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Identifying Plan Assets Is Not as Easy as It Seems
"[T]he DOL has indicated that plan assets are to be identified on the basis of ordinary notions of property rights under non-ERISA law and to include any property -- tangible or intangible -- in which a plan has a beneficial ownership interest ... Federal courts have accepted this definition as a reasonable one ... although it may still be difficult to apply -- for example, in determining whether the data of participants that plans obtain is a plan asset, an issue that is relevant in determining the presence of fiduciary obligations in the context of cybersecurity. Recent court cases illustrate this principle."
Marcia Wagner, via planadviser
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Putnam, Fidelity Win 401(k) Lawsuits
"A federal judge shot down plaintiffs' arguments that Putnam breached its fiduciary duty to its own 401(k) plan participants by "stuffing" the plan with Putnam-affiliated investment funds, without regard to cost, performance or other metrics.... The Fidelity lawsuit, Ellis et al. vs. Fidelity Management Trust Co., concerned the firm's alleged mismanagement of a stable value fund. Plaintiffs claimed the fund's low investment returns and high fees made it an imprudent investment for 401(k) plan participants."
Pensions & Investments
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Target Wealth: The Evolution of Target Date Funds
16 pages. "Based on a model with parameters fitted to historical returns, and also on model independent bootstrap resampling, ... constant proportion strategies give virtually the same results for terminal wealth at the retirement date as target date strategies. This suggests that the vast majority of Target Date Funds are serving investors poorly. However, if we allow the asset allocation strategy to adapt to the current level of the total portfolio value, significantly lower risk of terminal wealth can be achieved, at no cost to its expected value."
Peter Forsyth, Kenneth R. Vetzal, and Graham Westmacott, Via SSRN
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Task Force Develops Small Plan RFP Template
"[A] special joint NAPA/CIkR task force has developed a template designed to make it easier to obtain a consistent, apples-to-apples comparison of service features from 401(k) recordkeepers.... The NAPA Recordkeeping Platform Assessment Template deals with three key service aspects: [1] Administration Fee Detail (including per-participant, asset-based, and participant and document services); [2] Plan Service Highlights (including data submission, reporting and testing, and call center services); [3] Investment Program Overview (including fund menu requirements, and revenue-sharing methodology)."
American Society of Pension Professionals & Actuaries [ASPPA]
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Pension Crisis Won't Be Reversed by High Returns, Moody's Says
"A 'best case' scenario of a cumulative 25% investment return during the 2017-2019 period will not offer a respite for chronically underfunded U.S. public pension plans ... The growing gap between how much state and local governments are projected to pay employees and how much funds they actually have set aside has risen to over $4 trillion nationwide. New Jersey sports the widest funding gap, followed closely by Kentucky and Illinois."
Bloomberg
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U.S. Public Pension Plan Contribution Indices, 2006-2014 (PDF)
"In every year studied, most of the 160 plans with enough data to complete analysis for the year received insufficient employer contributions to maintain their unfunded liabilities ... For 2014, 3% of plans showed a funding surplus and 20% of plans received enough employer contributions to fund their shortfall within 30 years without it growing through negative amortization in the meantime. Employer contributions for the same 130 plans increased 76%, from about $48 billion in 2006 to roughly $85 billion in 2014. Employee contributions increased 30% during this period, from $28 billion to $37 billion, while payroll and prices both increased 17%."
Society of Actuaries
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State and Local Government Contributions to Statewide Pension Plans, FY 2015 (PDF)
"The median actuarially determined contribution [ADC] received in FY 15 was 100 percent, and ranged from 12 percent to 528 percent.... On a dollar-weighted basis, the average ADC received was 91 percent, up from 87 percent in FY '14 and marking the highest aggregate annual contribution effort since FY '02.... The aggregate rate of increase in required contributions from FY '14 to FY '15 was 4.5 percent, which is the lowest rate of increase during the measurement period."
National Association of State Retirement Administrators [NASRA]
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Trump Tax Proposal Could Create Compensation-Related Opportunities
"A change in value of corporate tax deductions could, with proper tax planning, provide opportunities for substantial savings on compensation plans and arrangements. In the short term, potential savings would be possible from tax deductions on annual cash bonus payments and retirement plan contributions, while the long-term impact could involve significant changes to the structuring of compensation plans."
Skadden, Arps, Slate, Meagher & Flom LLP
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[Opinion]
The CFP Board's Thunderbolt Fiduciary Play Should Proceed and Likely Will
"In what may be a giant step forward for investors and the advice business, the Certified Financial Planner Board of Standards is proposing to make its CFP certificants 'fiduciaries at all times.' It may also be death knell of sorts for the suitability standard that allows financial advisors greater latitude in choosing how and when investors' interests get put ahead of their own."
RIABiz
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[Opinion]
Texas Board Aims to Kneecap 403(b) Participant Choice, Providers
"[The Texas Teachers Retirement System (TRS) Board of Trustees] is required by law to review and consider for re-adoption each of its rules every four years. This cycle, the Board has devoted its review to its fee-capping authority, registration fees and parameters for companies to enter the system and sell products. Of the thousands of products currently registered to be marketed in the Lone Star State, it appears that almost none would make the cut, potentially sending providers packing and leaving teachers with dramatically fewer choices."
National Tax-Deferred Savings Association [NTSA]
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[Opinion]
ARA Recommendations for the 2017-2018 IRS Priority Guidance Plan (PDF)
"ARA recommends that the IRS: [1] [A]ddress issues related to mid-year changes to safe harbor plans.... [2] Provide guidance on the determination of affiliated service groups and management groups.... [3] Provide a method to obtain a ruling on affiliated service group status by reopening the determination letter process for this purpose.... [4] [A]ddress issues related to the changes to the determination letter program for individually designed plans.... [5] [F]inalize the expansion of the pre-approved plan document program as indicated in IRS Announcement 2014-41 to permit pre-approved cash balance plan and ESOP documents."
American Retirement Association [ARA]
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Benefits in General
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Tide Is Turning Against Discretionary Authority and the Abuse-of-Discretion Standard of Review (PDF)
"[L]egislators, courts, and regulators have all moved to severely limit the discretion of plan administrators and walk back the deference traditionally afforded their decisions under the deferential, abuse -of-discretion standard of review.... Because of the Orzechowski decision, ERISA plans in California, and maybe elsewhere in the Ninth Circuit, that rely on a 'policy, contract, certificate, or agreement' have now lost the benefit of deferential judicial review.... The Second Circuit has abandoned the 'substantial compliance' doctrine and held that even minor violations of the [DOL] claim regulations deprive a plan administrator of the abuse-of-discretion standard of review."
Groom Law Group
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Executive Compensation
and Nonqualified Plans
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Discussions on
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Contribution of Real Property to a DB Plan
"I know that several large companies, such as Anheuser-Busch and Coca Cola, have contributed real property to their pension plans (rather than cash). Have you seen this done by smaller companies as well? Where can I find individual prohibited transaction exemptions so that I can see what criteria the DOL uses in granting an exemption?"
BenefitsLink Message Boards
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Handling Required Minimum Distributions After Plan Termination
"A single-participant DB plan terminated on 12/31/2016. The participant turns 70-1/2 today. If the plan had not terminated, he would be taking his first annual annuity installment on April 1, 2018. The plan distributes its assets in a few weeks. Will he need to take his first RMD as part of his full distribution?"
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BenefitsLink.com, Inc.
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Lois Baker, J.D., President
David Rhett Baker, J.D., Editor and Publisher
Holly Horton, Business Manager
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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