Retirement Plans Newsletter

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[Official Guidance]

Text of IRS Clarifications to Form 5500 Instructions Pertaining to Required Minimum Distributions for Missing Participants
"[T]he IRS announced that, in the absence of other guidance, filers do not need to report on Lines 4I of the Schedule H and I to the Form 5500 and 10f of the Form 5500-SF unpaid required minimum distribution (RMD) amounts for participants who have retired or separated from service, or their beneficiaries, who cannot be located after reasonable efforts or where the plan is in the process of engaging in such reasonable efforts at the end of the plan year reporting period."  Internal Revenue Service [IRS]


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[Guidance Overview]

Correcting Required Minimum Distribution Failures
"To report a RMD failure, you may complete IRS Form 14568-H Appendix C, Part II, Schedule 8, as an attachment to IRS Form 14568, Appendix C Part I ... Form 14568-H (Schedule 8) can only be used for affected participants.... If the listed RMD failure is an IRC Section 401(a)(14) commencement of benefit failure or any other failure, use the Form 14568, Appendix C, Part I (or alternative narrative format)."  Internal Revenue Service [IRS]

[Guidance Overview]

'Complete Discontinuance' of Contributions to a Profit Sharing/401(k) Plan -- What You Need to Know
"During its Complete Discontinuance of Contributions Project, the Employee Plans Compliance Unit (EPCU) looked at Forms 5500 and 5500-SF showing both: [1] No contributions for the preceding five years (excluding 401(k) plans' employee deferral contributions); and [2] Distributions.... If you've had a complete discontinuance and have made partially vested distributions, the plan's qualification is at risk. You can fix this failure through EPCRS. Correction requires restoring previously forfeited accounts to affected participants, adjusted for lost earnings."  Internal Revenue Service [IRS]

[Guidance Overview]

What to Do When You Receive an IRS Compliance Statement
"The compliance statement is conditioned on the plan sponsor correcting the failures before the end of the correction period. The correction period in most cases is 150 days after the date the compliance statement is signed ... You must completely correct plan errors by following the compliance statement and listed proposed corrections. In addition, you must take action as outlined to locate former employees and beneficiaries and revise any administrative procedures."  Internal Revenue Service [IRS]

[Guidance Overview]

Final DOL Fiduciary Rule: Higher Bar for Investment Advisors (PDF)
"The final rule identifies some examples of communications that are recommendations, such as recommendations to switch from a commission-based account to an advisory fee based account. The final rule also provides examples of communications that are not recommendations, such as guidelines and other information on proxy voting policies provided to a class of investors, without regard to individual investment interests or policies."  Anderson, Helgen, Davis & Cefalu, PA


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[Guidance Overview]

Currency Hedging Complications When 'Hardwiring' Hedge Fund Feeders for ERISA
"The ERISA 'Plan Asset' rule is complex, and the world of sophisticated financial instruments makes its application even more challenging.... [A] master feeder hedge fund arrangement involved in international investment ... may experience unexpected complications when 'hardwiring' its feeder funds for ERISA purposes if the feeder funds issue classes denominated in US currency, but the base currency of the master and/or feeder funds is a non-US currency."  Morgan Lewis

Helping Employees at Retirement -- 401(k) Decisions, Decisions, Decisions! (PDF)
"No matter what type of retirement savings accounts they have, fees should play a large factor in participants' decisions to consolidate or move accounts.... [A] Fee Analysis Worksheet [in this article] is a sample that sponsors could provide to employees (with plan level information/fees ... optionally completed by the plan sponsor or administrator) to make sure they are thinking through the potential costs of staying in the plan versus moving to another qualified plan or IRA."  Milliman

Startups Shake Up 401(k) Arena
"Led by technology entrepreneurs and backed by venture capitalists, a crop of startups have launched online 401(k) plans in recent months with the aim of bringing robo-style automated investment services to small businesses, many of which offer their workers high-cost 401(k)s or no retirement savings plans at all. The upstarts are pursuing a large market that has been relatively ignored until recently -- a vacuum that has prompted some states to start requiring small businesses to offer retirement plans."  The Wall Street Journal; subscription may be required

Principal: DOL Rule to Cost Us $1M a Month
"Complying with the [DOL's] new fiduciary rule will cost an estimated $1 million a month for the next 18 months to 24 months, and between $5 million to $10 million a year afterwards, executives with Principal Financial Group said Friday. Earlier in the week, executives from Ameriprise Financial said DOL rule compliance-related issues had cost the company $11 million in the first half of 2016."

Franklin Resources Workers Sue Over In-House 401(k) Funds
"According to the newest class action complaint, Franklin Resources -- which does business as Franklin Templeton Investments -- invested hundreds of millions of its workers' retirement dollars in funds managed by the company and its subsidiaries, even though these funds carried fees between 57 and 1,100 percent higher than those of comparable funds offered by Vanguard. This decision caused them to lose more than $64 million in retirement savings, the workers allege."  Bloomberg BNA

State Street to Pay $60M to ERISA Clients for Foreign Exchange Practices
"The settlement includes $155 million to the Department of Justice, $167.4 million in disgorgement and penalties to the SEC and at least $60 million to [ERISA] plan clients in an agreement with the DOL, to settle allegations that it deceived some of its custody clients when providing them with indirect foreign currency exchange (FX) services."  planadviser

How Employers Perceive Older Workers
"Many workers would like to work past age 65 to sure up their retirement finances. Some employers are on board with this, with nearly a third saying they strongly support their employees continuing on the job after age 65 ... However, employees discern the situation differently, with fewer than a quarter saying their employers are strongly supportive of older workers."  U.S. News & World Report

Pennsylvania Auditor General to Examine State Employee Retirement Funds
"Auditor General Eugene DePasquale says one of the things his office will examine is the use of outside investment advisers by the State Employees Retirement System and the Public School Employees Retirement System. The auditor general says those advisers can't even beat conservative stock index funds."  CBS Philly


Actuarial Profession Should Advocate True Social Security Sustainability
"The common sense solution to providing true Social Security sustainability is to require that the system automatically be placed in actuarial balance on a periodic basis in the future, as is the case for all sound actuarial processes. For example, current law could be changed to require the program's tax rate be automatically changed effective for the year following an actuarial valuation that shows the program has fallen out of actuarial balance by 5% or more."  Ken Steiner, FSA Retired

Benefits in General

[Guidance Overview]

Agencies Publish Proposed Revisions to Form 5500 and Schedules (PDF)
"The proposed Form and Schedules have been annotated by the Agencies to note 'New' line items. A rough count of 'New' lines ... [1] Form 5500: 30 line items; [2] Schedule A: 6 line items; [3] Schedule C: 12 line items; [4] Schedule H: Well over 150 lines and sublines -- detailed breakouts of assets and investments; [5] Schedule MB: 11 line items; [6] Schedule R: 25 lines or sub lines; [7] Schedule J: all new -- over 100 line and sublines."  United Actuarial Services, Inc.

Group Proposes $333 Billion in Cuts to Feds' Pay and Benefits
"Federal employees are overpaid because the government operates independently of market pressures, according to [The Heritage Foundation], which proposed $333 billion in savings over the next decade aimed at federal personnel costs.... [The] Foundation proposed $26 billion in cuts specifically to federal employees' pay, which researchers argued far outpaces that of the private sector. The rest of the savings came from proposed reforms to retirement benefits, paid leave and health care."  Government Executive

Press Releases

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