Retirement Plans Newsletter

April 27, 2017

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[Official Guidance]

Text of Treasury Department Notice of IAM Motor City Pension Fund Application to Reduce Benefits
"The Board of Trustees of the International Association of Machinists Motor City Pension Fund (IAM Motor City Pension Fund) ... has submitted an application to reduce benefits under the plan in accordance with [MPRA].... [T]he application ... has been published on the Treasury website, and ... public comments [are requested] from interested parties, including participants and beneficiaries, employee organizations, and contributing employers[.]"
U.S. Department of the Treasury

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[Official Guidance]

Text of Treasury Department Notice of Alaska Ironworkers Pension Trust Application to Reduce Benefits
"The Board of Trustees of the Alaska Ironworkers Pension Trust ... has submitted an application to reduce benefits under the plan in accordance with [MPRA].... [T]he application ... has been published on the Treasury website, and to... public comments [are requested] from interested parties, including participants and beneficiaries, employee organizations, and contributing employers[.]"
U.S. Department of the Treasury

2017 Investment Company Fact Book: A Review of Trends and Activities in the Investment Company Industry (PDF)
316 pages. "In its 57th edition, this ICI publication continues to provide the public and policymakers with a comprehensive summary of ICI's data and analysis."
Investment Company Institute [ICI]

Court Again Dismisses ERISA Complaint Against Disney
"The second amended complaint in a lawsuit accusing the Walt Disney Company of wrongdoing under ERISA fails to plausibly demonstrate that fiduciary breaches occurred, a district court ruled." [In re Disney ERISA Litigation, No. 16-2251 (C.D. Cal. Apr. 21, 2017)]
planadviser

Seven Best Practices Every Retirement Plan Committee Member Should Follow
"[1] Have a written investment policy for the plan.... [2] Create a written charter that clearly defines the roles of committee members versus those of outside consultants.... [3] Establish criteria for hiring outside consultants and evaluate those outside consultants on an annual basis.... [4] Create criteria for the selection of members.... [5] Consider terms for members. [6] Maintain documentation of meetings.... [7] At minimum, have an annual meeting."
Meaden & Moore

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New Evidence on the Demand for Advice within Retirement Plans (PDF)
13 pages. "Demand for advice on asset allocation and income planning jumps four-fold with the introduction of online advice tools ... Demand increases significantly with age and account balance, suggesting that participants are more likely to seek out advice when they have more assets to manage or are getting closer to picking a retirement date.... There is a strong positive correlation between proxies for retirement plan engagement and levels of advice seeking."
TIAA Institute

What Should 401(k) Plan Sponsors Do About Retirees?
"As a liability to the plan, retirees raise risks immeasurably. If plan sponsors are responsible for how a participant manages his money, which he is because he is a fiduciary, then it is logical to assume the plan sponsor is also responsible for how a retiree who has left his assets in the plan manages his money. This means that, in essence, the plan sponsor is responsible for the lifetime income of that retiree."
John Riley of Cornerstone Investment Services, via Kiplinger

What It Takes for Financial Advisors to Specialize in Retirees
"[E]ffectively managing a retirement portfolio, and the distributions that occur from it, is about more than just managing the investments themselves. Because retirement portfolios also have to face sequence of return risk -- the possibility that even if the portfolio generates the desired long-term return, if it achieves that return with an unfavorable sequence, ongoing distributions could catastrophically deplete the portfolio before the good returns show up! As a result, the best strategy for retirement income isn't necessarily the one that produces the best return."
Nerd's Eye View

Year-End 2016 Funding Status, Discount Rates, Asset Allocations and Contributions for WTW 100 Plans
"For the third year running, average funded status for the [Willis Towers Watson] Pension 100 was 82.4%. Most of these companies contributed more to their pensions in 2016 than in 2015. Two developments will be key in 2017: whether interest rates rise as they did toward year-end 2016, and whether tax reform will occur."
Willis Towers Watson

One Small State, One Giant Perspective for the Nation
"While reactions were mixed among the small-business owners regarding the new [Connecticut state-run retirement plan], there was also some confusion about the state-run retirement plan and how it would affect their businesses.... Some of the negative perceptions of the state-run plan comes from unsatisfactory experiences with health exchanges. In other cases, participants conflate the state managing the new state-run retirement plan with the already established state teachers' and employees' pension programs. Both have faced well-publicized funding and liability challenges."
LIMRA

Colorado Senate Panel Rejects Democratic Plan for State-Sponsored Retirement Accounts
"46 percent of all Coloradans don't have access to a plan through their employer. And that number rises to 8 in 10 for those who work at the smallest businesses, according to an AARP study. But ideological differences -- coupled with heavy lobbying by the financial industry to preserve the status quo -- have combined to make any attempts to find a solution at the Colorado Statehouse elusive."
The Denver Post

Jacksonville City Council OKs Bill to Close Pension Funds
"The Jacksonville City Council unanimously approved a bill closing the $2 billion Jacksonville (Fla.) City Retirement System and $1.8 billion Jacksonville Fire & Police Pension Fund. The retirement systems will close Sept. 30 and employees hired on or after Oct. 1 will be automatically enrolled in the city's $24 million ... retirement system [which] consists of the general employees' and corrections officers' pension funds."
Pensions & Investments

Benefits in General

Chief Human Resource Officers on Trends Shaping the Workplace, Outdated Policies Governing It, and the Way Forward (PDF)
86 pages. "[Recommendations] of the most senior HR executives working for America's largest employers on ... what can be done from a policy perspective to make the workplace work [include] ... [1] Increased portability of employee benefits that are not tied to tenure with a single employer.... [2] A tax-preferred system in the mold of a 401(k) that would help employees to save and pay off student loan debt sooner.... [3] Companies already providing generous paid leave benefits should have a federal safe harbor from being hampered by the varying requirements of state and local leave mandates.... [4] Protect the Tax Exemption of employer-sponsored health insurance (ESI).... [5] Federal legislation enabling employees to collect defined benefit plan retirement income earlier while permitting them to continue to work for their employer[.]"
HR Policy Association

Measuring Compensation Expenses (PDF)
"Employers can work systematically to align wage and benefit costs with product market values and targeted profits as follows: [1] Complete the Worksheet [in this article] for each employee, and compare with the BLS results for the employer's specific industry and employee categories ... [2] Redirect some Form W-2 Wages to indirect employer costs for pension and welfare benefits to achieve a compensation package for each employee reflective of his or her market value of production.... [3] Seek less expensive labor[.]"
H.C. Foster & Company

[Opinion]

Tax Reform Can Both Improve the Economy and Protect Employer-Sponsored Benefits
"Taxing employer-sponsored health insurance will not raise revenue, but instead will force employers to curtail their health benefits in order to avoid the tax.... A drastic shift to Roth contributions could undermine the entire retirement system in this country and undo the progress that has been made through widely favored pre-tax 401(k) plans."
The ERISA Industry Committee [ERIC]

Executive Compensation
and Nonqualified Plans

Could Your Incentive Plan Be Subject to ERISA?
"Many incentive or bonus plans make payments or deliver stock within 2-1/2 months after the end of the year the participant became vested in order comply with the short-term deferral exception of Code Section 409A. However, some incentive plans provide for accumulations, multi-year periods, and mandatory deferrals. These plans may unwittingly become subject to ERISA's requirements."
Winston & Strawn LLP

Press Releases

CAPTRUST Announces New Investment Chief
CAPTRUST Financial Advisors

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David Rhett Baker, J.D., Editor and Publisher  davebaker@benefitslink.com
Holly Horton, Business Manager  hollyhorton@benefitslink.com

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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