Retirement Plans Newsletter

May 5, 2016 logo logo LinkedIn logo Twitter logo Facebook logo
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Employee Benefits Jobs

Education Consultant
in TX

Retirement Plan Consultant/Administrator
Bronfman E.L. Rothschild
in MN, WI

Manager, 401(k) Compliance
Newport Group
in IL

Supervisor / Manager
Newport Group
in CA

Conversions Consultant
Newport Group
in CA

Regional VP, Sales
Newport Group
in FL, MI, NJ, RI

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Webcasts and Conferences

Savings Fitness: Setting Financial Goals
(Employee Benefits Security Administration [EBSA], U.S. Department of Labor)

Savings Fitness: Determining a Target Retirement Saving Rate
(Employee Benefits Security Administration [EBSA], U.S. Department of Labor)

Retail Wellness Strategies
May 10, 2016 WEBCAST
(InComm Healthcare )

DOLís Final Regulation and Prohibited Transaction Exemptions: Impact on Distributions and Rollovers
May 12, 2016 WEBCAST
(Drinker Biddle & Reath LLP)

Final DOL Conflict of Interest Rule
May 18, 2016 WEBCAST
(PenServ Plan Services, Inc.)

What to Expect When Youíre Requesting: Investment Advisor RFPs and Due Diligence
May 18, 2016 WEBCAST
(University Conference Services)

Kill Inefficiencies, Find Hidden Value in the Service Provider Arrangements for Your Companyís ERISA Plans
May 25, 2016 WEBCAST

Winning Ways with IRAs
October 27, 2016 in NV
(Retirement Industry Trust Association [RITA])

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[Guidance Overview]

DOL Final Fiduciary Rule: What Plan Sponsors Need to Know
"[T]he final rule does not provide a per se exemption for investment education, and educational services may cross the line into investment advice unless certain requirements are met ... [S]ponsors may notice that fewer terminated vested participants are rolling their money out of the plan.... [P]lan sponsors may see advisors move to level fee arrangements. These arrangements should be reviewed to ensure that they comply with the BICE rules." (Poyner Spruill LLP)  


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[Guidance Overview]

The Final Fiduciary Rule: A Plan Sponsor's Perspective (PDF)
"The Fiduciary Rule largely allows employers to continue to provide plan information and educational materials to participants without taking on additional fiduciary responsibility.... Plan sponsors should expect to see material changes to both the procurement process (e.g., RFPs) and their ongoing relationship with service providers." (Groom Law Group)  

[Guidance Overview]

DOL's Fiduciary Rule Means Financial Advisers Must Consider Changes to Business Models
11 pages. "Financial services companies will need to reassess practices that historically would not have created a fiduciary relationship, and determine the impact on their business models.... [T]his reassessment will need to include everything from what is commonly considered the provision of investment advice, to the marketing and educational materials, and even call center protocols.... [T]he compliance cost will drive many retirement accounts that previously were serviced under a commission structure into a fee-based advisory account structure." (Latham & Watkins)  

[Guidance Overview]

Normal Retirement Age Proposed Regs Provide Encouraging Outlook for Governmental Plans (PDF)
"The following questions should ... be considered to ensure all normal retirement ages under your plan meet a safe harbor or otherwise meet the reasonably representative requirement: [1] Does the plan use different normal retirement ages for different groups of participants (and if so, on what basis are the groups differentiated)? [2] Do individuals who meet the definition of a qualified public safety officer... and individuals who do not meet the definition participate in the same plan? If so, are the applicable safe harbors satisfied?" (Gabriel Roeder Smith & Company)  

How Not to Operate a 401(k) Plan
"The monetary remedy fashioned by the judge was a return of all [City National Bank's (CNB's)] compensation to the Plan [it sponsored for its employees] plus lost opportunity costs.... CNB's compensation included [1] all mutual fund revenue that CNB received from the Plan for its service provider work from Jan. 1, 2006, to June 1, 2012; and [2] all IDA fees CNB received from Plan participants from Jan. 1, 2006 through Dec. 31, 2010, for [investment advisor and broker-dealer services provided by CNB affiliates]. The DOL estimated this compensation to be in excess of $6 million.... The moral of the story: When the DOL comes knocking at your door, pay attention to them." (W. Scott Simon, in Morningstar Advisor)  


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DOL Wins Fifth Circuit Battle Over Valuation of Employer Stock ESOP Purchase
"The Fifth Circuit devoted much of its 39-page opinion to clarifying the proper standard for determining whether ESOP fiduciaries properly relied on an expert opinion.... The court explained that the fiduciaries didn't sufficiently investigate the appraiser's background, didn't give the appraiser significant information about the company's risk factors, overlooked evidence that the appraiser was colluding with the company's attorney to increase the stock valuation and failed to double-check the appraiser's conclusions." [Perez v. Bruister, No. 14-60811 (5th Cir. May 3, 2016)] (Bloomberg BNA)  

Independent Agents to Suffer Under DOL Rule
"A significant population of insurance agents are not affiliated with a financial institution 'and these independent agencies are seemingly disenfranchised by the rule, absent some future relief from the DOL,' [Alain Karaoglan, of Voya Financial] said. He also said that 60 percent of Voya's sales are conducted through financial institutions and 85 percent of sales are conducted through registered representatives. Those distributors, if they need to affiliate with a financial institution, 'will be able to do so.' Under the new rule, the insurance company or the broker/dealer, not the individual agent, bears the responsibility for assuring fiduciary conduct." (  

No Rest for the Disorganized Fiduciary (Podcast with Transcript)
"Having a thoughtfully organized investment committee is an important step employers can take to ensure they're fulfilling the fiduciary responsibilities for their retirement plans ... Key elements of a well-organized committee include its structure and size, the appointment process, the frequency of meetings, training, and insurance[.]" (Vanguard)  

Neither DB nor DC: The Composite Plan (PDF)
"Congress may soon consider legislation for a new type of shared-risk multiemployer retirement plan known as a Composite Plan. This design was initially proposed in the NCCMP 2013 Retirement Security Review Commission Report, Solutions not Bailouts... [This article] summarizes key points of the Composite Plan design.... [and] provides an illustration of the ability of a Composite Plan to recover from a severe shock, based on timely, aggressive plan trustee management. Such action would be required under the proposal -- even for a very mature plan, where shocks are more difficult to absorb." (Segal Consulting)  

Construction Company Can't Avoid Pension Withdrawal Liability by Acquiring Nonunion Business, Resuming Work
"A multiemployer pension plan was authorized to assess withdrawal liability against a construction company whose parent company soon purchased a nonunion construction company that performed the same type of work for which pension contributions had been made ... [The Tenth Circuit ruled that to hold] otherwise would mean that a construction company could avoid withdrawal liability by terminating its obligation to contribute to a pension fund and then acquiring a nonunion business that resumed the covered work[.]" [Ceco Concrete  v. Centennial State Carpenters Pension Trust, No. 15-1021 (10th Cir. May 3, 2016] (Wolters Kluwer Law & Business)  

GAO Report on Retirement Security: Low Defined Contribution Savings May Pose Challenges
"According to GAO's projections, households in the lowest earning group accumulated DC savings that generated lifetime income in retirement, as measured by an annuity equivalent, of about $560 per month on average (in 2015 dollars). Yet, 35 percent of this group had no DC savings at retirement. In contrast, households in the highest earning group saved enough to receive about 11 times more per month in retirement and only 8 percent had no DC savings. GAO also simulated several scenarios involving workers' decisions (e.g., participating in a DC plan or maximizing the employer match) and employer decisions (e.g., offering a DC plan or automatic enrollment) that increased the amount of projected DC savings available for retirement[.]" (U.S. Government Accountability Office [GAO])  

More Advisors Finding Retirees and Pre-Retirees Represent Majority of Their Business
"Half of all financial advisors say the majority of their business consists of pre-retiree and retiree financial planning -- nearly 40 percent higher than in 2011 ... [T]he number of advisors offering Social Security claiming strategies has more than doubled (33 percent in 2011 vs. 70 percent in 2016). In addition, required minimum distribution (RMD) planning, long term care, sequence of withdrawal planning and defined benefit pension claiming strategies all saw double-digit growth over the last five years[.]" (LIMRA)  

Are Counties Major Players in Public Pension Plans?
"While the majority of county employees participate in state pension plans, counties in 22 states sponsor their own plans; County pension costs, which include contributions to plans they administer and to state-run plans they participate in, equal 4.8 percent of their revenues; The plans sponsored by counties are about 75 percent funded, slightly higher compared to other governmental entities. Overall, counties hold 12 percent of unfunded public pension liabilities, indicating that -- with a few exceptions -- they play a modest role in the pension world." (Center for State & Local Government Excellence)  

S&P 1500 Pension Funded Status Continues to Struggle in 2016
"The estimated aggregate funding level of pension plans sponsored by S&P 1500 companies decreased by one percent to 78 percent as of April 30, 2016 ... As of April 30, 2016, the estimated aggregate deficit of $504 billion increased by $12 billion as compared to the end of March. Funded status is now down by $100 billion from the $404 billion deficit measured at the end of 2015[.]" (Mercer)  

2016 Investment Company Fact Book (PDF)
316 pages. "A review of trends and activities in the U.S. investment company industry; 56th edition.... The largest segment of the asset management business in the United States is made up of registered investment companies. U.S.-registered investment companies play a major role in the U.S. economy and financial markets, and a growing role in global financial markets. These funds managed $18.1 trillion in assets at year-end 2015, largely on behalf of more than 90 million U.S. retail investors." (Investment Company Institute [ICI])  

Benefits in General

[Guidance Overview]

ERISA Spring Cleaning: Have You Properly Identified All of Your ERISA Benefits?
"What are the general types of plans subject to ERISA? ... Are certain types of plans totally exempt from ERISA? ... What are some of the more common benefit arrangements that are potentially subject to ERISA's Form 5500 annual reporting requirement? ... What should be done once the benefits subject to ERISA have been identified? ... If a required Form 5500 has not been filed for an ERISA benefit, what should be done?" (Bond, Schoeneck & King)  

[Guidance Overview]

Partners Aren't Employees, but IRS May Reconsider
"Partners in a partnership that owns a disregarded entity -- a single-owner business that isn't a corporation -- are subject to self-employment taxes the same way a sole proprietor is.... Partners aren't allowed to participate in tax-favored employee benefit plans, the [IRS] confirmed May 3 in final, temporary rules ... Groups including the American Bar Association Section of Taxation have been pushing the IRS to soften its stance in light of the widespread practice of 'rank-and-file' partners in small service partnerships. The ABA tax section's goal is to allow partnerships and limited liability companies to elect to treat partners, who own small interests, as employees for benefit purposes and to treat their guaranteed payments as W-2 wages." (Bloomberg BNA)  

Executive Compensation and Nonqualified Plans

[Guidance Overview]

Proposed Rules Issued on Dodd-Frank Incentive Compensation Requirements for Financial Institutions
13 pages. "The Proposed Rule would ... for the first time subject investment advisers and broker-dealers to Federal compensation standards.... Level 1 and Level 2 covered institutions should consider whether changes to their equity and other incentive- based compensation plans and arrangements will be necessary in order to comply with the required deferral, forfeiture, downward adjustment, clawback and other incentive-based compensation policies for senior executive officers and significant risk-takers." (Latham & Watkins)  


2016 Trends and Developments in Executive Compensation
"Approximately 40% of responding companies currently have clawback provisions in place that are compliant with the SEC's proposed rules.... Merit increases were modest for CEOs, executives and non-executives alike (median of approximately 3%) ... Relative to last year, responding companies are considering more factors in the goal-setting process[.]" (Meridian Compensation Partners, LLC)  

Press Releases

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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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