Retirement Plans Newsletter

April 20, 2017

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[Official Guidance]

Text of Treasury Department Notice of Multiemployer Pension Plan Application to Reduce Benefits, Opening of Comment Period
"he Board of Trustees of the Teamsters Local 805 Pension and Retirement Fund (Local 805 Pension Fund), a multiemployer pension plan, has submitted an application to reduce benefits under the plan in accordance with the Multiemployer Pension Reform Act of 2014. The purpose of this notice is to announce that the application ... has been published on the Treasury website, and to request public comments on the application from interested parties, including participants and beneficiaries, employee organizations, and contributing employers of the Local 805 Pension Fund."
U.S. Department of the Treasury

[Advert.]

P&I 401k/403b Investment Lineup: San Fran, Dallas, Chicago, NY

Sponsored by Pensions & Investments

San Fran: 5/9, Dallas: 5/11, Chicago: 5/16, NY: 5/18 Register to learn about the crucial issues and options plan sponsors must consider to help their participants achieve their retirement savings and income goals.


[Guidance Overview]

Rules for Design and Operation of Section 403(b) Plans
"While all employers are eligible to set up a defined benefit plan, and most tax-exempt nongovernmental employers are eligible to set up 401(k) plans, 403(b) plans are another option for certain tax-exempt and governmental organizations. These organizations may establish a 403(b) plan (sometimes called a tax-sheltered annuity plan or a TSA), which can fulfill most of the functions of a qualified plan, including allowing for pre-tax employee elective contributions, while offering various advantages to employers over a traditional qualified plan design."
Venable LLP

Text of ERISA Advisory Council Issue Statement: Mandated Disclosure for Retirement Plans -- Enhancing Effectiveness for Participants and Sponsors (PDF)
"The Council ... study will include the following: [1] Are there duplicative disclosure requirements and/or specific disclosures that could be eliminated or combined to relieve the burden on the plan sponsor and/or the participants/beneficiaries? [2] Is the content of the disclosures understandable and are there specific recommendations and examples that can be provided to improve [them]? [3] Are disclosures readable in accordance with federal plain language guidelines? [4] Are the disclosures valuable to users and are the disclosures material to a participant's understanding of the plan and their decision making? [5] When should disclosures be made to participants to optimize the objective of the specific disclosures? [6] Should the disclosures indicate 'Action Required'; 'Action Requested'; 'No Current Action Required'; 'For Information Purposes Only' or other introductory comments to inform participants of their purpose? [7] Would a 'Summary'/Quick Start Guide' to disclosures help achieve the above objectives? [8] What is/are the most effective and efficient methods of design and distribution? [9] How do the above considerations differ between small, medium and large single and multiemployer plans?"
Advisory Council on Employee Welfare and Pension Benefit Plans, Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL]

Managing PBGC Premiums: There Is More Than One Lever
"[T]wo effective levers for reducing headcounts and PBGC premiums that a plan sponsor should strongly consider: [1] Annuity Purchases ... [2] Lump Sum Windows ... [H]owever, these de-risking techniques can cause additional required cash contributions, often much larger than PBGC premium savings."
Findley Davies | BPS&M

Using Permitted Disparity to Design a Contribution Formula
"The analysis of permitted disparity involves a comparison of percentages, rather than dollar amounts, and there are restrictions on the contribution percentage allocated on pay exceeding the integration level."
Retirement Management Services

[Advert.]

P&I 401k/403b Investment Lineup: San Fran, Dallas, Chicago, NY

Sponsored by Pensions & Investments

San Fran: 5/9, Dallas: 5/11, Chicago: 5/16, NY: 5/18 Register to learn about the crucial issues and options plan sponsors must consider to help their participants achieve their retirement savings and income goals.


Ex-Wife Can Pursue Pension Claims Against NFL Plan
"The ex-wife of a former New England Patriots player can move forward with her claims to recover pension benefits from her late ex-husband ... Garcia-Tatupu seeks to collect pension benefits of her late ex-husband Mosiula F. Tatupu, who played for the Patriots from 1978 to 1990 and died in 2010.... [The judge's] decision is noteworthy because of his discussion of posthumous qualified domestic relations orders." [Garcia-Tatupu v. Bert Bell/Pete Rozelle NFL Player Retirement Plan, No. 16-11131 (D. Mass. Apr. 18, 2017)]
Bloomberg BNA

What's Congress Cooking Up for Retirement Plans?
"While tax reform is a current priority of the Senate, the lowering of retirement plan contribution limits does not appear to be a top-shelf item ... There is still hope that the Open-MEP provision can be attached to tax reform or some 'must pass' legislation in order to pass [.]"
Cammack Retirement Group

Ohio Carpenters' Multiemployer Pension Plan Applies for Benefit Cuts
"Trustees of the plan, which had $216.9 million in assets and $471.3 million in liabilities as of Jan. 1 for a funding ratio of 46%, submitted a plan under [MPRA] that calls for reducing, or suspending, benefits by an average of 17% for 90% of plan participants, including retirees.... People who retired before age 62 would see deeper cuts between 17% and 66%[.]"
Pensions & Investments

Majority of Asset Owners Say ESG Improves Investment Returns
"Sixty-eight percent of asset owners globally believe the integration of [environmental, social and governance (ESG)] strategies has significantly improved returns, ... 80% reported having some form of [ESG] strategy in their portfolios.... Only 17% of survey respondents reported that more than 50% of their total assets have exposure to ESG factors; 39% said between 25% and 49% of their assets have exposure; and 44% said between 1% and 25%."
Pensions & Investments

Most Americans Maintain or Increase Spendable Income After Claiming Social Security (PDF)
"Three years after claiming, the median taxpayer in the study reported spendable income that was greater (103 percent) than spendable income in the year before claiming. Median replacement rates three years after claiming were higher for individuals in the lowest quintile of 1999 income (123 percent), and lower for the highest income (95 percent for the top 1 percent of the income distribution)."
Investment Company Institute [ICI]

Why Are U.S. Households Claiming Social Security Later?
"The Early Baby Boomer cohort was less likely to be fully retired than [the cohort of persons having 1931-1941 birth years] at both age 62 (36.7 percent vs. 44.0 percent) and age 64 (49.5 percent vs. 53.9 percent).... [T]he shift from DB towards DC plans was the biggest contributor to these declines, followed by better health. Changes to Social Security rules and improvements in mortality played smaller roles. Taken together, the four changes explain about 60 percent of the drop in full retirement at 62[.]"
Center for Retirement Research at Boston College

[Opinion]

Setting a Fiduciary Standard That Puts Investors First: Problems with the DOL Rule
"[1] The current implementation plan calls for a piecemeal rollout of provisions.... [A] full review of the rule should be completed before any one element is made final.... [2] The rule currently defines 'investment advice' in broad terms. This sweeping definition brings with it regulatory requirements that are in some instances sensible but in many cases unnecessary.... [3] [T]he rule makes unnecessary distinctions between how advice is delivered ... the topic of advice ... and the type of client ... This fragmented approach is confusing, and will ultimately increase the complexity and cost of advice."
Vanguard

[Opinion]

SPARK Comment Letter to DOL on Examination of the Final Fiduciary Rule (PDF)
16 pages. "[T]he Regulation will prevent smaller plans and individual investors from receiving beneficial products and services that are currently made available to them by retirement industry service providers.... [The] overly broad definition of fiduciary investment advice, restrictive carve-outs, and unnecessarily burdensome requirements for satisfying the BICE will cause an increase in litigation, and an increase in the price that investors and retirees must pay to gain access to retirement services."
The SPARK Institute

[Opinion]

Are State Pension Systems Failing to Deliver?
"[T]here should be a detailed breakdown of fees paid to brokers, advisors, lawyers, and pretty much all service providers at any public pension plan.... All public pensions should report all their returns net of all fees and costs because that represents the true cost of managing these assets.... [M]ost US state pensions ... [are] clinging on to their pension rate-of-return fantasy which will never materialize. They do this to keep contributions low to make their members and state governments happy but sooner or later, the chicken will come home to roost[.]"
Pension Pulse

[Opinion]

Appleby Retirement Consulting Comment Letter to IRS on Form 5498, IRA Contribution Information (PDF)
"[M]any IRA custodians refuse to report indirect Roth IRA conversions in Box 3 ... of Form 5498, and instead, report such amounts as rollover contributions in Box 2 ... IRA custodians are hesitant to apply the self-certification procedure to indirect Roth IRA conversions that miss the 60- day deadline. Even for those that are inclined to apply the self-certification procedure to indirect Roth IRA conversions that miss the 60-day deadline, they are unsure of whether such amounts should be reported in Boxes 13a, 13b and 13c."
Appleby Retirement Consulting, Inc.

Benefits in General

[Official Guidance]

Text of Exposure Draft on Proposed Statement on Auditing Standards: Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA (PDF)
133 pages. "The proposed [Statement on Auditing Standards (SAS)] includes the form and content of the auditor's report for an unmodified opinion, a new form of opinion when an ERISA-permitted audit scope limitation exists and reporting requirements on findings from procedures performed on specific plan provisions relating to the financial statements (either included in the auditor's report on the ERISA plan financial statements or issued as a separate report). The proposed SAS would apply to audits of single employer, multiple employer, and multiemployer plans subject to ERISA."
American Institute of Certified Public Accountants [AICPA]

Cybersecurity: ERISA Advisory Council Provides Tips for Pension and Welfare Plan Sponsors (PDF)
"Every ERISA-governed employee benefit plan has confidential participant data it is required to protect. From the largest pension plan to the smallest vacation fund, employee benefit plans contain sensitive, personal, participant data which needs to be protected from unauthorized breaches. In developing a robust cybersecurity program, trustees will want to work closely with their IT vendor and other plan professionals."
United Actuarial Services, Inc.

Six Questions to Ask Your Benefits Tech Vendor
"[1] How is your customer support model organized? ... [2] How are upgrades and updates made to the platform? ... [3] Do you offer ongoing training and learning opportunities? ... [4] To what extent do customers have influence over product development? ... [5] How do you measure customer satisfaction? ... [6] Do you have a customer engagement portal?"
Benefitfocus

Executive Compensation
and Nonqualified Plans

[Guidance Overview]

How a 'Substantial Risk of Forfeiture' Operates Under Various Kinds of Nonqualified Plans
"This practice note discusses the concept of substantial risk of forfeiture (SRF) under sections 83, 409A, 457(f), 457A, and 3121(v)(2) of the Internal Revenue Code (I.R.C.) (referred to hereafter as Section 83, Section 409A, etc.) and the different consequences of the failure to achieve a SRF under each such section. SRF is the standard that the I.R.C. and Treasury Regulations apply to determine when an employee's or an independent contractor's deferred compensation (or transfer of compensatory property) vests, and therefore (depending upon the particular I.R.C. section) may be includable in income for the individual (or deductible for the employer or other controlled group member granting the compensation)."
Venable LLP

Unexpected Risks of Early Exercise ISOs
"Companies that permit the grant of early exercise incentive stock options (ISOs) do so primarily to limit the impact of the alternative minimum tax (AMT). However, due to fairly counterintuitive tax regulations, structuring options in this fashion can expose optionees to negative tax consequences in the event of a disqualifying disposition. This [article] reviews the tax effects of early exercise ISOs and compares the tax results to alternate structures."
Dorsey & Whitney LLP

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David Rhett Baker, J.D., Editor and Publisher  davebaker@benefitslink.com
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BenefitsLink Retirement Plans Newsletter, ISSN no. 1536-9587. Copyright 2017 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 those materials. You may not alter or remove any trademark, copyright or other notices from copies of the content.

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