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[Official Guidance]

Comment Period Opens July 6 for EBSA's Request for Information on Fiduciary Rule and PTEs
EBSA's Request for Information is scheduled for official publication in the Federal Register on Thursday, July 6, 2017, which means the two comment periods described in that RFI will end: [1] 15 days after July 6, for comments on a possible extension of the Jan. 1, 2018 applicability date for certain provisions in the Best Interest Contract Exemption and other prohibited transaction exemptions, and [2] 30 days after July 6 for comments on all other aspects of the fiduciary rule and the exemptions. The comments could form the basis of new exemptions or revisions to the fiduciary rule and its associated PTEs.
Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL]

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[Guidance Overview]

The Final DOL Fiduciary Rule: The Fifth Request for Public Comments (PDF)
"Unquestionably, this rulemaking process has become uncommonly burdensome for both proponents and critics of the Final Rule, who may be filing their seventh and eighth comment letters on the record with DOL.... At least in the short term, this process is imposing unquantified inefficiencies and costs on the operation of the private retirement system, which ultimately are borne by the participants in that system.... The June 29 RFI differs from the March 2 notice in the attention it gives to recent market developments, particularly since June 9, and the possibility of new exemptions."
Eversheds Sutherland

Operational Compliance for Eligibility Classification: Reviewing the Plan Document (PDF)
"Among the suggestions for determining an employee's eligibility classification accurately are: [1] First and foremost, know what the plan document says. [2] If necessary, determine which related employers are members of the same controlled group. [3] If you have leased employees, follow the special rules that apply to them. [4] If you use independent contractors, temporary employees or you contract for workers through a staffing firm, make sure that t hey are classified correctly. [5] Use Microsoft language (but watch for coverage failures as well)."
Boutwell Fay LLP

DOL Seeks Additional Comments on Fiduciary Rule
"Indicating its previously expressed desire to better coordinate the rule with other financial services regulators, including the [SEC], the DOL asks several questions about current and potential new standards that apply to retail investment advice ... Noting that only the impartial conduct standards (duty of care, duty of loyalty, reasonable compensation, and no misleading statements) apply during the transition period, the DOL asks about the costs and benefits of allowing the additional exemption conditions to become applicable on January 1."
Morgan Lewis

A First Look at Alternative Investments and Public Pensions
"Public pension plans have boosted their holdings in alternative assets, defined as private equity, hedge funds, real estate, and commodities. This shift reflects a search for higher returns, a hedge for other investment risks, and diversification. The question is how the shift has affected returns and volatility over two periods: 2005-2015 and 2010-2015. In terms of returns, a 10-percent increase in the average allocation to alternatives was associated with a reduction of 30-45 basis points, primarily due to hedge funds. In terms of volatility, alternatives did not have a statistically significant effect. Hedge funds reduced volatility, but real estate and commodities increased it."
Center for Retirement Research at Boston College


The Advisor's Guide to the DOL Fiduciary Rule

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FAS87 ASC715 Discount Rates and Moody's Rates
Includes an unofficial monthly report as of June 30, 2017 of Moody's Daily Long-term Corporate Bond Yield Averages and Moody's Daily Treasury Yield Averages, used as benchmarks by some corporate pension plans.
David Rigby via BenefitsLink Message Boards

Pension Finance Update, June 2017
"Pension sponsors suffered modest declines in funded status last month, due to mixed stock markets and lower long-term interest rates, but both model plans ... have enjoyed modest improvement overall in the first half of 2017. Plan A lost close to 1% last month but is still ahead almost 2% for the year, while Plan B lost a fraction last month but is still up about a half percent during the first half of the year."
October Three Consulting

Six Things to Know About the Year-End Account Balance Used for RMDs
"[I]f you are calculating [a required minimum distribution (RMD)] for 2017 you would use the 2016 year-end account balance. If you are calculating a missed RMD for 2014, you would use the 2013 year-end account balance.... As usual with retirement distribution rules, there are some exceptions to the general rule.... Rollovers or transfers ... Recharacterizations ... Excess QLAC contributions ... Prior-year RMDs ... Still-working exception to RMDs."
Slott Report

Pathways to Retirement through Self-Employment
"Late-career transitions to self-employment are associated with a larger drop in income than similar mid-career transitions. Data from the Health and Retirement Study suggest that hours worked also fall upon switching to self-employment. These results suggest that self-employment at older ages may serve as a 'bridge job,' allowing workers to gradually reduce hours and earnings along the pathway to retirement."
National Bureau of Economic Research [NBER]


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Nobody Knew Couples Budgeting Could be So Complicated
"[If] a couple's Income from Other Sources (such as Social Security benefits, pension benefits, or life annuities) is expected to decrease or cease upon the death of one of the individuals, the left-hand side of the Basic Actuarial Equation (the assets) can be overstated ... [and]the right-hand side of the equation (spending liabilities) may be understated.... [T]wo possible approaches ... [are] a simple approximate approach and a more complicated (but more accurate) actuarial approach."
Ken Steiner, FSA Retired

Pension Watchdog Sues San Rafael
"A Marin man is suing San Rafael over public pension 'enhancements' he says were approved illegally and have put taxpayers on the hook for millions of dollars in future benefits.... [His] comments and lawsuit specifically call into question the city's response to a 2015-16 Marin County Civil Grand Jury report that criticized the pension enhancements approved by San Rafael, as well as those by Southern Marin Fire District, Novato and Marin County. The grand jury report ... suggested Marin public agencies may have violated statutes for transparency in approving pension enhancements."
Marin Independent Journal


Do US Pensions Threaten Real Estate?
"So, can underfunded US public pensions pose a threat to residential real estate? You better believe it, especially in states like Illinois where public pensions pose a serious threat to state finances and a court ruling just sent the state into a financial abyss.... And ... what will happen to commercial real estate values when the next crisis hits and these mature, chronically underfunded pensions have to unload commercial real estate to meet their pensions obligations?"
Pension Pulse

Benefits in General

Law Firm Can't Escape Malpractice Claim Over ERISA Advice
"There are issues of fact on whether the law firm failed in its duty of care in providing legal advice as well as issues related to causation and damages, Judge George Caram Steeh of the U.S. District Court for the Eastern District of Michigan held June 30.... SSL Assets alleged that Jaffe provided faulty legal advice that ultimately made the investment firm liable for $3.9 million in withdrawal liability under [ERISA] and made it invest several millions in supporting a newly acquired company." [Cohen v. Jaffe Raitt Heuer & Weiss, P.C., No. 16-11484 (E.D. Mich. June 30, 2017)]
Bloomberg BNA

Retirement, College, and Health Savings Activity Expanding in the U.S.
"Employees under age 25 represent just nine percent of savers on Ascensus' platform. But ... the average 401(k) account balances of savers ages 25-34 nearly double that of their under 25 cohorts.... HSA owners under age 25 and ages 25-34 represented 20% of all HSAs on the Ascensus platform in 2016.... In 2016, 37 percent of HSA market growth was attributed to high deductible health plans offered by employers. Additionally, 46% of all dollars contributed to an HSA came from an employer."

Discussions on
the BenefitsLink Message Boards

Incorrect Refund of Deferrals Due to Mistaken Belief as to Failure of ADP Test
"Employer gave incorrect payroll data by essentially putting back the deferrals twice, thus overstating comp for many participants. The mistake caused one person to be treated an HCE, who then caused a failure of the ADP test, so refunds to HCEs were paid out! Can this be corrected as a valid self-correction under Rev. Proc. 2016-51, Section 6.06(4), by notifying the affected participants and giving them the option to repay or not? Other solutions?"
BenefitsLink Message Boards

Deductibility of One-Time Large Contribution to Fully Fund and Terminate DB Plan
"The business owners have been wanting to terminate their DB Plan for some time. They say if they make a one-time contribution of about $20 million, the DB will be fully funded and then can be terminated. The business owners ask, what is the tax deductibility of the $20 million contribution? Deductible in the current year?"
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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