Retirement Plans Newsletter

May 18, 2016

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Employee Benefits Jobs

Entry Level Plan Consultant
The MandMarblestone Group, llc
in PA

Regional Sales and Client Service Manager
Growing Retirement Plans Firm
in MD

Employee Benefits Enroller/Presenter
Total Benefit Communications, LLC
in Contiguous U.S., Telecommute

Enrolled Actuary
Economic Group Pension Services, Inc.
in NY

Transition / Conversion Manager
OneAmerica Financial Partners, Inc
in CA

Retirement Compliance Consultant
OneAmerica Financial Partners, Inc
in CA

Plan Design and Taxation Associate
Groom Law Group
in DC

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Webcasts and Conferences

Healthcare Benefits Legislative and Regulatory Insights & Outlook
May 24, 2016 WEBCAST
(Healthcare Trends Institute)

Mitigating the Impact of Healthcare Reform Fees & Taxes
June 1, 2016 WEBCAST
(Hill, Chesson & Woody)

Accumulated Sick and Vacation Pay Deferred to 403(b) or 457(b) Plans
June 2, 2016 WEBCAST
(IRS [Internal Revenue Service])

Second-Stage ESOP Transactions
June 24, 2016 WEBCAST
(National Center for Employee Ownership [NCEO])

IRA Beneficiary Distributions - Part 2
August 18, 2016 WEBCAST
(Ascensus)

ASPPA Cincinnati Regional Conference
November 16, 2016 in KY
(ASPPA [American Society of Pension Professionals & Actuaries])

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[Official Guidance]

Text of IRS Notice 2016-33: Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates for May 2016 (PDF)
"This notice provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under Section 417(e)(3), and the 24-month average segment rates under Section 430(h)(2) of the Internal Revenue Code. In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under Section 417(e)(3)(A)(ii)(II) 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)." (Internal Revenue Service [IRS])  


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[Guidance Overview]

The DOL's 2016 Final Fiduciary and Conflict of Interest Rule: Why Challenges to the DOL's Authority to Regulate the IRS Will Fail
"Has the [DOL] exceeded its authority by regulating rollovers to, and investments in, [IRAs] and other tax-favored accounts under the Internal Revenue Code that are not subject to regulation under [ERISA]? ... [S]ome commentators expect the financial services industry to seek to overturn these rules in the courts ... Should such a challenge materialize, however, [the authors] are of the view that it would fail -- at least to the extent that the challenge is based on the lack of authority on the part of the [DOL] to regulate IRAs." (Mintz Levin)  

The DC Plan of the Future: DB Principles for the DC Generation (PDF)
16 pages. "Historical approaches to DC plans have generated decidedly mixed results, including an over-reliance on retail investment solutions, inability to integrate automation and education, and inefficiently priced products and services.... [B]est practices [now] being utilized to increase [plan efficiency include] ... [1] Leveraging institutional investment strategies, or the 'institutionalization' of DC; [2] Ensuring that education and automation work together; [3] Pursuing greater transparency in the pricing model." (BNY Mellon)  

How to Evaluate 401(k) Provider Competence
"The key to making this process simple is choosing objective criteria for your survey.... The goal for [your checklist] should be identifying competence 'red flags' such as lack of experience, insufficient mitigation of risk, or non-commitment to timely service. If a red flag is found, you should either eliminate the provider from further hiring consideration or justify the flag (e.g., company is new, but leadership has industry experience). [This article includes] a sample checklist." (Employee Fiduciary)  

Straw, Stick and Brick House TPAs.
"While there are dozens of reasons a plan may go awry, ... many times the fault does not lie with the plan sponsor directly, but with the service provider the plan sponsor engages to assist him with his administrative duties. In times of trouble, these mismanaged plans are blown away by avoidable fees and penalties due to lack of diligence and experience on the service provider's part." (TriStar Pension Consulting)  


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'Best Interest,' BICE and Class Action Targets
"[T]here are six areas that will face the most scrutiny and potential class action litigation under the DOL's new fiduciary rule and BICE: [1] Actively managed mutual funds; [2] Closet index funds; [3] Brokerage 'preferred provider' programs; [4] 401(k) rollovers and IRAs accounts; [5] Variable annuities; [5] Equity indexed annuities." (The Prudent Investment Adviser Rules)  

Actions for Financial Advisors to Demonstrate Compliance with DOL Fiduciary Rule
"[1] Implement 'impartial conduct standards.' ... [2] Have policies and procedures in place that are designed to prevent violations of the impartial conduct standards.... [3] Avoid all sales incentives and any form of inducement that may compromise the quality or objectivity of your advice. [4] Disclose all compensation, conflicts, and fees and expenses relating to the client relationship and the advice you render. [5] Set up a protocol that will subject your firm's decision-making processes to scrutiny." (fi360)  

Company Stock in ESOPs: What Should a Fiduciary Do?
"After the Dudenhoeffer decision and the GreatBanc settlement agreement, ESOP trustees are compelled to consider additional steps to help manage their fiduciary liability, including: [1] Avoid conflicts of interest ... [2] Align competent financial advisors ... [3] Acquire fiduciary insurance ... [4] Plan design ... [5] Communication strategies ... [6] Document, document, document." (Principal Financial Group)  

Special Considerations for an S-Corp ESOP and Net Unrealized Appreciation
" 'Can participants in an S-Corporation's employee stock ownership plan (ESOP) take advantage of the special tax treatment for NUA associated with distributed employer stock?' The answer is, 'potentially'." (National Association of Plan Advisors [NAPA])  

Advancing Financial Literacy, Capability and Well-Being Among Hispanics (PDF)
27 pages. "[S]ome institutions are cognizant of the retirement savings disparity that exists among Latinos, in general, but others do not have this level of awareness. In the latter cases, educating the institutional client is the first step in prioritizing the engagement of its Hispanic workforce.... Retirement goals among Hispanics often defy convention.... So the process cannot assume the conventional; it needs to first discover and understand and then counsel in the appropriate way." (TIAA Institute)  

Mandatory IRA Bill Headed to Connecticut Governor
"The bill's requirements would apply to all private-sector employers with at least five workers who each made at least $5,000 in the preceding calendar year. Covered employees are those who have worked for a qualified employer for at least 120 days and are at least 19 years old." (Bloomberg BNA)  

[Opinion]

What Went Wrong with the 1983 Social Security Fix?
"[T]here are two problems with any proposed reform options that simply reduce Social Security's 75-year actuarial deficit to zero: [1] Given the projected costs of the program, limiting the actuarial balance calculation to 75 years ignores projected annual deficits expected to occur after the end of the 75-year projection period. Over time, these deficits will emerge in the actuary's annual calculations. [2] There exists no process in current law to automatically adjust the System's tax rates to maintain a balance between system assets and system liabilities." (Ken Steiner, FSA Retired)  

[Opinion]

Letter by Industry Groups to IRS: Recommendations for QLAC Guidance on 2016-2017 Priority Guidance Plan
"[G]uidance is needed to: [1] Clarify how the limitations on QLAC premiums apply when a participant in a qualified plan wants to purchase a QLAC via a direct rollover because the plan does not offer one, and [2] Clarify how the regulations apply following a divorce of the QLAC owner if the contract was originally purchased with spousal benefits. Guidance on these items would resolve significant issues that are preventing many taxpayers from gaining access to QLACs." (American Benefits Council and 7 other industry groups)  

Benefits in General

Supreme Court: 'Real' Harm Required to Recover Statutory Damages
"The Court's decision could discourage the filing of class actions under the numerous federal statutes that provide for statutory damages where actual or potential harm resulting from a violation is often nonexistent. It could also create individualized issues that will present challenges for class-certification motions in cases involving such statutes.... [S]uch statutes include ... [ERISA and the] Americans with Disabilities Act[.]" [Spokeo v. Robins, No. 13-1339 (S. Ct. May 16, 2016)] (Ballard Spahr LLP)  

Pension/OPEB 2016 Assumption and Disclosure Study (PDF)
23 pages. "The 2015 median discount rate for pension plans in the study increased 30 basis points since 2014 but has decreased 195 basis points since 2007.... Median plan funding levels remained unchanged from 2014, with pension plan assets equal to approximately 82% of the projected benefit obligation (PBO) in 2015 and 2014 ... The 2015 median discount rate for OPEB plans in the study increased 35 basis points since 2014 but has decreased 200 basis points since 2007.... The percentage of funded OPEB plans in the study has remained constant since 2014 with 49% of plans being funded in 2015 compared with 50% being funded in 2014." (PricewaterhouseCoopers)  

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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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