Retirement Plans Newsletter

December 27, 2018

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[Official Guidance]

Text of PBGC Adjustment of Civil Penalties for Inflation

"This rule adjusts as required by law the maximum civil penalties that PBGC may assess under sections 4071 and 4302 of ERISA. The new maximum amounts are $2,194 for section 4071 penalties and $292 for section 4302 penalties."
Pension Benefit Guaranty Corporation [PBGC]

Full Ninth Circuit Panel Asked to Review Chevron ERISA Case

"The plaintiffs request a review by the full appellate panel, rather than the three-judge panel that affirmed dismissal of the case, because they say the court imposed strict pleading standards that conflict with the decisions of the 9th and other circuits." [White v. Chevron Corp., No. 17-16208 (9th Cir. Nov. 13, 2018, unpub.; appellants' petition for rehearing filed Nov. 27, 2018)]
planadviser

Second Circuit Revives Dismissed IBM Stock-Drop Suit

"The Second Circuit reinstated a claim for breach of fiduciary duty under ERISA brought by participants in IBM's 401(k) plan who suffered losses from their investment in IBM stock.... In so ruling, the Second Circuit became the first circuit court since the Supreme Court's decision in Fifth Third Bancorp v. Dudenhoeffer ... to allow such a claim to survive a motion to dismiss. According to media reports, this has sparked renewed hope within the ERISA plaintiffs' bar in the viability of these claims." [Jander v. Ret. Plans Comm. of IBM, No. 17-3518 (2d Cir. Dec. 10, 2018)]
Proskauer's ERISA Practice Center

The Plain English Guide to Form 5330

"Form 5330 is used to report and pay a variety of excise taxes related to employee benefit plans.... You don't want to make a mistake on a correction.... There's a penalty for missing the Form 5330 deadline.... How Form 5330 is filed (and who usually files it).... An example of Form 5330 for late contributions."
ForUsAll

23 Questions to Ask When Choosing a Financial Education Vendor

"Cost isn't the only factor to consider when choosing a financial education vendor. You'll want to take into account whether the content will be objective (not a sales presentation), the vendor's track record in providing personal finance education, how relevant the content is to your unique workforce, the delivery methods that will be used to reach your plan participants and so much more!"
International Foundation of Employee Benefit Plans [IFEBP]

The Impact of Employee Financial Health at Work

"[E]mployees who are financially struggling: Lose 41% more work time to absence than peers without financial worries; Have lower engagement levels than peers without financial worries (51% vs 29%); Are less productive compared with peers without financial worries (32% vs. 5%).... Within a given employee population, wants and needs vary according to life stage and other individual characteristics."
Willis Towers Watson

[Opinion]

The DOL's Own Reasoning Supports MEPs Being 'Open'

"The Department wants the MEP sponsor to perform a 'substantial employment function' to preserve ERISA's fundamental employment based purpose, and does not see how that exists in commercial practice.... [T]his concern is really alleviated in the retirement plan market ... Unlike the AHP sponsor, the MEP sponsor itself is, after all, still a retirement plan Sponsor, and is subject to the MEP service crediting rules for participation, vesting and benefit accrual ... [M]aintaining the plan is, in itself, a 'substantial employment function' ... [T]he real concern should be ... whether the pecuniary interest of the fiduciary overwhelms (and becomes primary over) the interests of the plan and the participants in its dealings with the plan. However, the operation of the prohibited transaction rules prevent this from being so."
Business of Benefits

[Opinion]

'Phased Retirement' Requirement Would Be Lump of Coal for Plan Sponsors

"The newest proposed federal mandate comes from individuals who have never served as a plan sponsor or worked in human resources.... The authors recommend workers be given a legal right to phased retirement. To qualify, it seems that an employee would only need to be working for an employer with 20 or more workers -- no minimum age, no minimum completed service, no performance/productivity requirements, no other requirement."
Plan Sponsor Council of America [PSCA]

Executive Compensation
and Nonqualified Plans

[Guidance Overview]

SEC Adopts Final Hedging Disclosure Rules

"The required disclosure must either provide a fair and accurate summary of the practices or policies that apply (including the categories of persons covered and any categories of hedging transactions that are specifically permitted or specifically disallowed) or disclose the practices or policies in full. In addition, if the company does not have any such practices or policies regarding hedging, the company must disclose that fact or disclose that the company generally permits its employees, officers and directors to engage in hedging transactions."
Vorys

[Guidance Overview]

SEC Adopts Final Rules for Disclosure of Hedging Policies

"The final rules provide the following illustrative list of hedging transactions: prepaid variable forward contracts, equity swaps, collars and exchange funds. However, in the release to the final rule, the SEC notes that the term 'hedge' should be broadly applied to cover any financial transactions that are designed to hedge or offset any decrease in market value of the company's equity securities."
Meridian Compensation Partners, LLC

[Guidance Overview]

SEC Adopts Final Rules on Hedging Disclosures (PDF)

"The new rules do not require that reporting companies prohibit or limit hedging transactions, or that reporting companies adopt a specific policy relating to hedging. However, in light of the new rules, reporting companies should review their current policies and consider adding a policy about employees' and directors' ability to engage in hedging transactions to the extent hedging is not already covered. All proxy statements and information statements for the election of directors filed during fiscal years beginning on or after July 1, 2019, must comply with the new disclosure requirements."
Alston & Bird

ISS Releases Updates to U.S. Equity Compensation Plans FAQs

"These updates cover: [1] How the changes to Internal Revenue Code Section 162(m) under the Tax Cuts and Jobs Act of 2017 (TCJA) will affect ISS's evaluation of Section 162(m)-related proposals.... [2] The factors considered in ISS Equity Plan Scorecard evaluations. [3] How excessive dilution will impact ISS recommendations on equity plan proposals. [4] Burn rate benchmarks."
Thompson Reuters Practical Law

Selected Discussions
on the BenefitsLink Message Boards

Form 945: Complete the Paid Preparer section?

Does anyone prepare Form 945s and complete the "paid preparer use only" section of the form? If you do, do you have a PTIN? We let our PTINs lapse because they are not required for Form 5500 preparers. But the Paid Preparer section asks for the PTIN.
BenefitsLink Message Boards

Participant Loan Eligibility -- When Is Vested Balance Determined?

A plan has a fraud prevention procedure that delays issuing a participant loan request by a couple of days after the request is made. A participant's vested balance is $10,000 on the day they request a $5,000 loan. The market drops during those 2 days so their vested balance is $8,600 when the loan is issued. Can the plan issue a loan for $5,000 or must they redo the amort schedules etc. and only issue a loan for $4,300?
BenefitsLink Message Boards

Changing Plan Year in a Safe Harbor Plan

We have a client that just informed us that they would like to convert their FYE 11/30 safe harbor plan to a FYE 12/31 safe harbor plan, so we would basically have a 12 month SH plan that ran from 12/1/17 to 11/30/18, then a 1 month SH plan (12/1/18 to 12/31/18) followed by a 12 month SH plan (1/1/19-12/31/19). Hence we would meet the requirements to make this change and keep the SH status intact. My issue is the timing of the amendment, because the short plan year has started already. Is it now too late?
BenefitsLink Message Boards

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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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