Retirement Plans Newsletter

March 31, 2016

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[Official Guidance]

Text of IRS Comment Request for Proposed Changes to Annual Return/Report of Employee Benefit Plan (Form 5500 and 5500-SUP)
"[T]he IRS is soliciting comments concerning the Annual Return/Report of Employee Benefit Plan.... Written comments should be received on or before May 31, 2016 to be assured of consideration." [Filing includes a chart detailing proposed changes.] (Internal Revenue Service [IRS])  


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Preliminary Settlement Reached in Dudenhoeffer Case
"The stock-drop lawsuit that led to a landmark U.S. Supreme Court ruling on company stock funds in defined contribution plans has been tentatively settled for $6 million.... As part of the settlement, Fifth Third Bancorp agreed to make several plan design changes, most notably freezing its company stock fund.... The company also will prepare an education campaign to inform participants about the changes and about 'the benefits of asset allocation and diversification'[.] " (Pensions & Investments)  

Private Equity Fund Liable for Portfolio Company's Pension Contributions
"[T]he court ruled that the Sun Capital entities should be treated as a joint venture even though they were not a partnership-in-fact.... Although the ruling does not implicate tax rules ... if the IRS [were to take] a similar position, the consequences [could] extend to minimum coverage and nondiscrimination testing for retirement plans of portfolio companies, because the same common control rules apply to those tests." [Sun Capital Partners III, LP, et al. v. New England Teamsters & Trucking Industry Pension Fund, No. 10-10921 (D. Mass. Mar. 28, 2016)] (RSM US)  

100 CEOs Have More Saved Up for Retirement Than 41 Percent of U.S. Families Combined
"The report, in a way, obscures the crisis at hand. The comparison it's making -- between 100 exceedingly well-paid executives and tens of millions of Americans -- suggests intolerable corporate excess. As the report makes clear, on the CEO side of the equation, there are beefy retirement accounts flush with more than $4.5 billion. But on the typical-American side of the equation, there are a huge number of people who have practically nothing saved up -- for all American households nearing retirement age, the median retirement-account balance is about $12,000. So, it's not so much that these CEOs have a lot (they do) but that everyone else has next to nothing." (The Atlantic)  

Fate of 400,000 Teamster Pensions Rests in Ken Feinberg's Hands
"[Special Master Kenneth Feinberg], 70, who also helped adjudicate claims in the Deepwater Horizon oil spill disaster and will soon oversee a fund to compensate victims of state-sponsored terrorism, has repeatedly reminded retirees that the law requires him to answer three big questions: Did Central States exhaust all other alternatives? Are the benefit cuts equitable? And will they preserve the fund?" (Bloomberg)  


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New Fiduciary Standard May Force Brokers to Put Your Retirement Interests First
"According to [a recent] survey ... 46 percent of Americans incorrectly believe that advisers already 'are legally required to put the best interests of their clients first' when dealing with retirement assets. The majority of respondents, 54 percent, knew advisers weren't under that requirement, but they sure weren't happy about it. Overall, 93 percent said it's important that all advisers put clients' interests first when providing retirement advice." (Bloomberg)  

Independent Broker-Dealer Advisors Change Tune on Digital Advice Ahead of Fiduciary Rule
"Ladenburg Thalmann believes it has a solution: $ymbil, its new digital advice platform. The self-service portfolio account will be made available to its advisor network and will require a minimum $500 investment to open.... The launch comes amidst industry expectations that smaller accounts collectively worth billions will be dropped by firms unwilling to service them due to cost or liabilities, straight into the arms of independent robo platforms." (On Wall Street)  

New Florida Law Allows Local Sales Tax to Fund Pensions
"Florida cities and counties will have the option of funding the pension liabilities of government plans via a half-cent sales tax under new legislation ... [which] takes effect July 1 and will let municipalities propose a local sales tax to aid underfunded local pension plans ... subject to approval by a voter referendum. To take advantage of the tax option, the relevant pension plans must prohibit new enrollees into any defined benefit plan, must be below 80 percent funded and must require employees to contribute at least 10 percent of their salaries to the retirement plan." (Bloomberg BNA)  

Will More Transparency Help with Public Pension Plan Financing?
"That's the premise behind a bill introduced in Congress to require state and local government pension plans to be more candid, but whether it turns out to be true will depend on what accounting standard is used to determine plan liabilities... The introduction of PEPTA fits into a decade-old campaign by economists and their actuary allies who believe that all pension plans should be evaluated on a 'market liability basis' ... [which] calculates a plan's liability according to the discount rate that the plan would get if it were to go into the market and settle its pension obligations by purchasing an annuity or portfolio of low risk bonds[.]" (Bloomberg BNA)  


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Cypen & Cypen Newsletter, March 31, 2016
Topics include: [1] Would raising Social Security retirement age pose hardship on millions? [2] IRS curtailment of determination letters could be final nail in DB coffin; [3] Ex-court administrator guilty of theft sues for retirement benefits; and [4] Pensions, office allowances and other federal benefits. (Cypen & Cypen)  

Executive Compensation and Nonqualified Plans

[Official Guidance]

Text of FASB Update 2016-09: Stock Compensation (Topic 718) -- Improvements to Employee Share-Based Payment Accounting
127 pages. "The areas for simplification in this Update involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. Some of the areas for simplification apply only to nonpublic entities." (Financial Accounting Standards Board [FASB])  

FASB Issues Standard to Simplify Share-Based Payment Accounting
"In addition to rules that affect all organizations that issue share-based payments, the ASU contains provisions that simplify two areas specific to private companies:... [1] [P]rivate companies will be able to apply a practical expedient to estimate the expected term for all awards with performance or service conditions that have certain characteristics. [2] Private companies will be able to make a one-time election to switch from measuring all liability-classified awards at fair value to measuring them at intrinsic value." (Journal of Accountancy)  

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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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