Retirement Plans Newsletter

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Defined Contribution Plan / 401k Plan Administrator
N.A. Falcone & Associates, Inc.
in PA

Conversions Consultant
Newport Group
in CA

Conversions Analyst
Newport Group
in AL, CA

Internal Sales Consultant
Newport Group
in CA

Plan Administrator
Newport Group
in FL, TX

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[Official Guidance]

Text of DOL Information Letter: Application of ERISA's Fiduciary Provisions to Default Investments with Lifetime Income Features That Contain Certain Liquidity and Transferability Restrictions
Unnumbered letter to TIAA-CREF, dated Dec. 22, 2016. "It is the view of the Department that a fiduciary of a participant-directed individual account plan could, consistent with the provisions of Title I of ERISA, prudently select an investment with lifetime income elements as a default investment under the plan if it complies with all the requirements of 29 CFR 2550.404c-5 except for reasonable liquidity and transferability conditions beyond those permitted in paragraph (c)(5)(i) of the regulation. When evaluating whether it is prudent to use this type of investment alternative as a default investment alternative, the fiduciary must engage in an objective, thorough and analytical process that considers all relevant facts and circumstances."
Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL]


The Advisor's Guide to Qualified Plans

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[Guidance Overview]

Multiemployer Pension Benefits: Take a Hit Now or a Bigger Hit Later
"The success of the Iron Workers plan in implementing the voluntary reductions is an indication that plans now understand the standards they must meet in order to get Department of Treasury approval of their voluntary reductions.... Hopefully, with dozens and dozens of other multiemployer pension plans in critical and declining status, more plan trustees will see that voluntarily implementing a reduction in pension benefits to avoid insolvency may be more advantageous to their participants than facing the more-significant benefit cuts that would be imposed by the PBGC."
McDonald Hopkins

A Crystal Ball and a Compass: The Plan Sponsor's Guide to Navigating 2017
"History will likely show that the events of 2016 were an impetus for significant change in the landscape of America's retirement system.... [T]he following issues will be the main drivers of change. The DOL's fiduciary rule ... Litigation on the rise ... An improving economic environment ... Future policy direction."
CAPTRUST Financial Advisors

Employee Benefits Considerations in Corporate Mergers and Acquisitions
16 pages. "Employers that sponsor a retirement plan face a host of potential issues to consider both before and after a corporate merger or acquisition. These include the impact of the type of corporate transaction on the employee benefit plans sponsored by the buyer and the seller and the integration of the employee benefit programs following a corporate merger or acquisition. These topics can be complex and often require appropriate analysis and planning prior to an acquisition in order to meet the goals of all parties and the needs of the affected employees."

Alternatives for Pension Cost Recognition: Implementation Approaches Using Bond Models (PDF)
15 pages. "An alternative approach to developing pension cost involving the application of the spot rates for each year -- rather than aggregated rates appropriate for the plan as a whole -- has become widely accepted in recent years. While the application of this methodology is essentially straightforward for plan sponsors using yield curves to develop discount rates, its application is less obvious for those using bond models. A number of approaches can be identified to implement more granular expensing approaches within bond model applications.... A recently articulated SEC staff view may present obstacles to the adoption of some of [these] approaches[.]"
American Academy of Actuaries


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State And Local Pension Reform Since the Financial Crisis
"74 percent of state plans and 57 percent of large local plans have cut benefits and/or raised employee contributions to curb rising costs. While the majority of state and local plans reduced benefits for new employees only, 25 percent also cut benefits for current employees. The two most common benefit reductions for current employees were increases in employee contributions and reductions to the COLA.... Plans more likely to make cuts had the highest annual required contribution (ARC) as a percentage of revenue or had lower employee contributions."
Center for State & Local Government Excellence

Committee Will Recommend Vermont Create State-Sponsored Retirement Plan for Private Sector Workers
"45 percent of Vermont businesses, employing a total of 104,000 people, don't offer workers access to a retirement plan.... State Treasurer Beth Pearce who chairs the Public Retirement Study Committee says the group will recommend that lawmakers create a public plan for businesses with fewer than 50 employees that currently don't have a way for workers to invest in their retirement."
Vermont Public Radio

Pre-Retirees Are Terrified About Health Care Costs
"More than 7 in 10 Americans nearing retirement say they are terrified of what health care costs may do to their retirement plans ... Nearly 3 in 4 older adults say one of their top fears in retirement is out-of-control costs for health care.... Among actions that non-retirees are doing now to save for health care costs in retirement: 41 percent are building their savings, 33 percent are paying off credit cards and debt, 28 percent are investing and 27 percent are increasing 401(k) contributions."
Warren Hersch, in Producers Web

Benefits in General

[Guidance Overview]

The New ERISA Claims and Appeals Regulations for Disability Benefits
"The new regulations add the following requirements to the claims and appeals process for disability benefits: [1] Claims and appeals must be decided independently and impartially, meaning that those who decide claims should not be incentivized to deny claims.... [2] Denial letters must include [certain specified items] ... [3] Before an appeal can be denied, claimants must be given notice and a fair opportunity to respond if the appeal denial is based on new or additional rationales or evidence.... [4] Claimants are not barred from suing due to failure to exhaust the plan's claims procedures where the plan itself failed to comply with its claims procedures (except for certain minor failures). [5] Retroactive rescissions of coverage are considered benefit denials that trigger the plan's appeals procedures."
Jackson Lewis P.C.

Seventh Circuit Finds Requirement to Contribute to Fringe Benefits Funds Can Extend Past Decertification
"Ultimately, the opinion appears to be driven by an increasing concern for the funding of multiemployer funds. The opinion mentions that the Funds had 'budgeted' for five years of contributions from RiverStone and recites that 'once [multiemployer plans] promise a level of benefits to employees, they must pay [the benefits] even if the contributions they expected to receive do not materialize.' ... By extension, this holding could also be applied to withdrawals of recognition and disclaimers of interest." [Midwest Operating Engineers Welfare Fund v. Cleveland Quarry, Nos. 15-2628, 15-3221, 15-3861, 16-1870 (7th Cir. Dec. 20, 2016)]
Ogletree Deakins

Executive Compensation and Nonqualified Plans

Analysis of New Stock-Based Compensation Rules
"[A recent FASB] update provides private companies, when granting stock to employees, with a one-time election to switch from measuring all liability-classified awards at fair value to measuring them at intrinsic value. In contemplating whether to make such an election, companies should be mindful that not all valuation methodologies are created equal.... [C]hoosing any of the various methods for allocating such values can have a major impact on a company's share price."

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David Rhett Baker, J.D., Editor and Publisher
Holly Horton, Business Manager

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 those materials. You may not alter or remove any trademark, copyright or other notices from copies of the content.

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