Retirement Plans Newsletter

December 3, 2018

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Deconversion Account Manager
Nova 401(k) Associates
in AZ, TX, Telecommute

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Morgan, Lewis & Bockius LLP
in PA

Pension Administrator - Retirement Plans
Steidle Pension Solutions, LLC
in NJ

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[Guidance Overview]

Proposed IRS Regulations for Hardship Distributions Offer Welcome Guidance

"While the expansion of available sources for hardship distributions and the elimination of the requirement that a participant first take a plan loan are voluntary changes, the proposed regulations require that, for any hardship distribution made on or after January 1, 2020, a plan may not impose the six-month suspension of employee contributions as a condition of obtaining the distribution."
Pepper Hamilton LLP

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IRS Issues Proposed Regulations on Hardship Distributions

"IRS clearly recognizes the administrative burden that some plans will face to implement system changes. Therefore, the IRS provides plan sponsors some flexibility in implementing the elimination of hardship suspensions as follows: [1] Plans may be amended to eliminate hardship suspensions on or after January 1, 2019. [2] The plan amendment may provide that all suspensions be immediately lifted (including for participants whose hardship suspension began in the second half of 2018)."
Findley

USC Calls on Supreme Court to Undo ERISA Arbitration Ruling

"The University of Southern California petitioned the U.S. Supreme Court Thursday to establish a rule that would prevent retirement plan participants from filing class-action lawsuits with regard to ERISA breach-of-fiduciary-duty claims. The petition stems from a decision reached by the 9th U.S. Circuit Court of Appeals in July that said USC cannot compel participants in two retirement plans to accept arbitration rather than proceed with a trial to address ERISA complaints against university fiduciaries." [Munro v. Univ. of So. Cal., No. 17-55550 (9th Cir. July 24, 2018; cert pet. filed Nov. 29, 2018)]
Pensions & Investments

Edison Wants Denial of 401(k) Expert Fees to Stand

"Edison International is urging a federal appeals court to uphold a ruling denying a request to recover nearly $1 million for expert witnesses used during an 11-year litigation.... The case had two trials and multiple trips to appeals courts. Recently, a class of 20,000 Edison workers won $13.2 million in damages and the company agreed to pay $5.8 million in attorneys' fees." [Tibble v. Edison Int'l, No. 18-55974 (9th Cir. appellees' brief filed Nov. 29, 2018)]
Bloomberg BNA

Testing Participant Data in Employee Benefit Plans

"Testing how contributions are determined, remitted, and recorded is a critical part of the audit.... Key Audit Issues: [1] Definition of plan compensation.... [2] Remittance of participant contributions.... [3] Testing and reconciling contributions."
The CPA Journal

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Latinos' Retirement Insecurity in the United States

"The retirement plan participation rate for Latino workers (30.9%) is about 22 percentage points lower than participation rate of White workers (53%). When a Latino has access and is eligible to participate in a plan, they show slightly higher take-up rates when compared to others races and ethnicities. For working Latinos who are saving, their average savings in a retirement account is less than one-third of the average retirement savings of White workers. Overall, less than one percent of Latinos have retirement accounts equal to or greater than their annual income."
National Institute on Retirement Security [NIRS]

Pension Finance Update, November 2018

"After an awful October, pension finances stabilized in November, with both model plans we track [1] treading water during the month. Plan A eked out a fractional improvement in November and is now up 6% for the year, while the more conservative Plan B was unchanged last month and remains ahead by less than 1% through the first eleven months of 2018."
October Three Consulting

Common 401(k) Plan Participant Misconceptions

"[1] I only need to contribute up to the maximum company match ... [2] It is OK to take a participant loan ... [3] I should stop making 401k contributions when the stock market crashes ... [4] Actively trading my 401k account will help me maximize my account balance ... [5] Target date funds are not good investments ... [6] Money market funds are good investments ... [7] A million-dollar 401k balance is enough."
Lawton Retirement Plan Consultants

2019 Contribution Limits Are Up, and You Can Thank the IRS

"$500 may not seem like a lot. But it could lower your taxable income. (Every little bit helps, right?) Plus, if you already save the max amount, it's just $41.66 more per month to contribute the 'new' max in 2019.... Over the next 20 years, assuming a 6% annual return, you could have more than $18,000 more in the retirement nest egg you've built."
Principal Financial Group

FAS87 ASC715 Discount Rates and Moody's Rates, Updated November 30, 2018

An unofficial monthly report as of November 30, 2018, of the Moody's Daily Long-term Corporate Bond Yield Averages and Moody's Daily Treasury Yield Averages (used as benchmarks by some corporate pension plans).
David Rigby, via BenefitsLink Message Boards

Benefits in General

[Official Guidance]

Text of AICPA Statement on Auditing Standards: Forming an Opinion and Reporting on Financial Statements of Employee Benefit Plans Subject to ERISA (PDF)

Final Balloted Draft; 104 pages. "This Statement on Auditing Standards (SAS) addresses the auditor's responsibility to form an opinion and report on the audit of financial statements of employee benefit plans (EBPs) subject to [ERISA], hereinafter referred to as ERISA plans. It also addresses the form and content of the auditor's report issued as a result of an audit of ERISA plan financial statements.... When issued as final, this SAS is effective for audits of ERISA plan financial statements for periods ending on or after December 15, 2020. Early adoption is not permitted."
American Institute of Certified Public Accountants [AICPA]

Fifth Circuit Opinion Clarifies Legal Claims Distinction Under ERISA

"[T]he Fifth Circuit reiterated the standing rule that a claim for relief cannot be brought under the Equitable Relief Provision when an adequate remedy is afforded under Section 502(a)(1)(B) of ERISA (the 'Plan Terms and Benefits Provision').... The Fifth Circuit confirmed that ... problems with administrative claims procedures under ERISA, such as those alleged [here], are redressable under the Plan Terms and Benefits Provision and not the Equitable Relief Provision." [Manuel v. Turner Industries Group, LLC, No. 17-30835 (5th Cir. Oct. 1, 2018)
Haynes and Boone, LLP

Selected Discussions
on the BenefitsLink Message Boards

Asset Acquisition: Employees Leased for a Short Period

Company ABC is acquiring Company XYZ in an asset acquisition. XYZ currently sponsors a 401(k) plan. There will be a few weeks after the acquisition date during which the employees remain on XYZ's payroll. They'll be leased to ABC during that time. XYZ's 401(k) plan will be terminated. The employees will participate in ABC's plan. My inclination is that XYZ's plan should be terminated prior to the acquisition date. However, if XYZ continues the plan for the few weeks that the employees are leased to ABC, is there then a potential successor plan issue? My inclination is yes, the "leased" employees are really common law employees of ABC at acquisition.
BenefitsLink Message Boards

Two Matches -- One for Everybody, Other Only to Last-Day-of-Year Employees?

Would you be permitted to have two matches where the first match would go to everyone but the second one would only go to employees employed on the last day (meaning the active employees would get both matches). I'm trying to think of any discrimination issues.
BenefitsLink Message Boards

Which 'Plan Year' Is Used in Determining Key Employees for Top-Heavy Purposes?

To determine whether a plan is top-heavy for a "plan year" one uses account balances as of the "determination date," which is the last day of the plan year preceding the plan year for which the determination of top-heaviness, or not, is being made. So now we have the key and non-key participant balances for purposes of determining whether more than 60% belong to keys. But then we have to figure out whether those balances belong to keys or non-keys. IRC sec. 416(i)(1) says the keys are employees who meet certain requirements, such as percentage of ownership of the employer, "at any time during the plan year." Just looking at 416(i)(1), it would seem that the "plan year" being referred to for identifying keys is the current plan year, i.e. the year for which you are making the top-heavy determination. But Treas. Reg. 1.416-1, T-12 seems to say that the "plan year" being referred to by 416(i)(1) is the previous plan year. What gives?
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Press Releases

Most Popular Items in the Previous Issue

The Top-Hat Exemption After Sikora v. UPMC (PDF)
McDermott Will & Emery, via Benefits Law Journal

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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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