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[Official Guidance]

Text of IRS Notice 2017-44: Model Amendments to Add Bifurcated Distribution Options to Defined Benefit Plans (PDF)
12 pages. "This notice provides model amendments that a sponsor of a qualified defined benefit plan may use to amend its plan document to offer bifurcated benefit distribution options to participants in accordance with final regulations issued under Section 417(e) of the [Code] ... [A] plan that provides for a bifurcated distribution option is not required to include this specific model language. The sponsor of a plan that currently provides for bifurcated distributions under plan terms that comply with the provisions of Section 1.417(e)-1(d)(7), relating to either implicit or explicit bifurcation, does not need to amend those plan terms. In addition, use of the model language by an employer that has adopted a pre-approved plan will not cause the plan to fail to be identical to the pre-approved plan."
Internal Revenue Service [IRS]


Section 409A: Structuring Compliant Plans and Avoiding Pitfalls

Sponsored by Lorman and BenefitsLink

This August 22 webinar will help you identify arrangements that are subject to Section 409A, and design and administer these nonqualified deferred compensation plans in a legally compliant manner. CE Credits. BenefitsLink discount

District Court Rejects Union's Challenge to CalPERS Amendment Increasing Retirement Age
"The case goes back to the Golden State's budget crisis in 2013, when lawmakers passed a law that raised the retirement age to 62 for its state workers' pension plan CalPERS... The union said the change violated the Contract Clause of the U.S. Constitution by retroactively impairing the union's contract rights and sued CalPERS, Gov. Jerry Brown and other state administrators. In her ruling for summary judgment in favor of the state, U.S. District Judge Beth Labson Freeman found the change to the contract was legal." [Local 101 AFSCME v. Brown, No. 14-5640 (N.D. Cal. Aug. 16, 2017)]

Three Pension Funds Sue Major Banks in Stock Loan Case
"Three public retirement funds have banded together to file a lawsuit against six major Wall Street investment banks, alleging that they were overcharged by those banks in the stock loan market and that the banks conspired to control the market.... Stock lending is a common practice among institutional investors, particularly public pension funds, which often sit on large piles of cash for a long time. Lending shares ... allows these investors to earn a cash return on their investments while holding a stable interest in publicly-traded companies... [T]he investors allege that the banks worked together to keep the stock-loan market inefficient by conspiring to keep third-party electronic platforms from tapping into this lucrative business."
Institutional Investor

Nudging Retirement Savings: A Field Experiment on Supplemental Plans
"Among workers participating in a supplemental plan, individuals who received an informational nudge increased their contributions in the months following the intervention relative to the control group. Moreover, those that received the nudge reported in a subsequent survey that they were more likely to have developed a retirement plan and report more confidence in their retirement preparedness. In contrast, individuals who were not enrolled in a retirement saving plan were not moved to begin contributing to a supplemental plan."
National Bureau of Economic Research [NBER]

Survey of Financial Planners Says DOL's Fiduciary Rule Already Hurting Savers, Financial Professionals
"The Financial Services Roundtable ... polled 600 financial advisers [in July 2017]. The survey, conducted ... one month after the rule's June 9 initial compliance deadline, shows 'significant disruption' to the marketplace ... A majority of the poll's respondents, or 50 percent, report the rule is restricting them from serving their clients' best interests."


The Advisor's Guide to the DOL Fiduciary Rule

Sponsored by The National Underwriter Company

Authored by ERISA experts at The Wagner Law Group, this Guide delivers a powerful combination of expert explanations and legal analysis along with vital Q&As that provide reliable, direct answers to vital questions before they arise. BENLINK for 10% discount.

Retiree Carve-Outs: The Whats, Whys and Hows of Pension Plan Annuity Purchases
"Removing participants from the plan, along with the liabilities and assets associated with their benefits, shrinks the size of the plan and therefore the potential for volatility in funded status.... Cost reduction may be the most compelling reason for plan sponsors to purchase annuities for their retirees. Pension plan annuity purchases remove costs because they reduce one of the biggest expenses that plans deal with today: PBGC premiums.... Annuity purchases make the most sense for retirees whose benefits are small."
P-Solve LLC

Abandoning the Pension Rat Race for Absolute Returns
"A pension fund does three things... It pays current benefits, grows assets for future benefit payments, and weathers markets to ensure the delivery of the first two. For each function -- liquidity, growth, and hedging -- the investment team modeled a dedicated portfolio, so the assets overall no longer needed to serve three functional masters."
Institutional Investor

Public Pensions: Why Do 100% Required Contribution Payers Have Decreasing Fundedness?
"[According to a May 2017 working paper from the Center for Retirement Research at Boston College,] 'The valuation (or measurement) of public pension liabilities and contribution requirements is highly sensitive to the choice of several actuarial assumptions, which should be considered when assessing the financial condition of public pension systems.' ... [T]he part that is significant: a sensitivity to valuation parameters, especially the discount rate used. And public pension plans get to choose that for themselves.... [T]he point is that the plans are often optimistic on parameter choice.... The discount rate is just the most obvious parameter choice. There are many others that go into the mix."

The Biggest Risk to Target Date Funds Isn't What You'd Expect
"[T]he biggest market-related risk in target-date funds isn't bonds -- it's stocks. This belief extends to the most conservative target-date funds, where equity allocations typically run between 30% and 50% of the portfolio. And it's especially true today, when we're eight years into an equity bull market and every valuation metric for equities is above historical averages.... It's also a healthy reminder that the types of bonds matter. Shortening the duration of your fixed income exposure and/or overweighting corporate bonds at the expense of U.S. Treasuries may leave your target-date funds underexposed to the very bonds that have delivered the best results in equity bear markets."


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Michael Kitces' Comment Letter on CFP Board's Proposed Fiduciary Standards
"the CFP Board's proposed changes do introduce numerous new questions and concerns, from key definitions that ... still need to be clarified further, to new wrinkles in what does and does not constitute a fee-only advice relationship ... to uncertainties about how CFP professionals are expected to navigate important conflicts of interest, and how CFP professionals should interpret the 29(!) instances where the CFP Board's new standards are based on 'reasonableness'... with no explanation of how 'reasonable' is determined, and a non-public CFP Board Disciplinary and Ethics Commission that doesn't even allow CFP professionals to rely on prior case histories for precedence."
Nerd's Eye View

Discussions on
the BenefitsLink Message Boards

Employer Using Salary Deferrals to Cover Bad Cash Flow
"Client works for a small company and has been deferring from his paycheck. He was on track to defer around $13K for 2017. After looking at his account he became concerned that the deferral deposits are not adding up. Significant discrepancy. Come to find out the deferrals have been withheld BUT they were not being deposited. In fact the company was using his (and maybe other participants) deferrals to cover some cash flow problems. What steps should he take?"
BenefitsLink Message Boards

Waiver of Benefits by 'Majority' Owner in a PBGC Standard Termination
"To qualify for a PBGC 'standard' termination, benefits must be fully funded under a PBGC-covered defined benefit plan. To accomplish this, under 4041.21(b)(2), an owner of 50% or more can make an election to forego benefits. Is anyone aware of the definition of majority owner being treated as flexible by the PBGC? It seems to me that, if a 10% partner were to make such an election, then no staff is harmed. Plus the IRS gets an extra tax dollar if a deduction is not taken for fully funding the benefit."
BenefitsLink Message Boards

Do You Withhold on Corrective Distributions?
"I am studying the DC-2 book to eventually get my QKA and I came across a sentence saying that corrective distributions (ADP and ACP corrections) are subject to 10% withholding unless the participant completes a Form W-4P. I was wondering, do you practice this? I don't recall ever seeing a corrective distribution with any withholding applied, during my short tenure."
BenefitsLink Message Boards

Press Releases

DOL Extends Nominations Period for 2018 ERISA Advisory Council
Employee Benefits Security Administration [EBSA], U.S. Department of Labor

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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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