Retirement Plans Newsletter

November 22, 2016

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Webcasts and Conferences

DOL Audits of Group Health Plans: Prepare and Respond Effectively
December 7, 2016 WEBCAST
Thomson Reuters / EBIA

Executive Compensation Proxy Season Preview
December 8, 2016 WEBCAST
Willis Towers Watson

Voluntary Fiduciary Correction Program Workshop
December 14, 2016 in CA
Employee Benefits Security Administration [EBSA], U.S. Department of Labor

Group Health Plans Year-End Update
December 15, 2016 WEBCAST
Thomson Reuters / EBIA

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[Guidance Overview]

IRS Publication 4286: SARSEP Checklist (PDF)
Revised Nov. 2016. "Every year it's important to review the requirements for operating your Salary Reduction Simplified Employee Pension (SARSEP) plan. Use this checklist to help you keep your plan in compliance with many important rules. For additional information (including examples) on how to find, fix and avoid each mistake click on [a link in the text of this Checklist].' "
Internal Revenue Service [IRS]

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Learn about IRS top ethics concerns & much more! Join John Griffin, J.D., LL.M., December 1st for a webcast discussion of the ethical issues facing employee benefits practitioners. Register now!


GAO Report on 401(k) Plans: Effects of Eligibility and Vesting Policies on Workers' Retirement Savings
93 pages. "To ensure that current vesting policies appropriately balance plans' needs and interests with the needs of workers to have employment mobility while also saving for retirement, Treasury should evaluate the appropriateness of existing maximum vesting policies for account-based plans, considering today's mobile labor force, and seek legislative action to revise vesting schedules, if deemed necessary.... To help participants better understand eligibility and vesting policies, DOL should develop guidance for plan sponsors that identifies best practices for communicating information about eligibility and vesting policies in a clear manner in summary plan descriptions." [GAO-17-69, published Oct. 21, 2016, publicly released Nov. 21, 2016.]
U.S. Government Accountability Office [GAO]

Qualified Retirement Plan Amendments and IRS Filings (PDF)
"Although it appears that for most plans no such amendments are required in 2016 ... [if] you have made any discretionary amendments, you should take some time to make sure they have been formally adopted by the end of the year. Additionally, some cash balance and hybrid plans may still need to be amended by December 31, 2016, to comply with previously issued IRS guidance regarding market rates of return and other IRS guidance."
Alston & Bird LLP

Preparing for a Partial Plan Termination: Considerations and Consequences
"In a difficult economic environment, partial plan terminations occur more frequently and often without any warning. To avoid administrative problems and potential plan disqualification or penalties, it is important for employers to understand the circumstances that may lead to a partial plan termination and to identify whether a partial plan termination has occurred as soon as practicable.... This article [reviews] the background and guidance issued by the [IRS] on determining whether a partial plan termination has occurred [and identifies] unresolved questions that still remain in this analysis in practice."
Baker Botts LLP

Transitioning Retirement Benefits in a Complex World
"The shift that is under way from traditional DB pension plans to account-based DB plans or a DC-only environment is well established. Nevertheless, many DB sponsors in the Fortune 100 still offer pension plans to new hires, albeit in a hybrid form, and the majority of companies with pensions are continuing to accrue benefits for many workers, administer the plans, and manage plan assets and obligations. The transition to account-balance plans is presenting new opportunities and challenges for both employers and employees in terms of workforce/risk management and retirement security."
Willis Towers Watson

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Clear, concise explanations, numerous examples, and comprehensive coverage of the issues involved in advising clients about investing in traditional IRAs, Roth IRAs, SIMPLE IRAs, SEP IRAs, and Coverdell ESAs.


GAO: Outdated 401(k) Rules Are Shortchanging Americans
"Bureau of Labor Statistics data show the median tenure at 4.1 years for private sector workers in 2014, and federal data found that for workers between the ages of 18 and 48 the average number of jobs held was more than 11. 'Being ineligible to save in a new employer's plan for 1 year on 11 occasions, especially occurring more frequently early in a worker's career, may result in $411,439 less retirement savings ($111,454 in 2016 dollars),' according to the GAO's projections."
Bloomberg

FMC Corp. Sued Over 401(k) Stake in Sequoia Fund, Valeant
"In a proposed class action filed Nov. 18, FMC workers claim the Sequoia Fund's increasingly heavy concentration in Valeant stock should have caused plan fiduciaries to rethink the investment, which was the third-largest holding in FMC's 3,420-person retirement plan."
Bloomberg BNA

American Airlines' $8.8M ERISA Deal Not Enough for Judge
"The lawsuit claimed that American Airlines shortchanged workers by allowing more than $1 billion in 401(k) assets to be invested in a credit union fund that failed to outpace inflation, rather than a stable value fund that would provide a higher, guaranteed return. In refusing to bless the proposed deal, the judge said Nov. 18 that $8.8 million may be 'inadequate,' because workers may have lost out on as much as $88 million in expected returns over the past six years." [Ortiz v. American Airlines, Inc., No. 16-151-A, (N.D. Tex. Nov. 18, 2016)]
Bloomberg BNA

A Prudent Process: The Key to Demonstrating Fiduciary Compliance (PDF)
"Establishing and implementing a prudent process may be the most valuable tool fiduciaries have as they carry out their duties under ERISA. The process should be monitored and reviewed on an ongoing basis, just like the underlying recommendations that are being made, to confirm that the process is effectively capturing the information required to support the fiduciary's actions. It's important to document the review process and any recommendations or decisions that are made and the reasons for them, including recommendations to refrain from acting."
Nationwide Retirement Institute

[Advert.]

Phased Retirement Programs: Exploring the Issues

Sponsored by Lorman and BenefitsLink

Dec. 5 webinar. Learn practical and legal advice for implementing a phased retirement program. Identify the situations in which phased retirement may be beneficial, structure arrangements in such a way as to avoid the practical and legal pitfalls.


Influencers Driving Today's Fiduciary Best Practices
"In today's market, where volatility is a 'new normal,' it becomes critical for fiduciaries to frame investment due diligence and portfolio performance around the investor's objectives rather than a hypothetical benchmark.... As the DOL encourages more level, transparent fee structures, fiduciaries must shift their focus to offering a service rather than selling an investment product.... Recent 401(k) litigation demonstrates that no fiduciary decision is insignificant."
Manning & Napier

Defined Contribution Plan Committees Face Tough Choices
"The majority of the members of plan committees come from the human resources department, and these individuals may not be equipped to assess investments ... In addition, they are only offered limited resources when it comes to selecting funds. For these reasons, ... more plan committees will turn to outside resources such as advisers and [ERISA] attorneys."
PLANSPONSOR

Tax Incentives for ESOPs
"Tax incentives enacted by Congress to promote increased use of employee stock ownership plans include advantages for the sponsoring company and the participating employees. This article reviews some key incentives."
Jackson Lewis P.C.

The Impact on Pension Plans of the Post-Election Increase in Bond Yields
"[S]ince the U.S. election, the 10-year Treasury yield has risen by fifty basis points (.50%).... The increase in yields means that corporate pension plans will have seen their funding level improve.... [T]he closer to full funding they get, the less need there is to chase returns, and the more fixed income becomes attractive as a way to match asset behavior to liabilities. So while the reaction of many investors to the prospect of a significant increase in government borrowing ... has been to sell existing Treasury holdings, corporate pension plans are likely to find themselves on the other side of that trade."
Russell Investments

How Does Pension Eligibility Affect Labor Supply in Couples?
"[B]oth partners leave the labor force as they become eligible for a pension. The effect of their own pension eligibility is 12 percentage points for women and 28 percentage points for men. Women also reduce their labor force participation by 2 to 3 percentage points as their partner reaches pension eligibility. For men, the effect of their partner's eligibility is smaller and not significantly different from zero."
Rafael Lalive and Pierpaolo Parrotta, via SSRN

[Opinion]

Comments by Pension Rights Center to PBGC on Proposed Rule for Missing Participants in Defined Contribution Plans (PDF)
"We urge the PBGC to reconsider its decision not to use its authority under the Pension Protection Act to require employers who do not transfer accounts to the PBGC to report the names of missing participants and location of their accounts for inclusion in the searchable database.... We also urge the PBGC to incorporate specific diligent search criteria into the missing participant regulations for defined contribution plans.... We recommend that the PBGC form for transferring a missing participant account include a question asking whether the employer has verified that the amount transferred is correct.... Additionally, we recommend that the PBGC include several questions on the Annual Reporting Form 5500 for terminating defined contribution plans."
Pension Rights Center

[Opinion]

ERIC Submits Comments on PBGC Missing Participants Rule
"[1] Support expansion of the program to all defined contribution plans and not limited to only terminated defined contribution plans; [2] Increase the fee waiver threshold from $250 to $1,000, or lower the $35 fee for balances between $251-$1,000 to encourage utilization of the program; [3] Maintain the voluntariness of the program; and [4] Encourage exploration of electronic rollovers to qualified individual participant accounts."
The ERISA Industry Committee [ERIC]

Benefits in General

[Guidance Overview]

IRS Changing Employee Plans and Exempt Organization Audit Procedures
"The IRS Tax Exempt and Government Entities Division (TEGE) [has] issued updated internal guidance governing the procedures its agents will use to gather information for employee benefit plan and exempt organization examinations beginning April 1, 2017.... The Guidance also calls for: [1] Taxpayers to be involved in the [information document request (IDR)] process; [2] Examiners to discuss the issue being examined and the information needed with the taxpayer prior to issuing an IDR; [3] Examiners to ensure that the IDR clearly states the issue and the relevant information they are requesting."
Solutions Law Press

Benefits Litigation Update, Fall 2016 (PDF)
Articles include: [1] The Goldilocks Paradox for defined contribution plans: how will plan sponsors determine whether investment alternatives offered are 'just right'? [2] ERISA class action certified challenging behavioral health TPA's administration of mental health benefits; [3] Defining the scope of ERISA preemption; [4] Plan fiduciaries continue to be scrutinized; [5] Employers offering their own proprietary funds under their 401(k) plans at heightened risk for litigation; and [6] EEOC loses another wellness plan voluntariness challenge but prevails on its ADA safe harbor argument.
Epstein Becker Green; The ERISA Industry Committee [ERIC]

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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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