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Retirement Plans Newsletter June 7, 2019 |
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Webcasts, Conferences |
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Discussions |
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This Newsletter:
BenefitsLink Health & Welfare Plans Newsletter:
Message Boards Digest:
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[Guidance Overview]
SEC Adopts Regulation Best Interest "[W]hile the final version of Reg BI is only about three pages, the accompanying release runs over 700 pages. The first 350 pages of the release in particular contain a good deal of substantive discussion that firms will need to review to implement Reg BI.... Part I of this memorandum provides a brief summary of Reg BI; Part II discusses problematic aspects of Reg BI; Part III provides an overview of the SEC Commissioners' statements regarding Reg BI; and Part IV provides some compliance suggestions.... [A]ttached to the end of the memorandum [is] a comparison of the adopted version of the Regulation BI as against the proposed version."
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[Guidance Overview]
"Broker-dealers ... must begin complying with Regulation BI, and broker-dealers and SEC-registered investment advisers will be required to prepare, deliver to retail investors, and file relationship summaries pursuant to Form CRS requirements by June 30, 2020. The Interpretations, on the other hand, will be effective immediately upon publication in the Federal Register."
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Broker Conflict-of-Interest Rules Approved by Divided SEC "Wall Street's main overseer approved new conflict-of-interest rules for brokers, a sweeping regulatory overhaul that drew criticism from investor advocates for being too lax.... Support from the industry, which successfully sued to overturn Obama-era rules that were more stringent, only heightened concern among opponents that the SEC measures are a giveaway to bankers that will confuse investors. Some are already contemplating a legal challenge and have been mobilizing a public relations campaign against the regulator."
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IRS Proposed Regs Clarify Tax Withholding for Pensions "The proposed rules [issued on May 31, 2019 would clarify various aspects of IRS Notice 87-7]: [1] Withholding is required when the recipient's residence address is outside the US even if the payment is sent to a financial institution or other individual located in the US. [2] Withholding is required when the recipient's residence address is in the US if the distribution is sent to a financial institution or other individual outside the US. [3] Military and diplomatic addresses are treated as within the US, so recipients at these addresses may elect no withholding."
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Employers Now Face Penalties for Failure to Comply with OregonSaves "The new law gives Oregon's Bureau of Labor and Industries authority to investigate and penalize noncompliant employers.... Employees can report noncompliant employers to the bureau -- although complaints can't be made earlier than two years after the employer's applicable registration deadline.... Employers found to be noncompliant face civil penalties of up to $100 per affected employee, capped at $5,000 total per calendar year."
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Defined Benefit Funding Rises Even as Returns Turn Negative (PDF) "A higher average discount rate lowered liabilities for the 100 largest U.S. corporate defined benefit plans in 2018, but that funding advantage was mostly offset by negative returns for plans with a reporting date of Dec. 31 ... The average return on plan assets for the 100 largest plans plummeted to -3.53% from 12.27% one year earlier, while the average return for plans with a reporting date of Dec. 31 was -4.6%. The aggregate fair value of assets dropped 6.5%[.]"
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"The U.S. Solicitor General is recommending that the Supreme Court accept an ERISA case questioning whether pension plan participants can sue plan fiduciaries if they have not experienced financial harm.... [T]he 8th U.S. Circuit Court of Appeals said participants did not have statutory standing to assert breach of fiduciary duty based on an alleged failure to diversify investments, since the participants had not suffered any individual financial harm." [Thole v. U.S. Bank, N.A., No. 16-1928, (8th Cir. Oct. 12, 2017; cert. pet. filed June 22,
2018)]
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Congress Looks to Overhaul Retirement System for First Time in More Than a Decade "Through some version or another, this legislation has been proposed for nearly five years. This is the farthest it has gone ... The real centerpiece is the multiple-employer defined-contribution plans expansion. Time will tell whether this will drastically increase the number of small employers offering 401(k) plans or whether the ones that do today obtain real savings through economies of scale."
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More Pension Lump Sum Cashout De-risking Activity Expected in 2019 "Pension plan sponsors looking for significant cash savings and de-risking opportunities have another favorable environment to pull the participants' lump sum cashout lever this year.... Employers that have previously offered a lump sum cashout to participants should be aware that this doesn't exclude them from pursuing a de-risking program again.... [P]lan sponsors will also want to consider ... [1] Potential increases to contribution requirements; [2] One-time accounting charges that could be triggered; [3] Potential increase to annuity purchase pricing upon plan termination."
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"In a very short written opinion, the Ninth Circuit found that neither ERISA nor the Internal Revenue Code contained a binding interpretation of 'spouse' after the Supreme Court found the Defense of Marriage Act (DOMA) to be unconstitutional.... [T]he Court found that because California law gave registered domestic partners the same rights as spouses and that was not inconsistent with ERISA or the Internal Revenue Code (again ignoring DOMA), the plan administrator should have interpreted the term 'spouse' to include registered domestic partners." [Reed v. KRON/IBEW Local 45 Pension Plan, No. 17-17176 (9th Cir. May 16, 2019; unpub.)]
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$60M Settlement Reached in SSM Health Care Corp. Litigation Over 'Church Plan' Status "The settlement requires SSM Health Care Corp. to fully fund its employee retirement plan for 10 years, deposit $15 million per year in the plan from 2019 to 2022, and make $115 payments to workers who received their retirement savings in a lump sum. The plan's funding status was a point of contention during the case's three years in court, with SSM Health workers saying the plan was underfunded by roughly $813 million due to its official classification as a church-affiliated plan[.]"
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Benefits in General |
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EBSA Provides Revised Model Summary Annual Report Forms "These revised versions made minor changes to prior model SAR language; for example, the address where plan participants can request a full copy of a Form 5500 has changed."
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Executive Compensation |
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"[It] may be possible for employers to enforce non-competition forfeiture provisions by including them in deferred compensation top hat plans subject to [ERISA].... This may represent a paradigm shift for employers operating in California; the potential loss of deferred compensation by key employees might meaningfully deter employees from competing, or at least make the choice to compete more difficult. On the other hand, a forfeiture provision may not be enough to change employee behavior or assure the safety of trade secrets and other confidential information."
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Selected Discussions |
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Auto-Revocation Clause in Plan if Participant Becomes Divorced -- Enforceable? Are there any cases which support an auto-revocation upon divorce clause in a 401(k) plan as it pertains to a named spouse beneficiary?
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Press Releases |
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Most Popular Items in the Previous Issue |
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Text of SEC Regulation Best Interest: The Broker-Dealer Standard of Conduct (PDF)
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Text of Final Rule on SEC Form CRS Relationship Summary; Amendments to Form ADV (PDF)
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BenefitsLink.com, Inc.
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Winter Park, Florida 32789
(407) 644-4146
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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