Retirement Plans Newsletter

October 21, 2016

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Assistant Pension Processing Manager
Service Employees International Union
in DC

Cash Balance Plan Administrator or Actuary
Cash Balance Actuaries, LLC
in MN, Telecommute

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GEHA, Inc.
in MO

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National Coordinating Committee for Multiemployer Plans
in DC

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Webcasts and Conferences

Engaging Employees through Benefits Communication
RECORDED
International Foundation of Employee Benefit Plans [IFEBP]

Compensation & Benefits - Employee Stock Purchase Plans: The Introductory Course
November 9, 2016 WEBCAST
Winstead PC

Wellness Communications: A Case Study
November 10, 2016 WEBCAST
International Foundation of Employee Benefit Plans [IFEBP]

The Power of Data - Strengthen & Focus Your Strategies
November 16, 2016 WEBCAST
University Conference Services

Where Do We Go from Here? Employee Benefits in 2017
December 13, 2016 in MA
New England Employee Benefits Council

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[Official Guidance]

Text of PBGC Disaster Relief Announcement 16-15, in Response to Hurricane Matthew in Georgia
"This Disaster Relief Announcement provides relief relating to PBGC deadlines.... The relief generally extends from October 3, 2016 through March 15, 2017. The disaster area consists of Bryan, Camden, Chatham, Glynn, Liberty and McIntosh Counties."
Pension Benefit Guaranty Corporation [PBGC]

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[Guidance Overview]

Interesting Angles on the DOL's Fiduciary Rule, Part 24
"[The DOL] says that it is permissible to pay differential compensation among reasonably designed investment categories, so long as the differences are based on neutral factors.... The key to understanding these concepts is to realize that the 'neutral factors' differential compensation is not a dollar amount. Instead, it is a ratio established, for both the first and each subsequent year, between the different categories of investments."
FredReish.com

[Guidance Overview]

IRS Makes Significant Changes to Plan Correction Guidance
"Many of the changes to EPCRS are conforming changes that reflect the IRS's recent suspension of the determination letter application process for individually designed plans. In addition, penalties and sanctions imposed under EPCRS are being modified and may, in some cases, make correcting plan failures costlier."
Winston & Strawn LLP

[Guidance Overview]

IRS Final Regs Clarify Partial Lump Sum Distribution Rules
"The final regulations provide two approaches to bifurcating a participant's accrued benefit under a plan so that the Internal Revenue Code section 417(e) minimum present value requirements apply only to the lump sum portion: Explicit Bifurcation Rule.... Implicit Bifurcation -- Distribution of a Specified Amount.... Plan sponsors that have previously considered but rejected partial lump sum distributions due to lack of clarity on the present value requirements may want to revisit the design change."
Morgan Lewis

[Guidance Overview]

Reasonableness Prevails: New IRS Procedure Allows Self-Certification for Late Rollovers
"[A] plan administrator or an IRA trustee may not rely on the self-certification ... if the administrator has actual knowledge that the information in the self-certification is not true.... [T]he IRS has not elaborated on what constitutes 'actual knowledge' that the self-certification is not true, or how a plan administrator would obtain or rely on such information. This could require the implementation of a new administrative process or monitoring by plan administrators."
Trucker Huss

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DOL Continues Uphill Battle on Pension Plan Standing
"In its brief to the Eighth Circuit, the department argued that this trend toward denying pension plan participants standing is bad for both participants and the department itself, because the labor secretary will be left as the only entity that can use the courts to challenge pension mismanagement. In the department's view, this will create a 'significant burden for the Secretary, as the only person with standing, to bring suits to monitor and protect the many underfunded defined-benefit pension plans.' On that point, the department noted that nearly 80 percent of single-employer pension plans are underfunded." [Adepipe et al. v. U.S. Bank, N.A., No. 13-2687 (D. Minn. Dec. 29, 2015; on appeal to 8th Cir.)]
Bloomberg BNA

Pension Plan Funded Status Increases Slightly in Q3 Due to Positive Equity Returns (PDF)
"During the third quarter of 2016, the funded status of the model pension plan ... rose by 1 percentage point: from 76 percent to 77 percent. This increase was the result of a 3 percent asset increase and a 2 percent liability increase during the quarter."
Segal Rogerscasey

SOA 2016 Mortality Scale Update Points to Lower Liabilities
"The Society of Actuaries has released updated projection scales for use with the mortality tables it released in 2014 and 2015. The revisions reflect actual 2012 and 2013 mortality data and 2014 estimated mortality data instead of previously assumed projections for those years. The revised data will typically produce lower liability estimates. Plan auditors will require that these revisions be considered in setting assumptions for plan and corporate financial statements."
Xerox HR Services

Verizon Considering Borrowing to Fund Pension
"The company has contributed $750 million to its pension so far this year, more than the $600 million it had previously expected.... More companies are considering adding money to their pensions in light of higher fees being charged by the PBGC ... Congress has boosted the amount in premiums pension sponsors must pay ... Businesses with underfunded plans must pay additional variable rate premiums that further increase the cost of their pensions."
The Wall Street Journal; subscription may be required

Honoring the PBGC Guarantee for Multiemployer Plans Requires Difficult Choices (PDF)
11 pages. "Reform options include premium increases in a variety of structures, resources from outside the system, and alternatives that could increase the stability of ongoing multiemployer plans in an effort to reduce the need for PBGC financial assistance. None of the options are ideal, and they require difficult sacrifices, possibly from parties who had no role in the creation of the problem. But it is clear that if nothing is done, the guarantees promised to the participants in multiemployer plans will not be fully honored."
American Academy of Actuaries

Houston Mayor Announces Plan to Cut Pension Benefits, Issue Bonds
"[The mayor] announced benefit reductions in the three pension funds would reduce total liabilities by $2.5 billion, and the city would also issue $1 billion in pension obligation bonds, $750 million of which would be contributed to the police officers' pension system and $250 million of which would be issued to the municipal employees pension system."
Pensions & Investments

[Opinion]

Are 401(k) Vesting Schedules in Need of an Update?
"Workers' average tenure with an employer has plummeted over recent decades and now stands at 4.2 years ... Yet 401(k) vesting schedules have remained nearly unchanged.... Employers that use the popular six-year graded (or graduated) vesting method ... could move to a three-year cliff vesting approach ... If turnover is high in the first two years of employment, for example, and then levels off, there would be no additional cost to the company for those who leave during this time frame. In addition, three-year vesting may entice those who are contemplating leaving to stay and contribute to the organization at least another year."
Society for Human Resource Management [SHRM]

[Opinion]

How Pensions Provide Retirement Security
"Defined contribution plans, such as 401(k)s, are not designed to provide the same level of retirement security as defined benefit pensions. Originally, 401(k)s were not intended as replacements for pensions, but as supplements to them. The reforms to defined contribution plans in recent years are geared toward making them more like pensions."
National Public Pension Coalition

Benefits in General

How Will the Election Impact Employee Benefits?
"In health care, the top issues employers support are: [1] More health care provider price transparency (96%); [2] Tax-favored status of employer-provided health coverage for employers (87%); [3] Small business health plans ... (85%) ... For other benefits-related topics, the top issues employers support are: [1] Tax-favored status of employer-provided retirement savings for workers (91%); [2] Tax-favored status of employer-provided retirement savings for employers (88%); [3] Tax exclusions for child-care expenses (75%)."
International Foundation of Employee Benefit Plans [IFEBP]

Executive Compensation and Nonqualified Plans

[Guidance Overview]

Nasdaq Clarifies Its Position on Stock Plan Amendments to Allow Greater Than Minimum Tax Withholding
"[T]his year's amendment of the accounting standards for stock based compensation -- ASU 2016-09 -- allows for equity plans to withhold a participant's shares of taxes related it his or her award up to the maximum individual tax rate in the applicable jurisdiction, rather than the just the minimum statutory withholding amount, without triggering liability accounting treatment.... Nasdaq updated its FAQs, which now indicate that an amendment to increase the ability for a plan to go from withholding at a minimum tax rate to a maximum tax rate would not be considered a material amendment."
Winston & Strawn LLP

Senate Considering Tax Change for Options and RSUs in Pre-IPO Companies
"HR 5719 seeks to give employees in privately held companies extra time to pay taxes on the income they recognize at exercise. Instead of paying taxes at the exercise of nonqualified options or at the vesting of stock-settled RSUs, employees would be allowed to elect to defer the resulting income, and thus the taxes on that income, for up to seven years."
myStockOptions.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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