Retirement Plans Newsletter

May 23, 2016

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[Official Guidance]

Treasury Department Notice: Teamsters Local 469's Multiemployer Pension Plan Application to Reduce Benefits
"The Board of Trustees of the Teamsters Local Union No. 469 Pension Plan, a multiemployer pension plan, has submitted an application to Treasury to reduce benefits under the plan in accordance with the Multiemployer Pension Reform Act of 2014 (MPRA). The purpose of this notice is to announce that the application submitted by the Board of Trustees of the Teamsters Local 469 Pension Plan has been , and to request public comments on the application from interested parties, including contributing employers, employee organizations, and participants and beneficiaries of the Teamsters Local 469 Pension Plan. Comments must be received by June 22, 2016." (U.S. Treasury Department)  


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[Guidance Overview]

Fiduciary Considerations in Making Retirement Plan Investments: Hot Topics (PDF)
68 presentation slides. Describes the final DOL fiduciary rule, including definitions, timelines, and the potential effects on service providers. Also provides materials on the selection and monitoring of service providers, and on investment committee issues: compensation, competence, governance, documentation, risk management, and valuation of assets. (Good Risk Governance Pays)  

[Guidance Overview]

The DOL Issues Broader Fiduciary Adviser Definition: What Does it Mean for You?
"Under new exemptions adopted under the final rule, financial institutions will be obligated to acknowledge their status and the status of their individual advisers as 'fiduciaries.' Furthermore, financial institutions and advisers will be required to make prudent investment recommendations without regard to their own interests, charge only reasonable compensation, and make no misrepresentations to their customers regarding recommended investments." (Greenberg Traurig)  

SEC to Propose Fiduciary Rule Next Spring... Maybe
"The SEC is slated to roll out its own fiduciary rule for advisers next April, but some in the financial services industry are skeptical the commission will adhere to its own timeline ... The delay comes amid increased demand for an SEC fiduciary rule following the April release of the [DOL's] fiduciary regulation, which only governs certain kinds of retirement advice. The SEC has been authorized to draft a fiduciary rule since 2010." (Financial Planning)  

Tenth Circuit Expands Withdrawal Liability of Construction Industry Employer
"Unionized construction employers should now closely scrutinize acquisitions within jurisdictions where the employer had previously contributed to a [multiemployer plan]: non-contributory work performed by an after-acquired entity will (at least within Oklahoma, Kansas, New Mexico, Colorado, Wyoming, and Utah) likely trigger withdrawal liability." [Ceco Concrete Construction, LLC v. Centennial State Carpenters Pension Trust, Nos. 15-1021, 15-1190 (10th Cir. May 3, 2016)] (Jackson Lewis P.C.)  


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A Close Look at ERISA-Governed 403(b) Plans, 2013 (PDF)
60 pages. "Most large 403(b) plans offer employer contributions.... 403(b) plans with automatic enrollment are more likely to have both employer contributions and participant loans outstanding than plans without automatic enrollment.... Mutual funds were the most common investment vehicle in ERISA 403(b) plans.... Equity funds accounted for the largest share of assets in ERISA 403(b) plans.... Mutual fund expenses in ERISA 403(b) plans tend to be lower in larger plans and have trended down over time." (Investment Company Institute [ICI])  

Helping 403(b) Plan Sponsors Understand the Universal Availability Rules
"Failure to comply with universal availability (UA) rules is still one of the most common errors the [IRS] finds in examinations of 403(b) retirement plans.... [T]he agency completed two compliance projects ... that found some plan sponsors were excluding employees based on classifications versus hours worked, not keeping track of hours, excluding from the plan employees that they are not allowed to exclude, failing to notify employees of the eligibility to participate in the plan, and/or not operating the plan according to the plan language." (planadviser)  

Failing Central States Pension Fund Is Out of Options
" 'The fact that the ... PBGC is also running out of money means our participants may see their pension benefits ultimately reduced to virtually nothing when the fund runs out of money,' [fund director Thomas Nyhan said in a letter to workers and retirees]. Only government funding, either to the Central States Fund directly or through the PBGC, can fix the problem, he said." (CNNMoney.com)  

Treasury's Reasoning for Rejecting Central States Suspension Application is Misunderstood
"Many commentators ... have stated that the Treasury believes a 7.5% interest rate is not a reasonable actuarial assumption for funding a pension plan. The reasoning related to the 7.5% interest rate was much more specific ... Treasury did not say that a 7.5% investment return assumption was inappropriate for purposes of determining a plan's minimum funding requirements (or for funding a public pension plan over the long term). Instead, Treasury recognized because of Central States's specific situation (with negative cash flow), there needed to be a focus on the near term when testing whether the Plan could avoid insolvency." (Cheiron)  

Treasury Denies Central States; How Will Other Multiemployer Plans Fare?
"If the Department of the Treasury will not approve benefit suspensions under the Multitemployer Pension Reform Act (MPRA) for participants in the Central States Pension Fund then how will other multiemployer plans lined up for approvals fare? ... [This article includes links to] the latest 5500 forms for all five plans in the pipeline ... A spreadsheet comparison shows all the plans similarly situated as to depletion dates[.]" (Burypensions)  

`Zombie' Pension Plans Need Autopsies
"For retirees of Central States and other plans facing insolvency, a forensic investigation may be more productive and more likely to succeed than lobbying Congress ... If wrongdoing is found, those responsible can be made to compensate the fund for the damages they caused ... [F]und's participants could easily raise the money to hire an independent investigator through crowd sourcing or other means." (Bloomberg BNA)  

Benefits in General

Why Should You Care About Employee Communication Design?
"Getting employees engaged in the decisions they need to make is critical to how managers can put more productive processes in place, help people make more responsible choices, and drive more predictable outcomes. But the content of your message is often not enough to get that level of engagement, to create the deeper personal 'meaning' that triggers acceptance and response. How you design and deliver the message can make a huge difference in how effective you are." (Xerox HR Insights)  

Executive Compensation and Nonqualified Plans

Mandatory Deferral of Financial Institution Bonuses and Impact on Nonqualified Deferred Compensation Plans (PDF)
"As a result of the required delay in payment under the proposed rules well beyond the date the substantial risk of forfeiture lapses, most of the mandatorily deferred awards will be subject to Section 409A and must have a compliant time and form of payment.... Due to the restrictions on accelerated payment in the proposed rule, covered institutions will be unable to take advantage of [certain] plan termination rules under Code section 409A.... [A] prohibition on accelerations means a company should not satisfy its clawback obligation under the proposed rule by deducting the amount to be recovered from an executive's nonqualified plan account (or any other amount subject to Section 409A), as such a practice would expose the executive to Code section 409A's tax penalties." (Groom Law Group)  

Why Is It So Difficult to Get Equity Amounts Right?
"The main selling point of equity compensation is that it provides unequaled compensatory upside through its extreme variability, while allowing a predictable and fixed compensation expense. This can be frustrating when things don't go as planned.... The reason equity is so hard to value is that all of the methods provide inaccurate results at some point. Given the uncertainty in the markets, [this article discusses] some of the ways people assign value to equity." (Performensation)  

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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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