Retirement Plans Newsletter

April 29, 2019

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Senior Legal Editor
Bloomberg, BNA
in Arlington VA

Director, Retirement Plan Administration Services
Ascensus
in Franklin TN

Vice President, Relationship Management
Ascensus
in Newton MA / Telecommute

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Including ESG Funds in a 401(k) Plan Fund Menu: Fiduciary Considerations

"[It] is probably most useful to think of an ESG fund as implementing a particular style of active management, and to evaluate and monitor its performance and suitability (as an investment option) using the same economic criteria that would be used for any other actively managed fund.... [P]laintiffs' challenges ... to the inclusion of actively managed funds in plan fund menus have in some cases been difficult to prove."
October Three Consulting

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Increase Expected Return on Pension Assets at the Same (or Lower) Level of Funded Status Risk

"It is possible for pension plan sponsors to increase expected returns on assets by 100 to 300 basis points (1-3%) per year for the same or lower funded status risk.... Step 1: Hedge uncompensated interest rate risk ... Step 2: Replace that same funded status risk with return-seeking synthetic equity ... Step 3: Consider shaping the potential outcomes of the return-seeking assets to reduce funded status volatility."
River and Mercantile Solutions

Proposed Legislation Would Provide Plan Sponsors Opportunity to Provide 401(k) Match on Student Loan Repayments

"[T]he Retirement Parity for Student Loans Act ... would allow employers to pair student loan payments with 401(k) savings.... [by giving] employers the option to match student loan payments with 401(k) contributions. Currently, contingent benefits rules make it difficult for employers to link workplace benefits in this fashion and so few employers choose to do so."
Hall Benefits Law

Common Retirement Plan Operational Errors

"Two decades of plan audits have shown time and time again that even the most accurate plan sponsor is not immune from making one of the common errors ... The latest update of the EPCRS program, Revenue Procedure 2019-19 did not change [these] corrections ... [1] Automatic enrollment omissions ... [2] Elective deferral elections not observed ... [3] Distributions to ineligible participants and other overpayments ... [4] Excess annual additions to participant accounts."
Belfint Lyons Shuman

Recordkeeper Consolidation Creates a Smaller Pool of Plan Sponsor Choices

"The trend of recordkeeper consolidation has been ongoing since at least 2009. In fact, an analysis of the top 20 recordkeepers by assets in 2009 versus 2017 ... finds only four have not pursued an acquisition-based growth strategy... [I]nvestment providers realized they could use recordkeeping to have assets flow into their asset management business, but over the years they realized recordkeeping is complicated -- and that demanding clients want complex administration support.... [T]he constant top four or five recordkeepers today ... are clearly in the investment management business foremost, but found a way to break even at least on recordkeeping and fuel their investment management business."
PLANSPONSOR; free registration may be required

Benefits in General

Partnership Compensation and Benefits: Traps for the Unwary

"[P]artners are not able to participate in cafeteria plans, so this favorable tax treatment is not available ... [S]ome employee welfare or fringe benefits are entirely unavailable to partners, such as educational assistance, qualified employee discounts and working condition fringe benefits.... The partner, however, may ultimately be allowed to deduct amounts he or she pays for these benefits on his or her tax return.,,, [A] partnership's matching contribution to a partner's 401(k) is generally treated as a guaranteed payment and would be subject to self-employment taxes (but not income taxes)."
Alvarez & Marsal

Executive Compensation
and Nonqualified Plans

[Guidance Overview]

The Section 4960 Excise Tax: Application to Tax-Exempt and Affiliated Taxable Entities

"In situations where a for-profit related organization pays the lion's share of the covered employee's remuneration, the for-profit entity could be responsible for a large portion of the excise tax.... Related organizations that are publicly traded should note that any remuneration paid to a covered employee for which a deduction is not allowed by reason of Section 162(m) is not taken into account for purposes of Section 4960."
Wilmer Hale

Selected Discussions
on the BenefitsLink Message Boards

Late Offset of Participant Loan

We're taking over a 401(k) plan. A participant has an outstanding loan balance. She terminated employment in 2017, continued making payments until June of 2018, then stopped making payments. The prior TPA should have had the loan offset as of 9/30/2018, the end of the cure period. I need to offset the loan now, but it's been accruing interest since last June. I will request that the recordkeeper (Hancock) offset the loan using the balance on 9/30/2018, which is the date this should have been done. Do you agree?
BenefitsLink Message Boards

Timing of Grace Period for SIMPLE Employer Eligibility

Does the grace period for SIMPLE employer eligibility apply if an eligible employer started a plan mid-year but then employed over 100 employees with compensation over $5,000 later that same year?
BenefitsLink Message Boards

Handling a QDRO Following Remarriage

The series of events is as follows: [1] the parties divorce, [2] a QDRO is filed with the court, [3] the parties re-marry each other, [4] participant dies, [5] widowed alternate payee submits QDRO to the Fund for the first time after his death. My only question is: does the existence of a valid QDRO nullify the J&S benefit to the AP? Does she get both?
BenefitsLink Message Boards

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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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