Retirement Plans Newsletter

July 21, 2016 logo logo LinkedIn logo Twitter logo Facebook logo
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[Guidance Overview]

DOL Commences Retirement Plan Audits for Compliance with Section 401(a)(9)
"Recently, the [DOL] has begun an expansion of its audit initiative directed at large defined benefit and defined contribution retirement plans, examining plans that the DOL suspects have not made reasonable attempts to locate terminated vested participants who have reached their 'required beginning dates' under Internal Revenue Code Section 401(a)(9). This initiative draws attention to the importance of maintaining updated records regarding retirement plan participants and the consequences of not doing so under both the Code and [ERISA]." (Dickinson Wright PLLC)  


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[Guidance Overview]

Prompt Correction of Elective Deferral Errors Becomes Less Expensive
"The previous correction method for these types of errors was for the plan sponsor to make a contribution to each affected participant's account equal to 50% of the missed deferral opportunity plus any missed employer matching contribution plus earnings. The new method eliminates or reduces the required contribution for the missed deferral opportunity when the error is caught and corrected quickly." (Pension Consultants, Inc.)  

The Importance of Administration When Selecting an Annuity Provider (PDF)
12 pages. "This paper addresses the following questions: [1] Why does administration matter to a fiduciary selecting an annuity provider? [2] How have technological changes made it more important? [3] What are the key aspects of insurers' administrative capabilities and practices on which a fiduciary should focus?" (Penbridge Advisors, LLC; free registration may be required)  

Pension Participation, Wealth, and Income: 1992-2010
"[T]his paper compares pension participation, pension wealth, projected retirement income, and replacement rates attributable to past service, by pension type for households ages 51-56.... [T]he increase in DC participation has not offset the decline in DB participation.... DC wealth is more skewed towards the top quartile than DB wealth.... [T]he shift to DC plans has produced a decline in the ratio of income to wealth. The decline in the income-to-wealth ratio would have been even greater if expected retirement ages had not increased." (Center for Retirement Research at Boston College)  

Now You Can Check Your Retirement Account on Your Apple Watch
"It's true that 401(k) plan participants can be passive about picking and monitoring investments and remembering to increase their savings rate.... At the same time, getting savers so involved in their 401(k) that they monitor it constantly, tempting them to monkey around with allocations based on daily market movements, could seriously damage their retirement prospects." (Bloomberg)  


ASPPA's New Retirement Plan Fundamentals Course - Now Available

Sponsored by ASPPA

ASPPA's Retirement Plan Fundamentals course has been redesigned as online, interactive modules. Perfect for anyone new to the industry or who is preparing for an ASPPA credential. Ask your employer to make RPF part of your professional development.

The Two Minute ERISA Fiduciary Liability Risk Management Challenge
"After considerable frustration with both the genuine and the bogus complaints, [the author] decided to create a metric to help clarify the concepts of the prudence and 'best interests' required of fiduciaries under the Prudent Person Rule.... The strength of the [Active Management Value Ratio™ 2.0 (AMVR)] is its simplicity, both in terms of calculation and interpretation.... The AMVR calculates the cost efficiency of an actively managed mutual funds relative to a comparable passively managed, or index, fund based on the incremental cost incurred and incremental return, if any, produced by an actively managed mutual fund." (The Prudent Investment Adviser Rules)  

The New Fiduciary Rules: Court Challenges and Considerations for Employers
"Existing fiduciaries may no longer want to provide specific investment advice or otherwise engage in fiduciary activities for a plan. [E]mployers may want to consider whether to secure the investment services of a fiduciary that complies with the new BICE rules. At a minimum, employers should specifically ask how any new advisor anticipates complying with the Fiduciary Rules." (Polsinelli PC)  

Money Management Firms Using In-House Funds in Their 401(k) Plans Risk Lawsuits
" 'If only proprietary products are in a plan line up, that does put a target on you,' said Marcia Wagner, an ERISA attorney. 'The question is whether it's a bull's-eye or not,' she said, adding that key questions for such plans include whether the fund options are a breach of fiduciary duty; are fees reasonable; and are the funds best of class." (InvestmentNews)  

Banks Strive to Thread DOL Fiduciary Advice Needle in Way That Allows Them to Retain Small Accounts
"A common solution for banks with broker dealer operations is to shift larger clients to the bank's registered investment advisors (RIAs) while offering a robo investment advice solution to smaller accounts that require 'less hand holding' ... Offering only a robo solution will not work for all people with small accounts so banks will need other solutions that provide personal advice[.]" (Mind Over Market)  

The Final Fiduciary Rule: Six Action Steps for Advisors (PDF)
"[1] Take time to breathe.... [2] Figure out what you personally are responsible for.... [3] Identify your key business activities.... [4] Identify the legal compliance issues for each step ... [5] Address potential prohibited transactions.... [6] Be willing to adapt." (David Levine, Esq., for National Association of Plan Advisors [NAPA])  

Benefits in General

[Guidance Overview]

Significant Changes Proposed for Form 5500
"Comments, which are due by October 4, 2016, are specifically sought on a variety of issues, such as the cost and feasibility of providing the detailed group health plan data required under the proposal. Comments are also requested on the feasibility of treating the filing of Form 5500 (including Schedule J) as compliance with health care reform's transparency in coverage and quality of coverage reporting requirements.... Because [certain IRS-only] questions do not apply to welfare plans, the IRS seeks comments on whether to add the questions to the various forms and schedules based on subject matter or collect them on a single IRS-only schedule." (Thomson Reuters / EBIA)  

Executive Compensation and Nonqualified Plans

[Guidance Overview]

409A and 457 Updates (PDF)
21 pages. "The Section 409A modifications affect almost every company that defers a portion of executive pay to a future year. The Section 457 regulations apply to the deferred compensation plans of state and local governments and tax-exempt organizations.... The regulations revise a specific provision ... regarding the calculation of amounts includible as income under Section 409A(a)(1) and clarify the interaction of Section 457 with Section 409A. Additionally, the proposed regulations provide guidance relating to the definitions of a bona fide severance pay plan under section 457(e)(11) ... and substantial risk of forfeiture under section 457(f)(1)(B)." (Fulcrum Partners, LLC)  

Press Releases

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