Retirement Plans Newsletter

December 5, 2018

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DB / DC Administrator
Southern California TPA Firm
in CA, Telecommute

Retirement Plan Sales Consultant
Commonwealth Financial Network
in CA

Defined Benefit Plan Consultant
The Pension Studio
Telecommute

Senior Retirement Plan Consultant
The Pension Studio
Telecommute

Retirement Service Consultant
Ascensus
in PA

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Open MEPs: A Promising Way to Close the Coverage Gap (PDF)

12 pages. "66% of small business owners who don't offer a retirement plan are likely to consider an open MEP. And the same proportion of small business owners who do offer a retirement plan say they would consider switching to an open MEP.... [This paper will] outline the current state of retirement readiness in the United States, provide an update on the latest efforts to expand MEPs and summarize the research ... conducted with small business owners."
Empower Retirement

[Advert.]

ASC's Ethics 2018 CE Webcast

Sponsored by ASC

Learn how to deal with ethical dilemmas from the expert, Ethics and ERISA guru, John Griffin, J.D., LL.M. Topics include an ethical responsibility overview, new practical case studies, an explanation of IRS Circular 230 and more. Register Now!


California Pension Reform Goes Before State High Court

"The high stakes case tests the so-called California Rule, the legal precedent that forbids California government agencies from reducing retirement benefits without offering workers some kind of compensation to offset a loss in income. If the court sides with [Gov. Jerry Brown], unions worry that future city managers and governors will be emboldened to cut benefits they promised to their workers."
San Jose Mercury News

More Support for Universal Savings Accounts

"Republicans in Congress adopted the idea and included USAs in their Tax Reform 2.0 package, which passed the House in September. Individuals would deposit after-tax funds in the accounts, and then the earnings would grow tax-free and could be withdrawn at any time for any reason with no taxes or penalties. USAs would allow Americans to save without the restrictions and complexity of other vehicles."
Cato Institute

Reasons Why the Smoothed Actuarial Budget Benchmark is Superior to IRS RMD for Developing Spending Budgets

"[T]he RMD suffers from the following deficiencies: ... The assumptions underlying RMD withdrawal factors are questionable and are inconsistent with assumptions used to price inflation-indexed annuities.... [T]he RMD withdrawal factors are not based on one's life expectancy. Application of RMD is unclear for ages under 70. RMD doesn't coordinate with other sources of income. RMD doesn't consider non-recurring expenses.... RMD is inflexible and doesn't accommodate 'budget shaping.' "
Ken Steiner, FSA Retired

Combining Small 401(k) Accounts Helps Preserve Retirement Saving

"Consolidation helps the employees accumulate a more adequate level of retirement saving, because research shows that hitting the $20,000 milestone makes participants much more likely to preserve their balances. And consolidation helps sponsors fulfill their fiduciary duty and cut aggregate plan costs by reducing the number of stranded accounts. Consolidation helps providers to increase assets under management and reduce the headaches associated with mandatory distributions, stranded accounts, and uncashed checks for missing participants."
Alicia Munnell, via MarketWatch

[Opinion]

Is 401(k) Chaos Coming for Plan Sponsors?

"If SCOTUS upholds the 1st Circuit's decision, and a plan's advisory contract contains that clause insulating the advisor from liability, it will then fall solely on the plan sponsor to prove that it was prudent in the selection of their plan's investment options.... [In] most cases they will simply not be able to do so, resulting in full liability, including unlimited personal liability for a plan's fiduciaries." [Brotherston v. Putnam Investments, LLC, No. 17-1711 (1st Cir. Oct. 15, 2018)]
The Prudent Investment Fiduciary Rules

[Opinion]

New PBGC Director Approved

"Gordon Hartogensis will need more than 'successful entrepreneurial experiences' to lead the PBGC through these minefields: [1] Mutiemployer plans slashing benefits with no bailout in sight; [2] Single Employer plans terminating apace due to extortionate premiums; and [3] Small plans going through routine standard terminations subjected to full-cavity-search audits that coalesce the most intrusive practices of the DOL, IRS, and TSA.... [P]ossibly a pension outsider could bring common sense solutions to the disaster that pension insiders have allowed to fester."
Burypensions

Executive Compensation
and Nonqualified Plans

Subjective Performance Goals After Elimination of the Performance-Based Compensation Exception

"A compensation committee that adopts or applies performance targets that are too subjective could lead to ... [1] Criticism from institutional investors and proxy advisory firms for the failure to adequately link incentive pay to performance.... [2] [U]ncertainty in the mind of executives' as to precisely what is required of them, which would reduce the incentive value of an award. [3] Failing to create a fixed grant date for equity-based awards under ASC 718. [4] Required reporting of annual incentive payments in the 'Bonus' column of the Summary Compensation Table, instead of the Non-equity incentive plan compensation column."
Winston & Strawn LLP

Selected Discussions
on the BenefitsLink Message Boards

RMD for Not-Quite-Terminated Employee

An employee has an accrued benefit. He's over 70‑1/2. He works seasonally. The company does not usually know if he will be coming back for the next year until March or April. He hasn't resigned from the company or retired but doesn't work the last few months of the year. Should he begin receiving an RMD?
BenefitsLink Message Boards

Adding Safe Harbor to Existing 401(k)

Is it too late to add safe harbor match provisions to an existing 401(k) plan for 2019?
BenefitsLink Message Boards

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Press Releases

Most Popular Items in the Previous Issue

Limitations Periods in Benefit Plans: Guidance from the Courts (PDF)
benefits magazine, a publication of the International Foundation of Employee Benefit Plans [IFEBP]

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Lois Baker, J.D., President  loisbaker@benefitslink.com
David Rhett Baker, J.D., Editor and Publisher  davebaker@benefitslink.com
Holly Horton, Business Manager  hollyhorton@benefitslink.com

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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