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The Impact of Managed Accounts and Target Date Funds on Defined Contribution Plans
"This report discusses ways in which professional investment assistance (managed accounts and target date funds) can be effective tools for workers.... Availability and usage of in-plan professional investment assistance is on the rise.... Historical returns are higher on average and less volatile for workers using in-plan professional investment assistance.... Workers using in-plan professional investment assistance have more diversified portfolios.... Savings decisions are better with consistent managed account usage."
Alight; free registration required
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District Court Rejects Request by Franklin Resources to Dismiss ERISA Lawsuit
"[The District Court judge] consolidated the complaint with a similar pending suit against executives of the 401(k) plan. A former Franklin employee and plan participant sued the company and plan executives ... alleging violations of [ERISA] such as charging excessive fees, offering poor-performing proprietary mutual funds and failing to monitor fiduciaries ... The plan had $1.21 billion in assets at year-end 2016, according to the latest Form 5500." [Fernandez v. Franklin Resources, Inc., No. 17-6409 (N.D. Cal. Apr. 6, 2018)]
Pensions & Investments
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Buyer of Assets Ruled Liable for Seller's Withdrawal Liability
"[T]he Seventh Circuit explained that the district court should have looked at the impact that the purchase of the target's assets had on the operations of what would have been the target's business, absent the sale.... ManWeb's use of the target's goodwill and reputation to attempt to convince the target's customers to purchase services from ManWeb weighed heavily in favor of a finding of continuity of operations.... The mere fact that ManWeb attempted to capture the target's customers was sufficient to show that there was continuity of customers." [Indiana Electrical Workers Pension Benefit Fund v. ManWeb Services, Inc., No. 16-2840 (7th Cir. Mar. 12, 2018)]
Morgan Lewis
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Tips for Handling Combined DB/DC Plan Testing
"All plans must have the same plan year. Plans being aggregated must have the same start and end date. Benefits rights and features may not be available on a discriminatory basis.... The only qualified plans that may be aggregated to comply with Internal Revenue Code Section 401(a)(4) are model SEPs and SIMPLE plans, and they must be the employer's only active plan ... To demonstrate comparability ... all the participants must have an EBAR at least equal to the DB top heavy minimum EBAR.... [E]ach type of plan must comply with Code Section 404 separately."
American Society of Pension Professionals & Actuaries [ASPPA]
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Defusing the Pension-Savings Time Bomb (PDF)
"The current environment of low interest rates and investment returns, sluggish wage growth and inadequate private savings is creating a retirement-funding problem.... [S]trategies for employers ... can include: [1] Making lump-sum offers to future retirees.... 43 percent of U.S. firms have offered buyouts to future plan beneficiaries. [2] Shifting obligations for existing retiree groups, or entire plans, to insurance companies."
Aon
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Retirement Preparedness of the Boomer Generation, 2018 Update (PDF)
26 pages. "The percentage of Baby Boomers with retirement savings rose to 58 percent, from 54 percent in 2017.... Among Boomers with retirement savings, 43 percent have $250,000 or more saved, as compared to 32 percent having this level of savings in 2017.... 79 percent of Boomers who have a relationship with a financial professional have at least $100,000 saved for retirement, versus only 48 percent of those who do not work with a financial professional.... 80 percent of annuity owners have at least $100,000 saved for retirement, as compared to only 53 percent of non-owners."
Insured Retirement Institute [IRI]
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Roth Conversion Cost Averaging and Roth 'Barbell' Strategies
"Although many popular Roth conversion strategies are no longer viable after the elimination of the recharacterization of Roth conversions, the attractiveness of recently reduced tax rates arguably makes Roth conversions even more appealing... with the caveat that it's more important than ever to consider the timing!"
Nerd's Eye View
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Benefits in General
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Executive Compensation
and Nonqualified Plans
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Credit Karma Settles with SEC over Alleged Stock Option Disclosure Failures
"The [SEC] recently instituted a cease-and-desist proceeding against Credit Karma, Inc.... for failing to provide adequate disclosure to its stock option holders pursuant to SEC Rule 701 because Credit Karma did not comply with relevant disclosure requirements for offerings in excess of $5 million.... Credit Karma agreed to a settlement with the SEC and paid a civil penalty of $160,000 -- well above what the disclosures would have cost.... Rule 701 is a safe harbor exemption that excuses certain employee benefit plans, including stock incentive plans, from registering equity offerings and sales under the Securities Act."
DLA Piper
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Selected Discussions
on the BenefitsLink Message Boards
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Union Members as Excluded Class; Participant Becomes Union Member Mid-Year
A plan excludes unions and has a last day of the plan year allocation requirement for profit sharing contributions. An employee enters the plan, but later during the year changes job to a union position. Can the plan require a participant to be an eligible employee on the last day of the year to be eligible for an allocation, or is that limited to employment on last day of the year?
BenefitsLink Message Boards
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Splitting a 401(k) Plan to Avoid Audit Requirement -- With a Twist
Plan sponsor wants to split its current safe harbor 401(k) plan (130-ish participants and going up each year) into two identical plans in order to avoid the audit requirement. The split probably could be done by placing certain categories of employees in just one plan. I'm much more comfortable with this than an alphabetical approach. Here's the wrinkle: the employer also sponsor a cash balance plan, which is tested with the 401(k) plan. Does this cause complications for splitting the 401(k) plan?
BenefitsLink Message Boards
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BenefitsLink.com, Inc.
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(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.
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