Retirement Plans Newsletter

November 17, 2017

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[Guidance Overview]

Puerto Rico Treasury Department Finally Grants Relief to Participants Affected by Hurricane Maria (PDF)
"After a long and tumultuous process, and 56 days after Hurricane Maria hit Puerto Rico, the Puerto Rico Treasury Department issued Administrative Determination No. 17-29 to grant relief on eligible distributions (including hardship withdrawals) and plan loans by participants in Puerto Rico tax qualified retirement plans who were affected by Hurricane Maria."
Groom Law Group

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ERISA Fiduciary Litigation: Are We at a Tipping Point?
"A number of recent decisions dismissing 401(k) actions involving fees and breach of fiduciary duties has caused some commentators and investment industry leaders to claim that the tide has shifted and such actions will meet with similar summary dismissals going forward. However, a closer analysis of the decisions suggests that such dismissals may result in nothing more than a false sense of optimism."
The Prudent Investment Fiduciary Rules

PBGC Fiscal Year 2017 Annual Report: Multiemployer Program Deficit Widens; Single-Employer Program Continues to Improve
"[T]he deficit in [PBGC's] insurance program for multiemployer plans rose to $65.1 billion at the end of FY 2017, up from $58.8 billion a year earlier. The increase was driven primarily by the ongoing financial decline of several large multiemployer plans that are expected to run out of money in the next decade. PBGC's Single-Employer Insurance Program continued to improve as the deficit dropped to $10.9 billion at the end of FY 2017, compared to $20.6 billion at the end of FY 2016. The primary drivers of the continued improvement include premium and investment income and increases in the interest factors used to measure the value of future liabilities."
Pension Benefit Guaranty Corporation [PBGC]

Multiemployer Solvency Crisis: Adjustments to the PBGC's Benefit Guarantee to Reduce Pressure on the Guarantee Fund (PDF)
"Using the Multiemployer Pension Simulation Model (MEPSIM), we project that about 130 multiemployer pension plans covering 2.1 million participants will become insolvent over the next 20 years, and that the [PBGC's] multiemployer guarantee fund -- the backstop against such insolvencies -- will itself be exhausted by 2027.... The adjustments to the guarantee that we examine within this paper have a significant downward impact on the present value of projected PBGC assistance payments, but the impact is not sufficient to prevent the exhaustion of the guarantee fund. Given the large number of plans heading towards insolvency, it is unlikely that a single policy action is available to stabilize the guarantee fund. Rather, several simultaneous actions will be required, among which a reduction of the guarantee can be considered."
The Pension Analytics Group

Treasury Announces Voting Schedule for International Association of Machinists Motor City Pension Plan MPRA Benefit Reductions
"[T]he proposed benefit reductions will now be subject to a vote of participants and beneficiaries of the Plan. Ballots were mailed to participants and beneficiaries on November 16, 2017. The voting period opens November 16, 2017 ... and closes December 7, 2017[.]"
U.S. Department of the Treasury

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[Opinion]

Any Action to Address PBGC Deficit Must Protect Improving Single-Employer Pension Plan System
"Traditional defined benefit pensions are in a delicate balance, with the retirement savings of millions of people at stake. Increasing pressure on the single-employer program would only compel healthy plans to exit the system, leaving a dwindling premium base and creating a death spiral for the PBGC[.]"
American Benefits Council

[Opinion]

Senators Introduce Bills to Save Financially Troubled Multiemployer Plans and Protect Retirees
"These bills set up a new office in the Treasury Department called the Pension Rehabilitation Administration (PRA), which would receive proceeds from the issuance of Treasury bonds. This money would then be lent to financially-troubled plans as long as they meet certain criteria. The Pension Rights Center is particularly pleased that the loans would be used to fully pay the benefits of retirees and that the bill would require plans, which have already been approved to cut benefits under MPRA, to apply for these new loans and if approved, use that money to restore previously suspended benefits."
Pension Rights Center

Benefits in General

Senate Tax Bill Revisions Kill ACA Individual Mandate, Preserve Current Retirement and NQDC Contributions
"Unlike the House version, the Senate bill, as amended, would effectively repeal the [ACA's] individual mandate ... Like the House tax bill, the Senate version now keeps pretax retirement contributions to 401(k) and similar plans intact.... Senate Republicans added an employer credit for paid family and medical leave to the bill.... [By] Nov. 15 the NQDC provision was gone from the revised mark-up of the bill."
Society for Human Resource Management [SHRM]

2017 Global Benefits Attitudes Survey
"Employees ... with choice and flexibility today are twice as likely to feel their benefit program meets their needs.... More than one-fifth of employees expect to still be working at age 70 or later. Over 60% say their employer retirement plan is their primary means of saving for retirement. Employees look to their employers for support in improving their health and well-being, and becoming more financially secure. Although companies are responding with programs that support physical, emotional, financial and social well-being, ... [e]mployee engagement in well-being programs remains low. Employers could likely boost engagement by designing programs that leverage the workplace environment and promote the use of new technologies."
Willis Towers Watson

Executive Compensation
and Nonqualified Plans

Latest Senate Markup of the Tax Bill Strikes NQDC Provisions but Retains Revisions to 162(m) Limits on Executive Pay
"Adoption of Code section 409B would have literally been the end of elective nonqualified deferred compensation plans.... It appears support for overhauling the rules relating to nonqualified deferred compensation is losing steam.... At the same time, the latest markup of the Act by the Senate did not remove the provisions changing Code section 162(m)."
Trucker Huss

Tax Reform: The Shifting Landscape of Executive and Equity Compensation
"The House passed its [version of the] bill on November 16, 2017.... [On] November 15, 2017, the Senate Finance Committee released its current proposal which ... eliminated certain wide-sweeping amendments included in the initial Senate tax reform proposal.... [A table] summarizes key executive and equity compensation provisions of the House Bill and the Senate Proposal."
Pillsbury Winthrop Shaw Pittman LLP

Discussions
on the BenefitsLink Message Boards

Retroactive Amendment Liberalizes Eligibility for Matching Contributions But Makes Vesting More Strict
We have a 401(k) with matching. Participants must work for 18 months before being eligible for matching, and vesting is immediate. For testing purposes, we want to allow non-HCEs to be immediately eligible in their first 18 months with 3 year cliff vesting and we want to make this effective as of 1/1/17. Can we do this?
BenefitsLink Message Boards

Beneficiary is Participant in Deceased Participant's Plan; How to Handle Death Benefit?
Can I simply transfer the deceased spouse's account to the surviving spouse's account in the Plan? Would it be a rollover? Should I separately account for it to ensure the 10% penalty applies? Perhaps more importantly, must the balance leave the Plan within 5 years due to RMD rules? (The participant was not yet 70-1/2 at the date of death.)
BenefitsLink Message Boards

Sole Proprietor Wants to Terminate Plan and Start Another One for New Business, During Same Plan Year
We have a solo-k plan with plan sponsor Y. Sole-proprietor decided to end his business, Y, this year and establishes a new business Z in the same year. Sole-proprietor would like to establish a plan for business Z. Is this ok? In my gut, I say 'yes', as an owner of multiple companies can sponsor plans for each company if they want within the regulations. It is the sole-proprietor that is throwing me.
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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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