Retirement Plans Newsletter

May 16, 2017

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Contributions Associate
Professional Capital Services
in PA

Retirement Plan Administrator / Pension Consultant
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in NY

Sr. Relationship Manager
TD Ameritrade
in CO

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Third Party Administrator Team Lead
Retirement Plan Consultants
Telecommute

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Nationwide Insurance
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Webcasts and Conferences

Mastering Form 5500 Schedule H: Avoiding Audit Triggers
May 18, 2017 WEBCAST
Strafford

Alternative Investments in ERISA Retirement Plans: Mitigating Liability Risks for Hedge and Private Equity Funds and Pension Plan Fiduciaries
May 24, 2017 WEBCAST
Strafford

Workplace Fringe Benefits
May 25, 2017 WEBCAST
Cowden Associates, Inc.

Employer Benchmarking Survey Results
May 30, 2017 in TX
Worldwide Employee Benefits Network [WEB] - Dallas Chapter

2017 Wellness: Generational Wellness: Bridging the Gaps in Your Organization
June 7, 2017 in MA
New England Employee Benefits Council

Administrative Services Agreements for Health & Welfare Plans
June 15, 2017 WEBCAST
Thomson Reuters / EBIA

Employee Wellness Challenges: Keeping Them Well, Keeping You Compliant
June 15, 2017 WEBCAST
New England Employee Benefits Council

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[Official Guidance]

PBGC Monthly Interest Rate Statement for May 2017
Listed and described are rates that change each month (ERISA 4022 Lump Sum Interest Rates and Variable-Rate Premiums) and rates that change each calendar quarter (ERISA 4044 Annuities, Late Premium Payments and Late Withdrawal Liability).
Pension Benefit Guaranty Corporation [PBGC]

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[Guidance Overview]

Credit Quality Declines Won't Trigger PBGC Review (PDF)
"[T]he PBGC removed two items that were listed in its guidance in December as possible triggers for the agency's attention under the program: a significant drop in a sponsor's credit rating and a downward trend of a sponsor's cash flow or other financial factors."
Keightley & Ashner LLP, via Bloomberg Law Pension & Benefits Daily

Principal Life Must Defend Class Action Over 401(k) Funds
"In certifying a proposed class of about 41,000 investors, a federal judge ... [held] that the lawsuit involved common issues related to Principal's conduct and potential status as a fiduciary under [ERISA].... The lawsuit attacks Principal's guaranteed interest funds ... The investors say that Principal reaps unreasonable profits from these investments by paying investors too small a portion of the returns Principal receives from the underlying investments." [Rozo v. Principal Life Ins. Co., No. 14-0463 (S.D. Ia. May 12, 2017]
Bloomberg BNA

Fee Litigation 2016 Round-Up: Mitigating Risk in the Face of Expanding Targets and Theories of Fiduciary Liability (PDF)
17 pages. "Employees, not employers, bear the risk of investment performance in defined contribution plans, and they also pay the cost of investment management and administrative fees for the plans. The enhanced role of 401(k) plans has thus put increased pressure on plan performance and, since 2006, has led to multiple waves of [ERISA] litigation challenging the fees and the selection of mutual fund and other investments offered in the plans. The latest wave of litigation began in late 2015 and continued throughout 2016 and also introduced the first large wave of cases challenging the fees and investment offerings in 403(b) plans."
Robert Rachal, Myron D. Rumeld, and Tulio Chirinos, via Benefits Law Journal

How 401(k) Plan Design Can Increase Retirement Savings
"[1] More is not better. Have a limited number of high-quality investment choices.... [2] Have a good default investment for participants who don't choose their own.... [3] Monitor fees.... [4] Add managed accounts as a choice.... [5] Implement auto-enrollment and auto-escalation.... [6] Offer lifetime income options.... [7] Limit in-service withdrawals and loans.... [8] Seek professional advice."
PenChecks

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Default Deferral Rates for DC Plans Get a Nudge Upward
"Defined contribution plans that offer auto enrollment are moving away from the traditional initial deferral of 3% of annual salary to higher amounts -- sometimes to 6% or more -- nudging participants to expand their contributions."
Pensions & Investments

Listen to Your Participants: Don't White Label 401(k) Investment Funds
"The process of white labeling obscures the identity of the fund(s) being used.... [It] leads to participant confusion and lack of trust.... Hiding the identity of funds and fund companies would seem to be a stumbling block to achieving better participant understanding.... It hides complex investment strategies ... It obscures fund changes ... It's hard to obtain objective information ... It hides the impact of superstar managers[.]"
Lawton Retirement Plan Consultants

Could a Switch to Roth Be Good for Retirement Security?
"[T]he break-even point in terms of where the tax advantages of Roth at the back end in retirement largely equal out the advantages of deferral at the front end lies at a 9.1% reduction in contributions. Beyond that point, the Roth option (and the assumed reduction in retirement savings) worsens the retirement savings shortfall -- though even assuming a 25% reduction, the shortfall deepens by a mere 2.6%."
American Society of Pension Professionals & Actuaries [ASPPA]

Income Illiteracy May Favor Simple Annuities
"Asset allocation, the 4 Percent Rule retirement portfolio withdrawal mantra, return on asset classes, tax implications, Social Security strategies -- many of these concepts in retirement finance are lost on millions of retirees. But talking to retirees about investing all or a portion of their $200,000 nest egg into an income annuity generating $700 a month for the rest of their lives? It doesn't get much easier than that[.]"
InsuranceNewsNet.com

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Fidelity's Approach to DOL Fiduciary Rule Rankles Some Investment Advisers
"For some smaller DC plans with less than $50 million, Fidelity is amending client contracts through negative consent ... This is done via an addendum to existing service agreements authorizing Fidelity to provide ERISA fiduciary investment advice to participants once the DOL rule comes into force ... For larger plans, Fidelity is being more explicit in terms of plan sponsors' ability to opt out of participant-level fiduciary services by presenting employers with a communication that seeks their active confirmation[.]"
InvestmentNews

Why Wait to Retire to Take Control of Your 401(k)?
"If you're 59-1/2 years old and still working, you have the ability to roll over money from your 401(k) into an IRA.... There are four reasons why you should consider an in-service rollover: [1] You are in control of your money.... [2] An IRA gives you more investment options to choose from.... [3] There are more safe havens for your money in an IRA.... [4] You can automatically set up your account as a multigenerational IRA (or 'stretch IRA')."
Chad Slagle, via Kiplinger

Social Security and Total Replacement Rates in Disability and Retirement
"[A]bout half of the 10-percentage-point advantage in Social Security replacement rates for SSDI beneficiaries is due to the actuarial adjustment applied to retirement benefits, implying that career earnings are not that different between retired workers and SSDI beneficiaries. But total replacement rates are substantially lower for SSDI beneficiaries, which indicates that, despite Social Security's vital role in providing a reliable income source, SSDI beneficiaries have much lower post-career well-being than retired workers."
Center for Retirement Research at Boston College

The Growing Gap in Life Expectancy by Income: Recent Evidence and Implications for the Social Security Retirement Age (PDF)
34 pages. "This report provides a brief overview of the concept of life expectancy, how it is measured, and how it has changed over time in the United States. While life expectancy may be studied in a variety of contexts, this report focuses on the link between life expectancy and [socioeconomic status], as measured by lifetime income. In particular, this report synthesizes recent research on [1] the life expectancy gap by in come and [2] the relationship between this gap and Social Security benefits. Finally, this report discusses the implications of this research for one type of Social Security reform proposal: increasing the Social Security retirement age." [CRS Report R44846, May 12, 2017]
Congressional Research Service [CRS]

Discussions on
the BenefitsLink Message Boards

Former Employer Says DB Plan Was Frozen Many Years Ago But Didn't Tell Us
"My former employer just sent me a letter saying the pension plan in which I participated has been terminated, with a description of my benefit that's much smaller than I expected. I called the plan's actuary, who says my employer had frozen the pension formula nine years ago while I was still working there, but neither I nor any of the several employees I've spoken to remembers being informed of the plan being frozen. Anything we can do?"
BenefitsLink Message Boards

Fixing Unallocated Contributions: How to Handle Earnings?
"The plan sponsor incorrectly reported that an HCE had made deferrals in an amount that was $5,000 more than the deferrals he actually had made. The plan sponsor contributed the $5,000 into the trust during the plan year. We can adjust the HCE's account so that it does not credit him with the $5,000 or its earnings, and we can use the $5,000 to reduce the plan sponsor's next contribution. What should we do with the earnings, though?"
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Lois Baker, J.D., President  loisbaker@benefitslink.com
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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