Retirement Plans Newsletter

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Navia Benefit Solutions
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ESCO Corporation
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State of Delaware - Office of the State Treasurer
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Webcasts and Conferences

ESOP Accounting: By the ESOP
March 8, 2016 WEBCAST
(National Center for Employee Ownership [NCEO])

Would you Survive a HIPAA Audit?
March 31, 2016 WEBCAST
(International Foundation of Employee Benefit Plans [IFEBP])

Health Benefits Laws Compliance Assistance Seminar
April 5, 2016 in ME
(Employee Benefits Security Administration [EBSA], U.S. Department of Labor)

2016 Benefits Selling Expo
April 18, 2016 in FL
(Summit Professional Networks)

2016 ASPPA Spring Virtual Conference
April 21, 2016 WEBCAST
(ASPPA [American Society of Pension Professionals & Actuaries])

Will ACOs Go the Way of HMOs and What Is the Difference Anyway?
April 24, 2016 WEBCAST
(International Foundation of Employee Benefit Plans [IFEBP])

Legislative Update: Retirement Plans
May 25, 2016 WEBCAST

View All Webcasts and Conferences


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[Guidance Overview]

IRS Proposes Regs Limiting New Comparability Allocations (PDF)
"Employers that use individual allocation groups would ... no longer be able to satisfy rate group testing using the average benefits test as the groups will not satisfy the reasonable classification requirement. Their plans would need to either be amended so that the allocation groups satisfy the reasonable classification requirement or have each rate group satisfy the ratio percentage test, which could require significantly higher employer contributions than are needed under the current regulations." (Ascensus)  


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[Guidance Overview]

January Guidance from IRS Revisits Mid-Plan Year Changes to Safe Harbor 401(k) Plans
"Under the new guidance, in general, any amendment that is permitted to be made mid-plan year to a non-safe harbor 401(k) plan can also be made to a safe harbor 401(k) plan with the exception of a defined list consisting of a few specifically prohibited situations. In addition, no special procedures are required to effectuate the amendment unless it would impact the safe harbor 401(k) plan provisions or the required content of the safe harbor 401(k) notice." (Legacy Retirement Solutions)  

GAO Report: Better Information on Income Replacement Rates Needed to Help Workers Plan for Retirement
"The information and tools on replacement rates that the [DOL] provides may be too limited to help workers understand how to use such rates for retirement planning.... While EBSA's materials note that a target replacement rate can vary based on individual circumstances, they do not include specific examples of demographic groups that research indicates can result in higher or lower income replacement needs, or how much a replacement rate might need to be adjusted for those groups or for other individual circumstances.... Further, EBSA's worksheet and online tool for calculating how much to save use a default replacement rate with no opportunity for a user to adjust the rate based on individual circumstances. Without the ability to adjust the replacement rates used in planning tools, workers may over- or under-estimate how much they need to save for retirement." [GAO-16-242, published Mar 1, 2016; publicly released Mar 1, 2016.] (U.S. Government Accountability Office [GAO])  

Employers Express Growing Concern Over PBGC Premiums
"Of the 66% of respondents who are changing their DB plans, about a third (32%) are considering higher contributions, while the same number (32%) are considering lump sum payouts. About one in five (17%) are considering partial pension risk transfer in the form of annuities." (PLANSPONSOR)  

Target Date Fund Adoption in 2015
"In 2015, 48% of Vanguard participants were invested in a 'professionally managed allocation' -- in other words, their entire account balance was invested in a single TDF, a single target-risk or traditional balanced fund, or a managed account advisory service. Driving this development is the growing use of TDFs. Forty-two percent of participants were invested in a single TDF in 2015 -- a percentage that has more than doubled over the past five years. Among new plan entrants (those entering the plan for the first time), three-quarters of participants were invested in a single TDF[.]" (Vanguard)  


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Supreme Court Shuts Down Ninth Circuit Stock-Drop Decision -- Again
"The Supreme Court's ruling does not foreclose the ability of the participants to bring their claims, but rather leaves it up to the district court to determine whether or not the participants may amend their complaint to meet the standards set forth in Fifth Third. It is unclear whether the district court will allow revision. But after the second Amgen ruling, it is clear that the Court will not stray from its holdings in Fifth Third." [Amgen Inc. v. Harris, No. 15-278 (U.S. Jan. 25, 2016; per curiam)] (Reid and Riege, P.C.)  

Ninth Circuit Joins Seventh Circuit in Holding That Successor May Be Liable for Predecessor's Withdrawal Liability
"Like the Seventh Circuit, the Ninth Circuit adopted a broad view of 'successor liability' for purposes of employment law -- broader than the traditional four tests under state law -- and found that a successor employer can be liable for its predecessor's MPPAA withdrawal liability, so long as the successor: [1] had notice of the liability, and [2] substantially continued the operation of the business.... [T]he reverberations of this case may be felt by unwary asset purchasers and employers, particularly those in the construction industry." [Resilient Floor Covering Pension Trust Fund Bd. of Trustees v. Michael's Floor Covering, Inc., No. 12-17675 (9th Cir. Sept. 11, 2015)] (Epstein Becker Green)  

State and Local Government Spending on Public Employee Retirement Systems (PDF)
"Based on the most recent information provided by the U.S. Census Bureau, 4.1 percent of all state and local government spending is used to fund pension benefits for employees of state and local government.... [P]ension costs have remained within a narrow range over a 30-year period, declining from a high point of 5.0 percent, in FY 85, to a low of 2.3 percent in FY 02, and reaching 4.1 percent in FY 13. State and local governments contributed, in aggregate, an estimated $ 121 billion to pension funds in FY 14, a figure that is projected to equal 4.5 percent of projected state and local direct general spending[.]" (National Association of State Retirement Administrators [NASRA])  

A Lot Going on Behind the Numbers for the $20 Billion Club in 2015 (PDF)
"In some previous years, there has been a single dominant cause behind the change in funded status: longevity improvements in 2014; rising interest rates in 2013; calamitous asset performance in 2008. But there was no such single story in 2015. Rather, several significant effects, none of which was overwhelming, combined to create a small net improvement in funded status." (Russell Investments)  

Does Your Financial Adviser 'Specialize in Misconduct'?
"In the first large-scale study documenting the economy-wide extent of misconduct among financial advisers and financial advisory firms in the United States, researchers find that most financial advisers who engage in misconduct get to keep their jobs -- or are quickly rehired by another firm in the industry.... [F]irms that hire advisers who have left or lost jobs because of misconduct appear to have a culture of it. 'This "match on misconduct" reemployment undermines the disciplining mechanism in the industry, lessening the punishment,' the researchers write." (Capital Ideas, The University of Chicago Booth School of Business)  

The Market for Financial Adviser Misconduct
"Roughly 7% of advisers have misconduct records. Prior offenders are five times as likely to engage in new misconduct as the average financial adviser.... [A]pproximately half of financial advisers lose their job after misconduct.... [Of] these advisers, 44% are reemployed in the financial services industry within a year.... Firms that persistently engage in misconduct coexist with firms that have clean records.... [M]isconduct is concentrated in firms with retail customers and in counties with low education, elderly populations, and high incomes." (Mark Egan, Gregor Matvos, Amit Seru, via SSRN)  


DOL's Retirement Rule Would Throw Small Business Retirement Plans Out with the Bathwater
"The proposed rule singles out small businesses from their competitors and 'protects' them by enforcing stricter regulations. Apparently, there's a stereotype that small business owners are naive and more at risk of being swindled by financial advisors, while larger businesses are assumed to be immune from swindling." (U.S. Chamber of Commerce)  

Benefits in General

Supreme Court Says Plan Fiduciaries Cannot Seek Recoupment Under ERISA Section 502(a)(3) from a Participant's General Assets (PDF)
"The Supreme Court's decision narrows the timeframe within which plan fiduciaries can enforce their right to recoupment and limits the enforcement of such rights under ERISA section 502(a)(3), making their duty to recover plan assets more cumbersome.... [P]lan sponsors should revisit plan operations to ensure that rights to subrogation and recoupment are asserted promptly. This may require closer monitoring of payment information and potential settlements." [Montanile v. Bd. of Trustees of Nat. Elevator Ind. Health Benefit Plan, No. 14-723 (U.S. Jan. 20, 2016)] (Groom Law Group)  

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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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