Retirement Plans Newsletter

December 9, 2016

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The Fiduciary Underpinnings of Plan Loans
"It is easy to forget that the fiduciary's exclusive obligation is to provide retirement income from these plans. ERISA is pretty clear that even 401(k) plans and 403(b) plans are actually meant to provide retirement income.... Loans, however, are really a necessary part of retirement plans. Without that sort of access, many employees would shy away from making deferrals, which also undermines retirement readiness. But there remains this tension between the exclusive obligation to protect the ability to provide the retirement benefit, and the practical demand to have a loan program."
Business of Benefits

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Important Advantages of Multiple Employer 401(k) Plans
"Joining a MEP can make it easier for business owners to provide a 401(k) to their employees, as the MEP ... assumes many of the most critical administrative tasks that currently fall on business owners.... [T]he PEO or association takes over a fiduciary role as the plan sponsor, which helps reduce the business owner's fiduciary liabilities while also relieving them of many of the administrative responsibilities.... [P]articipating employers in a MEP often realize competitive or lower investment, time and opportunity costs."
401K Specialist

RP-2014 Mortality Tables Already Outdated?
"The new tables significantly increase life expectancy assumptions and, if adopted by regulators and DB plan actuaries, will significantly increase DB plan liability valuations for purposes of disclosure, funding and de-risking. So far the IRS has not incorporated this new table and they might not have to as the American people seem to have stumbled upon their own solution to the pension crisis."
Burypensions

2016 Retirement Preparedness Survey (PDF)
"Healthcare costs (48%), illness or disability (43%), and changes to Social Security (43%) are the top aspects adults fear could have negative impacts on their retirement. Most retirees (75%) think that people who have not yet retired will have a more difficult time saving for retirement compared to their generation. Pre-retirees (57%) tend to believe that their generation will have a more difficult time saving for retirement than their parents or grandparents did."
Prudential

Non-Profit Launching Retirement Plan for Uncovered Workers
"The National Association of Retirement Plan Participants (NARPP) will launch Icon in 2017, a universal retirement plan designed to help the 75 million working Americans who do not have access to an employer-sponsored retirement plan.... Icon has been designed for independent contractors and 'gig workers,' people who work for an employer that doesn't offer a plan, as well as employers who don't offer a plan but want to help their employees save for retirement."
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Robos Set Their Sights on Retirement Plan Providers
"It is no surprise that the retirement industry -- with entrenched players and complex arrangements between multiple vendors for services like fund lineups, administration and record-keeping -- is proving difficult to disrupt. Recent announcements, however, hint that these alternative retirement plan providers may be gaining traction."
Corporate Insight

To Roll or Not to Roll: A Framework for Implementing the DOL's New Fiduciary Rule for IRA Rollovers
22 pages. "Little research explores what should be considered when determining whether a rollover is in the best interests of an investor.... [This article outlines] a framework to make this decision, with a focus on the potential decision to roll retirement savings into an IRA managed by a financial advisor. Fees, the quality and scope of investments offered, the quality and scope of services being provided (e.g., financial planning), as well as other unique considerations should all be considered."
Morningstar

Estimates of the Financial Effects on Social Security of H.R. 6489, the Social Security Reform Act of 2016 (PDF)
30 pages. "Assuming enactment of the plan, we estimate that the combined OASI and DI Trust Funds would be fully solvent (able to pay all scheduled benefits in full on a timely basis) throughout the 75-year projection period, under the intermediate assumptions of the 2016 Trustees Report. In addition, under this plan the OASDI program would meet the further conditions for sustainable solvency, because projected combined trust fund reserves would be growing as a percentage of the annual cost of the program at the end of the long-range period."
Office of the Chief Actuary, U.S. Social Security Administration [SSA]

House Passes Spending Bill without Mine Workers Pension Relief, Other Retirement Measures
"The House of Representatives passed a streamlined spending bill ... that left behind several expected retirement-related measures ... [The bill] includes only a four-month extension of health benefits for the mine workers.... [A] package of retirement savings reforms ... would have allowed employers to access open multiple employer plans, make it easier for them to offer annuities, expand access to 401(k) plans to some part-time workers, and offer startup and automatic-enrollment tax credits for small businesses. Opponents of a second round of reforms for multiemployer pension plans were relieved that those did not make it into the spending bill."
Pensions & Investments

Corporate Pension Funded Status Improved by $71 Billion in November (PDF)
"The funded status of the 100 largest corporate defined benefit pension plans improved by $71 billion during November ... This month's funded status boost was the largest of 2016. The deficit fell to $340 billion due to interest rate gains experienced during November and has fallen by $117 billion since August 31. As of November 30, the funded ratio increased to 80.3% from 77.2% at the end of October."
Milliman

[Opinion]

Let's Scrap Pension Systems Altogether
"Dallas is not alone in the mismanagement of its pension fund that could leave taxpayers on the hook for a whopping $1.1 billion. Pension funds all over the country are going broke or bleeding profusely ... It's time to scrap pension funds for future workers and allow them -- actually, require them -- to set aside their own 401(k)-type accounts with contributions matched by employers. Let workers manage their own money as private employees around the country do every day."
National Center for Policy Analysis [NCPA]

[Opinion]

U.S. State Pensions Need a Miracle?
"[T]he median state pension has had 74.5 percent of assets needed to meet promised benefits, down from 75.6 percent the prior year. Typically any figure close to 80% is considered fine to pension actuaries who smooth things out over a long period. But ... the structural headwinds pensions face, driven primarily by demographics but other factors too, are unlike anything in the past and looking ahead, the environment is very grim for US state pensions."
Pension Pulse

[Opinion]

Comments of American Benefits Council on Draft of the Retirement Improvements and Savings Enhancements (RISE) Act
10 pages. "[A]n employer would be permitted to make matching contributions under a 401(k) plan, 403(b) plan, or SIMPLE IRA with respect to 'qualified student loan repayments,' which are broadly defined as repayments of any indebtedness incurred by the employee solely to pay qualified higher education expenses of the employee (emphasis added) (expenses of a dependent would not be covered).... We applaud the innovation ... [Another] proposal would eliminate the ability of many plan and IRA beneficiaries to receive benefits over a period longer than five years.... [This] will in many instances reduce retirement savings for beneficiaries."
American Benefits Council

Benefits in General

DOL Announces New Appointments, Leadership for 2017 ERISA Advisory Council
"The newly appointed members and the expertise they represent are: Employee organizations: Douglas L. Greenfield is a member of the Washington D.C. law firm, Bredhoff & Kaiser, P.L.L.C.... Accounting: Robert A. Lavenberg is a national employee benefit plan audit partner at BDO and has more than 30 years of experience with ERISA.... Employers: Marjorie F. Mann is senior attorney, Florida Power & Light Company.... General public: Colleen E. Medill is the Robert and Joanne Berkshire Family Professor of Law at the University of Nebraska College of Law.... Insurance: Srinivas Dharam Reddy is a senior vice president at Prudential Retirement."
Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL]

Trump Names Regulation Foe to Labor Post
"President-elect Donald Trump has named fast-food CEO Andrew Puzder as his secretary of labor.... Puzder is chief executive of CKE Restaurants, parent of the Carl's Jr. and Hardees chains, and a financial supporter of Trump's campaign. The 66-year-old executive is a sharp critic of regulation. He is on record as opposing the [DOL] overtime rule, and it's likely he also would favor killing the fiduciary rule."
InsuranceNewsNet.com

Press Releases

DOL Resolves Lawsuit to Restore $138K Owed to Employee Benefit Plan of Chicago Ophthalmologist Nicholas C. Caro
Employee Benefits Security Administration [EBSA], U.S. Department of Labor

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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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