Retirement Plans Newsletter

June 23, 2016

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Senior Pension Actuarial Analyst
Newport Group
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Unified Trust Company, N.A.
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Stifel Financial
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DWC ERISA Consultants, LLC
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Webcasts and Conferences

Practicing Before the IRS: Circular 230 A to Z
July 13, 2016 WEBCAST
(IRS [Internal Revenue Service])

DC-2 Exam Review: Tips and Traps
July 19, 2016 WEBCAST
(ASPPA [American Society of Pension Professionals & Actuaries])

Just for ERPAs Workshop
September 6, 2016 in IL
(FIS Relius Education)

2016 Annual Conference - Shifting the Focus to Employee Wellbeing
September 20, 2016 in MA
(Worksite Wellness Council of Massachusetts)

Consumer Experience & Digital Health Forum
December 6, 2016 in IL
(America’s Health Insurance Plans [AHIP])

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[Guidance Overview]

The Cold Comfort of the Best Interest Contract Exemption
10 pages. "[T]he BIC Exemption comes at a steep price, imposing extensive compliance costs in the form of new disclosure requirements, as well as new policies and procedures requirements ... The exemption also substantially increases litigation risk by providing IRA and other retirement plan investors ... a new private enforcement right against financial advisers." (Latham & Watkins)  


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[Guidance Overview]

Proposed Regs on Deferred Compensation Released
"Additional regulatory guidance was needed under section 457 to incorporate certain statutory changes and required amendments to existing regulations. Accordingly, the proposed regulations incorporate changes with respect to designated Roth contributions, certain public safety officers and qualified military service." (RSM US)  

[Guidance Overview]

Flexibility Offered for Deferred Compensation Plans of Tax-Exempt Organizations, Government Agencies
"Highlights of the new proposed regulations include ... 'Rolling' vesting is still permitted, subject to certain conditions.... Section 457(b) plans maintained by state and local government entities may include Roth contribution features.... Guidance is provided in defining bona fide vacation and sick leave plans, which are exempt from the Section 457(f) deferred compensation rules." (Ballard Spahr LLP)  

Evaluating Auditor Proposals
"Evaluating responses to your plan auditor request for proposals can be done simply and efficiently if you lay out the criteria you consider most critical in advance and assign a weight in terms of importance to each. This approach creates a framework of objectivity before you begin reviewing the proposals. Each evaluator should assign their own weighting to each criterion ... [You should] also determine if there are any 'non-starters' in the criteria that would eliminate a candidate regardless of how it responds in other areas." (Fiduciary Plan Governance, LLC)  

The Problem with Investment Committees
"The decisions which have the most negative impact on investment results tend to be associated with capitulating on a good strategy after a stretch of bad performance. In fact, capitulation can evolve into a pattern of selling low and buying high as the investor seeks to recoup foregone returns. The typical investment committee structure doesn't help." (Russell Investments)  


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Plan Fees Are Still a Lawsuit Trigger for Retirement Plan Sponsors
"The principles promoted by DOL and in the fiduciary rule can help recordkeepers avoid a 'race to the bottom' in which the promise of lower fees leads to lower plan performance, [said Tom Kmak, founder and CEO of Fiduciary Benchmarks]. Too often the setting of fees is considered a one-variable equation in which the only factor that matters is the cost ... Instead ... the better way to consider fee setting is as a four-variable equation in which cost is the last consideration after quality, service and value." (Bloomberg BNA)  

How 403(b) Plans Can Inform 401(k) Plans
"[U]nlike 401(k) plans, 403(b) plans originally were designed as core retirement plans for nonprofit organizations, with a focus on generating lifetime income. Investment menus for 403(b) plans commonly feature income options -- such as low-cost, in-plan fixed annuities, which can provide a guaranteed benefit that never goes down and serve to manage risk in employee' overall portfolios." (CFO)  

Takeaways from the 2016 Enrolled Actuaries Meeting (PDF)
"[A] PBGC representative predicted the largest of the multiemployer pension plan takeovers are yet to come.... Many accounting firms interpreted the FASB guidance to mean the RP-2014 tables should be applied with full mortality improvements through age 120 without modifications, producing very large pension liabilities ... A primary concern of accountants, attorneys, and actuaries is that they do not inadvertently incur fiduciary status via advice that implies discretionary authority and/or control over plan matters." (H.C. Foster & Company)  

Employee Financial Literacy and Retirement Plan Behavior
33 pages. "[The authors] examine changes in employee plan behavior one year after employees completed a Learning Module about retirement planning, and we compare it to baseline patterns.... [T]hose employees who completed the Learning Module were more likely to start contributing and less likely to have stopped contributing to the DC plan post-survey." (Pension Research Council, Wharton School of the University of Pennsylvania; free registration required)  

Retirement Calculators Show 'Dramatically Different' Results
"Calculators used by investors to gauge their probability of retirement success may not actually be good gauges of that success. Comparing the outputs from several retirement planning programs shows a huge dispersion of results, underpinning how investors and advisers should use them as a guide rather than take them at face value." (InvestmentNews)  

Social Security Finances: A Review of the 2016 Trustees Report (PDF)
"Projections indicate that scheduled Social Security benefits can be paid in full over the next 18 years with no change in current law. Over the long term, a significant projected shortfall must be addressed. Timely revenue increases and/or gradual benefit adjustments can bring the program into long-term balance, ensuring that Social Security will continue to pay all promised benefits for the next 75 years and beyond." (National Academy of Social Insurance [NASI])  

Social Security Will Be There for You, Millennials
"While older Americans can't imagine a world without Social Security, most millennials have become fatalistic about it ... Only 6 percent of them expect current benefits to be there when they hit 67 years old -- the full benefit age for those born in 1960 or later -- and 51 percent expect the program to go entirely extinct ... Under the current estimate, 2034 is the year when Social Security can no longer pay full benefits ... But the program should still be able to pay three-quarters of benefits at that time and for decades afterward, backed by a steady stream of payroll taxes from future generations." (Bloomberg)  

Executive Compensation and Nonqualified Plans

[Guidance Overview]

IRS Clarifies Numerous 409A Issues (PDF)
"The new regulations still do not flatly state that beneficiaries are treated the same as participants for all section 409A purposes. However, the new guidance helpfully provides for that treatment in [certain specified] situations.... Many employers have struggled with the current section 409A rules around the timing of payments following death. The proposed regulations provide ... very helpful relief on this front.... The new regulations tighten significantly the correction opportunity afforded prior to the year of vesting ... A number of the changes in the new regulations impact equity awards and transactional matters." (Groom Law Group)  

[Guidance Overview]

IRS Issues Sec. 409A Proposed Regulations
"[T]he proposed rules clarify that Sec. 409A applies to nonqualified deferred compensation plans separately and in addition to the Sec. 457A rules.... The proposed regulations also modify the short-term deferral rule (which provides that a prohibited deferral of compensation does not occur for certain short-term deferrals) to permit a delay in payments to avoid violating federal securities or other laws." (The Tax Adviser)  

Press Releases

PSCA Announces 59th Annual Survey
PSCA [Plan Sponsor Council of America]

Redrock Wealth Management is Certified for Fiduciary Excellence
Centre for Fiduciary Excellence [CEFEX]

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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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