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Retirement Plans Newsletter May 21, 2019 |
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Webcasts, Conferences Fiduciary Investment Advice 2019
Form 5500 Industry Update
Cash Balance Plans for Partnerships
Cash Balance Plans for Corporations
To DB or Not DB - That Is the Question
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Discussions |
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This Newsletter:
BenefitsLink Health & Welfare Plans Newsletter:
Message Boards Digest:
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[Official Guidance]
Text of OPM Notice: Federal Employees' Retirement System; Normal Cost Percentages "With regard to the economic assumptions ... used in the actuarial valuations of FERS, the Board concluded that it would be appropriate to assume a rate of investment return of 4.50 percent, a reduction of 0.75 percent from the existing rate of 5.25 percent."
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[Advert.]
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[Guidance Overview]
Money Purchase Pension Plans with an 'Opt-In' Feature "The glaring problem with many of the plans is that they give employees a window of up to 60 days to make their opt-in election. This violates the IRS election timing rule ... Other plans of this sort also violate the timing rule because they are established (and allow the opt-in election) after the eligible employees have already been employed for many years. This may happen in the case of a newly established plan for a specified group of employees. So what happens if you have one of these plans?"
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Top Areas of Focus in DOL Investigations of Retirement Plans "[1] Terminated vested participants that are missing or have not commenced benefits at required beginning date.... [2] Timeliness of participant contributions ... [3] Required plan documents and disclosures ... [4] Bonding ... [5] Plan fiduciary processes and claims procedures ... [6] Fiduciary duties and prohibited transactions ... [7] Plan investment conflicts ... [8] Hard-to-value assets ... [9] Proprietary funds and services ... [10] ESOPs."
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How to Understand and Review Form 5500 "[I]tems you need to review on your Form 5500-SF (short form) or Form 5500 (long form): [1] Is the plan a 'small plan' or a 'large plan'? ... [2] Are your investments reflected accurately in the financial information, both in amount and type? ... [3] Are you operating the plan in such a way so that answers to the compliance questions are not raising red flags to the DOL or IRS? ... [This article provides] a high level explanation of many of the compliance questions[.]"
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Driving Cybersecurity with Participants and Providers "Ensuring participants have registered can provide an additional degree of security in knowing that no one else is registering on a participant's behalf.... [A]nother step in securing private information is implementing two-factor authentication ... Instead of just asking about the number of incidents a service provider has had, plan sponsors should be asking how the provider will work with them in the event of a cyber incident in their plan[.]"
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[Advert.]
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"Problems may arise when employers change their plan's TPA and do not notify the product providers, the plan participants or the former TPA. In the absence of such notification, all parties continue to interact with the former TPA, but plan transactions are not processed or approved. Delays occur, contributions are not processed, information is not provided and a logjam develops.... [This article describes] general recommendations based on successful transitions that have been made in the 403(b) marketplace[.]"
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"By all accounts, 2019 will see the advancement of a number of fiduciary and best interest investment advice regulations at both the federal and state levels. Firms subject to these regulations will face challenges in dealing with rules that will impose a host of new obligations, and that may overlap and conflict with one another. This [6-page] chart is intended to help firms take stock of the evolving framework and aid firms in putting the pieces together"
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Fiduciary Education Curriculum, Part 3: The Importance of Delegating Fiduciary Duties "Problems can arise when plan sponsors believe they're hiring an 'adviser' to served in the prudent expert role while they've only hired an 'advisor.'... [T]he plan sponsor's advantage to hiring a prudent expert consists of that prudent expert exercising discretionary authority over plan investments. This requires the expert not merely recommend investments, but actively make investment decisions. Only a Registered Investment Adviser (or discretionary trustee) can legally perform this service."
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Do Benefit Cuts Encourage Public Employees to Leave? "[This] analysis looks at a 2005 reform in Rhode Island that reduced benefits for some current workers. The results show that the affected employees were significantly more likely to leave the government over the next four years. Although the direct cost of hiring new workers was relatively small, governments should consider how losing skilled workers affects the quality of public services."
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Crowdout in the Decumulation Phase: Evidence from the First Year of Required Minimum Distributions "This study estimates the extent to which a policy-induced increase in distributions at retirement crowds out dissaving from taxable assets.... The study shows that retirement distributions at age 70 vary discontinuously at a statutory threshold in exact day of birth. Using this discontinuity as a first stage, the study finds that taxable saving becomes more positive (or less negative) among those whose retirement distributions are induced to be higher. In the baseline specification, ratio at which induced retirement contributions crowd out taxable dissaving is estimated to be 0.42."
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Understanding the 'Same Property' Rule for IRAs "For IRA-to-IRA or Roth-to-Roth 60-day rollovers, the same property received is the property that must be rolled over. These rules also apply to SIMPLE and SEP IRAs. An individual cannot receive a distribution of cash and then roll over shares of stock that he purchases with the cash or that he currently owns. If cash is distributed from an IRA, then cash must be rolled over within 60 days."
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Executive Compensation |
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Designing Executive Pay Plans in the New 162(m) World "Over a year after the 'performance-based compensation' exception to Section 162(m) of the IRS Code was eliminated ... relatively few companies have made significant changes to their pay programs to take advantage of its repeal.... Companies ... are uncertain how shareholders would react even if they recrafted their programs to preserve most performance-based design elements. However, with the recently issued [FAQs from Institutional Shareholder Services (ISS)], there's a bit more clarity about changes that are acceptable and those that are cause for shareholder concern."
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Selected Discussions |
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If a participant takes a $200,000 in-service withdrawal (and pays the 20% mandatory tax withholding), then they decide they don't need the money after all, can they put it back into a plan or an IRA? Or is it a done deal since it was a cash distribution to the participant?
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Florida Documentary Stamp Tax as Applied to Participant Loans Florida imposes a document tax on loan transactions that are made, signed, executed, issued in the state. Before you ask, why would a Plan Sponsor care, the loan is under a Qualified Plan (and ERISA)? Answer: the Florida statue specially states that "promissory notes made in connection with a pension plan loan, 401(k) loans and share loans" ARE specifically included. Failure to pay the documentary tax could result in a the plan's inability to enforce provisions of the promissory note. It'as been suggested that failure to pay the tax could mean a 401(k) is extending loans that are not adequately secured, meaning prohibited transaction excise taxes or operational failures. It seems everyone is aware of this but no one pays the taxes. Could the State of Florida challenge the loan? For folks with Florida clients, are you recommending that plan administrators have the loans
recorded with the state and pay the documentary tax?
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Press Releases |
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NIPA Announces Lifetime Achievement, Excellence in Education and Outstanding Volunteer Award Recipients at the 2019NAFE
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Supovitz Named to ERISA Advisory Council
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Most Popular Items in the Previous Issue |
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Former Employee's Release Agreement Bars ERISA Claim Against ESOP Fiduciary
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Connect
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BenefitsLink.com, Inc.
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Winter Park, Florida 32789
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Lois Baker, J.D., President
David Rhett Baker, J.D., Editor and Publisher
Holly Horton, Business Manager
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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