Retirement Plans Newsletter

September 14, 2016 logo logo LinkedIn logo Twitter logo Facebook logo
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AFC Pensions, Inc.
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Trinity Pension Consultants, Inc.
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Trinity Pension Consultants, Inc.
in OH

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Webcasts and Conferences

2016 Legislative & Regulatory Updates
October 11, 2016 WEBCAST
ECFC [Employers Council on Flexible Compensation]

Employee Benefit Plans of Tax-Exempt and Governmental Employers
October 20, 2016 in DC
American Law Institute Continuing Legal Education Group [ALI CLE]

403(b) Masters Summit
January 25, 2017 in AZ
National Tax-Deferred Savings Association [NTSA]

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[Official Guidance]

Text of PBGC Interest Rate Update for October and Fourth Quarter 2016
"The fourth quarter 2016 interest assumptions under the allocation regulation will be 1.98 percent for the first 20 years following the valuation date and 2.67 percent thereafter. In comparison with the interest assumptions in effect for the third quarter of 2016, these interest assumptions represent no change in the select period ... a decrease of 0.52 percent in the select rate, and a decrease of 0.18 percent in the ultimate rate ... The October 2016 interest assumptions under the benefit payments regulation will be 0.50 percent for the period during which a benefit is in pay status and 4.00 percent during any years preceding the benefit's placement in pay status. In comparison with the interest assumptions in effect for September 2016, these interest assumptions are unchanged."
Pension Benefit Guaranty Corporation [PBGC]


70-1/2 Year Olds NOT in Pay Status?

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[Guidance Overview]

Interesting Angles on the DOL's Fiduciary Rule, Part 19
"[If] you intend to use 'hire me' to market your services, keep in mind that it is to describe your services and fees, but without a suggestion that any particular product, investment or platform, be used by the IRA owner."

[Guidance Overview]

IRS Clarifies Minimum Valuation Rules for Partial Annuity Distributions (PDF)
"The regulations generally support the approaches most plans had been using in the absence of official guidance. The regulations are available retroactively and offer limited anti-cutback relief for plans that are timely amended to support their desired calculation approach for future distributions."
Xerox HR Services

Voya Accused of Layering 401(k)s With Unnecessary Fees
"According to the lawsuit ... Voya contracted with federally registered investment adviser Financial Engines Advisors LLC to provide advice to participants in Voya-administered retirement plans. Voya then charged participants a fee of as much as 50 basis points for this arrangement ... Voya's arrangement with Financial Engines is structured largely so that Voya can collect an unnecessary layer of fees from the retirement plans it oversees, according to the Nestle plan participant's complaint. In her view, this is an attempt by Voya to avoid federal laws limiting its ability to provide financial advice steering retirement savers toward its own products." [Patrico v. Voya Fin., Inc., No. 16-07070 (S.D.N.Y. complaint filed Sept. 9, 16]
Bloomberg BNA

Northrop Grumman Drained Retirement Fund, Workers Allege
"The lawsuit ... accuses the company of charging its workers between $1.7 million and $2.1 million per year in administrative fees associated with the company's retirement plan, even though the plan was already paying millions of dollars in fees to a third-party record keeper. Under this scheme, Northrop executives had 'unfettered control' over the amounts taken from the retirement plan, allowing the company to receive plan assets 'in the guise of compensation' that wasn't reasonable or necessary for the plan's administration, the lawsuit contends." [Marshall v. Northrop Grumman Corp., No. 16-6794 (C.D. Cal. complaint filed Sept. 9, 2016)]
Bloomberg BNA


Safe Harbor 401(k) Plans - Sept. 28 webinar

Sponsored by Lorman and BenefitsLink

This webinar will provide a comprehensive overview of safe harbor 401(k) plans, including various design options, notice and contribution requirements, automatic contribution arrangements, plus common mistakes and how to fix them.

DOL Revisits R.J. Reynolds' Nabisco Stock Dump in New Brief
"The DOL argued that two recent Supreme Court decisions, involving the employer stock plans of Fifth Third Bancorp. and Amgen Inc., didn't squarely apply to the R.J. Reynolds dispute. That's because those cases involved pleading standards -- specifically, what plaintiffs must include in their complaints to keep a case alive -- and not loss causation, the DOL argued." [Tatum v. R.J.R. Pension Inv. Comm., No. 02-00373(4th Cir., amicus brief filed Sept. 9, 2016]
Bloomberg BNA

Is Your 401(k) Plan Income 'Floating' Away? New Lawsuit Challenges Fidelity's Practices
"[I]ssues to consider: [1] The fact that the trustee will retain float income and relevant details should be disclosed in the services agreement and the Section 408b-2 disclosure.... [2] Fiduciaries may want their agreements to specify a maximum number of days in which cash contributions could be held in a cash account prior to investment.... [3] Even if the provider's fees are paid by the plan sponsor, if the amount of retained float income is consistently higher than expected, it may be appropriate to renegotiate compensation. [4] Certain actions or inaction by plan fiduciaries can increase the float."
Cohen & Buckmann pc

A Fiduciary Blueprint: The Restatement of Trusts, the Prudent Investor Rule, and the DOL's New Fiduciary Rule
"In adapting their practices to the DOL's new fiduciary rule, financial advisers need to focus on the fact that fiduciary liability is generally based on a fiduciary's imprudent conduct in developing their investment recommendations, not the actual performance of the actual investments and strategies. It is reasonable to assume that the courts will continue to rely on the Restatement of Trusts and the Prudent Investor Rule in interpreting imprudent conduct under the DOL's new fiduciary rule."
The Prudent Investment Adviser Rules

State Farm, Citing DOL Fiduciary Rule, Cuts Agents from Mutual Fund and Variable Annuity Sales
"Beginning in April 2017, when the [DOL] rule comes into effect, State Farm will only sell and service mutual funds, variable products and tax-qualified bank deposit products through a self-directed customer call center, according to spokeswoman Rachael Risinger.... In August, the Wall Street Journal reported that the brokerage Edward Jones will curtail mutual fund access for retirement savers in commission accounts and cut investment minimums to comply with the rule."

Growing Number of Employees Rank a Company Stock Plan as Their Top Workplace Benefit
"16 percent of employees say company stock is their most important benefit, up from 10 percent in 2014.... Almost two-thirds of employees (63 percent) said that participating in their company stock plan gives them a sense of ownership of the company, and 53 percent said it makes them feel more loyal to their employer. Nearly half of employees (49 percent) said that a company stock plan was an important factor when considering a new job."

2016 Lifetime Income Survey (PDF)
"58 percent of American adults feel confident they can successfully turn their retirement savings into income after they stop working. Only 35 percent of survey respondents are concerned about running out of money in retirement, despite the fact that Americans are living longer. Today, a couple at age 65 has a 73 percent chance of one of them living to to age 90."

401(k) vs. 403(b): Differences in Investments, Compliance and Administration
"In the past, 403(b) plans were easier to administer for many nonprofits ... While the 403(b) came with less administrative hassle, their more limited investment options often led to higher fees than many 401(k) plans. Today, many 403(b) plans have to follow similar ERISA compliance requirements, without the typical 401(k) benefits. It may make sense to see if switching to a 401(k) is the right move."

Pensionomics 2016: Measuring the Economic Impact of DB Pension Expenditures (PDF)
34 pages. "The economic gains attributed to DB pension expenditures are considerable.... [In] 2014: Nearly $519.7 billion in pension benefits were paid to 24.3 million retired Americans ... Each dollar paid out in pension benefits supported $2.21 in total economic output nationally. Each taxpayer dollar contributed to state and local pensions supported $9.19 in total output nationally."
National Institute on Retirement Security [NIRS]

Drop in Funding Levels of City and County Retirement Systems in Fiscal Year 2015 (PDF)
"For the 99 city and county retirement systems that reported actuarial data for 2015, pension assets grew by 0.4%, or $1.9 billion, from $451.1 billion in 2014 to $453.0 billion in fiscal 2015, while liabilities grew 5.9%, or $35.7 billion, from $600.5 billion in 2014 to $636.2 billion in 2015. These 99 plans saw their aggregate shortfall increase $33.7 billion over fiscal year 2015 from -$149.5 billion to -$183.2 billion."
Wilshire Associates

An Examination of State Pension Fund Performance: 2006-2015
13 pages. "While capital markets largely drove returns for state pensions ... a wide range of 10-year return outcomes [exists] among state pensions, most of which is attributable to implementation (fund/manager selection) rather than differences in asset allocation.... [F]und/manager selection by state pensions, in aggregate, has been accretive to return over the study period. [T]he role of investments in helping solve pension underfunding will largely be determined by the future health of the capital markets, particularly for equity securities."
Cliffwater LLC

Consumer Protection Comparison of the Federal Pension System and the State Insurance System
68 pages. "When an employer de-risks its pension plan by purchasing one or more annuity contracts, consumer protections for affected individuals shift from the pension system to the insurance system. From a consumer-protection perspective, how does that shift affect the relative levels of protection? ... [T]he two systems employ different methods of protections that have different features and formulas, but both provide strong, time-tested protection of future pension or annuity benefit payments."
National Organization of Life and Health Insurance Guaranty Associations [NOLHGA]


Auto-Portability: Default IRA Boon or Bust?
"Auto-portability is a clever concept. But ... what's to prevent misinformed or fraudulent efforts, especially on account balances under $5,000, that many plan sponsors would prefer to get off their books? Furthermore, one has to wonder by what authority is either side entitled to carry on such a search, and whether there might be some fiduciary concerns -- such as the sharing of confidential social security numbers. And what if the participant is enrolled in a non-401(k) plan where individualized records are recorded differently, or a 401(k) plan that does not offer investment choices to its participants?"

Benefits in General

The Centre Barely Holds: ERISA Preemption After Gobeille v. Liberty Mutual (PDF)
"The multiple opinions generated by [Gobeille] demonstrate the ambiguity of current Supreme Court jurisprudence on ERISA preemption. Perhaps more troubling is the extent to which the differing opinions reach differing conclusions while relying on the same established standards, suggesting that the standards simply cannot provide accurate prescriptive guidance to either lower courts or practitioners."
Stephen Rosenberg of the Wagner Law Group, in Tax Management Compensation Planning Journal

Executive Compensation and Nonqualified Plans

Ninth Circuit Holds SOX 304 Clawback Applies to Executives that are Not at Fault
"The Ninth Circuit recently held that Section 304 of the Sarbanes-Oxley Act allows for a clawback of certain CEO and CFO compensation regardless of whether the clawback was triggered by the personal misconduct of such officers. District courts have reached this conclusion before, but the Ninth Circuit appears to be the first circuit to adopt such a view." [SEC v. Jensen, No. 14-55221 (9th Cir. Aug. 31, 2016)]
Mintz Levin

Legislation Affecting Executive Compensation Likely to Be Reintroduced
"While much of the congressional focus has been on health care this session, executive compensation has not been totally ignored -- it just hasn't received as much media attention. [This article describes] several pending bills not expected to be enacted this year, but likely to be reintroduced in the 2017-2018 legislative session. Many of the provisions are revenue-raisers likely to remain under discussion regardless of the outcome of the November elections."
Willis Towers Watson

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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