Retirement Plans Newsletter

September 20, 2017

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Webcasts, Conferences

Taking the Perspiration Out of Compensation
RECORDED
ASPPA [American Society of Pension Professionals & Actuaries]

Basic IRA Training
October 3, 2017 WEBCAST
Wolters Kluwer

Creating an Effective ESOP Team
October 10, 2017 WEBCAST
National Center for Employee Ownership [NCEO]

Importance of the Right Benefits Data!
October 11, 2017 in TX
Worldwide Employee Benefits Network [WEB] - Houston Chapter

15th National Forum on ERISA Litigation
November 2, 2017 in NY
American Conference Institute

Retirement Income Summit
April 30, 2018 in IL
InvestmentNews

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Discussions

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New Comments and Topics

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[Official Guidance]

Text of PBGC Disaster Relief 17-13 in Response to Hurricane Irma in Georgia
"[PBGC] is waiving certain penalties and extending certain deadlines in response to Hurricane Irma that began on September 7, 2017, in Georgia.... The disaster area consists of any of the 159 counties in Georgia."
Pension Benefit Guaranty Corporation [PBGC]

[Advert.]

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[Guidance Overview]

Understanding Pre-Approval of 403(b) Plans
"In March 2017, the [IRS] began issuing advisory and opinion letters to the first preapproved retirement programs described in Internal Revenue Code Section 403(b) ... [This] article discusses preapproved 403(b) plans, including their advantages, legal pitfalls, and other issues that an eligible employer may consider when determining whether to convert its existing 403(b) plan into a preapproved plan."
Venable LLP

Avaya Retiree's Widow Loses Bid to Secure Pension Payments
"The survivor benefit ... received by the widow is an unsecured debt and not a 'retiree benefit' as defined by the code, [the bankruptcy court for the Southern District of New York] held Sept. 18. The benefit is based on the widow's right to receive her late husband's deferred compensation, and Avaya's obligation to make those payments doesn't convert a pension payment into a 'retiree benefit' protected by the code, he said." [In re Avaya Inc., No. 17-10089 (Bankr. S.D.N.Y. Sept. 18, 2017)]
Bloomberg BNA

Selecting a DC Plan Recordkeeper: Is Cheaper Always Better? (PDF)
"While the DOL has provided guidance on the overall responsibilities of plan sponsors, these guidelines fall short of speaking to best practices when dealing with recordkeepers.... [It] is essential to periodically assess if all contractual obligations are being met (not just fees).... [This paper describes] five core components to consider in order to both meet your fiduciary duties and get the most value from your retirement plan recordkeeper: Fees, Hidden Expenses, Plan Demographics, Service Quality and Technology."
Portfolio Evaluations, Inc.

The Future of Plan Sponsor Site Messaging
"[C]ertain messaging features can be particularly useful in the retirement space and add to the overall effectiveness of the digital plan sponsor experience.... Increasing employee engagement with company retirement plans and improving participants' retirement readiness are tasks central to the plan sponsor role but difficult to accomplish. One way recordkeepers can help plan sponsors in this area is to allow them to broadcast messages to participant sites."
Corporate Insight

[Advert.]

SPARK Forum - November 5-7, 2017 -- The Breakers, Palm Beach, FL

Sponsored by SPARK

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BICE and Related Exemptions: Limiting Your Liability Until Full Implementation
"[This article includes] a non-exhaustive list of steps that financial institutions and financial advisors can take to protect themselves and demonstrate compliance with the Impartial Conduct Standards during the extended Transition Period, or at least until it becomes more clear what the compliance landscape will look like after the Transition Period is over. Although no single step ... is required by law or regulation ... it is important for financial advisers and institutions to take some steps to implement and enforce the Impartial Conduct Standards."
The Wagner Law Group

Interesting Angles on the DOL's Fiduciary Rule, Part 62
"It is possible that for a new plan or for a plan changing recordkeepers, the recordkeeper would provide a list of investments in response to an RFI or RFP. If properly done, the list will not be fiduciary advice -- because of a fiduciary exception for recordkeepers. In turn, if the advisor does not comment on the list, either favorably or unfavorably, the advisor would not be viewed as having provided fiduciary advice. Then, at future meetings with the plan sponsor, the advisor or the recordkeeper could simply provide information about the existing investments. However, is it feasible that an advisor would not make comments about poorly performing investments which could be viewed as 'suggestions' that they be removed? If those suggestions are made by an advisor, it could be fiduciary advice."
FredReish.com

Keep Your 401(k) Safe from Cybercrime: Don't Delegate Fiduciary Responsibilities
"Within the 401(k) plan fiduciary hierarchy, there are only two fiduciary roles that can direct the Custodian to transfer or distribute plan assets: [1] ERISA 403(a) Trustee -- is named in a 401k plan or trust document and has exclusive authority and discretion to manage and control plan assets. [2] ERISA 3(16) Plan Administrator -- is basically responsible for any fiduciary responsibility not assumed by the ERISA 403(a) Trustee. These roles are often a 401(k) plan's last line of defense when a cybercriminal attempts to steal its assets."
Employee Fiduciary

In 2017, Millennials Still Prefer Real-Life Advisors to Robo-Advisors
"46.41 percent of millennials said that they were working with a financial advisor ... [O]nly 24.30 percent claimed to have been using one of the many robo-advisors to invest and save for the future. 75.70 percent have never used a robo-advisor, but ... 61.58 percent of those who have not used a robo-advisor said their reason was that they have never heard of a robo-advisor."
lendedu

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Employees Are Changing the Way They Acquire Company Stock
"A growing number of U.S. workers are taking advantage of their ESPP to purchase company stock, with the percentage of employees participating in their ESPP increasing to 28 percent in 2016, up from 23 percent in 2014.... The percentage of employees with company stock in their 401(k) has dropped by almost half, from 41 percent in 2005 to 23 percent in 2016. More than one in four employers (28 percent) still offered company stock through their 401(k) in 2016, dropping from 39 percent in 2005. Nine percent of employee 401(k) assets were in company stock in 2016, down from 16 percent in 2005."
Fidelity

Estimates of the Financial Effects on Social Security of H.R. 3112, the 'Providing Choice for Social Security Retirees Act' (PDF)
"H.R. 3112, the 'Providing Choice for Social Security Retirees Act' ... would provide a 'partial lump sum' option for workers becoming initially entitled for retired worker benefits in 2019 or later at an age older than their normal retirement age (NRA). At the time of their initial benefit entitlement (that is, the first month for which benefits will be received), these workers could choose to receive a lump sum amount equivalent to 2 percent (one-fourth of the value) of any 8 percent delayed retirement credits (DRCs) earned up to that time.... Table 1 ... presents annual and 75-year-summarized cost rates, income rates, balances, and changes in annual balances for the OASDI program under the proposal.... [F]or the latter years of the long-range projection period shown in Table 1, enactment of the proposal would have a relatively small net effect on OASDI cost."
U.S. Social Security Administration [SSA]

SEC Action Prompts Adviser to Issue Rebates, Credits
"Action by the [SEC] due to breaches of fiduciary duty, inadequate disclosures and compliance deficiencies has prompted a registered investment adviser to stop certain practices and to issue rebates and credits to some of its clients, which include small to medium sized non-profit, faith-based organizations that sponsor ERISA Section 403(b)s as well as individuals that hold IRAs or Roth IRAs."
National Tax-Deferred Savings Association [NTSA]

IRS Revises Procedures for Multiemployer Plan Benefit Suspensions (PDF)
"Revenue Procedure 2017-43 modifies the submission and notice requirements for suspension of benefits applications. Under the revised procedures, if the IRS identifies an error in the application after it is submitted, it will ask for additional materials to correct the error, instead of rejecting the application. The latest guidance also includes [additional] changes[.]"
Prudential

[Opinion]

New York State Teamsters' Pensions to Be Slashed Because of Unfair Law
"[T]he workers and retirees overwhelmingly voted against the cuts (71% of votes cast were against cuts; 29% votes were in favor of cuts). However, the way the vote was structured anybody who DIDN'T cast a ballot -- was counted as a yes vote. Because 60% of the ballots were not returned, this flipped the vote.... MPRA is a bad bill and the cut-back provisions, including these ridiculously unjust voting provisions, have to be repealed."
Pension Rights Center

Benefits in General

[Official Guidance]

Text of IRS Disaster Relief Notice GA-2017-02, for Victims of Hurricane Irma in Georgia
"Victims of Hurricane Irma that took place beginning on Sept. 7, 2017 in Georgia may qualify for tax relief from the [IRS].... Individuals who reside or have a business in any of the 159 counties in Georgia may qualify for tax relief.... [C]ertain deadlines falling on or after Sept. 7, 2017 and before Jan. 31, 2018, are granted additional time to file through Jan. 31, 2018."
Internal Revenue Service [IRS]

[Official Guidance]

Text of IRS Disaster Relief Notice PR-2017-01, for Victims of Hurricane Irma in Puerto Rico
"Victims of Hurricane Irma that took place beginning on Sept. 5, 2017 in parts of Puerto Rico may qualify for tax relief from the [IRS].... Individuals who reside or have a business in the municipalities of Adjuntas, Aguas Buenas, Barranquitas, Bayamón, Camuy, Canóvanas, Carolina, Cataño, Ciales, Comerío, Culebra, Guaynabo, Hatillo, Jayuya, Juncos, Las Piedras, Loiza, Luquillo, Orocovis, Patillas, Quebradillas, Salinas, San Juan, Utuado, Vega Baja, Vieques, and Yauco may qualify for tax relief.... [C]ertain deadlines falling on or after Sept. 5, 2017 and before Jan. 31, 2018, are granted additional time to file through Jan. 31, 2018."
Internal Revenue Service [IRS]

Comments May Enhance ERISA Advisory Council's Attempt to Streamline Disclosures to Participants
"[M]ost respondents agree that the SAR for 401(k) plans adds little to no value. However, one commenter stated that the SAR should be eliminated for most defined contribution (DC) plans but maintained for employee stock ownership plans (ESOPs) and money purchase pension plans. Most commenters agreed that the notices should be given out all at one time or based on life events. Participants become numb to the flood of plan notices they receive each year, and may delete or toss them upon receipt.... Comments regarding SPDs were mixed, with some commenters stating these should stay as they are, and others saying that SPDs have become overly complicated and should be simplified."
HR Daily Advisor

Managing Benefits: To Outsource or Not to Outsource?
"Make sure when researching firms, you ask the right questions, such as: What is your benefits strategy today? In the next three years? Do you work directly with my employees or solely through my HR department? What specific dynamics are most important to you across HR and your organization?"
Hodges-Mace

Executive Compensation
and Nonqualified Plans

SEC Official Confirms No Delay for CEO Pay Ratio Disclosure
"Last Friday, an official of the [SEC] confirmed that the SEC will not delay the effective date of the CEO pay ratio disclosure rule and that the SEC staff will be issuing additional guidance on the rule."
Meridian Compensation Partners, LLC

Equity Incentive Plans Targeted by Plaintiffs' New Theory on Section 16 Short-Swing Profit Liability
"[In] several recent cases, plaintiffs' attorneys have claimed that insider or issuer discretion to elect to have shares withheld at the time of vesting of awards (as opposed to the automatic withholding of shares upon vesting of the award) is not exempt under Rule 16b-3(e), and as a result, the executive is subject to liability under the short-swing profit rule. In one such case, the court summarily rejected the plaintiff's claims. Other cases remain pending."
Benefits Bryan Cave

T+2 Is Here: What It Means for Stock Compensation
"[In] a cashless exercise of stock options or in a stock sale at restricted stock/RSU vesting or after ESPP purchase, the cash will now show up in your brokerage account sooner, within two days after the execution date. Additionally, to settle by T+2, the broker must, sooner than previously, receive the shares and know the funds to send the company to cover the exercise cost and/or the tax withholding. Companies may also now need to give withheld taxes to the IRS sooner after NQSO exercise and restricted stock vesting."
myStockOptions.com

Discussions
on the BenefitsLink Message Boards

Controlled Group Involving Non-Profit Org and Two For-Profit Companies
"We provide services to a non-profit establishing a safe harbor 401(k) plan. The main director of the non-profit owns 100% of two for-profit corporations with employees. Because the main director of the non-profit essentially represents the other organizations by virtue of owning them and acting as their president, I am thinking this is a controlled group situation among the three organizations. But the for-profit companies don't have any direct control over or other involvement with the non-profit, so my client disagrees. Am I right?"
BenefitsLink Message Boards

Actuarial Adjustment of QPSA Benefit Due to Missed Payments
"We have a plan that has not been able to locate the surviving spouse of a deceased terminated-vested participant for a number of years. The TV participant would have turned 65 in 2015 (when QPSA payments would have started) and we are wanting to begin distribution of the QPSA for the spouse soon. The plan does not allow for retroactive payments. Would the QPSA benefit due to the spouse be actuarially increased to 2017 based on the participant's lifetime or the spouse's lifetime?"
BenefitsLink Message Boards

Handing Missed Deferrals and Matching Contributions Under a Safe Harbor 401(k) Plan
"Under a safe harbor 401k plan, the plan sponsor failed to withheld deferrals on bonus checks. They realized the error the next week. Because it was caught so early, are they allowed to just let participants make up their missed deferrals on the next check? And if a participant chooses not to make it up, should the employer get something in writing from the participant? Would the employer have to fund the match that would have been been for the deferral by such a participant?"
BenefitsLink Message Boards

Loan VCP for Owner of Plan Sponsor
"Can people share success rates for a Voluntary Compliance Procedure correction of an owner's loan (he owns 50% of the business)? The participant did not make the majority of payments in the first year, so he's 'way behind.'
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
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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