Retirement Plans Newsletter

April 8, 2019

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Actuarial Analyst
RHI
in Spring TX

Director of Recordkeeping and Administration
Human Interest
in San Francisco CA

Senior ERISA Compliance Counsel
Hall Benefits Law
in Atlanta GA

Retirement Plan Consultant
National Associates, Inc. [Farmers National Banc Corp.]
in Cleveland OH

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[Official Guidance]

Massachusetts Division of Securities: Request for Comments on Proposed Amendments to Investment Adviser Disclosure Regs

"[T]he Division proposes amendments that would: [1] Require investment advisers registered in Massachusetts to provide clients and prospective clients with a table of fees for services provided by the investment adviser; and [2] Revise paragraphs (a) and (d) of the existing regulations to remove redundancy and potential ambiguity in those paragraphs as currently drafted."
Massachusetts Securities Division

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Will Association MEPs Be DOA?

"[T]he proposed regulation that would expand the available of 401(k) MEPs to associations uses language that is almost identical to what the [District] Court invalidated in [its ruling about Association Health Plans]. Since those same definitions apply to both health and retirement plans, logic suggests that DOL will either have to go back to the drawing board or wait to finalize the association retirement plan rules pending further appeal of this decision (which could take years). Alternatively, the DOL could consider removing associations from the proposed rule and finalizing it only with respect to PEOs."
DWC

How Secure Is a Securitization's 'Debt' Classification for ERISA Purposes?

"The Plan is alleging that the Trusts were plan-assets vehicles that were subject to ERISA, and that the defendants were ERISA fiduciaries that violated their fiduciary duties. In this regard, the plaintiffs generally alleged that, in light of the ERISA status of the investors that had acquired Notes, the Trusts were subject to ERISA because the Notes should be characterized as equity, rather than as debt, for ERISA purposes. The court, while seemingly skeptical of this claim, nonetheless declined to dismiss the case at this stage." [Powell v. Ocwen Financial Corp., No. 18-1951 (S.D.N.Y. Mar. 15, 2019)
Dechert

Pay to Play Lawsuits: Issues for Plan Sponsors

"In the typical case that has (thus far) been decided, courts have dismissed plaintiffs' claims, finding that the platform provider is not a fiduciary and/or that the transaction has been approved by the sponsor fiduciary.... [Do] these arrangements pose an ERISA prudence challenge for sponsor fiduciaries? ... [T]he key question is likely to be, is the plan overpaying for these services? And the answer to that question is likely to turn on the issue of fair market value and the cost of alternative solutions."
October Three Consulting

Retirement Plan Funding Status Update, April 2019

"The month of March gave back some of the funded status gains since the beginning of the year. For most plans, gains since the beginning of the year should still be up by about 1% to 2%. Equities added to 2019's strong returns, with global equities up over 10% year to date."
River and Mercantile Solutions

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Bipartisan Retirement Legislation: Chance of Passage Goes Up

"On April 2, 2019, the House Ways and Means Committee approved bipartisan retirement legislation titled the 'Setting Every Community Up for Retirement Enhancement Act of 2019' (SECURE Act, H.R. 1994).... The SECURE Act's prospects for enactment in this Congress are good as it is the result of a multi-year, bipartisan process and has the support of many key lawmakers."
Groom Law Group

IBEW Local 237 Letter to IRS Withdrawing Application for MPRA Benefit Suspension (PDF)

"The Plan fully intends to submit ... a resubmission review under MPRA as soon as practicably possible. If not permitted, the Plan intends to submit a new application for approval of suspension of benefits under MPRA on or before June 30, 2019."
U.S. Department of the Treasury

Editor's Pick Defined Contribution Plan Fee and Investment Litigation (PDF)

34 presentation slides, from ABA EBC 2019 Midwinter Meeting. Topics: [1] 401(k) and 403(b) fee litigation; and [2] Fiduciary risk on alternative investments.
Employee Benefits Committee [EBC], American Bar Association

Retirement Preparedness and Expectations of the Boomer Generation, 2019 Update (PDF)

24 pages. "[B]oomers are largely unprepared for retirement: unrealistic in their expectations, and under-saved. In fact, 45 percent have no retirement savings.... [M]any of those with savings are either unwilling to engage in actions that can ensure efficient and sustainable income is created from their savings, or unaware of the need to take such action.... However, there are bright spots, especially for those boomers still in the work force -- while higher wealth certainly helps, it is professional advice and guidance, and ownership of annuities, that translate into security and peace of mind."
Insured Retirement Institute [IRI]

[Opinion]

American Academy of Actuaries Comments to PBGC on Proposed Methods for Computing Withdrawal Liability under MPRA (PDF)

"PBGC might want to consider making a clearer statement in the regulations that the new rules apply prospectively only, to prevent unintended consequences with respect to prior withdrawal liability determinations.... PBGC would do well to consider clarifying that the simplified methods described in the proposed regulation are 'safe harbor' methods, but that alternate simplified methods could be appropriate as well.... PBGC might consider clarifying the point at which the de minimis credit under section 4201(b)(1) of ERISA is applied in determining an employer's withdrawal liability."
American Academy of Actuaries

Benefits in General

[Official Guidance]

Second Quarter Update to Treasury Department 2018-2019 Priority Guidance Plan (PDF)

36 pages. "The 2018-2019 Priority Guidance Plan sets forth guidance priorities for the Department of the Treasury and the [IRS] based on public input, and taking into account the deregulatory policies and reforms described in Section 1 of Executive Order 13789 ... and Executive Order 13771[.]" [Employee benefit items begin on page 15.]
Internal Revenue Service [IRS]

Editor's Pick Engagement Letters for Employee Benefits Attorneys (PDF)

7-page presentation outline, from ABA EBC 2019 Midwinter Meeting."An initial issue ... is whether employee benefit plans are an independent legal person, different than the plan sponsor. On this issue, the law is not only obtuse, but the federal circuits have conflicting lines of authority.... For pension plans, is the plan sponsor or the plan administrator, if different entities, the proper party to act for the plan? ... For fully insured welfare benefit plans, is the insurer also the plan and thus the proper party? For engagement letters, this issue can often be finessed by an arrangement that does not resolve it but makes it not relevant."
Employee Benefits Committee [EBC], American Bar Association

Editor's Pick Benefit Claims: Alternatives to Litigation (PDF)

16 presentation slides, from ABA EBC 2019 Midwinter Meeting. Topics: [1] Pre-suit settlement negotiations; [2] Media coverage; [3] External review; and [4] Request for review strategies.
Employee Benefits Committee [EBC], American Bar Association

Senate Committee Eyes Lack of Guidance on ERISA Cybersecurity

"There is no definitive answer to the question of whether the sponsor of a benefit plan is subject to the fiduciary standards of ERISA with respect to implementing cybersecurity measures to protect participants' financial data ... Acknowledging a complete lack of guidance, on February 12, 2019, the Senior Pensions Counsel for the Senate Committee on Health, Education, Labor, and Pensions sent a letter to [GAO] requesting guidance ... on issues related to cybersecurity and the private retirement system."
Trucker Huss

Executive Compensation
and Nonqualified Plans

[Guidance Overview]

Editor's Pick Interim Guidance Under Section 4960: Excise Taxes and Parachute Payments (PDF)

"[This article provides] an overview of Section 4960, summary of the positions taken in [Notice 2019-09], and discussion of whether such positions resolve patent ambiguities or represent interpretations that are aggressive (in our view) or likely to prove administratively daunting, troublesome, or costly to ATEOs, their boards, and management."
Mintz

Selected Discussions
on the BenefitsLink Message Boards

Permissive Aggregation for Coverage Testing

I'm looking at a situation where an employer has an ESOP and a 401(k) plan. The 401(k) plan provides deferrals and a safe harbor match only. The census/testing results provided for the ESOP are confusing at best, but it APPEARS that the ESOP failed the 70% ratio test for coverage. It further appears that the ESOP was then permissively aggregated with the 401(k) to "allow" it to pass coverage. Under the mandatory disaggregation rule in 1.410(b)-7(c)(2), it would appear that for coverage purposes, an ESOP plan (or portion of plan) can't be permissively aggregated even with another non-ESOP Profit Sharing plan (or portion of plan), other than as provided in 54.4975-11(e), much less with a 401(k) or 401(m). Am I missing something?
BenefitsLink Message Boards

Ineligible HCE Deferred Before Entry Date; How to Correct?

I have a highly compensated ineligible participant who deferred into the 401(k) Plan before her entry date. EPCRS and the SCP say you can correct this by a retroactive amendment if the participants are predominately NHCE's. How do I correct it since this is a HCE?
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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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