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[Guidance Overview]
Text of IRS Publication 794: Favorable Determination Letter (PDF)
4 pages; revised Nov. 2016. "This publication explains the significance of a favorable determination letter, points out some features that may affect the qualified status of an employee retirement plan and nullify the determination letter without specific notice from us, and provides general information on the reporting requirements for the plan."
Internal Revenue Service [IRS]
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Fee Allocation: Which Methodology is Best for Your Plan?
"Once it has been determined that the fees in the plan are reasonable, the next issue plan sponsors must tackle is how to allocate those fees. In most cases, the participants ... share the majority, if not all, of the plan fees. An issue over which plan sponsors are showing greater concern is whether these participant fees should be calculated based on a percentage of assets (and allocated pro rata) or whether all participants should be assessed the same flat dollar fee (i.e., per capita)."
Cammack Retirement Group
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Legislation, DOL Rule Could Boost Multiple Employer Plans
"Federal legislation that has a good chance of passing by year-end, together with the [DOL's] new fiduciary rule ... will likely encourage more retirement plan sponsors to go after this business.... [S]ome may have one employer who serves as the lead sponsor, serving as plan trustee and contracting with service providers, while in others the participating employers band together to jointly sponsor a MEP."
InvestmentNews
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Survey Finds Major Differences in How Male and Female Millennials View Retirement
"When asked which concerns them more -- being healthy enough to enjoy retirement or having enough money to enjoy retirement -- 54 percent of Millennial men and just 30 percent of Millennial women surveyed say being healthy is the greater concern. Forty-six percent of men and 70 percent of women, the overwhelming majority, say having enough money is the greater concern."
Charles Schwab
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A Concerned Billionaire Develops a Proposal for Enhancing Retirement Security
"[According to Blackstone president Hamilton E. James,] 401(k) plans are too easily tapped into and even when they are left alone, their returns over the long term suffer because of poor performance and steep fees charged by fund managers.... Mr. James and [New School economist Theresa Ghilarducci] propose that workers and employers be compelled to contribute to a so-called guaranteed retirement account, or G.R.A., which would be independently managed by an investment firm or pension fund manager. Everyone would be required to contribute, with existing retirement plans rolled into the new account. Employers would also have to participate."
The New York Times; subscription may be required
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[Advert.]
The Advisor's Guide to Qualified Plans
The Advisor's Guide to Qualified Plans enables you to handle all aspects of qualified plans and provide the perfect solution for each client – on a case-by-case basis, without a one-size fits all cookie cutter approach. Print and eBook editions available.
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Deferring Commencement of Social Security Benefits Is OK, Deferring Retirement Is Better -- Part 2
"[A recent study concludes] that the financial benefits of continuing to work an additional five years is much lower than the 40% figure [this author] previously developed.... In their analysis, the [study's] authors assume that the Earnings Test is a 'pure tax on benefits', i.e., they ignore the increase in future benefits that results. We respectfully disagree with the reasonableness of this assumption and, as a result, find the author's conclusion misleading."
Ken Steiner, FSA Retired
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Why Socially Responsible Investing Is Now Important for Your 401(k)
"Recently Morningstar ... introduced Sustainability Ratings to gauge an investment's adherence to [socially responsible investment (SRI)] principles.... A recent U.S. Trust survey found SRI factors are important to 93% of millennials when making an investment decision. Your 401k plan can have greater value to your employees if you begin sharing Morningstar's Sustainability Ratings for your 401k investment options."
Lawton Retirement Plan Consultants
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New Developments in Social Investing by Public Pensions
"Public pension funds continue to engage in social investing, most recently divesting from Iran and fossil fuels. However, social investing is often not effective, as other investors step in to buy divested stocks. Social investing can also produce lower investment returns, conflict with the views of beneficiaries and taxpayers, and interfere with federal policy. In short, public pension funds should not engage in social investing."
Center for Retirement Research at Boston College
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Understanding Fiduciary Services: Does Outsourcing Work for You? (PDF)
"If a fiduciary is outsourced it is still the responsibility of the internal fiduciaries to monitor the services being provided. This includes monitoring the third party fiduciary's performance, reviewing reports provided, confirming fees being charged, and periodic benchmarking of those fees. The act of hiring a third party fiduciary in and of itself is a fiduciary function."
Plan Sponsor Council of America [PSCA]
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Edward Jones Hit with Second ERISA Lawsuit Over 401(k) Fees
"Edward Jones selected investments for its employees' retirement plan with higher administrative fees than available alternatives and included a money-market fund that consistently had negative returns for every year it was in the plan, the complaint alleged. It also selected and maintained an unreasonable number of high-risk investment options to the detriment of participants, the complaint said." [Schultz v. Edward D. Jones & Co. L.P., No. 16-1762 (E.D. Mo. complaint filed Nov. 11, 2016)]
Bloomberg BNA
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Trump Victory Means More Uncertainty for DOL Fiduciary Guidance (PDF)
"The most immediate action that President-elect Trump could take would be to issue an executive order stating that the guidance would not be enforced under new DOL leadership.... Complicating the picture for financial organizations is the fact that many have already taken steps to adapt to the new DOL rules. Furthermore, it is unclear if or when the [SEC] could beef up fiduciary requirements of its own in the future."
Ascensus
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The 2016 Election and the Future of the DOL Fiduciary Rule
"What do we know about President-elect Trump's plans for the Rule? ... Could the DOL revoke the Rule? ... Could the DOL revise the Rule? ... What could financial services firms do if the DOL does not act to revoke or revise the Rule? ... Could the DOL delay the compliance date of the Rule? ... What might happen to existing cases challenging the Rule? ... Could Congress take action in the event the Trump Administration does not? ... How do these options impact potential private litigation?"
Morgan Lewis
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The Changing Fiduciary Duty Landscape in a Trump Presidency
"Following on the heels of the issuance of a final [DOL] fiduciary rule is the pending effectiveness of new fiduciary standards for municipal advisors, and the expected release of a proposed uniform fiduciary standard for investment advisers and broker-dealers by the [SEC]. The election ... creates uncertainty about the current path, but also increases the possibility of change in respect of one or more of [these] initiatives ... Financial institutions will need to again consider the impact of developments on their current business practices."
Shearman & Sterling LLP
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SEC Chair Mary Jo White Announces Departure Plans
"SEC Chair Mary Jo White, after nearly four years as the agency's head, [on Nov. 14] announced that she intends to leave at the end of the Obama Administration. Under Chair White's leadership, the Commission strengthened protections for investors and the markets through transformative rulemakings that addressed major issues highlighted by the financial crisis.... Chair White, who became the 31st Chair of the SEC in April 2013, will be one of the SEC's longest serving Chairs."
U.S. Securities and Exchange Commission [SEC]
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Benefits in General
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Handling a DOL Audit with Ease (PDF)
"Traditionally, DOL audits of employee benefit plans have focused primarily on retirement plans, such as 401(k) plans. However, now that the DOL has started enforcing compliance with the [ACA], health plan audits are on the rise. Depending on the complexity of your plan design, availability of documents, degree of cooperation between the DOL and your plan administrators, and the number of potential violations, an audit can take anywhere from several weeks to over a year."
Cowden Associates, Inc.
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Employee Benefit Issues to Keep You Awake at Night
"Does your employer have ERISA fiduciary insurance? ... Do you know the amount of fees paid by your 401(k) plan for 2015? Do you know both the fees in an absolute dollar amount and as a percent of assets? ... Does your 401(k) plan have an investment policy? ... What standard do you impose upon your vendors? ... Is your investment advisor a fiduciary? ... Do you have complete, historic retirement plan records? ... Are your temporary/staffing workers, independent contractors, and leased employees your employees for the [ACA] (ACA) purposes?"
Jackson Lewis P.C.
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Executive Compensation and Nonqualified Plans
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Apple Must Include Shareholder Proposal on Executive Compensation in Proxy
"The SEC found that: [1] The proposal focuses on senior executive compensation, so that the company could not omit the proposal from its proxy materials in reliance on rule 14a-8(i)(7). [2] The proposal was not so inherently vague or indefinite that neither the shareholders voting on the proposal, nor the company in implementing the proposal, would be able to determine with any reasonable certainty exactly what actions or measures the proposal requires [rule 14a-8(i)(3)]. [3] The company did not lack the power or authority to implement the proposal [rule 14a-8(i)(6)].... [T]his no-action letter is a worrisome development for next year."
Winston & Strawn LLP
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Examining the Impact of the 2016 U.S. Elections on Executive Compensation
"[If] the Dodd-Frank Act were to be fully repealed, the currently effective say-on-pay, say-when-on-pay, and say-on-golden-parachute requirements would be repealed along with the Compensation Committee independence and Chairman/CEO structure proxy disclosure rules ... All of these rules are well-established at this point, so it would not be surprising to see these rules remain in place and to see some or all of the Dodd-Frank Act executive compensation rules that are not yet effective be repealed or modified."
Latham & Watkins
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Press Releases
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BenefitsLink.com, Inc.
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David Rhett Baker, J.D., Editor and Publisher
Holly Horton, Business Manager
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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