Retirement Plans Newsletter

April 24, 2019

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Erickson, Brown & Kloster, P.C.
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Retirewell Administrators, Inc
in Marlton NJ

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[Guidance Overview]

Corrections Made Easier: IRS Expands the Self-Correction Program

"While it considers loan problems corrected under VCP to be fully corrected for ERISA purposes, the [DOL] does not give that same deference to self-correction under EPCRS. Therefore, if the plan sponsor or participant wants to be sure that the loan does not represent a prohibited transaction or that excise taxes are not accruing, a separate filing under the DOL's Voluntary Fiduciary Correction Program will be required.... The new procedure allows self-correction by amendment in many more situations.... [In] order to self-correct these issues, the correction must be done before the end of the second year following the year in which the error occurred."
Ferenczy Benefits Law Center

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[Guidance Overview]

IRS Makes Significant Improvements to EPCRS in Rev. Proc. 2019-19

"[O]perational mistakes can result in participants receiving higher benefits than were called for under the terms of the plan. If the plan sponsor is willing to provide for the higher benefit, this type of mistake can now be corrected through a retroactive conforming amendment."
Trucker Huss

[Guidance Overview]

IRS Updates Correction Program for Retirement Plans

"[Rev. Proc. 2019-19] expands SCP in several important ways, which will facilitate compliance for plans while reducing applicable costs and burdens.... [1] Correction of certain plan document failures ... [2] Correction of certain plan loan failures ... [3] Correction of certain operational failures by plan amendment ... [4] Spousal consent."
McGuireWoods

[Guidance Overview]

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

"[1] Who has to comply with the proposed rule? ... [2] What is the anticipated timeline for a final rule? ... [3] What will be different under the proposed rule? ... [4] When do Registrants owe customers the fiduciary duty? ... [5] What would be the consequences of a violation of the Proposed Rule (if implemented as drafted)? ... [6] Why didn't New Jersey wait on the SEC's Reg BI?"
Kilpatrick Townsend

Ninth Circuit Opinion: City National Violated ERISA by Setting Own Fees as Recordkeeper (PDF)

From the published summary: "[T]he panel held that City National Corporation engaged in prohibited self-dealing under ERISA Section 406(b) by setting and approving its own fees from Plan assets for serving as its own recordkeeper. The panel held that this conduct was not exempted under ERISA Section 408(c)(2) as 'reasonable compensation' for services provided by a fiduciary such as recordkeeping services. The panel held that the 'reasonable compensation' exemption does not apply to prohibited self-dealing, including where a self-dealing fiduciary seeks the exemption for actual and legitimate services rendered." [Acosta v. City National, No. 17-55421 (9th Cir. Apr. 23, 2019)]
U.S. Court of Appeals for the Ninth Circuit

[Advert.]

Handling QDROs, QMCSOs And Other Benefits Issues When An Employee Divorces

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Triple Stack Match Formula Can Maximize Contributions Without Discrimination Testing

"The triple stack match may be a great way to get around cross-testing, but it creates an even greater emphasis on making sure that each participant that does not want to defer received the safe harbor notice and still does not want to defer. A budget risk to an employer that adopts a triple stack match formula is that the NHCEs who weren't deferring previously will now be compelled to defer 6% of their wages, since the plan's match is well over 200% of up to 6% of deferrals."
Belfint Lyons Shuman

Monitoring Fund Menus Can Improve Performance (PDF)

24 pages. "[Using] a unique longitudinal data set of plan menus ... that includes 3,478 fund replacements, [the authors] find significant evidence that the replacement fund outperforms the replaced fund over both future one-year and three-year periods.... This analysis suggests that monitoring fund menus can improve performance, although more research on why this effect occurs is warranted."
Morningstar Advisor

ERISA Advisory Council Finds Noncompliance With ERISA Fidelity Bond Rules

"[T]he ERISA Advisory Council is recommending that the [DOL] relaunch the updated rules it published in [FAB 2008-04], this time focusing directly on plan sponsors and other plan officials and plan service providers as the targeted audience.... [T]he Council says the instances of noncompliance are concentrated in the small plan market[.]"
planadviser

ERISA Advisory Council Recommends Safe Harbor for Lifetime Income

"[The Council] recommended that the DOL amend the qualified default investment alternative [QDIA] rule to address ... the permissibility of including fixed annuities, living benefits and other lifetime income approaches in a QDIA, and address the importance of tailoring QDIA options to affected participants, similar to rules applicable to QDIA balanced funds."
Pensions & Investments

Is a Solo 401(k) or a SEP-IRA Better for a Small Business with No Employees?

"Depending on the time of year you ask this question, you may find you've eliminated one of the options right off the bat.... Is there a chance you might want to wait until after the tax year to fund the plan? ... Are you looking for the simplest and easiest option? ... Do you want a Roth Option? ... Do you want to make the highest possible contribution? ... Do you earn more than $280,000? ... Do you want to contribute your entire earnings? ... Are you age 50 or above and wish to take advantage of a catch-up provision? ... Do you think you might need to take a loan from your retirement savings? ... Do you expect to hire employees in the future?"
Forbes

Quarterly Survey of Public Pensions: Summary for 2018 Q4 (PDF)

"For the 100 largest public-employee pension systems in the country, assets (cash and investments) totaled $3,640.1 billion in the fourth quarter of 2018, decreasing by 6.1 percent from the 2018 third quarter level of $3,877.9 billion. Compared to the same quarter in 2017, assets for these major public-pension systems decreased 4.4 percent from $3,806.1 billion."
U.S. Census Bureau

[Opinion]

Social Security Trustees Report Shows Modest Improvement in Financial Outlook

"What will happen if the trust fund is exhausted in 2035, as projected? Social Security is mostly a pay-as-you-go program, so current revenues will still be sufficient to cover 80 percent of promised benefits.... [T]he system would survive, and beneficiaries would still be better off than under some 'reform' proposals that would preemptively cut benefits more ... While momentum is growing to shore up the program and expand benefits through increased revenues, so far this is not a bipartisan movement."
Economic Policy Institute

Benefits in General

[Guidance Overview]

Editor's Pick UBIT Changes for Benefit Plan Investors and the 2018 Tax Year Filing Season

"Effective for tax years beginning after December 31, 2017, benefit plans with two or more unrelated trades or businesses will no longer be able to 'net' the income and losses of the businesses in the aggregate when determining UBIT.... A key area of uncertainty in this area is whether each investment held by a plan would be viewed as a separate 'trade or business,' or alternatively, whether a plan can consider all investments of the same 'type' (e.g., all real estate investments or all private equity funds) as a single trade or business. [IRS Notice 2018-67] provides a variety of rules that plans may apply to simplify the impact of this change."
Groom Law Group

2019 American Bar Association Midwinter Meeting Report on Employment Discrimination and Employee Benefits (PDF)

8-page report of 2018 regulatory and litigation developments. Topics include: [1] Benefits issues for same-sex spouses, domestic partners, and transgender individuals; [2] Equal Pay Act; [3] Age Discrimination in Employment Act; [4] Americans with Disabilities Act; [5] Wellness programs; and [6] Interference with protected rights under ERISA Section 510.
Employee Benefits Committee [EBC], American Bar Association

2019 American Bar Association Midwinter Meeting Report on Issues Unique to Jointly Administered Plans (PDF)

11-page report of 2018 regulatory and litigation developments. Topics include: [1] Legislation and regulation of jointly administered plans; [2] Substantive requirements of Section 302(c)(5) of the Taft-Hartley Act; [3] Criminal liability under Section 302 of the Taft-Hartley Act; [4] Actions to enforce the contribution obligation; [5] Funding rules for multiemployer plans; [6] Multiemployer Pension Plan Amendments Act -- plan termination insurance; [7] Coal Industry Retiree Health Benefit Act of 1992.
Employee Benefits Committee [EBC], American Bar Association

Selected Discussions
on the BenefitsLink Message Boards

Questions About Recent Private Letter Ruling Approving a Student Loan 401(k) Program

I've read the IRS private letter ruling to Abbott that was used to implement the student loan contribution arrangement under a 401(k) plan. My client just launched a student loan program, under which the employer's contribution will be a QNEC. Was the nonelective contribution by Abbott a QNEC? Can the plan sponsor place a last day/1000 minimum hours requirement on the contribution?
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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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