Retirement Plans Newsletter

December 27, 2016 logo logo
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Uncovering Coverage Gaps in Your Benefits Program

Getting to Know your Vendor: Investment Advisor
January 31, 2017 WEBCAST
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ADP/ACP Failure Corrections
"EPCRS requires ADP/ACP test failures corrections beyond the 12-month period to include not just a refund, but also to make an additional one-to-one QNEC in the same amount of the refunds.... To correct an ADP failure, the plan sponsor can elect to use the 'bottom-up leveling method.' Because the ADP test gives an equal weight to each person included in the test, a small QNEC contribution to a person who earned minimal wages due to short-term employment or termination early in the year has a much greater impact on the test results than the same contribution to a full year employee.... QNECs can become very expensive, and plans that continue to fail discrimination tests may need to look for an alternative plan design."
Belfint Lyons & Shuman, CPAs


Online Learning Course: 401(k) Plan Administration

Sponsored by International Foundation of Employee Benefit Plans [IFEBP]

Learn more about plan design issues, plan investments, fiduciary responsibility and plan fees, employee communications and investment education, automatic enrollment, participant loans, distributions, and plan amendment and termination.

401(k) Education Best Practices
"Offer financial wellness education.... Address the most important financial wellness topics.... Stick with education, not counseling.... Marry financial wellness education to your 401k employee education.... Include behavioral finance.... Incorporate retirement readiness concepts into your curriculum.... Correct plan misperceptions.... Caution against loans and withdrawals.... Discuss your company match."
Lawton Retirement Plan Consultants

Regulatory Issues Not Foremost on the Minds of Plan Sponsors
"Defined contribution plan executives have plenty to do in 2017 without contemplating the impact of the next president, the next Congress or the next set of regulatory agency chiefs. From fee negotiations to plan design changes, sponsors -- as well as service providers and asset managers -- will work on practices and confront challenges independent of Washington's influence or interference[.]"
Pensions & Investments

Expect More Varied ERISA Litigation in 2017
"Aside from traditional allegations of excessive fees and mismanagement of company stock, ERISA litigation in 2016 included challenges to fund types, fiduciary processes and provider arrangements; expect more to come."

Investment Funds on Hook for U.S. Pension Liabilities (PDF)
"Owners of US companies -- including some private equity funds -- could become more frequently liable for making extra contributions to remedy pension fund deficits ... Parallel and non-parallel private equity funds under a common corporate parent seem most at risk.... If two different private equity firms owned stakes that together exceeded 80% of an investee company, it is less likely that they would be deemed a common entity -- so long as one is not absolutely controlling the other -- but a deemed partnership is not completely out of the question." [Sun Capital Partners III, LP, et al. v. New England Teamsters & Trucking Industry Pension Fund, No. 10-10921 (D. Mass. Mar. 28, 2016)]
Schulte Roth & Zabel LLP

Leveraging Technology Ahead of the Fiduciary Rule in 2017
"To make tasks simpler, firms this past year have unleashed a wave of new tools, platforms and services to help advisers remain compliant ahead of the rule. These products help with various tasks including evaluating fund lineups, reexamining compensation practices, and documenting all these efforts to ensure proper disclosure and the mitigation of any conflicts of interest."

Texas Pension Fund Takes Bold Step on Fees
"The $133.2 billion Austin-based defined benefit plan is the first to adopt a new fee structure developed by its hedge fund consultant, Albourne Partners Ltd. The objective of the fee formula is to ensure that the investor consistently retains 70% of the gross alpha returns of the hedge funds in its portfolio."
Pensions & Investments

Administration Makes Long-Desired Change to Postal Service Pensions
"The U.S. Postal Service could finally have its payments into the federal employee pension account calculated using assumptions from its workforce specifically, rather than the federal workforce as a whole, which has long been a sticking point at the mailing agency."
Government Executive

Contingency Planning for Clients Relying on Pensions
"If the pension is funded at 85% or less, there could be cuts in the future to the cost-of-living adjustment, for example, or to health benefits. In cases like this, where the client's current retirement planning is based on receiving 100% of their pension income, build in contingency plans where the client relies only on as little as 85% of their pension."
The Wall Street Journal; subscription may be required

How Much Cash Would It Take to Get You to Delay Retirement?
"[Researchers] assigned an 'approximate actuarially fair' dollar amount of $60,000 to the value of waiting four years after people could first claim -- so, until age 66 -- to apply for their benefit. The researchers asked people between the ages of 50 and 70 to assume they were 62, single, and could afford to wait to claim.... Thirty-four percent said they'd take less than $60,000 if they didn't have to work during the wait; the average amount was $53,711. It fell to 30 percent if they had to work half-time during the wait, and the average dollar amount required to wait went up to $61,406."

Press Releases

DOL Lawsuit Seeks Funds Owed to Retirement Plan of Maryland Company
Employee Benefits Security Administration [EBSA], U.S. Department of Labor

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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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