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[Official Guidance]
Text of IRS Notice 2018-34: Weighted Average Interest Rates, Yield Curves, and Segment Rates Applicable for April 2018 (PDF)
"This notice provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under Section 417(e)(3), and the 24-month average segment rates under Section 430(h)(2) ... In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under Section 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008 and the 30-year Treasury weighted average rate under Section 431(c)(6)(E)(ii)(I)."
Internal Revenue Service [IRS]
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TPA Due Diligence Requires Weighing More Than Fees
"TPAs who fully disclose their fee schedules can receive revenue sharing, but the revenue sharing is used to offset the fees. Any and all extra revenue sharing is allocated to the participants.... TPAs are ... split into two camps related to their pricing/revenue models; those that strictly use a fee schedule and will not accept a penny more and those that have uncapped revenue via revenue sharing agreements and/or asset-based fees.... The following questions should give you a clear understanding of breadth and quality of services."
Employee Benefit News
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Tax Reform, Federal Budget Agreement and Employee Benefits: The Tinkering Trend Continues
"The only action required by employers to comply with the new rule is to make sure that participants are properly notified of the new rule when the loan offset occurs ... [E]mployers who allow their former employees to continue to repay loans after their employment terminates may now want to revise their plans to require immediate repayment.... As a result of the temporary reduction in federal income tax rates, all sponsors of 401(k) or 403(b) plans should consider allowing Roth deferrals to be made under their plans, if they do not already."
Miller Johnson
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NYU to Begin Trial Over Retirement Plan Mismanagement Claims
"More than 20,000 current and former NYU employees are part of a class that is scheduled to begin a two-week trial on April 16 ... The employees accuse NYU of violating federal benefits law by paying high fees to its retirement plan record keepers. NYU also offered certain actively managed investment funds that carried high fees despite having no realistic expectation of higher returns, the employees say."
Bloomberg BNA
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Interesting Angles on the DOL's Fiduciary Rule, Part 87
"Before the 5th Circuit decision, the primary exemption for those conflicts was BICE (the Best Interest Contract Exemption) [which] permitted conflicted compensation if the advisor and the supervisory entity (e.g., a broker-dealer) adhered to the best interest standard of care ... After [the Fifth Circuit] decision, there are only a few exemptions for conflicted advice -- and they are very limited."
FredReish.com
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Plan Design Has Made Participants Better Investors
"With the rise of autopilot plans that employ target-date investments, most participants now turn portfolio construction over to investment professionals. As a result, today more than 70% of participants own a well-balanced portfolio, compared with less than 50% ten years ago. In addition to being well balanced, participants today tend to think long term. Only 8% made an exchange on their plan account in 2016. While there's still some way to go, plan design is fast turning the average participant into a model investor."
Vanguard
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Asset Decumulation or Asset Preservation: What Guides Retirement Spending? (PDF)
"[W]ithin the first 18 years of retirement, individuals with less than $200,000 in non-housing assets immediately before retirement had spent down (at the median) about one-quarter of their assets ... Retirees with at least $500,000 immediately before retirement had spent down only 11.8 percent within the first 20 years of retirement at the median. While some retirees do spend down most of their assets in the first eighteen years following retirement, about one-third of all sampled retirees had increased their assets over that period."
Employee Benefit Research Institute [EBRI]
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DOL Fiduciary Rule Helped Birth New Model Portfolio Breeds
"Advisers have deployed investment models in client portfolios for decades, but the types of models available and how advisers are using them are rapidly changing ... A number of factors are contributing to the rise of these products, including advances in technology, competitive pricing pressures, the rise of passive investing and demands for advisers to operate as fiduciaries ... [T]he number of advisers using products that rely on investment models, such as separately managed accounts and unified managed accounts, has grown rapidly."
InvestmentNews
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How Six Types of Retirement Income Are Taxed
"[1] Tax-deferred accounts. Prepare to feel pain.... [2] Profits from the sale of investments, such as stocks, bonds, mutual funds and real estate, are taxed at capital gains rates, which vary depending on how long you've owned the investments.... [3] Roth IRAs. Give yourself a high five if your retirement portfolio includes one of these accounts.... [4] Many retirees are surprised -- and dismayed -- to discover that a portion of their Social Security benefits could be taxable.... [5] Payments from private and government pensions are usually taxable at your ordinary income rate ... [6] If you purchased an annuity that provides income in retirement, the portion of the payment that represents your principal is tax-free; the rest is taxable."
Kiplinger
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[Opinion]
Fred Reish Says DOL 'Conflicted' Over Conflict-of-Interest Rule Appeal
"[It's] too early to say that the Rule is dead. I believe that the SEC will be providing additional and, in some cases, enhanced standards and requiring better disclosures. So, while the particulars of the DOL Rule may have been killed by the 5th Circuit decision, I don't know that the principles are necessarily dead. I think that the SEC will include some of those principles in their guidance. That could include, for example, better disclosures and higher standards of care. In any event, there will be a need for updated prohibited transaction exemptions since the 5th Circuit ruling also vacated the exemptions[.]"
Fiduciary News
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[Opinion]
IRIC Comment Letter In Support of the Retirement Enhancement and Savings Act of 2018 (PDF)
"We appreciate the fact that RESA will make significant strides in bringing additional security to future retirees. In keeping with this goal, IRIC offers the following [recommendations:] ... [1] Additional knowledge on their own retirement readiness through 'income' projections on participant statements.... [2] The ability to protect the benefits of an investment in a guaranteed income product in the event their plan sponsor decides to no longer offer the guaranteed product.... [3] The security and comfort associated with an approved methodology to ensure appropriate fiduciary review of the insurer offering the guarantee."
Institutional Retirement Income Council [IRIC]
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Selected Discussions
on the BenefitsLink Message Boards
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Automatic Enrollment -- Notice Not Provided
We have a 401(k) plan with an automatic enrollment provision (ACA). The client has not provided the required notice for the past two years. They've been operating according to the provisions in the plan document; they simply neglected to provide employees with the notice. Is there a "correction" for this? Maybe anyone who was auto-enrolled would need to be given the option to remove their funds?
BenefitsLink Message Boards
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Deferrals Taken from Bonus Payments: Can Exclude from SH Match?
Is it permitted to exclude any elective deferrals made from year-end bonus pay from the SH match? If so, how are those amounts tested for ADP/ACP? Does that throw out the entire ACP safe harbor and test is run as it normally would be? What then about those elective deferrals that have no SH match? Are they tested separately?
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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Health Savings Account (HSA) Specialist
