Retirement Plans Newsletter

December 29, 2016

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[Official Guidance]

IRS Updates Determination Letter Instructions for DB Plans with Risk Transfer Language
"Applicants requesting determination letters for [DB] plans should identify whether the plan has lump sum risk transfer language in either the cover letter to their application or an attachment. For plans that do, also identify the appropriate plan section and whether the plan satisfies one of the conditions in Notice 2015-49. For DB plan applications we've already received, we'll request the plan sponsor to inform us of this information."
Internal Revenue Service [IRS]

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[Official Guidance]

Text of Instructions for IRS Form 5300: Application for Determination for Employee Benefit Plan (PDF)
Revised Jan. 2017; dated Dec. 13, 2016. "The form and instructions have undergone major revisions in format and information required.... Many of the revisions reflect the changes affecting individually designed plans described in Rev. Proc. 2016-37 ... including [1] eliminating 5-year remedial amendment cycles, and [2] generally limiting determination letter (DL) requests to initial plan qualification and qualification on plan termination, effective January 1, 2017. In addition, sponsors may submit requests for determinations on partial termination regardless of their ability to request DLs on their plan document. Many other changes are intended to reduce burdens on filers."
Internal Revenue Service [IRS]

[Guidance Overview]

SEC Addresses Disclosure Issues and Procedural Requirements for Mutual Fund Compliance under DOL Fiduciary Rule
"The [Guidance Update] is focused on disclosure issues and certain procedural requirements for mutual funds offering variations in sales loads and new share classes. It also reminds mutual funds of certain administrative procedures that may streamline the review of SEC disclosure filings."
Practical Law Company

IRS Proposal Would Boost Pension Funding and Payout Costs
"The proposed rule would require that sponsors use the updated [mortality] tables for plan years beginning on or after Jan. 1, 2018. The [IRS] also proposed updating the requirements that a plan sponsor must meet to obtain IRS approval to use custom mortality tables for minimum funding purposes. If finalized, it's expected that the long-anticipated rule would require sponsors to increase the funding of their plans. Several large employers over the past year have ended, or de-risked, their plans in anticipation of the costs associated with these new mortality tables. That trend is likely to continue in 2017."
Bloomberg BNA

Qualified Retirement Plans in 2017 and Beyond: Resources and Considerations for Employers
"The Required Amendments List is not exhaustive ... Operational compliance may be required prior to plan amendment ... Reliance on existing Determination Letters is limited ... Preserve the version of the plan document for which the most recent determination letter was issued, so that any subsequent amendments can be clearly identified; Weigh stylistic revisions to the plan document (whether via amendment or restatement) against their potential impact on reliance; and Consider the desired reliance on the existing plan document when drafting future amendments, e.g., in assessing which sections to amend and how best to do so."
Caplin & Drysdale

Robo-Advisers to Expand Deeper Into DC Space in 2017
"Robo-advisers rolled into the financial services industry initially targeting individual investors, but in recent years automated advice pushed deeper into the retirement planning space with the release of a wide variety of products and services. A number of integrated 401(k) platforms emerged during 2016, offering personalized investment advice for large and small groups of participants; they provide plan sponsors with streamlined administration and fiduciary support."
PLANSPONSOR

Using a PTE 80-26 Loan to Convert ESOP Terminated Participant Accounts
"The decision to redeem, recycle or re-leverage shares from terminated participants' accounts can have a significant effect on future participant benefit level, stock price and repurchase liability. For many mature ESOPs, the value of stock in terminated participants' accounts is increasing due to the number of baby boomers who will retire over the next five to ten years.... In order to convert terminated participants' balances within the ESOP, it may make sense for the plan sponsor to loan money to the plan ... If a PTE 80-26 loan is used to make distributions or convert terminated participants' accounts, the loan can be repaid as of the next annual valuation date. One option for the repayment of the loan would be to redeem the number of shares equal in value to the loan amount at the new share price."
Principal Financial Group

Quarterly Survey of Public Pensions: Third Quarter 2016
"This report provides national summary data on the revenues, expenditures and composition of assets of the largest defined-benefit public-employee pension systems for state and local governments. This report produces three tables: Tables 1 and 3 include data on cash and security holdings, and Table 2 provides data on earnings on investments, contributions and payments."
U.S. Census Bureau

McClatchy Buys Group Annuity to Transfer $46 Million in Pension Liabilities
"The agreement with American United Life was made by the company's retirement committee on Dec. 20 and affects participants in The McClatchy Company Retirement Plan who are currently receiving $180 per month or less from the plan.... The pension plan was frozen March 31, 2009. It had $1.349 billion in assets and $1.931 billion in projected benefit obligations as of Dec. 27, 2015, for a funding ratio of 69.9%[.]"
Pensions & Investments

Executive Compensation and Nonqualified Plans

More ISS Updates for 2017
"How does ISS view a plan amendment to increase the tax withholding rate applicable upon award settlement? ... What is ISS' policy on say-on-pay frequency?"
Winston & Strawn LLP

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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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