with 3.1 percent during the first three quarters of 2014.... Only 1.3 percent of DC plan participants took hardship withdrawals ... similar to the pace observed over the first three quarters of 2014.... Only 2.5 percent of DC plan participants stopped contributing in the first three quarters of 2015, compared with 2.7 percent during the first three quarters of 2014 and 2.5 percent during the first three quarters of 2013."
(Investment Company Institute [ICI])
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Retirement Date Risk and Sequence of Returns
"[A]ccumulators in the final years leading up to retirement may wish to proactively manage risk and reduce the volatility of the portfolio, specifically as a means to reduce the retirement date risk they face. Of course, getting a portfolio more conservative at the end of the accumulation phase may also force an accumulator to work slightly longer, or save more, to make up for the lower expected returns in those last few years. Still, for those who don't want the risk of a much later retirement date, a decreasing equity glidepath leading up to retirement may be a very appealing retirement date risk management strategy!"
(Michael Kitces in Nerd's Eye View)
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The Efficacy of Publicly Available Retirement Planning Tools
"The authors conclude that the advice provided from a majority of these tools is extremely misleading to households, and propose a more systematic approach to tool development by improved choice of input variables. Analyzing professional advisor opinion and theory, critical input variables are identified and recommended. A case scenario is developed incorporating these critical variables and used to test the efficacy of 36 publicly-available retirement planning tools."
(Taft Dorman, Barry S. Mulholland, Qianwen Bi and Harold Evensky, via SSRN)
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How America Supports Retirement: No, Benefits Are Not 'Tilted' to the Higher Earners
"Research and policy discussions that focus only on the benefits of tax deferral ignore the important role played by Social Security and emphasize the fact that higher-earning workers derive larger benefits from tax deferral, both in dollar terms and as a share of their income.... When benefits are measured as a percentage of lifetime earnings, lower earners benefit more from Social Security and higher earners benefit more from tax deferral. The combined benefits of the two programs, however, are proportionately higher for workers with lower lifetime earnings."
(Investment Company Institute [ICI])
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[Opinion]
Speech by Pension Rights Center Director Karen Friedman to the Texas-Houston Committee to Protect Pensions
"Central States calls these cuts a 'rescue plan', but these cuts are nothing short of a pension demolition plan that will ruin the lives of more than 270,000 retirees, widows and widowers.... The Central States trustees, from the start, had disabling conflicts of interest ... Central States spent $500,000 of your plan money to lobby for the passage of MPRA.... Even with the steep and unjust cuts proposed in its 'rescue' plan, it is pretty clear that Central States may not survive for the long term, which is a key condition to Treasury accepting this proposal."
(Pension Rights Center)
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[Opinion]
American Retirement Association Letter to IRS Recommending Changes to Pre-Approved Plan Programs (PDF)
"In an effort to further enhance the effectiveness of the current pre-approved plan programs, the ARA recommends: [1] The establishment of a single, streamlined revenue procedure that covers both 401(a) qualified plans and 403(b) plans ... eliminating distinctions (substantive, procedural and terminology) currently associated with 'M&P' and 'volume submitter' plans. [2] Specific enhancements to improve and expand the availability of pre-approved plans in light of the changes to the determination letter program for individually designed plans. [3] An initial restatement period of three years for employers adopting pre-approved 403(b) plans. [4] The addition of 457(b) plans to the pre-approved plan program."
(American Retirement Association [ARA])
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Benefits in General
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ERISA Advisory Council to Meet March 16
"The purpose of the open meeting ... is to welcome the new members, introduce the Council Chair and Vice Chair, receive an update from the Assistant Secretary of Labor for the Employee Benefits Security Administration, and set the topics to be addressed by the Council in 2016."
(Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL])
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BenefitsLink.com, Inc.
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Lois Baker, J.D., President
David Rhett Baker, J.D., Editor and Publisher
Holly Horton, Business Manager
BenefitsLink Retirement Plans Newsletter, ISSN no. 1536-9587. Copyright 2016 BenefitsLink.com, Inc. All materials
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