Retirement Plans Newsletter

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Webcasts and Conferences

New FMLA Employer Guide Issued: Time to Check Your Policies and Practices
August 30, 2016 WEBCAST

Innovative Strategies for Open Enrollment
August 31, 2016 WEBCAST

Fiduciary Education Workshops
September 21, 2016 in TX
Employee Benefits Security Administration [EBSA], U.S. Department of Labor

Employee Benefits Forum
September 29, 2016 in VA
Williams Mullen

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[Official Guidance]

Text of DOL Final Regs: Savings Arrangements Established by States for Non-Governmental Employees (PDF)
52 pages. "This document describes circumstances in which state payroll deduction savings programs with automatic enrollment would not give rise to the establishment of employee pension benefit plans under [ERISA]. This document provides guidance for states in designing such programs so as to reduce the risk of ERISA preemption of the relevant state laws. This document also provides guidance to private-sector employers that may be covered by such state laws."
Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL]


P&I DC West Conference | San Diego | Oct 23-25

Sponsored by Pensions & Investments

Join leading executives who manage 401(k), 403(b), 457 and TSP plans at DC West. You'll learn how other plan sponsors analyze, develop, implement and measure programs for their participants, so you can improve your own plan.

[Official Guidance]

Text of DOL Proposed Regs: Savings Arrangements Established by State Political Subdivisions for Non-Governmental Employees (PDF)
44 pages. "In ... the current final rule, the [DOL] defines the term 'State' to have the same meaning as given to that term in section 3(10) of ERISA ... [namely,] 'any State of the United States, the District of Columbia, Puerto Rico, the Virgin Islands, American Samoa, Guam, [and] Wake Island.' ... [These proposed regulations] would ... add the term 'or qualified political subdivision' wherever the term 'State' appears ... Thus, the [current final rule's] safe harbor provisions would apply in the same manner to payroll deduction savings programs of qualified political subdivisions as they currently apply to state programs."
Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL]

[Official Guidance]

Text of Draft 2016 IRS Form 5500-EZ (PDF)
"This form is required to be filed under section 6058(a) of the Internal Revenue Code. Certain foreign retirement plans are also required to file this form."
Internal Revenue Service [IRS]

[Guidance Overview]

Text of White House Fact Sheet: Middle Class Economics -- Making It Easier to Save for Retirement
"DOL's Final Rule ... provides that a state retirement savings program is not an ERISA plan and hence unlikely to be preempted by ERISA if the program is established and administered by the state, provides for a limited employer role, and is voluntary for employees.... Under the proposed rule, a city can create its own retirement savings program provided it has the authority under state law, its population is equal to or greater than the population of the least populous state, and the state does not have its own retirement savings program."
The White House Blog

[Guidance Overview]

DOL Announces Final Rule on State Payroll Deduction IRA Accounts
"The final rule announced today provides guidance for states in designing programs by providing a safe harbor from ERISA coverage to reduce the risk of ERISA preemption of the relevant state laws. Importantly, the rule also protects worker rights by ensuring they have the ability to opt out of auto-enrollment arrangements."
Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL]


Things Have Changed Are You Up-To-Date?

Sponsored by ASPPA

Keep up to date on the latest rules and regulations with the ERISA Outline Book, THE resource for information on qualified plans. Choose from two great formats; hardcopy or online, including access to a fully searchable and cross-referenced website.

[Guidance Overview]

Facilitating State Efforts to Help Workers Save for Retirement
"Eight states -- California, Connecticut, Illinois, Maryland, New Jersey, Oregon, Massachusetts, and Washington -- have already passed laws creating their own retirement savings arrangements.... Today's rule will clarify the status of existing state efforts, and will enable more states to create their own programs. The Department is also publishing a proposed rule that would allow some larger cities to establish their own retirement savings programs."
U.S. Department of Labor [DOL] Blog

[Guidance Overview]

IRS Releases Self-Certification Procedure for Late IRA Rollovers
"In many cases, taxpayers should consider using a direct rollover from an employer plan or trustee-to-trustee transfer from an IRA to avoid any chance for missing the 60-day rollover window and to avoid withholding on the distribution. In addition, taxpayers should note that self-certification is not an automatic waiver of the 60-day window from the IRS; the issue may still be adjusted upon an IRS audit if the IRS finds incorrect information or disagrees with the facts supplied in the self-certification statement."

[Guidance Overview]

IRS Allows Self-Certification for Late Rollovers of Retirement Plan Funds
"To qualify for this relief, the IRS cannot have previously denied relief to the taxpayer for that rollover, and the taxpayer must have missed the 60-day deadline for one of [11 specified reasons] ... According to the IRS, the taxpayer's self-certification is not a waiver of the 60-day requirement because the IRS can still deny the waiver on audit if it determines the taxpayer did not meet the requirements."
Journal of Accountancy

[Guidance Overview]

IRS Finds Charity Is Exception to 'Contingent Right', Making Trust a 'Qualified Beneficiary'
"When there are multiple beneficiaries of a trust, the beneficiary with the shortest life expectancy is used for purposes of calculating RMDs. Only a primary or contingent beneficiary is considered ... In [a recent Private Letter Ruling], the IRS determined that [the named] charitable organizations fall under that exception, because they could become beneficiaries only if all the other beneficiaries in the other classes died before the assets were fully distributed. As such, the charitable organizations ... are 'mere successor beneficiaries'[.]"
Appleby Retirement Dictionary


Section 409A: Structuring Compliant Plans and Avoiding Pitfalls

Sponsored by Lorman and BenefitsLink

August 31 webinar. Provides a good foundation for identifying arrangements that are subject to Section 409A and for designing and administering these nonqualified deferred compensation plans in a legally compliant manner.

[Guidance Overview]

Proposed Regs on Deferred Compensation Plans Under Section 457
"The proposed Section 457 regulations' recognition that a non-compete agreement can create a substantial risk of forfeiture represents a significant departure from the Section 409A regulations, under which a covenant not to compete does not create a substantial risk of forfeiture for purposes of Section 409A."

A Primer on Plan Fees (PDF)
"Ensure understanding of the different fee models available to you as a client, and implications to the plan and participants. Ask your service provider to show how your plan compares to others in your industry in terms of plan design features, investment options offered, and fees, and how your plan compares to similar plans within the client base.... Inquire about the different methods of allocation, as many service providers are investigating or have recently instituted fee-leveling services that could impact the proportion of fees incurred by each participant. A deeper dive is warranted periodically[.]"
Jean Martone, CFP, Portfolio Evaluations, Inc., via Plan Sponsor Council of America

Is Using Active Investment Management a Fiduciary Breach? Part 6
"Is it prudent ... to include in fund lineups selections from a group that as a whole and even in highly select sub-groups consistently fails to deliver returns greater than low cost index tracking funds? Isn't the prudent choice to simply index everything at the lowest possible cost and be done, at least when it comes to 401(k), 403(b) and any other fiduciary plan fund lineup? ... Since, under ERISA, prudence is a process, begin by asking if the added cost of the active approach you are considering is justified given the low probability of achieving additional return."
Fiduciary Plan Governance, LLC

Federal Court to Hear Challenges to Final DOL Fiduciary Rule Today
"[T]he United States District Court for the District of Columbia will be the first court to hear challenges to the [DOL's] final conflict of interest regulation and related exemptions (Fiduciary Rule).... [T]he National Association for Fixed Annuities (NAFA), a trade association representing insurance interests, and the DOL will present arguments [on Thursday, Aug. 25] addressing NAFA's demand for an interim order, or preliminary injunction, suspending the Fiduciary Rule's applicable date until the court determines its validity on a full record."
Miller & Chevalier

Fund Families Are Being Sued by Their Own Employees Over Their Retirement Plans
"Why do these investment firms offer their own funds to their employees without significantly lower fees? ...[T]hey do not want to convey to their employees that there are potentially superior investment opportunities outside of the company.... [S]ince these plans tend to be very significant in size, reducing investment fees for their own employees ... could potentially increase fees for their retail investors to absorb the cost."
Castle Rock Investment Company

Excessive Fee Lawsuit Calls for Closer Look at Fund Performance
"The participants' complaint stated plan fiduciaries had the duty to offer investments with reasonable expense ratios and to offer diverse investment options to participants. The complaint stated the Plan failed to offer an adequate and appropriate number of passively managed, less expensive investment options.... Not only did the complaint allege fees were too high, but also that fees were too high in light of fund performance. While this was always part of the embedded reasoning for evaluating fees, this suit more explicitly articulates this hybrid consideration and requires a more highly detail-oriented evaluation of plan fees, particularly with regard to investments."
Pension Consultants, Inc.

Boomers -- Not Just Millennials -- Value Importance of Technology to Manage Retirement
"[T]wo-thirds of millennials and baby boomers (66%) agree that mobile apps and tools are either important or very important to manage and track the value of their retirement savings. Six in 10 millennials (59%) also place a high value on tools to help monitor when they will be able to retire and how much income they can expect in retirement. Roughly the same percentage of boomers (54%) feel the same way."
Willis Towers Watson

2014 Update of the EBRI IRA Database: IRA Balances, Contributions, Rollovers, Withdrawals, and Asset Allocation (PDF)
"The average IRA account balance in the database was slightly more than $100,000 and the average IRA individual balance was $127,583, but the balances varied significantly by the IRA type: Roth IRAs had the lowest average balance, while Traditional IRAs had the highest average balance.... Roth IRAs were more likely to receive a contribution than Traditional IRAs (25.9 percent vs. 6.4 percent).... Almost 24 percent of individuals owning a Traditional or Roth IRA took a withdrawal in 2014, including 27.2 percent of Traditional IRA owners."
Employee Benefit Research Institute [EBRI]

The State Pension Funding Gap in 2014: New Accounting Rules Provide Clearer Picture
"The nation's state-run retirement systems had a $934 billion gap in fiscal year 2014 between the pension benefits that governments have promised their workers and the funding available to meet those obligations. That represents a $35 billion decrease from the shortfall reported for fiscal 2013.... When combined with the shortfalls in local pension systems, this estimate reaches more than $1.5 trillion for fiscal 2015 and will likely remain close to historically high levels as a percentage of [U.S. GDP]."
The Pew Charitable Trusts

Funding for State Pension Funds Improves in 2014
"Among the 50 states, South Carolina, Oregon, Wisconsin, Tennessee and North Carolina posted the highest funding ratios at 107%, 104% 103%, 99% and 99%, respectively. Illinois, Kentucky, New Jersey, Connecticut and Alaska reported the lowest funding ratios at 41%, 41%, 42%, 51% and 60%, respectively."
Pensions & Investments

Benefits in General

California Court Says ERISA Preempts Physician's State Law Claim of Tortious Interference
"[Dr. Morris Silver's claim against a self-funded health plan] for interference with contractual relations [with his patients] is predicated on the EOB the Plan sent to policyholders stating the 'Total Patient Responsibility' for the amount charged by Silver was zero. Whether use of this EOB essentially constituted a tort -- a question with wide-ranging implications for any plan using a similar form -- is precisely the kind of decision that conflict preemption is intended to eliminate ... As such, this cause of action addresses an area of exclusive federal concern -- the manner in which adverse determinations are communicated to plan participants -- and directly affects the relationship between the plan and participants." [Morris B. Silver M.D., Inc. v. Int'l Longshore & Warehouse Union, No. B267941 (Cal. Ct. App. Aug. 22, 2016)]
Cary Kane ERISA Lawyer Blog

Preparing for Open Enrollment: How Is Your Benefits Tech Provider Helping You?
"[Y]our dedicated point of contact should be able to provide guidance on the best way to design your benefits platform for a streamlined enrollment experience.... Do you have complex eligibility rules? Varying employer contributions for flex benefits based on location and years of service? Provide all of this information to your vendor during your discovery meetings and let them advise the best way to design the benefits platform to meet your specific needs."

Treasury Announces 2016-2017 Regulatory Agenda for Employee Benefits
A chart lists projects included on both Agencies' Agendas. "Projects added to the agendas since they were last published are shown in bold. There are 14 new IRS initiatives, and no new DOL initiatives.... [T]he section 280G guidance project is no longer on the IRS Business Plan."
Sutherland Asbill & Brennan LLP

Executive Compensation and Nonqualified Plans

[Guidance Overview]

NYSE Clarifies Position That Amendment of Equity Incentive Plan to Allow Maximum Tax Withholding Is Not a Material Amendment
"[T]he NYSE has posted revised equity compensation FAQs on its website. Among the amendments is one to Question C-1, which clarifies that an amendment to allow the maximum tax withholding is not a material amendment. The same is true if forfeited but unissued shares are recycled back into the plan. If restricted shares that have been issued are recycled back into the plan, it is not a material amendment ONLY if those shares are forfeited rather than vesting."
Winston & Strawn LLP

Final IRS Section 83(b) Regs Ease Paper Filing Requirements with Income Tax Return
"A common mistake in employee compensation transactions is the failure of the employee to file the Internal Revenue Code Section 83(b) election with his or her Form 1040. Newly issued final regulations ... eliminate this Form 1040 requirement to submit a paper copy of the 83(b) election with the employee's income tax return."
Holland & Hart LLP

Press Releases

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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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