Retirement Plans Newsletter

March 13, 2018

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

Senior DC Plan Administrator
Heritage Pension Advisors, Inc.
in NY

Account Manager
Nolan Financial
in MD

Senior Compliance Analyst
Insperity
in TX

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A Close Look at 401(k) Plans, 2015 (PDF)
84 pages. "More than half of large 401(k) plans in the sample with more than $100 million in plan assets reported that they automatically enrolled their participants.... Nearly all of the largest plans -- about 95 percent of 401(k) plans with 5,000 participants or more -- had employer contributions.... 82 percent of 401(k) plans ... had participant loans outstanding and 88 percent of participants were in those plans in 2015."
BrightScope and Investment Company Institute [ICI]

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SunTrust Agrees to Pay $4.75M to Settle 401(k) Stock Drop Case
"If approved, the proposed settlement would end a 10-year lawsuit accusing SunTrust of breaching its fiduciary duties under [ERISA], when plan participants lost hundreds of millions of dollars as the market price of SunTrust stock fell 73 percent between May 2007 and October 2009.... The proposed deal would also provide plan participants with ... quicker vesting on matching contributions and a guarantee that the vesting schedule won't change to a less generous one for a period of at least three years. SunTrust also agreed to fund matching contributions in cash and enhance training for its fiduciary committee[.]"
Bloomberg BNA

'Patent Troll' 401(k) Investment Leads to $180k Settlement
"The deal resolves a lawsuit claiming Emerald Coast Eye Institute and its founder, Dr. Samuel Poppell, directed a significant portion of the 401(k) plan's assets into the stock of VirnetX, a company that allegedly specialized in acquiring patents and attempting to bring litigation against violators of those patents. Poppell, who allegedly had no background in investment management, learned of VirnetX through 'online message boards and unqualified or speculative investment blog-type websites,' according to the lawsuit."
Bloomberg BNA

Can Bonuses Be Excluded from Retirement Plan Compensation?
"The most common definitions of compensation used in plan documents are tied to amounts reportable on Form W-2 or used to determine income tax withholding.... Although it is possible to modify a default definition of compensation, there is a special test in place to ensure the alternate definition does not discriminate in favor of the plan's highly compensated employees."
DWC

Recharacterization of Roth Conversions: Exit Stage Left in 2018
"The fact that recharacterization is no longer permitted doesn't mean that the Roth conversion isn't still a powerful tax diversification strategy. It just means that more time and consideration should be given to the potential outcome if circumstances change post-conversion. It may make more sense to wait until closer to year end when one's tax picture is more clearly defined and less likely to change substantially. Smaller conversions over several years to mitigate the risk of a large tax bill all at once is always an option as well."
HLS Retirement Consulting

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Retirement Adequacy in the United States: Should We Be Concerned? (PDF)
45 pages. "Although the major studies reviewed in this report have significant differences in empirical approaches, data, and measures of adequacy, they relatively consistently conclude that from 25% to 35% of the population is at risk of being unable to maintain their pre-retirement standard of living throughout the retirement period ... [T]hese results should be tempered by SOA research ... which generally indicate[s] that many retirees are quite content with living at lower standards of living in retirement than they maintained during their working years.... [T]he U.S. retirement system lies somewhere between crisis and serendipity."
Society of Actuaries

Much Ado About Nothing Saved for Retirement? Why Social Security Alone May Be Enough
"It may be true that many who have had low income levels live off income from Social Security, but circumstances occur when other people must face this same fate.... Cutting expenses prior to retirement has two benefits. First, it conditions to future retiree to live a more modest (and therefore affordable) lifestyle. Second, if presents the added bonus of freeing up money that can then be saved for retirement."
Fiduciary News

Diocese of La Crosse Terminates Underfunded DB Plan
"[T]he Diocese of La Crosse plans to terminate its pension plan for lay employees this summer, replacing it with an undetermined one-time payment.... Bishop William Patrick Callahan informed members of the diocese's Lay Employees' Retirement Plan that the plan has been underfunded for years.... The pension plan covered Catholic school teachers, custodians, secretaries, rectory workers and other lay employees throughout the diocese, which serves 19 west-central Wisconsin counties[.]"
Leader-Telegram

CalPERS Payouts Approach $21 Billion, Up 43% Over Past 5 Years
"California's largest public pay database released pension payout data for [CalPERS] for the fiscal year ending July 31, 2017 [which] show total pension payouts of $20.63 billion -- a 43 percent increase from the amount reported in 2012.... [T]he dataset reveals 40 agencies or state departments with at least 100 CalPERS recipients drawing pensions of $100,000 or more."
Transparent California

Benefits in General

[Guidance Overview]

New ERISA Disability Benefit Claims and Appeals Rules Take Effect April 2, 2018
"The new rules will apply to disability benefit claims under both pension and welfare plans, but only if the plan's claims adjudicator must make a determination of disability in order to decide the claim. If a plan conditions eligibility for benefits on a finding of disability by a third party, such as the Social Security Administration (SSA) or an employer's long-term disability plan, the plan is not subject to the new rules. Plans may be amended to condition eligibility on a determination of disability made by the SSA or the employer's long-term disability plan to avoid the application of the new rules[.]"
Hanson Bridgett LLP

Issues for Plan Sponsors and Fiduciaries to Follow
"Fiduciary regulation may be substantially on hold, but other regulators are on the move ... Tax reform's impact on Schedule C reporting for expenses in 2018 ... DOJ memo to U.S. Attorneys regarding guidance policy in litigation has implications for health and retirement plans ... SCOTUS again considers claim of lifetime retiree medical benefits ... Short term limited duration insurance proposal ... Vasectomy or male contraception benefit disqualifies from HDHP status ... HSA contribution limit dropped for 2018."
Winstead PC

Bipartisan Budget Act Affects Retirement and Health Care Plans
"The act increases Medicare premiums for some and closes the Medicare Part D coverage gap a year ahead of schedule. Recipients of retirement plan distributions due to the California wildfires are now eligible for the same tax relief provided last year for distributions due to major hurricanes. The act repeals the Independent Payment Advisory Board, which was created under the ACA to curb the growth in Medicare spending."
Willis Towers Watson

Executive Compensation
and Nonqualified Plans

CEO Pay Ratio Checklist (PDF)
"Consider identifying a date that best reflects the demographics of the company.... Confirm with local counsel if there are any data privacy laws in that country that would prohibit collection of information.... The de minimis exemption may be useful where it impacts the median.... Annualizing the compensation of full-time and permanent full time and part-time employees is probably not worth the time and effort.... Using estimates or statistical sampling may be overly burdensome for many companies and not actually save any time.... In drafting the disclosure, consider impact on investor and employee relations."
Orrick

Selected Discussions
on the BenefitsLink Message Boards

S-Corp Compensation
Does anyone know where I can find a guide to understanding what items are included in the different definitions of compensation (W-2, withholding, safe harbor, etc.) for S-Corp. shareholders?
BenefitsLink Message Boards

Minimizing Settlement Charges?
I have a number of clients who are getting very close to being able to terminate, but they are reluctant to do so because they don't want to recognize the large unrecognized loss as a Settlement Charge. These are typically banks where they have always been more concerned about "expense" and less concerned about actual cash. Is there any way to recognize the unrecognized loss sooner than the 10% corridor would permit? In other words, is there any way to avoid recognizing the Settlement Charge all in one year?
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Lois Baker, J.D., President  loisbaker@benefitslink.com
David Rhett Baker, J.D., Editor and Publisher  davebaker@benefitslink.com
Holly Horton, Business Manager  hollyhorton@benefitslink.com

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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