Retirement Plans Newsletter

April 23, 2019

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DB / DC Administrator
Primark Benefits
in Burlingame CA / Telecommute

Defined Contributions Administrator
Primark Benefits
in Burlingame CA / Telecommute

Regional Vice President, Retirement Plan Sales
Ascensus
in Miami FL

Retirement Contribution Processor
Alerus Financial
in Arden Hills MN

Retirement Services Associate
Alerus Financial
in East Lansing MI

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Fee Litigation 2018 Round-Up: Recent Developments and Best Practices to Mitigate Risk (PDF)

36 pages. "[T]he overall pace of new cases substantially decreased when compared to the 2015 to 2017 time period ... Plaintiffs continued to have success in the initial stages of 403(b) lawsuits ... [D]efendants' success increased in claims challenging in-house or proprietary funds offered in plans ... The First and Ninth Circuits affirmed decisions that dismissed stable value fund claims ... Defendants had some success on statute of limitations arguments, but the Ninth Circuit's ruling ... that a plan participant was not held accountable to read plan documents provided him may limit this trend ... The enforceability and effect of arbitration agreements has become a frequent focus of litigation[.]"
Benefits Law Journal

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Editor's Pick Investment Committees: Techniques to Improve Their Effectiveness (PDF)

25 pages. "Investment committees steward millions or billions of dollars in assets, and their ability to function effectively as a team can have a tremendous and long-lasting impact on the performance of those assets. For this reason, it is worth applying intention and focus to committee structure and decision-making. This paper outlines the fundamentals of building and maintaining a successful investment committee."
Arnerich Massena

Proposed New Jersey Fiduciary Rule Far Exceeds SEC Proposed Regulation Best Interest and the DOL's 2016 Rulemaking

"[A] financial professional would be presumed in breach of the duty of loyalty for certain recommendations that are not the best of the reasonably available options. Additionally, the proposal permits transaction-based compensation only if it is the best of the reasonably available fee options. Non-retail consumers are excluded from coverage by the regulation, including banks, broker-dealers, investment advisers, insurance companies, and persons with at least $50 million in assets.... New Jersey's proposal also does not apply to persons acting in the capacity of ERISA fiduciaries."
Groom Law Group

Proposed New Jersey Rule Progresses State Efforts to Impose Fiduciary Duties on Brokers

"While the proposed rule merely codifies the fiduciary duty already owed to customers by investment advisers, it would impose a heightened standard of care on broker-dealers.... [T]he proposed rule also creates a presumption that the duty of loyalty is breached where an investment professional offers or receives any compensation when recommending or trading in customer accounts securities that are 'not the best of the reasonably available options.' "
McGuireWoods

Finding the Right Words: Enhancing Retirement Plan Participant Communications

"[I]nvestments are no longer a primary source of confusion for retirement plan participants.... [W]ithdrawals were found to be the most confusing topic, followed by rollovers, and employer matches.... [R]etirement plan communications typically use jargon rather than wording participants can easily understand, exacerbating the complexity of the topic."
Cammack Retirement Group

[Advert.]

2019 SPARK National Conference -- June 4-5, Falls Church, VA

Sponsored by SPARK

The retirement services industry's leading event for top marketing, sales, administration and record keeping professionals. Comprehensive agenda is designed to meet the needs of 401(k) Plan Providers, Financial Advisors and Record Keepers.


IRS Expands Self-Correction Program for Retirement Plan Errors

"Effective immediately, [Rev. Proc. 2019-19] provides plan sponsors and practitioners long-desired participant loan correction relief, as well as greatly expands the types of failures that can be corrected by retroactive amendment through the Self-Correction Program (SCP)."
Holland & Hart LLP

IRS Updates EPCRS and Expands Self-Correction Program

"The user fee for a VCP submission currently ranges from $1,500 to $3,500, depending on total plan assets. The SCP expansion should reduce the number of VCP submissions that plan sponsors must make, thereby saving the time and expense involved in preparing a submission. As participant loans are a frequent source of errors in 401(k) plans, plan sponsors should pay particular attention to the loan changes. Even with the changes, not all loan failures can be self-corrected."
Thomson Reuters Practical Law

Tools and Tripwires Involved in Supporting Charitable Work Abroad

"A QCD is a direct transfer of funds from an IRA custodian to a qualified charity.... Likely the biggest tripwire, however, for individuals who want to participate in rebuilding and restoring the Notre Dame Cathedral or other tragedies occurring abroad is the restriction against transferring funds offshore from an IRA. To be a qualified distribution, the transfer must be made to a charity qualified to receive charitable contributions under the United States tax laws. Organizations being named in media reports as potential donees may not be eligible as they may be foreign organizations not recognized as eligible for receipt of a tax deductible charitable contribution for U.S. federal income tax purposes."
Jackson Walker

Social Security Costs to Exceed Income in 2020, Trustees Say

"The new projection ... is rosier than one made in their 2018 annual report, which anticipated the program would run in the red by the end of last year. The improved forecast stems in part from the health of the labor market, which has boosted workers' paychecks and fueled higher tax revenue. But the programs' unsustainable long-term outlook is little changed from last year."
The Wall Street Journal; subscription may be required

Tax Law Fallout Changes Decisions for Retirement Savings

[I]increasingly, the only way for most people to reduce their taxes ... requires the make a retirement plan contribution.... The 199A deduction is based on net income (after retirement plan contributions) so the retirement plan contributions can actually reduce the tax benefit of the 199A deduction.... Over the last decade or so there's been a developing consensus around the concept of 'tax diversification' in retirement plans. This involves combining both tax-deferred and after-tax retirement savings into one coherent strategy."
Fiduciary News

Many Americans Confident About Current Financial Health But Lack Confidence in Retirement Future (PDF)

"62% of respondents feel confident about their current financial health ... 75% of respondents range from feeling only somewhat confident to not confident at all about their retirement finances ... When asked if they had a financial plan in place for retirement, only 18% have one documented ... What retirement unknowns worry people the most? Health care is concern No. 1."
Fidelity

[Opinion]

America's Retirement System Is a Mess -- This New Legislation Can Help

"While it's probably unrealistic to expect a return to widespread pension coverage, this new legislation fosters better retirement security by encouraging employers to include annuities as an option their employees can buy with their payroll retirement contributions. With annuities, retirees purchase their own pensions from an annuity provider, and receive that money back as regular payments for as long as they live -- ensuring a steady stream of income throughout their retirement."
The Brookings Institution

Benefits in General

Editor's Pick 2019 American Bar Association Midwinter Meeting Report on ERISA Preemption and Effect on Other Laws (PDF)

34-page report summarizes 2018 litigation, including [1] Scope of ERISA Section 514; [2] Definition of employee benefit plan; [3] Level of employer involvement necessary for the establishment or maintenance of a plan; [4] Arrangements excluded by statute or regulation; [5] Circuit Court attempts to define the boundaries of preemption; [6] Lack of ERISA standing; [7] Removal issues; and [8] Application of preemption to particular claims.
Employee Benefits Committee [EBC], American Bar Association

Editor's Pick 2019 American Bar Association Midwinter Meeting Report on Reporting and Disclosure (PDF)

25-page report of 2018 plan regulatory and litigation developments.
Employee Benefits Committee [EBC], American Bar Association

Editor's Pick 2019 American Bar Association Midwinter Meeting Report on Benefit Claims and Individual Rights (PDF)

72-page report summarizes cases decided during 2018.
Employee Benefits Committee [EBC], American Bar Association

Selected Discussions
on the BenefitsLink Message Boards

Changing from Eligible Class to Excluded Class

The plan excludes "seasonal" employees. If an employee goes from working 1000 hours a year and being eligible to then working less than 1000 hours and becoming labeled "seasonal", do they then become ineligible to contribute? If so, upon what day are they considered ineligible? For example, the lifeguard worked 1001 hours in 2017 and entered the plan on 1/1/18 (semi-annual entry dates), but then the next summer he only worked 600 hours. Can he become ineligible on 7/1/18, or does he need to complete the year in order to see total hours and then he becomes excluded on 1/1/19?
BenefitsLink Message Boards

Effect of Family Aggregation on Rules for Required Minimum Distributions

[1] Does family attribution apply for purposes of required minimum distributions? A 70-1/2 year old man is an employee of his wife's company. Is he considered to be a "more than 5% owner" for RMD purposes? A different question: [2] If someone starts taking RMDs, and later discovers she doesn't have to (never should have started), does she have to keep taking RMDs each year?
BenefitsLink Message Boards

Safe Harbor Plan -- Mid-Year Amendment to Reduce Requirements for Deferral Eligibility?

Can you amend the eligibility requirements for salary deferrals to be more relaxed mid-year while keeping the Safe Harbor NEC requirements at 1 year?
BenefitsLink Message Boards

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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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