Retirement Plans Newsletter

March 26, 2019

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Webcasts, Conferences

Hot Topics in ERISA Litigation: How is the Landscape Changing?
April 18, 2019 in NY
Worldwide Employee Benefits Network [WEB] - New York Chapter

Ways to Design Your ESOP and 401(k) Plan to Work Together
April 23, 2019 WEBCAST
National Center for Employee Ownership [NCEO]

De-Mystifying Defined Benefit Plans
April 24, 2019 in GA
Pension Education Council of Atlanta [PECA]

Fundamentals of 401(k) and Other Qualified Plans
June 5, 2019 in IL
FIS Relius Education

Fundamentals of 401(k) and Other Qualified Plans
June 12, 2019 in NJ
FIS Relius Education

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Discussions

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[Official Guidance]

Text of IRS-Authored Operational Compliance List, Updated for 2019

"The Operational Compliance List is provided ... to help plan sponsors and practitioners achieve operational compliance by identifying changes in qualification requirements effective during a calendar year.... Effective in 2019: [1] Changes relating to hardship distributions: Bipartisan Budget Act of 2018, Sections 41113 and 41114.... Proposed regulations regarding hardship withdrawals ... Relief for victims of hurricanes Florence and Michael ... [2] Extension of temporary nondiscrimination relief for closed defined benefit pension plans (Notice 2018-69)."
Internal Revenue Service [IRS]

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What Are Average 401(k) Fund Fees?

"[A] company with 10 employees could pay anywhere from 0.25% annually on the low end to 1.92% on the high end.... [T]hough 401(k) expense ratios can be wildly different for different plans, with the average being 1.34%, most are paying way too much.... [1] Build a low-cost fund lineup.... [2] Remove funds that have 12b1 fees.... [3] Shop around!"
ForUsAll

Implications of Defined Benefit Plan Lawsuits May Be Widespread

"Currently, there are no ... regulations mandating the use of specific mortality tables when converting a DB benefit into certain other actuarial equivalent forms of payments ... [T]hese lawsuits may open pension plans to scrutiny. If the proceedings rule in favor of the Plaintiffs, adjustments may need to be made to the mortality tables (and possibly interest rates) set within plan documents to avoid the risk of future lawsuits. This may lead to larger benefit payments which, in turn, could cause plans to be underfunded."
Cammack Retirement Group

Target Date Funds May Increase 401(k) Plan Sponsors' Fiduciary Liability

"Target date funds increase fees due to the fact employees must pay the fees for the fund management on top of the fees for the sub-funds the target date fund invests in. If the funds are poorly chosen, or specifically chosen by a provider for their high fees, the additional cost to the employees can result in liability for the employer.... The sheer size demands exacting due diligence in the selection and monitoring process.... TDFs contain too many moving parts. This impacts not only the due diligence process, but also plan sponsor education."
Fiduciary News

Fourth Circuit Permits Common Fund Award in Addition to ERISA Attorney's Fees

"After affirming the district court's conclusions on the ERISA fiduciary breach issues, the Fourth Circuit affirmed the district court's decision to award attorney's fees to plaintiff's counsel under ERISA's fee-shifting provision and the common fund doctrine.... [T]he district court held that the trustee breached its fiduciary duties and awarded well over $29 million in damages to the ESOP. The district court also awarded the participant's counsel: $1.8 million in attorney's fees under ERISA's fee-shifting provision [and] $1.5 million in attorney's fees from the ESOP's damages award under the common fund doctrine." [Brundle v. Wilmington Trust, N.A., Nos. 17-1873, 17-2224, 17-2323, 17-2324, 18-1029 (4th Cir. Mar. 21, 2019, amended Mar. 22, 2019)]
Thomson Reuters Practical Law

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Industry Groups and State and Federal Securities Regulators Grapple with Fiduciary Standards for Broker-Dealers and Private Fund Investment Advisers

"This Legal Alert provides an overview of recent efforts by regulators and industry groups to enact stricter BD and IA fiduciary obligations, as well as a summary of the central arguments at issue in the BD-IA duty debate.... [T]he tension between regulators and the industry ultimately seems to stem from a disagreement regarding how much responsibility rests with investors to understand the services they are buying and the protections that are included therewith."
Kilpatrick Townsend

American Workers Stressed About Finances, Look to Congress for Help

"[R]etirement security remains a primary focus, with nearly seven in 10 respondents saying they are concerned they will not have enough money to live comfortably in retirement.... Nearly eight in 10 workers say Congress should do more to expand access to retirement plans.... 68 percent believe policymakers should support retirement solutions that convert savings into a stream of lifetime income payments.... A majority of workers (53 percent) say they would not work for a company that didn't provide a retirement plan. And among employer-provided programs, workers rank retirement plans (74 percent) and life insurance (56 percent) as the most valuable in supporting their financial well-being."
Prudential

Why You Don't Want to Retire Retirement Planning

"[R]etirement has changed from the stereotype made popular in the 1960s. Better lifestyles and medical advances keep people active longer than used to be the norm and alive even longer.... [We'd] like the financial security and independence to be able to walk away and do other things, if that's what we prefer. Planning is required to reach that point, and it will resemble current retirement planning."
Forbes

Generating Income During Retirement

"After you've determined a reasonable portfolio withdrawal rate ... [1] Set aside a cash cushion ... [2] Manage your retirement portfolio sensibly ... [3] Boost your potential returns by investing tax-efficiently ... [T]he next question is: Where should the money come from? ... Dividends and interest versus selling shares.... Bonds maturing in the coming year.... Which investments should you sell? ... Required minimum distributions.... Tax bracket ramifications.... Securities held for slightly less than a year."
Charles Schwab

Benefits in General

[Official Guidance]

Text of IRS Disaster Relief Announcement NE-2019-02, for Victims of Severe Winter Storm, Straight-Line Winds, and Flooding in Nebraska

"Victims of the severe winter storm, straight-line winds, and flooding that took place on March 9, 2019 in Nebraska may qualify for tax relief ... Individuals who reside or have a business in Butler, Cass, Colfax, Dodge, Douglas, Nemaha, Sarpy, Saunders, and Washington counties may qualify for tax relief.... [C]ertain deadlines falling on or after March 9, 2019 and before July 31, 2019, are granted additional time to file through July 31, 2019."
Internal Revenue Service [IRS]

[Official Guidance]

Text of IRS Disaster Relief Announcement IA-2019-02, for Victims of Severe Storms and Flooding in Iowa

"Victims of the severe storms and flooding that took place on March 12, 2019 in Iowa may qualify for tax relief ... Individuals who reside or have a business in Fremont, Harrison, Mills, Monona and Woodbury counties may qualify for tax relief.... [C]ertain deadlines falling on or after March 12, 2019 and before July 31, 2019, are granted additional time to file through July 31, 2019."
Internal Revenue Service [IRS]

[Official Guidance]

DOL Fact Sheet: Guidance and Relief for Employee Benefit Plans Impacted by Nebraska, Iowa and Alabama Storms in March 2019 (PDF)

"The [DOL] has published employee benefit plan compliance guidance and relief for victims of the 2019 Nebraska Severe Winter Storm, Straight-line Winds, and Flooding ... 2019 Iowa Severe Storms and Flooding ... and the 2019 Alabama Severe Storms, Straight-line Winds, and Tornadoes.... [Special rules are provided for:] [1] Verification procedures for plan loans and distributions ... [2] Participant contributions and loan repayments ... [3] Blackout notices ... [4] ERISA claims compliance guidance."
Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL]

[Official Guidance]

DOL FAQs for Participants and Beneficiaries Following the Nebraska Iowa and Alabama Storms in March 2019 (PDF)

22 Q&As covering health and retirement plan benefits, including: [1] I think I may lose my health coverage because of a Covered Disaster. How can I obtain other health coverage? ... [2] I lost my spouse. My spouse's employer has agreed to pay the premiums for my health coverage for 12 months. Will that affect my future eligibility for continuation health coverage under COBRA? ... [3] My employer did not pay my insurance premium. May I pay the premium to continue my coverage? ... [4] How can I make changes in the way my 401(k) plan account is invested if it was affected by a Covered Disaster? ... [5] Can I get money out of my retirement plan if I need financial assistance now? ... [6] All of the records concerning my employment with the retirement plan sponsor and my participation in the retirement plan were destroyed as a result of a Covered Disaster. What do I do?
Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL]

Selected Discussions
on the BenefitsLink Message Boards

Eligibility:When Does This Participant Enter?

Eligibility is 18 and 1 year of service with immediate entry date. Computation period changes to Plan Year if service is not met during the initial computation period (date of hire to date of hire). Hired on 4/1/2017. As of 3/31/2018, employee had not completed 1,000 Hours of Service. So computation period changes to the Plan Year (1/1 -- 12/31). Question: on 7/10/2018, the employee attained 1,000 hours. Does the employee enter on 7/10/2018, or does he wait until the close of the 2018 year end and enter on 1/1/2019?
BenefitsLink Message Boards

Increase NRA for DB Plan Participant's Accrued Benefit?

Have a one-participant traditional DB plan that has existed for 4 years. The employer (and participant) never had, and never will have, any employees. The participant is age 55 and the plan currently has NRA of 62. If the participant's accrued benefit is grandfathered, is there any problem increasing the NRA to 65?
BenefitsLink Message Boards

Failed to Suspend Deferrals After Hardship -- Now What?

Participant took a hardship in 2018, but the employer did not suspend the deferrals. What to do now? I think we just suspend the deferrals for 6 months going forward. Right? What about the "no more suspension" rules for hardships?
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Pension Benefit Guaranty Corporation (PBGC): A Primer
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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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