Retirement Plans Newsletter

March 15, 2016

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Webcasts and Conferences

2016 Benefits & Beyond: Navigating EBP
April 5, 2016 in TX
(Weaver)

2016 Professional Standards
April 10, 2016 in DC
(Conference of Consulting Actuaries)

Actuarial Funding Policies and Practices for Public Pension Plans: What’s Behind the White Paper?
April 13, 2016 in DC
(Conference of Consulting Actuaries)

IRA Reporting
May 3, 2016 WEBCAST
(Ascensus)

Top QDRO Mistakes in Divorce
May 13, 2016 WEBCAST
(National Business Institute)

Ensuring a Compliant IRA Program
May 17, 2016 WEBCAST
(Ascensus)

Transfer of a Business: ESOP Tax-Advantage Strategies and More
May 20, 2016 WEBCAST
(National Business Institute)

NBCH 21st Annual Conference
September 26, 2016 in FL
(National Business Coalition on Health [NBCH])

View All Webcasts and Conferences

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[Official Guidance]

Text of IRS Notice 2016-25: March 2016 Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates (PDF)
"This notice provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under Section 417(e)(3), and the 24-month average segment rates under Section 430(h)(2) of the Internal Revenue Code. In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under Section 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008 and the 30-year Treasury weighted average rate under Section 431(c)(6)(E)(ii)(I)." (Internal Revenue Service [IRS])  


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[Guidance Overview]

The End of an Era: IRS Issues Additional Guidance on End of Determination Letter Application Program
"As anticipated in connection with the 2015 announcement, the IRS continues to [1] encourage plan sponsors to transition to and adopt pre-approved plan documents for their plans, and [2] curtail the ability of plan sponsors to elect to use a Cycle A remedial amendment cycle under Revenue Procedure 2007-44. Plan sponsors that do not already have a pre-approved plan document are eligible for a one-year extension for submitting a determination letter application if they adopt a pre-approved plan." (Sutherland Asbill & Brennan LLP)  

SEC Backs DOL in BP Stock-Drop Case
"The [SEC] endorsed [DOL] guidelines governing the proper behavior for fiduciaries who manage company-stock funds in defined contribution plans and who learn that employer stock is 'materially overvalued due to an undisclosed fraud.' The impact of the SEC's comments -- filed in an amicus brief in a stock-drop case, now before the 5th U.S. Circuit Court of Appeals in New Orleans -- will go beyond this single case because it should clarify gray areas that have existed at the intersection of securities laws and [ERISA].... [T]he SEC cited several examples in which ERISA standards and securities laws are in harmony. The [DOL] also filed a separate amicus brief on March 11, outlining the responsibilities of fiduciaries. Both the SEC and DOL documents were filed in support of the plaintiffs." [Whitley v. BP P.L.C., No. 10-cv-4214 (S.D. Tex. Oct. 30, 2015; on appeal to 5th Cir.)] (Pensions & Investments)  

Should Your 401(k) Plan Offer ESG Investment Options?
"At the very least, your Investment Committee should have a discussion about the topic.... The most persuasive reason your Investment Committee should consider ESG investment options in your 401(k) plan? Your employees. ThinkAdvisor cites a Morgan Stanley study that shows 71% of individuals are interested in [socially-responsible investing (SRI)]. For the millennial group, that response is greater than 80%." (Lawton Retirement Plan Consultants)  

Why the Retirement Fiduciary Cannot Ignore Age Longevity
"The future business of retirement planning will include the traditional core services of ensuring financial security -- but will add an entirely new generation of advisory services. The new business of retirement planning will be transformed into longevity planning. Tomorrow's advisers and related services will take an integrated approach to helping individuals and families navigate decades of life after work. Value added advice will include finance but connect money and planning to specific services in retirement -- e.g., career transitions, transportation, housing choices, care-giving." (Fiduciary News)  


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BofA Headed to Trial in 401(k) Asset Transfer Case
"The long-running lawsuit -- first filed in 2005 -- accuses Bank of America of violating [ERISA] by depriving workers of the 'separate account' feature of their 401(k) plan. The workers are seeking to recover the difference between the investment earnings they would have received in the 401(k) plan and the earnings that the company credited them with following the transfer of assets to the company's cash balance plan." (Bloomberg BNA)  

DOL Focuses Audits on Failure to Make Timely Payments to Participants (PDF)
"The DOL is now specifically investigating retirement plans to determine whether plan sponsors have timely begun paying vested benefits to retirement -- eligible participants. Issues are not limited to retirement plans and have been found in ERISA severance plans as well. Plan sponsors can avoid criticism by following robust operational policies and procedures." (Xerox HR Services)  

Death and Taxes for Qualified Plans
"[No] standard IRS correction procedure exists to remedy a transfer of a plan benefit by a participant outside of the QDRO rules. In [a recent Tax Court case], undoing the illegal assignment of the ex-wife's ESOP account may have simply been unacceptable to the IRS and/or the parties under the circumstances." [Family Chiropractic Sports Injury & Rehab Clinic, Inc. v. Comm'r, No. 29613-13R (T.C. Memo. Jan. 19, 2016)] (Jackson Lewis P.C.)  

ESOP Repurchase Liability: A Funding and Fiduciary Obligation
"A passive, 'pay-as-you-go' approach may not satisfy fiduciary requirements or be a prudent way for your company to address repurchase obligation. Developing a funding strategy for how the company will satisfy liquidity needs to pay ESOP participants is an industry standard.... Step 1: Forecast the liability ... Step 2: Use iterative repurchase liability forecasting ... Step 3: Evaluate funding alternatives ... Step 4: Consider the effects on the plan design and administrative actions ... Step 5: Monitor, evaluate and make adjustments." (Principal Financial Group)  

Treasury Is Listening to Retiree Voices on Proposed Pension Cuts
"Through the comments we've received online, our weekly phone calls and these public sessions across the country, we've heard from a cross section of the approximately 400,000 plan participants in the Central States Pension Plan.... We are required to decide on the Central States application, in consultation with the [DOL and PBGC] by May 7, 2016. Congress has given us a very specific task -- review the application and determine if it meets the requirements set out in the law that Congress passed. If it does, we are required by Congress to approve it." (U.S. Department of the Treasury)  

Retirees Protest Proposed Pension Cuts
"Just this past weekend, retirees in five states held coordinated actions to call attention to the cuts authorized by [MPRA].... These events come on the heels of testimony from Rita Lewis, who spoke before the Senate Finance Committee about the 'shameful and cruel cuts' authorized by MPRA.... [This] was the first congressional hearing held that provided an overview on the impact MPRA would have on retirees, their families and the overall economy." (Pension Rights Center)  

Central States Retirees: A Wave of Organized Wrath
"A 1982 consent decree, designed to rid the Fund of corruption, turned over management of much of its assets to Wall Street firms such as Goldman Sachs. These firms collected more than a quarter-billion dollars in fees just in 2009-2013. For a while, the Fund was flush -- so flush that the IRS ordered the trustees to either take in less money or pay out more. They started sending retirees a 13th check each year, and later instituted '30-and-Out' and then '25-and-Out.' Retirees made plans accordingly, not knowing that their union president and UPS would impoverish the Fund[.]" (Labor Notes)  

What ERISA Attorneys Will Look for in Final Fiduciary Rule
"[A]ttorneys Fred Reish and Brad Campbell ... [warned] listeners the final fiduciary rule language could emerge as soon as this week, 'with all signals being that it will be here before the last week of March is out.' Campbell ... says he expects the final rule to look a lot like the proposed rule, with some potential softening around the roughest edges, 'but not much.' ... [He] believes the final rule will in all likelihood still be quite strict, lumping many financial services providers into the fiduciary domain, while also striving to allow current variable compensation business models to survive through the Best-Interest Contract Exemption[.]" (planadviser)  

Post Fiduciary, SEC May Have to Weigh In
"SIFMA, the industry's leading lobby group, has warned that the Labor Department's proposed fiduciary rule would create a messy regulatory framework, leaving advisors confused and being held to different standards by different regulators. Now, with the proposal likely to become rule at the end of this month ... SIFMA CEO Ken Bentsen says that the brokerage industry's other regulators may yet bring order to chaos." (On Wall Street)  

[Opinion]

The White House's Common-Sense Idea to Protect Retirement Savings
"The fiduciary rule would inevitably abolish some number of business relationships certain people might accept; instead of possibly conflicted, but still 'suitable,' advice, they would get none, or perhaps 'robo-advice' online. On the plus side, however, other people would be protected from exploitation.... We revert to common sense: If you're in business to advise small investors, it should be as clear as possible that you work for them and not a third party behind the scenes. Yes, the fiduciary rule might shrink the business, but what remains could well enjoy greater legitimacy, in both reality and perception. In this time of raging populism, the financial industry needs all the trustworthiness it can get." (The Washington Post; subscription may be required)  

[Opinion]

The Global Retirement Marketplace Is Big and Ripe for Innovation
"[T]he tsunami of complex regulations is cited as a reason why employers need help from financial technology organizations. With mandates growing and becoming more muscular, no one should be surprised if cash-rich backers write big checks to financial technology businesses. As Xconomy reporter Angela Shah points out, multiple start-ups are 'trying to compete for the 80-plus percent who don't offer benefits.' " (Pension Risk Matters)  

Benefits in General

[Official Guidance]

Text of IRS Announcement LA-2016-01: Tax Relief for Victims of Severe Storms and Flooding in Louisiana
"Individuals who reside or have a business in Bossier, Claiborne, Grant, Morehouse, Ouachita, Richland, and Webster Parishes may qualify for tax relief.... [C]ertain deadlines falling on or after March 8, and on or before July 15, 2016 have been postponed to July 15, 2016. This includes 2015 income tax returns normally due on April 18." (Internal Revenue Service [IRS])  

Text of First Circuit Opinion: Failure to Include Time Limit for Filing of Civil Suit in Claim Denial Letter Renders Limitations Period Inapplicable (PDF)
"Claimants are obviously more likely to read information stated in the final denial letter, as opposed to included (or possibly buried) somewhere in the plan documents, particularly since, as was the case here, plan documents could have been given to a claimant years before his claim for benefits is denied. The [DOL], recognizing this, has required that the denial letters themselves include certain information that the Department has deemed critical to ensuring a fair opportunity for review. We think it clear that the Department has included the plan-imposed time limit for filing suit among this required information.... [We] conclude that MetLife's failure to include the time limit in the final denial letter rendered, as a matter of law, the contractual three-year limitations period altogether inapplicable." [Santana-Diaz v. Metropolitan Life Ins. Co., No. 15-1273 (1st Cir. Mar. 14, 2016)] (U.S. Court of Appeals for the First Circuit)  

Mobility, Millennials and Benefits Administration: Maximizing Productivity
"In addition to mobility, Millennials want to be recognized as the individuals they are. When it comes to benefits, the old model just won't work. This generation has been raised on personalized recommendations and suggestions tailored to their specific tastes and habits. They expect targeted content in context with their personal situation, and they want to be able to access that information 'whenever, wherever, and however they want it.' " (Benefitfocus)  

Maximizing Employee Benefits Through Multinational Pooling (PDF)
16 pages. "Developing effective local employee benefits programs for multinational companies can be challenging and time-consuming. It requires finding alignment between corporate philosophy, local business needs, market practice, and cultural values. To be effective in the global economy, it is crucial for multinational companies to achieve the right mix of employee benefits programs to attract and retain key talent." (Lockton)  

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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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