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Retirement Plans Newsletter June 13, 2019 |
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Webcasts, Conferences Employee Benefit Communication: Think Like a Marketer
Is an ESOP Right for You?
Third Quarter 2019 Washington Update
Washington Update with Will Hansen, American Retirement Association's Chief of Governmental Affairs Officer
Legislative and Regulatory Policies Update
Executive Compensation National Institute 2019
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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]
"The July 2019 lump sum interest assumptions will be 0.75 percent for the period during which a benefit is 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 June 2019, these assumptions represent a decrease of 0.25 percent in the immediate rate and are otherwise unchanged...The third quarter 2019 interest assumptions will be 2.92 percent for the first 25 years following the valuation date and 3.07 percent thereafter. In comparison with the interest assumptions in effect for the second quarter of 2019, these interest assumptions represent an increase of five years in the select period, a decrease of 0.15 percent in the select rate, and an increase of 0.02 percent in the ultimate rate."
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[Guidance Overview]
SEC Finalizes Broker-Dealer Standard of Conduct Rule "[Regulation Best Interest] will significantly change the standard of conduct rules for brokers and thus is likely to change how brokers and their affiliates interact with plan participants.... [R]etirement plan fiduciaries generally have a legal obligation under ERISA to monitor the conduct of plan service providers. That duty to monitor may extend to monitoring compliance with federal securities laws.... [This article reviews] the new standard of conduct rules for brokers, focusing on how it will apply to broker interaction with plan participants."
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[Guidance Overview]
The Final Reg BI Package: What to Know and What's Next "[T]he changes from the proposals to finalization were limited.... [T]he SEC elected not to define [the term 'best interest'] in the final rule text ... [The SEC also] did not ... adopt a uniform standard of conduct for broker-dealers and investment advisers.... [T]he Chairman and the final rule release cited to the now-vacated fiduciary rule by the [DOL] and the positive working relationship between the staffs of the SEC and DOL.... As a result of this collaboration, one of the enhancements from the proposal ... involved the SEC's increasing focus on retirement accounts and specifically rollovers:"
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[Guidance Overview]
SEC Rulemaking Package, Part 4: The 'Solely Incidental' Broker-Dealer Exclusion "In general, a broker-dealer's advice about the value and characteristics of securities or the advisability of transacting in securities falls within the 'solely incidental' Exclusion 'if the advice is provided in connection with and is reasonably related to the broker-dealer's primary business of effecting securities transactions.' While the determination is based on a fact-and-circumstances analysis, the Interpretation provides guidance regarding the application of the Exclusion in the context of: [1] exercising investment discretion over customer accounts, and [2] account monitoring."
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[Guidance Overview]
"The key to this foreign pension fund exemption is to be a 'qualified foreign pension fund' or 'QFPF'. Entities all of the interests of which are held by a qualified foreign pension fund ('qualified controlled entities' or 'QCEs') are also treated as QFPFs.... The principal clarifications in the proposed regulation definitions of QFPF and QCE include: [1] Indirect ownership of qualified controlled entities ... [2] Multiple QFPF owners ... [3] Creditor interests in a qualified controlled entity ... [4] De minimis ownership of a qualified controlled entity by non-QFPFs not allowed ... [5] Anti-avoidance rule -- selling a corporation holding U.S. real property to a QFPF or QCE ... [6] Establishment to provide retirement or pension benefits ... [7] Five percent limitation and related parties ... [8] Annual reporting requirement ... [9] Tax
deduction or exemption requirement ... [10] No safe harbors."
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[Advert.]
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What the SECURE Act Could Mean for Businesses "In order for a plan to be treated as a MEP or what would be called a 'pooled employer plan,' a 'pooled plan provider' (PPP) would have to be selected and be responsible for performing all necessary administrative duties to ensure compliance with regulations such as ERISA and the IRS Code. The PPPs would serve as a fiduciary and administrator, and be subject to registration, audit and examination by regulators."
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Proposed Regs Address Foreign Pension Exception to FIRPTA "The proposed regulations address section 897(l), which provides that a qualified pension fund (or a qualified controlled entity) is not treated as a nonresident alien individual or foreign corporation for purposes of FIRPTA. Under the proposed regulations, a qualified pension fund that has a gain or loss from the disposition of [U.S. real property interests] would be exempt from taxation."
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Inflation and Retirement Annuities "The only retirement contract that both insures against longevity risk and hedges against inflation is a life annuity that is linked to the consumer price index (CPI).... An annuity that is not linked to the CPI [a 'nominal annuity'] ... is measured in units that are different from Social Security, so it would be a mistake to add the two in computing a replacement ratio.... The vast majority of income annuities sold are fixed in nominal dollars.... The purpose of this article is to explore the reasons behind this puzzle and to suggest ways to solve it."
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Lawmakers Take Another Crack at Solving Multiemployer Pension Plan Problems "[The] House Education and Labor Committee approved H.R. 397 ... The 26-18 vote on June 11 was on party lines. If eventually approved, the measure would help those financially ailing plans with 30-year repayable federal loans to shore up their assets and value, at affordable interest rates. The loans would come from a trust fund in the Treasury Department and plans seeking aid would have to prove the money would keep them solvent and able to provide current benefits."
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Employers Help Workers Build Household-Emergency Funds "A growing number of employers are helping workers start emergency savings accounts, reflecting concern over the impact money problems are having on productivity levels and workers' ability to retire. Companies ... are encouraging employees to fund emergency accounts, in some cases by offering them cash and other incentives. Others are diverting a portion of employees' paychecks into rainy-day funds related to their 401(k) plans."
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[Opinion]
"[T]he public K-12 403(b) market is a mess; the polar opposite from the rest of 403(b)s. High fees, too many recordkeepers, and far too many investments are the norm for these plans.... [T]he school districts are generally small and have no staff allocated to providing proper oversight to their 403(b) or any other voluntary benefits. For the most part, these 403(b) plans are voluntary and supplemental to a state retirement system that is in place, so they are quite low on the totem pole in terms of allocated resources."
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Executive Compensation |
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[Guidance Overview]
Section 4960 Excise Tax: What Tax-Exempt Employers Need to Know "Not just for tax exempt organizations ... Once a covered employee, always a covered employee ... Remuneration paid means remuneration vested ... Exclusion for remuneration for medical and veterinary services ... Excess parachute payments ... No grandfathering for amounts credited prior to effective date ... No indexing ... Positions deemed not in good faith."
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How Should Boards Handle Involuntary CEO Retirement? "[I]nvoluntary retirement scenarios are kind of uncharted territory.... Companies should consider incorporating an involuntary retirement provision in new employment agreements, new award agreements or long-term incentive plans going forward. Make it transparent, explicit up front, and set the expectation that if there's a termination that meets these qualifications, it might be handled a different way than an involuntary termination."
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Selected Discussions |
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Section 4980 (Excess Assets in a Terminating Plan) -- Too Good to Be True? I continue to struggle with the excess assets issue in a terminating pension plan. The rules under 4980 seem to permit the maximum 415 lump sum to be exceeded.
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EACA: Where to Start Auto-Deferrals After Rehire? A participant was covered under an EACA. He was in the plan a few years and his auto-deferral went from 3 to 4 to 5%. Then he left. When he comes back, I know he is automatically eligible for the plan and enters immediately. But at what rate? The initial 3%? Or his former 5%?
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5500-EZ Late Filing -- $500 Flat Fee? Has anyone used the penalty relief program ($500 flat fee)? Experience? We had someone use it, filed/paid in January, and they've received two letters so far saying "we need more time," implying they're researching it.
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Press Releases |
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Strategic Benefit Services Expands into the Small to Mid-Sized Market
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Most Popular Items in the Previous Issue |
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Regulation Best Interest and More: A Present to Investors from the SEC
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Using Rabbi Trusts to Fund Nonqualified Plan Benefits
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Connect
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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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