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[Guidance Overview]

IRS Explanation, Worksheet (Alert Guidelines), and Deficiency Checksheet: Minimum Participation Standards (PDF)
11 pages; revised April 2016. This single PDF document contains three items: Publication 6388, Form 5622, and Form 6040. Excerpt: "The purpose of the Worksheet Number 1 (Form 5622) and this explanation is to identify any major problems an employee benefit plan might have in satisfying the minimum participation standards of Internal Revenue Code section 410(a).... The worksheet concerns plans to which Code section 410 applies, except those mentioned in section 410(c) (such as governmental plans) and plans that cover participants who are employed in maritime or seasonal industries." [Cycle A Submission Period, 2/1/2016 through 1/31/2017]
Internal Revenue Service [IRS]


Free Webcast with Best-Selling Author – Using Your Brain to Win!

Sponsored by PenChecks Trust

PenChecks Trust is proud to sponsor a free ASPPA webcast by best-selling business author, Holly Green – Using Your Brain to Win! An experienced business leader and behavioral scientist, Holly helps companies achieve lasting excellence and focus.

[Guidance Overview]

IRS Overview of Rules for Hardship Distributions
"Although not required, a retirement plan may allow participants to receive hardship distributions. A distribution from a participant's elective deferral account can only be made if the distribution is both: [1] Due to an immediate and heavy financial need. [2] Limited to the amount necessary to satisfy that financial need."
Internal Revenue Service [IRS]

[Guidance Overview]

IRS Overview of Methods for Correcting Common Hardship Distribution Errors
"If your plan terms require an employee to be suspended from contributing to the plan making the distribution and all other employer plans for at least six months after receiving a hardship distribution, then your plan must suspend salary deferrals. If your plan fails to do this, here are some correction options[.]"
Internal Revenue Service [IRS]

Seventh Circuit Rejects Applicability of Dudenhoeffer 'Special Circumstances' Pleading Requirement to Privately Held Stock
"The Court found the lack of outside funding in an [ESOP] transaction, plus a stock drop following the transaction, sufficient to support an inference that the trustee breached its fiduciary duty. To state a claim against a trustee for engaging in a Section 406 prohibited transaction, the Court held that a plaintiff does not have to plead facts negating the Section 408 exemptions." [Allen v. GreatBanc Trust Co., No. 15-3569 (7th Cir. Aug. 25, 2016)]
Holland & Knight

The Path Forward: Defined Contribution Plans Can Achieve More (PDF)
"Use both auto enrollment and auto escalation to maximize participant preparedness for retirement.... Analyze your employee demographics and determine the appropriate baseline enrollment rate and escalation cap for your plan.... Evaluate whether your investment strategies are effectively managing various risks that are critical when investing for retirement.... Consider providing a menu option to address inflation sensitivity.... Create a menu of options to address decumulation needs that includes three types of investments: a target date fund series, access to an annuity option and access to customizable systematic withdrawal."
Northern Trust


Celebrate ASPPA's Golden Anniversary!

Sponsored by ASPPA

This October the nation's retirement industry elite will converge in our nation's capital to celebrate ASPPA's Golden Anniversary with insights from industry insiders, regulators, pundits and the nation's leading voices. Join us.

DC Plan Investment Fees Fall 4 Basis Points in 2015
"Defined contribution plan investment fees continue to fall, reaching 42 basis points in 2015 vs. 46 basis points in 2014 ... Fifty percent of DC plans made changes in one or more investments for lower-cost share classes in 2014, while 29% said they did so in 2015 ... When sponsors were asked to name the most important item to address this year, fees placed first among 11 categories[.]"
Pensions & Investments

Point to Ponder: A Reverse BICE Cause of Action?
"Is it possible that financial advisers should also consider the possibility of a reverse BICE action against them as a result of advising a customer to stay in their 401(k) plan? Given the numerous legal actions against 401(k) plans and the adverse decisions and settlements against such plans, a strong argument can be made that there are a number of plans that are not in the best interests of the plan's participants, increasing the possibility of unnecessary financial losses."
The Prudent Investment Adviser Rules

Interesting Angles on the DOL's Fiduciary Rule, Part 20
"[T]he Best Interest Standard of Care has three parts: The prudent man rule; a requirement for individualization; and a duty of loyalty. Notice that none of the three parts requires that the 'best' investment be recommended."

Accelerating Growth: The DOL Conflict of Interest Rule and its Impact on the ETF Industry (PDF)
16 pages. "[T]he DOL Rule will potentially create even greater growth in the ETF industry due to shifts in advisory strategy to move more expensive active investments to less expensive passive investments to meet the new standard of fiduciary responsibility. The DOL Rule also has the potential to change the landscape of ETF products."
BNY Mellon

Opponents Take On the DOL in a Topeka Court
"As in two other lawsuits, Market Synergy claims the DOL has no authority to enact the rule. But the company, based in Topeka, is taking a more nuanced stand than the other plaintiffs. The Kansas claim focuses solely on the late change moving fixed indexed annuities out of Prohibited Transaction Exemption 84-24 to the new Best Interest Contract Exemption. The BIC is seen as more costly and restrictive."

New Fiduciary Registry Will Promote Advisers Who Adhere to Strictest Guidelines
"A new fiduciary registry aims to counteract perceived shortcomings in the SEC and the CFP Board's fiduciary requirements by identifying the strictest fiduciary advisers nationwide.... [T]he registry will promote advisers who observe its 12 best practices.... The SEC declined to comment on the institute's new registry. The CFP Board's spokesman Dan Drummond says the board is 'evaluating' the list."
Institute for the Fiduciary Standard

Assessing Compensation Reasonableness of Retirement Investment Advisers (PDF)
12 pages. "This paper is intended to inform and to limit the damage to advisers who perform at a high level for reasonable compensation. Supporting this initiative to limit the damage to good advisers, is the unanimous 2010 Supreme Court decision that stipulates that reasonable compensation must be based on factors of value described in the Gartenberg Standard.... The Court warned about the use of benchmarks to comp are advisers, limiting such tools to 'arm's length benchmarks' that include only those arrangements derived from arm's length bargaining. The Court ordered that even 'arm's length benchmarks' were unnecessary and only ancillary to the other Gartenberg factors."

Multiemployer Plan Application for Benefit Suspension: New York State Teamsters Conference Pension and Retirement Fund
"The New York State Teamsters Conference Pension and Retirement Fund application proposing benefit suspensions can be found [at the link]. The application is organized by the items specified in Revenue Procedure 2016-27."
U.S. Department of the Treasury

From Assets to Income: A Goals-Based Approach to Retirement Spending (PDF)
24 pages. "For retirees who hold the majority of their assets in tax-deferred accounts, assets can be turned into income by setting up an automatic withdrawal plan from their current holdings or purchasing an investment that is specifically designed to provide regular distributions. For other retirees, where taxable assets are a meaningful portion of their portfolio, working with an advisor to develop a unique goals-based strategy can add significant value. Regardless of the means ... the combination of complexity and consequences underscores the need for, and the value of, skillful guidance."

Testimony: Comparing CBO's Long-Term Projections with Those of the Social Security Trustees
"For some time, both CBO and the Social Security Trustees have projected that, if full benefits were paid under the formulas specified in current law, the program's spending would rise significantly during the coming decades. In contrast, total revenues for the program are anticipated to grow more slowly than outlays: The faster growth projected for total benefits than for total revenues means that a shortfall in the program's finances is expected to continue. Although both CBO and the Trustees project such a shortfall, they differ in their assessment of its magnitude. This testimony describes that difference and the major factors that contribute to it."
Congressional Budget Office [CBO]


Lifetime Income Language Should Be Voluntary, Not Required
"While [ERIC is] grateful that the Chairman's mark includes provisions to expand automatic enrollment, [ERIC is] extremely concerned that the mark includes a mandate to include lifetime income language on retirement plan statements, which will only drive up costs to administer a plan and lead to confusion among participants."
The ERISA Industry Committee [ERIC]


Holy Smokes! The 401(k) Form 5500 May Become Useful Soon
"When 401k market data is not readily accessible, it's more difficult for 401k fiduciaries to evaluate the reasonableness of plan fees, making excessive fees -- and fiduciary liability -- more likely. Further, any additional fees necessary to maintain a second set of 401k fee records do not offer value to 401k participants, they just lower returns. Fortunately, the government agencies responsible for the Form 5500 ... know the Form 5500 is a problem and want to do something about it."
Employee Fiduciary

Benefits in General

[Official Guidance]

DOL Announces Two-Month Extension for Public Comments on Proposed Form 5500 Revisions
"The [DOL], IRS and PBGC decided to extend the public comment period on the proposed forms revisions and regulatory amendments from the original Oct. 4, 2016 deadline to the new Dec. 5, 2016 deadline. The result will be a total of almost five months for interested persons to prepare and submit comments. This step is intended to facilitate robust and thoughtful public input on the proposals while respecting the need to keep the rulemaking aspects of the project moving forward and on pace with procurement and system development objectives to recompete the contract acquisition plan."
Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL]

Text of Ninth Circuit Denial of Rehearing of Benefit Claim Decision Shifting Burden of Proof to Plan Sponsor (PDF)
Excerpt, from the dissenting judges: "A party may petition for rehearing en banc when 'the panel decision conflicts with a decision of the United States Supreme Court or of the court to which the petition is addressed ... and consideration by the full court is therefore necessary to secure and maintain uniformity of the court's decisions.' ... In this case, the majority ignores United States Supreme Court precedent and our own [ERISA] precedent ... In Metropolitan Life Insurance Co. v. Glenn, the Supreme Court applied Firestone's deferential standard, even where the plan administrator had a conflict of interest arising from her dual role of both evaluating and paying benefits claims.... The Court refused to create special burden-of-proof rules, or other special procedural or evidentiary rules, as an exception to Firestone deference." [Estate of Barton v. ADT Security Serv. Pension Plan, No. 13-56379 (9th Cir. rehearing en banc denied Sept. 20, 2016)]
U.S. Court of Appeals for the Ninth Circuit

Press Releases

DOL Seeks Independent Fiduciary for Terminated Homestead Physicians P.A. 401(k) Plan in Florida
Employee Benefits Security Administration [EBSA], U.S. Department of Labor

DOL Sues Bridgeport Health Care Center Inc., Executive for Diverting Nursing Home Retirement Plan Assets Improperly
Employee Benefits Security Administration [EBSA], U.S. Department of Labor

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David Rhett Baker, J.D., Editor and Publisher
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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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