Retirement Plans Newsletter

June 14, 2016

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Conversion Consultant
Aspire Financial Services LLC
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Benefit Consultants Group
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Webcasts and Conferences

Case Study - Success with Wellness Goals
June 28, 2016 in TX
(Worldwide Employee Benefits Network [WEB] - Dallas Chapter)

Employment and Benefits Law Update
June 28, 2016 in TN
(Bass, Berry & Sims)

The Do's and Don'ts of Wellness Programs
June 29, 2016 WEBCAST
(Husch Blackwell)

Paid State and Local Leave Laws
July 11, 2016 WEBCAST
(Worldwide Employee Benefits Network [WEB])

New Final Wellness Program Regulations: Compliance Requirements Clarified, Finally!
July 14, 2016 WEBCAST
(ABD Insurance & Financial Services)

Retirement Policy Initiatives in the States: How You Might Be Impacted
August 23, 2016 WEBCAST
(ASPPA [American Society of Pension Professionals & Actuaries])

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[Official Guidance]

Text of PBGC Interest Rate Update for July and Third Quarter 2016
"The third quarter 2016 interest assumptions under the allocation regulation will be 2.50 percent for the first 20 years following the valuation date and 2.85 percent thereafter. In comparison with the interest assumptions in effect for the second quarter of 2016, these interest assumptions represent no change in the select period ... a decrease of 0.27 percent in the select rate, and a decrease of 0.01 percent in the ultimate rate ... The July 2016 interest assumptions under the benefit payments regulation will be 0.75 percent for the period during which a benefit is in pay status and 4.00 percent during any years preceding the benefit's placement in pay status. In comparison with the interest assumptions in effect for June 2016, these interest assumptions are unchanged." (Pension Benefit Guaranty Corporation [PBGC])  


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[Guidance Overview]

Taxability of Phased Pension Retirement Payments
"[Notice 2016-39] provided three requirements that, if met, allow pension payments received during phased retirement to be treated as payments not received under an annuity.... [W]hen the employee fully retires, the payments to be received will be calculated based upon the plan's terms for taking into account the phased retirement payments already received. The amount of the pension payments to be received in full retirement that will be includible in gross income are amounts received as an annuity and will follow the applicable rules for the recovery of basis of annuity payments." (RSM US)  

Supreme Court Moves Could Change Participant Class-Action Suits
"The ability of retirement plan participants and institutional investors to pursue ERISA and securities class-action lawsuits could be significantly altered, following two Supreme Court actions that have sent both groups back to the circuit courts to make their respective cases. For plan participants, ... Spokeo Inc. v. Robins raised the bar for such lawsuits by requiring greater proof of harm to even get a day in court." (Pensions & Investments)  

QDIA Fiduciary Red Flags for 401(k) Plan Sponsors
"[T]here remains one final Achilles' heel with respect to TDFs. 'Target date funds assume that all people that are same age have the same financial needs,' says [P. Jeffrey Christakos of Westfield Wealth Management, LLC]. 'Their risk tolerances and risk capacities may be totally different. They anticipate a projected retirement date but may not have the ability to work to that date due to health issues or lack of work opportunities.' This has long been the most damaging issue with TDFs, and one that risk-based funds appear well-suited to address. Here, however, is where plan sponsors need to be most careful." (Fiduciary News)  

401(k)s 'Not Suitable' as Vehicles for Retirement Income Products
"Cerulli suggests that 401(k)s can learn from 403(b)s about retirement plan decumulation.... [S]everal issues need to be resolved before plan sponsors will feel comfortable offering an in-plan retirement income product ... The report notes that fee levels need to decline because they are generally perceived as too high." (PLANSPONSOR)  


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Make Benchmarking Your Plan an Annual Exercise (PDF)
"When benchmarking your plan's employer match, it is important to ensure that you are comparing apples to apples. For example, BrightScope and ICI found that the percentage of 401(k) plans with employer contributions varied widely by the size of the plan, ranging from 75% in plans with fewer than 100 participants to 95% in plans with 5,000 to 9,999 participants." (United Retirement Plan Consultants)  

Your Qualified Plan: A Retirement 'Home' for Your Former Employees?
"Sponsors should consider their corporate philosophy around supporting retirees by keeping them in the plan.... There may be sponsor costs associated with supporting retirees staying in the plan (e.g., recordkeeping fees). However, sponsors may achieve economies of scale with pricing: Keeping retirees in the plan may help drive down the per-participant price.... [A] plan's withdrawal options should allow enough flexibility to accommodate participants in all phases." (Vanguard)  

State Automatic IRA Retirement Plan Mandates Gain Momentum
"[S]tates' laws vary somewhat as to coverage and other matters.... Employers may need to keep separate records of Roth IRA and traditional IRA deductions for affected employees.... Although automatic enrollment in retirement plans has been adopted by many employers, there may be complications.... Further, the requirement to furnish notices to employees may vary in terms of timing, content, handling and other matters.... Penalties for employer noncompliance also vary considerably." (ADP)  

House GOP Outlines Pieces of Retirement Security Agenda
"Last week, House Republicans released the first of six work products detailing their policy agenda, a portion of which included recommendations to 'build retirement security through the private retirement system.' ... [T]here was zero discussion of the retirement savings tax incentives that underpin success of the system.... [The] report contained five general retirement policy recommendations that revealed Republican lawmakers' concerns about the funding of both single and multi-employer defined benefit plans and the federal agency that guarantees those benefits, the [DOL's] fiduciary rule, and other regulatory impediments to the adoption and maintenance of employer-provided retirement plans." (National Association of Plan Advisors [NAPA])  

IRS Employee Plans Compliance Unit (EPCU) Project Summary: Missing, Incomplete or Invalid Business Activity Code
"A random sample of cases identifying 932 filings with a missing or incomplete business code was selected ... Most of the taxpayers provided a brief explanation of why the business code was missing or invalid on their return. The responses from the taxpayers showed that less than 10% of the sample did not know what business code to use, while the majority of the sample simply missed, omitted or overlooked the question on the form." (Internal Revenue Service [IRS])  

Overview and State-by-State Digest of Recent Significant Reforms to Retirement Systems (PDF)
76 pages. "Since [2009], nearly every state passed meaningful reform to one or more of its pension plans. Although the global market crash and recession affected all plans, differing plan designs, budgets, and legal frameworks across the country defied a single solution; instead, each state met its challenges with tailored changes specific to its unique circumstances." (National Association of State Retirement Administrators [NASRA])  

Using Sound Actuarial Principles to Better Manage Retirement Finances (PDF)
Begins at page 36 of 40-page document. "Yes, the actuarial approach already outlined is more complicated than using [a Rule-of-Thumb] approach, but [there are] benefits to the retiree and the retiree's financial advisor of using the actuarial approach ... Applying actuarial principles to retirement spending plans may create opportunities for actuaries who are also qualified financial advisors." (Ken Steiner, FSA Retired, in Society of Actuaries Pension Section News)  

[Opinion]

HBO Comedian Lambasts U.S. Retirement Savings System, Supports DOL Fiduciary Rule
"Comedian John Oliver criticized the American retirement savings system and expressed bona fide support for the Labor Department's fiduciary rule on his HBO show Sunday night, calling out non-fiduciary brokers, high 401(k) fees and active management using his characteristic satirical brand of comedy.... Mr. Oliver cast a negative light on brokers paid on commission, saying they are sometimes 'actively incentivized' to make certain recommendations with sales perks such as gifts or high commissions, and therefore may not be serving a client's best interest." [Video at link.] (InvestmentNews)  

Benefits in General

[Official Guidance]

Text of IRS Disaster Relief Notice HOU-2016-08: Tax Relief for Victims of Severe Storms and Flooding in Texas
"Individuals who reside or have a business in Austin, Brazoria, Brazos, Fort Bend, Grimes, Hidalgo, Hood, Montgomery, San Jacinto, Travis, Waller and Washington Counties may qualify for tax relief.... [C]ertain deadlines falling on or after May 26, and on or before October 17, 2016 have been postponed to October 17, 2016." (Internal Revenue Service [IRS])  

Employee Benefits Cost Employers $10.70 Per Hour in March 2016
"Employers paid an average of $33.94 per hour for employee compensation for civilian workers in March 2016. $23.25 (68.5 percent) of total compensation was paid for employees' wages and salaries while $10.70 (31.5 percent) went toward benefits. Over the year, costs for wages and salaries increased $0.37 and costs for benefits rose $0.09." (U.S. Bureau of Labor Statistics [BLS])  

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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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