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June 12, 2019 logo logo
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[Guidance Overview]

Regulation Best Interest and More: A Present to Investors from the SEC

"[W]hile this guidance is much more broad-based, the SEC Rule does discuss retirement plan issues, most particularly rollovers and account selection.... The new SEC Rule has no impact on TPAs operating as such. However, the DOL has announced that it is planning to issue a new proposed fiduciary rule, perhaps in December. It is anticipated that the new DOL guidance will coordinate with the SEC Rule."
Ferenczy Benefits Law Center


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[Guidance Overview]

SEC Rulemaking Package, Part 2: Investment Adviser Standard of Conduct

"[T]he SEC recognized that an investment adviser's fiduciary duty must be viewed in the context of the scope of the relationship between the adviser and the client. However, the SEC also determined that the fiduciary duty is principles-based. Thus, the duty is flexible enough to apply regardless of the type of client or service provided, including the clients and services of automated advisers (i.e., robo-advisers)."
Spencer Fane

[Guidance Overview]

SEC Rulemaking Package, Part 3: Form CRS

"The SEC created Form CRS for the purpose of informing retail investors about the differences between brokerage and investment advisory firms and their services.... The Form is designed to provide information regarding: [1] the types of client and customer relationships and services the firm offers, [2] the fees, costs, conflicts of interest, and required standard of conduct associated with those relationships and services, [3] whether the firm and its investment professionals currently have reportable legal or disciplinary history, and [4] how to obtain additional information about the firm."
Spencer Fane

Supreme Court Will Again Review the Pleading Standard for Retirement Plan 'Stock Drop' Claims

"The justices will review the Second Circuit's unexpected holding that a complaint, which alleged that plan fiduciaries violated ERISA by failing to disclose information about overvalued employer stock held in a 401(k) plan, satisfied the high 'more harm than good' pleading standard enunciated in Fifth Third Bancorp v. Dudenhoeffer ... If upheld, this ruling -- which runs contrary to the recent trend in employer stock drop cases -- likely would lead to an increase in filings of such cases and in the number of such cases that survive early motions to dismiss." [Jander v. Retirement Plans Committee of IBM, No. 17-3518 (2d Cir. Dec. 10, 2018; cert. pet. granted June 3, 2019)]
Eversheds Sutherland

Supreme Court to Review What It Takes for a Plan Participant to Have 'Actual Knowledge' of a 401(k) Plan's Investments

"A decision by the Supreme Court in favor of the participant ... would mean that compliance with the [DOL] standards for disclosing the investments in a 401(k) plan, which themselves are quite detailed and complex, is not sufficient to put a plan participant on actual notice, so as to begin the limitation period for a lawsuit under ERISA challenging the propriety of those investments. Faced with that eventuality, employers with 401(k) plans would predictably be left wondering what steps they would need to take to be deemed to have provided that 'actual' notice." [Sulyma v. Intel Corp. Investment Policy Comm., No. 17-15864 (9th Cir. Nov. 28, 2018; cert. pet. granted June 10, 2019)]
Blank Rome LLP

Multiemployer Pension Reform Bill Approved by House Education and Labor Committee

"Also known as the Butch Lewis Act, H.R. 397 would establish the Pension Rehabilitation Administration and a related trust fund within the Treasury Department to make loans to multiemployer plans in critical and declining status that are approved by Treasury to reduce benefits, or to plans that are already insolvent but not terminated."
Pensions & Investments

Potential Untapped Value in California's Public Retirement System

"State, county and municipal plan sponsors parlay their own creditworthiness when they issue Pension Obligation Bonds (POBs). If they can issue bonds with an interest ('coupon') rate that is lower than their respective retirement system's assumed rate of investment return, they can immediately lower their expected retirement costs by transferring POB proceeds into the retirement system and paying down their unfunded liabilities. And, if the retirement system's investments return more than the coupon rate, the plan sponsor will have lowered its actual retirement costs with arbitrage profits."
Reed Smith LLP

Puerto Rico Pension Deal Scales Back on Planned Cuts to Retiree Benefits

"Government retirees who receive $1,200 a month or less in benefits would be shielded from any reduction under the settlement, up from a $600 threshold previously proposed by the board ... The deal keeps 102,000 pensioners, or 61% of the total number, safe from cuts, compared with 45,000 or 25% in the earlier proposal, according to the retiree committee."
The Wall Street Journal; subscription may be required

Segmenting Retirement Expenses Into Core vs. Adaptive Buckets

"[W]hat defines more flexible 'discretionary' spending to fund wants (rather than needs) isn't just a function of certain categories of expenses, or funding solely the expenses necessary to ensure base-level safety and survival needs. Instead, retirees can upgrade their lifestyle across any number of traditionally 'essential' spending categories as well ... as long as there's a clear resource bucket to show how long that spending can be sustained, and when the retiree really may have to adapt!"
Nerd's Eye View

Executive Compensation
and Nonqualified Plans

The State of Play on Clawbacks and Forfeitures Based on Misconduct

"[B]ecause implementation of the proposed Dodd-Frank clawback rules may never be finalized, companies are beginning to implement or update executive compensation recoupment and forfeiture rules on their own based on investor sentiment, good governance principles, and recent events at CBS (and other #MeToo moments), Nissan, Equifax and other examples of supervisory failure."
Pillsbury Winthrop Shaw Pittman LLP

Using Rabbi Trusts to Fund Nonqualified Plan Benefits

"Rabbi trusts have been maintained to support non-qualified plans since the early 1980s. A rabbi trust is a grantor trust (typically with an independent financial institution serving as trustee) that is used by employers in order to accumulate assets to defray benefit obligations under a non-qualified plan. The rabbi trust is usually irrevocable, although it can be designed to be revocable until the happening of certain events such as a change in control."
Newport Group

Selected Discussions
on the BenefitsLink Message Boards

Change Benefit Election on Plan Termination?

Plan is a traditional defined benefit plan. Plan has 4 participants who elected annuity forms of payment, and are receiving their payments from the plan's trust. The plan will terminate through a standard termination with the PBGC. Can the participants already in pay status make new elections on plan termination if, for example, they want to get a lump sum from the plan?
BenefitsLink Message Boards

Terminating Employer in Multiple Employer 403(b)(9)

Do the final regs around terminating a 403(b), in which the sponsoring employer must "Generally, stop any other 403(b) plan during the period that begins on the termination date and ends 12 months after all benefits have been distributed from the terminated plan" apply to an employer terminating its relationship with a 403(b)(9) church plan?
BenefitsLink Message Boards

Terminated Participant Resurfaces

We terminated a DB plan, that was effective 1986 and froze all benefits as of 1/1/92 for all participants, in 2015. Now, in 2019, the participant comes forward asking about the plan. She was terminated in 1996.Plan sponsor send out notices, certified, return receipt in 1996-7-8. All came back unable to forward. All assets had been distributed and Final 5500-SF as well as Post Distribution Certification have been filed, showing the plan had $0 as of 12/31/2015. What should be done here??
BenefitsLink Message Boards

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Press Releases

HERO Announces Board of Directors, Adds Two New Members
Health Enhancement Research Organization [HERO]

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BenefitsLink Retirement Plans Newsletter, ISSN no. 1536-9587. Copyright 2019, 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, 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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