Retirement Plans Newsletter

June 22, 2018

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ESOP Administrator
Blue Ridge ESOP Associates
in VA, Telecommute

Director, Retirement Products
Edward Jones
in MO

Retirement Plan Administrator
Gateway Pension Services, Ltd.
in MO

Retirement Analyst HOP04579
Cargill
in MN

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It's Official: The Fiduciary Rule Is Dead

"[T]he final judgment ... not only spoke to the disposition of the case ... but also contained an order that the DOL 'pay to appellants the costs on appeal to be taxed by the Clerk of this Court.' Most of the document was a copy of the March 15 decision." [Chamber of Commerce v. DOL, Nos. 16-1476, 16-1530 and 16-1537 (5th Cir., mandate issued Jun 21, 2018)]
American Society of Pension Professionals & Actuaries [ASPPA]

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It's Over! Fifth Circuit Issues Mandate Vacating Fiduciary Rule

"What this means is that the 'Five Part Test' from 1975 has sprung back to life, and Advisory Opinion 2005-23A (the 'Deseret Opinion') has likely been restored.... The SEC has proposed a slate of rules that would cover the retirement space. The retirement industry has a role to play first in ensuring that any new regulations are workable and second in seeking coordination between the SEC and DOL. Separately, financial institutions that achieved BIC Exemption compliance may seek new exemptions that provide broad relief for advice fiduciaries."
Groom Law Group

PBGC Inspector General Report SR-2018-14: Summary and Analysis of IT Audit Recommendations and PBGC FISMA Performance (PDF)

13 pages, June 20, 2018. "How does PBGC measure up in the area of IT security? This information-only report provides a summary and analysis of the [PBGC's] progress in remediating IT audit recommendations, as well as its [Federal Information Security Modernization Act (FISMA)] performance in general and its FISMA performance in comparison to other federal agencies. Bottom line: PBGC has made progress in IT security in the past five years. In FISMA performance, PBGC ranks as average among small agencies in one comparison and above average in another."
Office of Inspector General, Pension Benefit Guaranty Corporation [PBGC]

Plan Sponsors Need to Give Special Tax Notice Update for 401(k)s

"[T]he TCJA has changed the time period for making eligible rollover loan offsets for 401(k)s, which will require a notification for plan participants to understand the changes.... [As] of yet, the IRS has not issued any model notices based on TCJA changes to comply with Section 402(f). Therefore, plan sponsors will have to provide notice to plan participants about how the tax law changes will affect their plans."
Butterfield Schechter LLP

The ESOP Fiduciary's Responsibility for Determining Stock Value

28 PowerPoint slides. "[ERISA] generally requires relying upon the work of an independent appraisal expert. If a fiduciary relies on an inadequate appraisal, that fiduciary can breach its duties and/or violate ERISA's prohibited transaction rules."
McDermott Will & Emery

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Companies Race to Top Off Pension Plans to Capitalize on Tax Break

"Pension contributions made through mid-September can be deducted from income on tax returns being filed for 2017 -- when the U.S. corporate tax rate was still 35%.... With the deadline less than three months away, corporations are preparing to top off their pension plans to take advantage of the beneficial tax treatment. This one-time incentive is helping corporations close a pension funding gap that topped $680 billion for S&P 1500 companies after the financial crisis[.]"
The Wall Street Journal; subscription may be required

ASOP 51 Provides New Standard for Disclosure of Pension Risks (PDF)

"[ASOP 51] provides guidance to actuaries in determining and communicating the risks that the actual cost of a pension plan may differ significantly from the expected cost of a pension plan.... ASOP 51 does not require an actuary to perform numerical calculations in order to assess each specific area of risk. It does, however, require actuaries to use their professional judgement as to whether a particular risk analysis is warranted and, if so, to recommend to the client that the risk potential be quantified if 'a more detailed assessment would be significantly beneficial.' "
Findley

Retirement of Baby Boomers Stresses Social Security

"In 1980, there were 19 adults 65 years and older in America for every 100 people between 18 to 64[.] ... This ratio ... increased to a ratio of 21 to 100 in 2010.... However, between 2010 and 2017 ... the ratio of retiree-aged people to working-aged people [increased] to 25 for every 100.... The concern of this stress on retirement programs ... came to light when the first wave of baby boomers turned 65 in 2011. An additional 10,000 turn 65 each day ... and with declining birth rates (the lowest in 30 years), the concern continues to grow."
U.S. News & World Report

Could an Early Retirement Help You Live Longer?

"There's conflicting research on the connection between retirement and life expectancy.... The drawbacks of early retirement.... Finding a purpose in retirement is paramount for health and happiness."
U.S. News & World Report

Benefits in General

Five New Members Appointed to 2018 ERISA Advisory Council

"Current members Cynthia Levering and Srinivas Dharam Reddy will serve as the chair and vice chair, respectively, of the council.... The newly appointed members and the expertise they represent are: [1] Employers: David J. Kritz is General Attorney for Norfolk Southern Corporation ... [2] Corporate Trust: Linda M. Kerschner is a Senior Vice President of CAPTRUST Financial Advisors ... [3] General Public: David Blanchett is Head of Retirement Research at Morningstar Investment Management ... [4] Investment Management: Jason Bortz is Senior Vice President and Senior Counsel at Capital Group ... [5] Employee organizations: Bridget O'Connor is General Counsel of the International Union of Bricklayers & Allied Craftworkers (BAC)."
Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL]

Administration Proposal Rolls Out Proposal to Combine DOL and DOE

"The White House unveiled a proposal to combine the Labor and Education departments into a single agency with four subgroups, blending everything from enforcement to workforce development. The June 21 reorganization report calls for the two departments' sprawling assortment of subdivisions to be folded into agencies called K-12; the American Workforce and Higher Education Administration (AWHE); Enforcement; and the Research, Evaluation, and Administration agency. The new Cabinet agency would be called the Department of Education and the Workforce."
Bloomberg BNA

Selected Discussions
on the BenefitsLink Message Boards

Employee Deferrals from Off-Cycle Bonus Pay

Client has provided employees with bonuses at year-end for many years. While the plan document states that W-2 compensation is eligible plan compensation, the client did not withhold employee deferrals from the bonus pays as they would with any normal payroll. Instead, because employee feedback was that most employees did not want employee deferrals withheld, the client began communicating that employee deferrals would not be withheld unless the employee completed an election form specific to the bonus pay. Each year, only about 3% of employees completed the election form. Would a QNEC be required for employees that did not have employee deferrals withheld from the bonus pay? To your knowledge, how far back would the corrections need to go?
BenefitsLink Message Boards

Determining Eligibility for Matching Contribution: Use Date of Paycheck, or Date Pay Period Ends?

We are the TPA and we calculate the match for the client on a per pay basis. Their pay period ending date was 5/22 but the pay date was 5/29. The next pay period ending date is 6/5 with a pay date of 6/12. A participant met match eligibility on 5/24 and is an immediate entry. The client is thinking the person should not get a match until the 6/12 pay date because the pay on 5/29 is for time worked prior to her entry date. Our system processes based on the pay date and as 5/29 is the first pay after her effective eligibility date, we are thinking the participant is entitled to the match. Should use the pay period end date or should we use the actual pay date?
BenefitsLink Message Boards

1 Company in 2 Controlled Groups

I have 4 companies -- A, B, C, and D. Companies A, B, and C are a controlled group, and companies C and D are a controlled group. Companies A and C are not a controlled group and don't qualify to be an affiliated service group. Which of them do I test together? I'm thinking that I need to test A, B, and C together, AND then test C and D together, but that could be redundant for C. Am I missing something?
BenefitsLink Message Boards

Company Wants Me to Fund My Own QNEC After Test Failure -- I'm a Partner

My company reached out to me letting me know they failed discrimination testing and, as a result, had to give me additional profit sharing contributions. That makes sense, but they also said I am required to fund it out of pocket. Normally, it would be up to the company to fund this, but I'm a partner at my company. They've already funded it, but they are requesting a reimbursement. Is this correct? Am I required to fund this?
BenefitsLink Message Boards

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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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