Retirement Plans Newsletter

June 8, 2017

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Contemporary SERP Design
June 21, 2017 WEBCAST
Executive Benefit Solutions

CEO Compensation Study
June 22, 2017 WEBCAST
Korn Ferry

Executive Compensation Tax Issues in M&A: Navigating IRS Rules for Stock Options, Deferred and Equity Comp, Golden Parachutes
July 6, 2017 WEBCAST
Strafford

Navigating DOL Investigations - Strategies from the Trenches in a Changing World
July 11, 2017 WEBCAST
ABA Joint Committee on Employee Benefits [JCEB]

ERISA Revenue Sharing Arrangements: Avoiding Plan Asset Status, Complying With Due Diligence Requirements
July 18, 2017 WEBCAST
Strafford

Managing the Generation Gap When Designing Benefit Programs
July 31, 2017 WEBCAST
Lorman Education Services

Advanced Investments Management
September 25, 2017 in PA
International Foundation of Employee Benefit Plans [IFEBP]

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[Official Guidance]

IRS List of Pre-Approved 403(b) Plans (PDF)
18 pages. List of 403(b) plan documents pre-approved as of May 28, 2017; published online June 8, 2017.
Internal Revenue Service [IRS]

[Advert.]

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[Guidance Overview]

DOL Fiduciary Rule: Ready, Set, Go! But How Far?
"What conditions apply under the new exemptions on June 9? ... Is the requirement to 'levelize' compensation required under the 'impartial conduct standards'? ... When do the rule and exemptions become applicable? ... What other topics do the FAQs cover? ... What does the nonenforcement policy cover? ... Is the DOL still considering changes to the rule and exemptions?"
Morgan Lewis

[Guidance Overview]

Identifying Highly Compensated Employees in an Initial or Short Plan Year
"Identifying a plan's highly compensated employees (HCEs) is critical to the operation of a qualified retirement plan. The definition of an HCE is set forth in IRC Section 414(q). This Snapshot discusses how to identify HCEs in a plan's initial plan year or in a short plan year."
Internal Revenue Service [IRS]

'Last Minute' Fiduciary Rule Check-In: What Plans and Arrangements Are Covered
"Some plans are not subject to the Rule, and some arrangements that are not actually IRAs are treated as if they were IRAs and therefore subject to the Rule. So, how are 'plans' and 'IRAs' defined?"
Drinker Biddle

House Committee Leaders Move to Overturn Flawed Fiduciary Rule, Strengthen Protections for Retirement Savers
"Rep. Phil Roe (R-TN), member of the House Committee on Education and the Workforce, and Rep. Peter Roskam (R-IL), chairman of the Ways and Means Subcommittee on Tax Policy, today introduced the Affordable Retirement Advice for Savers Act (H.R. 2823). The legislation would protect access to affordable retirement advice by overturning the Obama administration's flawed fiduciary rule while ensuring retirement advisors serve the best interests of their clients."
Committee on Education and the Workforce, U.S. House of Representatives

[Advert.]

Automatic Enrollment: The New Norm for Retirement Benefits?

Sponsored by Lorman and BenefitsLink

June 20 webinar. There may be a place for automatic enrollment, but not at the cost of jeopardizing your Plan's operational integrity or your fiduciary duty. CE Credits available. BenefitsLink discount


Church Plan Sponsors Should Take Action to Shore Up Exemption
"Any church-affiliated organization that has not established a formal governance structure for plans that it intends to treat as church plans should do so.... A church-affiliated employer that has already established a formal governance structure for its church plans may wish to consider a 'rebranding' ... of its plan administrative committee in a way that would help support the current and historic status of such committee as a principal-purpose organization.... Finally, any plan that is intended to be maintained as a church plan should be reviewed, and amended if necessary, to assure that it does not contain terms and provisions that invoke ERISA." [Advocate Health Care Network v. Stapleton, No. 16-74 (U.S. June 3, 2017)]
Verrill Dana LLP

ERISA 'Church Plan' Exemption Applies to Religiously Affiliated Hospital Plans
"Nonprofit religious organizations who have relied upon the church plan exemption can take some comfort from the Advocate Health Care Network decision, but they still must assess: whether they can establish 'principal-purpose organization' status; whether maintaining a church-plan exemption is worth the litigation risk; and whether complying with ERISA requirements is an acceptable alternative." [Advocate Health Care Network v. Stapleton, No. 16-74 (U.S. June 3, 2017)]
McGuireWoods LLP

Church-Affiliated Hospitals Fall Within ERISA's Church Plan Exemption
"Justice Sonia Sotomayor wrote a separate concurring opinion to express her concern over the possibility that the Court's decision could cause many employees who work for organizations that act and operate like secular businesses to be denied ERISA's protections. She invited Congress to correct the result because these 'organizations bear little resemblance' to those Congress considered when enacting the amendment." [Advocate Health Care Network v. Stapleton, No. 16-74 (U.S. June 3, 2017)]
Eversheds Sutherland

TE/GE Advisory Committee Recommendations for FICA Replacement Plan Requirements (PDF)
68 pages. "Currently the revenue procedure used for evaluating defined benefit plans ... includes only limited safe harbor alternatives referencing more traditional benefit formulas. The standard for defined contribution plans is based on a 7.5 percent employee and employer combined contribution rate of 'compensation.' ... [T]he guidance has not been updated to reflect the emerging trend to use hybrid plans, including cash balance plans, and combinations of defined benefit and defined contribution plans."
Advisory Committee on Tax Exempt and Government Entities [ACT], Internal Revenue Service [IRS]

Pension Plan De-risking Initiatives
"De-risking techniques can take two approaches: [1] Transfer the liability and risk to a third party, which could be the individual plan participant or an insurance company. [2] Retain the liability as part of the pension plan and apply de-risking techniques to manage overall risk.... With either or both approaches, pension plan de-risking strategies must align with the plan sponsor's long-term objectives, such as helping their plan participants prepare for a financially secure retirement. Most employers, however, manage toward a series of short-term objectives."
Findley Davies | BPS&M

Funded Status Drops in May by $22 Billion (PDF)
"The funded status of the 100 largest corporate defined benefit pension plans decreased by $22 billion during May ... The deficit grew to $279 billion from $257 billion at the end of April due to a decrease in the benchmark corporate bond interest rates used to value pension liabilities.... As of May 31, the funded ratio fell to 83.8%, down from 84.9% at the end of April. The funded status deficit and ratio at the end of May is almost spot-on to the level on December 31, 2016 even though the discount rate has declined 23 basis points."
Milliman

The IRA Investor Profile: Traditional IRA Investors' Activity, 2007-2015 (PDF)
88 pages. "Although relatively few traditional IRA investors contribute to their traditional IRAs in any given year, those that do contribute tend to do so in multiple years; this tendency persisted even from 2008 to 2015. Withdrawal rates rose slightly between 2008 and 2015, but still only a small fraction of younger traditional IRA investors took money out of their traditional IRAs."
Investment Company Institute [ICI]

The IRA Investor Profile: Roth IRA Investors' Activity, 2007-2015 (PDF)
96 pages. "Forty-eight percent of consistent Roth IRA investors aged 26 or older in 2015 contributed to their Roth IRAs between tax year 2008 and tax year 2015, and about 80 percent contributed in multiple years.... Withdrawal rates rose slightly between 2008 and 2015, but still only a very small fraction of Roth IRA investors took money out of their Roth IRAs."
Investment Company Institute [ICI]

[Opinion]

ERIC Testimony to ERISA Advisory Council on Mandated Disclosures for Retirement Plans (PDF)
"Prior to this position in human resources, as a lawyer and policymaker in Washington, DC, I was naïve to the impact laws and regulations can have on plan sponsors and participants.... I now firmly believe that the decades of laws, regulations, and court decisions since the enactment of ERISA in 1974, coupled with a decrease in financial education programs in schools and communities, have caused the retirement industry to be overly complex and intimidating for a large segment of plan participants.... [E]mployers can only do so much when in place are laws, regulations, and legal precedence that impede their ability to educate their employees."
Will Hansen, for The ERISA Industry Committee [ERIC]

Benefits in General

[Guidance Overview]

AICPA Proposal Would Require Auditors to Perform More Tests and Provide More Information in Reports on ERISA Plans (PDF)
"[T]his requirement could result in the auditor reporting information that the plan sponsor has no obligation to report in the financial statements or the annual Form 5500 the plan files with the DOL. Because the auditor's report is attached to the Form 5500, plan participants and regulators would have access to it. As a result, regulators could learn about plan errors before the plan administrator has a chance to correct them ... This requirement could result in more work for the auditor, the plan sponsor and the plan's ERISA counsel ... If this requirement is included in any final standard, plan sponsors may want to consider performing internal compliance reviews to prepare for their annual financial statement audits."
EY

Benefits Enrollment Communication Errors to Avoid
"Underestimating the value of a strong visual identity, including a benefit program name ... Using long emails with multiple attachments to share benefit information ... Communicating with employees only before, during and immediately after the open enrollment window ... Sending enrollment packets that include contract-like carrier materials and legal notices ... Relying on a single communication channel to convey benefit information."
Willis Towers Watson

Executive Compensation
and Nonqualified Plans

CEO Pay Disclosure: Preparing for Compliance or Hoping for a Delay?
"The final Pay Ratio Disclosure rule requires public companies in the U.S. to disclose the ratio of CEO pay to median employee pay with their 2018 proxy statements, with reporting based on fiscal year 2017 pay.... As companies consider their approach to pay ratio calculations, it's time to think through an overall strategy.... Employees generally question their pay appropriateness, so it's important for you to be prepared if they react strongly to the pay ratio and the median employee pay figure used to calculate it."
Willis Towers Watson

Discussions on
the BenefitsLink Message Boards

Distribution Accidentally Paid by Employer, Not by Plan
"While preparing the 12/31/2016 accounting for a pooled profit sharing plan, I found out that the employer used its corporate checking account to pay a terminated participant her vested balance of $684 in April 2016. Her account is in safe harbor non-elective funds, so she was 100% vested. Because it wasn't paid from the plan's account, no taxes were withheld and no 1099-R was issued. The employer did not include the amount on the former employee's W-2. I know the plan cannot reimburse the employer, but I'm not sure how to fix this. Can the plan pay her the $684 and she then write a check back to the employer?"
BenefitsLink Message Boards

Failure to Issue Form 1099-R for P.S. 58 Cost of Life Insurance
"What are the consequences of a failure to issue a Form 1099-R for the P.S. 58 cost of life insurance inside a profit sharing plan? My thinking is it is the same as the failure to issue any other 1099-R -- i.e., a reporting failure which is $250 penalty per incident."
BenefitsLink Message Boards

ROBS Promoter Is Fiduciary Under New DOL Rule?
"Under the new DOL Fiduciary Rule, wouldn't a promoter of a ROBS plan (Rollover as Business Start-Up) be a fiduciary? They are being paid a fee to recommend the client move funds from an IRA to a qualified plan for the purpose of purchasing employer stock."
BenefitsLink Message Boards

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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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