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[Guidance Overview]

An Overview of the DOL's Final Fiduciary Rule
"The fiduciary definition of 'investment adviser for a fee' remains largely unchanged from the proposed rule and DOL chose to adopt the FINRA definition of 'recommendation.' DOL did clarify fiduciary status in small ways.... The final rule appears to reflect a few significant changes to the Best Interest Contract (BIC) Exemption, ... DOL did not, as it suggested it might, adopt a streamlined option for low-fee or low-cost, passively managed investment options.... Another major change from the proposal exempts ERISA plans from the requirement that the Advice Provider enter into a written contract with the investor before making a recommendation." (Miller & Chevalier)  


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[Guidance Overview]

At Long Last, the DOL Issues Final Fiduciary Rule
"Education will still be permitted, so that plan sponsors, and the entities who work with them, will not risk becoming subject to the new fiduciary standard for advisers merely due to the fact that such education is provided.... In a victory for the financial services industry, those who receive level fees ... will not be subject to ... the 'Best Interest Contract Exemption' (BICE), that ... would have effectively prevented individuals from advising participants on IRA rollovers if the advisor received compensation from the IRA product." (Cammack Retirement Group)  

[Guidance Overview]

DOL Releases Final Investment Advice Fiduciary Rules
"The final regulations allow the contract required under the Best Interest Contract exemption to be adopted at the time investments are purchased instead of the time in which they are initially recommended, and eliminate the requirement that a formal contract be required for participants in ERISA-covered plans. Additionally, the final regulations no longer define appraisals and fairness opinions regarding investments, including opinions for valuations of employee stock ownership plans (ESOPs) as fiduciary functions and specifically exempt health and welfare plans, disability plans, and term life insurance policies from complying with its requirements." (Ballard Spahr LLP)  

Labor Secretary Perez: DOL Fiduciary Rule Can Survive Lawsuits
"The [DOL] is confident that its just-released rule to amend the definition of fiduciary under [ERISA] will survive legal challenges... 'Every rule we take, people threaten us with litigation,' Labor Secretary Thomas Perez told reporters ... 'We had a very lengthy and deliberate process, and what people see when they review the rule is that we listened and made changes. I'm confident in what we've done on the policy front, and I'm confident that we will survive any legal challenge.' " (ThinkAdvisor)  

Expect Close Monitoring During Fiduciary Rule Implementation
"The [DOL] will closely monitor the rule as it is implemented, 'and if we think there is some continued abuse that hasn't been adequately addressed, we'll figure out what to do,' [said] Timothy Hauser, a deputy assistant labor secretary ... 'It's a very complicated marketplace, so we are going to deal with whatever problems [that arise] as they come up.... By the same token, if we see that there's something in the rule that is having an unintended consequence, we are going to look to deal with that, too.' Hauser's comments came in response to concern from some quarters that the department caved to pressure from the industry on key issues." (On Wall Street)  


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DOL Fiduciary Rule Includes Unexpected Treatment of Fixed Indexed Annuities
"[Fixed indexed annuities (FIAs)] have always been afforded the 84-24 Prohibited Transaction Exemption, which classified them as an insurance product subjected to suitability standards of sale. In the final version of the rule, the DOL peeled away FIAs' PTE exemption and classified them with variable annuities [VAs], which are considered securities. VAs and mutual funds, which are currently also included in PTE 84-24, will be subjected to the tougher Best Interest Contract (BIC) exemption in the new rule.... FIA sales skyrocketed in recent months as carriers shied away from VAs. FIAs booked record fourth quarter gains and sales of more than $53 billion last year[.]" (  

A Plan Advisor's Best Defense Against Robo-Advisors Is Being an Expert on Robo-Advisors (PDF)
"The robo-advisor community has initiated contact with plan sponsors across the country.... Marketing and sales pitches in this segment are polished.... In most cases, low fees will be the bait, along with efficiency, technology and simplicity.... [T]he plan sponsor may truly have a fiduciary duty to 'listen' to what is being sold. A retirement advisor's challenge is to remain at least two steps ahead of whomever may be approaching the plan sponsor client." (National Association of Plan Advisors [NAPA])  

It's Time to Rethink Fixed-Income Investing
"Low rates and longevity equate to difficult math for CIOs of major pension plans.... Some have recalculated expected rates of return by asset class; others have adjusted their published expected rate of return. Many are starting to review liabilities under more aggressive longevity assumptions.... Consider alternatives to traditional bonds.... Redefine borders and emerging markets ... Rethink the glide path." (Institutional Investor)  

Sun Capital and the Ever Expanding Scope of Multiemployer Pension Withdrawal Liability (PDF)
"[P]rivate equity funds routinely structure investments through multiple funds -- even non-parallel funds -- to keep the ownership percentage of any single fund below 80%. That was long-expected to be an effective strategy to insulate private equity funds an investor from potential withdrawal liability. Going forward, private equity funds are likely to reevaluate how they value pension risk and evaluate further risk mitigation strategies." [Sun Capital Partners III, LP, et al. v. New England Teamsters & Trucking Industry Pension Fund, No. 10-10921 (D. Mass. Mar. 28, 2016)] (Groom Law Group)  

Milliman 2016 Pension Funding Study (PDF)
"[T]he 100 largest corporate defined benefit (DB) pension plans made little progress in 2015.... [T]he pension funding deficit declined by $19 billion, settling at $307 billion at the end of 2015.... 37 of the largest 100 plan sponsor companies will record fiscal year 2016 pension expense using an accounting calculation method change linked to the spot interest rates derived from yield curves of high quality corporate bonds. Changing to the spot rate method for determining the interest cost of pension expense will result in pension expense savings in 2016 for these 37 plan sponsors." (Milliman)  

Courts Strike Down Church Plan Exemptions for Church-Affiliated Organizations
"The recent holdings by two, and perhaps soon to be three, federal circuit courts rejecting the church plan exemption for plans established and maintained by church-affiliated organizations represent an alarming trend for sponsors of such plans. These holdings not only conclude that a church-affiliated organization cannot establish a church plan but also suggest that many such organizations are not even qualified to maintain a church plan." (Bradley Arant Boult Cummings LLP)  

Forfeitures -- To Restore or Not to Restore?
"In defined contribution plans, if a former participant who was not fully vested is rehired after a forfeiture of their non-vested account balance, the forfeiture may need to be restored to their account. The timing and amount of the forfeiture restoration depends on the specific wording in your company's plan document.... The plan document may or may not require repayment of the vested balance.... Forfeiture value depends on when the plan document says the forfeiture occurred." (Principal Financial Group)  

Required Minimum Distributions: FINRA Answers Ten Common Questions About IRA Accounts
"[1] What are required minimum distributions? ... [2] How do I calculate the RMD? ... [3] What if I don't take any distributions, or if the distributions I take do not meet the RMD amount? ... [4] Can I withdraw more than the minimum required amount? ... [5] If I do take more than the minimum amount, can a distribution in excess of the RMD for one year be applied to the RMD for a future year? ... [6] Can I just take the RMD from one account instead of separately from each account? ... [7] What happens if a retirement plan account owner or IRA owner dies before RMDs have begun? ... [8] Do I have to take an RMD if I own an annuity? ... [9] What reporting obligations does my brokerage firm have with respect to RMDs? ... [10] What if a mistake is made?" (Financial Industry Regulatory Authority [FINRA])  


How the Final DOL Rule Became a Paler Shade of Its Former Self: 'Somebody Made a Deal'
"Wall Street lobbyists prevailed on the aspect of the DOL rule that counts -- enforcement.... [An] earlier iteration of the proposal ... contemplated the client and the advisor signing a best interest contract exemption. Under that scenario, the legal burden was simply one of proving a contract breach.... Under the final rule, however, a consumer must prove the harder-to-pin-down breach of fiduciary duty." (RIABiz)  


Teachers Now in Insurance Agents' Crosshairs After DOL Rule
"Imagine you are an agent who likes to sell Equity Indexed Annuities (EIAs) ... Today you are likely shell-shocked by the new DOL rule which just made it much more difficult to sell EIAs in [IRAs]. Incredible vacations and large commission checks are a thing of the past ... or are they? What if there was one last bastion of the retirement market where you could continue to hunt for juicy prey to sell your toxic products? This market exists, it's called the non-ERISA 403(b) market." (The Teacher's Advocate)  

Executive Compensation and Nonqualified Plans

[Guidance Overview]

FASB Issues Accounting Standards Update on Employee Share-Based Payment Accounting Improvements (PDF)
"[E]arly adoption of ASU 2016-09 is permitted in any interim or annual period for which financial statements have not been issued, but companies must adopt all of the guidance in the same period. For example, if a company wishes to early adopt to take advantage of the more favorable stock-for-tax withholding provisions, it must also early adopt all other provisions of the ASU including the potentially volatile income tax provisions[.]" (Frederic W. Cook & Co., Inc.)  

[Guidance Overview]

FASB Changes the Accounting Rules for Equity Compensation
"ASC 718 will now allow companies to withhold shares for taxes up to the maximum individual tax rate in the applicable jurisdiction rather than the minimum statutory withholding amount.... [C]urrently, to avoid triggering liability accounting treatment, any shares withheld to cover the taxes due at settlement of an option or award must be limited to the minimum required statutory withholding of the award holder. Most companies and their counsel have hardwired the minimum required statutory tax-withholding requirement into their stock plan documents." (Winston & Strawn LLP)  

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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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