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January 11, 2018 logo logo
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Pension Administrator
PBMares, LLP
in VA

401(k) Retirement Plan Administrator
Alliance Pension Consultants, LLC
in IL

Senior Counsel - Benefits
University of California Office of the President
in CA

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[Official Guidance]

Text of IRS Notice 2018-11: Weighted Average Interest Rates, Yield Curves, and Segment Rates Applicable for January 2018 (PDF)
"This notice provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under Section 417(e)(3), and the 24-month average segment rates under Section 430(h)(2) ... In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under Section 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008 and the 30-year Treasury weighted average rate under Section 431(c)(6)(E)(ii)(I)."
Internal Revenue Service [IRS]


PSCA's 71st Annual National Conference, May 1-2, 2018, Scottsdale, AZ

Sponsored by Plan Sponsor Council of America [PSCA]

Join us in the Arizona desert to replenish and refresh your retirement plans. Hear from industry experts about issues, trends, and solutions. Spend two days drinking up knowledge that will rejuvenate your plan for the rest of the year! Register now!

[Official Guidance]

Text of PBGC Interest Rate Update for Benefits Payable in Terminated Single-Employer Plans, February 2018
"The February 2018 interest assumptions under the benefit payments regulation will be 0.75 percent for the period during which a benefit is in pay status and 4.00 percent during any years preceding the benefit's placement in pay status. In comparison with the interest assumptions in effect for January 2018, these assumptions are unchanged."
Pension Benefit Guaranty Corporation [PBGC]

[Official Guidance]

Text of PBGC Final Regs: 2018 Adjustment of Civil Penalties for Inflation
"This rule adjusts as required by law the maximum civil penalties that PBGC may assess under sections 4071 and 4302 of ERISA. The new maximum amounts are $2,140 for section 4071 penalties and $285 for section 4302 penalties."
Pension Benefit Guaranty Corporation [PBGC]

[Guidance Overview]

Text of IRS Publication 3066: Have You Had Your Check-Up This Year? (For Retirement Plans) (PDF)
Rev. Dec. 2017. 4-page summary of resources and checklists provided by IRS. Includes: [1] List of retirement plan checklists; [2] Tips, publications and forms for plan operation; [3] Common mistakes; [4] IRS corrections programs; and [5] Links to additional resources.
Internal Revenue Service [IRS]

[Guidance Overview]

Text of IRS Publication 4336: Salary Reduction Simplified Employee Pension Plan for Small Businesses (PDF)
12 pages; rev. Dec. 2017. "A SARSEP is a written arrangement (a plan) that allows an employer to make contributions toward its employees' retirement without becoming involved in more complex retirement plans. A self-employed individual may also maintain a SARSEP. Under a SARSEP, SEP-IRAs are set up for each eligible employee and contributions are made to the traditional SEP-IRAs -- not Roth or SIMPLE IRAs -- of the plan participants." [Also available: IRS Publication 4407, SARSEP Key Issues and Assistance, rev. Dec. 2017]
Internal Revenue Service [IRS]


Online Learning Course: 401(k) Plan Administration

Sponsored by International Foundation of Employee Benefit Plans [IFEBP]

Learn more about plan design issues, plan investments, fiduciary responsibility and plan fees, employee communications and investment education, automatic enrollment, participant loans, distributions, and plan amendment and termination.

[Guidance Overview]

Text of IRS Publication 4530: Designated Roth Accounts Under 401(k), 403(b) or Governmental 457(b) Plans (PDF)
Rev. Dec. 2017. "An advantage of a designated Roth account is that you pay tax on your contributions now, but later, when you receive a qualified distribution from the account, it is tax-free. Less tax on your plan distributions could mean more money in your pocket during your retirement."
Internal Revenue Service [IRS]

What Are Plan Committees Responsible For?
"A good way to think of a committee's role is to think of the relationship between a corporate board of directors and management. Management is responsible to and reports up to the board. Management also implements its decisions by directing down and causing the execution of it decisions through the organization. The key difference is that a committee owes an exclusive duty of loyalty and care to plan participants and beneficiaries."
Fiduciary Plan Governance, LLC

'Composite' Solution for Multiemployer Plans in the Works
"[T]he Give Retirement Options to Workers (GROW) Act ... would facilitate a transition to what is being called a 'composite' retirement plan ... [which would combine] the key features of defined benefit and defined contribution plans. Proponents say that this new structure will give peace of mind to workers who will still receive lifetime income through the composite plan, while giving employers certainty in how much they will be required to pay into the system. Opponents ... argue that the option would divert much-needed funding from legacy DB plans."
National Association of Plan Advisors [NAPA]

Baltimore Fire and Police Pension Changes Ruled Unlawful
"Reforms implemented in 2010 ... increased employees' contributions and replaced a variable benefit tied to investment returns with a tiered cost-of-living increase. Instead of annual increases that averaged 3% under the variable benefit, the 2010 pension reforms created a tiered COLA that gave older retirees 2% increases, while retirees under 55 did not receive an increase. In the latest ruling, issued Jan. 2, [Baltimore Circuit Judge Julie Rubin] said the variable benefit change was a breach of contract." [Cherry v. Mayor and City Council of Baltimore City, No. 24-C-16-004670 (Cir. Ct. Balt. Jan. 2, 2018)]
Pensions & Investments

Conflicting Decisions in California as to 'Vested Rights' of Public Employees: Where Will the State Supreme Court Land?
"A California Court of Appeal recently issued a decision with implications that can affect all public employers in California and in contrast to a decision by another Court of Appeal just over a year ago.... [The judge] found that applying detrimental changes to the pension benefits of Legacy Members is only justified by compelling evidence that the required changes manifest a material relation to the successful operation of the pension system.... [We] now have two divergent decisions on the fundamental notion of a vested right to immutable pension benefits in the aftermath of PEPRA." [Alameda County Deputy Sherriff's Ass'n v. Alameda County Employees' Retirement Ass'n, No. A141913 (Cal. Ct. App. Jan. 8, 2018)]
Liebert Cassidy Whitmore

Missouri Introduces Proposal to Create Secure Choice Savings Program
"The bill would allow employers with 25 or more workers that do not already offer employees a retirement plan to automatically enroll workers aged 18 and older in a state-run payroll-deduction Roth IRA. It would apply to for-profit and non-profit employers and would be open to employers with fewer than 25 workers who wish to participate on a voluntary basis."
National Association of Plan Advisors [NAPA]

New Tax Law Means Fighting Over Underfunded State Pension Plans Is About to Get Worse
"Unless states can implement effective ways to circumvent the SALT restriction, they will face much higher political barriers to meeting their unfunded benefit obligations through increased tax revenues. Instead, states will be forced to severely cut spending on public services and/or adopt major reforms of their benefit plans.... [A table] summarizes the situation for each of four states with the highest unfunded liabilities relative to their revenues in 2016 -- Illinois, New Jersey, Connecticut and Kentucky."


Garden State Crowd-Out: How New Jersey's Pension Crisis Threatens the State Budget (PDF)
16 pages. "Since 2014, it has become clear that New Jersey needs a new strategy to address its pension problems.... Absent some unexpectedly robust acceleration of the economy, it is highly unlikely that New Jersey will generate enough new revenues to meet its pension commitments without severely hobbling the rest of the state's budget. At the same time, allowing its pension system to continue to accumulate debt by not contributing adequately to it will push New Jersey toward a potentially catastrophic failure of its government pensions."
Manhattan Institute for Policy Research

Benefits in General

[Guidance Overview]

The Impact of Tax Reform on Qualified Plans and Fringe Benefits
"[1] Are there changes to the plan loan rollover rules? ... [2] What favorable tax treatment is available for plan distributions to individuals living in 2016 disaster areas? ... [3] Are there any changes to the plan hardship distribution rules? ... [4] What happened to Rothification? ... [5] Fringe benefits are generally excluded from an employee's income. Are there any changes to these rules? ... [6] Does the Act change the tax treatment or deduction of meals provided to employees for the convenience of the employer?"
Drinker Biddle

[Guidance Overview]

DOL Green-Lights Disability Claims Regs
"The regulations will apply to most -- but not all -- claims where benefits are conditioned on a finding of disability. This may include certain benefits under retirement plans, in addition to benefits under long-term disability plans and some short-term disability plans.... [T]here are significant exceptions where the regulations will not apply.... A chart [comparing current law with] the new regulations is provided[.]"

Executive Compensation
and Nonqualified Plans

Deadlines Approach for Employer Reporting of 2017 ISO and ESPP Transactions
"The deadline for furnishing Copy B of Forms 3921 and 3922 to the employee or former employee for ISO exercises or ESPP shares purchased during 2017 is January 31, 2018. The deadline for filing Copy A of Forms 3921 and 3922 with the IRS depends on whether the returns are required to be filed electronically or manually.... These reporting obligations are in addition to any reporting obligations that arise upon the disqualifying disposition of shares acquired under either an ISO or an ESPP or upon the exercise of an option that does not qualify as an ISO."
Latham & Watkins

Looking for a Silver Lining in the 162(m) Tax Act Changes
"Eliminating the deductibility of performance-based compensation reduces the need for a company to base a substantial portion of its annual compensation on performance factors.... Eliminating the requirement that the performance goals must be established by a compensation committee comprised solely of two or more outside directors will give companies the flexibility to include on their compensation committees board members who would not have qualified as 'outside directors' under the requirements of Section 162(m).... Eliminating the requirement that the material terms of any performance goals must be disclosed to and subsequently approved by the company's shareholders before the compensation is paid will give the compensation committee flexibility to select any performance metrics it wants."
Winston & Strawn LLP

How Can a Tax-Exempt Employer Manage the New Excise Tax on Executive Comp?
"[T]ax-exempt employers may be able to mitigate (or at least manage) the sting of the new excise tax through a combination of traditional supplemental executive retirement plans and long-term incentive plans, and (where possible) well-designed non-competes that comply with the proposed regulations under Code Section 457(f) published last year. In ideal circumstances, a tax-exempt employer may even be able to avoid the excise tax entirely."
Verrill Dana LLP

Selected Discussions
on the BenefitsLink Message Boards

Payment to Previously-Terminated Later-Disabled Participant: Use Code 3 on 1099-R?
I have an ESOP client that normally makes you wait 5 years in order to get a distribution via 5 installments. They however have a provision that if a person terminates and then is ruled disabled they can be paid the year after the disability ruling. I just took over this plan. A person terminated in 2012. They were ruled disabled in 2014. They got their first payment in 2015. The firm that prepared the 1099-Rs in the past gave this person a code of 3. I am just not finding any guidance on this. Do you have to terminate because of disability or merely be paid because of disability in order to get a code of 3? It matters because the person is younger than 59-1/2 years old. Back when I did 401(k) plans, if a person terminated and refused to take a distribution for years and then became disabled, I don't recall making such a person a code 3.
BenefitsLink Message Boards

Terminating Plan; Can Owner Forego Receipt of Portion of Annuity Benefit?
Sole proprietor sponsors a one person defined benefit plan. The plan is overfunded on a lump sum basis but the participant is interested in purchasing an annuity upon plan termination. I'm aware that an owner can forego receipt of a portion of his benefit if he elects a lump sum. Can the owner elect to forego receipt of a portion of his monthly benefit to make plan assets sufficient?
BenefitsLink Message Boards

401(k) RMD After IRA Rollover
An RMD-eligible 5% owner participant has a 401(k) balance at 12/31/2016. In July 2017 the participant rolls over the balance to an IRA. In Sept. 2017 he makes a lump sum contribution to the plan. In Dec. 2017 we force out an RMD from the balance created by the contribution. The Participant adamantly stated that he took the RMD from the IRA rollover and that shouldn't have forced his RMD from the plan. Any support to the rules would be greatly appreciated.
BenefitsLink Message Boards

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BenefitsLink Retirement Plans Newsletter, ISSN no. 1536-9587. Copyright 2018, 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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