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May 19, 2017 logo logo
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[Guidance Overview]

Recent Legislation Impacts Puerto Rico Tax-Qualified Retirement Plans
"[S]ome of the main changes adopted by the Act include ... New maximum on contributions ... New definition of Highly Compensated Employee (HCE) ... New safe harbor for Cash or Deferred Arrangement (CODA) Plans ... Although the Act was effective immediately and, technically speaking, requires Puerto Rico qualified plans to adopt amendments incorporating its provisions ... PR Treasury officials informally instructed [practitioners] ... to wait before adopting and implementing the Act until PR Treasury examines the scope of the new qualification requirements and issues guidance regarding their implementation."
McConnell Valdes


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House Committee: 401(k) Fiduciary Rule 'Hurts Those Intended to Help'
"The House subcommittee on Health, Employment, Labor, and Pensions held a hearing [May 18] to 'examine regulatory barriers facing workers and families saving for retirement.' Members discussed the need to protect workers and small businesses from what they see as a flawed fiduciary rule, which they claim would restrict access to affordable retirement advice. Members also discussed bipartisan solutions to make it easier for small businesses to provide retirement benefits to their employees."
401K Specialist

Trump's 'Lawless' Behavior with Fiduciary Rule Undermines Process, Bullard Says
"[University of Mississippi law professor and founder of Fund Democracy] Mercer Bullard, a strong advocate of the [DOL's] fiduciary rule, argues such a standard should have been adopted 'decades ago' and the department's current 60-day delay could hurt future rulemaking. Bullard ... is puzzled by the delay, arguing the rule had one of the most thorough vettings.... 'Half-a-dozen court rulings have found that the rule is well-justified,' he recently [said].... 'No agency will ever again allow for a compliance period that runs into another administration if it knows this type of lawless behavior will lead to a rule being rejected by the new administration without any analysis.' "

Trump Signs Measure Ending Safe Harbor for State-Run Private-Sector Plans
"Legislation removing safe harbors for states to implement private-sector retirement programs was signed [May 17] by President Donald Trump, who signed a similar measure against cities and large political subdivisions on April 13. Rep. Tim Walberg, R-Mich., chairman of the Education and the Workforce Subcommittee on Health, Employment, Labor, and Pensions, in a statement called the safe harbors 'a misguided regulatory loophole that would discourage small businesses from providing retirement benefits and put the hard-earned savings of workers at risk.' "
Pensions & Investments

The Effect of Rising Interest Rates on Stable Value Accounts
"In this environment, stable value products could provide a smoother ride than traditional bond funds. These lower-risk accounts can be a smart choice for the conservative fixed income portion of a portfolio, as they avoid the losses likely to hit bond funds, while delivering higher returns than money market funds. These accounts are specifically designed to protect principal in defined contribution (DC) plans, regardless of interest rate fluctuation."
Cammack Retirement Group


EPCRS: Correct Plan Errors and Minimize Penalties

Sponsored by Lorman and BenefitsLink

May 31 webinar will discuss common retirement plan errors and pre-approved methods of correction, as well as tips and practices that can help avoid future problems. Presented by Blake C. MacKay, of Alston & Bird LLP. BenefitsLink discount

First Quarter 2017 Annuity Sales Decline
"U.S. annuity sales were $52.0 billion, a slight uptick from [the] fourth quarter, but a 12 percent decline from the first quarter 2016 ... In the first quarter, variable annuity (VA) sales totaled $24.4 billion, down eight percent. There has only been one quarter of growth when compared to prior years since 2012."

DOL Could See Lawsuit by Fiduciary Rule Supporters
"The department 'should expect to be challenged vigorously in court' if the two provisions of its fiduciary rule that are set to go into effect June 9 -- the revised definition of the term fiduciary and the impartial conduct standard -- are delayed again, Stephen Hall, legal director of the advocacy group Better Markets [said] ... A legal challenge from rule supporters would likely be brought under the Administrative Procedure Act[.]"
Bloomberg BNA


Why Raising Social Security's 'Full Retirement Age' Is a Bad Idea
"[T]he retirement age has little to do with how long people work, and a lot to do with how much money they get.... [As] the FRA rises from 66 to 67, the worker retiring at 62 sees his monthly benefit cut from 75% to 70%of the full benefit. The worker who increases his retirement age from 66 to 67 sees no cut in the monthly benefit but receives benefits for one less year, reducing his lifetime benefit. So raising the FRA is a cut in benefits either way."
Alicia H. Munnell, in MarketWatch


New Jersey's Stupid Pension Trick: Let's Use Lottery Money!
"The lottery cash is already being used for something. Moving that cash to the pensions means they have to decide to cut something else. Which they would have to do if they simply said 'we're putting more cash in the pensions'. "

Benefits in General

Two Recent Cases Illustrate Costs of Ignoring Process in Benefits Administration
"In neither case was it likely that problems arose due to a lack of knowledge of the specific rules that should have been followed; what may have been lacking is a good understanding of why it's important to follow those rules.... [E]stablishing, following, and monitoring a compliant process matters. And if the rules seem unworkable, see if you can re-work them and find a way to comply. The cost of noncompliance can be steep."
Stinson Leonard Street

Discussions on
the BenefitsLink Message Boards

Vesting of Rehired Participant's Account After Change in Vesting Schedule
"Participant was hired when the plan had immediate vesting. He leaves for 20 years and then is rehired, but now the plan's formula is the common 2-to-6 year graded vesting schedule. His account in the plan was never distributed, so we know that his current account is vested. But must future accruals be fully vested when made, for this participant?"
BenefitsLink Message Boards

Cash-outs Under $200: Withholding Required?
"We have always operated with the understanding that plan may simply pay out terminated participants with less than $200, of course with nothing withheld. Does anyone have a reference we can cite authorizing the plan to do this? We have plan trying to clear out old dead wood and several people have balances well below the $200."
BenefitsLink Message Boards

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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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