Retirement Plans Newsletter

September 6, 2018

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Webcasts, Conferences

Voluntary Fiduciary Correction Program Workshop
September 19, 2018 in NV
Employee Benefits Security Administration [EBSA], U.S. Department of Labor

Fridays With Benefits: Employer Options for Student Loan Benefits
October 5, 2018 WEBCAST
McDermott Will & Emery LLP

►See 115 Upcoming Webcasts and Conferences

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Discussions

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New Comments and Topics

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Opening a Constructive Dialogue on Open MEPs (PDF)

9 pages. "MEPs have been around a long time.... But not broadly promoted, historically.... 'Nexus' or 'commonality' is the key difference between open and closed MEPs.... Even associations may not have enough nexus today.... The 'one bad apple rule'.... Association Health Plans (AHPs) could be the model.... 'Sub-regulatory' guidance can be fast.... Major policy changes require formal process.... What this means for the U.S. retirement system."
Pentegra

[Advert.]

Available now! DATAIR's PPA DB & CB Plan Documents!

Sponsored by DATAIR Employee Benefit Systems, Inc.

IRS-approved Defined Benefit and Cash Balance plan documents, including SPDs, forms and notices. Experienced and dedicated support team that includes actuaries. Special limited-time pricing. For more information: www.datair.com or 888-328-2474


New Changes in 2018 for Form 1099-R Reporting

"[1] The instructions reflect that the President may declare special rules applicable to retirement plan distributions that are made to employees affected by certain natural disasters.... [2] For 2018, the IRS added a new box for the date of a payment of reportable death benefits.... [3] For 2018 for box 7, the IRS has added two new distribution codes, as follows: C -- Reportable death benefits under section 6050Y ... and M -- Qualified plan loan offset[.]"
Ice Miller LLP

Sixth Circuit Finds Personal Trust May Be Liable for Single-Employer DB Plan Termination Costs

"The panel held that ... any entity that leases property to a commonly controlled company is categorically a trade or business for ERISA purposes.... [The court wrote,] 'The commonsense conclusion is yes: when a business gives land to the business's sole owner, who then puts it in a trust -- run by his sons -- which then leases the land back to his business, that land never stopped being a part of the company's functional assets.'  " [PBGC v. Findlay Industries, No. 17-3520 (6th Cir. Sept. 4, 2018)]
PLANSPONSOR

Text of Fifth Circuit Opinion Affirming Dismissal of Whole Foods Stock Drop Case (PDF)

15 pages. "There is an inevitable tension between an employer-fiduciary's duty of prudence and the use of a fund primarily to invest in the employer's stock.... While a prudent fiduciary might have looked at purchasing trends, no fiduciary could have known with certainty that the Plan would be a net purchaser over the course of the Class Period. And even if a prudent fiduciary could have predicted that the Plan would be a net purchaser over time, that fact alone does not show that an earlier disclosure would be 'so clearly beneficial' that no prudent fiduciary would consider it more likely to harm than help." [Martone v. Robb, No. 17-50702 (5th Cir. Sept. 4, 2018)]
U.S. Court of Appeals for the Fifth Circuit

Retention Practices: Fiduciary Records Are (Almost) Forever

"It is not difficult to make the argument (and a plaintiff's attorney surely will) that reviewing and monitoring plan investment portfolios is an annual affair and a best practice. If you accept this premise and do the math, plan fiduciaries are exposed for a significantly long period."
Fiduciary Plan Governance, LLC

[Advert.]

SPARK Forum - November 4-6, 2018 -- The Breakers, Palm Beach, FL

Sponsored by SPARK

Join us at the retirement services industry's leading event for top marketing, sales, administration and record keeping professionals. Comprehensive agenda includes topics of interest to Record Keepers, 401(k) Plan Providers, Financial Advisors and Cyber Security Professionals.


State's Proposal Would Expand OregonSaves to Individuals

"[T]he Oregon State Treasury [on August 31] filed a notice of proposed rulemaking that would create an option by which individuals could participate in OregonSaves. Currently, individuals can only participate in OregonSaves through their employers."
American Society of Pension Professionals & Actuaries [ASPPA]

Fidelity Lowers Fees for Blended Target Date Funds

"Previously, the net expense fee for the active-passive commingled pools, available only to institutional investors, included a management fee and an underlying expense fee, which covered administrative costs incurred by the Fidelity and Geode Capital Management investment strategies used in the target-date approach. Geode is Fidelity's subadviser for passively managed equity strategies. The underlying expense fee has been eliminated and the net cost of the pools lowered[.]"
Pensions & Investments

Benefits in General

Agreements to Individually Arbitrate ERISA Claims After EPIC Systems Corp. v. Lewis (PDF)

"The U.S. Supreme Court's blessing of class and collective action waivers in mandatory arbitration agreements related to employment claims brings some long-awaited clarity to this topic and opens the door to waiver of class actions arising under [ERISA].... Before employers rush to implement mandatory arbitration programs, a variety of factors touching on the legal, social, and practical implications of such a decision merit careful consideration." [Epic Systems Corp. v. Lewis, No. 16-285 (U.S. May 21, 2018)]
Greensfelder

Executive Compensation
and Nonqualified Plans

[Guidance Overview]

IRS Provides Guidance on Grandfathered Arrangements Under New Code Section 162(m) Rules

"Companies should be aware that an increase in an executive's base pay may impact potentially grandfathered amounts, for example severance benefits that are based on the executive's base pay.... [A] deferral of the payment timing of a grandfathered amount is considered a material modification, unless any additional amount that will be paid at a later date as a result of the deferral is based on either a reasonable rate of interest or a predetermined actual investment."
Mazursky Constantine LLC

[Guidance Overview]

IRS Issues Partial Guidance on Repeal of Performance-Based Exception in Section 162(m)

"[Notice 2018‑68] offers a question that concludes that if a plan permits amendments at any time that eliminate future earning credits, only the account balance credited as of November 2, 2017 is grandfathered. Any later earnings on these amounts are not grandfathered, unless that right to earnings is expressly reserved. But this cannot be the correct conclusion."
Pillsbury Winthrop Shaw Pittman LLP

Boards Focus on Search for Meaningful Compensation Limits

"Total pay for non-employee directors continues to grow at a modest but steady rate, driven by increases to the annual cash retainer and the value of annual equity grants.... Annual compensation for directors continues to be a hot topic for shareholders and boards alike, precipitated by the ongoing attention to shareholder lawsuits that allege 'excessive' pay for board members. This mutual interest has prompted boards to look for ways to mitigate exposure to lawsuits involving director pay programs; the most visible result is the swift action taken in adopting annual compensation limits specific to directors."
Willis Towers Watson

Recognize and Motivate Key Employees Using a Nonqualified Incentive Bonus Plan (PDF)

12 pages. "What can employers do to help ensure that top talent remains committed to the organization and not to their competition? ... [C]onsider enhancing the benefits package with a Nonqualified Incentive Bonus Plan. This type of plan is designed to: [1] Encourage the best employees to join an organization as the organization grows. [2] Keep key employees satisfied and motivated for the long term. [3] Reward top talent for reaching goals."
Fulcrum Partners LLC

Selected Discussions
on the BenefitsLink Message Boards

SAR Program in an ESOP: How Much is Too Much?

Our 100% ESOP S Corp has a Stock Appreciation Rights program for senior leadership and board members that creates a huge amount of synthetic equity. In fact synthetic equity is now almost 30% of the outstanding shares of stock. At the end of this year the program will pay out almost $4 million to these select shareholders. This company, on average, makes only $5 million in net income annually. It appears they're staying just within 409(p) testing, but they just merged the 401k with the ESOP to help with this ratio testing. I'm afraid they're going to get even more bold in coming years in creating more synthetic equity. Employees now need to contribute to 401k to get matching ESOP shares. I'm concerned that management and board may be acting unethically and hurting the value of average employees retirement benefits. I also see some self-dealing going on with leases and sales of a building owned by a board member to the company. Same three board members and CEO appear to be the main beneficiary of all this. Any recommendations about what to do next would be appreciated.
BenefitsLink Message Boards

New Money Purchase Plan: Must Fund at Least a Bit Before First Year-End?

We are setting up a money purchase plan for 2018 that will not have actual allocations made to the plan prior to 12/31/2018. The actuary is suggesting that a nominal amount be contributed to the plan prior to 12/31/2018 to establish the trust. Can someone point me to the regulation or guidance on why this would need to be done? Does it apply to all plans or is it special to plans subject to minimum funding requirements?
BenefitsLink Message Boards

What Does Line 14 on a Partner's Schedule K-1 Refer To?

What does line 14 on a Schedule K-1 refer to? Do I use that number as 401(k) plan compensation, or is there a better way to calculate self-employment compensation for that purpose?
BenefitsLink Message Boards

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Press Releases

DATAIR Approved for 2018 EFAST2 Filings
DATAIR Employee Benefit Systems, Inc.

Most Popular Items in the Previous Issue

Text of PBGC Comprehensive Premium Filing Instructions (PDF)
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Great-West Financial and Empower Retirement

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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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