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June 5, 2019 in DC
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[Guidance Overview]

IRS Breathes New Life into Retiree Lump Sum Windows

"Notice 2019-18 represents a significant change to the de-risking landscape. Although a retiree lump sum window program may not be appropriate for all plans, it should again become part of the discussion for plan sponsors seeking additional opportunities to de-risk their pension plans."
Morgan Lewis


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.

The Definition of Compensation: When Operation Does Not Match the Plan Document (PDF)

"Because this type of failure is a frequent problem for plans, and it can go on for many years before discovery, it is a good idea to include an annual audit of your payroll system and the plan's definition of compensation in the plan's administrative procedures to determine that they are consistent.... [C]orrective steps to prevent continued failures, such as updating the payroll system or amending the plan document, should be carried out as soon as possible to limit the liability for the failure."
Boutwell Fay LLP

Workers Delaying Retirement Are Taxing Employers

"A majority of employers (83 percent) report having a significant number of employees nearing retirement, but only half (53 percent) know when they will retire ... 80 percent of employers view their older staff as crucial to their success. But without a firm grasp on when they will retire, employers are unable to anticipate when they should set out to hire new staff."

Mixed Ruling in Oracle ERISA Suit Strongly Favors Defense

"Despite a setback for Oracle at the class certification stage, a new ruling out of a federal court in Colorado pushes back strongly against many -- but not all -- of the plaintiffs' claims." [Troudt v. Oracle Corp., No. 16-175 (D. Colo. Mar. 1, 2019)]

California Supreme Court Issues Opinion in Cal Fire Case

"[T]he Court made clear that the March 4 ruling was not intended to alter or affect the continued application of the California Rule.... [A]lthough the Court recognized that a constitutionally protected contractual right (a vested right under the California Rule) may be implied from legislation in appropriated circumstances, it chose not to articulate what the California Rule covers or protects -- rather it explained why the right to purchase airtime was not protected[.]" [Cal Fire Local 2881 v. CalPERS, No. S239958 (Cal. Mar. 4, 2019)]
Best Best & Krieger LLP


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Texas Supreme Court Says Changes to Local Pension Plan Were Constitutional

"The Texas Supreme Court affirmed an earlier state appeals court ruling that changes to the [Deferred Retirement Option Plan(DROP)]interest rate and distribution policy at the Dallas Police & Fire Pension System that were approved in 2014 were constitutional." [Eddington v. Dallas Police and Fire Pension System, No. 17-0058 (Tex. Mar. 8, 2019)]
Pensions & Investments

First Public Sector-Specific Mortality Tables Released (PDF)

"There is wide variation in the mortality tables used by public sector plans. A broad analysis of recent experience shows clear mortality differences among participants in different job categories in the public sector. Teachers have significantly higher life expectancies than other employment classifications at most ages."
Segal Consulting

How QDIAs Have Changed the Fiduciary Role of 401(k) Plan Sponsors

"The real power behind the [qualified default investment alternative (QDIA)] lay in its allowance for plan sponsors to adopt the 'opt-out' default policy of automatically enrolling employees into the retirement plan.... That simplicity may appear to make life easier for the 401k plan sponsor -- maybe too simple.... While TDFs do reduce the fiduciary risk, they don't eliminate it.... [C]hoosing an appropriate target date fund provider presents the same level of fiduciary liability as that of selecting any other investment option."
Fiduciary News

Funded Status Update, February 2019

"Discount rates were relatively stable. February was a quieter month for bond markets following prior volatility in both US Treasury yields and corporate bond yields.... Funded status likely improved during February on the back of strong equity markets."
River and Mercantile Solutions

Choosing Between a Roth IRA and a Traditional IRA Contribution

"[1] Make sure you received eligible compensation for 2018 ... [2] Check your age for traditional IRA contributions ... [3] Check your MAGI limit for eligibility for Roth IRA contributions ... [4] Check eligibility for deductibility of traditional IRA contribution ... [5] Check suitability."
Denise Appleby, via Forbes

White House Revives Federal Employee Retirement Cuts in 2020 Budget Proposal

"The first part of the budget ... includes a laundry list of proposals that would substantially alter federal employees' non-salary benefits, particularly their defined-benefit pensions. Most of the ideas were suggested by the administration during the fiscal 2018 and 2019 budget cycles, but all were rejected by congressional appropriators each year."
Government Executive

Benefits in General

MIT 401(k) Plan Participants Not Entitled to Jury Trial of ERISA Breach of Fiduciary Duty Claims

"The court followed the 'great weight of authority' in ruling that there is no right to trial by jury in ERISA actions for breach of fiduciary duty.... The MIT decision is notable because it may seal the small crack plaintiffs made in the wall of cases rejecting a jury-trial right in ERISA fiduciary-breach cases." [Tracey v. Mass. Inst. of Tech., No. 16-11620 (D. Mass. Feb. 28, 2019)]
McDermott Will & Emery

Executive Compensation
and Nonqualified Plans

[Guidance Overview]

Excise Tax on Executive Compensation and Excess Parachute Payments

"On December 31, 2018, over a year after the release of the TCJA, the IRS released Notice 2019-09, which provided 92 pages of much anticipated informal guidance regarding IRC Section 4960. The Notice provided some clarity for tax-exempt organizations ... Excess remuneration ... Common-law employees ... Medical and veterinary services ... Excess parachute payments ... Effective date ... Reporting the liability under Section 4960."
WithumSmith+Brown, PC

How to Reduce the Tax Impact of Your Stock Options or Restricted Stock Units

"Exercise early-stage ISOs before their value increases ... Make the 83(b) election for early exercise ... Exercise ISOs to AMT crossover point ... Raise your ordinary income with same-day sales ... Exercise ISOs early in the year ... Take deductions in years with high RSU vesting income."
Moss Adams LLP

Selected Discussions
on the BenefitsLink Message Boards

Timing of Refunds Due to Failure of ACP Test

401(k) Plan has a discretionary match that's calculated after end of the plan year. The ACP test fails, so there's a return of excess to process. The employer won't be depositing the match until May or June. Do we still process that distribution by March 15 even though the deposit hasn't been made? Doing so would take the withdrawal from the participant's current account balance. Or do we wait until the match has been deposited and pay the 10% excise tax penalty?
BenefitsLink Message Boards

Beneficiary Accounts -- Count in Top Heavy Test?

Company has three owners, A (the father), and B & C (the sons). Um, had three owners -- A passed away in 2017 (while in RMD status, but I don't think it matters here). With advice from their financial adviser, B&C chose to keep their portion of their father's money in the plan, so we created beneficiary accounts for them in the plan alongside their regular accounts. How should we be treating these beneficiary accounts for the purposes of top heavy calculations? I'd think we count them in both numerator and denominator for 2018, but what about beyond?
BenefitsLink Message Boards

Safe Harbor 401(k) Plan / Failed 414(s) Compensation Test

It appears from my research that a safe harbor 401(k) plan that uses the 3% nonelective contribution on plan compensation that does not satisfy the "safe harbor" definition of compensation and fails the 414(s) compensation test is a problem. It appears the method of correction is to base the 3% safe harbor contribution on a "safe harbor" definition of compensation which may or may not need an amendment depending on how the plan is written. I am wondering if there are any alternatives other than having the employer deposit additional contributions. For example, can one run the ADP Test on the basis of a "safe harbor" definition of compensation?
BenefitsLink Message Boards

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BenefitsLink Retirement Plans Newsletter, ISSN no. 1536-9587. Copyright 2019, 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, 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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