Retirement Plans Newsletter

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Retirement Plan Analyst
Retirement Plan Solutions, Inc.
in NC, Telecommute

Retirement Plan Administrator
Blade Benefit Consulting
in VA

Account Manager
in NC, OH

Compliance QA Software Tester / Wolters Kluwer
in WI, Telecommute

in FL

Assistant Administrator
in FL

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Advisers Face Perils When Firms Tell Them to Ignore DOL Fiduciary Rule
"[T]he DOL's imposition of fiduciary standards on those who provide ongoing advice to IRA accounts ... makes it much more likely that state common law fiduciary status will be found to exist.... [F]iduciary status may result, and the impartial conduct standards deemed to apply, if courts determine ... that compliance with the DOL's impartial conduct standards (which the DOL mandates to so occur, under the extensions) is an implied term of every contract.... [A] carefully undertaken cost-benefit analysis must be undertaken now, for rollovers to IRA accounts. Advisers beware. If you firm is saying to you, 'Don't worry' -- perhaps you should really be worrying."
Ron A. Rhoades, JD, CFP


Join EBRI's December 14 Policy Forum!

Sponsored by Employee Benefit Research Institute [EBRI]

Learn about recent EBRI research and hear perspectives on the latest retirement, health, and financial wellbeing research and policy developments from expert panelists. Learn more and register here (attendance is free of charge).

DOL Delays Full Application of BICE; Significance of the Interim Standard for Plan Sponsors
"[O]ne of the major sponsor-fiduciary burdens under the new fiduciary rule (and the related BIC) will be the duty to monitor the provider-fiduciary's compliance with the rule and the BIC.... While DOL's special transition period rules relax those compliance standards, in some respects the relaxation is with respect to the easiest things to monitor -- objective contract and disclosure requirements. By contrast, the Impartial Conduct Standards that do apply during the transition period are somewhat vague."
October Three Consulting

Financial Planning as an Advisory Firm Employee Benefit
"[I]ssues to consider for advisory firms that want to ... [offer] financial planning as an employee benefit to the employees of their own firm [include] ... [1] whether to provide such services internally or externally, [2] whether to let employees choose their own advisor, [3] the tax consequences to consider, and [4] why providing financial planning to employees can actually provide an Return On Investment as employees gain better perspective on how to improve the firm's client experience (by actually experiencing financial planning themselves!)."
Nerd's Eye View

Union Retirement Plan Latest Target of 401(k) Fee Litigation
"The flurry of litigation over 401(k) plan fees has reached a new frontier: a union retirement plan covering more than 27,000 Teamsters and other union workers. The proposed class action ... targets the trustees of the Supplemental Income 401(k) Plan, a $921 million union retirement plan based in California. According to the lawsuit, the plan paid excessive fees to its two record keepers and offered expensive, retail share classes of mutual funds when cheaper, institutional share classes were available."
Bloomberg BNA

Multiemployer Pension Plans: Current Status and Future Trends (PDF)
71 pages. "At this stage, the majority of proposed solutions to the multiemployer challenge fall into two categories: alleviating the burden of orphaned members -- workers left behind when employers exit -- and providing subsidized loans -- either through direct government lending or government guarantees on private sector loans. Whatever the ultimate solution, a case can be made for a package that involves contributions from employers (tailored not to sink already fragile plans), from plan participants, and from taxpayers."
Center for Retirement Research at Boston College

Underfunded Multiemployer Fund Proposes 'Two-Pool' Program
"[E]mployers who join the new pool will likely pay a withdrawal liability amount, possibly on a discounted basis, for past unfunded liability. They will then join the 'new pool,' which will be funded at a very high rate -- with reduced benefits -- to prevent future unfunded liability problems like those in the present plan.... [The] Fund's two-pool proposal may mark the first significant proposal by a large multiemployer pension plan since the proposal suggested by the Central States Pension Fund was rejected by the [PBGC] and The Treasury Department during 2016."
Polsinelli PC

Social Security Primer (PDF)
17 pages. "This report provides an overview of Social Security financing and benefits under current law. Specifically, the report covers the origins and a brief history of the program; Social Security financing and the status of the trust funds; how Social Security benefits are computed; the types of Social Security benefits available to workers and their family members; the basic eligibility requirements for each type of benefit; the scheduled increase in the Social Security retirement age; and the federal income taxation of Social Security benefits." [Report R42035, Nov. 30, 2017]
Congressional Research Service [CRS]

A New Retirement Era: How Many Years Past 65 Will You Work?
"Anticipation of an early retirement highlights how we still expect our personal finance life cycles to conform with a baby boomer timetable. Careers starting in your mid-20s, houses and kids in your early 30s and retirement in your early 60s.... [T]he timing of all these events is being pushed ahead as a result of longer lifespans and shifts in the economy."
The Globe and Mail

Executive Compensation
and Nonqualified Plans

Making Annual Bonus Payments Deductible in 2017 Using Section 162(m)
"[C]ompanies may be able to accelerate into 2017 the vesting, taxation, and deductibility of some performance-based equity awards with performance periods that end on December 31, 2017.... The potential stumbling block is the 162(m) requirement that the 'compensation committee must certify in writing prior to payment of the compensation that the performance goals and any other material terms were in fact satisfied.' However, there are several possibilities for satisfying that requirement in 2017."
Winston & Strawn LLP

Sponsoring a Non-Qualified Deferred Compensation Plan? Don't Forget the FICA Tax! (PDF)
"[It] is not unusual to find ... FICA withholding is overlooked when the contributions are from the employer.... It is better to have language in the plan that does not require you to pay the FICA taxes when the contributions vest, so that if you inadvertently fail to do so you are not in violation of the plan and potentially liable to participants for any increase in their FICA tax at distribution ... If you determine that FICA tax has not been withheld properly for previous periods, you will likely want to correct the error so that FICA will not be due on distribution."
Boutwell Fay LLP

Non-Qualified Deferred Compensation: Not Just for Large Companies (PDF)
"In the same way that large corporations benefit from a NQDC plan for highly compensated employees, so do many small companies, including Sub-S Corps and LLCs. Companies of all sizes can use these plans to retain specific, high performing employees, avoid discrimination testing in the 401(k) plan, create important retention mechanisms, and overall, create a unique wealth accumulation vehicle benefitting the company and its key employees."
Fulcrum Partners, LLC

on the BenefitsLink Message Boards

PBGC Coverage Continues If Non-Owner Terminates But Isn't Paid Out?
Plan covers owner and sister. Hence covered by PBGC because sister does not have ownership. That's good; it allows 25% deduction for DC plan. Sister terminates. If she is not paid her benefit and her benefit remains in plan as terminated vested, is the plan still covered by PBGC, such that we still have a 25% DC deduction?
BenefitsLink Message Boards

Worrying About Effect of Tax Reform on Pass-Through Income
I'm worried about the proposed reduction of pass-through income taxes to 20%. Would 100% of pass-through income be subject to just 20%? In other words, does that include Guaranteed Payments and the allocation of ordinary income? ASPPA has brought up the issue that if clients only get a deduction for 20% when the money goes in and then the money is taxed as ordinary income when it's distributed, the client likely will be paying MORE tax on the way out, creating a huge disincentive to save.
BenefitsLink Message Boards

Calculation of Deduction Limit Includes Comp of Participant Who Terminated Before Year-End?
For DC plan deductible limit, in a plan with a last day requirement, does eligible compensation include compensation of participant who terminated before the end of the plan year?
BenefitsLink Message Boards

Amendment to Eligibility Rules When Plan Year's Almost Over (Dec. 1) -- Too Aggressive?
An existing 3% safe harbor nonelective 401k plan has the calendar year as its plan year. It has a One Year Wait for eligibility. The plan sponsor would like to amend the plan today, 12/1/2017, to permit anyone employed as of 12/1/2017 immediate eligibility. This would bring in 2 HCEs and 6 NHCEs. It seems that expanding the eligible employees is allowed mid-year, but this timing seems aggressive because the new entrants have only one month to defer. What do you think?
BenefitsLink Message Boards

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David Rhett Baker, J.D., Editor and Publisher
Holly Horton, Business Manager

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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