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[Guidance Overview]
Bipartisan Budget Act of 2018 Brings Changes for Retirement Plans
"The Act ... expands the sources from which employees may take hardship distributions.... [It] is not clear that these ... changes will apply to 403(b) plans without a change to the 403(b) regulations ... since the 403(b) regulations specifically prohibit distributions from earnings.... Plans sponsors who would like to allow the repayment of amounts wrongfully levied upon by the IRS to their plans should consider amending their plan language to expressly permit these contributions."
Ice Miller LLP
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[Guidance Overview]
Tax Reform's Impact on 401(k) Plan Loan Offset Treatment
"Plan administrators and HR benefits managers should [1] contact the plan's record keeper to confirm that the actual practice relating to plan offsets and deemed distribution timing reflects the plan administrator's interpretation ... and that those practices will not be impacted by the new rules.... [2] update employee communications.... [3] establish procedures for accepting rolled over amounts into their plans that include loan offset amounts."
Holland & Knight
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[Guidance Overview]
Interesting Angles on the DOL's Fiduciary Rule, Part 80
"[T]he non-enforcement policy does not give a free pass during the transition period. Instead, there are expectations about good faith efforts to comply with the Impartial Conduct Standards and about the adoption and application of policies, procedures and practices to mitigate the effects of conflicts of interest and incentive compensation."
FredReish.com
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Fidelity Stable Value Fund Suit Gets Final Dismissal from Appellate Court
"The appellate court notes that the primary investment objective of the MIP is to 'seek the preservation of capital as well as to provide a competitive level of income over time consistent with the preservation of capital.' As a benchmark, the MIP used the Barclay's Government/Credit 1-5 A- or better index throughout the relevant time period. The 1st Circuit points out that during the years covered by the lawsuit, the MIP fully achieved its objective of preserving the investors' capital." [Ellis vs. Fidelity Management Trust Co., No. 17-1693 (1st Cir. Feb. 21, 2018)]
planadviser
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Should You Switch to an Unbundled Service Provider for Your Defined Contribution Plan?
"For plan sponsors focused intently on fiduciary considerations, ... bundled service providers also mean restricted investment selections and limited insight into the true costs of asset management and asset servicing. Neither of those plan components are without an associated cost, and the issue of costs and expenses has been the lynchpin in many recent lawsuits filed against plan sponsors."
BNY Mellon
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Making Sure 401(k) and 403(b) Fees Are 'Necessary' and 'Reasonable', Part 3
"Reference checking is part of the due diligence process.... It is appropriate to stipulate that the references work with the service team they are assigning to you.... Think of the entire process as a negotiation. You want to maintain your leverage right up to the end of the process."
Fiduciary Plan Governance, LLC
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Clean Up This April with Required Minimum Distributions (PDF)
"[P]lans that allow participants to defer receipt of payment past the normal retirement date should carefully monitor participants approaching age 70.... Track any returned mail from required compliance mailings such as annual funding notices, summary material modifications, and summary plan descriptions. Then follow up with an address search.... Use one or more address search vendors that offer to continuously monitor a pension plan's vested terminated population for unreported deaths ... Automatically mail normal retirement packets 90 to 180 days prior to the participant's NRA."
Milliman
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ESOPs: Legislative Updates
"The National Defense Authorization Act of 2017 ... has been updated to include certain ESOPs as falling within the category of small business concerns owned and controlled by service-disabled veterans. In calculating the 51% minimum veteran ownership, these businesses can now disregard the percentage of ESOP stock ownership. This change effectively opens up more partial employee-owned businesses to defense contracting preferences."
Butterfield Schechter LLP
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Funds, Fees, and Annuities: A Guide to 403(b) Investment Options (PDF)
11 pages. "[W]hile annuity contracts were once the only option -- and still constitute a majority of the total assets nationwide -- there is a strong trend toward offering mutual funds as an alternative to annuities. In 2015 ... while 87.1% of 403(b) plans offered mutual funds as an investment option, only 58.6% offered annuities.... [A]dditional investment options are not likely to be permitted anytime soon."
Greensfelder
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Defined Contribution Plan Participants' Activities, First Three Quarters of 2017 (PDF)
"Defined contribution (DC) plan withdrawal activity in the first three quarters of 2017 remained low and was similar to the activity observed in the first three quarters of 2016.... The commitment to contribution activity in the first three quarters of 2017 continued at the high rate observed in the first three quarters of 2016.... Most DC plan participants stayed the course with their asset allocations as stock values increased over the first nine months of the year.... DC plan participants' loan activity was little changed at the end of September 2017."
Investment Company Institute [ICI]
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[Opinion]
2018 Retirement Security Blueprint: Policies to Help Americans Achieve Their Retirement Goals.
"[1] Maintain and enhance current tax treatment for retirement savings; [2] Expand opportunities to save for retirement by enhancing access and features of workplace retirement plans; [3] Increase access to lifetime income products in workplace retirement plans; [4] Preserve and improve access to professional financial guidance, education and information; and [5] Provide more resources to protect older Americans from financial exploitation."
Insured Retirement Institute [IRI]
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[Opinion]
Letter from Congressman to IRS About Changes to EPCRS Fee Schedule Made by Rev. Proc. 2018-04 (PDF)
"I have concerns about the EPCRS changes because they were implemented with little feedback from the small business community and increase costs for small employers. The lack of feedback is inconsistent with Section 1101 of the Pension Protection Act of 2006, which directs the IRS to take 'into account the special concerns and circumstances that small employers face with respect to compliance and correction of compliance failures' when updating EPCRS."
Richard E. Neal (D-Mass), via National Association of Plan Advisors [NAPA]
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Benefits in General
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Benefits and Compensation Changing Due to Tax Cuts and Jobs Act
Infographic. "[T]he most common changes organizations have made or are planning or considering include expanding personal financial planning, increasing 401(k) contributions, and increasing or accelerating pension plan contributions. Other potential changes include increasing the employer health care subsidy, reducing or holding flat the employee payroll deduction, or adding a new paid family leave program in accordance with the ... tax credit available for paid leave for certain employees."
Willis Towers Watson
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Recent UBIT Change May Impact Benefit Plans as Investors
"Effective for tax years beginning after December 31, 2017, benefit plans with two or more unrelated trade or businesses will no longer be able to 'net' the income and losses of the businesses when determining the UBIT.... Many investment funds generate tax losses in early years, and with regular turnover of investments, UBIT can often be deferred for many years. Thus, the potential impact of the law could be significant."
Groom Law Group
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Executive Compensation
and Nonqualified Plans
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[Guidance Overview]
Insights Into Tax Reform's Radical New Game Plan for Tax Exempt Organizations (PDF)
"[O]rganizations operated without an expectation of retaining profits may now find themselves subject to either complying with the new compensation limit or paying the tax. While the changes to the compensation limit for companies with publicly traded securities included a transition rule, ... the addition of this compensation limit to [non-profit] entities -- that had not faced this type of hard line limit -- did not provide for any transition for existing contracts."
Winstead PC, via Bloomberg Tax Daily Tax Report
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U.S. Biopharma Companies Segment Long-Term Incentives by Function, with Focus on R&D
"LTI eligibility is high or even universal in all functional areas for roles with base salaries of $120,000 and above.... In the commercial, industrial affairs and support functions, LTI eligibility drops off materially below this level of base salary. In contrast, LTI eligibility tails off much more slowly in the R&D function ... [M]any biopharma companies are using LTI in a targeted fashion to boost their ability to attract, retain and engage R&D talent from a relatively early career stage."
Willis Towers Watson
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Selected Discussions
on the BenefitsLink Message Boards
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Who Processes a Domestic Relations Order to a Non-ERISA 403(b) Plan?
Plan is set up to be a non-ERISA, deferral-only plan. In order to avoid ERISA status, operational requirements apply in addition to the plan provisions. The Plan Administrator, upon receipt of a domestic relations order, refers it to the Vendor because the Plan Administrator doesn't want to kick the plan into ERISA status by making a determination as to whether the order meets the requirements for a QDRO. Vendor kicks it back and says, "I'm not going to make this determination." A similar situation could occur with hardship withdrawals. How do you folks or your clients handle these situations?
BenefitsLink Message Boards
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Flexibility of Individual Class Based New Comparability: Hard to Believe
Profit-sharing-only plan has a provision that each participant is in their own class for allocations. Plan has immediate eligibility. No compensation exclusions, no annual hours or last day condition. Not top heavy. Client identifies the following classes who will get allocations: Owner-employee (single HCE) maxes out. Owner-employee identifies lowest-paid individuals only statutory group and allocates just enough of a percentage to pass 401(a)(4) including average benefits and gateway -- kind of like a bottom-up QNEC. Gateway is only given to these individuals. A few of those individuals were excluded because they didn't work at least 1,500 hours and employed on last day. If individual class based has this much flexibility, why does any plan's profit sharing provision have an age/service, annual condition, compensation exclusions and employee class exclusions? All you need is for the
employer to fill out a formula questionnaire each year to instruct the plan administrator who gets an allocation and how much.
BenefitsLink Message Boards
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BenefitsLink.com, Inc.
1298 Minnesota Avenue, Suite H
Winter Park, Florida 32789
(407) 644-4146
Lois Baker, J.D., President
David Rhett Baker, J.D., Editor and Publisher
Holly Horton, Business Manager
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.
Links to web sites other than BenefitsLink.com and EmployeeBenefitsJobs.com are offered as a service to our readers; we were not involved in their production and are not responsible for their content.
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