Retirement Plans Newsletter

March 30, 2016

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Webcasts and Conferences

30th Annual Ohio Employee Ownership Conference
April 29, 2016 in OH
(Ohio Employee Ownership Center)

401(k) Plan Workshop - Bloomington, IL
May 12, 2016 in IL
(FIS Relius Education)

Form 5500 Workshop - Bloomington, IL
May 13, 2016 in IL
(FIS Relius Education)

2016 Human Resources Conference
May 18, 2016 in NY
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[Official Guidance]

Text of Treasury Department Announcement of Multiemployer Plan Application to Reduce Benefits and Partition Plan
"The Board of Trustees of the Road Carriers -- Local 707 Pension Fund, a multiemployer pension plan, has submitted an application to Treasury to reduce benefits under the plan in accordance with [MPRA]. The purpose of this notice is to announce that the application ... [will be] published on the website of the Department of the Treasury, and to request public comments on the application from interested parties, including contributing employers, employee organizations, and participants and beneficiaries of the ... Pension Fund to reduce benefits under the plan. Road Carriers -- Local 707 Pension Fund also submitted to PBGC an application to partition the plan. Comments must be received by April 29, 2016." (U.S. Department of the Treasury)  


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[Official Guidance]

Text of PBGC Disaster Relief Notice 2016-06 In Response to Severe Storms and Flooding in Mississippi
"This Disaster Relief Announcement provides relief relating to ... any person responsible for meeting a PBGC deadline ... that is located in the disaster area for which the [IRS] has provided relief in MS-2016-21, March 28, 2016 ... whose operations are directly affected by the Severe Storms and Flooding that began on March 9, 2016, in Mississippi.... The relief generally extends from March 9, 2016 through July 15, 2016. The disaster area consists of Bolivar, Coahoma and Washington Counties." (Pension Benefit Guaranty Corporation [PBGC])  

[Guidance Overview]

Will Your Forfeiture Account Disqualify Your 401(k) Plan?
"The basic rule is that forfeitures must be allocated on an annual basis. Forfeitures should not be held over into later years.... [T]he IRS has recently taken the position that forfeitures cannot be used to offset safe harbor contributions under a regular or QACA safe harbor plan. Use for safe harbor contributions can also result in plan disqualification." (Jackson Lewis P.C.)  

Text of Federal District Court Opinion: Private Equity Funds Jointly Liable for Multiemployer Pension Plan Withdrawal Liability (PDF)
44 pages. "[T]he 80 percent ownership rule appears to provide a roadmap for exactly how to contract around withdrawal liability. In this case, for example, the Funds forthrightly admit that an important purpose in dividing ownership of portfolio companies between multiple funds is to keep ownership below 80 percent and avoid withdrawal liability.... The LLC appears to be better understood as a vehicle for the coordination of the two Sun Funds -- and an attempt to limit liability -- than as a truly independent entity. It is another layer in a complex organizational arrangement. Under the MPPAA framework, which looks past the formal separation of entities, it is not clear why there should be any difference if the Sun Funds invest in Scott Brass, Inc. directly, invest through an intermediary holding company, or invest through both an intermediary holding company and an intermediary LLC." [Sun Capital Partners III, LP, et al. v. New England Teamsters & Trucking Industry Pension Fund, No. 10-10921 (D. Mass. Mar. 28, 2016)] (U.S. District Court for the District of Massachusetts)  

Private Equity Funds Liable to Multiemployer Pension Plan
"Two private equity funds are jointly liable for $4.5 million in pension fund debts owed by one of the companies they own, a federal judge in Massachusetts ruled. This decision is a blow to the private equity community, which may be forced to reevaluate the risks associated with investing in companies that have obligations to multiemployer pension plans.... The Sun Capital funds argued that they each failed to meet the 80 percent ownership threshold required by the statute, because one fund owned 70 percent of the company that owned Scott Brass, and the other fund owned 30 percent. However, [the judge] found the two Sun Capital funds combined to create a joint venture or partnership under federal law, and that 'partnership-in-fact' was a trade or business that owned the entirety of Scott Brass." [Sun Capital Partners III, LP, et al. v. New England Teamsters & Trucking Industry Pension Fund, No. 10-10921 (D. Mass. Mar. 28, 2016)] (Bloomberg BNA)  


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2016 Key Administrative Dates and Deadlines for Calendar-Year Single-Employer Defined Benefit Plans (PDF)
Detailed 5-page chart of notice and reporting requirements and their deadlines. (Milliman)  

In-Plan Guaranteed Lifetime Income: Debunking Portability Myths (PDF)
"Portability is frequently cited as an obstacle to offering a lifetime income product due to both its importance and the widely held view that portability options do not exist or are not feasible. In fact, portability solutions and options are available today but are not well recognized. Much has changed in the last 10 years with product designs, industry standards and new technology all working together to help plans and participants keep guarantees. These [questions and answers] ... address the most common concerns and questions." (Institutional Retirement Income Council [IRIC])  

Pension Funding in Retail Companies Shows Little Change for 2015
"On an aggregate basis -- total assets divided by total liabilities for all 16 firms -- funded status was 80% at both FYE 2014 and FYE 2015. Higher interest rates at FYE 2015 reduced plan liabilities, and these companies would have gained funding ground had their reporting year ended in December. This gain was offset by a stock market drop in January 2016 that left many plan sponsors back where they were in February 2015." (Willis Towers Watson)  

Defined Contribution Plans of Fortune 100 Companies in 2014
"Of Fortune 100 employers that offered only DC plans to new hires in 2014, 48% provided both matching and non-matching contributions, 48% offered matching contributions only, 3% provided non-matching contributions only and 1% made no contribution.... More than half (53%) of these Fortune 100 companies had automatic enrollment in 2014, and 58% of those with auto-enrollment also provided for automatic increases in employee contributions over time." (Willis Towers Watson)  

Accounting for Pension Buy-In Arrangements (PDF)
"The purchase of a traditional buy-out annuity contract generally triggers settlement accounting, and often significant income statement impact. The buy-in contract, however, typically results in no settlement charges but retains some other advantages of an annuity purchase. This [article] explores the advantages, disadvantages, and accounting implications of buy-in arrangements." (PricewaterhouseCoopers)  

The X's and O's of a Winning Fiduciary Strategy
"Here are five coaching strategies [for financial professionals] to help plan sponsors effectively satisfy their fiduciary duties. [1] Draft an all-star investment committee.... [2] Create a playbook for selecting and monitoring plan investments.... [3] Serve as plan referee.... [4] Keep score of plan costs.... [5] Be a loyal team player." (Vanguard)  

Non-Profit Employer Strategy to Increase Maximum Retirement Plan Contributions
"For 2016, contributions to a stand-alone defined contribution plan are limited to $53,000 plus, in the case of a participant who reaches age 50 by the end of 2016, additional salary deferral contributions of $6,000 (Catch-Up Contributions). However, by utilizing a combination of plans qualified under Sections 401(a) and 403(b) ..., contributions may be as high as $77,000[.]" (Clifton Budd & DeMaria, LLP)  

Millennials' New Retirement Number? $1.8 Million (Or More!)
"Older Millennials -- those born in the early 1980s -- will need about $1.8 million salted away to maintain their standard of living in retirement while younger Millennials -- those born in the late 1990s -- will need upwards of $2.5 million... [T]hat equation ... assumes they'd need to generate $30,000 to $40,000 in annual income from their nest eggs in today's dollars. [And] it assumes a 2% inflation rate, which is currently the Federal Reserve's target rate." (Lebanon Daily News)  

[Opinion]

Nobody Should Oppose the DOL's Proposed Investment Fiduciary Regs (PDF)
"The rule will require advisors to be candid & honest with plans, participants and IRAs. Current law does not require this! ... More educated consumers of plan and IRA investment advice should mean better decisions, better control and thus greater retirement savings.... Financial concerns earn the greatest returns in ERISA's marketplace. There is absolutely huge money in plans and IRAs. Financial institutions and their related parties should have some skin in the game when the only skin will be that the industry will not be allowed to deceive plans, fiduciaries, participants, and IRA owners. Advisors will have to act in their clients' best interests." (The ERISA Law Group)  

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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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