Retirement Plans Newsletter

June 22, 2016

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Employee Benefits Jobs

Plan Administrator
Newport Group
in CA, TX

Enrolled Actuary
TPA Firm
in AZ

Defined Contribution Administrator
TPA Firm
in AZ

Defined Benefit Administrator
TPA Firm
in AZ, TX

401(k) Plan Administrator
Alliance Pension Consultants, LLC
in IL

Key Relationship Manager
Nova 401(k) Associates
Telecommute

Defined Contribution Manager
Nova 401(k) Associates
Telecommute

Special Project Account Manager
Nova 401(k) Associates
Telecommute

Software Support Specialist -DC/401(k) & 5500
Actuarial Systems Corporation
Telecommute

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Webcasts and Conferences

Rural ACOs in 2016: Challenges, Opportunities, Insights and Experiences
June 23, 2016 WEBCAST
(Healthcare Web Summit)

EBIA’s 18th Annual Advanced Cafeteria Plans and Benefits Conference
July 13, 2016 in WA
(Thomson Reuters)

CEO Pay Trends: Looking Beyond Reported Pay Figures
July 23, 2016 WEBCAST
(Equilar)

Advanced Pension Conference
September 7, 2016 in IL
(FIS Relius Education)

National Conferences on Medicare, Medicaid & Duals
October 23, 2016 in DC
(America’s Health Insurance Plans [AHIP])

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[Guidance Overview]

IRS Proposes Rules Under Section 457 for Deferred Compensation Arrangements Maintained by Tax Exempt Organizations
"The proposed regulations issued on June 21, 2016: [1] Include amendments to the 2003 final regulations to reflect subsequent statutory changes made to Section 457 ... [2] Provide guidance on certain issues under Sections 457(e)(11) and 457(e)(12) (relating to exemptions from Section 457) that are not addressed in the 2003 final regulations. [3] Provide additional guidance for ineligible plans under Section 457(f)." (Practical Law Company)  


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[Guidance Overview]

DOL Issues Final Investment Advice Fiduciary Rules (PDF)
16 pages. "Sponsors and fiduciaries of ERISA-governed plans who wish to retain an investment advice fiduciary to advise participants ... need to carefully review the agreements under which those services will be performed to determine if the compensation arrangements or other potential conflicts of interest require reliance on the 'best interest contract' exemption. If so, then the plan fiduciaries would need to determine if the contract or other disclosures provided by the fiduciary meet the requirements of the exemption and to monitor the investment adviser's compliance with the exemption going forward." (Pillsbury Winthrop Shaw Pittman LLP)  

[Guidance Overview]

PBGC Proposes Late Payment Penalty Relief
"This proposal could drastically reduce the financial burden imposed on a plan for underpaid and late filings. For example, a plan with a $1 million premium that is two months late (after notice from the PBGC) would have a $100,000 penalty (two months at 5% per month times the amount outstanding) under the current regulation. Under the proposed regulation, this penalty would be reduced to $50,000. The penalty could be further reduced to $10,000, if the plan is eligible for the compliant plan partial waiver of 80%." (Milliman Retirement Town Hall)  

Text of the 2016 Annual Report of the Board of Trustees of the Social Security Trust Funds (PDF)
272 pages. "Considered separately, the DI Trust Fund reserves become depleted in the third quarter of 2023 and the OASI Trust Fund reserves become depleted in 2035. In last year's report, the projected reserve depletion years were 2034 for OASDI, 2016 for DI, and 2035 for OASI. The change in the depletion date for DI is largely due to the temporary tax rate reallocation enacted in the Bipartisan Budget Act of 2015.... The projected OASDI annual cost rate increases from 14.05 percent of tax- able payroll for 2016 to 16.61 percent for 2038 and to 17.68 percent for 2090, a level that is 4.35 percent of taxable payroll more than the projected income rate[.]" (The Board of Trustees, Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds)  

Social Security Board of Trustees: Long-Range Projection Unchanged for Trust Fund Reserve Depletion
"The asset reserves of the combined OASDI Trust Funds increased by $23 billion in 2015 to a total of $2.81 trillion. The combined trust fund reserves are still growing and will continue to do so through 2019. Beginning in 2020, the total cost of the program is projected to exceed income. The year when the combined trust fund reserves are projected to become depleted, if Congress does not act before then, is 2034 -- the same as projected last year. At that time, there will be sufficient income coming in to pay 79 percent of scheduled benefits." (U.S. Social Security Administration [SSA])  


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The Ease of Automation and Guaranteed Lifetime Income (PDF)
16 pages. "Participants who have had experience with either auto enrollment or auto escalation contribute, at the median, 43% more of their pay to their retirement plan than those without that experience. More than three-quarters of plan participants familiar with guaranteed lifetime income solutions consider it very important to include them in workplace retirement plans. Among participants in different age groups, Millennials are the most enthusiastic about automatic plan features and guaranteed lifetime income solutions." (Prudential)  

Rescue Plan Proposed for Your Stranded 401(k)
"Senator Elizabeth Warren [D-MA] ... [has] introduced a bill that would create a database of your old retirement accounts. The bill would also allow abandoned retirement accounts to be invested in target-date mutual funds ... Right now, many stranded 401(k) accounts end up in cash, where their value is steadily eroded by inflation." (Bloomberg)  

Interesting Angles on the DOL's Fiduciary Rule, Part 10
"FINRA issued its Regulatory Notice 13-45 in late 2013. As that notice explained, distribution recommendations are investment recommendations (and thus, in the case of FINRA, are subject to the suitability standard), but distribution education is not an investment recommendation.... [M]any RIA firms and broker-dealers adopted a distributions education approach using 13-45 as the model. While the DOL agrees that distribution education is not a fiduciary recommendation, it does not agree that 13-45 is a safe harbor:" (FredReish.com)  

Some Life Insurance Sales Covered by DOL Fiduciary Rule
"Life insurance is the forgotten transaction in ongoing debate over the [DOL's] fiduciary rule.... The key is the fiduciary rule governs the sale of investments into qualified retirement accounts. So that means all life insurance that is sold into 401(k)s and purchased with plan distributions will be covered by the new rule. In the big picture, that covers a small amount of life insurance sales, but agents need to be prepared." (InsuranceNewsNet.com)  

Spring 2016 Zone Report: Multiemployer Plans Are Predominantly 'Green' (PDF)
"[W]hile 64 percent of plans are in the green zone based on all zone certifications filed in the 12 months ending in March 2016 ... just under half of all participants are in plans in the red zone based on the full set of plan data. Significantly, about half of these red-zone participants (23 percent overall) are in plans that are considered to be 'critical and declining.' " (Segal Consulting)  

Text of Grand Jury Report: Orange County's $4.5 Billion Unfunded Pension Liability and Retirement Plans (PDF)
36 pages. "When compared to its peer units of government in California, Orange County at 70% funded is in the median range (70-80%) of pension liability funding; Unfunded pension liabilities of the County have been reduced by over $500 million (11%) since 2012 after many years of dramatic increases ... Orange County Employees' Retirement System (OCERS) has reduced the amortization of the unfunded liabilities from 30 years to 20 years, helping to reduce the liabilities faster ... The reduction of unfunded liabilities in recent years is contrary to OCERS actuary's forecast, which projects increases totaling 8% in the next four years, followed by declining levels. This contradiction needs to be resolved.... [This report provides] a number of findings and recommendations that should allow the County to further reduce its unfunded pension liability and provide for a more equitable pension/retirement choice." (Grand Jury of Orange County, California)  

Tax-Efficient Retirement Portfolio Spending Strategies
"The conventional view is that taxable investment accounts should be liquidated first, while tax-deferred accounts are allowed to continue to compound.... [T]he optimal approach is actually to preserve the tax-preferenced value of retirement accounts and to fill the tax brackets early on, by funding retirement spending from taxable investment accounts but doing systematic partial Roth conversions of the pre-tax IRA to fill tax brackets in the early years." (Michael Kitces in Nerd's Eye View)  

[Opinion]

PSCA Supports Multiple Employer Plan Legislation
"In a time when policy makers in Washington are looking for ways to encourage employers to offer retirement plan coverage, the positive attributes of MEPs become more noteworthy.... [T]he time finally has come to revise our country's laws to remove the barriers that have prevented MEPs from growing and prospering, and the Plan Sponsor Council of America ('PSCA') supports bi-partisan proposals to do so." (Plan Sponsor Council of America [PSCA])  

Benefits in General

Fact Sheet: Social Security and Medicare Trustees Report
"Taken in combination, Social Security's retirement and disability programs have dedicated resources sufficient to cover benefits for nearly two decades, until 2034. The Medicare Hospital Insurance Trust Fund will have sufficient funds to cover its obligations until 2028, two years earlier than was projected last year, but still 11 years later than was projected in the last report issued prior to passage of the Affordable Care Act." (U.S. Department of the Treasury)  

Executive Compensation and Nonqualified Plans

[Guidance Overview]

IRS Proposes Rules Clarifying and Modifying Section 409A Final Regs, and Withdrawing and Replacing a Provision of the Proposed Income Inclusion Regs
"[Among other items, the proposed regs:] [1] Clarify that Section 409A's rules apply separately and in addition to the rules under Code Section 457A ... [2] Modify the short-term deferral rule ... Modify the definition of 'eligible issuer of service recipient stock' ... [3] Modify the rules regarding recurring part-year compensation ... [4] Create a rule for determining when a payment has been made under Section 409A." (Practical Law Company)  

2016 CEO Pay Trends (PDF)
22 pages. "The data in this report examines CEO pay for S&P 500 companies ... over the last five fiscal years. In that time, the U.S. stock markets have recovered from previous lows during the financial crisis, and in tandem with the recovery, reported CEO pay increased every year -- the largest period of growth coming between 2012 and 2013 when reported pay was 10.5% larger at the median. This report also visualizes shifts in how companies award CEO pay." (Meridian Compensation Partners, LLC)  

Press Releases

Intac Continues To Build Its Team Of Actuaries
Intac Actuarial Services, Inc.

Randall McGeorge Newly Elected as Partner
Morgan Lewis & Bockius LLP

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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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