Retirement Plans Newsletter

April 22, 2019

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Jobs

Section 125 Administrator
401 Plans
in Simi Valley CA

Retirement Plan Administrator
Great Lakes Pension Associates, Inc.
in Farmington MI

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Webcasts, Conferences

Employee Benefits Briefing
May 14, 2019 in NY
Nixon Peabody LLP

Defined Benefit Plan Document Workshop [2019] - Part 2
June 17, 2019 WEBCAST
FIS Relius Education

Top Heavy Testing
July 23, 2019 WEBCAST
ASPPA [American Society of Pension Professionals & Actuaries]

Vesting Computation Changes
July 24, 2019 WEBCAST
ASPPA [American Society of Pension Professionals & Actuaries]

►See 179 Upcoming Webcasts and Conferences

►See 1518 Recorded Webcasts


Discussions

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[Guidance Overview]

IRS Eases Correction Procedures

"The rules for correction by plan amendment have been greatly loosened by [Rev. Proc. 2019-19]. Such correction is appropriate in instances in which a plan was not operated in accordance with its terms. Such an operational failure may be corrected under SCP by an appropriate plan amendment if three conditions are satisfied ... In determining whether a plan loan failure can be corrected under SCP, the first question is whether the failure is one covered by the [DOL's] Voluntary Fiduciary Correction Program (VFCP). The VFCP provides for a no-action letter for a defaulted loan failure corrected under VCP, provided the conditions of the VFCP are met. However, the same relief does not apply if the loan failure is corrected under SCP."
Venable LLP

Correction of Plan Loan Problems: IRS Helps Those Who Help Themselves

"While [Rev. Proc. 2019-19] provides welcome relief for the most common loan failures, there are several loan-related errors that still require formal IRS approval. [1] Loans that exceed statutory maximum amount -- generally 50% of a participant's vested balance; [2] Loans that exceed the statutory limit as to duration -- five years unless for the purchase of a primary residence; [3] Requests to have a deemed distributed loan taxed in the year of correction rather than the year of the failure; and [4] Corrections that also qualify for DOL approval.... Even though the IRS now accepts self-correction of certain loan failures, the DOL still does not."
DWC

Editor's Pick 2019 American Bar Association Midwinter Meeting Report on Corporate Pension Plan Terminations and Benefit Insurance (PDF)

18-page report describes 2018 developments, including litigation, plan terminations, and statutory and PBGC regulatory developments.
Employee Benefits Law Committee, American Bar Association

2019 American Bar Association Midwinter Meeting Report on Regulation of Qualified Retirement Income Plans Generally (PDF)

11-page report of regulatory developments for qualified plans during 2018.
Employee Benefits Law Committee, American Bar Association

New Jersey Releases Proposed Fiduciary Rule for Broker-Dealers and Investment Advisers

"[T]he Proposed Rule would establish a uniform fiduciary standard for IAs, investment adviser representatives, and most BDs and BD agents doing business (i.e., providing investment advice or soliciting trades) in New Jersey with clients that have less than $50 million in assets."
Kilpatrick Townsend

[Advert.]

Fiduciary Protection for Default Investments in 401(k) and Other Retirement Plans

Sponsored by Lorman and BenefitsLink

Apr. 30 webinar. Review basic fiduciary standards and duties, and how ERISA Section 404(c) may relieve fiduciaries of these duties for a participant's directed investment. BenefitsLink discount.


Proposed Tweaks to the 401(k) System Are Small Ball, But Welcome

"The Secure Act ... boosts incentives for small businesses to offer their employees 401(k)s and to enable the businesses to enroll employees automatically once a plan is in place. It enables part-time workers to join 401(k)s. Also, it raises from 70-1/2 to 72 the age at which [IRAs] must be tapped.... [T]he Secure Act includes offsets for most of its $5.7 billion in new tax breaks over the next five years, and is fully paid for over a decade."
The Washington Post; subscription may be required

LIfetime Income Annuities Support Higher Success Rates in Retirement (PDF)

16 pages. "Adding an income annuity to a retirement portfolio provides the same or higher income with lower risk of outliving savings than an investments-only approach. Income annuities allow a retiree to spend at a level that investments alone couldn't match without significant risk of running out of money before age 95. Using both annuities and investments can enhance the legacy value of assets over the long term."
Principal Financial Group

An Annuity Payment Option May Be Coming to Your 401(k) -- Should You Take One?

"People who should annuitize typically want higher levels of certainty with respect to their retirement income, are less concerned about leaving a bequest, have above-average health/life expectancy, and like the fact that they don't have to worry about figuring out how much they can withdraw from their portfolio each year during retirement (or having to pay someone to do it for them). Plenty of evidence suggests retirees don't like to spend down their savings, and therefore anything that provides an automatic paycheck (like an annuity) typically makes that process easier."
The Wall Street Journal; subscription may be required

The Case for Taking Your Pension as a Lump Sum

"A lump sum affords complete control of your funds. It avoids dependence on the company's solvency. It also offers many distribution options. It gives the investor more control over their tax liability.... A lump sum rollover into an IRA also 'quarantines' the employee's funds, thereby mitigating the risk of a reduction in pension benefit, which may occur in the event of a company's bankruptcy."
Kiplinger

California Employers: Get Ready for the CalSavers Program

"Employers ... should pause to re-examine their earlier decisions against maintaining a retirement plan for employees. The benefit of sponsoring your own plan is that it will bear the 'brand' of your business and will serve to attract and retain quality employees. Further, the administrative functions you must fulfill in order to participate in CalSavers are comparable to those required by a SEP or SIMPLE plan, both of which offer larger contribution limits and an employer deduction to boot."
E is for ERISA

2019 OASDI Trustees Report (PDF)

270 pages. "The reserves of the combined OASI and DI Trust Funds along with projected program income are adequate to cover projected program cost over the next 10 years under the intermediate assumptions.... OASDI cost is projected to exceed total income starting in 2020, and the dollar level of the hypothetical combined trust fund reserves declines until reserves become depleted in 2035.... Considered separately, the OASI Trust Fund reserves become depleted in 2034 and the DI Trust Fund reserves become depleted in 2052. In last year's report, the projected reserve depletion years were 2034 for OASDI, 2034 for OASI, and 2032 for DI."
U.S. Social Security Administration [SSA]

Benefits in General

Addressing 401(k)s, Health Benefits and Compensation After a Merger or Acquisition

"When the buyer and seller both sponsor a 401(k) plan, a common integration strategy is for the buyer to continue its plan for both its employees and the employees it acquires in the transaction... [T]he parties should enter into a transition services agreement outlining their rights and responsibilities during the transition period.... [T]he buyer should obtain the information necessary to fulfill ACA reporting requirements for the next year as well as the data necessary to transition the seller's former employees onto the buyer's hours tracking system for purposes of ACA's 'pay or play' employer mandate. When the seller sponsors a flexible spending account (FSA), the parties must decide whether the buyer will transmit contributions to the seller's plan for the remainder of the year or transfer the seller's employees (along with their elections and account balances) to the buyer's plan."
Voya

Editor's Pick 2019 American Bar Association Midwinter Meeting Report on Plan Fiduciary Responsibilities (PDF)

54-page report of 2018 plan fiduciary litigation, including [1] applications and limitations of the functional fiduciary standard; [2] Section 404 standards and application; [3] duty to protect against violations by other fiduciaries; [4] prohibited transactions; and [5] statute of limitations.
Employee Benefits Law Committee, American Bar Association

Selected Discussions
on the BenefitsLink Message Boards

Determining What Are Salary Deferrals: Employee Has Annual Choice of Higher Pay or Deferral of That Amount

It seems to me this plan sponsor is avoiding FICA tax.... The plan sponsor has a job-defined pay scale and adds a percentage to each employee's wages based on years of service. This added percentage ranges from 2% to 16% of their job-defined wages. There are no key employees and no HCEs. The plan sponsor is a church. Each year, the plan sponsor allows each eligible employee (separately) to determine whether their percentage of pay based on years of service is paid as wages or whether it is deposited into the plan as an employer contribution FBO the employee. Should these "employer" contributions be considered employee salary deferrals?
BenefitsLink Message Boards

Too Few Deferrals Taken from Participants' Paychecks: How to Correct?

We had a new earnings code used for group of associates on our last payroll that was not set up correctly as 401k eligible. It was caught after 1 payroll. So there were some whose contribution was not calculated on the entire amount of their earnings. We propose to tell everyone affected that they can increase their deferrals to make up for any part on their end, and that our match true-up at year-end will apply to such additional deferrals. Comments?
BenefitsLink Message Boards

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Press Releases

Most Popular Items in the Previous Issue

How Employers Are Tackling Student Loan Debt (PDF)
Employee Benefit Research Institute [EBRI]

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Lois Baker, J.D., President  loisbaker@benefitslink.com
David Rhett Baker, J.D., Editor and Publisher  davebaker@benefitslink.com
Holly Horton, Business Manager  hollyhorton@benefitslink.com

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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