Retirement Plans Newsletter

July 29, 2016 logo logo LinkedIn logo Twitter logo Facebook logo
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Trust Company of America
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CUNA Mutual Group

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IUPAT Industry Pension Fund
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[Guidance Overview]

Action Steps for Eligible Tax-Exempt and Governmental Employers Under the New Proposed Deferred Comp Requirements
"[T]he lack of guidance that existed prior to the issuance of the Proposed Regulations may have resulted in certain assumptions being made when deciding how to structure an agreement, plan, or program subject to the Deferred Compensation Requirements, and it may be appropriate to revise those assumptions in light of the new guidance ... [T]he Proposed Regulations provide new planning opportunities ... that were not clearly available before the issuance of the Proposed Regulations[.]"  Bond, Schoeneck & King


The Advisor's Guide to Qualified Plans

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[Guidance Overview]

IRS Proposes Rules for 'Closed' Defined Benefit Plans
"The proposed regulations add a new exception to the requirement that when a defined benefit plan is aggregated with a defined contribution plan for testing purposes, it must satisfy a minimum aggregate allocation gateway ... The exception applies for plan years that begin on or after the fifth anniversary of the closure date (so there is no immediate relief from the gateway requirement)."  Thompson Coburn

Fidelity Prevails in ERISA Float Litigation
"Plaintiffs did not claim a personal stake in the float; indeed the Court noted that plaintiffs were not 'short so much as a penny' and had 'no direct stake in the plan assets.' Rather, plaintiffs alleged that by returning the float, which they claim was a plan asset, to the mutual fund and not to the 401(k) plan, Fidelity breached its ERISA fiduciary duties.... The Court held that because the cash payout from the redemption does not go to, and was never intended to, the plan it did not become an asset of the plan upon the exchange." [Kelley v. Fidelity Management Trust Co., No. 15-1445 (1st Cir. July 13, 2016)]  Proskauer's ERISA Practice Center

Fifth Circuit Focuses on Process in ESOP Valuations (PDF)
"[A recent] case stressed the importance of 'process' in valuation determinations being utilized for acquisitions of a corporation's stock by an ESOP.... [T]his article provides a detail of the process that should be followed to ensure consideration of the appropriate factors by fiduciaries in reviewing valuations for ESOP transactions. The article concludes with a discussion of guidance provided by the court ... that may be instructive as to best practices for ESOP fiduciaries charged with establishing the value to be used by an ESOP holding shares of stock of a private company." [Perez v. Bruister, No. 14-60811 (5th Cir. May 3, 2016)]  McDermott Will & Emery

Employer-Provided Retirement Education a Win-Win for Employers and Employees
"40% of workers say their employers do not provide any type of retirement or financial education. And that gap leaves them feeling stressed -- those same workers rank anxiety as the number-one emotion they associate with retirement.... Half of Baby Boomers say their employers do not offer any educational resources on retirement, compared to 39% of Gen Xers and 33% of Millennials.... Nearly half (47%) of those who've saved [between] $250,000 and $999,999 say their employers are a source of retirement education -- second only to financial advisors. The same number (47%) of Americans with zero retirement savings list family/friends as their main source of retirement education."  Dave Ramsey


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Pet Project Campaign Boosts Retirement Savings by Connecting with Furry Friends
"In addition to posting photos of pets, provides tips on saving for retirement. 'Just like a pet, your retirement plan needs care, nurturing and your attention,' the site explains... The pet campaign is connecting particularly well with Millennials and the 55-plus age group: Savers ages 18-34 had the highest response rate; retirement savers age 55 and older had the highest increase in salary contributions. The increase was attributable to both men and women."  MassMutual

Overcoming Challenges in the 403(b) Tax Exempt Market (PDF)
"Plan fiduciaries should be diligent in fulfilling their fiduciary duties, documenting processes, meeting regularly, and adhering to plan documents, particularly given the uptick in litigation in the 401(k) segment of the market.... The presence of individual annuity contracts continues to challenge plan sponsors from making further improvements. The use of multiple recordkeepers, while less prevalent and much improved, continues to present challenges ... For plans that haven't yet embarked on fund and provider consolidation, there remain opportunities to build participant friendly and cost-effective designs."  Rocaton Investment Advisors, LLC

This $25 Trillion Mistake Could Change the Face of Retirement
"On a global level, pension-related longevity risk exposure is as high as $25 trillion. In other words, if all the companies out there that issued pensions were to actually make good on their promises, they'd risk coming up $25 trillion short. To combat this problem, many companies with pensions already in place have stopped offering them to new employees. Some have halted accruals on existing plans to minimize their risk. Most, however, are skirting the issue by not offering defined benefit plans in the first place."


Uncertain Times Ahead for the Retirement Industry
"10 years from now our industry will look very different than it does today. In fact, the main staple of the private retirement industry -- 401k plans -- probably won't exist in the same shape and form that we know today. Instead, we're likely to see government-run 401ks with some guaranteed return... or new types of programs that encourage people to save more. We're also likely to see added refinement to the new fiduciary rules that will more than likely create greater complexity and displacement. As a result, we may need to reinvent the way we currently deal with retirement funds and most definitely how we advise people who want their money managed."  PenChecks

Benefits in General

Form 5500 Proposal: Deadline for Comments is Monday, August 1 (PDF)
"The 2016 IRS changes could affect your business in 3 ways -- all of which will cost YOU money and time: [1] Your client list will become available to anyone [2] You'll likely need to retool your processes, workflow ... for Form 5500 for 2016 [3] You'll have to retool again when the DOL changes are unleashed upon us for 2019.... [P]lease submit a comment letter.... [A] sample comment letter [is provided] ... OMB takes comments very seriously -- especially well -- crafted and reasoned ones. Their primary concern is BURDEN -- so if your message focuses on burden and cost/benefit it will probably resonate with them."  Indiana Benefits

District Court Finds Forum Selection Clause Unenforceable in ERISA Action
"ERISA provides that an action 'may be brought in the district where the plan is administered, where the breach took place, or where a defendant resides or may be found.' ... [The court] determined that the word 'may,' as used in this context, could be read as either allowing a plaintiff to file suit in multiple districts or 'as providing a right to ERISA plaintiffs to file their action in the most suitable of these locations.' The court ... identified ERISA's public policy of providing plaintiffs 'ready access to the Federal courts' as a guide for determining the enforceability of the forum section clause.... [T]he court held that ... the most persuasive interpretation protects plaintiffs' option of bringing suit in a convenient forum and determined that the forum selection clause was unenforceable." [Harris v. BP Corp. North America Inc., No. 15-10299 (N.D. Ill. July 8, 2016)]  Proskauer's ERISA Practice Center

Employment Cost Index, June 2016
"The increase in the cost of benefits [for private industry workers] was 1.7 percent for the 12-month period ending in June 2016, and in June 2015 the increase was 1.4 percent.... Employer costs for health benefits increased 2.8 percent for the 12-month period ending in June 2016."  U.S. Bureau of Labor Statistics [BLS]

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BenefitsLink Retirement Plans Newsletter, ISSN no. 1536-9587. Copyright 2016, 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, 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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