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December 6, 2018 logo logo
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Pension Plan Administrator
American Pension Advisors, Ltd.
in IN

ERISA Attorney
Warner Norcross + Judd LLP
in MI

Retirement Plan Administration Specialist
Kassouf & Co.
in AL

Retirement Services Associate
Alerus Financial
in MI, MN

401(k) Administrator
Hicks Pension Services
in CA, Telecommute

Retirement Plan Administrator
Flexible Benefits Systems Inc.
in OH, Telecommute

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[Guidance Overview]

Hardship Regs Revisited: Communications and Nonqualified Plans

"The proposed hardship regulations were silent as to whether a nonqualified deferred compensation plan can continue to cancel deferral elections following a hardship withdrawal. Considering that effective January 1, 2019, suspensions following hardship withdrawals will no longer be required, plan sponsors with nonqualified plans may wish to review the suspension language in their nonqualified deferred compensation plans[.]"
Morgan Lewis

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[Guidance Overview]

IRS Extends Transition Relief for New Escheated IRA Tax Withholding, Reporting Rules

"[T]he extended transition relief applies to payments made before the earlier of January 1, 2020, or the date it becomes reasonably practicable to comply with the new rules.... [Rev. Rul. 2018‑17] is silent as to whether the IRA owner may roll the escheated IRA over to an eligible IRA and, if the rollover is permitted, when the 60-day period to make the rollover begins.... The Revenue Ruling is also silent as to whether an IRA owner who is under age 59‑1/2 at the time of an escheatment (in those states that escheat before the IRA owner reaches age 70‑1/2) would be liable for the 10% penalty tax for early IRA distributions.... [It also] does not address the tax withholding and reporting requirements for a SEP, SIMPLE, or Roth IRA."
Morgan Lewis

The Proposed Hardship Distribution Regs: Some Misconceptions

"Plan sponsors are NOT required to eliminate the provision that borrowing be exhausted in order to take a hardship distribution ... Plan sponsors MUST eliminate the requirement to suspend elective deferrals for six months following a hardship distribution ... These regulations have no effect on 457(b) plans."
Cammack Retirement Group

Missing Participants and Fiduciary Responsibilities: A Risk for TPAs

"[It] is important for plan sponsors to know that the DOL is taking demanding positions about fiduciary responsibilities for dealing with the issue of missing participants. As a result, TPAs should communicate with their plan sponsor clients about the DOL position, who has the responsibility for performing the searches required for missing participants, and what are considered to be reasonable search methods -- despite a lack of clear DOL guidance on the issue."
Drinker Biddle

Year-End Required Minimum Distribution Considerations

"If you have a RMD from a 401(k) plan, the RMD amount must be calculated separately. You cannot lump the amount together with another plan account or IRA.... RMD's are not eligible for a rollover.... If the account holder died during the year, the RMD must still be made."
Watkins Ross


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Year-End Bonuses and Compensation in Defined Contribution Plans

"Make sure your HR and payroll people know what compensation should and should not be included for contributions. This is especially important if you have a new plan, new HR representative, new payroll provider or a change has been made to your plan document."
Watkins Ross

Ninth Circuit Upholds Dismissal of 401(k) Fee Case

"The court sided with defendants on one of the critical issues in current 401(k) fee litigation: whether a plaintiff may state a claim for breach of the ERISA duty of prudence merely by alleging that there was a less expensive, 'identical' alternative to the service/fund provider selected by plan fiduciaries.... The Ninth Circuit's most recent decision, ... while brief, included a pointed discussion of the critical issue[.]" [White v. Chevron Corp., No. 17-16208 (9th Cir. Nov. 13, 2018; unpub.)]
October Three Consulting

Asset Purchasers Beware: Constructive Notice of Seller's Union Pension Liability

"A recent 9th Circuit decision called out a common misconception -- in the form of 'incorrect legal advice' that the buyer received prior to closing -- that '[a]bsent an express assumption of liability, the Buyer does not assume the [withdrawal] liability' for a multiemployer pension plan. The decision went on to hold a private equity fund liable for $480,000 of withdrawal liability, even though all parties conceded that the purchaser had no actual notice of the liability." [Heavenly Hana LLC v. Hotel Union & Hotel Industry of Hawaii Pension Plan, No. 16-15481 (9th Cir. June 1, 2018)]
The Wagner Law Group

MetLife Sued by Pension Plan Participants

"A class-action lawsuit ... [claims] the company underpaid retirement plan participants by using outdated mortality rates to calculate certain alternative retirement benefits.... The plaintiffs are demanding the insurer ... [pay] all previously withheld benefits, recalculate the benefits that have been paid, and provide an accounting of all prior payments of benefits to determine how much should have originally been paid." [Masten v. Metropolitan Life Ins. Co., No. 18-11229 (S.D.N.Y. complaint filed Dec. 3, 2018)]
Pensions & Investments

California Supreme Court Hears First Challenge to Public Employee Pension Reform

"The state Supreme Court, with four similar cases on the backburner, gave few signs during oral arguments on a labor-union challenge to Gov. Brown's pension reform yesterday that it's ready to take on the 'California Rule' preventing pension cuts."

Supreme Court Hears Oral Argument on Differing State Tax Treatment of Federal/State Government Retirement Benefits

"On December 3, 2018, the United States Supreme Court heard oral argument in Dawson v. Steager, a case addressing West Virginia's personal income tax regime, which exempts state employee retirement benefits without offering the same exemption to federal employee retirement benefits.... At oral argument, several justices expressed skepticism about the West Virginia scheme.... The decision is expected to have implications for state statutes that distinguish between federal and state government employee retirement benefits."
Kilpatrick Townsend

Benefits in General

Trends in Social Security Disability Insurance Enrollment (PDF)

21 pages. "Multiple factors have contributed to the growth in the SSDI enrollment between 1985 and 2014. Some of the main factors are [1] the increased eligibility and rising disability incidence among women, [2] the attainment of peak disability-claiming years (between age 50 and full retirement age) among baby boomers ... [3] the increase in full retirement age (FRA) from 65 to 66, [4] fewer job opportunities during economic recessions, and [5] the legislative reform that expanded the eligibility standard in SSDI. Some factors may have prolonged effect s on SSDI benefit receipt." [Report R45419, Nov. 30, 2018]
Congressional Research Service [CRS]

Selected Discussions
on the BenefitsLink Message Boards

After-Tax Conversions to Roth, Then 401(k) Plan Fails ACP Test

If a plan participant making after-tax contributions converts the entire balance to Roth and the plan later fails ACP, how would one operationally suggest the ROE be handled? Would you unwind the conversion for amount of the ROE plus earnings and distribute or simply process the ROE from the Roth source? It may be a difference without distinction since it is all after tax and you just have to deal with the earnings but curious if anyone has dealt with this yet.
BenefitsLink Message Boards

Eligibility for Match Contribution Determined Quarterly?

Can a calendar year 403(b) plan have as a condition for matching contributions that individuals must work 260 hours each quarter and be employed on the last day of each quarter? Is it acceptable to have contribution conditions established on a quarterly basis rather than an annual basis, knowing that ACP and 410(b) will be tested annually?
BenefitsLink Message Boards

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