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December 15, 2017 logo logo
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Leading Retirement Solutions, LLC
in WA

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[Official Guidance]

Text of IRS Notice 2018-02: Updated Mortality Improvement Rates and Static Mortality Tables for Defined Benefit Pension Plans for 2019 (PDF)
"These updated mortality improvement rates and static tables ... apply for purposes of calculating the funding target and other items for valuation dates occurring during calendar year 2019. This notice also includes a modified unisex version of the mortality tables for use in determining minimum present value ... for distributions with annuity starting dates that occur during stability periods beginning in the 2019 calendar year."
Internal Revenue Service [IRS]


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Defined Contribution Plan Sponsor Priorities for 2018
"[1] Ensure sound plan management ... [2] Conduct a financial needs analysis for employees ... [3] Targeted engagement efforts ... [4] Establish success measures ... [4] Consider ESG options ... [6] Enable 'rainy day' savings funds for employees ... [7] Increase diversification ... [8] Consider financial wellness solutions ... [9] Evaluate managed accounts ... [10] Examine retiree-focused tools and investments."

Behavioral Finance: How Participants Make Decisions
"The simplest choice is to simply not have to opt out of the program. A fund menu may have 15 or 20 investment choices. But the idea of the QDIA managed account solution is that the answer has been determined and the only choice the participant has to make is to not opt out of the program."

Best Practices for Plan Sponsors: The Importance of Internal Controls and Audit and Investigation Readiness
"The HIPAA Security Rule includes standards that group health plans must address ... (e.g., utilizing electronic systems to encrypt data, detect and eliminate the source of a breach, recover any lost data, restore the integrity of the system, safely destroy hardware, etc.). This is a good starting point for retirement plans."

A Blueprint for Reuniting Orphaned 401(k) Accounts with Their Owners
"[A]fter auto-portability was launched earlier this year for [one] large plan sponsor ... more than 15% of 'orphaned' participant accounts who were 'reunited' with their current-employer plan responded to a notice offering to help them complete a roll-in.... [Of] the participants who responded, 91% of them gave their consent to the roll-in and directed that the consolidation of their multiple accounts into their current-employer plan move forward, paying a small fee to do so. Of those who rolled accounts forward, 55% had balances that were less than $1,000."
Retirement Clearinghouse, via Employee Benefit News


The Tools & Techniques of Employee Benefit and Retirement Planning, 15th Edition

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Adding Religiously Compliant Funds to a Retirement Plan
"[To] include a fund in a plan requires a fiduciary due diligence process -- a review of quantitative and qualitative characteristics. Some funds, while religiously compliant, might not pass the criteria used to judge other funds in the plan.... Participant education would be key for any company deciding to add religiously compliant funds."

FINRA Shares Examination Findings
"FINRA [recently] released a report on its findings from recent examinations ... It contains selected observations for the purpose of highlighting issues that frequently occur or due to their broad impact on investors and markets.... The Report highlights a total of 11 topics [which include] ... Cybersecurity ... Product Suitability ... Best Execution ... Alternative Investments Held in IRAs."
The Wagner Law Group

Lawmakers Introduce Legislation to Increase Plan Access and Lifetime Income
"In addition to expanding access to MEPs, the bill would facilitate lifetime income disclosure and clarify the current annuity selection safe harbor."

Life Insurance: The Versatile Tool for Retirement Protection (PDF)
10 pages. "Just as human capital faces risk -- mainly premature death and disability -- during a couple's working years, retirees face a number of risks that may negatively impact their financial capital and the resulting income it is expected to produce. These risks include the risk of outliving financial capital, investment risk, healthcare costs, and taxes.... [P]ermanent life insurance can be used to help replace financial capital that is diminished due to the occurrence of each of these risk events during retirement."

PBGC Fees Rise for Underfunded Pensions
"GE's fees surged more than sixfold, to about $238 million, in 2017 from 2012, according to the PBGC data ... Boeing's bill was $151.7 million, about four times what it paid in 2014.... GE, whose pension fund is short by about $31 billion, said in November it would borrow $6 billion to fund its plan. After Boeing's fund fell short by about $20 billion at the end of 2016, the company said in July that it would add $3.5 billion of its shares to a scheduled $500 million pension contribution."

Benefits in General

Text of IRS Notice 2018-03: 2018 Standard Mileage Rates (PDF)
"The standard mileage rate for transportation or travel expenses is 54.5 cents per mile for all miles of business use (business standard mileage rate).... The standard mileage rate is 14 cents per mile for use of an automobile in rendering gratuitous services to a charitable organization under Section 170."
Internal Revenue Service [IRS]

Executive Compensation
and Nonqualified Plans

Accelerating Deductions for Annual Bonuses and Stock Units Paid in 2018
"Companies whose 2018 bonus payments may not be accruable in 2017 because of [various] contingencies might still amend their bonus plans before the end of their 2017 fiscal year in order to accrue the liability and support a deduction in 2017.... [C]onsider the following steps: [1] establish a 'fixed minimum bonus payment,' and/or a 'fixed minimum RSU (restricted stock units)/PSU (performance stock units) payment' for the entire group of employees in the company's bonus and equity plans ... [2] communicate that 'minimum promise' to the affected employees; and [3] clarify or amend existing plans, to ensure that this minimum promised amount cannot be reduced after year-end."
Morgan Lewis

Selected Discussions
on the BenefitsLink Message Boards

Can 2017 Conversion Be Recharacterized in 2018?
Is anyone aware of provisions in the tax bills to allow 2017 conversions to be recharacterized in 2018 despite the elimination of that ability going forward?
BenefitsLink Message Boards

Refund of Deferrals Due to ADP Failure; Use as RMD?
Can a refund resulting from a failed ADP test be used to satisfy RMD requirements for Key Employee in a 401k plan?
BenefitsLink Message Boards

Parsonage Allowance Can Be Included as Comp under Contribution Formula?
Client is a private high school with religious affiliation. They want to include the Rabbi/Head of School's parsonage allowance in the determination of the company contribution (5% of pay). For common law employee that's not taxable income, so I see no authority to include this in wages. Agree?
BenefitsLink Message Boards

Help for Participant Whose Ex-Spouse 'Forgot' to Mention a Retirement Plan
I've been talking to an individual whose ex-spouse "forgot" to mention one or more retirement plans as assets in a divorce settlement. The ex is a physician who is the plan sponsor. She's talked with ERISA attorneys. Apparently there was a money purchase plan that terminated in 2010 and its assets were merged into a profit sharing plan that was in existence (we think) at the time of the divorce. ERISA attorneys suggest that she involve the IRS or DOL. I'm aware of EBSA's call centers that assist plan participants, though I don't know of anything similar on the IRS side. I'm at a loss to understand what either agency can do about the fact that the assets of the plan were not disclosed in a divorce settlement.
BenefitsLink Message Boards

Nonqualified Deferred Comp Plan: Sponsor Can Make Vesting Elections on Behalf of Participants?
The plan offers two vesting elections that comply with the 409A fixed payment and timing requirement. So there is not a 409A compliance problem. But the company sometimes makes the election on a participant's behalf. Rather than giving two options, the company just goes with one. Is this allowed or must it be corrected? Should there be a retroactive amendment?
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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