Retirement Plans Newsletter

July 12, 2016

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Senior Director, Client Management Services
OneAmerica
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United Retirement Plan Consultants
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Webcasts and Conferences

What Employers Need to Understand About the New Fiduciary Rules
July 27, 2016 WEBCAST
(FIS Relius Education)

Merger and Acquisitions: Coming Together for Retirement
August 3, 2016 WEBCAST
(ASPPA [American Society of Pension Professionals & Actuaries])

Fiduciary Rule
August 17, 2016 WEBCAST
(National Association of Government Defined Contribution Administrators [NAGDCA])

Voluntary Fiduciary Correction Program and Abandoned Plan Workshop
August 31, 2016 in KY
(Employee Benefits Security Administration [EBSA], U.S. Department of Labor)

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[Guidance Overview]

Text of IRS Employee Plans 'Issue Focus' for Determination Specialists: Plan Terminations (PDF)
Dated July 1, 2016. "Rev. Proc. 2016-6 (as annually updated) provides that a terminating plan must be amended for all current law which is applicable to the plan even if the date by which the plan is required to be amended has not yet passed.... This report will update those previously provided 'Issue Foci' with the 'New' items listed on the 2015 Cumulative List ... as well as other provisions of the several Acts ... which would be applicable to plans terminating in their 2016 plan year. Please note that this update is not an all inclusive list of required plan changes. Therefore, determination specialists should review terminating plans for compliance with all applicable law in effect at the date of termination." (Internal Revenue Service [IRS])  


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[Guidance Overview]

New IRS Revenue Procedure for Qualified Retirement Plan Document Determination Letters (PDF)
"An interesting -- and likely unintended -- side effect of these rules is that restating an [individually designed plan (IDP)] onto another individually designed document, such as when a plan sponsor changes benefits counsel, will come with considerable risk. While the existing plan document will be able to rely in large part on its existing [favorable determination letter (FDL)], whenever it was issued, the new document will not be able to do so and a new FDL will be unavailable." (Ferenczy Benefits Law Center LLP)  

[Guidance Overview]

IRS Releases Technical Corrections to BIC and Principal Transactions Exemptions (PDF)
"The most significant change under the Technical Corrections is a correction to the BIC Exemption's definition of insurance companies that may act as Financial Institutions.... The Technical Corrections [1] fix an inconsistency between the preambles of both exemptions and their regulatory text regarding negative consent procedures.... [2] correct Section VI(b) of the BIC Exemption to clarify that exemptive relief extends to both the purchase and sale of investment products, including insurance and annuity contracts, rather than only purchases ... [3] clarify that the BIC Exemption is available to a broad group of insurance companies." (Groom Law Group)  

[Guidance Overview]

Long-Awaited 457 Plan Regs Provide Planning Opportunities for Tax-Exempt and Governmental Employers
"[T]he 457 proposed regulations largely follow the concepts embedded in Section 409A and previously issued regulations under Section 409A. However, there are some unexpected differences ... In particular, the proposed regulations are of special interest to tax-exempt employers whose plans utilize non-compete restrictions or 'rolling risks of forfeiture,' or who would like to add those features." (Davis Wright Tremaine LLP)  

[Guidance Overview]

Proposed 457 Regs: Bona Fide Severance Pay Plan and Substantial Risk of Forfeiture
"The Proposed Regulations do not limit annualized compensation to the amount that may be taken into account under Code section 401(a)(17). Also, the Proposed Regulations do not include exceptions for collectively bargained separation pay plans, foreign separation pay plans, and reimbursements and certain other separation payments." (Caplin & Drysdale)  


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[Guidance Overview]

IRS Finalizes Helpful Roth Account Rollover Guidance
"The amended regulations will enable participants to avoid current taxation on partial rollovers of nonqualified distributions from designated Roth accounts. While the IRS made the final rule retroactive to January 1, 2016, taxpayers may optionally apply it beginning September 18, 2014. Sponsors will need to update the 'safe harbor' rollover explanation given to recipients of eligible rollover distributions from designated Roth accounts." (Willis Towers Watson)  

A Reminder of the Rules for Timely Remittance of Participant Contributions
"[DOL] regulations require that all retirement plans deposit participant contributions to the trust account of such plan as soon as the money can reasonably be segregated from the employer's assets, but not later than the 15th business day of the following month. Many employers mistakenly believe that the rule means the later of those two events but, in fact, the DOL has always interpreted this rule to require that such amounts be contributed as of the earlier of the two possibilities.... Penalties for noncompliance are severe, and do not require an audit by the IRS or DOL to be detected." (Legacy Retirement Solutions)  

401(k) RFP Tips for Employers
"Do everything electronically.... [E]mail all advisors your RFP in a Word file.... Take the time to learn and understand the important decision variables in hiring an investment advisor.... Try to avoid hiring the best sales team, rather than the best consultant.... Don't conduct a recordkeeper and investment advisory search at the same time ... [A]llow at least a month for advisors to get back to you. Requiring a quick turnaround ... will actually ensure that you receive responses from those advisors who are the least busy." (Lawton Retirement Plan Consultants)  

Changing Pension Service Administration: When It Makes Sense and How to Get Started
"Proper due diligence starts with a cost-benefit analysis and consideration of the following questions: Can the service level to plan participants be improved? Can control over my compliance risk and calculation error risk be improved? Am I getting real value out of my current administration relationship? ... How old is the technology? When was it developed or updated? ... [S]chedule significant time to provide documentation, as well as for review and signoff on the administrative manual." (Findley Davies)  

DOJ Fires Back at Fiduciary Rule Opponents
"Department of Justice attorneys are urging a federal judge to reject a request for a preliminary injunction halting the [DOL] fiduciary rule. The DOJ filed the first response Friday to a series of lawsuits filed by opponents of the rule, which was published in April.... In a 105-page response, DOJ attorneys argue that the six claims made in the [National Association for Fixed Annuities (NAFA)] suit are without merit." (InsuranceNewsNet.com)  

Everything You Always Wanted to Know About the Hypothetical 'Child IRA'
"By dialing back the start age to 'new born baby' and investing that $1,000 annual until said baby reaches age 19, we find the value of The Child IRA will have grown to two-and-a-quarter million dollars.... [It] quickly became apparent The Child IRA could easily obviate the need for Social Security.... [Published articles explain how] The Child IRA can become a viable national policy to eventually replace Social Security." (Fiduciary News)  

Preserving Retirement Income Security for Public Sector Employees (PDF)
42 pages. "[M]ost public retirement systems provide new members with a DB pension benefit or a DB benefit in combination with a DC account. Only a very small number of systems provide only a DC benefit.... 71 percent of the plans surveyed credit their members with interest on their contributions if they leave and request a refund.... [A]ll public DB plans allow for the purchase of service credits for prior military service, and more than half of the plans surveyed allow for the purchase of credits for prior out-of-state government service.... A number of plans have features that increase benefits for short or moderate term employees." (National Institute on Retirement Security [NIRS])  

[Opinion]

The Great Recession and Public Pensions
"[In] 2007, most public pensions were reasonably well-funded. Several were over 100 percent funded, a good number were over 90 percent funded, and many were above 80 percent funded.... Then, in the two year period from 2008 to 2009, we see the funded ratios drop for almost all plans. Florida drops from 101.4% funded to 84.1% funded. New York drops from 101.5% funded to to 94.3% funded. Oregon drops from 112.2% funded all the way down to 80.2% funded ... The single most important thing states can do to have well-funded public pensions is to fully pay their contribution to the pensions each year." (National Public Pension Coalition)  

Benefits in General

Severance Plan Was Subject to ERISA, and Properly Denied Benefits to Employee Who Didn't Return Deleted Files
"Affirming summary judgment against an employee who was denied severance pay because he failed to return company property, the Fifth Circuit first held that ERISA governed the severance plans because they required more than a single lump-sum payment but involved ongoing plan administration and discretionary decisions on eligibility and amount of pay. On the merits, the appeals court agreed with the lower court that the plan allowed the employer to deny severance benefits on the ground that the employee failed to return company property (the deleted computer files) upon termination." [Gomez v. Ericsson, Inc., No. 15-41479 (5th Cir. July 8, 2016)] (Wolters Kluwer Law & Business)  

Executive Compensation and Nonqualified Plans

[Guidance Overview]

New Proposed Regs Issued Under Section 409A
"Some commentators had expressed concerns about the administrative impracticability of making timely payments of death benefits ... The Proposed Regulations add payment timing flexibility by providing that an amount payable due to the death of a service provider or his or her beneficiary that is to be paid at any time during the period beginning on the date of death and ending on December 31 of the calendar year immediately following the year of death ... will be treated as timely paid for purposes of Section 409A if it is paid at any time during this period." (Wilson Sonsini Goodrich & Rosati)  

[Guidance Overview]

The 409A Proposed Regs: Clarifying Guidance for Employers (PDF)
"[A] noncompliant plan term may be amended in a manner permitted under applicable correction guidance even though the noncompliant plan term may not have been eligible for correction under that guidance (for example, due to applicable timing requirements). In addition, the portion of the unvested amount that is affected by the correction is not subject to income inclusion, additional taxes, or applicable premium interest, and the IRS does not need to be notified of the correction." (Drinker Biddle)  

[Guidance Overview]

New IRS Regs Under Sec. 409A
"One common sense tweak made by the regulations is to clarify that stock awards made to prospective service providers still may qualify for the important 'stock rights' exception to 409A. This would apply to a service provider who is reasonably anticipated to begin providing services within 12 months after the grant date, if the person actually begins providing services during that 12-month period (or the award lapses if services do not commence by the deadline). Note that a service provider may be an employee, non-employee director, or an entity." (Winston & Strawn LLP)  

Press Releases

PSCA Announces New Directors
PSCA [Plan Sponsor Council of America]

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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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