Retirement Plans Newsletter

November 22, 2017

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New Mortality Tables for 2018: The Wait for IRS Guidance Is Over
"The new mortality tables will increase liabilities from 3% to 5% for lump sum distributions. For calendar year plans, 2017 would be the last year to terminate a Plan and/or pay lump sums under the old, less expensive mortality tables."
Markley Actuarial

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Don't Forget 401(k) Deadlines During the Holiday Bustle
"Here's a partial to-do list for participants and plan sponsors as 2017 comes to a close."
Bloomberg BNA

Required Minimum Distributions (RMDs): The Out-of-Sight, Out-of Mind-Problem
"Do you understand all of the shorthand references in your plan documents? Are your plan administration systems and capabilities consistent with the design and needs of your plan? Have you properly attempted to contact participants you have not heard from? Should you consider adding some form of the IRS guidelines to you plan?"
Best Best & Krieger LLP

Interest in Collective Investment Trusts Rising Among 401(k) Sponsors
"Use of collective investment trusts [CIT] by defined contribution plans has been hovering around 20% for three years, but momentum is building.... The percentage of 401(k) sponsors with $500 million to $1 billion in assets expected to convert to a CIT option jumped from 11% in 2016 to 30% in 2017[.]"
InvestmentNews

The Downside Risk of Diversifying Too Soon
"Good diversification is a staple of financial planning advice, though the principle long pre-dates financial planners.... Except the reality is that, when you look to those who achieve the greatest wealth or have the greatest impact, virtually none of them ever diversify... or at least, not throughout most of their years.... [D]iversification isn't literally always the winning strategy, and for those who are young and have a long time horizon, arguably not even a necessary one."
Nerd's Eye View

OregonSaves Serves as a Test for State-Sponsored Auto-IRAs
"Ascensus ran a series of pilot programs in 2017 ... [which] started with 11 employers for the first pilot in July and expanded in subsequent pilots.... Businesses with 100 or more employees were required to register by Nov. 15. Phased-in registration deadlines for smaller employers [follow] ... Employers that fall under the mandate will need to facilitate contributions, complete an enrollment process and provide data on participating employees ... There is also a notice requirement that employers need to meet."
Society for Human Resource Management [SHRM]

Another Question is Answered in the Who's the Employer Q&A Column
"Question: What is the rule for counting service prior to becoming a member of related group? Answer: Count it. That's as simple as it gets. There are folks who disagree with me on this, so let's take a moment and see if we can't narrow our disagreement. Let me provide an example we can analyze ..."
S. Derrin Watson, on BenefitsLink

[Opinion]

Should Failing Multiemployer Pension Funds Get a Federal Bailout?
"A core challenge is that the financially distressed multiemployer pension plans are in shriveling industries. For example, the United Mine Workers plan has 10 retirees for every active member.... Bailing out pension funds by offering them unpayable loans simply kicks the can down the road and increases future deficits in a non-transparent manner. Worse, this approach could easily spread to public sector retirement plans, allowing them to maintain unsustainable benefit formulas."
The Fiscal Times

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Benefits in General

New, Free Daily Publication: The Message Boards Digest
Subscribe to the new, free Message Boards Digest, sent daily by email. You'll get a summary of all new topics on the BenefitsLink message boards, including the number of times each topic has been viewed, and how many replies it has received. (Some topics are included in the BenefitsLink newsletters, but many are not.) Subscribe now!
BenefitsLink

Senate Finance Committee Releases Text of Committee-Approved Tax Bill
Documents pertaining to the Tax Cuts and Jobs Act, as passed by the Senate Finance Committee: the text of the bill, a section-by-section description of the bill, and the Joint Committee on Taxation's score of the bill.
Committee on Finance, U.S. Senate

Tax Reform Legislation Moves Through the House and Senate (PDF)
"[Both bills] contain several provisions that would change the tax rules with respect to retirement plans, executive and nonqualified deferred compensation (NQDC') arrangements, employee fringe benefits, and health and welfare plans. [Includes a link to a] side-by-side summary comparing the retirement, executive compensation, fringe benefit, and health and welfare provisions in the House and Senate bills[.]"
Groom Law Group

Tax Reform: Side-by-Side Comparison of Employee Benefit Provisions of House and Senate Bills
"The House initially took a heavy hand to many favorable executive compensation provisions and made some important changes in the retirement and welfare areas, but the House Ways and Means Committee relented a bit. The Senate Finance Committee proposal, as modified ... followed suit in its approach to executive compensation."
Seyfarth Shaw LLP

Executive Compensation
and Nonqualified Plans

No More Procrastination: The Pay Ratio Has Arrived
"While public companies with high ratios may encounter negative press, it is not clear how investors will react to the ratios disclosed, at least during this first year of disclosure. Institutional Shareholder Services (ISS) ... found that 63% of investor respondents indicated that they did intend use the pay ratio to make comparisons between companies and to make comparisons between ratios for the same company year after year."
Mayer Brown

Implications for Employers Who Delay Deferred Compensation FICA Taxation
"If an employer discovers an omission of FICA withholding on an employees deferred compensation after the statute of limitations has passed, the employer must follow the general timing rule and the deferred compensation will be subject to FICA tax when paid. Due to this error on the part of the employer, the employer and employee could be subject to higher FICA taxes, since they were unable to take advantage of the special timing rule."
WithumSmith+Brown, PC

Discussions
on the BenefitsLink Message Boards

Paying Federal and State Taxes on Distributions: Which EIN to Use?
When filing the Form 5500 for a plan AND when paying taxes for the plan, are both instances paid under the company's EIN or the Plan's EIN?
BenefitsLink Message Boards

Handling Differing Vesting Schedules When Plans Merge
Company A (surviving plan) acquires Company B and the plans will be merged effective 1/1/2017. For the company match, Company A (surviving plan) has a 1-5 year graded vesting schedule and Company B has a 4 year graded schedule Can Company B increase the existing matching vesting schedule to 100% vesting for existing participants and then be on the same vesting schedule as Company A (surviving plan) for any new matching contributions effective 1/1/2017? Or does the merged plan need to keep the Company B employees who were eligible before 1/1/2017 on the more favorable 4 year graded vesting schedule?
BenefitsLink Message Boards

409A Situation: Will Similar Awards in Different Years Be Aggregated?
We have some deferred compensation awards, subject to 409A, that were granted in 2016. We've discovered they violate 409A. The errors are such that they cannot be corrected, so several participants are in violation of 409A and subject to the 20% penalty. We've corrected the plan errors going forward and would like to award some of these participants similar awards for 2018. If we do that, will the 2016 and 2018 awards be aggregated, such that if the 2016 awards violate 409A, so will the 2018 awards, and ALL that deferred comp is subject to the 20% penalty?
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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