Retirement Plans Newsletter

June 28, 2018

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Jobs

401(k) Administrator
Capital Retirement Plan Services, Inc.
in PA

401(k) Retirement Plan Administrator
Nicholas Pension Consultants
in CA

Financial Analyst
Nicholas Pension Consultants
in CA

Retirement Plan Administrator II/Recordkeeper
Garcia Wealth Management Group
in CA, Telecommute

Compliance Manager
Associated Pension Consultants
in CA, Telecommute

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Webcasts, Conferences

Handling the Repurchase Obligation: Financing
August 28, 2018 WEBCAST
National Center for Employee Ownership [NCEO]

Plan Corrections: Fixing the Broken Plan Workshop
September 28, 2018 in KS
FIS Relius Education

Executive Compensation National Institute 2018
November 8, 2018 in DC
American Bar Association Joint Committee on Employee Benefits [JCEB]

►See 125 Upcoming Webcasts and Conferences

►See 1396 Recorded Webcasts


Discussions

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Is Your Pension Cyber-Secure?

"[T]oday's most dangerous attacks often ... require unique solutions that either use a varying combination of machine-learning, advanced threat intelligence and more to prevent against specific instances of attacks in an up-to-the-minute manner.... [W]hile the user is the main source of risk for many of today's attacks, the best way to turn the tables is to strengthen them as a 'last line of defense'. This requires basic education[.]"
Pension Pulse

A Look at Self-Correction and E-Delivery (PDF)

"[P]lan sponsors and recordkeepers have wanted the IRS to expand the availability of self-correction of Plan errors, and expand the rules and availability of electronic delivery and electronic signatures.... With the changes to the determination letter program, the increased fees for small plans for filing under [VCP], and the legislative proposals on updating the IT functions at the IRS, now may be the perfect time for these changes."
Groom Law Group, in TAXES The Tax Magazine

Are Roths the Future of 401(k)s?

"Under tax reform, most Americans now pay lower marginal rates. But those rates are scheduled to sunset at the end of 2026 ... Intentionally or not, the TCJA has made a Roth savings strategy more valuable than traditional pre-tax contributions for most savers, if the increased tax rate barometer is applied."
ThinkAdvisor

The Battle Over 'Vested Rights' in California

"From the beginning, the California Supreme Court, depending on the factual situation before it, has sent mixed messages.... The basic question comes down to: 'Can a California public agency make reasonable and necessary changes to the future pension benefits of current, active employees without providing something equivalent for anything taken away?' "
Best Best & Krieger LLP

GWU Tells Court 403(b)s Cannot Be Compared to 401(k)s

"In a brief supporting a motion to dismiss a case against George Washington University related to the management of its 403(b) plan, the defendants note that 403(b)s have always looked differently and were set up for a different purpose than 401(k) plans."
PLANSPONSOR

The Differences Between 403(b) and 401(k) Pricing

"[T]he recordkeeping fees for 401(k) plans are generally less expensive than those for 403(b) plans of the same asset size.... Assets in 403(b) plans typically reside in multiple contacts ... many will be individual in nature, where the plan sponsor will have little say.... [Annuities are] offered as an option in 68% of 403(b) plans.... Annuities are more difficult to recordkeep, particularly in the daily-valued environment that dominates retirement plans today ... 401(k)s rarely utilize more than one recordkeeper, where it is not unusual for a 403(b) plan to have multiple recordkeepers."
Cammack Retirement Group

Improving Social Security Coverage and Retirement Benefits for Independent Contractors (PDF)

44 pages. "This paper provides a background of the policy mechanism for covering [independent contractors (ICs)] through Social Security, explores the reasons why the system leaves gaps in coverage for ICs, and offers six categories of policy options to improve Social Security coverage and re tirement benefits for these workers."
National Academy of Social Insurance [NASI]

[Opinion]

PSCA Makes Recommendations for Guidance on Handling Missing Participants

"In response to [recent DOL] enforcement activity and GAO's January 2018 report recognizing that guidance is critical in addressing the missing participant issue, PSCA [reiterated] the benefits of the sample safe harbor plan originally proposed in the April 2017 correspondence. The sample plan provides plan sponsors with ten clear steps to locate missing participants for certain plans while continuing to meet their fiduciary obligations and preserve their plan qualification."
Plan Sponsor Council of America [PSCA]

[Opinion]

Joint Association Letter to EBSA Regarding Missing and Unresponsive Participants

"It is critical that regulators coordinate on guidance.... The proper steps that should be taken to deal with missing and unresponsive participants are context dependent.... Some participants and beneficiaries will simply not be found, and plans need workable solutions with respect to their benefit.... More transparency and consistency in audit guidelines would help manage expectations and speed the regional offices' review of plan procedures.... Input and comment from the regulated community is critical."
The ERISA Industry Committee [ERIC], American Benefits Council, and 8 other trade associations

[Opinion]

A Slightly Different Actuarial Perspective on the 2018 Social Security Trustees Report

"Since there are no mechanisms in current Social Security law to automatically adjust tax rates or benefits when the system falls out of 75-year actuarial balance or falls out of 'Sustainable Solvency', there is no way to 'ensure' Sustainable Solvency over a period longer than one year.... [A]chieving sustainable solvency with reform changes does not mean that the system's financial problems will be solved forever[.]"
Ken Steiner, FSA Retired

[Opinion]

Joint Trade Association Letter to Senators Proposing SCP Expansion Be Included in Senate IRS Reform Proposal (PDF)

"[This] proposal would direct the IRS to expand the self-correction program (SCP) within the IRS's Employee Plan Compliance Resolution System (EPCRS), to enable businesses with retirement plans to more easily correct common mistakes. Expanding SCP to address common mistakes enables businesses to fix these problems without a submission to the IRS and the payment of a user fee. Timely and efficient correction protects participating employees by providing them with their expected retirement benefits, including favorable tax treatment."
American Society of Pension Professionals & Actuaries [ASPPA]

[Opinion]

It's Time for 401(k) Plans to Become Part of the Sharing Economy

"The better way is through the aggregation of the plans of unrelated 401(k) plan sponsors into single plans called multiple employer plans.... This better way has the following objectives: [1] Reduce the employer's exposure to fiduciary liability as much as possible; [2] Put plan administration burdens entirely on a professional administrator with benefit plan expertise; [3] Keep the expenses of the arrangements at economical levels through the aggregation of the plans of unrelated employers."
Fiduciary Plan Governance, LLC

Executive Compensation
and Nonqualified Plans

Tax Reform Developments: Making Provisions For Individuals Permanent, Capital Gains Indexing

"The provisions in the [TCJA] that changed individual taxation and affect stock compensation are all scheduled to end after 2025 ... Republicans in the House of Representatives plan to vote on making the provisions permanent (Tax Reform 2.0), ... The legislation may also include some favorable tax changes related to retirement plans and may increase the amount of tax-free benefits companies can provide for education assistance and student-loan repayment[.]"
myStockOptions.com

Selected Discussions
on the BenefitsLink Message Boards

Creative Solutions for Plan That Will Fail Top Heavy Test in 2018?

The employer has a 401(k) plan that eliminated its Safe Harbor match in 2012 and has been subject to all testing ever since. This employer is angry because he has been told that for the first time, his plan became Top Heavy for 2018 based on the 12/31/2017 results of the test. He has been told that if he doesn't want to be obligated to make a Top Heavy contribution of any kind, then the Key employees cannot defer in 2018. Deferrals count, and even if a Key only deferred 1% of pay, then the company would owe the non-Key participants 1% of pay as a TH minimum contribution. Of course if any Key deferred 3% or more, then the company would have to make the standard 3% TH minimum contribution. I can think of all kinds of creativity for failed ADP/ACP tests, cross-tested formulas that don't work out, etc., but I don't know of a "creative" solution to Top Heavy!
BenefitsLink Message Boards

404(a)(5) Notice Needed When Funds in Brokerage Account Are Merged/Liquidated and Then Replaced?

A participant directed plan has a core fund line-up and a brokerage window. There are times where certain funds invested in by the participants in the brokerage window are liquidated/merged and their money in those funds are moved to a replacement fund. I understand that brokerage windows are not DIAs and therefore do not have the same notice requirements. However, a description of the window needs to be provided in an annual 404(a)(5) notice. Is there a requirement to disclose to participants in the brokerage window prior to the replacement, similar to what is required of other replacement funds in the core line-up?
BenefitsLink Message Boards

Withdrawal of Participating Employer -- Distributable Event?

We have a 401(k) plan with related participating employers. One participating employer (the owner and his wife) is terminating its participation in the plan. Is this a distributable event? I think not, because the plan did not terminate. If it isn't a distributable event, are those account balances still included in the TH test? I think those employees would be included in the 410(b) test. What if it had been a multiple employer plan?
BenefitsLink Message Boards

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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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