Retirement Plans Newsletter

June 23, 2017

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State-Wide Schools Cooperative Health Plan
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Webcasts and Conferences

Individual and Small Group Markets: An Actuarial Perspective on the Proposed Market Changes
RECORDED
Society of Actuaries

The Individual Market at a Crossroads: Health Insurance in 2017 and Beyond
RECORDED
Alliance for Health Reform

Capitol Hill Briefing — Multiemployer Pension Plans: Potential Paths Forward
June 27, 2017 in DC
American Academy of Actuaries

2017 Federal Group Health Plan Mental Health Rules Update
June 27, 2017 WEBCAST
Solutions Law Press, Inc.

Qualified Separate Line of Business (QSLOB)
July 6, 2017 WEBCAST
FIS Relius Education

Basics of Traditional IRAs - Establishing / Contributions
July 11, 2017 WEBCAST
Collin W. Fritz & Associates, Ltd.

Basics of Traditional IRAs - Distributions
July 11, 2017 WEBCAST
Collin W. Fritz & Associates, Ltd.

Church Plans After Advocate Health Care Network: Future Implications for Religiously-Affiliated Employers
July 12, 2017 WEBCAST
American Law Institute Continuing Legal Education Group [ALI CLE]

ERISA Breach of Fiduciary Duty Class Actions: Avoiding and Defending Claims Against Companies and Fiduciaries
July 25, 2017 WEBCAST
Strafford

401(k) Fiduciary Rules: What’s New and What’s Next?
July 26, 2017 WEBCAST
Thomson Reuters / EBIA

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Discussions

New Topics on the BenefitsLink Message Boards

New Comments and Topics

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Impact of the DOL Fiduciary Rule on Independent Insurance Agents
"[S]uggesting that an investor take money out of his IRA to purchase a life insurance policy would be fiduciary advice.... [The prudence requirement] does not require agents to guarantee a future outcome. But it does require agents to go through a thorough and well-documented series of steps.... The 'impartial conduct standards' require that the agent act in the best interest of the client and not make misleading statements in any information provided to the client."
Drinker Biddle

[Advert.]

Online Learning Course: Fiduciary Responsibilities for ERISA Plans - BenefitsLink discount

Sponsored by International Foundation of Employee Benefit Plans [IFEBP]

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Oregon Retirement Savings Program Amends Enrollment Language
"The temporary rule inserts language to clarify that if an employee has not established an IRA after being notified and having been given an opportunity to opt out of the program, an IRA will be established for that employee under directives and procedures the ORSP Board establishes."
National Tax-Deferred Savings Association [NTSA]

Voya's Win in 401(k) Fee Suit Involving Financial Engines Bodes Well for Other Record Keepers
" 'The court here has said that an entity can be a fiduciary for some purposes and not others, and with respect to this fee issue, Voya was not a fiduciary,' [attorney John Utz] said. 'It was not a fiduciary because it wasn't acting as a fiduciary in negotiating fees, and ... once the arrangement was in place, there was not anything Voya could do to control its compensation.' Voya, for example, couldn't control the number of participants using the personalized advice services offered in the Nestle 401(k) plan." [Patrico v. Voya Financial, Inc., No. 16-7070 (S.D.N.Y. June 20, 2017 ]
Pensions & Investments

Removing the Legal Impediments to Offering Lifetime Annuities in Retirement Plans
"Longevity risk ... is the greatest risk facing retirees in the U.S. today. Government policies could require plan sponsors to include lifetime income products in their investment options or provide tax incentives that encourage their use. To broaden the range of permissible lifetime income products, the federal government could allow low-cost products that pool risk among participants."
TIAA Institute

Putting the Pension Back in 401(k) Plans
"[Lifetime Income Annuities (LIAs)] are most beneficial to plan participants who optimally commit 8% to 15% of their plan balances at age 65 to an LIA that starts payments at age 85. Plan sponsors can integrate LIAs as defaults in their plans by converting as little as 10% to 15% of retiree plan assets."
TIAA Institute

[Advert.]

IRS Determination Letter: Recent Changes and New Guidance

Sponsored by Lorman and BenefitsLink

July 27 webinar. Learn how employers can ensure that their individually designed retirement plans, with various amendments and design changes, remain in compliance with the voluminous requirements for tax-qualified status. CE Credits. BenefitsLink discount


Target Date Funds, Annuitization and Retirement
"Financial/portfolio risks and mortality risks are independent and separable, so holdings including annuities can capture both completely. The target-date funds framework without annuities does not allow someone with a limited bequest motive to insure idiosyncratic mortality risk. The study's results support the use of target-date fund products within annuitized vehicles."
TIAA Institute

Financial Communications and Asset Allocation Decisions
"Communication media and format have large effects on reading style, which can affect comprehension. Print encourages a more systematic, deeper reading style compared to an online format. Charts attract visual attention. Comprehension and individual differences (especially risk tolerance and financial self-confidence) have large effects on asset mix decisions."
TIAA Institute

Millennials Make Greatest Gains in 401(k) Plan Participation
"Millennials have demonstrated the biggest gains in the percentage of those participating in their 401(k) plans over the last five years, with an increase of 13.3%. They're also the most-diversified generation, with 83% meeting Wells Fargo's minimum diversification goal.... In addition, 30% of millennials contribute enough to maximize their full employer match when one is offered."
Wells Fargo

How Do Distributions from Retirement Accounts Respond to Early Withdrawal Penalties?
"Crossing the age 59-1/2 threshold leads to a $1,600 increase in annual distributions from IRAs. People with birthdays that result in fewer months of penalty-free withdrawal in the calendar year in which they turn 59-1/2 have a much smaller increase in annual distributions between the years in which they turn 58-1/2 and 59-1/2. In contrast, those who turn 59-1/2 early in the calendar year see much sharper increases."
TIAA Institute

Getting Back On Track: Financial Wellness in the Public Sector
"Between 2009 and 2013, to improve their pension positions, virtually every state applied some combination of lower benefit accruals and higher employer contributions made possible with the federal government's help. Higher employee contributions became commonplace, too.... Now public employers are searching for opportunities to provide workers with services that may compensate for benefit changes and better prepare them for financial security in retirement."
Prudential

[Opinion]

ARA Letter to EBSA Requesting Interpretative Guidance Under ERISA Section 408(b)(2) (PDF)
"ARA recommends that [the] Department issue interpretative, sub-regulatory guidance that recognizes ... the associated uncertainty as to the final parameters of the Rule and related exemptions, and the potential for confusion by plan sponsors, are extraordinary circumstances beyond the control of covered service providers which would preclude the immediate distribution of an updated 408(b)(2) notice ... ARA further recommends that the Department's guidance indicate that as a result of these extraordinary circumstances, a covered service provider who provides an updated 408(b)(2) notice no later than the first calendar quarter of 2018 will be deemed to have provided the notice as soon as practicable[.]"
American Retirement Association [ARA]

[Opinion]

The Retirement Wellness Media: Separating Fact from Fiction
"We cannot have record numbers of people deferring to 401(k) plans at record rates and yet still have almost universally low-five figure account balances, on average. At least we cannot unless we also have record amounts of leakage via plan loans, withdrawals, and both deferral and work stoppages.... 74% of respondents to a question said that lifetime income is important, but only 25% thought they had a way to generate it.... But, having reached the holy grail of retirement, these same people now want to do all the things they dreamed of while working.... There is a problem with all of that. Those expenses are pretty front-loaded."
Benefits and Compensation with John Lowell

[Opinion]

GE Botches Its Pension Math?
"Is the solution to GE's pension woes more hedge funds and more private equity funds? ... [M]ore alternative investments won't cure America's growing pension crisis.... [T]he time has come to enhance Social Security to adopt a similar model to what we have in Canada with CPP assets being managed by the CPPIB. In order to to do this properly, they need to get the governance right."
Pension Pulse

Benefits in General

[Official Guidance]

IRS Reopening Preparer Tax Identification Number (PTIN) System, Waiving Charges
"On June 1, 2017, the United States District Court for the District of Columbia upheld the [IRS]'s authority to require the use of a Preparer Tax Identification Number (PTIN), but enjoined the IRS from charging a user fee for the issuance and renewal of PTINs. As a result of this order, PTIN registration and renewal was suspended on June 2. The IRS, working with the Department of Justice, is still considering how to proceed, but will make PTINs available while deciding how to address the court order. The IRS is resuming the issuance of PTINs, without charge, on June 21, 2017."
Internal Revenue Service [IRS]

Ninth Circuit: ERISA Does Not Preempt California Law Voiding Discretionary Clauses
"The court's conclusion that the law reaches discretionary clauses in plan documents -- not just insurance contracts -- might seem problematic for self-insured plans. But because this case involved an insured plan, the court did not discuss the 'deemer' clause of ERISA's preemption provision, under which an ERISA plan cannot be deemed to be an insurer for purposes of state insurance laws. Accordingly, the law's applicability to self-insured plans remains an open issue." [Orzechowski v. The Boeing Co. Non-Union Long-Term Disability Plan, No. 14-55919 (9th Cir. May 11, 2017)]
Thomson Reuters / EBIA

Let's Make an 'I-Deal'? When Employees Want Special Benefit Arrangements
"Employees often try to negotiate with their employers arrangements that take into account their individual needs -- such as asking for more-flexible work hours, a reduced workload, more pay or special training. These arrangements ... are sometimes in the interest of both the employee and employer, especially if such deals make employees more motivated and committed to their jobs.... [Co-workers] are more likely to understand when a company grants nonfinancial benefits because of an employee's personal needs ... Justifying financial rewards, however, is more difficult[.]"
Society for Human Resource Management [SHRM]

Executive Compensation
and Nonqualified Plans

[Official Guidance]

Text of IRS Chief Counsel Memorandum: Application of Section 409A to Back-to-Back Arrangement (PDF)
10 pages. "Treas. Reg. Section 1.409A-3(i)(6) provides that the amount of the payment under the ultimate service recipient plan may not exceed the amount of the payment under the intermediate service recipient plan. Therefore, the USR Plan fails to meet the requirements of section 409A because the USR Plan provision providing for a payment to Taxpayer in the event of a Participant's separation from service before vesting is an impermissible payment event." [CCM 201725027, Mar. 6, 2017, published online June 23, 2017.]
Internal Revenue Service [IRS]

Proposed Changes to Section 409A Regs: Greater Clarity and Better Planning Alternatives (PDF)
"Since its inception, the IRS has issued significant guidance under Section 409A, including close to 400 pages of final regulations and a number of other notices. However, the law in this area continues to evolve, and the most recent proposed regulations provided under Section 409A are intended to clarify and modify certain issues that posed problems for employers."
McDermott Will & Emery, via The Practical Tax Lawyer

Discussions on
the BenefitsLink Message Boards

DOL Handling of a 401(k) Participant's Claim
"Participant contacts DOL, says he's deferred more than the 401(k) plan has credited to his account. DOL starts an inquiry, which is handled by the plan sponsor's accountant. Accountant claims DOL has finished its inquiry, but DOL has not sent any correspondence accepting what the accountant submitted. Accountant says DOL only sends correspondence when there is an audit, NOT when a participant makes a claim. Is accountant correct?"
BenefitsLink Message Boards

How to Report Hedge Fund on Form 5500 Schedule H
"On what line of Schedule H of Form 5500 would you report the value of a private hedge fund? The investors are not partners, the fund is not a registered investment, and it's not a trust. Should it be reported as a joint venture?"
BenefitsLink Message Boards

Terminating a ROBS 401(k), Then Rollover to an IRA
"Individual bought a franchise using a Rollover-as-Business-Startup 401(k) plan and now wants to terminate it. Can the stock be rolled over to his IRA? If it could, there would be seem to be no such thing as a ROBS -- you would just start a company using an IRA. I thought the whole point was to take advantage of the employer securities exemptions available in a 401(k) plan."
BenefitsLink Message Boards

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Lois Baker, J.D., President  loisbaker@benefitslink.com
David Rhett Baker, J.D., Editor and Publisher  davebaker@benefitslink.com
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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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