Retirement Plans Newsletter

March 29, 2016 logo logo LinkedIn logo Twitter logo Facebook logo
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Employee Benefits Jobs

Employee Benefits Producer / Agent
Owen-Dunn Insurance Services
in CA

Director, Retirement Plan Compliance
RiversEdge Advanced Retirement Solutions

401(k) Plan Administrator
Qualified Plan Administrators, Inc.
in GA

Compliance Testing & Reporting Specialist
HK Financial Services
in IA

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Webcasts and Conferences

Value of ACA Coding Improvement: Market Share and Market Effects
April 6, 2016 WEBCAST
(Healthcare Web Summit)

Target Date Funds The Looming Liability of Misfit Risk
April 7, 2016 WEBCAST
(University Conference Services)

DOL Update on Enforcement and Alternative Investments
April 21, 2016 in NY
(Worldwide Employee Benefits Network [WEB] - New York Chapter)

Are Employers Still Hot on Private Exchanges? Results from the Chelko/WEB Employer Survey
April 27, 2016 WEBCAST
(Worldwide Employee Benefits Network [WEB])

ACFC Exam Preparation Session 3: ACA Compliant Advanced Planning Techniques (Part 1)
May 4, 2016 WEBCAST
(ECFC [Employers Council on Flexible Compensation])

ACFC Exam Preparation Session 4: ACA Compliant Advanced Planning Techniques (Part 2)
May 18, 2016 WEBCAST
(ECFC [Employers Council on Flexible Compensation])

2016 Chicago Mid-Sized Retirement & Healthcare Plan Management Conference
June 14, 2016 in IL
(University Conference Services)

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[Guidance Overview]

PBGC Issues Final Regs on Pension Plan Reporting Under ERISA Section 4010
"The final regulations: [1] Modify the $15 million aggregate underfunding waiver. [2] Add new reporting waivers ... [3] Codify the plan reporting provisions under [MAP-21], as modified by [HATFA] and the Bipartisan Budget Act of 2015 (BBA), and PBGC Technical Updates 12-2 and 14-2. [4] Provide alternative methods of reporting certain actuarial information." (Practical Law Company)  


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[Guidance Overview]

IRS Reminds Retirees of April 1 Deadline to Take Required Retirement Plan Distributions
"The April 1 deadline applies to owners of traditional (including SEP and SIMPLE) IRAs but not Roth IRAs. Normally, it also applies to participants in various workplace retirement plans, including 401(k), 403(b) and 457(b) plans. The April 1 deadline only applies to the required distribution for the first year. For all subsequent years, the RMD must be made by Dec. 31. So, a taxpayer who turned 70-1/2 in 2015 (born after June 30, 1944 and before July 1, 1945) and receives the first required distribution (for 2015) on April 1, 2016, for example, must still receive the second RMD by Dec. 31, 2016." (Internal Revenue Service [IRS])  

Merrill Lynch Beats Lawsuit Over Clifford Chance 401(k)
"According to the judge, the litigator's ERISA-based claims against Merrill Lynch -- which included allegations of excessive fees and impermissible kickbacks -- could succeed only if Merrill Lynch qualified as an ERISA fiduciary. The litigator argued that Merrill Lynch became an ERISA fiduciary through its actions in selecting a roster of investment funds for the Clifford Chance 401(k) plan. The judge disagreed, explaining that courts have consistently declined to impose fiduciary status on service providers that create a menu of investment options for plan trustees." [Walker v. Merrill Lynch, No. 15-cv-01959 (S.D.N.Y. Mar. 25, 2016)] (Bloomberg BNA)  

Does Your 401(k) Plan Investment Advisor Measure Up?
"How can you tell if you are working with the right 401(k) plan investment advisor? Top advisors: Sign-on to your plan as a fiduciary ... Have a clean background ... Do not accept soft dollar payments ... Are objective ... Work for investment advisory firms ... Work for RIAs ... Are able to work with everyone." (Lawton Retirement Plan Consultants)  

Matching Worker Retirement Planning Styles
"[E]xpecting every worker to become a customizer -- or even a fine-tuner -- is unrealistic. The investment world has become far too complex and is constantly changing. Furthermore, few people have the combination of time, knowledge, inclination and emotional fortitude to successfully go their own way when managing their retirement funds. Plan sponsors and administrators offering DC plans are wise to focus on strategies that accept most workers are delegators[.]" (International Foundation of Employee Benefit Plans [IFEBP])  


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Fiduciary Rule Effects on Investment Advisers Providing Distribution and Rollover Education
"In order to make a prudent recommendation, the adviser needs to investigate the relevant factors that a knowledgeable person would want to know to make that decision.... That requires quite a bit of investigation and analysis, but does not prohibit a recommendation....[U]ntil the final BIC exemption is issued, it isn't clear how advisers will be able to avoid prohibited transactions if they make distribution recommendations. However, if an adviser provides non-biased and good quality distribution education, that's not considered a recommendation. As a result, the prohibited transaction rules don't apply." (  

Conflicts in a Rapidly Changing Fiduciary Landscape: Dually Registered or 'Hybrid Advisor' Challenges (PDF)
12 pages. "For non-discretionary advice relationships, the DOL proposal would condition the availability to receive 12b-1 fees and other forms of revenue sharing upon satisfaction of the terms of a new 'best interest contract' or 'BIC' exemption. The conditions of the BIC exemption are numerous, highly technical and require the delivery of a 'best interest' promise to clients which exposes the firm and its representatives to litigation risk. In the case of discretionary advice relationships ... the receipt of 12b-1 fees, revenue sharing payments marketing fees, administrative fees, sub-TA fees and sub-accounting fees by hybrid firms with discretionary management authority over client IRA assets would be explicitly disallowed." (Pershing LLC)  

Conflicts in a Rapidly Changing Fiduciary Landscape: Broker Dealer Challenges (PDF)
"While the outcomes of the Dodd-Frank mandate and the DOL's proposal remain uncertain, for the foreseeable future, broker-dealer firms are likely to experience increasing pressure to demonstrate that they have policies and procedures that identify and prevent conflicts of interest. [This article discusses] some of the common practices that [the authors] believe to be potential conflicts.... [1] Sales of mutual fund shares and the receipt of 12b-1 fees ... [2] Receipt of revenue sharing payments ... [3] Transaction fee and no-transaction fee mutual fund sales ... [4] Recommendations concerning the investment of ERISA and IRA assets." (Pershing LLC)  

Three Obvious Tips Retirement Savers Too Often Ignore
"Why do retirement savers snub these common sense guidelines? Perhaps it's because they've fallen victim to some of the more insidious forms of behavioral blunders.... [1] Dollar Cost Averaging ... [2] Converting to a ROTH IRA ... [3] Stop Watching the News." (Fiduciary News)  


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Money's Worth Ratios Under the OASDI Program for Hypothetical Workers (PDF)
10 pages. "This note presents analysis of theoretical money's worth ratios for hypothetical workers with various earnings patterns and levels under the Old-Age, Survivors, and Disability Insurance (OASDI) program. The money's worth ratio is the ratio of present value of expected benefits to the present value of expected payroll taxes (contributions) for an individual or a cohort of workers.... For a group of workers and their dependents, money's worth ratios attempt to answer the question: How do benefits compare to payroll tax contributions? In other words, do particular individuals or groups get their 'money's worth'?" (U.S. Social Security Administration [SSA])  

Internal Real Rates of Return Under the OASDI Program for Hypothetical Workers (PDF)
9 pages. "This note presents analysis of theoretical internal real rates of return for hypothetical workers with various earnings patterns and levels under the Old-Age, Survivors, and Disability Insurance (OASDI) program. The internal real rate of return ... is the real interest rate (effective real annual yield) for which the present value of expected payroll taxes (contributions) is equal to the present value of expected benefits. Therefore, internal rates of return attempt to answer the question: If a group of workers with selected characteristics were to invest contributions to fund future benefits (including dependents), what real annual yield would be required to finance those future benefits?" (U.S. Social Security Administration [SSA])  

Helping Women Achieve Retirement Security
"When women have the opportunity to save for retirement at work, they are actually more likely than men to enroll and typically save a higher fraction of their incomes. But women are less likely to be eligible for employer-sponsored retirement plans because they are more likely to work part-time or leave an employer prior to vesting.... [myRA] may be a particularly attractive option for women who work part time, don't have access to a 401(k) or similar retirement plan, or who are just looking for a secure and straightforward way to save for the future." (U.S. Department of the Treasury)  

Board Recommends 'Secure Choice' Legislation to Implement State-Run Retirement Program in California
"The recommendations are based on a market analysis and financial feasibility study ... of a mandated program for employers with five or more workers that are not now offering a retirement savings plan.... [The] report calls for a default employee contribution rate of 5% into a Roth IRA, with the choice to switch to a traditional individual retirement account, and auto escalation after the program's first year. It also recommends ... two options: launching the program with target-date funds or a pooled IRA, with a California public authority managing a single investment pool." (Pensions & Investments)  

State Savings Initiatives: Lessons from California and Connecticut (PDF)
"8 states are considering retirement savings initiatives.... This brief focuses on lessons learned from [California and Connecticut] to inform other states considering similar efforts.... The first section describes the California and Connecticut initiatives. The second section presents three lessons learned from their feasibility studies: [1] high rates of employee participation can be expected; [2] employers are split in their support, but they will not discourage participation by employees; and [3] program design and implementation are critical. The final section concludes that while the work done by California and Connecticut suggests a promising outlook for auto-IRAs, success will depend on how well the programs are implemented." (Center for Retirement Research at Boston College)  

Measuring Compensation Expenses (PDF)
"The Total Compensation Cost for an employee paid $35,000 in Form W-2 earnings can easily be $45,500 with a 30% employer cost for Indirect Compensation, and may exceed the employee's commercial value. Total Compensation Costs can usually be redirected in a manner that better meets an employer's objectives.... [A] systematic analysis can be the first step to reducing compensation costs." (H.C. Foster & Company)  


Another Reason to Worry About the DOL's 'Reform' of Retirement Investment Advice: It Conflicts with Securities Laws
"The unsurprising result of the Labor Department thinking it knows best is a proposed rule that doesn't mesh with long-standing financial regulations issued by real financial regulators. Here are a few of the problems ... [1] Illegal investment performance predictions ... [2] Labor rule incents illegal 'reverse churning' ... [3] Labor rule flouts Congressional direction in Dodd-Frank ... [4] Labor definition of investment 'recommendation' differs from longstanding securities law definition." (U.S. Chamber of Commerce)  


How Much Do You Really Earn?
"We all earn money, but unless we save some of that money, we don't really earn any. Instead, all we're doing is acting as a conduit for the money to go somewhere else. What we save is what we really make.... [We] need to start educating students about the importance of saving for retirement, and we need to start doing it at a young age. Doing so would benefit our companies and our clients -- and help an entire generation prepare for a more secure retirement." (PenChecks)  

Benefits in General

[Official Guidance]

Text of IRS Announcement MS-2016-21: Tax Relief for Victims of Severe Storms and Flooding in Mississippi
"Victims of the severe storms and flooding that took place beginning on March 9, 2016 in parts of Mississippi may qualify for tax relief ... Individuals who reside or have a business in Bolivar, Coahoma and Washington counties may qualify for tax relief.... [C]ertain deadlines falling on or after March 9, 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.... A variety of business tax deadlines are also affected including the May 2 deadlines for quarterly payroll and excise tax returns." (Internal Revenue Service [IRS])  

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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