[Official Guidance]
Text of PBGC Interest Rate Update for Benefits Payable in Terminated Single-Employer Plans, June 2019
"The June 2019 lump sum interest assumptions will be 1.00 percent for the period during which a benefit is (or is assumed to be) in pay status and 4.00 percent during any years preceding the benefit's placement in pay status. In comparison with the interest assumptions in effect for May 2019, these assumptions represent no change in the immediate rate and are otherwise unchanged."
Pension Benefit Guaranty Corporation [PBGC]
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PBGC Coverage Determinations Could Become Easier
"A new [PBGC] coverage determination form with instructions could streamline and standardize the task of requesting whether a defined benefit plan is covered by the agency's plan termination insurance program. Under a one-year pilot program, employers could also use the form to request opinion letters about certain plans not yet established. Comments on the draft form and instructions ... are due by June 7."
Mercer
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Proposed IRS Regulations Liberalize Rules for Hardship Withdrawals
"[T]he lowest income quartile of participants who take a hardship distribution and wait two years before resuming deferrals take a 25% hit on their ultimate retirement savings accumulations when they stop working.... Sponsors who worry about the long-term impact of such distributions can take other steps to minimize leakage, including limiting the size of distributions and allowable reasons."
ORBA
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IRS Provides Welcome Relief from High VCP Fees
"In January 2018, the IRS announced a new VCP fee structure based on plan assets, rather than on the number of plan participants. This fee structure eliminated several exceptions -- including amendment or loan failures -- that used to carry a fixed or reduced general fee. As a result, many employers face significantly higher fees to correct operational failures under the VCP. But the IRS also allows more employers to fix plan failures through self-correction, perhaps as a result of the vigorous criticism about higher fees."
Ascensus
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The Meat and Potatoes Topics of 401(k) Plan Sponsor Training
"[For investment selection and monitoring, the] process is key ... It relies on trust law traditions dating back to the eighteenth century. These traditions have the plan sponsors back -- but only if they're diligently followed.... Since it's not reasonable to assume that all plan participants fully understand the nature and relevance of their investment choice, the plan sponsor must determine how best to educate them on these matters.... Thanks to 'process,' plan sponsors rarely get into trouble for offering investments that lose money. On the other hand, they'll find themselves in litigation if they make the wrong fee choice."
Fiduciary News
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Baltimore Court Ruling on Police, Firefighter Pensions Likely Faces Appeals from Unions and City Government
"Judge Julie R. Rubin ruled last year that the city breached the unions' contracts when it changed pension benefits for people who were already retired.... In Monday's ruling, she said those retirees are entitled to seek damages for the lost benefits. But she also ruled that the city could make modifications to the pension contract that extended the years of service from 20 to 25 years for employees to receive pension benefits."
The Baltimore Sun
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Social Security: The Windfall Elimination Provision (WEP) (PDF)
15 pages. "The windfall elimination provision (WEP) is a modified benefit formula that reduces the Social Security benefits of certain retired or disabled workers who are also entitled to pension benefits based on earnings from jobs that were not covered by Social Security and thus not subject to the Social Security payroll tax.... In December 2018, nearly 1.9 million people (or about 3% of all Social Security beneficiaries) were affected by the WEP." [Report 98-35, updated May 14, 2019]
Congressional Research Service [CRS]
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Many Filed for Social Security Retirement Benefits Out of Necessity -- But Wish They Had Waited Until Later
"More than half (53%) filed out financial necessity, such as not saving enough, and another one-third (30%) filed as the result of unforeseen issues, such as health issues or employment changes.... In the simplest and most conservative cumulative calculation, a married couple with longevity into their early 90's could be leaving more than a half million dollars on the table -- or as much as $2,000-4,000 per month for life -- by filing for Social Security retirement benefits at age 62 versus filing at age 70. Furthermore, a surviving spouse could receive $1,000-2,000 per month less for life as a result of filing at age 62."
MassMutual
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Executive Compensation and Nonqualified Plans
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[Guidance Overview]
Highly Compensated Excise Tax Deadline Imminent
"Set forth [in this article] are the key issues relevant to establishing a reasonable, good faith position under Notice 2019-09 that the Section 4960 excise tax should not apply to volunteer officers of a [private foundation (PF)] who receive all of their compensation from taxable organizations related to such PF. What is important to understand is that the Section 4960 excise tax only applies if volunteer officers are treated as employees of the related PF. Whether an employee relationship exists is a facts and circumstances test, and having someone serve as an officer to meet state law nonprofit corporation requirements does not result, by itself, in employee status."
McDermott Will & Emery
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Vesting Incentive Equity: Time vs. Milestone Vesting Schedules
"Achieving business milestones surely seems a better measure of 'value add' than the simple passage of time, and after all, the whole idea of vesting is to reward folks for adding value, not for passing time. And yet, time-based vesting is still the norm in the startup world. Why is that?"
Michael Best
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Selected Discussions on the BenefitsLink Message Boards
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Removing True-Up Mid-Year from Safe Harbor Plan
Currently the plan makes all matching contributions each payroll period. But the match as defined in the document is based on annual comp/deferrals -- a.k.a. a true-up. The employer wants to change the match to a payroll period only. No true-up. Can this change be implemented mid-year?
BenefitsLink Message Boards
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Most Popular Items in the Previous Issue
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