Retirement Plans Newsletter

January 22, 2019

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Senior 401(k) Administrator
Guidant Financial
Telecommute

Senior Pension Consultant
The Ryding Company
in CA

Agile Product Owner
Wolters Kluwer
Telecommute

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TPA Boot Camp
January 23, 2019 in GA
Pension Education Council of Atlanta [PECA]

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Avoid These Mistakes to Achieve Painless 401(k) Compliance in 2019

"[T]he average company makes 53 payroll mistakes each year. If left unfixed, these mistakes can have some big ramifications -- both in terms of compliance risk, as well as needless work during your annual audit.... [1] Missed Deferral Opportunity ... [2] Late Deposits ... [3] Invalid Deferrals ... [4] Defaulted 401(k) Loan ... [5] Failure to Send Notice."
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What Is 'Actual Knowledge' in ERISA Breach of Fiduciary Duty Cases?

"The 9th Circuit court found that because the plaintiff alleged he was unaware of the investments, he did not have actual knowledge that those investments occurred and that they were imprudent. The plaintiff may have had constructive knowledge based on the information available on the website, but he cannot have actual knowledge if he never looked at the documents." [Sulyma v. Intel Corp. Investment Policy Comm., No. 17-15864 (9th Cir. Nov. 28, 2018)]
Butterfield Schechter LLP

Nevada Fiduciary Reg Skips Over ERISA Exemption

"In general, the draft regulations state that the obligations to a client imposed by the fiduciary duty includes the time period for which the investment adviser or representative of an investment adviser: [1] provides investment advice; [2] performs discretionary trading; [3] maintain assets under management; [4] acts in a fiduciary capacity towards the client; [5] discloses fees or gains; [6] through the completion of any contract; and [7] through the term of engagement of services."
National Association of Plan Advisors [NAPA]

Do Pension Cuts for Current Employees Increase Separation?

"The analysis takes advantage of a 2005 reform to the Employees' Retirement System of Rhode Island (ERSRI) that dramatically reduced the generosity of benefits for current workers.... the pension cut caused a 2.4-percentage-point increase in the rate of separation, implying an elasticity of labor supply with respect to pension benefits of around 0.25. Rhode Island teachers were significantly less responsive to the benefit cut than other occupations[.]"
Center for Retirement Research at Boston College

ESOP Workers Have Higher Retirement Savings

"S-Corp ESOP employees ... have an average of $170,326 in retirement savings compared to $80,339 for non-ESOP workers.... ESOP workers making less than $25,000 a year have more than twice the retirement savings compared to non-ESOP workers making under $25,000. Similarly, even hourly ESOP employees making between $10 and $12.85 an hour average more than $6,500 in retirement savings, through the ESOP and other non-ESOP plans."
Butterfield Schechter LLP

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Relative Sizes of Age Cohorts and Labor Force Participation of Older Workers

"Population aging implies larger relative sizes of older cohorts in coming years. The usual hypothesis is that a large cohort generates 'cohort crowding,' increasing the relative supply of workers in that cohort, depressing their wages, and leading to lower employment and lower labor force participation.... When older cohorts are large relative to a young cohort (ages 16 to 24), the evidence fits the relative supply hypothesis. But when older cohorts are large relative to 25 to 49 year olds, there is a relative demand shift toward older workers."
Michigan Retirement and Disability Research Center, Univ. of Michigan

'KonMari' Your IRA

"Thrift shops around the country are reporting a large influx of donations as Americans reevaluate their homes and tidy up using the 'KonMari' method. While your retirement accounts may be a little different than your home ... [here] are 4 steps you can take to tidy up your IRA and other retirement accounts. [1] Consolidate ... [2] [R]eevaluate your investment strategy in terms of current market conditions.... [3] Review account information ... [4] Check your beneficiary form."
Slott Report

[Opinion]

What Constitutes 'Prudence'?

"[T]here isn't enough discussion among fiduciaries about what constitutes prudence and what doesn't. A robust evaluation of investment beliefs should occur on an ongoing basis. Those beliefs are the standards to which members of an investment committee should hold each other, and there should be regular debate about the application and continued appropriateness of them."
The Research Puzzle, by Tom Brakke

Benefits in General

Growth Expected in Individual Life Insurance, Technology and Workplace Retirement Savings Plans

"In 2019, LIMRA is expecting U.S. individual life insurance sales to rise three percent to $15.0 billion. This growth will be primarily driven by gains in disposable income and bond rates, coupled with low unemployment.... [T]his year will also see an increase in access to workplace retirement savings plans for private sector employees. This will be due to increased interest in multi-employer plans (MEPs) and the rise of FinTech.... One area [where] LIMRA sees a slowdown in growth is with supplemental benefits."
LIMRA

Selected Discussions
on the BenefitsLink Message Boards

DFVCP Filings -- Multiple Years, Not All of Them Ready to File

We have a client who has not provided sufficient data to enable us to produce an annual report or a 5500 since 2014. We are now in a position to provide them with a 5500 to file for 2015 and 2016. Since they are not under examination at this time, we can use the DFVCP program. From their instructions it would appear that we are supposed to file all delinquent years at one time. However, we are nowhere near being ready with 2017's form and may not be for several months. What are your thoughts on waiting a few months and doing them all at one time versus filing what we do have and doing another submission later on?
BenefitsLink Message Boards

Determining Proper Payee at Participant's Death -- Is the TPA on the Hook?

A client passed away last fall, and her sister popped up recently claiming to be the executrix of the estate and heir to all of the client's assets. We as the TPA do not keep beneficiary forms on file for any of our clients. So far all she has provided to us is a death certificate for the deceased and a "Letters Testamentary" document with one sentence naming her as the personal representative of the estate of the deceased. She is now pushing to have the deceased client's assets transferred to her. The plan document says that in the absence of a beneficiary form, the assets go first to the spouse, and if none, to the children, and if none, "such other heirs, or the executor or administrator of the estate, as the Plan Administrator shall select." To what extent are we as the TPA responsible for determining that the spouse is indeed an ex spouse, that he is indeed deceased, and that they had no children? Is this our problem or the brokerage house's problem that holds the funds? Do we have to worry about being sued later if she lied to us and there is a current spouse/children?
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Lois Baker, J.D., President  loisbaker@benefitslink.com
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BenefitsLink Retirement Plans Newsletter, ISSN no. 1536-9587. Copyright 2019 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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