Retirement Plans Newsletter

October 18, 2016

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[Official Guidance]

Social Security Announces 0.3 Percent Benefit Increase for 2017
"Monthly Social Security and Supplemental Security Income (SSI) benefits for more than 65 million Americans will increase 0.3 percent in 2017.... [T]he maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $127,200 from $118,500. Of the estimated 173 million workers who will pay Social Security taxes in 2017, about 12 million will pay more because of the increase in the taxable maximum."
U.S. Social Security Administration [SSA]

[Advert.]

DST Retirement Solutions - Rollover Solutions

Sponsored by DST Retirement Solutions

The DOL fiduciary rule is compelling advisors to carefully review their practices around giving advice and the handling of rollovers. Advisors are challenged with how to offer choice, education versus advice, and provide a better client experience.


[Guidance Overview]

DB to DC Plan Transitions: Thinking Long Term
"Depending on the plan changes made as part of the DB to DC transition, a plan may over time experience disproportionate coverage of highly and nonhighly compensated employees and future retirement benefits.... These proposed regulations provide needed flexibility in nondiscrimination testing so that the plan sponsor's DB to DC transition is not disrupted, and therefore preserves the retirement benefits promised to those grandfathered participants when the transition began."
Findley Davies

[Guidance Overview]

PBGC Proposed Regs Would Expand Its Missing Participant Program
"The PBGC proposes to completely redesign its existing missing participants program for single-employer DB plans and to adopt three new missing participants programs. The three new programs would be for multiemployer DB plans covered by Title IV, for professional service employer DB plans not covered by Title IV, and for most DC plans. All four programs would follow the same basic design."
Wolters Kluwer Law & Business

[Guidance Overview]

Clarification on SEC's Guidance for Company Stock Purchases Through a 401(k) Plan Brokerage Window
"[T]he guidance the SEC published in new C&DI, Question 139.33, was consistent with the SEC staff's previously announced (and long-held) position on employee stock purchase plans ... [T]he SEC was, in fact, providing a very helpful expansion of its prior position on open market employee stock purchase plans.... Many public companies make available a company stock fund into which Plan participants may direct all or a portion of their contributions.... Until the SEC's recent guidance, it was not clear whether those companies had to file a Form S-8 for shares of company stock purchased through the brokerage window."
Winston & Strawn LLP

2017: New Year, New Retirement Requirements for California Employers
"The [California Secure Choice Retirement Savings Program] is slated to take effect January 1, 2017, and will include one or more payroll deduction IRA arrangements, assuming California can act quickly enough to satisfy certain preconditions.... Other than imposing another deduction requirement on certain employers ... the law does not appear to place too much of a burden on employers ... [The authors] expect that January 1, 2017 is an overly optimistic goal and would not be surprised to see that date slip."
Paul Hastings LLP

[Advert.]

SPARK Forum - November 6-8, 2016 -- The Breakers, Palm Beach, FL

Sponsored by SPARK

Join us at the retirement services industry's leading event for top marketing, sales, administration and record keeping professionals. Comprehensive agenda to meet the needs of 401(k) Plan Providers, Financial Advisors and Third Party Administrators.


Millennials' Retirement Savings in Mutual Funds Reflect Role of Employer-Sponsored Plans as Gateway to Fund Investing
"[A]mong mutual fund-owning households, more households headed by Millennials (45 percent) than Baby Boom households (34 percent) held their funds only through employer-sponsored retirement plans.... [A]mong mutual fund-owning households that purchased their first mutual fund in 2010 or later, 71 percent purchased the fund through a workplace retirement plan, compared with 56 percent of those that made their first purchase before 1990."
Investment Company Institute [ICI]

Second Wells Fargo Stock Drop Suit Plows Some New Ground(s)
"While the most recent suit covers much of the same ground as the earlier litigation ... it includes as a defendant GreatBanc Trust Company, who was appointed independent fiduciary to act as a named fiduciary for limited purposes in connection with the ESOP provisions of the plan in 2012.... The suit also highlights the role of defendant Hope A. Hardison, Senior Executive VP, Chief Administrative Officer and HR Director, who 'ultimately oversaw both the Plan and the termination of thousands of employees as a direct result of fraud surrounding the Company's primary business strategy,' according to the complaint."
National Association of Plan Advisors [NAPA]

How Proposed Caps Could Impact IRA and 401(k) Accounts
"According to a 2014 [GAO] report ... there are almost 9,000 Americans who have accumulated more than $5 million in an IRA. However, the proposed cap would be a soft cap, allowing more than $3.4 million in an IRA or 401(k), as long as the amounts that exceed the cap are earnings, not contributions. Another interesting finding in the Government Accountability Office report was the estimate that there are 1,000 Americans with more than $10 million dollars saved in an IRA."
InvestmentNews

Roth 401(k), Pre-Tax 401(k), or Both?
"If you accept that state and federal tax rates could vary wildly over the next 30 to 40 years, that the government will keep its Roth promise, and that the best strategy is to contribute to both accounts, then the final question to answer is how much participants should contribute to each account."
Lawton Retirement Plan Consultants

Teacher Pension Costs Are Crowding Out Education Spending
"Almost every state increased retirement benefits for teachers in the booming 1990s ... By 2003, the funding for teacher pension plans overall was short by $235 billion; and by 2009, pension debt had more than doubled, to $584 billion.... [P]ension debt per pupil ... increased by an inflation-adjusted $9,588 between 2000 and 2013.... Retirement costs per pupil are already approaching 10% of all education expenditures."
Manhattan Institute for Policy Research

[Opinion]

fi360's Blaine Aikin: DOL's Fiduciary Rule 'Takes Advisors to a Fork in the Road'
"[T]he Rule is serving as a catalyst for needed change in the overall field of professional investment advice, not just in the retirement space.... We have great practitioners in every segment and business model within financial services, but we have been operating in a broken system when it comes to advice. We have been trying to build our profession on an unstable foundation when we have two different standards of conduct for practitioners. A strong foundation for professional advice requires a consistent culture of fiduciary responsibility and enforceable adherence to the fiduciary duties of loyalty and care."
Fiduciary News

Benefits in General

[Official Guidance]

Text of IRS Disaster Relief IR-2016-135, Expanding Relief for Victims of Hurricane Matthew; Parts of Four States Eligible
"Hurricane Matthew victims ... have until March 15, 2017, to file certain individual and business tax returns and make certain tax payments ... This includes an additional filing extension for those with valid extensions that run out at midnight tonight, Oct. 17.... Currently, the following areas are eligible for relief:

  • North Carolina: Beaufort, Bertie, Bladen, Brunswick, Camden, Carteret, Chowan, Columbus, Craven, Cumberland, Currituck, Dare, Duplin, Edgecombe, Gates, Greene, Harnett, Hoke, Hyde, Johnston, Jones, Lenoir, Martin, Nash, New Hanover, Onslow, Pamlico, Pasquotank, Pender, Perquimans, Pitt, Robeson, Sampson, Tyrrell, Washington, Wayne and Wilson counties.
  • South Carolina: Beaufort, Berkeley, Charleston, Colleton, Darlington, Dillon, Dorchester, Florence, Georgetown, Horry, Jasper, Marion, Orangeburg and Williamsburg counties.
  • Georgia: Bryan, Camden, Chatham, Glynn, Liberty and McIntosh counties.
  • Florida: Brevard, Duval, Flagler, Indian River, Nassau, St. Johns, St. Lucie and Volusia counties."

Internal Revenue Service [IRS]

[Official Guidance]

Text of IRS Disaster Relief SC-2016-21: Victims of Hurricane Matthew in South Carolina
"Updated 10/17/16 to include Beaufort, Berkeley, Charleston, Colleton, Darlington, Dillon, Dorchester, Florence, Georgetown, Horry, Jasper and Williamsburg counties.... This relief ... includes the filing of Form 5500 series returns, in the manner described in section 8 of Rev. Proc. 2007-56."
Internal Revenue Service [IRS]

Executive Compensation and Nonqualified Plans

[Guidance Overview]

Clawbacks, Clawbacks Everywhere Nor Any Moment to Think
"[In] 2015, public companies filed a total of 737 restatement disclosures. (The quantity of restatement and non-reliance disclosures had peaked in 2006 with 1851 disclosures.) Does that mean 737 companies would have been required to claw back compensation in 2015? Fortunately not."
Winston & Strawn LLP

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David Rhett Baker, J.D., Editor and Publisher  davebaker@benefitslink.com
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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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