Retirement Plans Newsletter

December 6, 2017

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HORAN Retirement Advisors
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in MA, RI

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Webcasts, Conferences

Affordable Care Act and Choosing a Retirement Solution
December 19, 2017 WEBCAST
Employee Benefits Security Administration [EBSA], U.S. Department of Labor

2018 NTSA Summit
January 23, 2018 in TX
National Tax-Deferred Savings Association [NTSA]

LA Advanced Pension & 401(k) Conference
January 25, 2018 in CA
ASPPA College of Pension Actuaries [ACOPA]

Fundamentals of Qualified Retirement Plans Series - Part 3
February 15, 2018 WEBCAST
ASC

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Discussions

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[Official Guidance]

Text of IRS Notice 2017-72: 2017 Required Amendments List for Qualified Retirement Plans (PDF)
"This notice contains the Required Amendments List for 2017 ('2017 RA List').... Pursuant to section 5.05(3) of Rev. Proc. 2016-37, this notice provides that December 31, 2019, is generally the last day of the remedial amendment period with respect to a disqualifying provision arising as a result of a change in qualification requirements that appears on this 2017 RA List. As a result, under sections 8.01 and 5.05(3) of Rev. Proc. 2016-37, December 31, 2019, is also generally the plan amendment deadline for a disqualifying provision arising as a result of a change in qualification requirements that appears on the 2017 RA List. However, a later date may apply to a governmental plan ... pursuant to sections 8.01 and 5.06(3) of Rev. Proc. 2016-37."
Internal Revenue Service [IRS]

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[Guidance Overview]

Revised Form 5300, Application for Determination for Employee Benefit Plan
"Form 5300, Application for Determination for Employee Benefit Plan, has undergone major revisions reducing it by seven pages. Plan sponsors submit Form 5300 to request a determination letter from the IRS on the qualification of their defined benefit or defined contribution plan and the exempt status of any related trust. Beginning January 1, 2017, applicants should've used the newest revision 1-2017 to file an initial determination letter application. However, applicants permitted to submit under cycle A3, under Revenue Procedure 2007-44, should use the prior version of Form 5300 (Rev. 12-2013)."
Internal Revenue Service [IRS]

[Guidance Overview]

Revised Form 8950, Application for Voluntary Correction Program (VCP) Submission
"Updates to the Form 8950 and instructions make it easier to understand and comply with the requirements of Revenue Procedure 2016-51, which became effective January 1, 2017. Highlights of changes include: [1] Deleted most questions and information items about determination letter applications and cycles, [2] Removed items about submitting determination letter applications with a VCP submission, [3] Replaced most citations to a specific EPCRS revenue procedure with a generic reference to 'current EPCRS revenue procedure' or to the Form 8950's Instructions[.]"
Internal Revenue Service [IRS]

[Guidance Overview]

The DOL Fiduciary Rule: Charting a Course, Avoiding Collisions and Potential Litigation, Part 4
"[T]his Q&A addresses issues raised in the Department's recent release which provides for an 18-month Extension ... In particular, [the authors] focus on the issues the Department (and consumer groups) raised regarding the status of 'enforcement' procedures during the transition period, with an emphasis on the comments in the Release on potential implications for both regulatory enforcement and litigation during this period and beyond.... [This Q&A] will address the IRA only transactions as well as potential litigation in federal court when advice or sales are made to ERISA plans."
Carlton Fields

Interesting Angles on the DOL's Fiduciary Rule, Part 72
"[U]nder the new rules, investment recommendations made to fiduciary advisors is also considered fiduciary advice. And, since virtually every advisor to a plan, participant or IRA is now a fiduciary, that means that the presentation of sample investment line-ups to advisors can be fiduciary investment advice, resulting in a recordkeeper becoming a fiduciary. That is obviously problematic for the recordkeepers, but is also a problem for advisors and particularly for advisors who are not experienced in working with retirement plans."
FredReish.com

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General Electric 401(k) Lawsuits Poised for Law Firm Battle
"[On December 4, GE asked a judge] to transfer a proposed class action over its $28.5 billion 401(k) to a federal court in Massachusetts, where three similar lawsuits have been filed in the past six weeks. Sanford Heisler Sharp LLP, the law firm that brought the first lawsuit against GE in a California federal court, responded the same day by asking for the Massachusetts cases to be transferred to California.... Each lawsuit accuses GE of filling its 401(k) plan with affiliated mutual funds that drained workers' retirement savings while earning hundreds of millions of dollars for a subsidiary company that GE eventually sold to State Street in 2016."
Bloomberg BNA

DOL Settlements Set Prudence Standard for ESOP Trustees
"Through a series of recent settlements, the [DOL] has outlined the process steps fiduciaries should follow in connection with a transaction involving a purchase from, or sale to, an employee stock ownership plan (ESOP). Largely based on the 'fiduciary process steps' first introduced by the DOL in the 2014 settlement of Perez v. GreatBanc Trust Co. ... [t]he recent settlements may ... provide helpful insight into the DOL's position regarding what is required to meet fiduciary obligations under [ERISA] when engaging in an ESOP transaction."
McDermott Will & Emery

ESG Adoption Rates Hold Steady
"In 2017, 37% of fund sponsors incorporated ESG factors into the investment decision-making process, unchanged compared to 2016. Larger funds (greater than $20 billion in assets) and foundations consistently had the highest rate of ESG incorporation (78% and 56% respectively)[.]"
Callan Associates

FINRA Says BB&T Overcharged Retirement Plans, Charities
"FINRA said that from at least July 1, 2009, through Aug. 1, 2017, BB&T sold Class A shares with a front-end sales charge or Class B or C shares with back-end sales charges and higher ongoing fees and expenses to certain retirement plan and charitable organization customers who were eligible to purchase Class A shares in certain mutual funds without a front-end sales charge."
Pensions & Investments

CalPERS Sees Unfunded Liabilities Rise $27 Billion
"CalPERS' unfunded liability grew $27.3 billion to $138.6 billion in the fiscal year ended June 30, 2016 ... The data lags a year, marking the end of a 12-month period in which the $344.4 billion system had a 0.61% investment return compared to the 11.2% return for the fiscal year ended June 30, 2017. CalPERS officials have estimated the system is 68% funded as of June 30, a drop from 68.3% a year earlier and 73.1% at the end of the 2015 fiscal year."
Pensions & Investments

Strategies to Reduce Required Minimum Distributions from Retirement Accounts
"Ultimately, it's impossible to completely and indefinitely avoid the requirement to distribute retirement accounts -- if only because, even to the extent the account isn't liquidated during life, the beneficiaries will be subject to additional RMD obligations after the death of the original account owner. Nonetheless, the potential exists to at least partially manage and minimize RMDs, and mitigate some of their tax bite!"
Nerd's Eye View

Senate Passes Tax Reform; Certain Savings Arrangements Impacted
"The changes to savings arrangements that are included in the bill would affect forms, documents, and operations if the provisions become law. The major savings related changes included in the bill are described [in this article].... IRA Recharacterizations Eliminated ... Slower Cost-of-Living Adjustments for IRAs, HSAs, Archer MSAs, and the Saver Credit ... 529 Plans and ABLE Accounts ... Rollover of Offset Retirement Plan Loans ... Hardship Distributions Expanded ... Taxation of Pass-Through Income ... Special Relief for 2016 Disaster Areas ... Items Removed From Original Senate Bill."
Ascensus

[Opinion]

It's Time to Protect Union Pensions
"The Teamsters have been working diligently for years with key members of Congress trying to come up with a solution to this pension crisis. And with the release of new legislation last month, the union believes it has found it. The bill would boost financially troubled multi-employer pensions so they don't fail. It would create a new agency under the U.S. Treasury Department that would sell bonds in the open market to large investors such as financial firms. The dollars raised, in turn, would go to these retirement plans to stave off cuts or complete failure."
James Hoffa, via The Detroit News

Benefits in General

Tax Reform: Comparison of Current Law with House-Passed and Senate-Passed Versions (PDF)
9-page chart compares current employee benefits and executive comp law with provisions included in House and Senate bills.
Groom Law Group

Senate Approves Tax Reform with Differences from House Version (PDF)
"On December 2, the Senate narrowly approved its own version of the Tax Cuts and Jobs Act. Earlier, the House approved a different version of this legislation ... The House has adopted a resolution to send the bills to a conference committee of members of both the House and Senate to resolve differences between the two versions." [7-page chart has side-by-side comparison of current law with the provisions of each bill, with comments.]
Mazursky Constantine LLC

Executive Compensation
and Nonqualified Plans

Preparing for Employee Reactions to CEO Pay Ratio Disclosure
"For many employees ... the real news will be the disclosure of the median employee's compensation. Employees will see quickly if they are paid more or less than the median employee not only at your company but also at other organizations within the same industry or geography. This information may change their perceptions with regard to their current compensation. So, what can you do to get ready to manage potential reactions from employees?"
Conduent

Discussions
on the BenefitsLink Message Boards

Rate Group Testing Situation; Husband and Wife HCEs
Plan uses rate group testing on an allocations basis. 2 HCE's. Wife makes all the money and wants to max out. (Cross testing doesn't work because owners are much younger than the four employees.) Husband takes a nominal salary, defers the max, but is excluded from all other employer contributions. Question: when performing the Average Benefits Percentage Test, do his deferrals get added back in? Common sense says no, but I'm having a brain cramp.
BenefitsLink Message Boards

Catch Up Contributions for Non-Calendar Year Plan
Question about off-calendar plan year and catch up. Little different twist than the usual "how much?" question. Plan year end is 9/30/2017. HCE employee turns 50 in 2017. Employee is on track to defer $24,000 during calendar year 2017. The catch up money would be in the 10/1/2017 to 12/31/2017 time frame. I am calculating a cross tested contribution for the 9/30/2017 plan year end. The employee would not get the benefit of the $6,000 catch up at the plan year 2016 (9/30/2017 PYE) time frame, correct? Put another way, does the employee get the catch up benefit for 2017 at the 9/30/2018 plan year end?
BenefitsLink Message Boards

Plan Received IRS Notice of Late 5500 Filing; DFVCP Available?
The plan was merged into another plan and the 2015 final (short plan year) Form 5500 was not filed. The plan sponsor received a notice from the IRS inquiring about the filing. We are proposing DFVCP. Will the IRS notice preclude them from filing under DFVCP? I'm reading that you can file under DFVCP as long as you don't receive a notice from the DOL but there is no reference to IRS.
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David Rhett Baker, J.D., Editor and Publisher  davebaker@benefitslink.com
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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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