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Retirement Plans Newsletter September 24, 2018 |
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Jobs
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Webcasts, Conferences Full Day Seminar with Derrin Watson
Tax Exempt Organizations: Governance, Design and Taxation of Executive Compensation
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Discussions |
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This Newsletter:
BenefitsLink Health & Welfare Plans Newsletter:
Message Boards Digest:
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Client Service Center Associate|
[Guidance Overview]
IRS Issues Revised Model Rollover Notices "If you use the IRS model notices for eligible rollover distributions, you should update yours to the new standards. If you use an alternative notice (which is also permitted), you should modify it to address the issues in the new models.... For the practitioner community, Notice 2018‑74 serves as a helpful checklist of recent rollover changes."
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Important Facts About 401(k) Plans (PDF) 16 pages."401(k) plans are the largest share of DC plan assets, with more than two-thirds of DC plan assets held in 401(k) plans.... More than one-third of 401(k) plan participants are younger than 40.... Most 401(k) plan participants receive plan contributions from their employers.... Equities figure prominently in 401(k) plans, and younger 401(k) plan participants are highly engaged in equity investing.... Fewer than one in five 401(k) plan participants have loans outstanding."
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Math Without Meaning to Participants: A Hidden Flaw in 401(k) Education "If employees don't understand the words in 401k meetings or materials, not much learning will ensure.... Math illiteracy might be a greater learning obstacle in 401k ed than jargon.... If you want to get serious, do a number audit. Start with a printout of the presentation and copies of all the basic 401k handouts and electronic media. As you go through these materials, draw a circle around each number you find. Ask the ed provider how are they certain the math-challenged employees understand it."
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"After determining the governing state law and the date of the POA, the plan administrator needs to determine if the state law's requirement for a valid POA have been met. These requirements may include, for example, notarization or witnesses.... Even where notarization is not required, a notarization of the POA should be reviewed to determine its validity, as the POA was apparently intended to be notarized. Once the POA's form has been determined to be valid, the more difficult task comes with determining if the agent's act is authorized by the POA."
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Exposure Draft: Valuing Benefits Payable as a Lump Sum (PDF) 46 pages. Draft; Sept. 2018. "When a lump sum is offered in a traditional pension plan, the amount of the lump sum often varies based on market interest rates.... [The IRS] requires the use of an 'annuity substitution' approach for the purpose of valuing certain benefits expected to be paid in lump sum form. This practice note discusses the valuation of these benefits for financial accounting purposes."
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Advantages to a Market Return Cash Balance Plan Design "[V]irtually every new Cash Balance Plan is incorporating the Market Return design right from the start. Reasons ... include: [1] Contribution stability ... [2] Reduced exposure to unfunded benefits ... [3] Increased stability as plan matures ... [4] Investment policy not driven by desire to 'hit the bogie' ... [5] Ability for participants to capture 'upside' potential ... [6] Similarity to 401(k) plan experience."
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"[U]nder the assumption that there are no opt-outs under [the Automatic Retirement Plan Act of 2017 (ARPA] the [retirement savings shortfall (RSS)] would be reduced by $645 billion or 15.6 percent of the current $4.13 trillion retirement deficit. If auto-portability were added to the system simultaneously with ARPA, the RSS would be reduced by an additional $287 billion for a total reduction of $932 billion or 22.6 percent of the current deficit."
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PBGC Finalizes Facilitated Merger Rules for Multiemployer Plans (PDF) "PBGC's final regulation omits proposed changes to plan solvency provisions ... Commenters were concerned that the revised tests would 'make mergers and transfers more difficult or prohibit them, would substantially expand burden for plan sponsors, and would restrict options for plans.' ... In addition to updates and reorganization of the existing regulations, the final regulation outlines the process to be followed for multiemployer plan mergers[.]"
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PBGC Director's Confirmation Hearing Set for September 27 "Mr. Hartogensis is an investor and technology sector leader in software development, with experience managing financial equities, bonds and private placements. He currently serves as director of a family trust. He co-founded Auric Technology LLC, a company that develops customer relationship management software. He is also Senate Majority Leader Mitch McConnell, R-Ky., and Secretary of Transportation Elaine Chao's brother-in-law."
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CBO Cost Estimate for H.R. 6757, Family Savings Act of 2018 "H.R. 6757, the Family Savings Act of 2018 ... include[s] changes to the rules governing multiple and pooled employer retirement plans, the creation of new tax-preferred 'Universal Savings Accounts,' to which an individual would be able to contribute up to $2,500 each year, and an exemption from required minimum distribution rules for individuals with account balances below certain amounts. The staff of the Joint Committee on Taxation (JCT) estimates that enacting the bill would reduce revenues by $21.0 billion over the 2019‑2028 period."
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Benefits in General |
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[Official Guidance]
"This notice provides that the suspension of the exclusion from income provided by section 132(a)(6) under section 132(g)(2) does not apply to amounts received directly or indirectly by an individual in 2018 from an employer for expenses incurred in connection with a move occurring prior to January 1, 2018, that would have been deductible as moving expenses under section 217 of the Code if they had been paid directly by the individual prior to January 1, 2018[.]"
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Keys to Modernizing Employee Benefits "[1] Offer a purpose-driven portfolio of benefits.... [2] Optimize the financing of benefits programs.... [3] Use technology to engage employees and help them make informed choices.... [4] Gain efficiencies through operating model and administration technologies.... [5] Use data-driven insights for informed decision making."
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Executive Compensation |
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Key Tax Planning Strategies for Executives Receiving Stock-Based Compensation "For those technology executives who derive a significant amount of income from stock-based compensation, a variety of planning opportunities are available -- such as estate planning, change in residency, and charitable giving. Regardless of which avenues are pursued, early planning is instrumental in helping executives get the most value from their options."
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Selected Discussions |
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Rollover to Account in Foreign Country I have a participant in the plan who has moved back to Italy -- he was a resident alien while he was in the USA. He wants to roll his money over to an IRA (or the equivalent) in Italy, or take a lump sum distribution. How would the tax withholding work if he took a cash distribution? He has been gone for a couple of years now.
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Invoice to Plan Was Paid by Different Plan Client has 3 plans: a DC plan, DB plan and a TDA plan. They paid legal invoices related to all three plans out of one of the plans' unallocated account. All plans cover same employees. Is this a prohibited transaction?
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Life Insurance as 401(k) Asset: Effect on RMDs We have a client who has life insurance within the 401(k) plan. The owner will be required to take an RMD this year. When calculating his RMD, do we include the value of the life insurance?
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409A Issue: Accelerating Payments Under Short Term Deferral Exception We have a payment that is supposed to be paid 10 days after vesting, so it's subject to the short term deferral exception. We want to accelerate the vesting, which would mean we are accelerating the payment as well, but it still would be subject to the short term deferral exception. I recall some guidance saying this still violates the anti-acceleration rules even though at no time was it technically was deferred compensation (since it was under the exception in both cases). I can't find it now. Am I remembering correctly?
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Retirement in America: Out of Reach for Working Americans? (PDF)
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A Closer Look at Health Savings Accounts: An Overlooked Retirement Savings Vehicle
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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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