Retirement Plans Newsletter

February 13, 2019

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Employee Benefits Associate
Shipman & Goodwin LLP
in Hartford CT

Assistant Administrative Manager, Health and Welfare
Northeast Ohio Benefit Fund
in OH

Benefits Manager
Pacific Maritime Association
in San Francisco CA

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Webcasts, Conferences

Legal and HR Considerations for Post-Merger Benefits Integration
March 20, 2019 WEBCAST
Eversheds Sutherland

Hardship Withdrawals from 401(k), 403(b) and 457(b) Plans
March 26, 2019 WEBCAST
ASC

DC Investment Lineup
April 4, 2019 in TX
Pensions & Investments

DC Investment Lineup
April 9, 2019 in NY
Pensions & Investments

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[Official Guidance]

Text of PBGC Interest Rate Update for Benefits Payable in Terminated Single-Employer Plans, March 2019

"The March 2019 lump sum interest assumptions will be 1.25 percent for the period during which a benefit is (or is assumed to be) in pay status and 4.00 percent during any years preceding the benefit's placement in pay status. In comparison with the interest assumptions in effect for February 2019, these assumptions represent no change in the immediate rate and are otherwise unchanged."
Pension Benefit Guaranty Corporation [PBGC]

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PBI reinvents Death Audit category with launch of CertiDeath

Sponsored by Pension Benefit Information, Inc.

CertiDeath™ eliminates the work, complexity, and uncertainty now associated with identifying deaths, saving companies loads of time spent reviewing obituaries and money lost due to missed or misclassified deaths.


Georgetown Prevails in ERISA Fee Litigation Case

"[T]he court concluded that plaintiffs ... had not experienced any harm ... because they failed to allege that: [1] they were invested in the challenged funds, [2] the challenged funds outperformed plaintiffs' alleged comparable investment fund, and/or [3] that they had withdrawn, or planned to withdraw from, one of the funds ... The court rejected plaintiffs' excessive recordkeeping fee claim because plaintiffs did not show that the fees were excessive relative to the services that were being offered." [Wilcox v. Georgetown Univ., No. 18-422 (D.D.C. Jan. 8, 2019)]
Proskauer's ERISA Practice Center

Texas Federal District Court Finds for Defendants in Post-Jander Stock Drop Case

"The court found that this proposed alternative action did not pass the 'more harm than good test': 'The Court cannot say that attempting to prevent Exxon's alleged misrepresentations would have been so clearly beneficial that a prudent fiduciary could not conclude that it would be more likely to harm the fund than to help it.' ... The court also rejected plaintiffs' (Jander-based) 'disclosure was inevitable' argument, finding that 'investigations into [as distinguished from the filing of charges against] Exxon by state attorneys general and the SEC' did not make it inevitable that the non-public information 'would come to light.' " [Fentress v. Exxon Mobil Corp., No. 16-3484 (S.D. Tex. Feb. 4, 2019)]
October Three Consulting

Court Finds Union's Withdrawal Liability Indemnification Obligation of Limited Duration

"Five days before the expiration of the final CBA in February 2014, the union disclaimed interest in represented the employer's bargaining unit members and notified the employer it would not be renewing the CBA upon its expiration. This resulted in the employer permanently ceasing to have an obligation to contribute to the plan, resulting in a withdrawal from the plan and the assessment of withdrawal liability against the employer in excess of $680 thousand dollars.... The sole issue before the Third Circuit on appeal was whether the district court properly held that the union's indemnification obligation did not cover withdrawal liability imposed after the expiration of the CBA.... The Court found that the employer could not withdraw and trigger withdrawal liability until it 'permanently ceased to have an obligation to contribute,' and that such cessation could not occur until the termination of the CBA." [Nitterhouse Concrete Prod., Inc. v. Glass, Molders, Pottery, Plastics & Allied Workers Int'l Union, No. 18-1429 (3d Cir. Feb. 6, 2019; unpub.)]
Jackson Lewis P.C.

Best Practices for Plan Sponsors, Part 7

"[N]ow that 401(k) plans have become the primary retirement plan for most employers and employees, it seems fairly obvious that the burden of success of 401(k) plans needs to fall primarily on employers and fiduciaries. That is, in part, a legal burden. However, it is also a societal burden ... If those legal and societal expectations are to be met, plan sponsors need to take charge of their plans and run them like businesses. In other words, they need to have budgets and measure whether budget-to-actual is being realized."
FredReish.com

First U.S. Pension Funds Take the Plunge Into Cryptocurrency Investing

"Many institutional investors, which cryptocurrency enthusiasts believe will be drawn to digital assets because of their volatility and potential outsized gains, have been deterred by market manipulation and a lack of regulation. The Virginia pension funds join a handful of institutions to invest in the cryptocurrency world, including Yale University ... [which] invested in a digital assets fund last year."
Pensions & Investments

Multinational Companies Take Note: U.K. Proposes Jail Time for Mismanagement of DB Plans

"[T]he prospect of this major tightening of UK pension regulations and possible criminal penalties seems likely to influence the decisions around pension funds and transactions involving UK pension plan sponsors in the future. Multinational companies will want to consider these.... [T]he UK has seen a movement toward de-risking pensions similar to the US and government initiatives such as these may well accelerate that trend."
Groom Law Group

Senate Committee Fields Suggestions for Promoting Savings

"Hearing witnesses discussed conducting a comprehensive review of the American retirement system, allowing for open multiple employer plans (MEPs), and changing certain [DC] plan rules to facilitate greater savings[.]"
planadviser

Alight Solutions 401(k) Index: January 2019 Observations

"Less volatility on Wall Street brought a slowdown to trading activity among 401(k) investors ... With three trading days of above-normal trading activity and one day of low activity, January 2019 was the slowest start to the year in the more than 20-year history of the Index. The average daily activity for the month was 0.016% -- lower than the 0.024% in January 2018 and the trailing 5-year average of 0.025%."
Alight Solutions

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Editor's Pick Public Pension Plan Investment Return Assumptions (PDF)

"[A]lthough the average nominal public pension fund investment return has been declining, because the average rate of assumed inflation has been dropping more quickly, the average real rate of return has risen, from 4.21 percent in FY02 to 4.56 percent in FY17. One factor ... is public pension funds' higher allocations to alternative assets, particularly to private equities, which usually have a higher expected return than other asset classes."
National Association of State Retirement Administrators [NASRA]

Finding the Tax-Rate Tipping Point for Retirees

"[T]he optimal strategy for managing tax-deferred growth -- and the potentially substantial build-up of pre-tax assets from unrealized capital gains, traditional IRAs and 401(k) plans -- is to defer enough to avoid high tax rates now, but not so much as to cause significantly higher tax rates in the future."
Michael Kitces, via Financial Planning

Actuarial Approach for Retiree Spending and Pension Funding Use the Same Basic Actuarial Principles

"These basic actuarial principles include: [1] Making deterministic assumptions about the future; [2] Reflecting the time value of money; [3] Reflecting the concept of probabilities; [4] Reflecting mortality; [5] Use of actuarial present values; [6] Use of a generalized individual model that compares the present value of assets with the present value of liabilities; [7] Periodic gain/loss adjustment to reflect experience different from assumptions (annual valuations), and [8] Conservatism."
Ken Steiner, FSA Retired

Estimates of the Financial Effects on Social Security of the 'Social Security Expansion Act' (PDF)

24 pages. "Trust Fund reserves would be extended from 2034 under current law to 2071 ... Under current law, 79 percent of scheduled benefits are projected to be payable on a timely basis in 2034 after depletion of the combined trust fund reserves ... Under the proposal, 89 percent of scheduled benefits are projected to be payable in 2071 after depletion of the combined trust fund reserves ... Enactment of the eight provisions of this proposal would reduce the long-range OASDI actuarial deficit of 2.84 percent of taxable payroll under current law to 0.62 percent of payroll under the proposal." [Act introduced on Feb. 13, 2019 by Sen. Bernie Sanders (D-VT) and Rep. Peter DeFazio (D-OR).]
Office of the Chief Actuary, U.S. Social Security Administration [SSA]

Benefits in General

Consider How Relevance Can Improve Your Financial Wellness Program

"The good news is that the risks financial stress pose are increasingly being addressed through widespread implementation of financial wellness programs. The bad news, though, is that participation rates are disappointing. And employers are struggling to find effective ways to accurately measure their value."
HR Daily Advisor

Executive Compensation
and Nonqualified Plans

[Guidance Overview]

ISS Releases Its 2019 Pay-for-Performance Methodology

"ISS is making certain minor changes and clarifications to its pay-for-performance methodology for shareholder meetings taking place on or after February 1, 2019."
Thomson Reuters Practical Law

Selected Discussions
on the BenefitsLink Message Boards

Effect on ADP Test When Applying the $275,000 Comp Limit

Running the ADP test for a traditional 401(k) plan based on compensation net of salary deferrals. A participant has compensation of $300,000 so she is being limited to $275,000. When we reduce her compensation for $18,500 of salary deferrals, is it subtracted from $300,000 or the $275,000 of limited compensation?
BenefitsLink Message Boards

OK to Estimate Compensation While a Participant?

When the document states compensation is only counted while a participant and entry is 01/01 and 07/01, can compensation be estimated by dividing full year compensation in half, or should I go to the client and ask for 07/01 through 12/31 actual compensation? I have a payroll report for the full year but not quarterly and client isn't great at responding.
BenefitsLink Message Boards

Using Divorce Decree Without Separate QDRO

A plan participant has provided a copy of his divorce decree to the plan administrator. The divorce decree stated that 100% of the participant's account balance under the plan is to be transferred to his ex-spouse. The plan administrator determined that the divorce decree is a QDRO (approved), and as such, has transferred the employee-participant's account balance to his ex-spouse. My question: Was a separate QDRO order required? Or was the plan administrator correct in processing the QDRO (balance transfer) based only on the divorce decree?
BenefitsLink Message Boards

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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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