Retirement Plans Newsletter

August 3, 2017

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Senior Pension Administrator
Primark Benefits
in CA

Retirement Services Supervisor
Sacramento County Employees' Retirement System
in CA

Lead Client Executive
Transamerica
in CA

Lead Client Executive
Transamerica
in CA

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Webcasts and Conferences

Employee Benefits and ERISA Year-End Review
RECORDED
Ohio State Bar Association

Benefit Plan Best Practices: Error Correction & EPCRS
August 22, 2017 in TN
KraftCPAs PLLC

Health Plan Eligibility and Enrollment Issues
August 24, 2017 WEBCAST
Cowden Associates, Inc.

Creative Approaches for Handling ADA and FMLA Issues in the Workplace: Actions You May Not Know You Can Take
September 12, 2017 in NY
Littler Mendelson

ABCs of ESOPs
September 14, 2017 WEBCAST
Menke Group

Fundamentals Series 04: Coverage test (Ratio Percentage Only) [2017]
October 3, 2017 WEBCAST
FIS Relius Education

Fundamentals Series 05: Elective Deferrals [2017]
October 5, 2017 WEBCAST
FIS Relius Education

63rd Annual Employee Benefits Conference
October 22, 2017 in NV
International Foundation of Employee Benefit Plans [IFEBP]

ADA & FMLA Compliance Update
April 12, 2018 in CA
National Employment Law Institute

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Discussions

New Topics on the BenefitsLink Message Boards

New Comments and Topics

All Topics, Grouped by Forum


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[Guidance Overview]

The Hardship of Administering 401(k) Plan Hardship Withdrawals
"Many employers contract with a third-party administrator or platform vendor to administer the hardship application and approval process. But, even if outsourced, employers are the ones at risk of tax liabilities or plan disqualification ... In February 2017, the IRS indicated a softening of its views on the hardship paperwork burden; employers may now want to reconsider how they or their vendors process hardships as a result."
Frost Brown Todd LLC

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Text of PBGC FY 2016 Projections Report (PDF)
60 pages. "This year's projections for PBGC's multiemployer program show less uncertainty regarding the year it will use up all of its assets; most projections show insolvency occurring during the three fiscal years 2024-2026. The risk of insolvency accumulates year by year, leaving the multiemployer program fund more likely than not to use up all of its assets by the end of fiscal year (FY) 2025.... New results for PBGC's single-employer program are consistent with findings of the prior year's report -- the financial status of the program is likely to improve and reach a surplus net position within the next decade. Low claim levels in FY 2016, combined with recent increases in interest rates, cause the program to potentially reach net surplus several years earlier than previously projected."
Pension Benefit Guaranty Corporation [PBGC]

401(k) Balances Reach Record Levels Although Many Workers Don't Take Full Advantage of Company Match
"Retirement account balances reached all-time highs for the third consecutive quarter.... People in their 401(k) for 10 years straight saw their balance increase to a record average of $266,100, up from $78,800 in Q2 2007.... Over the last 12 months, employees contributed a record average of $5,850 2 to their 401(k), up 4 percent from one year prior. But many employees are not taking full advantage of their employer's matching contributions."
Fidelity

401(k) Plan Asset Allocation, Account Balances, and Loan Activity in 2015 (PDF)
60 pages. "On average, at year-end 2015, 66 percent of 401(k) participants' assets were invested in equity securities through equity funds, the equity portion of balanced funds, and company stock.... Nearly 65 percent of 401(k) plans, covering nearly three-quarters of 401(k) plan participants, included target-date funds in their investment lineup at year-end 2015.... A majority of new or recent hires invested their 401(k) assets in balanced funds, including target-date funds.... 401(k) participants' investment in company stock continued at historically low levels.... 401(k) participants were less likely to have loans outstanding at year-end 2015 than at year-end 2014."
Employee Benefit Research Institute [EBRI] and Investment Company Institute [ICI]

Comparison Across Two Generations of 401(k) Savers in Their Twenties Shows Contrast in Asset Allocations
"Compared with their counterparts 20 years ago, the twenty-something 401(k) investors of 2015 allocated a similar share of their aggregate assets to equities -- including equity funds, company stock, and the equity portion of balanced funds -- but changed the mix, becoming less concentrated in equity funds and company stock and more concentrated in balanced funds (which include target date funds). These differences are consistent with both the allocation trends for all 401(k) plan participants and the evolution of plan design shown in EBRI/ICI's two decades of extensive 401(k) research."
Investment Company Institute [ICI]

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RFP for Target Date Funds Is a Good Idea
"Participants are suing plan fiduciaries over their selection of these funds, so how can fiduciaries protect themselves? One way is to conduct a separate RFP for target date funds.... [An] RFP can make sense even if a potential recordkeeper limits fund choices because fiduciaries should reject a recordkeeper whose only fund offerings are sub par or have excessive fees. How would this RFP work?"
401kTV

Questions Employers Should Ask About Stable Value Funds
"[1] How popular are stable value funds when offered as an investment option in a retirement plan? ... [2] Are there different types of stable value funds? ... [3] Why include a stable value option in a retirement plan? ... [4] How does stable value protect investors from interest rate volatility? ... [5] Are there any guarantees in stable value? ... [6] Are there waiting periods or restrictions on participant withdrawals? ... 10. Are stable value funds risk-free? ... [7] What are the fees associated with stable value investments?"
Strategic Benefit Services

Fiduciary Rule May Force Plan Advisers Away from Portfolio Management
"The latest research from Cerulli Associates suggests most executives in the advisory industry believe that home-office discretion over clients' investment exposures will increase significantly under the [DOL] fiduciary rule and other competitive pressures."
PLANSPONSOR

IRS OKs Hotel Industry Trust That Replaced 401(k) with Unusual Pension Plan Design
"The IRS recently approved a unique move by employers and unions in the hospitality industry to replace a 401(k) plan with a new type of traditional pension plan.... The union and plan sponsors in 2012 implemented a [variable defined benefit pension plan] that they believed would be fair to both employees and contributing employers.... The plan continues to maintain the 401(k) but makes matching contributions only for members who held accounts when the contributions were frozen for new participants."
Bloomberg BNA

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Could Accrual-Based Accounting Aid Your Company's Retirement Plan?
"Cash-basis accounting means no confirmation of receivables and no confirmation of receivables means no real ability to track contributions on a participant level. This is how errors ... go unnoticed ... Once receivables are properly included in your reporting you'll actually have accurate financial reporting for the year, you'll have more accurate participant counts listed on the Form 5500, and the contributions listed on the Form 5500 will finally tie to your W3 and your corporate Form 1120!"
Benefit Resources Inc.

Pension Funding Risk Remains Unchanged in 2017
"Among the Willis Towers Watson (WTW) Pension 100, average funded status climbed to 90.4% in 2013, boosted by rising interest rates and a prosperous stock market. By 2014, ... funding was back down to 82.4% -- where it has stayed. Investment returns in 2016 were just high enough to offset rising obligations, leaving funded status still at 82% by year-end 2016.... Risk scores have inched up over the last four years, increasing from 1.5% in 2014 to 1.9% in 2017."
Willis Towers Watson

The 403(b) Monk and What We Can Learn from Him
"Many people have financial problems that prevent them from even thinking about saving for retirement.... Teachers have a rough time accumulating wealth in their 403(b) plans, but it doesn't have to be that way.... It can be tough to help those who do not wish to be helped."
Cammack Retirement Group

Financial Effects on Social Security of the Save Social Security Act of 2017 (PDF)
22 pages. "Assuming enactment of the proposal, the projected trust fund reserve depletion year for theoretical combined OASDI and DI Trust Funds would be extended to 2064. Under current law, the projected trust fund reserve depletion year for the combined trust funds is 2034."
U.S. Social Security Administration [SSA]

Benefits in General

Exhaustion of Plan Administrative Remedies: Important Considerations for Plan Fiduciaries
"[T]he Sixth Circuit joined the majority of circuit courts in holding that claims alleging statutory violations of ERISA do not impose the same administrative exhaustion requirements that are applicable to claims seeking to enforce contractual rights under the terms of a plan. By deepening the current split on this issue among the circuit courts, the ruling could have a significant impact ... To address this concern, plan fiduciaries should consider taking several steps[.]" [Hitchcock v. Cumberland Univ. 403(b) DC Plan, No. 16-5942 (6th Cir. Mar. 14, 2017)]
Proskauer's ERISA Practice Center

Executive Compensation
and Nonqualified Plans

Developments in Tax Withholding for Equity Awards Under Employer Stock Plans
"When an employee exercises or settles an award such as a stock option or restricted stock unit, there is often a measure of value that must be included in the employee's compensation income. Consequently, employers are required to withhold and remit payroll and income taxes with respect to that compensation, and employers will typically require employees to satisfy their portion of those taxes.... Two recent developments -- one in the accounting arena and the second in securities law -- affect how this withholding can be handled."
Holland & Hart LLP

[Opinion]

Business Roundtable Comments to SEC on Reconsideration of CEO Pay Ratio Rule
"[We] believe the rule should be changed to exclude employees located outside of the United States in determining the median employee. Doing so would create a more consistent common denominator in the many variables that exist in formulating the ratio. In addition, we suggest that non-full time employees be exempt from the rule to provide some protection against distorted results."
Business Roundtable [BRT]

Discussions on
the BenefitsLink Message Boards

Reversion, Suspense Account, or Other?
"An employer accidentally paid a former employee a paycheck when no wages were due and deferrals were also withheld from the paycheck and deposited into the plan. The can get the net paycheck back and they are able to offset the taxes withheld with their next tax filings, but they are not sure what to do about the 'deferrals.' Technically the real paycheck is zero and thus no deferrals should be possible. Can the plan distribute these 'deferrals' back to the employer without triggering and excise tax? Or, should the amounts be held in the plan under a suspense account until the next contribution to the plan is made, and offset that contribution by the suspense account?"
BenefitsLink Message Boards

Can We Still Pay a Benefit That Is Supposed to Be Forfeited?
"Potential IRC Section 409A issue here. We have an employee who is leaving and his benefit will be forfeited because he is not due to vest for a couple years. Can we accelerate vesting for him? Or offer him the same (or modified, even) benefit in a second agreement that is fully vested, and let the current benefit forfeit? I know there are rules pertaining to replacement of one benefit for another, but that doesn't seem to be the case here."
BenefitsLink Message Boards

Phased Retirement: 'Definitely Determinable' Issue?
"Can a plan document permit the plan sponsor to exercise discretion as to whether an employee is able to participate in phased retirement, without violating the definitely determinable benefits rule?"
BenefitsLink Message Boards

Press Releases

PSCA Announces 2017 Board of Directors
PSCA [Plan Sponsor Council of America]

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Lois Baker, J.D., President  loisbaker@benefitslink.com
David Rhett Baker, J.D., Editor and Publisher  davebaker@benefitslink.com
Holly Horton, Business Manager  hollyhorton@benefitslink.com

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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