Retirement Plans Newsletter

April 18, 2017 logo logo
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Employee Benefits Jobs

Retirement Plan Administrator
Steidle Pension Solutions, LLC
in NJ

Retirement Products Compliance Officer, VP
MUFG Union Bank
in AZ, CA

Senior Implementation Consultant
in CT, KS, MA, NC, SD, TX

Senior Retirement Consultant
Trinity Health
in MI, Telecommute

Senior Benefits Manager
Plum Healthcare Group
in CA

Regional Vice President - 401(k) Plan Sales
in OK, TX

ASC Plan Document Support Specialist
Actuarial Systems Corporation
in CA, FL, Telecommute

401(k) Pension Administrator
Nicholas Pension Consultants
in CA

Product Support Consultant part of Wolters Kluwer Legal & Regulatory

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[Official Guidance]

Adopters of Pre-Approved Defined Contribution Plans Get One-Day Deadline Extension
"The IRS has extended the deadline from Sunday, April 30, 2017, to Monday, May 1, 2017, for certain employers to adopt a defined contribution pre-approved plan and apply for a determination letter, if permissible. Notice 2016-03 previously extended the deadline from April 30, 2016, to April 30, 2017, to help employers who wanted to convert their existing individually designed plan into a current defined contribution pre-approved plan based on the 2010 Cumulative List."
Internal Revenue Service [IRS]


Annual Funding Notice Deadline is April 30! Are you ready?

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DOL Continues to Investigate DB Plan Procedures for Locating Participants and Paying Benefits at Mandatory Retirement Age
"The challenges and costs of meeting ERISA and Code compliance and reporting requirements for missing terminated vested participants and retirees entitled to benefits can be significant and difficult ... Defined benefit plans increasingly include an older participant population approaching retirement age, and maintaining effective procedures for communicating with these participants as they approach retirement age is both good fiduciary practice and provides protection in the event of a government agency audit."
Jackson Lewis P.C.

How to Refinance Participant Loans
"Every so often, a sympathetic plan sponsor who wants to help with its employees who need financing for reasons that don't meet the hardship distribution requirements, endeavors to tackle the complexities of allowing two participant loans and/or offering participant loan refinancing. The rules can be tricky, but they are not difficult for those unafraid to take a couple of extra steps."
Belfint Lyons & Shuman, CPAs

Are 401(k) Loans Double Taxed?
"Many financial experts believe that 401k loans are not double taxed. They say that the overall tax treatment of the individual is the same whether he/she takes a 401k plan loan or a loan from somewhere else. An equivalent amount of taxes would be required to pay back a loan from any other lender.... However, that does not change the fact that a participant appears to experience a tax on the principal portion of 401k loans that is more than double his/her incremental tax rate."
Lawton Retirement Plan Consultants

Fear of Litigation Looms Over DC Plans
"A quarter of DC consultants surveyed ... rated avoiding fiduciary lawsuits as the most important consideration of their clients, compared with 29 percent who chose retirement outcomes. Of these consultants, who collectively advise on more than $4 trillion in DC assets, 84 percent recommended that clients compare plan costs with those of peers as one way to manage fiduciary risk. Another 55 percent said plan sponsors should avoid funds that charge performance fees."
Institutional Investor


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District Court Awards ESOP $9.4 Million After Fiduciary Caused Participants to Overpay for Company Stock
"A federal judge, presiding over a U.S. [DOL] lawsuit, has found that First Bankers Trust Services Inc. breached its duties of prudence and loyalty to the participants of an [ESOP] when it caused the plan to overpay for shares of the company's stock.... [The judge] awarded to the plan $9,485,000 (plus interest), subject to the reduction in a 2016 consent order against SJP Group Inc.'s CEO Vincent DiPano. SJP Group, the plan's sponsor, hired First Bankers as an independent fiduciary to advise the company's plan on whether, and at what price, to purchase company stock from its majority shareholder DiPano." [Perez v. First Bankers Trust Serv. Inc., No. 12-4450 (D.N.J. Mar. 31, 2017)]

Interesting Use of the QCD Strategy: Making Up Missed RMDs
"The tax code and regulations simply say that a QCD can satisfy [a Required Minimum Distribution (RMD) requirement]. They do not specify that it can only satisfy the current year's RMD. And, if you miss an RMD the rules are that it gets added to the next year's RMD."
Slott Report

Why You Should Consider Tax Diversification in Your Retirement
"If your future tax bracket is likely to be higher than your current tax level, you may want to pay tax on contributions now in exchange for tax-free withdrawals later. If your future tax bracket is expected to be lower, you can make tax-free contributions and your withdrawals will be subject to ordinary income tax. However, because of the uncertainty in your future tax level, tax diversification can temper any significant changes."
Butterfield Schechter LLP


It's Time for the DOL to Rescind the 2012 Advisory Opinion on Multiple Employer Plans
"It's not the plan structure that led to the theft, it was the criminal who was running the plan.... [H]ad the [DOL] not been brought into the Hutcheson case at the exact same time they were weighing Toth's request, multiple employer plans would be the dominant retirement plan structure for smaller employers across the United States today.... The [DOL] needs to rescind DOL AO-2012-04A and replace it with guidance that incorporates the spirit of the proposed legislation ... Congress needs to continue their work to establish Pooled Employer Plans, which will be overseen by registered Pooled Plan Providers beginning in 2021."
Terrance Power, via LinkedIn


U.S. Chamber of Commerce Comment Letter to DOL on the Economic Impact of the Fiduciary Rule and Associated Exemptions (PDF)
30 pages. "[T]he Department never appropriately considered the effects of the Fiduciary Rule on the fiduciary insurance marketplace.... The Fiduciary Rule's policies were not well coordinated with ... other regulators -- indeed; several offered very critical public comments during the rulemaking process, objecting to the proposed Fiduciary Rule.... New empirical evidence from real-world efforts to implement the rule show Department predictions to be wrong, understating costs and overstating benefits."
U.S. Chamber of Commerce


ICI Comment Letter to DOL on Proposed Re-Examination of Fiduciary Rule (PDF)
50 pages. "The final rule was developed based on a faulty and incomplete regulatory impact analysis, is excessively convoluted, and -- without significant revision -- will harm the very individuals it was designed to protect. More urgently, the Department must extend the compliance date for the rule to avoid very serious disruption and harm to retirement savers."
Investment Company Institute [ICI]


SIFMA Comment Letter to DOL on Proposed Delay and Reconsideration of Fiduciary Rule
128 pages. "[T]he path chosen by the former Administration has proven to be impractical, unworkable, unrealistic and therefore, unlikely to lead to better financial results for retirement savers.... [1] It limits products and services and makes both more costly to retirement investors. [2] It has disrupted the industry in such a way that millions of retirement savers will be unable to purchase lifetime income options ... [3] The exemptions' reliance on private plaintiffs to enforce the Rule significantly increases the probability of meritless litigation and will likely lead to even further increases to the costs of products and services[.]"
Securities Industry and Financial Markets Association [SIFMA]


American Retirement Association Comment Letter to DOL on Fiduciary Rule (PDF)
"The ARA recommends that [1] the definition of Level Fee in the Best Interest Contract Exemption [BICE] be clarified to permit a Level Fee Fiduciary to receive transaction-based compensation under an offset arrangement that falls within the parameters of Advisory Opinion 97-15A.... [2] the Department revise [BICE] to eliminate the costly, inefficient and inconsistent enforcement mechanism of class action litigation.... [3] the applicability date for the Regulation be delayed until January 1, 2018... and that ultimately, a transition period of at least 24 months from the date a revised exemption (or rule) is promulgated should be provided."
American Retirement Association [ARA]

Benefits in General

Findings from the 2016 Health and Voluntary Workplace Benefits Survey (PDF)
12 pages. "One-third of workers (32 percent) are only somewhat satisfied with the benefits offered by their current employer, and 20 percent are not satisfied. One-half (49 percent) are extremely or very confident that their employer will continue to offer a similar benefits package three years from now.... Eighty-seven percent of workers report that employment-based health insurance is extremely or very important, followed by a retirement savings plan (77 percent) and dental or vision (72 percent).... Workers identify lower cost, choice, and the convenience of paying pre-tax and through payroll deductions as strong advantages of voluntary employment-based benefits"
Employee Benefit Research Institute [EBRI]

Discussions on
the BenefitsLink Message Boards

Hardship Distribution OK in Order to Prevent Prospective Foreclosure?
"Participant wants a hardship distribution. He's past due on his mortgage. Although it's not yet in foreclosure, he's sure it will be. He wants an amount equal to 6 months of mortgage payments to prevent a foreclosure. Would this be allowed? Or should he request a distribution each month?"
BenefitsLink Message Boards

How Does a Last-Day Employment Requirement Apply to a Participant Whose Last Day at Work Was December 30 (not 31)?
"Calendar year plan requires employment on the last day of the plan year in order to share in the allocation of the employer's contribution. The employee's last day at work was December 30, 2016 -- a Friday. Does the participant get an allocation?"
BenefitsLink Message Boards

Press Releases

PenChecks Trust, ASPPA Renew Partnership and Expand QKA Scholarship Program
ASPPA [American Society of Pension Professionals & Actuaries]

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

BenefitsLink Retirement Plans Newsletter, ISSN no. 1536-9587. Copyright 2017, 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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