Retirement Plans Newsletter

August 1, 2018

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Manager, Client Transition Services
Transamerica
in IA, MA, NY

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CBIZ
in PA

Retirement Plan Administrator
American Retirement Plan Services, LLC
in MD

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Empower Retirement
in WI

Actuary
The Retirement Advantage
Telecommute

Client Relationship Manager
The Retirement Advantage, Inc.
Telecommute

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[Official Guidance]

Text of 2018 IRS Form 5498: IRA Contribution Information (PDF)

"The information on Form 5498 is submitted to the IRS by the trustee or issuer of your individual retirement arrangement (IRA) to report contributions, including any catch-up contributions, required minimum distributions (RMDs), and the fair market value (FMV) of the account."
Internal Revenue Service [IRS]

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[Guidance Overview]

Editor's Pick Meeting of the American Academy of Actuaries Multiemployer Plans Committee and Representatives from the Department of the Treasury, PBGC, and DOL (PDF)

14 pages; meeting held Feb. 23, 2018. Topics discussed: [1] Denials and withdrawals to date; [2] Reasonableness of actuarial assumptions; [3] Application review process; [4] Pre-application conferences; [5] Revenue Procedure 2017-43; [6] Non-standard mortality assumptions; [7] Resubmission considerations; [8] Investment return assumptions; [9] PBGC discussion topics. In addition, this document includes notes from follow-up discussions with Treasury that occurred after the meeting on two topics: [1] Investment return assumptions; and [2] Survivorship bias in assumed new entrants.
American Academy of Actuaries

PBGC Proposes Valuation and Notice Requirements for Insolvent Multiemployer Plans

"Insolvent plans receiving financial assistance (whether terminated or not) and plans terminated by plan amendment that are expected to become insolvent could generally perform actuarial valuations less frequently than currently required. Additionally, the proposal would eliminate some notice requirements for insolvent plans."
Conduent

UPS Retirees Bring First Challenge to Legality of Pension Cuts under MPRA

"The lawsuit is the first to challenge the Multiemployer Pension Reform Act [MPRA] ... [which] allows a multiemployer plan to request Treasury's approval to cut benefits if the plan shows that doing so would avoid insolvency. The retirees seek to hold the U.S. government liable for engaging in an 'uncompensated taking of their property' by authorizing -- through the Treasury -- those pension cuts. The retirees, who participate in the New York State Teamsters Conference Pension and Retirement Fund, seek to represent 21,250 similarly situated workers." [King v. U.S., No. 18-1115 (Fed. Cl., complaint filed July 31, 2018)]
Bloomberg BNA

No Award of Equitable Relief After Improper Transfer of Cash Balance Assets to 401(k) Plan

"[T]he Fourth Circuit ruled that the district court was not required to follow plaintiffs' proposed 'proportionate-share-of-the whole' approach to assessing whether BOA profited from unlawfully transferred funds, although it was within its discretion to do so.... The Fourth Circuit concluded that there was adequate factual basis to deviate from the 'proportionate-share-of-the-whole' methodology, which other courts have used to assess whether profits are realized from unlawfully commingled funds." [Pender v. Bank of America Corp., No. 17-1485 (4th Cir. June 5, 2018)]
Hodgson Russ LLP

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NYU Prevails in Lawsuit Over Employee Retirement Plans

"U.S. District Judge Katherine Forrest said the plaintiffs failed to prove that NYU's retirement plan committee acted imprudently or caused losses by saddling them with poorly performing investment options and excessive recordkeeping fees.... The plaintiffs included six professors and an instructor who said NYU's imprudence caused more than $358 million of losses at two 403(b) plans[.]" [Sacerdote v. New York Univ., No. 16-6284 (S.D.N.Y. July 31, 2018)]
Reuters

Plan's Retention of Stock of Former Parent Company Following Spinoff Did Not Breach Dudenhoeffer Standard of Prudence

"Participants in an individual account plan established following the spinoff of the plan sponsor did not plausibly allege that the retention of the former parent company's stock as a plan investment option was imprudent ... The stock no longer qualified as employer securities, exempt from ERISA's diversification requirements, but the participants failed to allege special circumstances that would have undermined the fiduciaries' reliance on market price in evaluating the prudence of the investment." [Schweitzer v. Investment Comm. of the Phillips 66 Savings Plan, No. 17-3013 (S.D. Tex. May 9, 2018)]
Wolters Kluwer Law & Business

Your DB Funded Status Has Improved. Now What?

"[D]uring 2017, corporate DB plans experienced their greatest improvement in funded status in the last five years -- improving from 81% to 85% -- the largest one-year increase since 2012 to 2013.... During 2017, corporations in the S&P 500 contributed $77 million in cash to their DB plans.... Moving from equities to fixed income allows DB plan sponsors to preserve the funded status they have achieved due to market returns and capital allocations, but investment committees are looking for new asset classes that can provide greater returns at a reasonable level of risk."
PLANSPONSOR

Partial Termination of Your Qualified Retirement Plan: Don't Let It Sneak Up on You (PDF)

"Because this can occur over a period of time, partial terminations frequently sneak up on plan sponsors ... The fact that a partial termination may be discovered long after it occurs can complicate taking necessary measures and require correction to maintain the plan's tax-qualified status.... Partial termination generally occurs when there is 'significant turnover,' i.e., a [1] significant and [2] employer-initiated, reduction in the number of plan participants. That deceptively simple statement has many moving parts[.]"
Boutwell Fay LLP

Everything You Need to Know About Safe Harbor 401(k)s

"In this article, we'll walk you through everything you need to know to decide if a Safe Harbor 401(k) is right for your business.... [1] A simple safe harbor 401(k) definition; [2] The primary reason business owners love safe harbor 401(k)s; [3] The main requirement for safe harbor 401(k)s; [4] Additional requirements for safe harbor 401(k)s; [5] Safe harbor 401(k) deadlines; [6] Adding profit sharing to your safe harbor 401(k); [7] Is a safe harbor 401(k) right for your business? [8] Alternatives to a safe harbor 401(k)."
ForUsAll

2018 Global Survey of Accounting Assumptions for Defined Benefit Plans

"By year-end 2017 most countries realized slight improvements in their funding positions. During 2017, investment returns on plan assets (both bond and stock returns) showed a solid performance in major markets and, in most cases, this performance was able to offset declining interest rates. The majority of surveyed countries imply life expectancies between 20 and 30 years. The impact of the differences in this assumption will vary depending on whether the typical payment form is lump sum or annuity."
Willis Towers Watson

FAS87 ASC715 Discount Rates and Moody's Rates, Updated July 31, 2018

An unofficial monthly report as of July 31, 2018, of the Moody's Daily Long-term Corporate Bond Yield Averages and Moody's Daily Treasury Yield Averages (used as benchmarks by some corporate pension plans).
David Rigby, via BenefitsLink Message Boards

[Opinion]

American Academy of Actuaries Comments on Exposure Drafts of Proposed Revisions to ASOP Nos. 4, 27 and 35 (PDF)

19 pages. "The proposed revisions to ASOP Nos. 4, 27, and 35 may require substantial effort to implement.... We believe is better to fully reflect assumption changes when the actuary deems those changes appropriate, and consider use of an output smoothing mechanism if needed to manage cost or contribution levels.... [We] are concerned that actuaries may not notice all of the changes and suggest that a version that tracks all of the changes be posted for use by the US actuarial profession ... We support the change to the requirement of Section 4.1.2 of ASOP Nos. 27 and 35 regarding the rationale for actuarial assumptions selected by the actuary."
American Academy of Actuaries

Benefits in General

[Official Guidance]

Text of EBSA Request for Nominations to the 2019 ERISA Advisory Council

"The terms of five members of the [Advisory Council on Employee Welfare and Pension Benefit Plans (the ERISA Advisory Council)] expire at the end of this year. The groups or fields they represent are as follows: [1] employee organizations; [2] employers; [3] actuarial counseling; [4] investment counseling; and [5] the general public.... Nominations must be received on or before [the date that is 45 days after publication in the Federal Register, which is currently scheduled for August 2, 2018]."
Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL]

Selected Discussions
on the BenefitsLink Message Boards

Testing of Company A's Plan After Mid-Year Acquisition of Company B and Its Employees

Company A acquires Company B 5/1/2017. Company A grants service with Company B for eligibility purposes (not sure exactly how exactly this was done). Can Company B be treated as otherwise excludable employees for testing purposes for 2017 (i.e. have 5/1/2017 hire dates)? Can Company B be excluded for 2017 testing purposes by using the acquisition transition rule? Or are Company B people treated for testing purposes as having their Company B hire dates?
BenefitsLink Message Boards

Employer Pays Into Plan's Trust to Reimburse Trust for Payment of Investment Fees

The employer reimburses investment fees through through the plan's trust instead of paying directly. I believe this is considered a contribution. Does anyone have a cite that clarifies this?
BenefitsLink Message Boards

Employee Quit, Then Rehired as Consultant. Distributable Event?

If an employee quits and gets rehired as a consultant with no benefits, does he/she have the ability to cash out their 401(k)?
BenefitsLink Message Boards

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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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