Retirement Plans Newsletter

August 11, 2017

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Webcasts and Conferences

Fundamentals of ERISA Fiduciary Responsibility
RECORDED
Committee on Investment of Employee Benefit Assets [CIEBA]

Final Regulations Released New York Paid Family Leave Benefits Law
RECORDED
Nixon Peabody LLP

Advanced IRA Training
August 22, 2017 WEBCAST
Wolters Kluwer

Mandated Sick Pay: Options And Requirements
August 23, 2017 WEBCAST
HRTrainingCenter.com

New Trustees Institute-Level I: Core Concepts
October 21, 2017 in NV
International Foundation of Employee Benefit Plans [IFEBP]

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Discussions

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New Comments and Topics

All Topics, Grouped by Forum


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[Official Guidance]

Text of IRS Notice 2017-43: Weighted Average Interest Rates, Yield Curves, and Segment Rates Applicable for August 2017 (PDF)
"This notice provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under Section 417(e)(3), and the 24-month average segment rates under Section 430(h)(2) ... In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under Section 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008 and the 30-year Treasury weighted average rate under Section 431(c)(6)(E)(ii)(I)."
Internal Revenue Service [IRS]

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[Guidance Overview]

DOL's Latest Set of FAQs: 408(b)(2) Disclosures and Plan Contribution Recommendations
"[T]he existing 408(b)(2) regulation -- including the obligation to provide any changes within 60 days -- is separate from any other requirement of the fiduciary rule or the related exemptions. As a result, some service providers have been confused about whether they need to provide a change notice related to their fiduciary status under the fiduciary rule, and if so, when such a change notice would be required.... DOL's latest set of FAQs provides significant relief through a very broad interpretation of the 408(b)(2) regulation based on the unique circumstances of the fiduciary rule[.]"
Drinker Biddle

[Guidance Overview]

New Conflict of Interest FAQs Address ERISA Section 408(b)(2) (PDF)
"The 408(b)(2) FAQ will allow some service providers to avoid changing previously provided 408(b)(2) notices and give others additional time to adjust the content of those notices. The contribution FAQs should ease concerns that encouraging retirement savings could lead to fiduciary status.... [T]he guidance could signal the Department's willingness to take a more measured approach to the Fiduciary Rule[.]"
Groom Law Group

Sears Hit with Second Lawsuit Over Company Stock in 401(k) Plans
"Numerous publicly known 'red flags' alerted Sears that its own stock was an 'unsuitable' investment for retirement, a participant in Sears' savings plan alleged in a lawsuit filed Aug. 10 in federal court in Illinois. Despite this knowledge, plan fiduciaries 'stood idly by' and failed to properly monitor the continued prudence of investing Sears stock while the value of the participants' investments in stock continued to plummet, the lawsuit said."
Bloomberg BNA

Do 401(k) Managed Accounts Live Up to All the Hype?
"Plan sponsors should assess the value of a vendor's managed account services against the fees paid out of participants' accounts.... Target-date funds (TDFs), like managed accounts, were created to tailor account investments to a participant's needs ... Managed accounts, in contrast, take into consideration a wider range of factors, such as contribution rates, personal risk tolerance, current savings in individual retirement accounts (IRAs) or taxable accounts, and anticipated spending needs in retirement.... The problem is getting participants to interface with the data and provide all necessary information to the account manager[.]"
Society for Human Resource Management [SHRM]

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DOL to Proposes Extension of Fiduciary Rule Transition Period to July 1, 2019
"The DOL's potential extension of the transition period appears to mean: Fiduciaries impacted by the regulations would temporarily benefit from a 'good faith' compliance standard through at least July 1, 2019, instead of January 1, 2018.... The written disclosure requirements for certain prohibited transaction exemptions would be scheduled to take effect on July 1, 2019 instead of January 1, 2018."
Mazursky Constantine LLC

DOL to Propose Extension of Fiduciary Rule Transition Period
"[T]he proposed amendments seek to defer the applicability of the full conditions of such exemptions for 18 months until July 1, 2019, but this date is subject to OMB clearance and may be changed before the proposal is officially published in the Federal Register. Moreover, the proposal likely will be subject to a notice and comment period so that interested parties may comment on the merits and length of the delay, as well as to further OMB review of any DOL proposed final rule. Thus, the ultimate length of the delay (if any) will not be clear until the DOL publishes a final rule."
Morgan Lewis

Another Fiduciary Rule Delay Would Cost Retirement Savers $10.9 Billion Over 30 Years
"[A map] shows how much retirement savers would lose in each state over the next 30 years as a result of an additional 18 month delay. The losses range from $16 million in Wyoming to $132 million in Iowa to $646 million in Texas to $1.2 billion in California."
Economic Policy Institute

Insurance Execs Say June 9 DOL Doomsday a Dud
"[If] June 9 provided little disruption to agents and clients, the same can't be said about the fiduciary rule affecting sales of certain annuity market segments.... Lingering ambiguity around the rule's implementation will continue to exert a drag on annuity sales ... Even so, individual insurers have found ways to spur sales through repricing."
InsuranceNewsNet.com

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Hardship Distributions: Source Documents vs. Documentation of Self-Certification by Participants
"If the third-party administrator is obtaining a summary of the information contained in the source documents, it should provide a report or other access to this data to the employer at least annually, describing the hardship distributions made during the plan year.... Hardship distributions issued in prior years should be reviewed to ensure that either the old rules or the new rules were followed."
Belfint Lyons & Shuman, CPAs

Text of 2017 Enrolled Actuary Program Booklet: Basic (EA-1) Examination, Pension EA-2 (Segments L and F) Examinations (PDF)
35 pages. "The EA-1 examination ... covers the mathematics of compound interest and practical financial analysis and the mathematics of life contingencies and practical demographic analysis. The pension (EA-2) examination consists of two segments: The EA-2 (Segment L) law examination ... covers relevant pension laws ... as they affect pension actuarial practice.... The EA-2 (Segment F) examination ... covers the selection of actuarial assumptions and calculation of minimum required and maximum tax-deductible contributions under current pension law, along with the related actuarial mathematics." [Issued July 2017, for Nov. 2017 and May 2018 exams. Rev. July 27, 2017]
Joint Board for the Enrollment of Actuaries [JBEA]; American Society of Pension Professionals & Actuaries [ASPPA]; Society of Actuaries

Risk Transfers: The Other Side of De-Risking
"LDI allows the employer to greatly mitigate this risk by investing plan assets in bonds that mirror the securities underlying the discount rate used to value plan liabilities.... Other types of de-risking strategies [include] purchase by the plan of annuities from an insurance company.... [or] payment of a lump sum to participants in lieu of providing the plan's monthly lifetime retirement benefit.... If anecdotal information of bad decisions persist, and with the prodding of participant advocacy groups, it is likely that the DOL or Congress could intervene to restrict the payment of lump sums."
Findley Davies | BPS&M

2017 Global Survey of Accounting Assumptions for Defined Benefit Plans
"During 2016, investment returns on plan assets (both bond and stock returns) showed a mild performance in major markets and, in most cases, this performance was countered by declining interest rates, which left companies with minor changes in average projected benefit security ratio from prior year levels.... The majority of surveyed countries imply life expectancies between 20 and 30 years."
Willis Towers Watson

Leaving an IRA to Charity
"[O]pening an inherited IRA is not necessarily easy for a charity.... [C]onsider opening a donor-advised fund run by a major financial institution, community foundation, or umbrella charity.... [Another approach is to leave all] assets including the IRA to [a personal] trust. The trust instrument states what percentage of the total trust each beneficiary is to receive and specifies that the IRA shall be used 'first' to fund the charities' shares."
Morningstar Advisor

[Opinion]

An Open Letter to the OMB: No Further Delays in the DOL Rule and Bice
"[A]ny arguments by the investment industry that the fiduciary duties imposed on broker-dealers and stockbrokers under the Rule and BICE are onerous and/or unfair are meritless, as those same duties have already been recognized by their own SRO, FINRA and its predecessor, the NASD.... The significant and irreversible damage that has already been done, and will continue to be done, by further delaying full implementation of the Rule and BICE has been documented by several independent research organizations."
The Prudent Investment Adviser Rules

Benefits in General

Employers Are Revamping Benefits Strategies to Outmaneuver Competitors and Become Destination Employers
"[R]educing healthcare costs remains the main driver for offering a wellness program (60 percent) ... The need to appeal to younger workers with parental leave policies has prompted a discussion about supporting the total wellbeing of employees as they try to solve the work-life equation.... [N]early half (48 percent) of employers use auto-enrollment in retirement plans to help employees improve savings, [but] only 37 percent are measuring retirement readiness."
Wolters Kluwer Law & Business

Seventh Circuit: Plan's Forum-Selection Clause Is Not Precluded by ERISA (PDF)
"With support from the Secretary of Labor, Mathias argues that forum-selection clauses in plan documents are categorically invalid because they deprive plan participants and beneficiaries of the right to select from the menu of venue options offered by Section 1132(e)(2).... [F]orum-selection clauses promote uniformity in plan administration and reduce administrative costs and in that sense are consistent with the broader statutory goals of ERISA.... The forum-selection clause in the Caterpillar plan chooses from among the venue options listed in Section 1132(e)(2), and nothing in the statute makes that choice invalid. Accordingly, we hold that the plan's forum-selection clause is enforceable." [In re Mathias, No. 16-3808 (7th Cir. Aug. 10, 2017)]
U.S. Court of Appeals for the Seventh Circuit

Discussions on
the BenefitsLink Message Boards

Are Employees of Excludable Class Part of ACP Test?
"Non-Safe Harbor 401(k) plan has (non-statutory) class exclusion for the employer.match. They are not excluded from salary deferrals. Must the employees of the excluded class be counted in ACP testing?"
BenefitsLink Message Boards

First Year Audit of a Plan: Handling the 'Comparative' Assets Statement
"When auditing a 401(k) plan for the first year for which an audit is required, how are the financials dated? The Statement of Net Assets Available for Benefit must be comparative, but this is the first year audited (limited scope). Should we include two years on both statements and mark the prior year as 'unaudited'?"
BenefitsLink Message Boards

Using Electronic Signatures for Plan Documents?
"Is anyone using DocuSign to facilitate the signing of plan documents? Do you like it, did you try it and hate it, let me know!"
BenefitsLink Message Boards

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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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