Retirement Plans Newsletter

November 30, 2017

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[Guidance Overview]

Considerations and Analysis of the DOL's 18-Month Transition Period Extension (PDF)
"Service providers may stand down on expending additional resources on contingency planning ... [P]roviders should not lose sight of the fact that the remainder of the Final Rule is in full effect -- with the expanded definition of fiduciary.... Plan sponsors and administrators may wish to confirm that existing plan service providers maintain a comprehensive compliance strategy and will rely (or will continue to rely) on any needed prohibited transaction exemptions."
Eversheds Sutherland

[Advert.]

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Sponsored by ASC

Get an overview of ethical responsibilities, an explanation of IRS Circular 230 from an employee benefits perspective, the most significant ethical concerns of the IRS Office of Professional Responsibility and more. Register Now!


[Guidance Overview]

DOL Extends Transition Period for Fiduciary Rule Exemptions: What This Means for Service Providers
"Affected firms should take advantage of the opportunity to revisit the guidance and to communicate with the DOL on possible changes. Indeed, the DOL specifically asks for 'input and data from stakeholders demonstrating the regulated community's implementation of the Impartial Conduct Standards.' While this may mean reiteration of comments previously submitted, it may also be possible to provide evidence to the DOL of the impact of the changes in the rules -- positive or negative -- to assist in the regulatory analysis."
Drinker Biddle

[Guidance Overview]

DOL Fiduciary Rule Transition Period Extended to July 1, 2019
"Given that the DOL is allowing for compliance flexibility, firms should consider seizing the opportunity to tailor their approach to the impartial conduct standards. The DOL has been clear that good faith compliance is essential ... [The authors] remain somewhat optimistic that the DOL, the SEC and the states will coordinate on a rulemaking to avoid duplicative and inconsistent regulatory obligations. The DOL alluded to this need for harmonization in its decision to extend the transition period."
Stradley Ronon

Interesting Angles on the DOL's Fiduciary Rule, Part 71
"[T]he goal of financial wellness programs is to provide help to participants in achieving their short-, intermediate-, and long-term financial objectives. Recordkeepers are uniquely suited to provide those services, because of the information they already possess and because of their call centers.... Some of that advice is fiduciary and some is not. Let's take a closer look at that."
FredReish.com

Beyond Glide Paths: Factors and Target Date Funds
"Investors often differentiate target date funds based on their glide paths, which illustrate how allocations to equities, fixed income, and other assets change as investors age. However, a glide path is an imprecise way to compare a target date fund's structure. Investors can gain greater insight by seeing how different types of equity, fixed-income, and other assets are used to construct the glide path."
Wells Fargo Asset Management

[Advert.]

Registration Open -- Orlando APC, Feb. 7-9, 2018

Sponsored by FIS Relius Education

Our ERISA experts will cover 403(b) restatement, anti-cutback rule, IRS disaster relief, QDROs, loan and hardship distribution, advanced plan design, RMDs, EPCRS , fiduciary regs update, and more. 19 CE hours. Early fee ends January 5. Register now.


Retirement Plan Best Practices: Investment Menu Construction (PDF)
10 pages. "This paper outlines a method of menu construction based on a foundation of behavioral economics principles. The approach detailed here provides a strong balance between providing enough diversification while avoiding overwhelming participants with too much choice. [The authors also] strategize around the presentation of the menu options, providing some guidance on how to facilitate participant decision-making."
Arnerich Massena

Are Proprietary Funds the New 'Lightning Rod' for 403(b) Plans?
"Recent litigation, as well as a number of articles in the press, have been highly cynical of recordkeepers' proprietary fund offerings ... [U]nlike variable annuities, where the criticism was a slam dunk, the assessment of proprietary funds in 403(b) plans is more like a half-court heave -- once you get past the obvious conflict of interest of a recordkeeper offering funds on the platform it also manages. Here's why."
Cammack Retirement Group

Senate HELP Subcommittee Examines the Mounting Multiemployer Pension Problem
"Members of the Subcommittee heard from the Honorable Tom Reeder, the Director of the [PBGC].... Reeder laid out the high stakes of finding a solution to preserve the pension plans promised to millions of workers and retirees.... PBGC's FY 2016 Projections Report shows that the [single-employer] program will be out of a deficit by 2022.... [T]he Multiemployer Program stands in stark contrast as financial conditions continue to worsen."
Committee on Education and the Workforce, U.S. House of Representatives

House Bill Would Allow Sponsors to Force Larger Auto-IRA Cash Outs
"The Retirement Plan Modernization Act would raise the automatic IRA rollover limit, based on the rate of inflation, from $5,000 to $7,600 and allow for future increases to be indexed for inflation."
PLANSPONSOR

Tax Reform Legislation's Potential Impact on Public Sector Retirement Plans
"Aggregation of 457(b) elective deferrals with 401(k) and 403(b) deferrals.... Inclusion of 457(b) contributions in defined contribution plan 415(c) limits.... Elimination of special 457(b) catch-up contributions.... Lower age for access to section 457(b) plan in-service distributions.... Hardship distributions: expansion of available assets.... Hardship distributions: elimination of loan requirement.... Hardship distributions: elimination of six-month waiting period to re-start contributions.... Extension of time for terminated employees to repay offset loans."
ICMA-RC

Tax Reform and Public Pensions: Minor Provision Causes Major Trouble
"Even though the [Unrelated Business Income Tax (UBIT)] would only impact a small portion of a pension fund's investments, it is still a cause for concern.... [A] new tax means a loss of revenue for the pension fund ... Furthermore, the new provision is scheduled to take effect on January 1, 2018, meaning public pension plans would not have time to restructure investments to avoid being subject to the UBIT."
National Public Pension Coalition

Annuity Sales See Historic Drop in Third Quarter
"Overall fixed and variable annuity sales dropped 13 percent to $46.8 billion compared with the year-ago period ... 'This is the first time total annuity sales have fallen below the $50 billion mark in 15 years,' said LIMRA CEO Robert A. Kerzner ... 'This is also the sixth consecutive quarter of decline in overall annuity sales.' "
InsuranceNewsNet.com

Benefits in General

Sign Up for a New, Free Daily Email: The 'Message Boards Digest'
Subscribe to the new, free Message Boards Digest, sent daily by email. You'll see all of the new topics on the BenefitsLink message boards. (Some topics are included in the BenefitsLink newsletters, but many are not.) You might take a look at a recent, sample issue. To subscribe, just enter your email address online, then click the Subscribe button you'll see there.
BenefitsLink Message Boards

Executive Compensation
and Nonqualified Plans

Senate Finance Committee Speaks: Proposed Executive Compensation Changes
"[F]or 2018, an executive who is eligible for a governmental employer's 457(b) and 403(b) plans could contribute a maximum of $18,500 to both such plans ... instead of contributing $18,500 ... to the governmental 457(b) plan and $18,500 ... to the 403(b) plan. This proposed change would not apply to non-governmental 457(b) plans.... The tax-exempt employer executive compensation excise tax provisions are substantially similar in the Senate Finance Committee Bill and the House Bill. However, the Senate Finance Committee Bill clarifies that 'compensation' includes amounts required to be included in gross income under Section 457(f) of the Code."
Drinker Biddle

Recent Developments Affecting Performance-Based Equity Awards
"[1] [T]he most common metrics of performance awards at the 'Equilar 500' companies in 2016 were relative TSR (52.4%), ROC/ROIC (34.9%), EPS (30%), revenue (17.8%), and cash flow (14%).... [2] In September, RSUs granted by Apple in 2014 paid out at the end of their cycle after the associated performance conditions were met.... The footnotes in the related Form 4 filings ... provide details on the grant, including its payout scale, and an example of Section 16 reporting ... [3] [A] federal district court in Massachusetts ruled that a covenant of good faith and fair dealing applies to potentially protect someone with unvested performance-based grants."
myStockOptions.com

Discussions
on the BenefitsLink Message Boards

Living Trust as Beneficiary
Participant dies at age 81. Was not Key or HCE. Spouse already had died. Three adult children, who are named as contingent beneficiaries. Primary beneficiary is a Living Trust established in the Participant's name. I have zero experience with handling a Living Trust as a beneficiary. Any comments will be greatly appreciated.
BenefitsLink Message Boards

Grouping of Rates/EBR's Under 1.401(a)(4)-(2) and (3)
The regulations give mathematical certainty as to what constitutes an acceptable "range." However, there is that annoying caveat that says as long as the allocation/accrual rates of the HCE's within the range cannot generally be significantly higher than the allocation/accrual rates of the NHCE's within the range. I've always found this troubling. What is "significantly higher" (especially since the range is limited anyway)?
BenefitsLink Message Boards

When to Withhold Money for Automatic Enrollment Plans?
When does money need to be withheld under an automatic enrollment plan? For example: Plan has requirement of minimum age 21 and three months of service for eligibility. Entry Date is first day of month following meeting those requirements. If a person meets eligibility on 10/16, he or she enters on 11/1. Does the plan sponsor actually withhold the money on the 11/1 pay period if no election or opt-out has been chosen by participant? Or does the sponsor wait to withhold until the opt-out period has ended?
BenefitsLink Message Boards

May a Plan Change from 'No True-Up' to 'True-Up' for a Year Already Begun?
2017 is about 90% done. Assume the plan document says that safe-harbor matching contributions are made on a payroll-by-payroll basis, and that "true-up" contributions will not be made. The employer now would like to provide that matching contributions are recalculated (after a plan year ends) based on the ratio of elective deferrals to compensation for the plan year, and "true-up" contributions are made. May the employer make this amendment effective for 2017? Or must the employer apply the amendment only to 2018 and later years? Which regulation and what reasoning allows or precludes the change for a year already begun?
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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