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[Official Guidance]

Text of IRS Proposed Regs: Deferred Compensation Plans of State and Local Governments and Tax-Exempt Entities
84 pages. "This document contains proposed regulations prescribing rules under section 457 of the Internal Revenue Code for the taxation of compensation deferred under plans established and maintained by State or local governments or other tax exempt organizations. These proposed regulations include rules for determining when amounts deferred under these plans are includible in income, the amounts that are includible in income, and the types of plans that are not subject to these rules.... This document also provides a notice of a public hearing on the proposed regulations." (Internal Revenue Service [IRS])  


FINAL! DOL's New Fiduciary Rules!

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401(k) Plan Design Best Practices
"[Many] employers are combining financial literacy/wellness education with 401(k) plan education and hiring firms to deploy online access to 10-15 minute modules. An online approach ensures that education opportunities are offered to millennial's where and when they want them -- on their smart phones at a time of their choosing.... many employers are stretching their matching contributions over a broader employee deferral." (Lawton Retirement Plan Consultants)  

Why Student Loan Debt Is a Threat to Your Retirement Plan (PDF)
"Many believe that pre-paying loans to avoid interest outweighs retirement investment earnings potential. But a recent study ... found that, in most cases, this is not the case, particularly if a worker receives an employer match on retirement savings ... Many employers look for ... ways to encourage employees to participate in their 401(k) plans when they might otherwise feel they could not. When it comes to student loan solutions, four approaches emerge[.]" (Lockton)  

Recent Appellate Court Decisions Heighten Concern for Hospitals with 'Church Plans'
"A recent wave of class action lawsuits ... is challenging those church plan designations, even for plans that have received specific approval from the [IRS] or the [DOL].... Two recent appellate court decisions have endorsed these lawsuits and substantially narrowed the applicability of the church plan exception such that many Catholic or other religiously affiliated hospitals may no longer qualify for the church plan exemption." (Morgan Lewis)  

More Older Americans Are Working Than in Recent Years
"More older Americans -- those ages 65 and older -- are working than at any time since the turn of the century, and today's older workers are spending more time on the job than did their peers in previous years ... The steady increase in the share of working older Americans contrasts with the adult population as a whole, whose employment-population ratio fell sharply during the Great Recession and has yet to recover to pre-slump levels." (Pew Research Center)  


Chicago APC, Sept. 7-9 Registration is open!

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Our ERISA experts will discuss the final fiduciary regs, prohibited transactions, midyear Safe Harbor amendments, church plans reforms, forfeitures, Multiple Employer Plans, keeping current, Washington update, and more. 19 CE hours. Register now.

Under-Saved and Underprepared: Women Face Challenges Saving for Retirement
"Men and women are on equal footing when it comes to 401(k) plan participation, but ... 83 percent of U.S. women aren't saving enough to meet their needs in retirement, compared to 74 percent of men.... [T]here is a gap of 3.3 times pay between what women need and what they're actually on track to have saved in order to retire at age 65.... This shortfall means women, on average, will need to work until age 69 -- one year longer than men -- in order to meet 100 percent of their needs in retirement." (Aon Hewitt)  

The Funding of State and Local Pensions: 2015-2020
"In 2015, the funded ratio of state and local pensions using traditional accounting rules, with smoothed asset values, rose from 73 percent to 74 percent. The funded ratio using new accounting rules, with market value, declined slightly. Required contributions continued to climb in 2015, but plans also stepped up their payments from 86 percent to 91 percent of the required amount. The funding outlook suggests steady improvement if plans realize expected returns, but a downward drift if returns fall short, as many financial experts predict." (Center for Retirement Research at Boston College)  

Lawmakers Ask GAO to Probe Central States Fund Finances
"Ten Democrats in the Senate and 41 in the House requested on June 20 that the Government Accountability Office review the Central States, Southeast and Southwest Areas Pension Fund's investment decisions going back to 1982, when the fund came under the supervision of a court-ordered consent decree. The requests seek to determine if there was any wrongdoing that led to the fund's severe financial woes. The fund has projected it will be insolvent in 10 years or less.... The GAO is already investigating the [DOL's] supervision of the fund in response to Sen. Charles Grassley's (R-Iowa) [February] request." (Bloomberg BNA)  

Why NUA Is the Tax Break You Don't Want to Miss
"When you leave an employer, you may assume that the right move is to roll over your retirement funds to an IRA.... However, don't assume that is always the way to go. In some cases, as strange as it may sound, taking a lump-sum distribution and paying taxes is a smart choice.... A tax break called Net Unrealized Appreciation (NUA) may make taking that distribution a good choice." (Slott Report)  

Life After 'File and Suspend'
"Acceptance of new applications for file and suspend officially ended on April 30, six months after the enactment of the legislation (though qualifying people who had filed before that were grandfathered in). But a related strategy known as 'Restricted Application' remains possible for certain people." (AARP)  

New Jersey Chamber of Commerce President: Pension Proposal Is 'Economic Armageddon'
"If the Democratic amendment is approved by voters, the state will be constitutionally required to begin making contributions into the pension fund in the fiscal year that begins July 1. The payments will increase annually until reaching the full pension contribution recommended by actuaries in 2021, which is more than $5 billion.... Two of the largest pension funds are in danger of running out of money in 2024 and 2027." (  


The Impact of the New Fiduciary Rule on Investors
"[It's] a big retooling for ... been insurance companies, broker-dealers, who now have this different standard to which they are going to be held.... [We're] frankly in a little bit of an awkward regulatory environment because [an investor] could actually work with an advisor who has different regulatory requirements about how good the advice has to be for my IRA account versus my taxable brokerage account, at the same firm with the same advisor.... [That's not] tenable in the long run." (Morningstar)  


John Bogle: Industry 'Crying Out for Change', Fiduciary Rule 'A Turning Point'
"[T]he industry has gone in the wrong direction. Ever since it became possible to sell your fiduciary duty -- the Supreme Court decision that was made in 1958 ... we have this industry with an incorrect structure, one that does not work for the investor. That's where it begins[.]" (Fiduciary News)  


Pension Holders Need a New Retirement Plan, Not Stock Tips
"While we can't simply blow up the current system, we should take the smaller step of requiring companies (other than small businesses) to offer revamped 401(k)'s, including mandatory contributions from employers and employees totaling at least 10 percent of wages annually. Those funds should be professionally managed by independent, multiemployer entities created for this purpose and structured to avoid the conflicts of interest inherent in our current system." (The New York Times; subscription may be required)  


Will TDFs Be the Next Target of Plaintiff's Attorneys? (PDF)
"Fiduciaries generally believe that they are protected from litigation by two safe harbors in their selection of target date funds: [1] Properly structured TDFs are Qualified Default Investment Alternatives (QDIAs) under the Pension Protection Act of 2006.... [2] There is safety in numbers, so choosing one of the most popular TDF providers is prudent.... There's more to selecting TDFs than these two simple rules." (Target Date Solutions)  


A Hedge Fund Adviser's Open Letter to Pension Trustees
"Advisers should be held to the same alignment and performance standards that are applied to active managers. Examine their picks from three years ago: Did they meet the assumptions established at the time? If not, why? It's too easy to move the goalposts or blame the markets." (Institutional Investor)  

Executive Compensation and Nonqualified Plans

[Official Guidance]

Text of IRS Proposed Regs: Application of Section 409A to Nonqualified Deferred Compensation Plans
65 pages. "These proposed regulations address certain specific provisions of the final regulations and the proposed income inclusion regulations and are not intended to propose a general revision of, or broad changes to, the final regulations or the proposed income inclusion regulations. The narrow and specific purpose of these proposed regulations should be taken into account when submitting comments on these proposed regulations.... [T]axpayers may rely upon these proposed regulations immediately." (Internal Revenue Service [IRS])  

Linkedin, Microsoft and 'Stock-Based Compensation'
"Silicon Valley Pre and Post-IPO companies used stock options almost exclusively until the last six or seven years.... LinkedIn was an early and enthusiastic member of the companies who moved to RSUs.... If LinkedIn had used exclusively stock options over the past 3 years, most of those options would have little or no readily ascertainable value in the Microsoft transaction. This would have been demotivational for LinkedIn staff and executives. It would have also been costly to Microsoft[.]" (Performensation)  

Press Releases

TRA Hires Tri-State Regional Sales Consultant
The Retirement Advantage [TRA]

Connect   LinkedIn logo   Twitter logo   Facebook logo, Inc.
1298 Minnesota Avenue, Suite H
Winter Park, Florida 32789
(407) 644-4146

Lois Baker, J.D., President
David Rhett Baker, J.D., Editor and Publisher
Holly Horton, Business Manager

BenefitsLink Retirement Plans Newsletter, ISSN no. 1536-9587. Copyright 2016, 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, 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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