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[Official Guidance]

Text of EBSA Extension of Transition Period and Delay of Applicability Dates for BICE and other Prohibited Transaction Exemptions
51 pages. "This document extends the special transition period under sections II and IX of the Best Interest Contract Exemption and section VII of the Class Exemption for Principal Transactions in Certain Assets between Investment Advice Fiduciaries and Employee Benefit Plans and IRAs for 18 months. This document also delays the applicability of certain amendments to Prohibited Transaction Exemption 84-24 for the same period.... The former transition period was from June 9, 2017, to January 1, 2018. The new transition period ends on July 1, 2019, rather than on January 1, 2018. The amendments to these exemptions affect participants and beneficiaries of plans, IRA owners and fiduciaries with respect to such plans and IRAs."
Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL]


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[Official Guidance]

Text of IRS CCM 201747007: Provisions in ESOP Document Designed to Prevent Occurrence of a Nonallocation Year Under Section 409(p) (PDF)
"The Prevention Methods ... are all variations on the two examples in the preamble that provide for the reduction of allocations to HCEs or the increase of allocations to NHCEs.... [T]hese provisions also need to articulate a methodology to guide the ESOP administrator in making the allocations.... One way to meet this requirement is for the ESOP to have plan language stating the order in which these provisions are to be applied.... The subject plan provision provides for the re-allocation of stock that has been already allocated to participants' accounts. This would result in the forfeiture of accrued benefits[.]"
Internal Revenue Service [IRS]

[Guidance Overview]

DOL Extends Transition Period for Fiduciary Rule Exemptions
"During the extended Transition Period, fiduciary advisers have an obligation to give advice that adheres to 'impartial conduct standards.' These fiduciary standards require advisers to adhere to a best interest standard when making investment recommendations, charge no more than reasonable compensation for their services, and refrain from making misleading statements. Further, between now and July 1, 2019, when the exemptions' remaining conditions are scheduled to become applicable, the Department intends to complete its review under the Presidential Memorandum and decide whether to propose further changes."
Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL]

401(k) Participant Sues Wells Fargo Alleging Excessive Fees, Self-Dealing
"Throughout the complaint, the plaintiff alleges that the plan's fiduciaries' lack of a systematic and unbiased review process caused participants to pay an unnecessarily high expense ratio for both Wells Fargo proprietary investments and nonproprietary investments."

These Law Firms Led the Way in Filing Benefit Class Actions
"Two law firms in particular -- Schneider Wallace and Bailey & Glasser LLP -- were the most active filers of [ERISA] class actions. Since October 2016, these two firms each filed nine ERISA lawsuits seeking class treatment ... The cases have mainly targeted financial institutions, prominent private universities, and administrative service providers, among others."
Bloomberg BNA


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Fiduciary Considerations When Adding and Reviewing Managed Accounts
"When considering adding a managed account feature, retirement plan sponsors must carefully reflect on their plan and participants to deem whether the option may truly lead to a more positive participant experience and better retirement outcomes.... Additionally, plan sponsors should consider how robust the managed account feature is and how complex is it for plan participants to fully engage with the program and to otherwise optimize their overall experience."
Cammack Retirement Group

Advantages of 'Combo Tested' Defined Benefit and Defined Contribution Plans
"[T]he actuary can assume a future rate of return of up to 8.50% per year on the employer contributions to the 401(k) Profit Sharing Plan ... [T]he regulations require the use of much lower interest rates to be used in the funding of the DB Plan. By lowering the monthly benefits accrued by the NHCEs in the DB Plan ... while increasing their employer contributions to the 401(k) Profit Sharing Plan, the savings achieved in the DB Plan exceed the added costs in the 401(k) Profit Sharing Plan."

How Americans Use Their 401(k)s
"[1] The average person only holds a few funds ... [2] Roughly half of all contributions are invested in one type of fund ... [3] Savers rarely buy their company's stock ... [4] Most people get started because it's automatic ... [5] The median saver puts away 10% of his or her income."
Motley Fool

Retirement Prospects for the Millennials: What's the Early Prognosis?
"Gen-X and Millennial women worked and earned more in their 20s and 30s than now-retired women did at those ages, and Millennial men and women are much more likely to have a four-year college degree than previous cohorts. Projections show that median age-70 income will be higher for Gen-Xers and Millennials than previous generations as earnings grow over time. However, a larger share of retired Gen-Xers and Millennials will be unable to replace at least three-quarters of their pre-retirement earnings, according to the projections, and will see their living standards decline when they retire."
Center for Retirement Research at Boston College


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401(k) Third Party Administrator vs. Advisors: Key Differences
"Outside of TPA/administrative work, an advisor may take on other responsibilities for your plan, such as: [1] Assuming fiduciary liability ... [2] Providing participant education ... [3] Monitoring eligibility for participants;[4] Making plan design recommendations; [5] Conducting investment reviews; [6] Updating the investment lineup; [7] Signing your form 5500; [8] Performing compliance checks; [9] Advising on alternative savings methods."

Retirement Plan Advisers Need to Start Planning for Their Own Succession
"Many expect to use the sale of their business as a primary source of their retirement funding. But even the most successful plan adviser with staff and infrastructure finds that their 'business,' which might be generating good cash flow and funding a nice lifestyle, is really a 'practice' that has little value to a buyer.... [M]ost plan advisers have a hard time walking away from their practices and the cash flow unless someone is willing to pay them a fair price. Which is why so few walk away."

Modeling Deviations from Assumed Future Experience
"[A] reasonable amount of risk assessment and risk mitigation can be helpful in facilitating achievement of your long-term financial goals.... In addition to making assumptions about the future and periodically balancing your assets with your spending liabilities, ... periodically stress-test important planning assumptions ... so that you can possibly mitigate negative outcomes if actual future experience punches you in the mouth."
Ken Steiner, FSA Retired


There Are No Mulligans in Fiduciary Law
"[It] will be interesting to see how, or if, the [DOL] will pursue the sale of variable annuities in connection with pension plans and plan participants. Variable annuities are annually among the top investments involved in customer complaints. Statistics show that the highest percentage of variable annuities sales are within pension plans and to plan participants."
The Prudent Investment Fiduciary Rules

Executive Compensation
and Nonqualified Plans

[Official Guidance]

Text of Preliminary FAQs from ISS on U.S. Compensation Issues (PDF)
7 pages. "ISS has received several questions regarding upcoming changes to the quantitative pay-for-performance screening methodology and the Equity Plan Scorecard.... [These] Preliminary FAQs address some of the most commonly received questions to date."
Institutional Shareholder Services [ISS]

[Guidance Overview]

ISS Releases Preliminary U.S. Compensation FAQs for 2018 (PDF)
"ISS released preliminary U.S. Compensation FAQs for 2018 that cover the Quantitative Pay-for-Performance (P4P) tests and the Equity Plan Scorecard (EPSC) policy. These FAQs make some significant changes to the existing ISS policies and it appears that they will apply to shareholder meetings on and after February 1, 2018, even though they were not released as part of ISS's Policy Updates for 2018."

Another Day, Another Important Dollop of Information from ISS
"ISS published nine 'Preliminary Frequently Asked Questions,' five announcing changes to its Equity Plan Scorecard and four changes to its Quantitative Pay-for-Performance Screens."
Winston & Strawn LLP

Third Circuit Holds That Plan Participant Bargaining Power Is Not a Substantive Element of a Top-Hat Plan
"The Third Circuit agreed with the First Circuit's approach, finding that [DOL Opinion Letter 90-14A] does not require that participants in a top-hat plan possess bargaining power. Although the Second, Sixth, and Ninth Circuits have inquired into plan participants' bargaining power, they do not clearly adopt bargaining power as an additional requirement. The Third Circuit affirmed the District Court and concluded that participants' bargaining power is not a substantive element of a top-hat plan." [Sikora v. UPMC, No. 17-1288 (3d Cir. Nov. 24, 2017)]
Roberts Bartolic

on the BenefitsLink Message Boards

Calculation of Maximum Loan Amount Following Repayment of Outstanding Balance
Participant has $150,000 in a 401(k) plan. The plan allows one outstanding loan at a time. Assume the participant took out a $50,000 loan in 2015. The current loan balance is $20,000. The highest outstanding loan balance in the past 12-month period was $30,000. The participant wants to repay the existing loan balance of $20,000 and take a new loan for the maximum possible amount. Is the maximum amount (after the repayment of the existing loan) $20,000, or is it $40,000? My calculations: $50,000-($30,000-0) = $20,000; but $50,000-($30,000-$20,000) = $40,000.
BenefitsLink Message Boards

Merger Scenario: OK to Continue to Treat 'Old Money' Under Prior, Stricter Schedule?
Plan B is merging into Plan A effective 1/1/2018. The vesting schedule for Plan A is better at every point. The plan sponsor wants to have the old (worse) schedule apply to the old money for all merging participants. Does the merger with different vesting schedules constitute an amendment of the vesting schedule? Must the new (better) vesting schedule apply to old and new money for a participant who works an hour of service after the merger date?
BenefitsLink Message Boards

Amendment to Change Method for Crediting Service
Is there any guidance on how to administer a plan amendment that changes the method for crediting service from equivalencies to actual hours, or do we just give all employees the greater of the two?
BenefitsLink Message Boards

Going from Non-Excludable to Excludable Classification During Plan Year
The plan excludes partners from participation. One associate was promoted to partnership on Oct. 1. The plan provides for a discretionary profit sharing contribution to all eligible participants who complete 1,000 hours during the year and are employed on the last day of the plan year (which is the calendar year). Can we allocate a PS contribution to the associate based on his earnings from January 1 through September 30, or is the participant excluded because he already was a partner as of the last day of the plan year? The plan document is silent with respect to how to deal with EE's who are participants and then become part of an excluded class. (It is in individually designed plan.)
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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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