Retirement Plans Newsletter

November 19, 2018

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Associate Consultant
Segal Group
in CT

Associate Consultant / Retirement Plan Administration
Spectrum Pension Consultants, Inc.
in CA, HI, WA, Telecommute

Plan Administrator
Benefit Associates, Inc.
in NY

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Webcasts, Conferences

QDROs: Navigating the Complexities of QDROs with Ease
March 6, 2019 WEBCAST
ASPPA [American Society of Pension Professionals & Actuaries]

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[Guidance Overview]

IRS Issues Much Anticipated Hardship Guidance

"The proposed regulations generally address: [1] the required elimination of the post-withdrawal suspension of elective deferrals, [2] the optional elimination of the requirement for participants to take plan loans first, [3] the ability to include additional plan account sources in hardship distributions, [4] changes in the ability to qualify for a hardship distribution in the case of casualty losses and losses associated with federal disaster areas, and [5] changes in the administrative process required to document that a participant has demonstrated the requisite financial need."
Groom Law Group

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[Guidance Overview]

IRS Proposes Regs on Hardship Withdrawals

"Although 403(b) plans generally follow the hardship rules applicable to 401(k) plans, the proposed regulations do not modify the 403(b) rules to permit withdrawal of earnings on 403(b) elective deferrals or QNECs/QMACs that are in custodial accounts.... 403(b) plan sponsors will need to exercise care when amending their plans to comply with BBA 2018 and the proposed regulations."
Morgan Lewis

Minimum Distribution Problems: Why Most Retirement Plans Have Them and What Can be Done About It

"[P]lan sponsors should assume that any employee who has not taken an RMD from their plan (403(b) or otherwise) is out of compliance. Plan sponsors should then work with their recordkeeper to contact those individuals and remind them of the associated penalty for satisfying the RMD. If a plan sponsor is unable to make contact with the individuals, the retirement plan should be amended to state that RMDs will be automatically distributed to employees who do not respond within a certain timeframe."
Cammack Retirement Group

The Effect of Employer Matching and Defaults on Workers' TSP Savings Behavior

"[22 presentation slides provide] information about how CBO estimates the effects of employer matching and default deferral rates on federal employees' contribution rates to the Thrift Savings Plan and on employers' costs."
Congressional Budget Office [CBO]

Voya Secures Dismissal of Fiduciary Breach Claim Involving Alleged Manipulation of Credited Interest Rates in Stable Value Funds

"Allegations that a legal reserve insurance company breached [its] duties under ERISA by manipulating credited interest rates under stable value funds failed to state a plausible claim for relief, according to a federal trial court in Connecticut. The complaint did not charge that the company kept the profits from the alleged manipulation or improperly retained any plan assets." [Dezelan v. Voya Retirement Ins. and Annuity Co., No. 16-1251 (D. Conn. Aug. 17, 2018)]
Wolters Kluwer; free registration required

Text of Amicus Brief to Second Circuit on Availability of Damages Under ERISA Section 502(a)(3)

"Plaintiffs' argument on appeal is premised on a fundamental misunderstanding: it assumes that a private damages remedy must be available in every ERISA case. The Supreme Court and this Court have repeatedly rejected precisely this type of argument, recognizing that ERISA's 'carefully crafted and detailed' enforcement provisions limit the relief available in some cases and for certain types of violations.... This Court should reject Plaintiffs' effort to broadly extend Section 502(a)(3) far beyond its text to afford relief that Congress did not make available." [Laurent v. PricewaterhouseCoopers, LLC, No. 06-2280 (2d Cir., amicus brief filed Nov. 14, 2018)]
American Benefits Council

Investment Selection and Monitoring Process: A Primer

"By evaluating measures such as alpha (return vs. a benchmark), beta (how closely a fund moves with its benchmark), upside & downside capture ratios, tracking error and other metrics, one can get a reasonable grasp on what to expect from a fund.... [M]any fund managers that have a focus on more stable businesses with reasonable valuations, be they growth or value, have not kept up with more speculative managers in the near term. However, as this trend shifts, it is likely that the stocks of quality companies will outperform those of more unstable companies."
Cammack Retirement Group

Equity Protection -- Is Now the Right Time?

"[To] contractually protect a portfolio of US stocks against market falls of up to 25% over a three year horizon is about 3.6% of the investment paid up front, or 1.2% p.a. An alternative strategy could be to pay zero premium for the same protection and instead agree to sacrifice returns above 26% over the same three year horizon. Both of these strategies may be especially attractive to asset owners looking to lock in current equity market levels ... In particular, frozen pension plans may not need the market to rise 26% or more in order to meet their funding objectives."
River and Mercantile Solutions

Should Corporate Pensions Invest in Risky Assets?

"[The authors] show that the investment risk sharing under typical DB plans is inefficient, and may cause DB plans to take more risk than what employees will choose for their DC plans. Further, by switching from DB plans to DC plans, firms may substantially reduce their overall pension funding costs without reducing employees' utility."
Wei Li, Tong Yao, and Jie Ying, Via SSRN

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How to Contribute to Multiple 401(k)s

"If you are one of the over 7 million who have more than one job, you could have the opportunity to make salary deferral contributions to more than one 401(k) plan. When doing so, you must take care not to exceed the statutory limit of $18,500 for 2018/ $19,000 for 2019, plus any catch-up contributions for which you are eligible. This is a 'per person' limit.... If you participate in a governmental 457(b) plan, you may defer up to 100% of your compensation, up to $18,500 for 2018/ $19,000 for 2019, plus catch-up contributions of $6,000 if you are eligible. This is in addition to (separate from) any salary deferral contributions that you make to a 401(k) plan."
Denise Appleby, via Forbes

How Much Cash Should Retirees Have on Hand?

"Retirees who now have access to their retirement accounts without penalty may consider having extra cash on hand ... to help sustain themselves should there be an extended down market. Retirees can draw from this 'cash cushion' account instead of having to sell investments at an inopportune time, locking in a loss."
T. Rowe Price

Selected Discussions
on the BenefitsLink Message Boards

Pension Valuation: Plan Says One Thing, Actuarial Firm Says Another

Divorcing individual participates in a defined benefit plan (government-sponsored). A pension valuation was prepared by an actuarial firm, which used "customary" factors in performing the calculation. The PV of the pension is $2.1 million, but the pension plan calculates the PV of the pension at $1.3 million. Clearly, a large discrepancy. Can an argument be made that the lower value should be used?
BenefitsLink Message Boards

Trustee Refusing to Approve Distribution Due to Participant's Dispute with Employer

The financial institution requires the Plan Trustee to sign off on any distribution. We have a terminated participant who has requested a distribution of his account (which includes 401(k) deferrals) and it appears that the Trustee is refusing to authorize it. I'm not sure if there's a reason behind it, but what are the ramifications if the Trustee refuses to ultimately approve it?
BenefitsLink Message Boards

Rolling 3-Year Vesting Requirement OK for a Church Plan?

In a typical qualified plan, an employer could not have a 3 year vesting period apply to each year's contribution, which could have an employer with 20 YOS who would not be vested in that year's contribution until she had 23 YOS. But if this were a church plan or other non-qualified plan, that type of vesting is acceptable, correct?
BenefitsLink Message Boards

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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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