Retirement Plans Newsletter

January 25, 2018

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Jobs

Pension Trust Admin Supervisor
Associated Pension Consultants
in CA, Telecommute

Compliance Consultant
Newport Group
in CA

Product Support Specialist
ftwilliam.com part of Wolters Kluwer Legal & Regulatory
Telecommute

Actuarial Associate, EA
Acuff & Associates, Inc.
in TN

Sales Director, USA
AHC
Telecommute

Retirement Plan Administrator
Northeast Professional Planning Group, Inc.
in NJ

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Retirement Readiness Improves When Income Replacement Rates Provided
"[I]ncome replacement scores for participants receiving a projected view of future monthly income were higher than the scores of participants who didn't receive such a projection. For the former group, ... projected income replacement scores rose to 77.8% from 68% during a roughly six-year period ... [Nationally,] projected income replacement rates remained relatively flat between 2013 and 2016 -- hovering each year between 58% and 62%."
Pensions & Investments

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A Plan Sponsor's Guide to Selecting Retirement Plan Providers (PDF)
"Look for experience, but don't put too much stock in experience ... Cost is key, but not the only key ... Make sure plan providers can connect with your plan participants ... Don't be over-wowed by all the bells and whistles ... Pick a provider that can be part of a team ... Don't put all your eggs in one basket ... Don't 'juice in' plan providers."
Ary Rosenbaum

District Court Denies Forced Arbitration in Charles Schwab ERISA Class Action
"The plan document's arbitration provision broadly encompasses 'any claim, dispute, or breach arising out of or in any way related to the Plan,' and extends to the ERISA claims asserted, [Schwab] said [and] further contended the arbitration provision of the plaintiff's severance of employment agreement likewise embraces the ERISA claims, insofar as it requires arbitration of 'any dispute or breach arising out of or in any way related to employment.' " [Dorman v. Charles Schwab & Co., Inc., No. 17-285 (N.D. Cal. Jan. 18, 2018)]
planadviser

Interesting Angles on the DOL's Fiduciary Rule, Part 78
"Once an investment's cost has been appropriately determined, and the appropriate share class has been determined, that information should be compared to similar data for other mutual funds in the same investment category.... [T]he requirement is not that the lowest-cost investment be recommended. Instead, it is that the cost be reasonable relative to the value provided. On a practical level, that means that there is a range of reasonableness for a given type of investment."
FredReish.com

Does Your Investment Fiduciary Have Your Back?
"A 3(21) fiduciary is a co-fiduciary. That means the employer is still responsible for making the final investment decisions, and bears liability for those decisions.... When you hire a 3(38), you aren't presented with fund recommendations that you must ultimately approve. The 3(38) fiduciary selects and monitors the funds, even removing managers when necessary. Unlike the 3(21), the 3(38) bears the investment risk."
ForUsAll

[Advert.]

2018 SPARK National Conference -- June 14-15, National Harbor, MD

Sponsored by SPARK

The retirement services industry's leading event for top marketing, sales, administration and record keeping professionals. Comprehensive agenda is designed to meet the needs of 401(k) Plan Providers, Financial Advisors and Record Keepers.


2016 Asset Allocations in Fortune 1000 Pension Plans
"[T]he percentage of plan sponsors with more than 50% fixed income and cash rose from 18% in 2009 to 37% in 2016. On average, frozen plans invested 49% of assets in more conservative investments, whereas open and closed plans took on a less cautious mix."
Willis Towers Watson

2017 Saw Lowest 401(k) Trading Activity in Two Decades
"1.45% of total plan balances were traded during the year, down from 2.13% in 2016.... The percentage of assets invested in target date funds grew in 2017 from 24.1% at the beginning of the year to 27.2% by the end of the year.... In 2017, 43% of contributions were to target date funds."
Alight Solutions

The Saver's Credit
"[This article provides] ...[A] three-page question and answer explanation intended for employers and employees who want to know all the related details.... [A] two-page notice, drafted by the federal government, to explain the rules to employees. Three charts of examples, showing the value of combining a tax deduction, a tax credit, and a matching contribution[.]"
Retirement Management Services, LLC

[Opinion]

The Argument for Ditching the 401(k) System and Starting Over
"The plan ... would supplant 401(k)s and individual retirement accounts with mandatory Guaranteed Retirement Accounts [GRA] that have these defining characteristics: [1] Workers and employers would each contribute 1.5 percent of wages or salary, maxing out at $3,750 each ... [2] Everyone contributing to a GRA would get a $600 refundable tax credit ... [3] Workers would own their GRA accounts and choose a pension manager to invest the money. But they wouldn't be able to withdraw money from the accounts before retirement.... [4] Upon retirement, the accounts would be converted into annuities[.]"
Justin Fox, via Bloomberg

Benefits in General

[Official Guidance]

Text of Instructions for IRS Form 2848: Power of Attorney and Declaration of Representative (PDF)
Jan. 23, 2018. "A checkbox has been added to line 5a to allow the taxpayer to authorize the designated representative(s) to access the taxpayer's IRS records via an Intermediate Service Provider.... The designation of Student Attorney or CPA has been changed to Qualifying Student.... When a representative with a Power of Attorney calls the IRS on your behalf, they must pass authentication procedures prior to the IRS speaking to them about your tax information."
Internal Revenue Service [IRS]

Supreme Court Shows Interest in ERISA Case Addressing Simultaneous Claims for Benefits and Fiduciary Breach
"On January 22, 2018, the U.S. Supreme Court requested the Solicitor General's opinion on whether a plaintiff can simultaneously bring a claim for benefits and a claim for breach of fiduciary duty under [ERISA]. A request for the view of the Solicitor Generally typically indicates the court's interest in hearing a case." [Strang v. Ford Motor Co. General Retirement Plan, No. 16-2090 (6th Cir. May 19, 2017; cert. pet. filed Oct. 5, 2017)]
Greensfelder

For Benefit Platforms, Employers Pick User Experience Over Cost
"The most valuable outcomes employers have found in their experience with benefits administration platforms are best-in-class employee user experience (49 percent) and the ability to integrate benefits technology with HR functions (37 percent).... Only 23.9 percent of employers cited [cost] as most important in 2017, down from 64.4 percent in 2016."
Society for Human Resource Management [SHRM]

DOL Announces April 1, 2018 Applicability Date for Disability Benefit Claims Procedures
"[It] is imperative for employers to work with their insurance carriers, third party administrators, and attorneys to ensure that all underlying disability plans/benefits and associated documentation (including any ERISA wrap plans, Code section 125 cafeteria plans, and claims denial forms) are reviewed and updated to ensure legal compliance with the requirements for claims filings beginning after April 1, 2018."
Fraser Trebilcock

EBRI 2017 Health and Workplace Benefit Survey
"60 percent of workers report that health insurance is extremely important when considering whether to stay in or choose a new job, whereas only 42 percent report that a retirement savings plan is extremely important.... [A] majority of workers (55 percent) describe the health care system as poor (25 percent) or fair (30 percent).... [J]ust 22 percent are extremely or very satisfied with the cost of their health insurance plan[.]"
Employee Benefit Research Institute [EBRI]

Executive Compensation
and Nonqualified Plans

[Guidance Overview]

Tax Cut and Jobs Act Adds Significant New Tax on Exempt Organizations
"The Act added new Code Section 4960, which imposes a 21% excise tax on any tax-exempt organization that pays remuneration to an employee that exceeds $1 million in a tax year ('4960 Tax').... [O]rganizations must determine ... [1] Is my organization subject to the 4960 Tax? ... [2] Which employees does the 4960 Tax affect? ... [3] How do I calculate remuneration for purposes of the 4960 Tax? ... [4] Who is liable for the 4960 Tax? ... [5] What is an excess parachute payment?"
Nixon Peabody LLP

Executive Comp Performance Metrics Will Change Under Tax Reform
"As a first step, carefully model the multi-year effect on earnings, especially when earnings in one year are depressed by tax reform and then artificially lifted in the year after. When contemplating adjustments to as-reported financial results, best practice is to set a principle and follow the principle consistently regardless of whether it helps or hurts incentive payouts in any given year. We expect that most companies using after-tax performance measures will back out the earnings effect of the tax cut on after-tax measures."
Financial Executives International Daily

Selected Discussions
on the BenefitsLink Message Boards

Rolled Over Into Roth IRA But Participant Wants to Change Mind; Options?
In 2017 (more than a little more than 60 days ago, I checked) a participant elected to roll over a fairly substantial pre-tax 401(k) directly to a Roth IRA. Despite making this election and agreeing he had read the Special Tax Notice that indicates if one elects to roll over to a Roth IRA this is taxable (though not subject to the 10% penalty), participant now claims he had no idea it would be taxable and had wanted it to go into a pre-tax IRA. Is there any recharacterization option available to the participant? I believe the transaction can't be unwound by returning the funds to the plan and re-issuing as rollover to traditional IRA.
BenefitsLink Message Boards

What Comp to Use for 25% Deduction Limit?
Top heavy plan has an owner and 2 new participants who entered on 7/1. I'm trying to run a maximum contribution scenario. Allocation is on comp during participation. Owner's comp is $110,000. NHCE1's comp is $28,000 during the full year but $14,000 while a participant. NHCE2's comp is $24,000 during the full year but $12,000 while a participant. What total amount of compensation do I use in applying my 25% ceiling? $162,000 or $136,000?
BenefitsLink Message Boards

QDRO on Unvested Assets?
I have received a DRO for a participant who is only partially vested in a 401(k) plan. The DRO instructs that we value the vested and unvested portion of account as of a specific date in the past. And then if/as the Participant vests in the future, the Alternate Payee will receive a proportionate share of that vesting. If the Participant doesn't vest, the AP doesn't receive any further funds. I'm accustomed to qualifying the DRO and immediately segregating the assets, but I can't give the AP unvested assets and then allow the AP to attain them as the Participant vests -- I can't imagine trying to keep track and move half of the newly vested portion over each year as the Participant vests further. The risk of a recordkeeping error seems high. The participant won't pay out from the vested portion and the attorney says there are no other options. Help!
BenefitsLink Message Boards

Entry Date After Termination/Rehire Under 401(k) Plan
Service requirement is 1 year; monthly entry dates. Participant was hired 10/20/2008, then terminated 12/31/2009. Deferred $4,000 in 2009, but took money out in 2015. Rehired on 2/1/2017. Does the participant come back into the plan on 2/1/2017?
BenefitsLink Message Boards

Form 1096/1099-R: OK to Use Signature Stamp?
Does anyone know if a signature stamp is acceptable on the 1096?
BenefitsLink Message Boards

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