Retirement Plans Newsletter

July 18, 2016

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Employee Benefits Administrator
Chadler Solutions
in NJ

West Coast Vice President of Sales
Professional Capital Services
in AZ, CA, CO, ID, MT, NM, NV, OR, SD, UT, WA, Telecommute

Sr. Benefits Consultant
Baylor Scott & White Health
in TX

Manager, Health and Life Benefits
Ameren
in MO

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Retirement Planners
in VA, Telecommute

Distribution Associate - Retirement Plans
Pension Consultants
in CT

Retirement Plan Administrator / Consultant
Boyce & Associates, Inc.
in AZ

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Webcasts and Conferences

DB Top Ten Tips Webcast
July 26, 2016 WEBCAST
(ASC)

PBGCís Proposed Regulation On Multiemployer Plan Mergers and Transfers
July 28, 2016 WEBCAST
(International Foundation of Employee Benefit Plans [IFEBP])

29th Annual ECFC Flexible Benefit Administratorsí Symposium: Building Your Future - One Benefit at a Time
August 3, 2016 in MN
(ECFC [Employers Council on Flexible Compensation])

401(k) Beyond the Basics 02: Plan Document Requirements and Deadlines
August 8, 2016 WEBCAST
(FIS Relius Education)

IRA Institute Self-Directed IRA Class
September 14, 2016 in ME
(Retirement Industry Trust Association [RITA])

Cincinnati Regional Conference
November 16, 2016 in OH
(ASPPA [American Society of Pension Professionals & Actuaries])

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[Guidance Overview]

Other Shoe Drops with Latest DOL Form 5500 Proposal (PDF)
"The changes proposed for the Forms 5500 and 5500-SF for 2019 and later plan years include the compliance questions that were first proposed and later withdrawn for 2015.... [T]he proposed changes include a number of subjective questions that will be difficult to reduce to simple yes-and-no answers. Because of this, it is expected that complying with the proposed changes will be significantly more labor-intensive for plan administrators and service providers that have been operating in sophisticated data-capture and storage environments." (Ascensus)  


[Advert.]

Planning Opportunities under New 457(f) Proposed Regs: July 27 webinar

Sponsored by Trucker Huss

Finally! The IRS has issued proposed regulations under Section 457(f) regarding deferred compensation for non-profits and governmental entities. This July 27 webinar will delve into the nitty gritty of all your questions on the proposed regs. Register now.



[Guidance Overview]

Safe-Harbor Definitions of Compensation: How Do They Differ?
"Plan sponsors can choose from one of three safe-harbor definitions for IRC Sections 415 and 414(s)/non-discrimination purposes.... With these basic definitions and not much more, it's still quite difficult to understand the differences among these safe harbor definitions of compensation." [Includes a chart detailing the three safe-harbor definitions.] (Pension Consultants, Inc.)  

Universal Retirement Plan Bill Introduced
"U.S. Representative Joe Crowley (D-New York), vice chair of the Democratic Caucus, introduced the Secure, Accessible, Valuable, Efficient Universal Pension Accounts (SAVE UPs) Act.... The SAVE UPs bill would require employers with 10 or more employees who do not already offer a retirement plan, to open individualized retirement accounts for every employee and contribute to those plans 50 cents per hour worked, per employee.... In addition to the employer contribution, once enrolled, employees would automatically begin contributing 3% of their pre-tax income, which would increase gradually over time, unless they opt-out." (PLANSPONSOR)  

Excessive-Fee Suit Targets Checksmart's $25M 401(k) Plan
"The lawsuit, filed July 14 in the U.S. District Court for the Southern District of Ohio, targets a plan with $25 million in assets and more than 1,700 participants.... This is the second time in two months that a smaller plan was targeted for its high administrative fees.... The expenses have been 'grossly excessive' because the investment options made available to the participants have been focused on 'expensive and unsuitable actively-managed mutual funds without an adequate or appropriate number of passively managed and less expensive mutual fund investment options,' the complaint said." (Bloomberg BNA)  

DOL Tweaks Fiduciary Rule; Plan Sponsors Struggle to Comply
"[C]orrections in the guidance affirmed that insurance firms can use the BICE; clarified the negative consent procedure by providing that an existing contract must be executed before Jan. 1, 2018, and that if a retirement investor does not consent, the exemption continues to provide relief for 14 days after receipt of termination; clarified that exemptions apply to sales as well as purchases; and fixed a few typographical errors." (Bloomberg BNA)  

Lawyers Ready to Swoop Down on 401(k) Vultures
"With more attorneys seeing an opportunity, smaller plans are starting to feel the heat. After launching four 401(k) lawsuits alleging breach of fiduciary duty late last year, Minneapolis-based Nichols Kaster has filed four more in 2016, most recently against Fujitsu and American Century's $600 million plan. This year has even seen a 401(k) plan with less than $10 million in assets get hit with a lawsuit." (Bloomberg via The Detroit News)  

As CalPERS Exits Hedge Funds, CalSTRS Adds More
"CalPERS announced two years ago that it was eliminating its $4 billion hedge fund program ... CalSTRS adopted a 'risk mitigation strategy' last November that will move 9 percent of its investment portfolio into long-term U.S. Treasury bonds and hedge funds with strategies designed to lose less value during recessions. The different views of hedge funds is one of the biggest separations of investment strategy since CalSTRS, under legislation 34 years ago, took control of the teacher pension fund that had previously been managed by CalPERS." (Calpensions)  

Don't Let Financial Fears Ruin Your Retirement
"Recent research has shown that some retirees may be underspending their assets in retirement.... [T]he Actuarial Budget Calculator enables you to match your liabilities with your assets, using your best estimates of future experience (or conservative estimates if you prefer) regarding the economy, your investment returns, your expected period of retirement, your future essential and discretionary expenses, etc. Thus, rather than simply worry about whether you will have enough money to pay your expected long-term care costs, make reasonable assumptions about when and how much those costs might be and set aside funds today to cover those expected costs." (Ken Steiner, FSA Retired)  

Distributional Effects of Means Testing Social Security: Income Versus Wealth
"This paper compares Social Security means tests that would reduce benefits for recipients who fall in the top quarter of the income distribution with means tests aimed at those in the top quarter of the wealth distribution. Both means tests would reduce the average benefits for the affected groups by about $5,000." (National Bureau of Economic Research [NBER])  

[Opinion]

How to Save Public Pensions, No Federal Bailout Needed
"Instead of bailing out these pensions, Congress should pass a law allowing states and local governments to reduce promised benefits -- something that is now illegal under some states' statutes or constitutions. Congress should stipulate that pension plans must be in very bad shape to qualify for relief ... Many pensions allow retirement at age 55; states and local governments could mandate that benefits cannot be drawn until age 65. Payments could be capped at 150% of the median income in the local jurisdiction. Automatic cost-of-living increases that now exceed expected inflation could instead be tied to increases in the median income." (The Wall Street Journal; subscription may be required)  

[Opinion]

American Academy of Actuaries Letter to IRS on Improving Access to IRS Actuaries and Other Employee Benefits Personnel (PDF)
"The Pension Committee ... is concerned about the decision by the [IRS] that would limit the pension actuaries' potential to interact with IRS actuaries and other experienced employee benefits personnel.... We do not believe ... that the inability of pension actuaries to interact with appropriate IRS personnel will result in cost-effective outcomes. U.S. retirement systems are exceedingly complex, and the ability of pension actuaries and the IRS to exchange timely, useful information is vital to the smooth operation of the systems." (American Academy of Actuaries)  

Benefits in General

Are Federal Pay and Benefits Too Generous?
"[Personnel reforms proposed by The Heritage Foundation] included: [1] Requiring new federal hires and employees with between five and 25 years of service to pay more for their retirement benefits by decreasing the government contribution.... [2] Requiring federal workers to shoulder more of their health care costs under the Federal Employees Health Benefits Program [FEHBP].... [3] Eliminating the FEHBP government contribution for retiree health benefits for new hires.... Federal employee unions took issue with the proposals." (Government Executive)  

Executive Compensation and Nonqualified Plans

[Guidance Overview]

Proposed Changes to Sec. 409A Are Welcome (For the Most Part)
"Some of the proposed changes include: [1] Modification of the short-term deferral exception to permit a delay in payments to avoid violating federal securities laws or other applicable law.... [2] Revision of the rules to allow pre-employment equity grants to be exempt from Section 409A.... [3] Modification of the rules regarding recurring part-year compensation.... [4] Addition of a rule regarding when payment has been made.... [5] Clarification of certain rules permitting payments in connection with the termination and liquidation of a plan not made in connection with a change in control.... [6] Limitation on ability to make corrections of unvested amounts under the proposed income inclusion regulations." (Jackson Lewis P.C.)  

[Guidance Overview]

Unraveling New Proposed Regs on Non-Qualified Deferred Comp Under Sec. 457
"Because of the retroactive application of the proposed regulations, tax-exempt employers should begin now to take an inventory of all deferred compensation programs that are not clearly designed to comply with the qualified plan rules ... Once these plans have been identified, employers should work with counsel to determine whether any of these plans require modification to comply with 457(f) or to comply with the bona fide severance pay plan requirements to ensure these plans are exempt from or comply with Section 457 and Section 409A." (Holland & Hart 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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