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Retirement Plans Newsletter December 19, 2018 |
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Jobs
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Webcasts, Conferences Financial Wellness Initiatives - Unlocking the Value to Employers
Hardship Distributions in 2019 and Beyond
Managing Your 401(k) Plan: A Day in the Life of a Healthy 401(k)
Multiple Employer Plans: The Latest on MEPs and PEPs [2019]
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Discussions |
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This Newsletter:
BenefitsLink Health & Welfare Plans Newsletter:
Message Boards Digest:
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Retirement Plan Administrator|
[Guidance Overview]
IRS Issues Proposed Regulations to Relax 401(k) Plan Hardship Distribution Rules "All plan revisions related to the proposed regulations will be treated as 'integrally related' to the required change to the six-month suspension rule, so there will be only one plan amendment deadline for all plan changes, even those that are optional. Based on the proposed regulations, and required adoption deadlines set forth in IRS guidance, this means that plan amendments for both governmental and non-governmental plans to implement the changes will not be required until 2021, at the earliest."
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[Guidance Overview]
Relief for 403(b) Plans Regarding the Exclusion of Part-Time Employees "During the Relief Period, a section 403(b) pre-approved plan will not be treated as failing to satisfy the conditions of the part-time exclusion or failing to follow plan terms in light of a failure to follow the OIAI exclusion condition, and is not required to be amended to reflect that the plan failed to apply the OIAI exclusion condition. For individually designed plans, an employer has until March 31, 2020, the end of the current remedial amendment period, to amend plan language to reflect the actual application of the OIAI exclusion condition."
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MetLife Reaches Settlement With Massachusetts Over Failure to Pay Thousands of Workers' Pensions "MetLife Inc. MET 1.90% will pay a $1 million fine to Massachusetts in its first regulatory settlement after the insurer failed to pay 13,500 people their pension benefits. The big New York insurer disclosed almost exactly one year ago that it had failed to adequately search for beneficiaries of private-sector pension plans for which it had taken on responsibility.... Some retirees were owed money from as far back as the 1990s, with amounts averaging less than $150 a month."
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Second Circuit Gives New Life to Stock Drop Claim "The Second Circuit reversed dismissal of an ERISA stock drop class action finding plaintiff alleged enough to plausibly show that disclosure of alleged corporate problems would not have done more harm than good and sketching a treasure map for ERISA plaintiffs seeking to recover for 401(k) plan losses." [Jander v. Ret. Plans Comm. of IBM, No. 17-3518 (2d Cir. Dec. 10, 2018)]
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New 401(k) Legislation Could Bring Big Changes For Retirement Savers "H.R. 88 ... would allow any participant to convert their retirement savings into a stream of income.... H.R. 4524, titled 'Retirement Plan Simplification and Enhancement Act of 2017' ... [includes] a lifetime income portability option. Under the portability option, participants can avoid early withdrawal penalties and taxes of a discontinued sponsored plan by moving their funds to another plan."
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Fiduciary Status for the Unwary "Since the determination of whether a broker-dealer is a fiduciary is 'functional,' that is, based on conduct, courts consider all of the facts in the relationship in determining whether the five-part fiduciary advice test is met. This includes the terms of the service agreement between the parties, as well as the conduct of the broker and the client's reliance on the broker's suggestions. Relevant factors may include: the regularity of the advice; the length of the relationship; the broker's knowledge about the plan client; the client's expertise in financial matters; whether the client is receiving any other investment advice for the plan assets; and whether the client has ever rejected the broker's recommendations."
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97 pages. "For the majority of their working careers, 68 percent of retirees participated in some form of employer-sponsored retirement benefits ... The majority of retirees (61 percent) saved for retirement outside of work.... Two-thirds of retirees (66 percent) say their most recent employers did 'nothing' to help pre-retirees transition into retirement and 16 percent are 'not sure' what their employers did.... Three in ten retirees (30 percent) used a financial advisor before retiring ... [A]lmost three in four retirees (73 percent) agree they wish they would have saved more and on a consistent basis."
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Most Retirees Say Employers Did Nothing to Help with Retirement Transition "Among the 18% of retirees whose employers helped pre-retirees, the most frequently cited offerings are financial counseling about retirement (6%), seminars and education about transitioning into retirement (5%), the ability to reduce work hours and shift from full- to part-time (5%), and accommodating flexible work schedules and arrangements (5%)."
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The Role of IRAs in US Households' Saving for Retirement, 2018 (PDF) "One-third of US households owned individual retirement accounts (IRAs) in 2018.... More than one-quarter of US households owned traditional IRAs in 2018 ... Rollovers from employer-sponsored retirement plans have fueled the growth in IRAs.... Traditional IRA-owning households with rollovers cite multiple reasons for rolling over their retirement plan assets into traditional IRAs.... Although most US households were eligible to make IRA contributions, few did so."
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[Opinion]
What the Fed Does Next Could Save Your 401(k) -- or Drive It Even Lower "Depending on what policy makers do and say, stocks could pull out of the dive that has left us worried about our 401(k) retirement savings.... Since most people expect the Fed to go ahead with its fourth 0.25 percentage point increase of 2018, the market's reaction shouldn't be too negative. (Quarter-point changes are the norm, except when drastic action is required.) However, a decision to pause would more than likely trigger a rally in stocks and bonds as investors breathe a big sigh of relief."
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Benefits in General |
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[Official Guidance]
Text of EBSA Updated FAQs: EFAST2 Form 5500 Electronic Filing for Small Businesses "Q1: Do I need to buy software to submit my Form 5500 or 5500-SF? ... Q2: If I want to use IFILE, what do I need? ... Q3: What do you mean by EFAST2 credentials and why do I need them? ... Q4: Is it easy to get EFAST2 credentials? ... Q5: If I don't want to get EFAST2 credentials so that I can personally file my plan's Form 5500 or Form 5500-SF, is there any way that I can have a service provider complete and electronically file the Form 5500/5500-SF for me? ... Q6: Once my completed and electronically signed Form 5500 or 5500-SF is transmitted, how do I confirm that it was received by EFAST2? ... Q7: Are there civil penalties for failure to electronically file the plans Form 5500 or Form 5500-SF? ... Q8: Is there a process to appeal civil penalties assessed for failing to e-file?"
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"[T]he Seventh Circuit declared that '[P]laintiffs alleging claims under 29 U.S.C. Section 1132(a)(1)(B) for plan benefits need not necessarily identify the specific language of every plan provision at issue to survive a motion to dismiss under Rule 12(b)(6).' Dr. Griffin did not need to point to a particular plan provision specifying entitlement to 'greater payment,' as such a requirement would 'turn notice pleading on its head[,]' especially when the plan failed to provide Dr. Griffin with 'information necessary to allege with more detail where the plan's calculation of the usual and customary rate went astray.' " [Griffin v. TEAMCARE, No. 18-2374 (7th Cir. Nov. 26, 2018, amended Nov. 30, 2018)]
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Selected Discussions |
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S-Corp Owner-Only 401(k) Plan: Deadline for Deposit of Deferrals? The document for a plan sponsored by an S-Corp where the only employee is the 100% shareholder states "If this plan is not subject to ERISA, the Employer shall deposit elective deferrals to the Trust as of such time as is required by the IRS and DOL." The DOL 7-day rule does not apply to a non-ERISA plan, right? So what is the deposit deadline for any withheld deferrals?
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Reporting Excess Deferrals with a Loss in Year of Contribution In a 403(b) plan, we have a participant that exceeded the 2018 402(g) limit by $84. Since the time of the deposit, he has had a loss of $3 on the $84. There is some confusion as to what we send back to him and what is reported on 1099-R. Do we issue a check for $81 and report $81 on the 1099-R? Do we send him $81 and report $84 on the 1099-R? Do we issue a check for $84 and report $84 on the 1099-R since that is the amount he exceeded the limit by? Or something else?
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Grandfathered, Unsecured Split Dollar ILIT Loan Forgiveness Here's a rather obscure split dollar issue: Employer extended one loan to employee's ILIT to buy second-to-die life insurance policy. Everything occurred before 2002/2003 and arrangement has never been modified. The arrangement was unsecured, i.e., no collateral assignment, just a note from the ILIT to the employer promising to repay with interest. Payment is due upon earlier of [1] sixty years later; or [2] 90 days after death of employee and spouse (both still living). Loan obligation now far exceeds cash value; significant additional premiums would need to be paid in to maintain policy. ILIT has no other assets. It appears that any loan forgiveness by employer would create compensation income to employee. It also seems to me that if the policy lapses (again, no collateral assignment or documentation at insurer), then both employee and spouse die later, the last one to die
would have income (or income in respect of a decedent) at some point. Any way to complete a rollout without taxing the unpaid/forgiven loan amount?
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Press Releases |
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Plan Sponsor of the Year - Winners for 2018
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NAPA Names Nation's Top DC Advisor Teams
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Most Popular Items in the Previous Issue |
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David Rhett Baker, J.D., Editor and Publisher
Holly Horton, Business Manager
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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