Retirement Plans Newsletter

May 9, 2017

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ERISA Consultant
Benefit Consultants Group
in NJ

Compliance Coordinator / Senior Plan Administrator
Scholz & Friends Enlightened Retirement Group, Inc.
in TX

ESOP Administrator
Newport Group
Telecommute

Participant Services Representative
Newport Group
in NC

Director, Account Management
Lincoln Financial Group
in IN

Defined Benefit Client Relationship Manager
Niles Lankford Group
in AZ, CA, IN

Mid-Level Pension Plan Administrator
Robin S. Weingast & Associates, Inc.
in NY

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Fourth Circuit's 'Would Have' Standard Exonerates Fiduciaries' Decision to Divest Company Stock After Corporate Spin-Off
"Elaborating somewhat on how the 'would have' standard should be applied, the Fourth Circuit stated that the fiduciaries' burden was to show 'by a preponderance of the evidence that a prudent fiduciary would have acted' as they did.... Plan fiduciaries hoping that the Fourth Circuit would further define how to gauge whether a prudent fiduciary 'would have' taken a particular action or the relationship between establishing a breach and loss causation will be left unsatisfied." [Tatum v. RJR Pension Inv. Comm., No. 16-1293 (4th Cir. Apr. 28, 2017)]
Miller & Chevalier

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Fundamentals of 401(k) Plans Workshop Registration open

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NAFA Launches Campaign to Stop DOL Fiduciary Rule
"The National Association for Fixed Annuities has launched a grassroots campaign to appeal directly to the Trump administration as well as to Labor Secretary R. Alexander Acosta to stop the [DOL's] fiduciary rule from taking effect on June 9."
ThinkAdvisor

401(k) Fiduciaries: Is it Time to Hone Your Processes? (Part Two)
"Advisors can help [plan fiduciaries] [1] Establish and run processes that demonstrate they have leveraged the lowest cost fees based on their plan size and servicing needs.... [2] Be market aware and have a basic understanding of industry fees and practices. [3] Articulate why one investment was chosen over the other. [4] Dig down deeper in understanding whether actual fund plan investments align with investment objectives."
Fiduciary Plan Governance, LLC

Outsourced Chief Investment Officers: Challenging Five Common Myths
"For plans that do not have in-house investment capabilities, the outsourced chief investment officer (OCIO) model is a means of filling the gap between the resources required to run efficient investment strategies and the typically constrained governance budget of a pension plan. The OCIO (also known as a fiduciary manager) implements an investment strategy within boundaries set by the investment committee, allowing high-level decision makers more time to focus on key strategic issues and long-term plan goals. The concept is fairly simple, but the implementation can be less easy to visualize."
Willis Towers Watson

How Freelancers in America Are Keeping Up With Their Retirement Preparation
"Around 38% of the respondents do not save for retirement because of their inability to generate enough income.... As many as 12% freelancers said that retirement plans are too expensive ... [F]reelancers are in favor of a portable retirement plan, which allows them to make contributions even when working with different employers. Further, they require a plan that supports intermittent contributions."
Dmitriy Fomichenko, Sense Financial, via 401kHelpCenter.com

[Advert.]

2017 SPARK National Conference -- June 1-2, National Harbor, MD

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The retirement services industry's leading event for top marketing, sales, administration and record keeping professionals. Comprehensive agenda is designed to meet the needs of 401(k) Plan Providers, Financial Advisors and Third Party Administrators.


Multiemployer Pension Funding Study, Spring 2017
"This study reports on the estimated funded status of all U.S. multiemployer plans as of December 31, 2016, and shows the change in funding levels from June 30, 2016. The aggregate funded percentage for multiemployer plans is estimated to be 77% as of December 31, 2016, compared with 76% as of June 30, 2016. The estimated 2016 calendar year investment return for our simplified portfolio was about 7.70%, which would produce a slight gain versus most plans' investment return assumptions."
Milliman

How Will Larger Retiree Populations Affect Investment Returns?
"Economic theory suggests that retirees draw down their assets, so a higher retiree-worker ratio reduces the supply of saving, thereby increasing investment returns. However, research generally shows that retirees draw down their wealth much more slowly than expected, particularly the wealthy who hold most of the assets. Therefore, retirees still hold substantial assets, leading to a greater supply of savings and a decrease in investment returns. To the extent that investment returns decrease, workers will need to save more to maintain their standard of living in retirement."
Center for Retirement Research at Boston College

Retiree-Employee Ratios Are Dooming the Multiemployer Pension
"Even as Congress has taken steps to solve the multiemployer pension problem, the plans continue to face a death spiral. In fiscal year 2016, 10 multiemployer plans went insolvent and requested financial assistance from the PBGC. The federal agency is now giving financial assistance to a record-high 71 multiemployer plans."
Bloomberg BNA

Closing a Governmental Pension Plan Increases Costs for Taxpayers
"In 1997, Michigan closed the Michigan State Employees' Retirement System (MSERS), the pension plan for state employees.... [E]mployer contributions to MSERS have risen sharply, from $145 million to $750 million, in the years since the plan was closed to new hires in 1997. This has occurred even as the payroll base has declined by more than $1 billion."
National Public Pension Coalition

Equities Drive First-Quarter Gains for Plan Sponsors
"Institutional plan sponsors netted investment gains of 4.2 percent at the median in the first quarter of 2017... While Corporate ERISA plans had the largest allocation to fixed income, they also had the largest allocation to high yield, emerging market debt and longer duration investment grade bonds, all of which returned noticeably more than traditional core bonds."
Northern Trust

Pension Indicator, April 2017
"While assets continued on an upward trajectory, this was more than offset by lower bond yields. Regardless, with just two months left before the common June 30 fiscal year-end, plan sponsors are looking at some welcome relief on their balance sheets."
Findley Davies | BPS&M, and Hartland

Annuity and Life Insurance Product Update, Q1 2017
"This slide deck examines new product releases from annuity carriers and life insurers ... [It provides] a rundown of the new products introduced on the firms' websites in the first quarter of 2017 and highlight[s] their key features."
Corporate Insight

[Opinion]

Could Small Plan Formation Be a First Casualty of Tax Reform?
"[U]nder President Trump's draft proposal, these small business owners -- partnerships, S Corporations, REITs, RICs and small business limited liability corporations -- would only be subject to a 15% maximum tax on pass-through income. On the other hand, if they invest that money in a retirement plan, when withdrawn it would be taxed at the maximum ordinary income rate, which could be in the neighborhood of 35%."
Nevin Adams, for National Association of Plan Advisors [NAPA]

[Opinion]

State IRA Plans Are Deeply Flawed
"There's no sense in addressing a national issue with state-by-state solutions.... State IRAs also carry unavoidable design defects.... State IRAs are inferior to 401(k)s.... Writing 50 rulebooks to do one book's work makes little sense. Also, the U.S. retirement system needs less fragmentation and more portability, not the reverse. But ignoring the problem simply won't do."
John Rekenthaler, in Morningstar Advisor

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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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