Retirement Plans Newsletter

June 15, 2016

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Retirement Plan Administrator
Hawkins Retirement
in UT, Telecommute

Manager of Retirement Administration
Georgia Municipal Association
in GA

Account Manager 403(b)-457 Markets
Aspire Financial Services LLC
in FL

Business Relationship Consultant
Aspire Financial Services LLC
in FL

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Aspire Financial Services LLC
in FL

Relationship Manager
John Hancock
in CO

Assistant Retirement Plan Administrator
Saltmarsh, Cleaveland & Gund
in FL

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Webcasts and Conferences

Fresh Perspectives on Assumption Setting
June 22, 2016 WEBCAST
(ASPPA College of Pension Actuaries [ACOPA])

NAPA Connect - A Unique Experience for Women Advisors
June 26, 2016 in MA
(National Association of Plan Advisors [NAPA])

Nightmare on TPA Street
June 28, 2016 WEBCAST
(ASPPA [American Society of Pension Professionals & Actuaries])

2016 Annual Conference - celebrating 50 years!
October 23, 2016 in DC
(ASPPA [American Society of Pension Professionals & Actuaries])

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[Guidance Overview]

IRS Issues Guidance on Tax Treatment of Phased Retirement Payments
"Notice 2016-39 [includes] guidance on: The appropriate present value factors to be used for purposes of determining the basis recovery fraction of each payment received during phased retirement ... [and the] time for determining the basis recovery fraction for these phased retirement payments. The Notice includes examples of basis recovery calculations for phased retirement and full retirement payments." (Practical Law Company)  


[Advert.]

FINAL! DOL's New Fiduciary Rules!

Sponsored by Mercer Select

Out with the old, in with the new! Click to see what the new rules mean for retirement plan sponsors. Mercer Select, keeping you informed about regulatory developments and market trends affecting retirement plans. Contact us at select@mercer.com.



The Current State of 401(k)s: The Employer's Perspective (PDF)
45 pages. "Seventy-four percent of employers offer a 401(k) or similar plan to their employees.... Fewer than one in five (16 percent) employers offers a company-funded defined benefit plan ... [O]nly 38 percent of [employers] extend eligibility to part-time workers.... Forty-one percent of large companies offer automatic enrollment ... Seventy-one percent of workers find the idea of automatically being enrolled in a 401(k) or similar retirement plan to be appealing ... Less than half of plan sponsors provide information about distribution options, planning materials, referrals to plan or IRA providers, educational resources, systematic withdrawals, or an annuity as a payout option as part of their plan." (Transamerica Center for Retirement Studies)  

Safe Harbor 401(k) Plans: Answers to Common Questions
"What are the employer contribution requirements for a safe harbor 401k plan? ... What's a Qualified Automatic Contribution Arrangement (QACA)? ... Can a discretionary profit sharing contribution be made to a safe harbor 401k plan? If yes, is it subject to testing? ... Can a discretionary matching contribution be made to a safe harbor 401k plan? If yes, is it subject to testing? ... Are safe harbor 401k plans always exempt from top heavy testing?" (Employee Fiduciary)  

The Fiduciary Status of Investment Platform Providers (PDF)
"In DOL Advisory Opinion 97-16A, the department took the position that a platform provider offering a roster of mutual funds ... would not be a fiduciary by virtue of changing a plan investment menu when the changes would be made under a procedure that gave plan fiduciaries advance notice and a reasonable opportunity to accept or reject the changes.... [A DOL] amicus brief [in McCaffree Financial Corp. v. Principal Life Ins. Co.], however, found it useful to distinguish the facts in the case from those in the advisory opinion. This indicates that until further notice, compliance with the conditions set forth in the advisory opinion continues to enable avoidance of fiduciary status under the plan management and administration prongs of the fiduciary definition." (The Wagner Law Group)  

Self-Directed Brokerage Accounts: Undesirable Elements for Plan Fiduciaries and Participants
"There are numerous fiduciary and participant related considerations that typically outweigh the investment flexibility benefit that [self-directed brokerage accounts (SDBAs)] offer. These potential issues coupled with the recent fiduciary regulations ... have many advisors moving these accounts to a more traditional recordkeeper and TPA plan arrangement.... [K]ey points to consider when transitioning from SDBAs to a recordkeeping platform: Ease of Conversion ... Plan Document Analysis ... Assurance of Current and Ongoing Plan Compliance ... Interim Valuation." (Benefit Plans Plus LLC)  


[Advert.]

The WBC: Not Your Ordinary Industry Conference

Sponsored by ASPPA

The Western Benefits Conference is the only Annual, Multi-day, Comprehensive Employee Benefits Conference west of the Rockies. Highly interactive sessions, Thought leaders, Practical industry leading ideas, Networking, Valuable CE credits – and more!



Interesting Angles on the DOL's Fiduciary Rule, Part 9
"[W]hat is the difference between the prudence part of the Best Interest standard and the prudent man rule in ERISA? Easy ... one word. 'Man' in ERISA was changed to 'person' in the Best Interest standard.... So, the prudent man rule has become the prudent person rule. It's more modern and politically correct. But, other than that, it is verbatim the same. That means that we have over 40 years of history of DOL guidance and fiduciary litigation to consider in applying the prudent person rule to IRA and rollover recommendations." (FredReish.com)  

SEC Chief Mary Jo White: No SEC Fiduciary Rule Until After Obama Departs
"A uniform fiduciary rule by the [SEC] will not be released before the end of the Obama administration, but the agency will watch the unfolding of the [DOL's] fiduciary rule to see if a 'conflict develops,' SEC Chairwoman Mary Jo White told Senate lawmakers on [June 14].... [Sen. John Tester (D-Mont.)] noted that oversight of advisors and brokers has been the SEC's turf, so 'how is this [DOL oversight] going to work?' White responded that the SEC and DOL are 'independent agencies [with] independent rules; we've had rules before that overlap. We will watch this [DOL rule] and if issues arise we will coordinate [with DOL] if a conflict develops.' " (ThinkAdvisor)  

Past Practice, Single Employer Doctrine Save Building Contractor That Didn't Contribute to Union's Fringe Benefit Fund
"A building contractor that subcontracted work to nonunion businesses did not necessarily violate its duty to pay contributions to a carpenters' union's fringe-benefit funds, held the Seventh Circuit.... [T]he nonunion business that was awarded the subcontract appeared to be a 'single employer' with a union signatory that ultimately performed the work, so the work was effectively done by a union business." [Chicago Regional Council of Carpenters Pension Fund v. Schal Bovis, Inc., Nos. 14-3413 & 14-3336 (7th Cir. June 10, 2016)] (Wolters Kluwer Law & Business)  

2015 Annual Survey of Public Pensions
"Total contributions were $180.2 billion in 2015, increasing 7.9 percent from $167.0 billion in 2014. Government contributions accounted for the bulk of them ... with employee contributions at $48.5 billion in 2015, climbing 6.5 percent from $45.5 billion in 2014.... The total number of beneficiaries increased 4.3 percent to 10.0 million people in 2015 ... The payments they received rose 5.1 percent from $272.5 billion in 2014 to $286.5 billion in 2015." (U.S. Census Bureau)  

Lawsuit Slams Puerto Rico Catholic Schools' Pension Plan
"A new lawsuit accuses those running the pension plan for Catholic school teachers in Puerto Rico's capital city of mismanaging the plan to the point of insolvency and then retroactively claiming an exemption from federal worker protections ... According to the lawsuit, the plan's administrators told participants for years that the plan was funded and federally insured in compliance with [ERISA]. The participants allege that they were informed earlier this year that the insolvent plan was an ERISA-exempt 'church plan' and that it would be terminating, with the plan's remaining assets largely reserved for those participants who were already receiving pensions." (Bloomberg BNA)  

Jackson Eyes Fee-Only Variable Annuity
"Jackson National Life Insurance, the top seller of variable annuities, is readying a fee-only VA to be distributed through broker-dealers affiliated with a registered investment advisor ... Perspective Advisor is a deferred variable annuity with a relatively short surrender charge period and Jackson National will pay no commission to financial institutions selling the contract ... Perspective Advisory is targeted at the lifetime income market and offers guaranteed income through income riders[.]" (InsuranceNewsNet.com)  

Rules to Do an IRA Qualified Charitable Distribution
"[O]btaining the tax benefits for doing a QCD from an IRA to a charity requires meeting very specific requirements, including a minimum age limitation, a maximum dollar amount limitation, and contributing to only certain types of eligible (public) charities ... In addition, there is the most stringent requirement -- though also the easiest to satisfy -- that for an IRA distribution to qualify as a QCD, the check cannot be made payable to the IRA owner and instead must be made payable directly to the charitable entity[.]" (Michael Kitces in Nerd's Eye View)  

Benefits in General

The Next 401(k)? Why Student Loan Repayment May Soon Be a Standard Benefit
"The average tenure of Millennials is around 16 months, and the bulk of these workers are saddled with a tremendous amount of student loan debt ... That revolving door mentality among younger workers hurts employers' retention rates and costs a fortune in extra recruiting and training costs. Plus, because student loan debt makes contributing to a 401(k) a low priority, employers' 401(k) participation rates suffer as well." (HR Benefits Alert)  

Executive Compensation and Nonqualified Plans

[Guidance Overview]

Agencies Release New Proposed Rules for Incentive-Based Compensation at Financial Institutions
"The proposed rules replace the proposed rules issued by the agencies in 2011. The new rules will likely not be effective until at least January 2019 ... However, these rules introduce new concepts and rules that Covered Institutions should begin to address sooner, rather than later, to ensure compliance when the rules ultimately become effective.... Generally, the Proposed Rules prohibit Covered Institutions from providing incentive-based compensation arrangements that encourage inappropriate risk-taking by providing a Covered Person with excessive compensation, fees, or benefits; or that could lead to material financial loss to a Covered Institution." (Ballard Spahr LLP)  

ERISA Does Not Apply -- Bonus! (PDF)
"Recognizing that Congress never intended to equate incentive compensation arrangements with pension plans, the [DOL] adopted a regulation that specifically excludes bonus plans. But the exclusion does not apply if payments under the bonus plan are 'systematically deferred' until the termination of covered employment or beyond or to provide retirement income. Thus, a critical inquiry for employers who sponsor bonus plans is whether payments under the plan are 'systematically deferred' to the termination of employment." (Groom Law Group, via Bloomberg Pension & Benefits Daily)  

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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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