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Retirement Plans Newsletter September 4, 2018 |
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Jobs
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Webcasts, Conferences Hot Topics in Employee Benefits: What We're Seeing
Labor and Employment and Employee Benefits Seminar
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Discussions |
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This Newsletter:
BenefitsLink Health & Welfare Plans Newsletter:
Message Boards Digest:
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Senior Pension Administrator - Combo DB/DC Plans|
[Official Guidance]
Text of Executive Order on Strengthening Retirement Security in America "Within 180 days of the date of this order, the Secretary of Labor shall consider ... whether to issue a notice of proposed rulemaking, other guidance, or both, that would clarify when a group or association of employers or other appropriate business or organization could be an 'employer' within the meaning of section 3(5) of [ERISA] ... "Within 1 year of the date of this order, the Secretary of Labor shall, in consultation with the Secretary of the Treasury, complete a review of actions that could be taken through regulation or guidance, or both, to make retirement plan disclosures required under ERISA and the Internal Revenue Code of 1986 more understandable and useful for participants and beneficiaries, while also reducing the costs and burdens they impose on employers and other plan fiduciaries responsible for their production and distribution.... "Within 180 days of the date
of this order, the Secretary of the Treasury shall ... examine the life expectancy and distribution period tables in the regulations on required minimum distributions from retirement plans and determine whether they should be updated to reflect current mortality data and whether such updates should be made annually or on another periodic basis."
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[Guidance Overview]
President Trump Issues Executive Order on Retirement Security "In its recently issued final regulations with respect to association health plans, the DOL modified its historic position with respect to welfare plans, but did not address the treatment of pension plans.... [L]egislation addressing the same issue has been introduced in Congress.... An unresolved issue with respect to open MEPs is the extent to which participating employers would retain residual fiduciary liability under such plans."
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President Trump Orders Review of Open MEPs, RMD Rules "Industry stakeholders have been calling loudly for greater use of open MEPs as one of the primary ways to address the retirement plan coverage gap. While there has been less discussion of the RMD issue, it is also a timely matter for today's retirees. In fact, 68% of retirees are only taking the required minimum distributions (RMDs) from their retirement accounts[.]"
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Automatic Enrollment for Retirement Savings: An Increasingly Available Option with a Large Impact "46 percent of retirement plans use automatic enrollment, up from 20 percent in 2008, with the percentage varying greatly by company size: 65 percent of plans with 5,000 or more participants use auto enrollment, but only 30 percent of plans with 500 or fewer participants do so. The effect is dramatic: ... 92 percent of employees participated in auto enrollment plans, with only a small percentage opting out, while 57 percent enrolled in voluntary plans."
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Consolidation of Record Keepers for 401(k) Plans 'Worrisome' "While advisers don't view mergers among big-name providers as inherently bad news, they see a reduced pool of record keepers as a potential problem -- fewer firms able to service quirks and complexities among clients' 401(k) plans, and a greater ability to impose restrictions and push proprietary products to boost margins."
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No Quick Exit on 401(k) Class Action Alleging Imprudent Proprietary Fund Offerings "A district court recently denied a motion to dismiss a 401(k) proprietary fund class action, continuing an overwhelming trend of allowing these cases to survive pleading challenges. On the bright side, however, the Eighth Circuit recently affirmed a dismissal of such a case, and the first of these cases to be tried resulted in a defense victory, which is on appeal with the First Circuit."
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ERISA Advisory Council Teleconference Meeting Scheduled for September 25 "[T]he 193rd meeting of the Advisory Council on Employee Welfare and Pension Benefit Plans (also known as the ERISA Advisory Council) will be held as a teleconference on September 25, 2018 ... from 10:00 a.m. to approximately 4:00 p.m. The purpose of the open meeting is to discuss reports/recommendations for the Secretary of Labor on the issues of: [1] Evaluating the Department's Regulations and Guidance on ERISA Bonding Requirements and Exploring Reform Considerations; and [2] Lifetime Income Products as a Qualified Default Investment Alternative (QDIA) -- Focus on Decumulation and Rollovers."
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FAS87 ASC715 Discount Rates and Moody's Rates, Updated August 31, 2018 An unofficial monthly report as of August 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).
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How Is the Mortality Gap Affecting Social Security Progressivity? "While Americans are generally living longer, the gains have been unequal; those with higher socioeconomic status (SES) have substantially longer lifespans. This growing mortality gap works against Social Security's progressive benefit design, as higher-SES individuals end up getting their benefits for a longer period. As a result, studies find that the mortality gap has significantly reduced -- though not eliminated -- the overall progressivity of the Social Security program."
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Retirement Savings: This Is How Much You Need "If you are looking forward to an active retirement -- traveling, completing your bucket list, or in general doing all of the things you have been putting off while you have been busy working -- you will need to adjust your savings target higher. For example, that rule of thumb suggesting targeting 70% of pre-tax income should be closer to 90% for you. Or even higher.... Most are much more comfortable targeting a replacement ratio of 100% of their final annual earnings."
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[Opinion]
Should We Retire the Concept of Retirement? "We know a lot of people aren't saving enough to retire comfortably. Are folks setting themselves up for deep depression when they realize they'll have to work long past age 65? Or, think about this: If you're able, why should you stop working at all? Maybe we should stop encouraging retirement and instead help people find meaningful work for their senior years."
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[Opinion]
"The president whose administration oversaw the takedown that of a DOL rule would've put investor interests ahead of their brokers will need to do much more homework. As conceived, it's still questionable at best whether small business owners are on safe ground participating in multi-employer plans without taking on uncertain liability and an uncertain amount of control."
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[Opinion]
"[401(k) education] was never designed for young, non-numbers-loving people who are yet-to-be-motivated to learn about something they believe they can put off 20 or 30 years. And still today, virtually no learning experts or cognitive scientists have been involved in improving 401k ed. This has contributed to making 401k ed the largest failure ever of adult education.... All aspects of 401k ed should involve more discussing, less telling."
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Benefits in General |
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[Guidance Overview]
"The guidance eliminates requirements for certain disclosures that are no longer considered cost beneficial and requires new ones that the FASB considers pertinent. The guidance is effective for fiscal years ending after 15 December 2020 for public business entities and fiscal years ending after 15 December 2021 for all other entities. Early adoption is permitted."
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"The parental leave benefit would be a specified percentage of the primary insurance amount as determined for the parent based on earnings prior to application for the parental leave payment, as if the parent had become disabled on that date ... Those who elect to receive a parental leave benefit would have their normal retirement age and their earliest eligibility ages increased by a specified number of months.... [If] enacted, this Bill would have a negligible effect on the long-range OASDI actuarial balance[.]"
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Executive Compensation |
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[Guidance Overview]
IRS Issues Guidance on Section 162(m) Amendments (PDF) "The most significant impact of the IRS Notice is that payments under the great majority of 162(m) 'umbrella' plans will not qualify for grandfathered deductibility under the TCJA.... [If] the company reserves the right to exercise negative discretion to reduce payments (which is a standard feature of 162(m) 'umbrella' plans), then the IRS Notice treats payments under the program as non-obligatory. Unless a portion of the payments under such a plan are mandated as a floor amount (which is rarely the case), the plan will not qualify for grandfathered deductibility."
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Selected Discussions |
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Cost of Tombstone: Eligible for a Hardship Distribution? Participant has requested a hardship distribution for the cost of a tombstone monument for her husband, who died over a year ago. She supplied a copy of the death certificate and an estimate from monument company. Does this apply to burial or funeral expenses?
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Can Entire Class of Employees Permanently Out Out of Participation? Can a group of employees who voluntarily choose to irrevocably waive eligibility to participate in the company's 401(k) plan for the duration of their employment be considered an excluded class (assuming they pass coverage)? Is it acceptable for the company to even allow employees to irrevocably waive 401(k) benefits?
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Application of 25-Highest-Paid Participants Restriction: OK to Roll Over Lump Sum Payments? We have a frozen DB plan where the 25 highest paid restrictions come into play. We understand that participants who are restricted may elect to take a lump sum payment each year equal to the sum of 12 monthly life annuity payments. May these 12 monthly payments aggregated into a lump sum be rolled over to an IRA?
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Effects of New Stock Appreciation Rights Program on Existing ESOP Suppose an S corporation has an ESOP that owns 100% of the stock. The employer is considering implementing a "SAR" plan. Does this SAR plan have any impact on the ESOP? What little I know about a SAR plan is that under some circumstances, it MAY be possible that they would be considered a retirement plan; so would there be issues with 404, 415, etc.? Assuming that's not a problem, it seems it could be considered compensation that might indirectly affect the ESOP, depending upon whether it represents currently taxable W-2 income or not.
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Require Deferral Amounts to Be Dollar Amounts, Not Percentages? The financial advisor for a plan only allows participants to make deferrals in dollar amounts, not percentages, to make it easier for the CPA who does payroll and enters the contributions into the investment house's website. Is this an issue, or is restricting them to a dollar amount not ethical?
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Press Releases |
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River and Mercantile Solutions Adds Director to Growing NYC Office
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Most Popular Items in the Previous Issue |
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How Trump Is Strengthening American Retirement Security
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BenefitsLink.com, Inc.
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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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