Retirement Plans Newsletter

November 28, 2016 logo logo
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Healthcare Reform and the New Administration
December 6, 2016 in NC
Hill, Chesson & Woody

Voluntary Fiduciary Correction Program Workshop
December 7, 2016 in WA
Employee Benefits Security Administration [EBSA], U.S. Department of Labor

Techniques to Enhance Your 401(k) Plans
January 31, 2017 WEBCAST
Lorman Education Services

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Six Questions Plan Sponsors Should Ask About Safe Harbor Plans
"[1] What are safe harbor plans? ... [2] What is non-discrimination testing? ... [3] What is the contribution requirement a plan sponsor must satisfy? ... [4] What are the vesting requirements a plan sponsor must satisfy? ... [5] What are the notice requirements a plan sponsor must satisfy? ... [6] Why might a plan choose this design?"
Strategic Benefit Services


The ERISA Fiduciary Compliance Guide

Sponsored by The National Underwriter Company

Authored by ERISA and employment law experts at The Wagner Law Group, this Guide is the practical reference you can rely on. Use code BENLINK for 10% discount.

Building Better Core Menus in the Age of Default Investments: Breadth Is Better Than Depth
"Today, many defined contribution (DC) plan sponsors are taking a 'less is more' approach to core menu design, reducing the number of investment options available to participants. This trend is based on fears that participants with too many options will build inappropriate portfolios ... [T]his 'less is more' paradigm needs to be revisited to reflect the shifting role of the core menu inside DC plans today.... [There is] a variety of reasons why plan sponsors should [apply] 'Breadth is Better Than Depth' when constructing core menus, where the goal is not to limit the number of options available, but rather focus on how to develop a core menu and choose investments that will better help participants achieve their retirement goals."

3(21), 3(38), or 3(16): Find the Right 401(k) Fiduciary Services for You
"With the 3(21) fiduciary, your employees can get advice directly from the fiduciary (but they will need to make the final decision on which funds they use, and how much they invest). With the 3(38) fiduciary, you have now hired someone to be accountable for selecting the exact investments in the entire portfolio. They're also responsible for monitoring and reviewing the funds regularly, and reporting performance results to you on, ideally, a quarterly basis. And your fiduciary has the final say, so if something goes wrong, then your fiduciary is on the hook."

Wells Fargo Employees Sue Over Funds in Retirement Plans
"In the complaint, [the plaintiff] said the difference reflected the layering of an extra set of fees to run the funds, on top of fees to manage the underlying indexed funds. Despite this, assets allegedly grew in part because Wells Fargo made its target date funds a default investment option, and provided an 'easy' and 'quick' enrollment feature. This 'generated substantial revenues for Wells Fargo' and provided 'critical seed money that kept the funds afloat by boosting market share,' the complaint said."

DOL May Grant Financial Institution Status to All IMOs
"The [DOL] is likely to develop a new financial institution category allowing independent marketing organizations (IMOs) to sell fixed indexed annuities with retirement funds, but the reserving requirements might be a high hurdle for those marketing companies.... A class exemption would raise the profile of qualifying IMOs to one of a 'financial institution' on a par with four other financial product distributors -- banks, broker-dealers, registered investment advisors and insurers -- for the purposes of the sale of financial products and advice into and for retirement accounts."

Pension Rescue Rejection Letters May Be Road Map for Other Plans
"Multiemployer pension plans seeking government approval to suspend benefits have a handy tool that could help them get that approval -- the government's rejection letters shooting down every proposed cut so far.... Although the decision letters address specific plan applications, they communicate what Treasury wants to see before it will sign off on cuts ... The level of detail in Treasury's letters far exceed what the agency needed to tell the rejected plans, but was quite informative for other potential plan applicants."
Bloomberg BNA

Taking the Taft-Hartley Defined Contribution Plan to the Next Level (PDF)
"This paper will explain the merits of moving the defined contribution plan from a balance forward, periodic-valued, trustee-directed plan to a daily-valued, self-directed plan that participants can view and monitor every day in order to make more informed decisions about their retirement.... [T]rustees have an increased fiduciary responsibility to ensure these plans are being run efficiently and in the best interests of the participants and their beneficiaries. Bringing the plan into a daily-valued environment that allows the participant to direct their investments offers [additional] advantages[.]"

California Supreme Court Agrees to Rule on Its Own Pensions
"The state Supreme Court last week agreed to hear an appeal of a groundbreaking ruling that allows cuts in the pensions earned by current state and local government workers, including judges.... [T]he seven Supreme Court justices seem unlikely to recuse themselves from a possible landmark ruling on this Marin County pension case, mainly because there is no clear alternative."

Another Question is Answered in the Who's the Employer Q&A Column
"A and B are in a controlled group. A sponsors a cross-tested profit sharing plan for its employees only. The plan passes coverage, but my concern is nondiscrimination. When performing rate group testing and the average benefit percentage test, does the plan count the employees of B?"


Why Is the American Academy of Actuaries Painting Such a Rosy Picture of Social Security's Long-Term Financing Problems?
"Under either set of assumptions, we are talking about significantly higher tax revenue shortfalls than the 23% figure claimed to 'fix' the System in the [American Academy of Actuaries'] Social Security Game. If you prefer to think in terms of necessary benefit reductions rather than required tax increases, the percentages are about 25% under the Trustees' assumptions and about 30% under the CBO assumptions.... It appears likely that those with relatively higher incomes (young and old) will be asked to bear a significant portion of the increased cost in this next round of System reform."
Ken Steiner, FSA Retired

Benefits in General

ERISA's Anti-Retaliation Provision: An Overview of Section 510
"A plaintiff must show that the alleged discrimination was intended either [1] to retaliate against the plaintiff for the exercise of a right, or [2] to interfere with the attainment of an entitled (i.e., vested) right. A plaintiff must show that the employer acted with the specific intent to violate the statute and to retaliate against the employee or interfere with an employee's ERISA rights."
Katz Marshall and Banks LLP, Via Lexology

'Change of Control' Severance Plan Isn't Governed by ERISA, Court Rules
"To decide whether ERISA applied, the court looked to whether the Executive Retention Plan involved an 'ongoing administrative program,' and concluded that it did not. First, the court concluded that the plan did not require managerial discretion as to amount of severance, timing of payouts, or the form of severance. Moreover, most of the factors supporting a 'Good Reason' separation did not involve any discretionary determination. Second, an employee wouldn't see the plan as involving an ongoing commitment to provide benefits -- only one severance payout was involved, and the plan only came into play for a two-year period. Third, the plan didn't have the usual earmarks of an ERISA plan, such as a plan administrator, fiduciary, administrative review, or procedure to submit claims. Fourth, the plan was not a pension plan because it was not contingent on retirement and did not involve deferred income." [Hall v. LSREF4 Lighthouse Corporate Acquisitions, LLC, No. 16-6461 (W.D.N.Y. Nov. 10, 2016)]
Zuckerman Spaeder LLP

Executive Compensation and Nonqualified Plans

ISS Policy Updates for 2017
"ISS announced that in its 2017 pay for performance analyses (typically undertaken as part of ISS' evaluation of a company's say-on-pay proposal), it will add six relative quantitative performance metrics to its qualitative analysis.... ISS may later include these six performance metrics in the quantitative analysis section of its pay for performance analysis -- perhaps for the 2018 proxy season.... ISS has indicated that the weight afforded each of these six metrics will vary by industry, though it did not release what those weights will be."

ISS Policy Updates for 2017: Focus on Director Compensation
"The ISS compensation-related changes are centered around director compensation and the addition of financial measures in the pay-for-performance assessment methodology for both the U.S. and Canada.... The proxy advisor also made relatively minor tweaks to the Equity Plan ScoreCard (EPSC) methodology in the U.S."
Willis Towers Watson

Press Releases

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