Retirement Plans Newsletter

April 12, 2016

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Account Manager
Corporate Synergies Group, LLC
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Retirement Plan Concepts & Services, Inc.
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Envisage Information Systems
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Retirement Planners
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Webcasts and Conferences

Managing Money Stress: The Emergence of Financial Wellness
April 20, 2016 in GA
(ISCEBS - Georgia Chapter)

2016 Legislative & Regulatory Updates
May 10, 2016 WEBCAST
(ECFC [Employers Council on Flexible Compensation])

Health Benefits Laws Compliance Assistance Seminar
May 11, 2016 in MS
(Employee Benefits Security Administration [EBSA], U.S. Department of Labor)

401(k) Plan Workshop - Kansas City
June 2, 2016 in KS
(FIS Relius Education)

Form 5500 Workshop - Kansas City
June 3, 2016 in KS
(FIS Relius Education)

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[Official Guidance]

Text of IRS Notice 2016-29: Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates, April 2016 (PDF)
"This notice provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates ... and the 24-month average segment rates ... In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities ... as in effect for plan years beginning before 2008 and the 30-year Treasury weighted average rate under Section 431(c)(6)(E)(ii)(I)." [Also available: recent corporate bond yield curve spot rates (XLS)] (Internal Revenue Service [IRS])  


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[Guidance Overview]

DOL's Final Fiduciary Rule: 'Hire Me' (PDF)
"[T]he Final Regulation clearly provides that one does not become a fiduciary merely by marketing oneself or an affiliate as a potential advice fiduciary, unless that recommendation is coupled with an investment recommendation. Thus, a fee-based adviser can freely 'recommend' his or her services. However, this may be a pyrrhic victory because the vast majority of such 'hire me' recommendations are likely to be made in conjunction with an investment recommendation.... [T]he streamlined BIC Exemption may not provide relief for recommending a rollover into an arrangement if the program's fees are levelized only at the firm level and not across the entire organization.... [A]bsent 100% level fees, recommending a rollover from one IRA to another will likely require a written contract and compliance with the full BIC Exemption." (Groom Law Group)  

[Guidance Overview]

Final Fiduciary Regs Pack Less Than Hurricane-Force Punch
"[T]he final rule and accompanying [PTEs] ... appear to be less disruptive and destructive than many thought they would be, compared to the 2015 proposed rule and exemptions.... In those cases where a signed BIC document must be executed, such as in an IRA rollover situation, contract execution can be part of an account opening process, rather than before the very first syllable of an advising communication! ... Also, the need for initial one, five and 10-year projections, and annual disclosures, were removed as BIC requirements, significantly reducing the administrative and record-retention burden of the BIC as initially proposed.... Health Savings Accounts (HSAs) and Coverdell Education Savings Accounts (ESAs) are covered by this guidance to the same extent that IRAs are." (Todd Berghuis, for Ascensus)  

[Guidance Overview]

New DOL Conflicted-Advice Regulation -- from a Plan Sponsor Viewpoint
"[An] employer has an affirmative duty to understand the nature of its relationships with all of the plan's service providers ... If the advisor has not been acting as a fiduciary, develop a timeline for when and how the advisor will transition its services to a fiduciary investment advisor model. A change in an existing advisor relationship to an investment fiduciary-based model may require more than just receiving and reviewing new account documents and disclosure statements. In many cases, in order for the advisor to meet the impartial conduct standards, more substantive changes, such as transitioning from a commission-based to a fee-based arrangement, will be necessary." (RSM US)  

[Guidance Overview]

GASB Addresses Pension Issues
"Statement 82 amends Statements 67 and 68 to require the presentation in schedules of required supplementary information of covered payroll -- defined as the payroll on which contributions to a pension plan are based -- and ratios that use that measure." (Journal of Accountancy)  


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[Guidance Overview]

Revised Annual Filing Procedure for Puerto Rico Benefits Trusts
"Benefits Trusts established or adopted by an employer that must file a Puerto Rico income tax return will comply with its Trust Filing requirement by completing Form SC 6042 and submitting it with the employer's income tax return.... [If] the employer is not required to file a Puerto Rico income tax return, the Benefits Trust will complete and file only certain prescribed portions of the Form SC 6042, in which case the Trust Filing is due by the same deadline that has applied to the Form 480.7(OE)." (Haynes and Boone, LLP)  

Final Fiduciary Rule Attracts Both Praise and Criticism (PDF)
"Congressmen and stakeholders will continue to plow through the final rule to determine its strengths and weaknesses. And, despite the potential to overturn the final rule by legislation, it is not likely during the current administration and Congress.... From the administration's perspective, the new rule is a 'critical step in the President's ambitious effort to put in place the strongest consumer protections in American history.' " (Xerox HR)  

'Father of 401(k)' Ted Benna Sounds Off on DOL Fiduciary Rule
"Ted Benna wants to make something absolutely clear ... 'The long-term risk for 401(k) advisors is that if they don't clean up the business, national and state-level government plans will take over,' he says.... Benna, commonly credited as the 'father of the 401(k)' for his early work (and risks) with the retirement vehicle, points to a particularly egregious case he's recently come across. 'There are some people who deserve to get sued,' he bluntly states." (401K Specialist)  

Target Date Funds: Getting Cheaper in a Hurry
"The fiduciary responsibility that is mandated by [ERISA], spurred by the threat of class-action lawsuits, has motivated large plan sponsors like no mutual fund investors have ever been motivated before. They want their funds to cost less. They need their funds to cost less. They have the buying power to make that happen. And it is. Target-date expense ratios are plunging -- From 1.03% to 0.73%, in just six years!" (John Rekenthaler, in Morningstar)  

Constructing a Defined Contribution Investment Lineup: Four Best Practices (PDF)
16 pages. "In terms of investment outcomes, the ultimate deciding factors are market returns, asset allocation, and costs.... [The authors propose] four best practices for constructing a plan lineup: [1] identifying plan objectives; [2] focusing on the fundamentals of investing; [3] creating a tiered lineup that reflects plan objectives; and [4] ensuring active, ongoing oversight." (Vanguard)  

DB Pension Plans: Hungry Octopus Just Took a $4.5 Million Bite Out of Private Equity
"This decision ... raises significant concern about whether this rationale will be adopted by other jurisdictions, and how far fund multiemployer plan trustees and the courts will go to find prey to feed a multiemployer plan when a participating employer cannot satisfy its withdrawal liability. Further, given that the PBGC regulation also applies to single employer pension plans, this decision raises concern about how the PBGC might react to this decision, and how far the PBGC may go to seek prey for underfunded single employer pension plans it has taken over." [Sun Capital Partners III, LP, et al. v. New England Teamsters & Trucking Industry Pension Fund, No. 10-10921 (D. Mass. Mar. 28, 2016)] (Tucker Ellis LLP)  

2013 PBGC Data Tables: Multiemployer Supplement (PDF)
10 charts illustrate Zone Status over Time (Participant); Zone Status over Time (Plans); Direction of Zone Status Changes; Zone Status and Tests for Declining Status; and Administrative Expenses (across various parameters). (Pension Benefit Guaranty Corporation [PBGC])  

Puerto Rico Church Strips Teachers of Pension Amid Crisis
"Archdiocese officials in recent weeks informed ... several hundred ... current and retired teachers that their pensions will be eliminated because payouts exceeded contributions. Enrollment at Catholic schools in Puerto Rico has plunged with so many families leaving the island for the U.S. mainland amid the island's economic crunch.... As Puerto Rico's government teeters on the brink of insolvency, the grim fate of this group of current and former teachers could signal more pain to come for other workers expecting pensions -- not only at private workplaces like the church, but also in the island's troubled public sector." (The Washington Post; subscription may be required)  

Retirees Say a Happy, Satisfying Retirement Is Not an Impossible Dream
"Headlines frequently focus on the anxiety surrounding retirement saving and planning, but the reality for many retirees is very different. A new study from TIAA ... reveals nearly universal satisfaction in retirement (93 percent) among its retired plan participants.... 65 percent of today's retirees say they are very satisfied with retirement, up from 51 percent in 1982.... In 1982, 39 percent of TIAA plan participants retired before age 65. Among the retirees surveyed in 2016, more than half (54 percent) retired before age 65.... 71 percent of today's retirees say they had expected to work until age 65 or older, but only 47 percent did." (TIAA)  

[Opinion]

New Fiduciary Rule: What the DOL Got Right, Came Close On, and Missed Entirely
"In many ways, the DOL put practical implementation ahead of any abstract legal theory, making the Rule more sustainable when the rubber meets the road.... By providing templates, interpretations, and model language, the DOL can improve the likelihood the Fiduciary Rule with perform as intended.... Ultimately, the risk here is without clearer guidelines from the DOL, interpretation may be left to the courts ... it's not just any particular specific within the Rule that could be wrong, but the rulemaking process itself.... The fact this new Rule exceeds one thousand pages suggests it may be too cumbersome. If a regulation's length makes it unwieldly, how can it ever be fully -- and faithfully -- implemented." (Fiduciary News)  

Benefits in General

Text of Federal District Court Opinion: ERISA Did Not Preempt Action for Intentional Infliction of Emotional Distress in Handling of Disability Claim (PDF)
"Plaintiff alleges ... Defendant 'knew of his physical disabilities and weak emotional state,' yet it prolonged review of his claim to force him to 'drop his disability claim, return to work in pain, and/or accept a smaller settlement than he is rightly entitled' under the Plan.... Although the conduct occurred in connection with Plaintiff's claim, Plaintiff alleges Defendant engaged in such tortious conduct as falsely accusing him of 'lying about and exaggerating' his disability and intimidating him into attending multiple IMEs that Defendant knew would cause him pain and emotional distress. If such claims were held to be preempted by ERISA, Plaintiff would be subject to such treatment with no available recourse, and a plan administrator could investigate a claim in all manner of tortious ways with impunity." [Kresich v. Metropolitan Life Ins. Co., No. 15-cv-05801 (N.D. Cal. Apr. 4, 2016)] (U.S. District Court for the Northern District of California)  

Judge Garland's ERISA Jurisprudence Reflects His Methodical and Moderate Reputation
"While Judge Garland's oeuvre in this area of the law is limited despite his 19 years on the [U.S. Court of Appeals for the D.C. Circuit], it does nonetheless reflect his methodical and restrained reputation, and his penchant for consensus-building, as the decisions that he has been a part of were all unanimous while still peppered with both Democratic- and Republican-appointed judges.... While Judge Garland has not authored an opinion in a denial of benefits case, the decisions in which he participated as a member of the panel do not lean one way or the other, and instead reflect the reasoned, middle of the road approach for which he is known." (Seyfarth Shaw LLP)  

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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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