Retirement Plans Newsletter

March 16, 2017 logo logo
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Withdrawal Liability: The Ticking Time Bomb of Participating in Multiemployer Pension Plans
April 13, 2017 WEBCAST
Jackson Lewis LLP

Hot Topics in Health and Welfare Plan Litigation
April 18, 2017 WEBCAST
ABA Joint Committee on Employee Benefits [JCEB]

Top QDRO Mistakes in Divorce
June 21, 2017 WEBCAST
National Business Institute

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[Guidance Overview]

Internal Memo Reveals IRS Expectations for Hardship Distributions
"According to the IRS, documenting an immediate and heavy financial need ... can be evidenced by either source documents, (e.g., estimates, contracts, bills, statements), or a summary of information from source documents. Whichever approach is taken, there must be sufficient detail to support the need for a hardship distribution." [Article includes a checklist of specific information needed for each type of hardship request.]

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[Guidance Overview]

IRS Provides New Guidelines for Documenting Hardship Distributions
"The memorandum requests that field agents follow a 2-step approach in determining if a hardship distribution was made on account of a deemed immediate and heavy financial need ... [If] the notification provided to employees in Step 1 or the information reviewed in Step 2 is incomplete or inconsistent on its face, the agent may ask for source documents from the employer or third-party administrator."

[Guidance Overview]

DOL Issues Temporary Enforcement Relief for Fiduciary Rule Non-Compliance
"[FAB 2017-01] provides no protection or assurances against action by other regulators or the private sector. Unless the DOL issues a class exemption providing relief for prohibited transactions occurring during a 'gap period' (or a 'reasonable period' after the decision not to delay the Rule is published, if this should occur), the enforcement policy alone won't provide relief for 'conflicted' advice to IRAs or for excise taxes resulting from prohibited transactions involving ERISA plans. The DOL has no jurisdiction over the enforcement of the prohibited transaction rules for IRAs, or the assessment of excise taxes, which is handled by the IRS in all cases."
Drinker Biddle

[Guidance Overview]

DOL Issues Temporary Enforcement Policy Regarding the Fiduciary Rule (PDF)
"Although [FAB 2017-01] provides for a delay in enforcement in the event of an April 10 Applicability Date, the guidance only applies to DOL enforcement action. The FAB does not provide relief from the prohibited transaction rules generally applicable to both ERISA plans and IRAs, and thus, it offers no protection against the imposition of excise taxes by the IRS. It is important that plan sponsors and advisors ... review the contractual terms of any recently negotiated changes to service agreements to comply with the Fiduciary Rule. These agreements may contractually hold advisors to new fiduciary standards as of an April 10 Applicability Date."
Trucker Huss

Merrill Lynch Outlines Plans for Its 401(k) Fiduciary Platform
"Merrill Lynch Wealth Management outlined plans [on March 15] to transition its defined contribution plan business over to a fiduciary model, coming several months after the firm announced similar plans for its retail retirement business and as the implementation deadline for the [DOL's] fiduciary rule approaches.... The announcement also follows on Merrill's decision to disallow use of commissions in the vast majority of advised IRAs in response to the fiduciary regulation."


Things Have Changed – Are You Up-To-Date?

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Updated SEC Investor Bulletin: How Fees and Expenses Affect Your Investment Portfolio
"The SEC's Office of Investor Education and Advocacy is issuing this updated bulletin to educate investors about how fees you pay for investment services and products can impact the value of your portfolio.... These fees may seem small, but over time they can have a major impact on your investment portfolio. [A] chart shows an investment portfolio with a 4% annual return over 20 years when the investment either has an ongoing fee of 0.25%, 0.50% or 1%."
U.S. Securities and Exchange Commission

Four Questions to Guide Your Fee Evaluation Process (PDF)
"[1] Who is receiving compensation from your plan? ... [2] What are the fees and expenses associated with your plan? ... [3] How do your fees and expenses compare to other service providers or investment options? ... [4] Why is the compensation warranted?"

How to Service Small Retirement Plans and Still Make a Profit
"Outsourcing ongoing investment monitoring and education meetings, taking work on a project basis and charging a flat fee are ways advisers can help small plans while making revenue."

Want to Invest in Art, Gems and Antiques? Why It's a Bad Idea to Put Exotic Investments in Your IRA
"According to the GAO, real estate, private equity and hedge funds are the most commonly held unconventional-asset type in IRAs, but investors also purchased limited liability companies, limited partnerships, precious metals ... promissory notes, church bonds and private placements. In the main, those assets are quite complex to buy, to value, and, come required minimum distribution (RMD) time, to distribute.... [D]oes it ever make sense to invest in unconventional assets in your IRA? For most investors, the answer is no."


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Text of Application for Benefit Suspensions: Western States Office and Professional Employees Pension Fund
"The Western States Office and Professional Employees Pension Fund application proposing benefit suspensions can be found [on the linked page]. The application is organized by the items specified in Revenue Procedure 2016-27."
U.S. Department of the Treasury

CalPERS Forced to Declare Southern California Agency in Default of Pension Obligations
"The [CalPERS] Board of Administration [on March 15] declared the East San Gabriel Valley Human Services consortium in default and terminated its contract after it failed to pay more than $400,000 to fund its pension plan.... [P]ension benefits will be reduced by approximately 63 percent for 191 members and 24 percent for six members hired after pension reform went into effect in 2013, effective July 1, 2017, if the consortium fails to pay."


Retirement Advisor Council Comment Letter to EBSA on Proposed Delay of Fiduciary Rule (PDF)
"We believe a 60-day delay is inadequate and we request [EBSA] consider delaying implementation by 266 days to the first business day following January 1, 2018. We also request that the Department consider extending the period for providing comments to August 8, 2017."
Retirement Advisor Council


American Retirement Association Comment Letter to DOL on Proposed Delay of Fiduciary Rule (PDF)
"ARA recommends that the applicability date be delayed until January 1, 2018, and that transitional relief with regard to the Best Interest Contract Exemption [BICE] be extended until July 1, 2018. ARA further recommends that the Department take such actions as are necessary to ensure that the effective date of the delay precedes the existing applicability date to avoid the unnecessary expense and disruption that would be caused by uncertain and shifting compliance standards."
American Retirement Association [ARA]


Will Collapsing U.S. Pensions Fuel Next Crisis?
"The major hurdle in adopting an enhanced Social Security where assets are managed at arms length from the government is the lack of proper pension governance.... This is the dire predicament of the US pension industry where one measure after another keeps placing a Band-Aid over a metastasized tumor, extending and hoping the problem will go away."
Pension Pulse

Executive Compensation and Nonqualified Plans

Stock Utilization in U.S. Companies Continues to Decline with the Increased Use of Full-Value Awards
"As U.S. companies continue a decade-long shift away from granting employees stock options toward issuing more full-value (time- or performance-lapsing) shares as part of their long-term incentive (LTI) programs, the number of shares required to deliver the same value to LTI plan participants has declined. At the same time, shareholders have increasingly monitored stock incentive usage at the companies in their portfolios and have taken action in limited cases where share usage exceeds norms via negative votes on LTI plan proposals. As a result, stock usage is at its lowest point in years as companies face continuing pressure to operate their LTI plans within market norms."
Willis Towers Watson

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