Retirement Plans Newsletter

December 13, 2016

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Employee Benefits and the New Administration
January 18, 2017 in IL
Michael Best & Friedrich

What the DOL Expects of Auditors and What Can Go Wrong
January 19, 2017 in CA
Western Pension & Benefits Council - Orange County Chapter

9th Annual ABCs of Pension Plans
January 24, 2017 in CA
Western Pension & Benefits Council - Orange County Chapter

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[Official Guidance]

Text of IRS Notice 2016-80: 2016 Required Amendments List for Qualified Retirement Plans (PDF)
5 pages. "This notice contains the Required Amendments List for 2016 (2016 RA List).... [T]his notice provides that December 31, 2018 is the last day of the remedial amendment period with respect to a disqualifying provision arising as a result of a change in qualification requirements that appears on this 2016 RA List.... December 31, 2018 is also the plan amendment deadline for a disqualifying provision arising as a result of a change in qualification requirements that appears on the 2016 RA List. However, a later date may apply to a governmental plan[.]"
Internal Revenue Service [IRS]

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Catch & Correct Common Testing Errors!

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[Official Guidance]

Forms 8950 and 14568-B: Additional IRS Instructions for VCP Submissions Beginning January 1, 2017
"Until we update Forms 8950 and 14568-B, follow these additional instructions for each form: ... Because some parts of the 9/2015 version of [Form 8950] don't match the new revenue procedure and contain old references, follow the 9/2015 version instructions, [except for certain specified items] ... Because the 8/2016 version of [Form 14568-B] contains some language that refers to the submission of proposed corrective amendments, be sure to: [1] Include copies of signed and dated corrective amendments including restated plan documents.... [2] Ignore language on the form that permits the submission of proposed corrective amendments."
Internal Revenue Service [IRS]

[Official Guidance]

Text of IRS Notice 2016-78: Update for Weighted Average Interest Rates, Yield Curves and Segment Rates, December 2016 (PDF)
"This notice provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under Section 417(e)(3), and the 24-month average segment rates under Section 430(h)(2) of the Internal Revenue Code. In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under Section 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008 and the 30-year Treasury weighted average rate under Section 431(c)(6)(E)(ii)(I)."
Internal Revenue Service [IRS]

[Official Guidance]

2016 Instructions for IRS Form CT-1: Employer's Annual Railroad Retirement Tax Return (PDF)
"Use Form CT-1 to report taxes imposed by the Railroad Retirement Tax Act (RRTA). Use Form 941, Employer's QUARTERLY Federal Tax Return, or, if applicable, Form 944, Employer's ANNUAL Federal Tax Return, to report federal income taxes withheld from your employees' wages and other compensation." [Also available: 2016 Form CT-1, Employer's Annual Railroad Retirement Tax Return.]
Internal Revenue Service [IRS]

2017 401(k) Trends
"[1] Offer only R6 or similar share classes ... [2] Lower the cost of your target date fund series ... [3] Offer online investment advice for participants ... [4] Answer all fiduciary questions ... [5] Hire 401k plan-only investment advisers ... [6] Integrate financial wellness education with employee 401k education ... [7] Provide socially conscious investment options ... [8] Add a Roth in-plan 401k conversion option ... [9] Allow after-tax contributions ... [10] Incorporate HSA accounts into retirement planning."
Lawton Retirement Plan Consultants

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Insights Into Retirement Planning Behavior (PDF)
"Only one-in-five [plan participants] (20%) said they reviewed or made adjustments to their retirement plan in the last year.... [M]ore than twice as many reviewed or made adjustments to their phone, cable and/or internet service (43%) or social media account profiles (43%).... During the past year, millennials were nearly four times as likely (63%) to update their social media profiles than they were to review or make adjustments to a retirement plan (17%)."
Voya Financial

Year-End Action Items for 403(b) Plans
"[If] a new safe harbor employer matching contribution for 2017 was approved, the plan must be amended by December 31 for safe harbor protection to be effective for 2017.... Excess IRC Section 402(g) contributions.... Excess IRC Section 415(c) contributions.... Compensation in excess of IRC Section 401(a)(17) limit.... Special Catch-up Contributions.... Year-End Contribution Adjustments.... Required Minimum Distributions (RMDs).... Universal availability.... Automatic enrollment."
Groom Law Group, via PLANSPONSOR

Take That Target Off My Back: A Guide to Avoiding 401(k) Litigation
"Documentation should demonstrate the process undertaken in reviewing fees, including an analysis of fees charged, the services received and the benchmarking of those fees. Selection of the correct share class of a particular mutual fund is important, as different share classes have different expense ratios. This review process should be regular and ongoing."
Greensfelder

Mutual Fund Share Class Evaluation: A Focus on 'Net' Costs
"The share class with the lowest expense ratio may have a high minimum initial investment to enable economies of scale. Expense ratios change; as assets grow in a share class, expense ratios tend to decline.... Revenue sharing agreements between recordkeepers and fund managers may change or be renegotiated at any time. Share classes, expense ratios, and minimum asset requirements should be reviewed on a regular basis to identify potential savings opportunities."
Cammack Retirement Group

2016 Year-to-Date Fixed Annuity Sales Remain Ahead of 2015, Variable Annuity Net Assets Rise for Fourth Consecutive Quarter
"Industry-wide annuity sales in the third quarter of 2016 totaled $51.3 billion, an 8.2 percent decline from sales of $55.9 billion during the second quarter of 2016, and a 12.3 percent decline from $58.5 billion in the third quarter of 2015.... Fixed indexed annuity sales remained strong during the third quarter of 2016, reaching $15 billion. While this represents a 6.8 percent decline from near-record sales of $16.1 billion in the previous quarter, it is a 4.2 percent increase from $14.4 billion during the third quarter of 2015."
Insured Retirement Institute [IRI]

State Auto-IRA Programs: The Keys to Financial Self-Sufficiency
"State auto-IRA programs for private sector workers are intended to pay for themselves. This goal is achievable in the long run, but auto-IRAs will incur losses initially. The keys to financial self-sufficiency are to: keep per-account costs low; set meaningful participant contribution rates; and charge higher fees initially or finance start-up costs over a longer period."
Alicia H. Munnell, Anek Belbase and Geoffrey T. Sanzenbacher, Center for Retirement Research at Boston College

Overcoming Barriers to Retirement Security for Women: The Role of Social Security (PDF)
16 pages. "Enhancing Social Security benefits would be an effective strategy for improving women's retirement security -- especially for women 75 or older, who face a significantly greater risk of poverty than their male counterparts. Expanding benefits would require increasing system revenue beyond what is necessary to close the projected long-term shortfall. Provisions that increase benefits for low earners, caregivers, or older seniors, or modernize benefits for certain marital statuses such as the divorced and survivors, would address the challenges that women particularly face."
National Academy of Social Insurance [NASI]

Hispanics' Retirement Security
"Older Hispanics receive less income, hold less wealth, and are more likely to be impoverished than older non-Hispanic whites. Financial outcomes are significantly worse for older foreign-born Hispanics than for those born in the United States. Various policy options, such as workforce development initiatives, efforts to promote education and retirement savings, and Social Security reforms that increase benefit progressivity, might improve financial security for current and future generations of older Hispanics."
Urban Institute

Benefits in General

[Official Guidance]

Text of IRS Notice 2016-79: 2017 Standard Mileage Rates (PDF)
"This notice provides the optional 2017 standard mileage rates for taxpayers to use in computing the deductible costs of operating an automobile for business, charitable, medical, or moving expense purposes.... The standard mileage rate for transportation or travel expenses is 53.5 cents per mile for all miles of business use (business standard mileage rate) ... This notice is effective for [1] deductible transportation expenses paid or incurred on or after January 1, 2017, and [2] mileage allowances or reimbursements paid to an employee or to a charitable volunteer (a) on or after January 1, 2017, and (b) for transportation expenses the employee or charitable volunteer pays or incurs on or after January 1, 2017."
Internal Revenue Service [IRS]

Cover Letters: The Key to Simplifying ERISA Plan Document Requests by Participants and Beneficiaries
"[P]lan sponsors are not required to provide any additional material when responding to a request for plan documents. However, it may pay off to include the following, additional information in a cover letter, when responding to participant requests: [1] The date of the response ... [2] The name of the person to whom the documents are provided.... [3] A list of the documents provided.... [4] Information about next steps."
Foley & Lardner LLP

Press Releases

DATAIR Releases 2016 Government Forms (5500s) and Schedules
DATAIR Employee Benefit Systems, Inc.

DOL Sues Coraopolis, Pennsylvania, Company for Abandoning 401(k) Plan after Ceasing Operations
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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