Retirement Plans Newsletter

October 7, 2016

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Webcasts and Conferences

Redefining Plan Success
November 16, 2016 in CA
Western Pension & Benefits Conference - Los Angeles Chapter

Ethics
December 7, 2016 WEBCAST
Conference of Consulting Actuaries

How to Survive an ACA Audit
December 13, 2016 WEBCAST
Lorman Education Services

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[Guidance Overview]

IRS Updates Retirement Plan Correction Program (PDF)
"In addition to incorporating previous guidance ... [1] Sanctions under the Closing Agreement Program (Audit CAP) will no longer be negotiated using a percentage of the maximum payment amount.... [2] Sanctions were also identified specifically for nonamender failures that are discovered during the determination letter process.... [3] A section was added describing 'egregious failures.' ... [4] For anonymous submissions that fail to be resolved, the IRS will no longer refund 50 percent of the applicable VCP fee."
Ascensus

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[Guidance Overview]

PBGC Proposed Rule May Offer DC Plans New Tool for Finding Missing Participants
"This newly-proposed voluntary program for defined contribution plans has certain limitations.... [1] it would only be available to locate missing participants upon plan termination. It would not be available to locate missing participants for ongoing plans.... [2] the program would not be available to find missing participants in connection with a plan correction under EPCRS.... [3] although the program would be available to many types of single-employer and multiemployer defined contribution plans, including abandoned plans, it would not be available to governmental plans and church plans."
Benefits Bryan Cave

Extra-ERISA Contractual Obligation Regarding Pension Plan Is Enforceable
"[A] Merger Agreement that provided that Berkshire would not cause Acme to reduce pension benefits for 12 months, or reduce the employer contributions pursuant to the plan. There was no time limit on the later obligation.... [In] 2014 Berkshire gave Acme an ultimatum that the Plan had to be amended (either to reduce employer contributions or to allow for such changes in the future), or Berskshire would divest itself of Acme. Acme made the change Berkshire requested.... The court noted: '[a]n employer can impose extra-ERISA contractual obligations upon itself, and when it does so, these extra-ERISA obligations are rendered enforceable by contract law.' " [Hunter v. Berkshire Hathaway, Inc., No. 15-10854 (5th Cir. July 11, 2016)]
Begos Brown & Green LLP

The Evolution of Advice: Digital Investment Advisers as Fiduciaries
19 pages. "This White Paper explores the application of fiduciary standards to digital advisers. It concludes that fiduciary standards, such as those incorporated into the Advisers Act, are flexible principles that digital advisers and their nondigital counterparts (traditional advisers) are equally capable of satisfying.... This White Paper also explains that the products and services offered by digital advisers are not unique, but instead are technologically enhanced versions of advisory programs and services that have long been subject to this flexible regulatory framework. Finally, this White Paper discusses the innovative and powerful ways that digital advisers can more effectively serve their clients, including by harnessing the efficiencies of technology and insights from behavioral finance."
Morgan Lewis

Merrill Lynch to End Commission-Based Options for Retirement Savers
"Merrill Lynch will no longer give retirement savers the option of paying a commission for trades, a wholesale exit from the traditional Wall Street sales model in accounts that stand to be affected by new conflict-of-interest rules on retirement accounts.... [W]hen the new rules take effect, investors who want a retirement account at Merrill will need to pay a fee based on a percentage of their assets, instead of having the option of being charged for each transaction made in their account."
The Wall Street Journal; subscription may be required

[Advert.]

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Sponsored by ASPPA

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The System of Employer-Provided Retirement Benefits Is at a Crossroads
"In order for employers to retain control over the very tools that enable them to compete in the race for talent, it is important for employers to consider their own philosophy concerning employee benefits and the types of programs that they desire to offer their workers across their workforce. It is also necessary to assess compliance efforts with any programs that may be mandated by changing laws."
Epstein Becker Green, via Westminster Consulting

Plan Carefully When an Employee Asks for a Phased Retirement
"[1] Have a written agreement. [2] Have the employee tender a retirement notice with a specific date.... [3] Make a clear statement that the employer is relying on the employee's pending retirement and will take steps to find and groom a replacement. [4] Specify the expectations of duties to be performed.... [5] If the employee is going to begin to lose authority and decision making, be clear about this.... [6] Clearly preserve at will employment."
Warner Norcross & Judd LLP

Tea Leaves Offer Clues to Coming Pension Rescue Petitions
"[T]he lower the ratio of active employees to total participants, the more likely a plan would be to file a petition.... Having a ratio that is too low could mean that a plan is susceptible to having its petition rejected for being too financially troubled to avoid insolvency. The Central States plan had an active to total participant ratio of about 16 percent, while the Road Carriers Local 707 Pension Fund, which also had its petition rejected, had a ratio of about 18 percent."
Bloomberg BNA

Wilkes-Barre to Receive Aid for Municipal Pension Plans
"Wilkes-Barre is one recipient of aid in a new round of state payments to municipal pension plans, but the payment is expected to only cushion the expected shortfall in the 2017 budget. Pennsylvania Auditor General Eugene DePasquale this week announced the distribution of $271 million in annual payments to nearly 1,500 pension plans for municipal employees, police and firefighters."
The Citizens' Voice

[Opinion]

Executive Overreach: Replacing 401(k)s and IRAs with 'Obamacare for Retirement'
"Earlier this year, the [DOL] finalized its 'fiduciary rule' dramatically changing how Americans plan for retirement, despite serious concerns from Members of Congress. And recently, the Obama Administration finalized yet another rule -- again, without approval from Congress -- dramatically changing who's in charge of Americans' retirement. Taken together, these two rules could destroy the voluntary system of private-sector retirement plans such as 401(k)s and [IRAs], and replace them with government-run retirement plans."
Committee on Ways and Means, U.S. House of Representatives

[Opinion]

U.S. Chamber of Commerce Comment Letter to DOL on Proposed Regs for Savings Arrangements Established by State Political Subdivisions for Non-Governmental Employees
"The Chamber has on-going concerns about the Final State Rule as well as additional concerns about the Proposed Rule.... [T]he DOL still has not addressed our concerns over ERISA preemption, lack of consumer protections, lack of protection for employers against litigation risk, creating an uneven playing field between the public and private sector and an inadequate economic analysis.... Rather than moving forward, we urge the DOL to delay the Proposed Rule until the experience with state-sponsored plans is fully analyzed."
U.S. Chamber of Commerce

Executive Compensation and Nonqualified Plans

[Guidance Overview]

Looking Ahead to Say-on-Frequency
"There are several exceptions to the 2017 say-on-frequency voting requirement. Smaller reporting companies ... were not required to hold their first say-on-frequency vote until their 2013 meeting, and so the matter will not come up again for them until 2019. In addition, the JOBS Act exempted the new class of emerging growth companies (EGCs) ... from the Dodd Frank say-on-pay, say-on-frequency, and say-on-golden-parachute vote requirements for as long as they remain EGCs."
Morgan Lewis

2016 Non-Qualified Deferred Compensation Plan Survey Results
"Nearly half of plans (48 percent) allow both employee and employer contributions, while 29 percent allow only employee contributions, and 23 percent allow only employer contributions. 71 percent of plans allowing employer contributions make a match, the most common being a fixed match. 42 percent offer participants the opportunity to make 'in-service' distribution elections."
Plan Sponsor Council of America [PSCA]

Preparing Employees for CEO Pay Ratio Disclosures
"Public companies in the U.S. will be required to disclose the ratio of CEO pay to median employee pay in their 2018 proxy statements ... Prudent companies are also considering the potential impact of these disclosures on the workforce, not just shareholders.... [C]ompanies face some important decisions, both regarding the variables in the calculation itself and in how they plan to present this information."
Society for Human Resource Management [SHRM]

Clawbacks: Can a New Statute or Regulation Override an Existing Employment Agreement?
"[A] federal appellate court considered the question of whether a governmental prohibition on making golden parachute payments to terminated employees of a company constitutes a 'taking' of the former employee's property interest, which is prohibited by the Fifth Amendment to the U.S. Constitution.... Piszel sued the U.S. government rather than his former employer. The court found that Mr. Piszel had a 'cognizant Fifth Amendment property interest.' " [Piszel v. U.S., No. 15-5100 (Fed. Cir. Aug. 18, 2016)]
Winston & Strawn LLP

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