Retirement Plans Newsletter

November 26, 2018

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Webcasts, Conferences

Student Loan Debt - How Much is There and How Can Employers Address it?
RECORDED
EBRI [Employee Benefit Research Institute]

Retirement Income - Insights From the 2018 Retirement Confidence Survey
RECORDED
EBRI [Employee Benefit Research Institute]

11th Annual ABCs of Pension Plans
January 24, 2019 in CA
Western Pension & Benefits Council - Orange County Chapter

Comparative Executive Compensation Pay Practices
March 13, 2019 WEBCAST
Lorman Education Services

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[Guidance Overview]

Proposed Amendments to the Hardship Distribution Regs (PDF)

"[This article includes] a table reflecting the various effective/applicability dates.... The Proposed Regulations make it automatic that a hardship distribution for those in FEMA-designated areas is permissible when there is a major federally declared disaster ... [T]he Proposed Regulations allow a plan to retroactively apply the new disaster event [rules] for 2018.... Employers will need to make operational decisions to implement changes under the Proposed Regulations prior to adopting a plan amendment.... A Hardship Distribution Operational Checklist will be helpful in this regard."
ASC

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Editor's Pick Year-End Compliance Reminders for Defined Contribution Plans Subject to ERISA (PDF)

"Every year, plan sponsors must make sure their plans meet certain compliance requirements ... This publication identifies the materials you need to review and will help you prepare for year-end."
Prudential

Small Businesses Face Growing Retirement Crisis

"90 percent of millennials are most likely to say a retirement savings option is important for staying with a current employer, and 91 percent identify it as an important factor when considering a new employer. However, only 23 percent of small businesses strongly agree that having a retirement benefit would help them attract and retain talented workers.... 45 percent admit they have not spent any time researching retirement programs."
Millennium Trust Company

Struggling Multiemployer Plans See Help Ahead at Expense of Healthy Funds

"The draft proposal ... offers several measures to help struggling plans protect retiree benefits, including increasing the PBGC minimum guarantee level ... It even undoes benefit cuts already authorized by the Treasury Department under [MPRA], but plans within five years of insolvency would cut to the minimum benefit level and then be terminated.... [H]ealthy plans would also be squeezed by a requirement to use a more conservative discount rate when measuring liabilities."
Pensions & Investments

The Single Biggest Problem for Multiemployer Pension Plans

"[I]ncreasing contributions, decreasing benefits or providing a federally backed loan all call the viability of the broader defined benefit system into question. If confidence in the system is eroded, the potential economic drags ... may become even more severe as participation decreases and employers see profitability come under pressure."
J.P. Morgan Asset Management

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New Jersey Holds Second Public Hearing on Pre-Proposal for Rule Implementing a Uniform Fiduciary Standard

"Many of the same arguments were raised (e.g. preemption by ERISA and NSMIA, deference to the SEC's Regulation Best Interest, and customer confusion caused by different standards of care).... [N]ew arguments ... [included that] the proposed Rule could create, as the DOL's fiduciary rule purportedly had, the inadvertent consequence of limiting or eliminating access to commission-based models for lower to mid-tier customers.... Public comment on the Pre-Proposal remains open until December 14, 2018."
Reed Smith

Unions Sue Puerto Rico Government Over Worker Retirement Accounts

"The action was filed in Puerto Rico's Title III bankruptcy case under the Puerto Rico Oversight, Management, and Economic Stability Act (Promesa). It seeks declaratory and injunctive relief for the workers, 'based on the commonwealth's admission that it failed to implement the provisions of Puerto Rico Law 106 of 2017, a law that was supposed to create and protect individual defined-contribution retirement accounts for thousands of union-represented workers'[.]"
Caribbean Business

Pension Reform and Return to Work Policies

"Existing research has shown that retirees are sensitive to the Social Security earnings test, which restricts the amount of earnings some beneficiaries can receive.... [This study uses] return-to-work rules limiting the number of hours of employment in a state's public pension plan and administrative data on employment and retirement to determine the rules' effects on retirement decisions and post-retirement labor supply.... [I]ncreases in the maximum number of hours of post-retirement employment lead to no change in retirement benefit collection and to increases in part-time work among retirees. As such, these policies appear to be binding on the labor supply decisions of some employees."
National Bureau of Economic Research [NBER]; purchase required for full document

[Opinion]

The 401(k) Defined Contribution Regime: A Pension System That Needs Fixing

"The private pension system in the US is in transition from defined benefit plans to defined contribution plans. On balance, this may be a step in the wrong direction.... The weakness that has generated the most attention is that employees have not been saving enough in their 401Ks to assure a comfortable retirement.... The post-retirement weaknesses in 401K-based plans have not generated nearly as much attention. Perhaps the most critical is the problem of managing mortality risk."
Jack Guttentag, in Forbes

Benefits in General

Meeting 1-on-1 to Discuss Benefits

Video blog. "One-on-one benefits counseling is easy to administer. Employees simply sign up for a time slot to discuss offerings with HR, and perhaps even with financial professionals. The employee and these experts go over specific issues about medical care, retirement, and other needs that can be met with voluntary benefits. In these individual sessions, employees are also educated on important topics like saving for retirement, investment risks and rewards, and automatic investing."
hr360

Executive Compensation
and Nonqualified Plans

New York's High Court Strikes Down 'Soft Cap' on Executive Compensation for Health Care Providers Receiving State Funds, Yet Upholds Limitations

"Last month, the New York State Court of Appeals invalidated a state Department of Health (DOH) regulation that restricted certain health care providers contracting with the state from paying executives more than $199,000 annually, regardless of whether the funds came from the state or not. However, the Court upheld two other DOH regulations; one that limits providers from using public tax-payer money directly to pay executives in excess of $199,000 annually, and another that limits the amount of public funds used for administrative costs." [LeadingAge New York, Inc. v. Shah, No. 93 (N.Y. Oct. 18, 2018)]
Epstein Becker Green

Selected Discussions
on the BenefitsLink Message Boards

Termination of Legacy Cash Balance Plan Followed by Prompt Adoption of New One -- OK?

A law firm client of mine, which has maintained a cash balance plan for over 10 years, raised the possibility of terminating the plan and then establishing a new one. They were told by another law firm that "if the plan has been in effect for 10 years this strategy is allowed by the IRS." There are reasons my client would consider this... including getting out from under a complicated interest crediting methodology that the investment advisor can't seem to track. There are no surplus assets that would revert to the employer. I told them that while you can terminate a plan and establish another, they would need to design the new plan with enough distinctions (e.g., different benefit structure, different eligibility, etc.) that the IRS would not consider this a subterfuge for making premature distributions. I tend to be "old school" but am I being overly cautious? They would file a Form 5310 for the termination.
BenefitsLink Message Boards

SMM Needed (or Desirable) for New Hardship Rules?

What are people doing to notify participants about the new hardship distribution rules, since the document providers have yet to issue their stuff?
BenefitsLink Message Boards

IRS FIRE Website Going Offline for a Month

The IRS FIRE site will be down for scheduled maintenance starting December 5, 2018 at 6 PM Eastern Standard Time through January 7, 2019, but won't be available until January 10, 2019. so I guess if you have an 8955-SSA due by 12/31 you need to check special exemption and say "because you shut the website down!"? (This seems to be an annual shutdown.)
BenefitsLink Message Boards

Church Plan Wants 3-Year Rolling Vesting Coupled with Delayed Contribution Until Vesting Date

We're looking at a larger church plan (300+ employees) that elects not to be subject to ERISA. There are several HCEs. They're thinking of making some changes in 2019. For individuals hired 1/1/19 or later, they want to have a 3-year cliff vesting schedule apply annually to that year's contribution. So that if you are eligible to receive an ER contribution for 2019 plan year and have 1 YOS in 2019, you do not vest in that contribution until 2021. If eligible for contribution in 2020, you do not vest until 2022, and so on. Because this is a non-ERISA plan, that seems legal. But it might be messy for the recordkeeper to track money in this manner, so the employer was not going to deposit the money into the plan until the employees actually vest in it. The employer would keep those contributions in a non-plan account. Do these changes sound permissible?
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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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