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[Guidance Overview]
Significant Changes to the IRS Determination Letter Program
"[E]mployers need to operate their plans in compliance with any change in qualification requirements from the effective date of the change, regardless of the plan's Section 401(b) period for adopting amendments.... Sponsors of new plans that receive, or of existing plans that have received, a favorable determination letter should not restate the plan for subsequent changes in law because they will possibly lose their reliance upon the provisions that were subject to the favorable determination letter. Instead, the plan should be amended for later changes."
(Cheiron)
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First Circuit Says 'Float' Is Not a Plan Asset
"[T]he Court stressed that this case is not about direct injury to any plan participants. The participants admitted that they received penny-for-penny the exact value of funds allocated to their 401(k) accounts.... The money as it moved through Fidelity to the participant did not become a plan asset just because it was in a fiduciary's hands; it was not a plan asset because it didn't belong to the plan. The plan documents themselves also prevented the trust from holding uninvested cash as plan assets, further supporting the Court's conclusion that the cash did not belong to the plan." [Kelley v. Fidelity Management Trust Co., No. 15-1445 (1st Cir. July 13, 2016)]
(DrinkerBiddle)
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New York Life Accused of Profiting from 401(k) Plans for Its Employees
"In a proposed class action, two New York Life employees accuse the company of lining its own pockets at their expense by offering its MainStay S&P 500 Index Fund in the company's 401(k) plans. The employees say this violated federal benefits law, because the MainStay fund carried fees more than 17 times higher than a readily available alternative from Vanguard."
(Bloomberg BNA)
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Independent Broker-Dealer and Sponsor of Small 401(k) Plan Sued Over Fees
"For the second time in two months, a small 401(k) plan is at the center of a lawsuit alleging excessive plan fees. The independent broker-dealer, Cetera Advisor Networks, has been named as a co-defendant ... Plaintiffs allege Cetera is a 'co-fiduciary' under ERISA, which is difficult to assess because there aren't any details in the complaint as to the specific services Cetera provided to the 401(k) plan[.]"
(InvestmentNews)
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Private Investment Fund Managers and Other Investment Advisers May Be Affected by New Fiduciary Rules
"Certain common marketing or offering activities for private investment funds and separately managed accounts involving ERISA plans and/or IRAs may be considered 'investment advice' under the final rule, potentially constituting 'conflicted' advice offered in a fiduciary capacity that could result in a violation of fiduciary duty and/or a prohibited transaction absent an exemption. Discussions with Targeted ERISA/IRA Parties may be considered 'investment advice' and fiduciary in nature if they are considered tantamount to a 'recommendation' to invest (or maintain an investment) in the fund or establish (or maintain) a separately managed account arrangement, even though, in the case of a prospective investor or client, a fee will not be charged until after the investor invests in the fund or the separately managed account is established."
(Proskauer Rose LLP)
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Withdrawals from Financial Accounts in Retirement
12 pages. "One-quarter of wealthier household retirement income comes from financial account withdrawals. The role of these withdrawals is expected to grow as financial accounts make up an increasing share of retiree wealth in the future ... [On] average, the rates of withdrawal and spending from financial accounts are sustainable at the current pace. However, about one-quarter of households ... may be at risk of exhausting financial assets ... Withdrawal strategy varies by the type of financial account ... The composition of retiree spending does not vary even if composition of income does."
(Vanguard)
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Who Pays for a Mistake in Your IRA?
"Why are these penalties owed by you, the innocent IRA owner? Because the 'I' in IRA stands for 'individual.' The tax code is structured so that you are totally, 100%, responsible for the correct operation of your IRA.... Employer plan participants may not be at as much risk, but they will be responsible for any amounts distributed to them or that are deemed to be distributed to them."
(Slott Report)
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Corporate Pension Funding Index, July 2016
"In June, the funded status of the 100 largest corporate defined benefit pension plans dropped by $46 billion as measured by the Milliman 100 Pension Funding Index (PFI). The deficit rose to $447 billion at the end of June, primarily due to a decrease in the benchmark corporate bond interest rates used to value pension liabilities. As of June 30, the funded ratio decreased to 75.7%, down from 77.5% at the end of May."
(Milliman)
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Financing State and Local Pension Obligations: Issues and Options (PDF)
29 pages. "This policy brief provides background on public pensions and discusses different ways to bring the poorly-funded systems into balance. [The authors] conclude that the legacy costs of these pension plans should be covered by some combination of overall tax increases and spending cuts, while the new costs that would otherwise accumulate could be mitigated by judicious reform proposals."
(The Brookings Institution)
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[Opinion]
The Short Scoop on Wall Street's Claim That the DOL Fiduciary Rule Is Too Long
"The broker-dealers and insurance companies, i.e. Wall Street lobbies, have recently berated the [DOL's] fiduciary rules for their length and complexity. Yet, a close examination reveals both the rules' elegance and how the DOL's strong effort to accommodate Wall Street compensation practices was the reason for the rules' reputed length."
(RIABiz)
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David Rhett Baker, J.D., Editor and Publisher
Holly Horton, Business Manager
BenefitsLink Retirement Plans Newsletter, ISSN no. 1536-9587. Copyright 2016 BenefitsLink.com, Inc. All materials
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