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March 13, 2019 logo logo
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Retirement Services Officer
Old Point Trust & Financial Services
in Newport News VA

Qualified Plan Consultant
Newport Group
in Lake Mary FL

Relationship Manager / Vice President
Union Bank and Trust
in Lincoln NE

Director, Product Management/Development
in Madison WI / Madison MN

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[Guidance Overview]

PBGC Proposes Simplified Methods for Calculating Withdrawal Liability

"The requirement to disregard a benefit suspension in calculating the value of unfunded vested benefits would apply only for withdrawals that occur within the 10 plan years after the end of the plan year that includes the effective date of the benefit suspension.... The proposed regulations provide simplified methods for disregarding certain contribution increases when determining the allocation of unfunded vested benefits attributed to an employer and the annual withdrawal liability payment amount."


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[Guidance Overview]

IRS Opens the Door for Cashing-Out Retirees in Pay Status (PDF)

"[S]ponsors of ongoing defined benefit pension plans may want to consult their actuaries as to whether retiree lump sum windows make sense for their plans. It may not be the best option; commercial annuity rates are rising, which could make an annuity purchase less expensive than paying lump sums. In addition, retiree lump sum windows can lead to adverse selection. Retirees in poor health are likely to choose lump sums while those in good health remain in the plan, increasing the cost of maintaining the plan or terminating it."
Korn Ferry

When a Retirement Plan Has the Beneficiary Blues

"Where it is unclear on the face of all the plan documentation who the proper beneficiary is, you ... can take into account whether there is employer information outside of plan records, such as a life insurance beneficiary form, that provides you with confidence that your interpretation of a fuzzy beneficiary designation form is appropriate. You may also want to consider whether the relative size of the benefit means that imposing your interpretation of an unclear form is a low risk proposition and the costs of obtaining a declaratory judgment are disproportionately high, or vice versa."

Editor's Pick 2019 Guide to Retirement (PDF)

52 presentation slides cover topics and themes for retirement planning, including: [1] Older Americans in the workforce; [2] Managing expectations of ability to work; [3] Retirement savings checkpoints; [4] Income replacement needs in retirement; [5] The 4% rule -- projected outcomes vs. historical experience; [6] Effects of withdrawal rates and portfolio allocations; [7] Structuring a portfolio to match investor goals in retirement; [8] Structuring a portfolio in retirement -- the bucket strategy; [9] Tax implications for retirement savings by account type.
J.P. Morgan Asset Management

Overseeing Retirement Plans in the Digital Age

"Enhancing the design of the enrollment website increased the number of workers who personalized their enrollment by 15 percent, and led to an overall increase in employee contributions of roughly 10 percent. There is an opportunity for employers to double and triple the most commonly suggested default savings rate (3 percent) without reducing enrollment.... Diversification can be driven by the number of blank lines on a retirement plan website; as more lines lead participants to invest in more funds."

Building Toward a Better Retirement: Choice Architecture and Plan Participants

"Whether a participant logs in once and makes a single choice or is making a lifetime of choices, there are many ways employers can use choice architecture to assist all types of decision-makers when they do engage. Understanding your employees and tailoring the approach can help them make the best decision-ultimately improving retirement readiness."

Texas Supreme Court Affirms Cuts to Future Public Pension Benefit Accruals

"[T]he court held that the term 'benefits' as used in ... the Texas Constitution did not apply to future benefits, meaning that the formula to calculate future interest under the [deferred retirement option plan (DROP)] was not a protected benefit.... Because the amendment to the plan had no impact on funds deposited before the amendments became effective, no Section 66 violation existed." [Eddington v. Dallas Police and Fire Pension System, No. 17-0058 (Tex. Mar. 8, 2019)]
Husch Blackwell

California Supreme Court Rules No Vested Right to Airtime Purchases; Leaves California Rule Intact

"The Court initially concluded that the Contracts Clause generally does not prohibit the prospective reduction or elimination of statutory terms and conditions of public employment. The Court recognized only two exceptions: [1] when the statute or the circumstances of its enactment clearly evince legislative intent to create a contract right, and [2] when certain benefits of public employees, primarily pension benefits, are protected as an implied contract right." [Cal Fire Local 2881 v. CalPERS, No. S239958 (Cal. Mar. 4, 2019)]
Hanson Bridgett LLP

No Plan? Big Problem When It Comes to a Successful Retirement

"40.6 percent of American households are not on track for a financially successful retirement. Many probably assume they will just work longer.... [W]hile the median worker believes he or she will retire at age 65, in reality, the median retiree left the work force at age 62. Further, while nearly a third of workers believe they will retire at 70 or older, only 7 percent of retirees actually did so."
EBRI [Employee Benefits Research Institute]


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Beyond the 4% Rule: How Much Can You Spend in Retirement?

"How do you determine your personalized spending rate? Start by asking yourself these questions: [1] How long do you want to plan for? ... [2] How will you invest your portfolio? ... [3] How confident do you want to be that your money will last? ... [4] Will you make changes if conditions change? ... [A table provides] an estimate of a sustainable initial spending rate.... Be sure to factor Social Security, a pension, annuity income, or other non-portfolio income, in determining your annual spending."
Charles Schwab

Executive Compensation
and Nonqualified Plans

Beware These Tax-Return Errors with Restricted Stock and RSUs

"[1] Not reporting income until the full grant vests.... [2] Double-reporting income on Form 1040.... [3] Not reporting the stock sale.... [4] Using too low a cost basis for the capital gains calculation.... [5] Miscalculating the number of shares surrendered or sold for taxes."

Selected Discussions
on the BenefitsLink Message Boards

Legacy Variable Annuity Contracts in Acquired 401(k) Plan

Sponsor acquired (through a stock purchase) a company that had a 401(k). Some participants have variable annuities as investments in the plan. The new fiduciary wants to know what his options are, because he doesn't want a legal duty to monitor the annuities.
BenefitsLink Message Boards

Exclude HCEs from Matching Contributions Retroactive to January 1, 2019?

A plan was supposed to exclude HCEs from getting matching contributions. The original plan document didn't have that option. The new plan document does, but the box wasn't checked. In all the meetings and materials, the plan was promoted as having no contribution for HCEs. We are giving matches to HCEs for 2018, but we don't want to give matches to HCEs for 2019. Can we retroactively exclude the HCEs for 2019 --- as of 1/1/2019?
BenefitsLink Message Boards

RMD Not Processed Before Rollover

Let's say a participant is over 70-1/2 and took a full distribution as a rollover and let's say that his RMD was not processed by mistake. What would be the correction method for this mistake if the participant already deposited the check into the receiving IRA? Is amending the 1099-R to reflect that a portion of the distribution is an RMD and requesting the participant to take out the excess from the IRA the only method?
BenefitsLink Message Boards

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Press Releases

Kaitlin Smith Awarded QPA Designation by ASPPA
Steidle Pension Solutions, LLC, [SPS]

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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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