Retirement Plans Newsletter

February 8, 2019

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[Official Guidance]

Text of 2018 IRS Form 8915B: Qualified 2017 Disaster Retirement Plan Distributions and Repayments (PDF)

"Complete this part only if you have qualified 2017 disaster distributions in 2018 and the total of your qualified 2017 disaster distributions in 2017, if any, for the type of qualified 2017 disaster distribution(s) (hurricanes or wildfires) made in 2018 was less than $100,000."
Internal Revenue Service [IRS]

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[Guidance Overview]

PBGC Issues New Staff Interpretations

"These PBGC-curated Q&As substitute for the Q&As that were developed by the American Bar Association Joint Committee on Employee Benefits in prior years.... The Q&As are grouped by topic, and cover 430(k) Liens, Bankruptcy Claims, Premiums, Distress Terminations, Guaranteed Benefits, Reportable Events, Valuations, Standard Terminations, and an 'Other' (just two so far, on counting days toward regulatory deadlines and on Section 4062(c) claims)."
The Wagner Law Group

[Guidance Overview]

IRS Issues Proposed Regs Modifying Hardship Distribution Rules

"Most of the changes made by the [Bipartisan Budget Act] and the proposed regulations apply to the safe harbor rules for hardship distributions, and many plans have adopted those changes because they provide better assurance of compliance with the hardship distribution standards.... [A] plan amendment that relates to the final regulations will be treated as an amendment to correct a disqualifying provision, even if it does not; therefore, all amendments that relate to the final regulations will have the same deadline."
Trucker Huss

Identity Theft: The Rising Threat to Retirement, and How TPAs Can Make a Difference

"[R]equiring that your clients use your secure portal to transmit data is an easy first step. It should be spelled out in the TPA's service agreement, enforced in the onboarding process, and reiterated every time the client fails to use the portal.... Big financial institutions/RKs have been moving to multi-key recognition software -- such as voice recognition and secondary PINs. While the typical TPA can't afford this level of protection, you can consider partnering with RKs who have taken these steps to help protect your clients...and YOU."
Ferenczy Benefits Law Center

American Views on Defined Contribution Plan Saving, 2018 (PDF)

38 pages. "Survey responses indicated that Americans value the discipline and investment opportunity that 401(k) plans represent and that individuals were largely opposed to changing the tax preferences or investment control in those accounts. A majority of respondents also ... opposed proposals to require retirement accounts to be converted into a fair contract promising them income for life from either the government or an insurance company."
Investment Company Institute [ICI]

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First Circuit Outlines Novel Compliance Approach to 401k Fiduciary Standard

"In the final analysis, the issue is whether a plan committee engaged in a prudent process to select the investments; it is not whether the process predicted the best future outcome. Nonetheless, the process must have an intended outcome, and it is not unreasonable to conclude that one objective of the process is to select investments that are anticipated to outperform a comparable index fund."
Fred Reish, via 401K Specialist

Georgetown Win in 403(b) Investment Suit May Help Other Schools

"The court acknowledged that because the backgrounds and structures of 403(b) and 401(k) plans are different, the application of ERISA's fiduciary standards should also be different.... This was a departure from the view of other courts addressing the university lawsuits thus far, most of which have not delved deeply into differences between the two types of plans. As the cases move to the appellate courts, the universities may rely on this minority view to argue that the differences matter."
Groom Law Group, via Bloomberg BNA

ERISA in Fund Finance

"If a Bank lends to a Fund which is a plan asset vehicle and the Bank is a 'party in interest,' the prohibited transaction rules apply. Fortunately, ... the majority of Funds stay below the 25% threshold and ... the prohibited transaction rules are not relevant regarding the loan.... But what if a class of equity in the Fund is over 25%?"
Cadwalader, Wickersham & Taft LLP

PBGC Strikes Deal with Sears on Sale to Edward Lampert, ESL Investments

"The agreement is subject to approval by the U.S. Bankruptcy Court ... Details ... will not be disclosed publicly until the court makes them available. This agreement also clears the way for the PBGC to assume responsibility for Sears' two pension plans, which are covered under PBGC's single-employer insurance program."
Pensions & Investments

If You Aren't Separately Budgeting for Non-Recurring Expenses, You Probably Don't Have a Robust Retirement Spending Budget

"One of the significant differences between the Actuarial Approach and these other approaches is that it develops separate budgets for your recurring and your non-recurring future expenses.... These new revised workbooks now permit you to input up to three expected non-recurring expenses and will now calculate a recurring spending budget, a non-recurring spending budget and a total spending budget for the current year based on the input items."
Ken Steiner, FSA Retired

[Opinion]

Editor's Pick NTSA and the Swimming Pool Dilemma

"Recently, the National Tax-Deferred Savings Association [NTSA] released a report titled Improving Retirement Savings for America's Public Educators in which it aims to provide evidence that increasing or maintaining (many) choices for public educators increases participation.... The main conclusion was that 'The data shows a decrease in the participation rates for 403(b) plans when the number of choices are reduced.' If true, this report would be evidence that Nobel winning research on behavioral finance is wrong. However, it's not true. The data doesn't confirm the claims[.]"
The Teacher's Advocate

Benefits in General

Editor's Pick Arbitrability of ERISA Fiduciary Breach Cases

"[A]ssuming that the law evolves to more clearly require courts to enforce those provisions in ERISA cases, employers should give serious consideration to whether they want to include those provisions in their employment agreements and/or plan documents, or attempt to compel arbitration of cases that would otherwise be litigated in federal court under ERISA. The decision is not as straightforward as it may at first seem."
Trucker Huss

EBRI's Financial Wellbeing Research Center Bringing Data Mining to Bear

"EBRI is fortunate in having decades of experience in developing and mining retirement and health benefits data. Leveraging this experience, in 2018, EBRI undertook its initial steps in creating a financial wellness database that it will mine to help employers, policymakers, and the industry better understand how financial wellness initiatives move the dial on employee financial wellbeing.... Over time, our goal will be to demonstrate links to overall wellbeing by tying in claims data as well."
Paul Fronstin, EBRI [Employee Benefits Research Institute]

Executive Compensation
and Nonqualified Plans

[Guidance Overview]

IRS Provides Interim Guidance on Executive Compensation for Tax-Exempt Organizations

"Each employer liable for tax is responsible for separately reporting and paying its share of the tax on Form 4720. For calendar year [applicable tax-exempt organizations (ATEOs)], the excise tax for the 2018 year must be paid on May 15, 2019, which is the due date for Form 4720. The due date for the tax payment is determined without regard to whether the employer files for an extension to file Form 4720."
Morgan Lewis

Tenth Circuit Smack Down of Serial Section 16(b) Plaintiff

"[D]espite the existence of some discretion as to the payment of withholding taxes in the plan and award agreements, the Court concluded that the tax withholding transactions satisfied the Rule 16b-3 exemption. The compensation committee was not required to separately approve a tax withholding transaction, because it had approved the plan and the RSU agreements, and the tax withholding transactions were specifically contemplated in those documents." [Olagues v. Muncrief, No. 18-5018 (10th Cir. Jan. 16, 2019)]
Winston & Strawn LLP

Selected Discussions
on the BenefitsLink Message Boards

Fixing Premature Distribution via Retroactive Amendment to Definition of Normal Retirement Age

Client paid out a participant in 2018 who had terminated employment after age 65. Problem: NRA in the plan is the later of age 65 or the 5th year of participation. Employee only had 4 years of participation at termination. She terminated one week after reaching age 65. Employer doesn't want to ask for return of the otherwise non-vested funds. Can the employer adopt a retroactive amendment to change the NRA to 65 (with no 5th year of participation condition)?
BenefitsLink Message Boards

Safe Harbor Plan Can Have Different Eligibility for Deferrals Than for Matching Contributions?

Can a safe harbor 401(k) plan impose different eligibility requirements for deferrals than for match?
BenefitsLink Message Boards

Cross-Testing a 401(k) Plan: Which Interest Rate and Mortality Table?

When cross-testing a 401(k) plan, we have always used an interest rate of 8.5% and the UP-1984 mortality table. Are those still the best choices or are others recommended?
BenefitsLink Message Boards

DOL Letter to Client Says 5500 Defective Because No Audit Attached, But DOL Web Site Says Otherwise

Client received a EBSA letter today that the Plan's 2017 5500 form filing was rejected for lack of the Accountant's opinion. I went on the EBSA website and the filing is there and contains the correct forms and Accountant's report. The letter tells the client to file an amended filing including the report and then notify them that the amended filing has been posted. Anyone else hear of such a thing?
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David Rhett Baker, J.D., Editor and Publisher  davebaker@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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