Retirement Plans Newsletter

May 6, 2016

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Consultant/Client Services Representative
Associated Pension Consultants
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Compliance Specialist
Newport Group
in AL

Defined Contribution Consultant
Aon
in FL, GA, IL, MO, NC, NJ, NY

Senior BOLI Consultant
Newport Group
in NC

Flexible Benefits Manager
BB&T Insurance Services - Stanley, Hunt, DuPree & Rhine
in SC

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Webcasts and Conferences

Savings Fitness: Debt Management
RECORDED
(Employee Benefits Security Administration [EBSA], U.S. Department of Labor)

Savings Fitness: Budgeting
RECORDED
(Employee Benefits Security Administration [EBSA], U.S. Department of Labor)

2015 5500 Update and Enhancements
May 10, 2016 WEBCAST
(ASC)

New Research: What is the Future of Wellness at Work?
May 10, 2016 WEBCAST
(National Wellness Institute)

COBRA Workshop
May 19, 2016 WEBCAST
(Employee Benefits Security Administration [EBSA], U.S. Department of Labor)

Rewarding HRA’s: Effective Member Engagement that drives Healthy Incentives
May 24, 2016 WEBCAST
(InComm Healthcare )

Benefits Communication: Decoding The Generation Gap
May 26, 2016 in OH
(Worldwide Employee Benefits Network [WEB] - Cleveland Chapter)

Handling HIPAA Data Breaches: Best Practices for Worst Case Scenarios
August 12, 2016 WEBCAST
(National Business Institute)

New Civil Procedure Rules and ERISA Litigation: One Judge’s View (along with Counsel) -- 9 Months In
September 8, 2016 WEBCAST
(ABA Joint Committee on Employee Benefits [JCEB])

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[Guidance Overview]

Church Plan Clarification Law Presents New Options for Church Plans
"The Coordinated Appropriations Act, P.L. 114-113 ... addresses the controlled group rules, automatic contribution arrangements, section 415 limits on grandfathered 403(b) defined benefit plans, transfers between 403(b) and 401(a) plans, and investing in group trusts. Some provisions will require guidance from the [IRS] to implement. The act is generally effective on or after December 18, 2015 (the enactment date), with the exception of the controlled group rules and the grandfathered 403(b) defined benefit plan limits, which are effective for plan years before, on and after December 18." (Willis Towers Watson)  


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[Guidance Overview]

The DOL's New Fiduciary Rule: The Details on Disclosure (PDF)
"[T]he final [DOL] fiduciary rule provides for two new prohibited transaction exemptions ... Financial institutions seeking to rely on these exemptions must make detailed disclosures to their retail clients, the [DOL] and the general public.... [A 5-page chart] describes the different disclosure requirements applicable under each of the BIC Exemption and the PT Exemption." (Shearman & Sterling LLP)  

Insurance Groups Opposed to DOL Fiduciary Rule Step Up Campaign Spending
"The American Council of Life Insurers has donated $734,000 to members of Congress to help fund their campaigns as of March 31 ... The Insured Retirement Institute, which represents the annuity and retirement income sector, has spent $131,700 so far in the 2016 cycle.... The ACLI is mulling whether to file a suit against the DOL rule.... On the adviser side, the Investment Adviser Association is on pace to increase its campaign outlays, having spent $30,000 so far in the 2016 cycle... The Financial Planning Association has spent $42,000. For lobbying Congress, spending follows the same trend." (InvestmentNews)  

To Save Wisely for Retirement, Sometimes Less Choice Is Best
"Though there are many elements to the study's findings, they boil down to a conclusion that simplifying a defined contribution plan can benefit employees by nudging them toward choices with lower fees and transaction costs, and encouraging a more prudent balance between expected returns and safety. The fact that very few participants chose the wide-open brokerage option indicates that employees are content with a plan that has fewer, simpler choices, presented in a format that is easier to understand." (Wharton School of the University of Pennsylvania)  

Decisions by Both Employers and Employees Can Change Retirement Savings Picture
"GAO found many decisions, some within the control of workers and some within the control of plan sponsors, can have significant effects on projected balances of DC savings. Universal participation provides the largest overall gains in the GAO's projections of household retirement annuities -- an average increase of 19%." (PLANSPONSOR)  


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2030 Target Date Strategies Continue to Underperform a 60/40 Strategy
"Over a 15-year period, 2030 target-date strategies, as measured by the S&P Target Date 2030 Total Return index, returned 4.67% annually. A 60/40 portfolio, as measured by the Russell 3000 index and Barclays U.S. Aggregate index, returned 5.78% annually with three quarters the volatility." (Pensions & Investments)  

New Tools Provide Boost to Use of Collective Investment Trusts
"[Collective Investment Trusts (CITs)] can mimic a mutual fund in approach and design, yet they can ... do away with various marketing, distribution, registration and disclosure requirements. This cost savings is passed on to the holder of the CIT (the plan sponsor and participant), making the trusts cheaper to own than a mutual fund but often holding near-identical assets.... [T]echnological advances, and the 2012 [DOL] regulation governing fee disclosures, companies such as Morningstar have been able to access portfolio and performance data more frequently to provide to plan sponsors." (Financial Planning)  

$20 Billion Underfunding of Central States Pension Plan May Tie Treasury Department's Hands on MPRA Benefit Suspensions
"In Central States' case, it may not even matter if the participants are in the majority against [the benefit suspension plan].... [MPRA] requires Treasury to determine if the plan in question is a 'systemically important plan' ... one that, absent MPRA suspensions, would be estimated to require more than $1 billion in assistance from the PBGC to support retiree benefits at guarantee levels as a result of the plan's insolvency. Central States is believed to be such a plan. In this case, Treasury would override the participants' vote and implement the suspensions anyway, although it could modify the terms[.]" (Milliman)  

Colorado Postpones Bill to Create Savings Plan for Private-Sector Employees
"At the bill sponsors' requests, the Colorado House Finance Committee voted Wednesday to indefinitely postpone HB 1403, which would create auto-enrollment, payroll-deducted retirement savings accounts for employees who do not have access to a workplace retirement plan aside from Social Security." (Pensions & Investments)  

[Opinion]

The DOL's Fiduciary Rule: Better Late Than Never
"This change clearly is a victory for investors. Roughly half of retail U.S. mutual fund assets will be protected by the new, higher standards. They will not prevent bad advice, of course, nor trades from lower- to higher-cost funds. But they do command that all advice, whether successful or not, be offered in good faith, and that the rationale for all trades, whether into cheaper or pricier funds, be recorded. Such precautions will inevitably lead to better overall outcomes.... What is less clear is that it is also a victory for financial advisors." (Morningstar)  

[Opinion]

FINRA Finds MetLife Does the Ol' Bait and Switch with Its Annuities
"According to the [May 3] settlement, MetLife sometimes overstated the cost of a customer's existing variable annuity contract, which in some instances increased a customer's cost by 2% annually.... FINRA sampled some 35,500 replacement contract applications submitted by MetLife representatives, and found that 72% -- or about 25,560 applications -- contained at least one error that understated the value of the contract being replaced.... MetLife representatives sold these replacement annuities to their unsuspecting clients and collected commissions that ranged between 5-7% on the new sales!" (A Teachable Moment)  

Benefits in General

Second Circuit Requires Strict Compliance with Claims Procedures to Receive Deferential Review of a Claim
"When considering a challenge to a denied claim, courts historically have analyzed whether the process and communications were in 'substantial compliance' with the DOL regulations. In a sharp departure from this standard, the Second Circuit rejected the 'substantial compliance' doctrine as 'flatly inconsistent' with the current DOL claims and appeals regulations." [Halo v. Yale Health Plan, No. 14-4055 (2d Cir. Apr. 12, 2016)] (Morgan Lewis)  

Small Business Owners Say Benefit Programs Important for Attracting and Retaining Workers
"[S]mall business owners are focusing on developing competitive benefit programs as part of their approach to attracting and retaining their workers.... [F]inancial professionals have tremendous influence over small business owners' purchasing decisions. An advisor has 35 times more influence than a supplier representative ... 39 percent of small business owners currently offer their workers retirement plans[.]" (Insured Retirement Institute [IRI])  

Executive Compensation and Nonqualified Plans

[Guidance Overview]

The Re-Proposed Rule on Incentive-Based Compensation at Financial Institutions: Overview and Observations (PDF)
"[T]he 2016 Proposal places front line responsibility with the boards of directors and their committees, as well as with management of the covered institution, for implementation of the rule and its principles, while requiring more clearly delineated and documented procedures in each step of the decision-making process to allow Agency oversight and audit." (Shearman & Sterling LLP)  

What's Equity Compensation Really Worth to Your Employees?
"What is equity compensation REALLY worth? How do you know how much to give? How do your employees know how much they are getting? What truly drives, impacts, reduces and magnifies this value? ... [This article addresses] valuations, taxation, restrictions, dilution, perceptions and competition ... the shapers of equity value that are seldom discussed." (Performensation)  

Press Releases

ABD is Proud to Announce the Acquisition of SharedHR
ABD Insurance & Financial Services

DOL Investigation Results in More than $23K in Losses Being Restored to Bonner & Borhart SIMPLE IRA Plan
Employee Benefits Security Administration [EBSA], U.S. Department of Labor

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David Rhett Baker, J.D., Editor and Publisher <davebaker@benefitslink.com>
Holly Horton, Business Manager <hollyhorton@benefitslink.com>

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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