Retirement Plans Newsletter

March 27, 2018

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Daily Valuation Specialist
TWG Benefits, Inc.
in IL, Telecommute

Regional Sales Director
Ameritas
in OR, WA

Plan Administrator
Newport Group
in CA, FL, TX, VA

Director of Retirement Plan Compliance Services
Newport Group
in IL

Associate Attorney
Sullivan, Ward, Asher & Patton, P.C.
in MI

Compliance Services Specialist
ABG Retirement Plan Services
Telecommute

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[Guidance Overview]

New Tax Act Extends Time for Rolling Over the Plan Offset Amount from an Outstanding Plan Loan to Avoid Adverse Tax Consequences
"A deemed distribution arises when the participant misses a scheduled installment payment on the loan (and the miss is not cured), or the loan otherwise fails to meet a requirement or limit under Code section 72 or the underlying Treasury regulations. A deemed distribution will also result in tax at ordinary rates and (if the participant is under age 59-1/2), the 10% excise tax. However, these adverse tax consequences cannot be avoided by rolling over the deemed distribution. Note that if both a deemed distribution and plan offset (with no rollover) occur, the participant could be taxed twice with respect to the plan loan."
Cary Kane ERISA Lawyer Blog

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Mandated Disclosure for Retirement Plans: Enhancing Effectiveness for Participants and Sponsors (PDF)
50 pages. "The Council focused on identifying concrete examples of improvements to the design and delivery of specific disclosures that could be applied in practice, with key principles that could be carried forward into future disclosures as they are developed.... [T]he Council has provided recommendations for design and delivery improvements with respect to the Summary Plan Description, the Annual Funding Notice and the Summary Annual Report, and observations regarding best practices for efficient and effective participant communications."
Advisory Council on Employee Welfare and Pension Benefit Plans, Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL]

401(k) Plans See Steady Increase in Automatic Features
"59.7 percent of plans have an automatic enrollment feature in 2016 compared to 35.6 percent in 2007.... 70 percent of plans with 5,000 or more participants have automatic enrollment versus 34 percent of plans with less than 50 participants. More than half of plans with automatic enrollment are set up for new hires only. The most common reason companies do not use automatic enrollment is because they're satisfied with participation rates."
Plan Sponsor Council of America [PSCA]

What 401(k) RESA Legislation Means for MEPs and PEPs (PDF)
"[This article provides] a summary of the Senate Bill and its possible implications for MEPs.... MEPs and PEPs are only one small part of RESA -- this is a broad, favorable piece of legislation covering many aspects of retirement plans.... MEPs and PEPs are more about simplicity and outsourcing for employers at a reasonable cost, but they cannot be about radically undercutting market pricing, as many suppose."
Pentegra

Appellate Court Affirms Dismissal of CVS Stable Value Fund Suit
"The appellate court found no evidence that the CVS retirement plan's stable value fund departed radically from the investment standards and logic of stable value funds....The plaintiffs [had] argued that they received significantly lower crediting rates 'than they would have received had the stable value fund been prudently managed in accordance with industry standards regarding duration and liquidity.' " Barchock v. CVS Health Corp., No. 17-1515 (1st Cir. Mar. 23, 2018)]
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DOL and Annuities Group Drop Fiduciary Rule Appeal
"The last ongoing legal challenge to the Labor Department's fiduciary rule won't be moving forward, as the rule remains in limbo. The DOL and the National Association for Fixed Annuities [NAFA] stipulated and agreed to the 'voluntary dismissal' of the [pending] appeal ... The request comes one week after the Fifth Circuit vacated in its entirety the Obama-era rule that sought to regulate the financial advice given to retirement savers."
Bloomberg BNA

Interesting Angles on the DOL's Fiduciary Rule, Part 84
"[The Fifth Circuit] decision isn't applicable yet. At the earliest, it will take effect on May 7. However, if the DOL contests that decision and the courts 'stay' -- or block -- it as the hearings and appeals take place, it may not apply for a year or more ... or it may be overturned. So, the only thing we know is that we don't know whether advisors are governed by the new fiduciary rule-the one the court vacated -- or if the 'old' pre-June 9, 2017 rules apply. Unfortunately, when it comes to recommendations of plan distributions and rollovers, those two sets of rules are different in significant ways."
FredReish.com

Bye-Bye Fiduciary Rule?
"Regardless of what DOL decides, for at least another six weeks broker-dealers and their advisors should comply with the Rule, the exemptions and their own internal policies and procedures and communications with customers about their status and services. That 'status quo' may last even longer if the DOL decides to pursue getting the decision over-turned.... [But] assume the 5th Circuit decision stands, and on May 7 the Rule becomes a footnote in history. What then?"
Drinker Biddle

NAIC Punts Fiduciary Standard, Invites More Comments
"A National Association of Insurance Commissioners [NAIC] working group voted [on March 24] to open up another 30-day comment period on its controversial annuity sales standard.... The NAIC is attempting to adopt a model law that states can then put in place, creating a uniform standard. Some industry critics say it too closely mimics the [DOL] fiduciary rule that was struck down by the courts last week, while others say it doesn't go far enough."
InsuranceNewsNet.com

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The Impact of Inflation on Retirement Plan Investing
"In addition to the long-term impact inflation has on the purchasing power of money, it can also affect the investments of retirement plan participants in the short term.... Equities tend to withstand an inflationary period better than most sectors of the bond market. The timing and consistency of cash flows from equity and bond investments are key considerations in determining how sensitive an investment is to inflation and rising rates.... Offering a diverse array of investment options to retirement plan participants can allow them the flexibility to protect their portfolio when rates rise."
Cammack Retirement Group

Individual Account Retirement Plans Have Become a Key Financial Asset Among Families That Own Them (PDF)
"[B]etween 1992 and 2016, the median amount of financial assets attributable to [individual account (IA)] plans for families owning them rose by more than half, where IA plans account for more than two-thirds of these families' financial assets (67.9 percent in 2016). This is up from 44.3 percent of financial assets in 1992."
Employee Benefit Research Institute [EBRI]

Benefits in General

[Guidance Overview]

Exempt Organizations Annual Reporting Requirements Filing Procedures: Incomplete Returns
"If an organization's return is incomplete or the wrong return for the organization, the IRS will send it back ... Be sure to: [1] Follow the instructions to provide the missing or incomplete information. We may not have identified everything. It's your responsibility to file a complete and accurate return. [2] Sign your return. [3] Attach a copy of the letter. [4] Include a reasonable cause explanation of why you didn't initially submit all the required information with your return."
Internal Revenue Service [IRS]

What's New in Benefits Administration?
"As dependence on mobile devices increases, many core enrollment solutions are moving from a 'mobile first' mindset to a 'mobile only' approach.... Industry expertise indicates voice recognition will be the next primary factor in app development.... Tying together mobile and AI will be a lynchpin for success. Back to the pharmacy example, by leveraging AI and geolocation you won't have to ask to see your insurance card."
Lockton

A Stock Plan Is Not Necessarily an ERISA Plan
"[The Second Circuit] essentially held that, when the primary purpose of a stock ownership plan was something other than deferring income or providing retirement income, ERISA may not govern. Though the Court asserted that the distinction between a pension plan and one that offered present benefits was 'crisp and unambiguous,' one might be forgiven for harboring doubt that the line is as well-defined as the Court believed.... [T]he Second Circuit adopted the rationale that sometimes the statute should not be construed literally, and it read 'primary purpose' into the definition of employee pension benefit plan." [Pasternack v. Shrader, No.16-217 (2d Cir. July 13, 2017)]
Robinson & Cole LLP

Executive Compensation
and Nonqualified Plans

Comparing CEO Pay Ratios: What the First 200 Filings Show
"[Put] disclosures in context so that differences are framed by labor demographics, company size, CEO compensation and calculation methodology. This may be less important for companies with ratios that are comparable with their peers, but when a significant disparity exists, it is time to focus on the reasons why ... Median pay differences will fluctuate based on company labor models ... Variations in CEO compensation due to special circumstances and transitions ... Flexibility in methodology predictably yielded a wide variety of approaches."
Willis Towers Watson

Selected Discussions
on the BenefitsLink Message Boards

Seeking Low-Cost Continuing Education for ERPAs
What have people found -- in addition to SunGard and ASPPA conferences -- for CE credit as an ERPA?
BenefitsLink Message Boards

W-2 Definition of 'Compensation': Include Shareholder Health Insurance? Auto Reimbursement?
Our document uses W-2 income. Working within a payroll company, we get to see all the bits and pieces of compensation. Should shareholders health insurance (SHI) and auto reimbursement be included in the W-2 income for compensation purposes?
BenefitsLink Message Boards

Count LLC Partner's Draw in Determining Matching Contribution?
One of an LLC Partnership's partners takes a draw each pay period from which 401k deferrals are taken but no match is done. It's now year-end. Is the match determined using the total draw income, or will it be calculated based on her K-1 earnings?
BenefitsLink Message Boards

Refund of 402(g) Excess: Exempt from 10% Withholding?
I'm reviewing a Return of Excess form from a large recordkeeper. In the tax withholding section it says (paraphrasing): If the distribution is on account of 415, ADP or ACP, then 10% withholding will apply unless otherwise indicated below. Then it goes on to say: "Excess deferrals (402(g)) are not subject to withholding." (emphasis mine). Is that right?
BenefitsLink Message Boards

Stock Options: Adding Payment Event to Short Term Deferral with Change in Control as Trigger
I'm working with a stock option that is currently a short term deferral because the option only vests upon a CIC. The client now wants to add termination of employment (except for cause) as a payment event. I am pretty sure the subsequent deferral election rules apply here, but the result seems impractical when using the possible CIC as the original payment date. I also see a problem with the prohibition against acceleration of payment, because of course, an employee could terminate before the CIC date. Thoughts?
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David Rhett Baker, J.D., Editor and Publisher  davebaker@benefitslink.com
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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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