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Retirement Plans Newsletter November 13, 2018 |
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Jobs |
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Webcasts, Conferences Transfers and Rollovers
Legacy of the DOL Fiduciary Rule
IRA and HSA Workshops
Year End Legislative and Regulatory Benefits Update
Ensure Your 403(b) Plan is in Compliance
Post-2018 Midterm Election: DB Legislative Outlook
Ethics: Doing the Right Thing in Difficult Situations [2018.02]
Plan Sponsor Roundtable - What Keeps You Up at Night?
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Discussions |
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This Newsletter:
BenefitsLink Health & Welfare Plans Newsletter:
Message Boards Digest:
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Pension Administrator|
[Official Guidance]
Text of DOL Advisory Opinion 2018-01: Retirement Clearinghouse Auto-Portability Program (PDF) "[The] portability services related to your request involve: [1] automatic rollovers of mandatory distributions ... and account balances from terminated defined contribution plans into default IRAs ... and [2] the subsequent automatic roll-in of funds in such default IRAs to an individual account plan maintained by a new employer when the IRA owner changes jobs.... [It] is the view of the Department that the plan sponsors of the former and new plans would not be acting as a fiduciary with respect to the decision to transfer the individual's default IRA into the new employer's plan.... Absent affirmative consent of the IRA owner/participant, RCH acts as a fiduciary... in deciding to transfer the individual's RCH default IRA to the individual's new employer plan.... Similarly, absent affirmative consent of the IRA owner/participant, in situations where a default IRA maintained by
a third party record keeper is transferred to an RCH default IRA acting as a conduit to facilitate the transfer to a new employer's plan, RCH acts as a fiduciary ... in directing the transfer of the individual's default IRA to the RCH default IRA and subsequently to the new employer's plan."
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[Advert.]
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With On-Site Education from the International Foundation, your staff can receive high-quality education in a customized, one-of-a-kind learning experience. Avoid the cost and inconvenience of travel, and let us bring the education to you! Learn More. |
![Sponsored by International Foundation of Employee Benefit Plans [IFEBP]](https://benefitslink.com/bnrs/2017/IFEBP_OnsiteEduc_top.jpg "Sponsored by International Foundation of Employee Benefit Plans [IFEBP]")
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[Official Guidance]
Treasury Department Approves MPRA Benefit Reductions for Two Multiemployer Plans (PDF) In letters dated November 8, 2018, the Treasury Department approved benefit reductions for two multiemployer plans: Plasterers Local #82 Pension Plan, and Plasterers & Cement Masons Local 94 Pension Fund.
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[Guidance Overview]
"The DOL is looking for insight on where you draw the line between a service provider purely serving its own narrow commercial interest (such as in the sale of DCIO products) and one which involves the service provider bearing some measure of the employer's employment based legal obligations. According to the DOL, failing to draw this line correctly 'would effectively read the definition's employment-based limitation' out of the ERISA."
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[Guidance Overview]
DOL Guidance on Auto Portability "Concerning the ERISA implications of a plan sponsor for electing to participate in the RCH Program, the DOL indicated that choosing to have a plan participant in the RCH Program is a fiduciary decision. The decision must, therefore, be prudent and solely in the interest of plan participants and beneficiaries. The relevant plan fiduciaries must also determine that the RCH Program is a necessary service, a reasonable arrangement, and that the compensation paid to RCH is reasonable.... The DOL further concluded that neither the plan sponsor of the former employer nor the new employer would be acting as a fiduciary in connection with a decision to transfer the individual's default IRA into the new employer's plan."
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[Guidance Overview]
IRS Proposes New Hardship Distribution Regs "The proposed regulations make the changes required by TCJA and the Budget Act, but also make additional revisions ... [including]: [1] New standard for determining whether hardship exists.... [2] Deferral suspension prohibited following hardship distribution.... [3] Expanded sources for hardship distributions.... [4] Casualty loss safe harbor restored to disregard changes made by TCJA.... [5] New safe harbor for natural disasters.... [6] Relief for victims of hurricanes Florence and Michael."
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[Advert.]
J.P. Morgan Retirement Link: Turning retirement resolutions into reality
Our 2018 survey finds that although DC plan participants are making progress and gaining confidence overall, more work is needed to: understand the state of the participant, motivate participants to save, and streamline investment decision-making. |
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[Guidance Overview]
New Hardship Distribution Guidance Brings Several Surprises "Depending on when a plan sponsor eliminates the 401(k) suspension period, there could be related consequences for administration of the nonqualified deferred compensation plan.... [E]arnings on pre-tax deferrals made to a 403(b) plan continue to be ineligible for hardship distributions. However, QNECs and QMACs would be eligible for hardship distributions in a section 403(b) plan that is not in a custodial account."
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The New Hardship Regs Are Here! "Profit-sharing/stock bonus contributions are now eligible for hardship withdrawal. Hardship distributions for medical, educational and funeral expenses may include those incurred by the primary beneficiary under the plan. Hardship distributions for casualty losses due to property damage may be taken and it does not matter whether the damage was due to a federally declared disaster."
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DOL Clears Path for Automatic 401(k) Transfers "In a news release, the [DOL] cited the possibility that such automatic transfers would 'eliminate duplicative fees for small retirement savings accounts and reduce leakage of retirement savings from the tax-deferred retirement savings system.' It is unclear whether employers and companies that serve as 401(k) record-keepers will adopt the new service on a widespread basis... [S]ome may balk at the prospect of sharing information about 401(k) savers with the company facilitating the transfers."
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Retirement Plans for the Millennial Workforce (PDF) "Given the importance of DC plans to Millennials, what characteristics will improve participation and utilization, and set the plan apart? ... [1] An attractive web portal that is easy to use with intuitive navigation features.... [2] Automatic enrollment with an escalating contribution feature.... [3] Managed accounts and target year/date funds.... [4] Socially responsible investments.... [5] Push communications.... [6] Roth savings option.... [7] Make it a 'smart' plan."
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Plan Sponsors Shore Up Their Portfolios Amid Trade Tensions "Defined benefit plan sponsors believe geopolitical tensions will be the biggest threat to their portfolios in 2019 ... Other concerns for defined benefit plan sponsors include political uncertainty, which 30 percent said would be the largest threat to their portfolio next year, and the behavior of the U.S. Federal Reserve, which 21 percent cited as their biggest worry."
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Do Mandated Reporting Formats Unintentionally Raise Fiduciary Liability and Mislead Investors? "More than a decade ago, the SEC began requiring every mutual fund to prominently disclose investment returns using (then) AIMR (now CFA Institute)-endorsed formats. Fiduciaries -- and the investing public -- regularly use this information by obtaining it directly from a fund's prospectus or indirectly through various mutual fund rating organizations. However, a simple exercise, using easy-to-understand mathematics, reveals a potentially fatal flaw in these reporting standards. How do you, as a fiduciary, know when you've fallen victim to this defect? Better still, what represents a better way you can perform investment due diligence to avoid this terrible trap?"
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Improving Retirement Savings for America's Public Educators (PDF) "[T]he number one factor driving participation and savings rates in school districts is participant choice.... [1] There is 25% greater participation in plans with 15 or more investment providers compared to plans with only one provider. [2] On average, account balances are 73% higher among plans with 15 or more providers compared to single provider arrangements. [3] There is a 203% increase in average contribution rates among plans providing access to 15 or more providers compared to plans with only one provider. [4] Single provider arrangements have the lowest participation rate; 8% below the national average."
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"This paper proposes a paradigm shift by creating a new, world class shared risk pension plan and transitioning through prepackaged Chapter 9 Plans of Debt Adjustment for all persons employed by, or retired from, local governments and school districts. Direct state employees and retirees could transition only voluntarily through incentives/disincentives.... In most states, a constitutional amendment to facilitate the transitions would be required."
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[Opinion]
Better to Split Up than Prop Up Troubled Multiemployer Pension Plans "One idea being pushed aggressively by the sponsor community is actually no solution at all, and should be taken off the table as soon as possible: namely, propping up insolvent multiemployer plans with taxpayer-financed loans. To put it bluntly, the loan approach is unfair, irresponsible, and it wouldn't work. Such loans would essentially be a continuation of ill-considered policies that to date have failed, and would only cause the costs of pension underfunding to soar still further."
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Benefits in General |
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Reminders of What's New for Plan Sponsors in 2019 "All plans: New claims procedures regulations for disability benefits claims, after multiple delays, have finally been set.... Retirement Plans: Plan participants no longer need to take the maximum available loan under the plan before requesting a hardship withdrawal for plan years beginning in 2018 ... BBA changes to hardship withdrawals are likely to require a plan amendment to be adopted on or before the end of the 2019 plan year, and a summary of material modifications to be issued soon thereafter.... Health Plans: The IRS ... [set] the 2019 affordability threshold for the ACA employer mandate at 9.86 percent."
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Executive Compensation |
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"In 2017, 65% of Study Group companies reported maintaining severance arrangements that provide cash severance benefits for [named executive officers (NEOs)], down slightly from 69% in 2014.... In 2017, 76% of companies determine the amount of cash severance based on a fixed multiple of 'pay,' down slightly from 83% in 2014.... For performance shares, 95% of companies determine the number of shares that vest based on actual performance, a significant increase from 2014 (81%)."
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Selected Discussions |
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Unallocated Shares in an ESOP: What Happens When Company Is Sold? The company is being sold with lots of unallocated shares in the ESOP. What happens to them? Are they divided up among the participants? Or do the new owners decide?
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Press Releases |
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401(k) Prosperity is Certified for Fiduciary Excellence
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Most Popular Items in the Previous Issue |
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Tracking Down an Unpaid Pension or 401(k) Can Be Tough
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Key Considerations for ERISA Investors in Private Investment Funds
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Connect
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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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