Retirement Plans Newsletter

January 29, 2018

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401(k) Retirement Plan Administrator
Nicholas Pension Consultants
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Nicholas Pension Consultants
in CA

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Webcasts, Conferences

Before the Feds Arrive, Have You Prepared?
February 7, 2018 in CA
Western Pension & Benefits Council - Orange County Chapter

Latest Trends in the Design & Strategy of Retirement Plans
February 22, 2018 in OH
Worldwide Employee Benefits Network [WEB] - Cleveland Chapter

Managing Your 401(k) or 403(b) Plans
April 26, 2018 in MI
Miller Johnson

►See 128 Upcoming Webcasts and Conferences

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Discussions

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New Comments and Topics

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[Official Guidance]

Text of IRS Notice 2018-14: Guidance on Withholding Rules (PDF)
10 pages. "This Notice ... provides that, for 2018, withholding under section 3405(a)(4) on periodic payments when no withholding certificate is in effect is based on treating the payee as a married individual claiming three withholding allowances."
Internal Revenue Service [IRS]

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Retirement Savings Plans and Tax Reform: How Will It Affect You?

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How New Leadership at DOL Could Address Retirement Rules
"[EBSA Secretary Preston Rutledge] has not commented publicly on the DOL's current fiduciary rule, other than to say the regulation should have had more input from the Treasury Department, which oversees IRAs but which by law must defer to the DOL in drafting prohibited transaction exemptions. Based upon comments made earlier by DOL Secretary Alexander Acosta, ... most of the [fiduciary rule] parts delayed until July 2019 will be radically scaled back or eliminated."
InvestmentNews

Mutual of Omaha Sued Over Affiliated Funds in 401(k) Plan
"The proposed class action accuses Mutual of Omaha of filling its 401(k) plan with affiliated investment funds that were essentially funds offered by third parties plus an extra layer of fees that went to the Nebraska-based insurer. The company also tacked on extra layers of fees to unaffiliated funds in the 401(k) plan, according to the complaint. These extra layers of fees allowed Mutual of Omaha to pocket more than $1 million per year at the expense of workers' retirement savings, the lawsuit says."
Bloomberg BNA

Retirement Plan Best Practices
"Best practices include: [1] Documenting the administrator's decision-making process to show the basis for making decisions on behalf of the plan. [2] Selecting qualified individuals for any fiduciary committee, with clearly designated areas of responsibility. [3] Regular monitoring and adjustment of investment selections based on the plan goals.... [4] Keeping an eye on costs.... [5] Carefully review any changes to the plan documents.... [6] Communicate with employees and plan participants about plan eligibility and enrollment deadlines."
Butterfield Schechter LLP

Unraveling Retirement Strategies: Floor-and-Upside
"The basic idea behind floor-and-upside is that a retiree devotes some of her retirement funding assets to building a lifetime stream of income and the remainder to an investment portfolio to provide liquidity and the possibility of increasing wealth over time.... [S]ince most Americans are eligible for Social Security retirement benefits, most Americans have a 'floor.' ... [I]magine that you are 85 and your upside portfolio balance just went to zero ... What is the least amount of income you could have remaining that would not make your life an economic misery?"
The Retirement Cafe

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How to Mitigate Interest Rate Risk in Your Retirement Portfolio
"Hold individual bonds to maturity ... Floating-rate securities ... A laddered portfolio ... A barbell portfolio."
Seeking Alpha; free registration may be required

2017 Retirement Plan Mobile Enhancements
"Over the course of 2017, multiple Retirement Plan Monitor coverage group firms launched new mobile apps and revamped existing apps, integrating more account data, introducing transaction capabilities and harnessing new mobile technologies to add app features.... A recent report finds that in the U.S., 71% of time spent online is on mobile devices, and 87% of time spent on those mobile devices is in apps. [In this article, the authors] review this past year's major mobile enhancements[.]"
Corporate Insight

Illinois Ponders Pension Fund Moonshot: A $107 Billion Bond Sale
"Lawmakers in Illinois are so desperate to shore up the state's massively underfunded retirement system that they're willing to entertain an eye-popping wager: Borrowing $107 billion and letting it ride in the financial markets....[T]he State Universities Annuitants Association... [proposes Illinois] issue the bonds this year to get its retirement system nearly fully funded, assuming that the state can make more on its investments than it will pay in interest."
Bloomberg

Benefits in General

2018 Millennial Benefit Trends Report (PDF)
14 pages. "When asked if they take into account whether a job offers benefits when considering applying, an impressive 96.77 percent said yes.... When asked to rate five general benefits categories in order of importance, '401(k) Retirement Savings' easily outpaced the others, with 38.98 percent rating it 'Extremely Important.' ... HR respondents said that health insurance was the top benefit that our millennial job seekers asked about[.]"
Pentegra

Federal Courts in Tennessee: Claimants and Administrators Must See the Administrative Process All the Way Through
"[Two recent] decisions reflect the courts' view of the importance of the ERISA 'administrative process' playing out to the very end, even if it results in a decision coming out beyond the statutory deadline. There's certainly appeal to the notion that the administrative process should be a flexible, open, information-sharing process not hampered by the rigidity of statutory deadlines or the fail-safe of substantial compliance.... Sometimes it makes sense to file suit immediately, other times it makes sense to allow the administrator to continue with the decision-making process. But I have different advice for Tennesseans: On Day 46, do not pass Go, do not collect $200, go straight to court."
Roberts Bartolic

Tax Law Prompting Enhanced Benefits and Pay, Companies Say
"31 percent of large and midsize U.S. employers have taken at least one action regarding their benefit programs, and 19 percent have done so regarding broad-based employee compensation, in response to the lower corporate tax rate. Many more are planning, or at least considering, doing so."
Society for Human Resource Management [SHRM]

Executive Compensation
and Nonqualified Plans

Don't Disband That Compensation Committee of Outside Directors Just Yet
"[A] compensation committee qualifying under 162(m) still must certify the achievement of performance goals for performance periods ending in 2017. Most equity awards made before November 2017 should qualify for grandfathering under the 162(m) transition rule. Until IRS guidance clarifies the extent of the grandfathering protection, we don't want to do anything that might adversely affect that."
Winston & Strawn LLP

Selected Discussions
on the BenefitsLink Message Boards

Combination of Safe Harbor Match and Discretionary Match: ACP Test Satisfied?
A 401k plan is written with a safe harbor match formula of 100% on the first 4%. Plan allows discretionary match. Plan sponsor wants to fund an additional 2% discretionary match so employees who defer 6% get a 100% match. I see this as two separate formulas: [1] safe harbor match is 100% of the first 4% deferred [2] discretionary match is 0% of first 4% deferred, 100% of next 2% deferred. Therefore, I believe they are subject to the ACP test because of IRC Section 401(m)(11)(B)(ii) where the rate of match cannot increase as deferrals increase. A large recordkeeper disagrees with me, saying this approach complies because the formulas are in a sense "aggregated" and the match is uniform (i.e., does not increase as the rate of deferrals increase). Do you believe this match formula indeed satisfies the ACP test?
BenefitsLink Message Boards

ACP Testing Needed for 4% After Tax Contributions in a Safe Harbor Plan?
Plan is Safe Harbor match with a discretionary match and after-tax option. If the plan sponsor does not make a discretionary match and the employees decide to put in a 4% after-tax contribution, does this need to be tested under ACP or can it be avoided?
BenefitsLink Message Boards

Setting a $5,000 Minimum for Loans to Participants
Regs say $1,000 limit is OK, but what about a $5,000 limit? The plan has few, if any, HCE's. Does this fail the rights-benefits-features test or the reasonably equivalent basis test?
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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