Retirement Plans Newsletter

July 13, 2018

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[Official Guidance]

Text of PBGC Proposed Regs: Terminated and Insolvent Multiemployer Plans and Duties of Plan Sponsors

"[PBGC] proposes to amend its multiemployer reporting, disclosure, and valuation regulations to reduce the number of actuarial valuations required for smaller plans terminated by mass withdrawal, add a valuation filing requirement and a withdrawal liability reporting requirement for certain terminated plans and insolvent plans, remove certain insolvency notice and update requirements, and reflect the repeal of the multiemployer plan reorganization rules."
Pension Benefit Guaranty Corporation [PBGC]

[Official Guidance]

Text of IRS Notice 2018-60: Weighted Average Interest Rates, Yield Curves, and Segment Rates Applicable for July 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]

[Guidance Overview]

Tax Code Changes Require Examination of Hardship Withdrawal Provisions

"[P]lan sponsors that have limited their hardship distributions to the safe harbors now must change their hardship distribution processes for casualty-related home repair expenses, due to an indirect change in Code section 165. These hardship distributions are now limited to home repair expenses caused by presidentially declared disasters only."
Kilpatrick Townsend

Affected Parties Suggest Reasons, Methods for Expanding IRS Determination Letter Program

"The circumstances believed to warrant determination letter applications included: [1] Significant legislative and regulatory changes; [2] Significant plan design changes; and [3] Mergers and acquisitions.... Under one suggested approach for obtaining an IRS stamp of approval, the agency would establish or provide official recognition of a third-party certification system to fill the void left when it contracted the determination letter program -- an idea that the IRS raised years ago in a 2001 White Paper."
HR Daily Advisor

In the Era of Electronic Enforcement, Fidelity Bond Issues Easily Revealed on Form 5500

"The fidelity bond requirement is high up on the DOL's compliance priorities, and it's not a great leap in logic to assume that they monitor this on Form 5500.... It could be a red flag for the DOL to take a closer look at the plan.... A plan's fiduciaries could be held personally liable for any loss that should have been covered by the fidelity bond."
The Retirement Plan Blog

The Fiduciary Rule May Be Dead, But Fiduciary Responsibility Isn't

"Nevada, New York and Massachusetts have taken steps to provide greater fiduciary protections through law changes and enforcement. Other states may follow their lead.... [T]here are issues whether states are permitted to act in this area due to ERISA preemption, and the status of these laws and state enforcement is not clear."
PenChecks

Court of Appeals Officially Nullifies Fiduciary Rule, DOL Extends Nonenforcement Policy

"[At] least 79% of sponsors charge recordkeeping fees to plan participants (through direct fees, netting from investments or both).... [M]ore than 80 lawsuits have challenged the reasonableness of plan fees paid from plan assets, some of which have resulted in multimillion-dollar settlements. These lawsuits underscore the need for monitoring the reasonableness of plan fees and documenting the process."
Willis Towers Watson

Checksmart Wins Dismissal of 401(k) Excessive Fee Lawsuit

"The proposed class action, filed two years ago by Checksmart employee Enrique Bernaola, made waves in the financial industry for being one of the first to challenge alleged excessive fees in a smaller 401(k) plan.... [The federal district court judge ruled that the participant's] claims were barred by ERISA's statute of limitations because the expense ratios for the various investment options offered by the plan were disclosed to him three years before he filed his lawsuit." [Bernaola v. Checksmart Financial LLC, No. 16-684 (S.D. Ohio July 12, 2018)]
Bloomberg BNA

DOL Shifts Focus of Enforcement Letter Following ARA Comments

"[ARA] learned that the wording describing the potential for 'alternative enforcement measures' was intended for plan sponsors who reported a fiduciary violation had occurred without a correction being made.... [G]oing forward the threat of alternative enforcement measures will be limited to plan sponsors where the late deposit violation has not been corrected."
American Society of Pension Professionals & Actuaries [ASPPA]

How to Deal with Improper Roth Contributions

"Option 1: Make a corrective distribution.... Option 2: Recharacterize.... Although the Tax Cuts and Jobs Act of 2017 eliminated the ability to recharacterize Roth conversions, the recharacterization option still exists for regular contributions to traditional or Roth IRAs ... Option 3: Accept the excess contributions penalty for one year and move on."
Natalie Choate, in Morningstar Advisor

[Opinion]

Few Read Mandatory Benefit Disclosures, Even Fewer Take Action

"[R]esearch and practical experience confirm mandated disclosures are not effective at prompting greater savings. Since disclosure costs are typically paid by participants, before we add a new burden, let's first ask the DOL and IRS to confirm the cost/benefit results and effectiveness of other mandated disclosures designed to prompt changes in participant behavior[.]"
Plan Sponsor Council of America [PSCA]

Benefits in General

Bullet Proofing Your Claims Procedures

"When there is a request for documents related to a claim or appeal pay close attention to what is requested ... and carefully assess what is relevant in light of the applicable court decisions. Given the change in the disability claim and appeal procedure requirements that became effective ... on April 1, 2018, and the regular litigation over disability claims, it may be prudent to carefully review the forms being used, the process being followed, how document requests are addressed, and how those match with the current requirements."
Winstead PC

Selected Discussions
on the BenefitsLink Message Boards

Estate is IRA Beneficiary; RMD Aspects?

I have a situation where a client recently died. Her estate is the named beneficiary of her IRA. Her will created a trust for estate assets. Can the beneficiaries of the trust be considered as designated beneficiaries for IRA RMD purposes?
BenefitsLink Message Boards

Intranet Posting of 5500 Information

To satisfy the requirement to post 5500 information to the plan sponsor's intranet, must the Form 5500 AND SAR be posted, or just the 5500, or just the SAR?
BenefitsLink Message Boards

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David Rhett Baker, J.D., Editor and Publisher
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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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