Retirement Plans Newsletter

December 22, 2017

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Webcasts, Conferences

403(b) Plans for 401(k) Administrators: Part 1 [2018]
February 26, 2018 WEBCAST
FIS Relius Education

403(b) Plans for 401(k) Administrators: Part 2 [2018]
February 27, 2018 WEBCAST
FIS Relius Education

403(b) Plans for 401(k) Administrators: Part 3 [2018]
February 28, 2018 WEBCAST
FIS Relius Education

71st Annual National Conference
May 1, 2018 in AZ
PSCA [Plan Sponsor Council of America]

►See 99 Upcoming Webcasts and Conferences

►See 1377 Recorded Webcasts


Discussions

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[Guidance Overview]

CalPERS Board Adopts New Regs on Compensation Counted in Pension Formula
"There are items of compensation earnable for Classic Members that are not considered Pensionable Compensation for New Members.... Uniform pay for New Members ... is not pensionable compensation in any amount.... Employer-Paid Member Contributions (EPMC) is not pensionable compensation for New Members ... [B]onuses are not pensionable for New Members.... '[T]emporary upgrade pay' is not pensionable compensation for New Members ... [O]vertime hours that are built into the normal work schedule of the employee will only be pensionable for New Members who are in the local fire or local police membership classifications if it is pursuant to an FLSA 7(k) work schedule."
Liebert Cassidy Whitmore

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PBGC to Expand Missing Participants Program Beyond Single-Employer DB Plans
"PBGC will work with sponsors of terminated 401(k) and other defined contribution plans, including profit-sharing, money purchase, target benefit, employee stock ownership and stock bonus 403(b) plans, to help distribute plan benefits to missing participants. Plans not covered include governmental plans, church plans and plans that cannot pay benefits to PBGC in cash. The agency will charge sponsors $35 per account to transfer plan benefits into the program and fees will not exceed PBGC's costs."
Pensions & Investments

Princeton Retirement Plan Lawsuit Paused by Judge
"A lawsuit challenging the fees and investment options in Princeton University's retirement plan will be put on hold until a federal appeals court considers a similar case against the University of Pennsylvania.... The judge said the Third Circuit's ultimate ruling in that case 'directly bears' on how the Princeton case is resolved."
Bloomberg BNA

Tax Reform's Secondary Impacts on ESOPs
"New leveraged ESOPs where the company borrows a large amount relative to its EBITDA may find that their deductible expenses will be lower and, therefore, their taxable income may be higher ... Most S corporations make distributions to non-ESOP owners so they can pay their taxes on their share of corporate profits. So if an ESOP owns 30% of the company, it gets 30% of the distributions. These distributions now will be somewhat smaller because the non-ESOP owner will be declaring 20% less income and therefore requiring a smaller S distribution."
National Center for Employee Ownership [NCEO]

Sometimes It's Good to 'Be a Little Bit Country' -- The Benefits of Rural Cooperative Status
"One of the lesser-known (and used) provisions of the Code allows a state or local government or instrumentality that is a 'rural cooperative' to set up and maintain a governmental 401(k) plan in addition to a 457(b) plan. Some of the more common types of rural cooperatives are: Governmental entities providing electrical services on a mutual, cooperative or public utility basis; Municipal irrigation, water conservation or drainage districts; and Mutual irrigation or ditch companies that are governmental."
Best Best & Krieger LLP

Retire Based on a Dollar Amount, Not an Age
"Now that Americans are increasingly responsible for financing their own retirement, waiting until an arbitrary age to retire is an outdated notion. If it's up to us to save for retirement, then it is equally in our power to decide when we can begin living off those retirement savings.... Start with your anticipated expenses.... Next, determine the projected rate of return you will need.... Calculate when your money will run out.... Plan early and often."
U.S. News & World Report

[Opinion]

Target Date Funds Could Be Costing Your Plan More Than You Know
"As a plan sponsor, you need to understand your participant demographics, needs, amount of service needed and any limitations of your plan provider. TDFs have been manufactured and brilliantly marketed by a very powerful financial service industry. It's important to understand that they are not superior to other investments when it comes to performance. So, if they're not superior to other investment options, then you should ask yourself ... who stands to profit the most from their use?"
PLANSPONSOR

Benefits in General

Senate Confirms EBSA Head, Two SEC Commissioners
"The Senate on Thursday confirmed Hester Peirce and Robert Jackson as new commissioners for the [SEC] and Preston Rutledge as assistant secretary of labor for the Employee Benefits Security Administration. The approvals came in voice votes during an executive session before the chamber left for the year."
Pensions & Investments

2018 Benefit Reporting and Disclosure Requirements, and Statutory Limitations (PDF)
Chart provides a handy listing of disclosure requirements and deadlines, and related 2018 information for retirement and health and welfare plans. A companion chart details the statutory limits applicable to benefit plans.
Willis Towers Watson

When Amending a Plan, Tell the Truth or Pay the Consequences
"The district court found that the communications to employees [about a 1996 modification of its pension plan to become a cash balance plan, causing a suspension of benefit accruals for four to five years for several thousand participants] were intentionally false and misleading ... You have to ask why this case did not settle. Well before trial, Foot Locker surely knew the facts were not favorable, and the plaintiffs also must have been concerned about serious legal issues.... There were legitimate limitations period issues. Compromise on technical actuarial factors (interest rates and mortality tables) might have been reasonable. The plaintiffs might have yielded on the windfall issue.... It might be difficult to find employment records back to 1996 ... But perhaps 'principle' took over.... This loss will cost Foot Locker [$180 million]." [Osberg v. Foot Locker, Inc., No. 15-3602 (2d Cir. July 6, 2017; cert. pet. filed Nov. 8, 2017)]
Bob Blum Mediation

Insurance Agents Held to Be Employees for ERISA Purposes
"Agents who are supposedly independent are not like franchisees who must follow all of the franchisor's rules.... Insurance companies may also want to consider: [1] Carving out agents they deem to be independent contractors from ERISA plans; [2] Not referring to agents as employees in training and personnel manuals; [3] Adding a term to agents' agreements expressly stating when the agreement will be renewable; [4] Allowing the agents to control their book of business, or, at the very least, having discretion in selling their agency and in writing business for other insurance carriers."
Vorys, Sater, Seymour and Pease LLP, via FORC

Executive Compensation
and Nonqualified Plans

[Guidance Overview]

Tax Legislation Includes Significant Executive Comp and Employee Benefits Provisions (PDF)
27 pages. "The Conference Report confirms that compensation paid pursuant to a plan qualifies for the exception under the transition rule, but only if the right to participate in the plan is part of a written binding contract with the covered employee in effect on November 2, 2017.... Additional questions may arise regarding plans or agreements that may be terminated prospectively and what portion of the deferred compensation accrued under the plan or agreement after the effective date is grandfathered.... The new Section 4960 21% excise tax would add a significant financial and administrative burden on tax-exempt organizations with highly compensated employees."
EY

Congress Delivers Bundle of Executive Comp and Employee Benefits Changes for the Holidays
"[P]ublic company employers should note that gain on stock options, previously exempt as performance-based compensation, will now be included in the $1 million deduction limit. There may be opportunities to circumvent these restraints with incentive stock options.... [E]mployers should analyze whether they can rely on the exemption for contracts that were in effect before November 2, 2017, and ensure that they do not take any actions to materially modify arrangements that do qualify for such exemption."
Akerman LLP

Selected Discussions
on the BenefitsLink Message Boards

Takeover Plan Has Only a Few Past SSA's
FreeERISA cannot provide SSA's anymore. If the employer doesn't have them, is there any other source for this information?
BenefitsLink Message Boards

403(b) Moves from Insurance to Mutual Funds; Preserve Hardship Distributions?
403(b) plan moves from an insurance company to a mutual fund company. There's a ton of money in the non-elective source. Any way I can preserve at least the existing money for hardship distributions?
BenefitsLink Message Boards

LRM #94 Changed: No More Restriction on Number of Allocation Rates in a Cross-Tested Plan?
My opinion is that the restriction on the number of allocation rates in a cross-tested plan was specifically dictated by LRM #94 and was solely applicable to get a prototype document approved during the EGTRRA cycle. This has been removed for the PPA cycle. And nothing in the 401(a)(4) regulations themselves even makes mention of this, thus meaning PPA documents are not limited to the number of groups or rates available, nor are plans operating under them expected to comply with such a restriction when running 401(a)(4) tests. Agree?
BenefitsLink Message Boards

Failure to Withhold 20% on Distribution from 401(k) Plan
Participant took a cash distribution from 401(k) plan in mid-2017. The participant accounts are held in individual brokerage accounts. The broker didn't withhold the 20% tax (even though they've been working with 401(k) accounts for years)... they didn't consult with us and paid the entire vested balance to the participant. The withholding would have been almost $10,000. We're supposed to do a Form 1099R for this. Who is responsible for paying the tax that wasn't withheld? The participant already has spent the cash. And part of the distribution represented an unpaid loan. Should we do the 1099R showing NO withholding, or instead show the correct 20% amount and tell the broker they owe that money to the employer? Or is the participant just liable to pay whatever tax is due on the distribution (on his 2017 income tax return)?
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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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