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[Guidance Overview]
IRS Provides New Option to Correct Late Restatements
"The IRS recently released information on how to correct an employer's failure to timely restate their plan. In the past, the only way to correct such a failure was to file under VCP.... A newly announced program allows financial institutions and other preapproved document providers to request an 'umbrella closing agreement' to remedy all their plans that were not timely restated.... The provider must have at least 20 plans being corrected."
(FIS Relius)
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[Guidance Overview]
IRS Requests Comments on New Compliance Questions in Form 5500
"The IRS added new compliance questions to the 2015 IRS Form 5500/5500-SF ... The Form 5500 instructions, however, specifically provide that plan sponsors should not complete these questions for the 2015 plan year filing. Last week, the IRS invited comments on several of the new questions. In its request for comments, the IRS has also proposed to modify some of the questions from their original form, or delete them entirely."
(Littler)
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The Evolution of ERISA Fiduciary Best Practices (PDF)
"With the increased focus on fees inside ERISA governed plans by the plaintiffs' bar and by the DOL, plan sponsors have become more sophisticated in ensuring that the fees paid by plan participants are reasonable.... On the end of the spectrum of low cost and minimal time investment, an ERISA plan fiduciary can benchmark a plan's fees.... On the other end of the spectrum, an ERISA plan fiduciary can conduct a full-scope request for proposal (RFP).... On the extreme end, some ERISA plan fiduciaries are taking the sections that address fees and moving them to a separate document called an expense policy statement."
(The Wagner Law Group)
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DOL Final Rule Contains a Litany of 11th Hour Concessions to Brokers That Show Wall Street Lobbyists Earned Their Keep
"[Secretary of Labor] Thomas E. Perez yesterday spoke to the press to lay out a dizzying array of points on which the DOL gave ground ... 'We eliminated the one-, five-, and 10-year-projections and we eliminated annual disclosures and streamlined other disclosures', he said ... [T]he deadline for full implementation for rules related to proprietary products and disclosures has been moved back an entire year -- with the deadline for implementation now Jan. 1 2018 as opposed to Jan. 1, 2017.... The DOL also gave ground on the use of proprietary products: the agency is now OK with their use by advisors.... The final rule ends the suspense about whether variable and indexed annuities will still be allowed in retirement plans.... The final rule also ends suspense about the fate of 12(b)1 fees. Neither they, nor the kick-backing 'revenue sharing' they facilitate, will be banned."
(RIABiz)
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SEC and DOL See Eye to Eye in Stock-Drop Case (PDF)
"Taken together, DOL and SEC advise plan fiduciaries in similar situations to: Urge others to disclose.... Suspend all purchases and sales.... Disclose the fraud ... The SEC and DOL comments in this case may encourage participants to file more 'stock-drop' lawsuits, could influence sponsors to consider the elimination of their company stock funds due to expanded litigation risk, and could increase the reluctance of company officials to serve as fiduciaries for defined contribution plans." [Whitley v. BP P.L.C., No. 10-cv-4214 (S.D. Tex. Oct. 30, 2015; on appeal to 5th Cir.)]
(Xerox HR Services)
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SSM Health in Cross Hairs of Latest Church Plan Lawsuit
"The recent influx of lawsuits challenging hospitals' pension funding levels doesn't appear to be slowing down, with the latest one accusing SSM Health Care Corp. of a $723 million pension shortfall in violation of ERISA. The lawsuit is the third class action filed in as many weeks that takes aim at a religious health-care company's decision to treat its pension plan as a church plan exempt from federal funding requirements. More than a dozen similar lawsuits have been filed over the past three years, with two federal appellate courts ruling against the hospitals."
(Bloomberg BNA)
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Pension Finance Watch: Strong Equity Returns Dominate March Results
"Equity markets rebounded sharply in March. The positive impact, however, was largely offset by a decline in corporate bond yields, which pushed up liability values. The Willis Towers Watson Pension Index moved up 0.7% for the month to 69.4. Even with the March increase the index remains down over 5% for the year."
(Willis Towers Watson)
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[Opinion]
Inclusion of 'Level-to-Level' Compensation in Fiduciary Regulation a Victory for Advisors and Participants
"In a big win for 401(k) plan participants, plan sponsors, and advisors alike, the Labor Department's final fiduciary regulation includes a streamlined exemption for 'level-to-level' advisor compensation. The fiduciary regulation, published in its final form today, acknowledges a special exemption for advisers and firms that receive only a 'level fee' for the advice they provide in conjunction with the decision to rollover assets from an employer-sponsored plan, such as a 401(k), so long as certain conditions are met, including an acknowledgement that the recommendation is in the customer's best interest. Level fee fiduciaries receive the same compensation regardless of the particular investments the client makes, whether based on a fixed percentage of assets under management or a fixed dollar fee."
(American Retirement Association)
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[Opinion]
New Fiduciary Regs: A Win For Plan Sponsors
"Plan sponsors working with advisors who haven't been acting as fiduciaries will be approached by these advisors as they begin to define a new working relationship. They are likely to outline relationships that feature higher costs. There will also be additional paperwork to sign, which describes their fiduciary limitations.... These regulations benefit you, the plan sponsor. Any advisor who whines and complains about taking your best interests into account when providing investment advice is not worth working with."
(Lawton Retirement Plan Consultants)
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Benefits in General
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ERISA Preemption Is Alive and Well
"Although prior Supreme Court decisions had suggested as much, [Gobeille v. Liberty Mutual Ins. Co.] makes clear that reporting, disclosure, and recordkeeping are fundamental ERISA plan administration activities, and that ERISA will preempt state laws that purport to directly regulate employee benefit plans in these areas regardless of whether they 'conflict' with any requirements imposed by ERISA."
(Steptoe & Johnson LLP)
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The High Court's Preemption Tango and the Future of ERISA
"The majority opinion in [Gobeille v. Liberty Mutual Ins. Co.], and the strongly worded dissent authored by Supreme Court Justice Ruth Bader Ginsberg (joined by Supreme Court Justice Sonia Sotomayor) are evidence of the push and pull in the tango over the scope of ERISA preemption. This case may also have practical implications for ERISA practitioners who are trying to keep in step with state laws that are out of step with ERISA's preemptive sweep."
(Alston & Bird LLP)
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Executive Compensation and Nonqualified Plans
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Stock Options and Tax Returns: Mistakes To Avoid
"[1] With a cashless exercise/same-day sale, the spread is reported on your W-2 and on your tax return as ordinary income.... [2] With nonqualified stock options (NQSOs), for employees the spread at exercise is reported to the IRS on Form W-2 ... [3] You will also mistakenly double-report income if you do not realize that your W-2 income in Box 1 already includes stock compensation income.... [4] With incentive stock options (ISOs), when you exercise and hold through the calendar year of exercise, remember that you need to complete an AMT return (Form 6251) to see whether you owe AMT.... [5] When you have paid AMT because of your ISO exercise and hold, you get a tax credit."
(myStockOptions.com)
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New FASB Accounting Rules: Share-Based Withholding on Equity Awards at the Maximum Federal Tax Rate Permitted
"One item of particular interest is a change in how federal income taxes can be 'netted' against the number of shares delivered upon exercise of a stock option, or upon vesting of restricted stock or settlement of restricted stock units. Under prior guidance, only the 'minimum required' tax withholding amount could be netted against the shares delivered. If this limit were exceeded, the grant would be considered a 'liability' award with coincident adverse accounting treatment."
(Wilkins Finston Friedman Law Group LLP)
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BenefitsLink.com, Inc.
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Lois Baker, J.D., President
David Rhett Baker, J.D., Editor and Publisher
Holly Horton, Business Manager
BenefitsLink Retirement Plans Newsletter, ISSN no. 1536-9587. Copyright 2016 BenefitsLink.com, Inc. All materials
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