Retirement Plans Newsletter

June 20, 2019

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Webcasts, Conferences

Business Succession Through Employee Stock Ownership Plans
July 17, 2019 in MN
Stinson

ERISA Litigation Update: 401(k) and 403(b) Excessive Fee Lawsuits
July 23, 2019 WEBCAST
Trucker Huss

S Corporation ESOPs: Legal Issues
August 20, 2019 WEBCAST
National Center for Employee Ownership [NCEO]

IRA Institute
September 23, 2019 in VA
Ascensus

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[Guidance Overview]

Update on State Fiduciary Duty Regulations

"Massachusetts Secretary of State William Galvin announced on June 14, 2019 a preliminary solicitation of public comments on a regulation that would apply a 'fiduciary' duty to broker-dealers and advisers in Massachusetts ... The Regulation is substantially similar to New Jersey's, but includes some important differences[.]"
Morgan Lewis

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[Guidance Overview]

SEC Adopts New Form CSR and Fiduciary Duty Interpretations Under the Investment Advisers Act

"The SEC adopted new Form ADV Part 3 (Form CRS) to require advisers to create a brief relationship summary containing information for retail investors.... [A]dvisers may not include disclosure in Part 3 other than disclosure that is required or permitted by the instructions and the applicable item.... The SEC also released an interpretation of the fiduciary duty of investment advisers ... [which] is not intended to establish new standards of conduct for investment advisers, but, rather reaffirm, clarify, and synthesize the SEC's understanding of the fiduciary duty as it has been established in previous rulings and regulations."
Troutman Sanders

Eighth Circuit Invokes Dudenhoeffer to Reject Fiduciary Claims in Stock Drop Case

"[T]he courts' application of Dudenhoeffer to these claims raises some questions. What are the special circumstances that can preserve a claim based solely on public information? And, in the absence of (as yet undefined) special circumstances, what is left of plan fiduciaries' duty to monitor publicly traded stock investments and weed out imprudent ones? Did the Supreme Court intend to insulate fiduciaries from claims that publicly traded stocks are unsuitable investments if the evidence of that unsuitability is entirely public? Until the courts have more fully explored the answers to these and other questions, cautious plan fiduciaries are unlikely to assume that the presumptive accuracy of market prices now allows them to pay less attention to factors other than price."
Thomson Reuters / EBIA

Index Fund Rise Coincides with 401(k) Suits

"More 401(k) lawsuits were filed in 2016 and 2017 than during the 2008 financial crisis, and the steady drumbeat of litigation could be affecting how workers save and invest. For one thing, the suits have coincided with a dramatic increase in equity index funds ... Last year, nearly one out of three U.S. stock funds were index funds, double the share 10 years ago."
Squared Away Blog, by the Center for Retirement Research at Boston College

Editor's Pick A Close Look at 401(k) Plan Design, Investments and Fees Using 2016 Data (PDF)

84 pages. "Larger 401(k) plans are more likely to report that they automatically enroll workers into the plan.... More than 90 percent of 401(k) plans in the sample with more than $50 million in plan assets had participant loans outstanding, compared with ... 36 percent of plans with less than $1 million.... In 2016, more than three-quarters of the large 401(k) plans in the sample with automatic enrollment also had both employer contributions and participant loans outstanding, compared with less than two-thirds of plans in the sample without automatic enrollment."
BrightScope and Investment Company Institute [ICI]

The Effect of Default Target Date Funds on Retirement Savings Allocations

"Participants who had joined plans with a money market default largely switched out of the default option ... Target date defaults raised the amount participants contributed to equity by 13 percentage points on average ... With a money market default, the size of the investment menu had a slight effect on the number of funds in which participants invested; this effect vanished under target date defaults."
TIAA Institute

Retirement Lessons from the Four Seasons

"Financial wellness is a thing, even if you have a lot of money ... Retirement may not be so bleak, even when you're in financial difficulty ... Retirement paths can be very different, even among friends ... Celebrities -- and everyone else -- are living a lot longer."
Cammack Retirement Group

Debt Close to Retirement and Its Implications for Retirement Well-Being

"The most financially-knowledgeable older adults are the least likely to report that they hold too much debt or that they are financially fragile. Older people with higher incomes and more education people tend to hold long-term debt, such as mortgages, while those with lower incomes and less education tend to carry high-cost debt, such as payday loans."
TIAA Institute

[Opinion]

Cash Balance Plans Could Make a Comeback

"The Pew Research Center and the Arnold Foundation have been actively pushing cash balance plans in Kansas, Kentucky, Alabama, and Virginia. They tout cash balance plans as a solution to the problem of pension underfunding, as some magic combination of defined benefit pension plans and defined contribution 401(k)-style plans. In reality, cash balance plans are a failure for public employees and taxpayers."
National Public Pension Coalition

[Opinion]

SIFMA Disputes Claim Broker-Dealers May Threaten to Boycott States with Local Fiduciary Rules

"Based on only rank speculation, [Ron Rhoades] suggests that the efforts of industry participants -- individually and through established and respected trade groups like SIFMA and FSI -- to inform state policymakers about the potential unintended consequences of local fiduciary rules could reflect a violation of the antitrust laws."
RIABiz

Benefits in General

FASB Changes for Employee Benefit Plans with Master Trust Investments

"FASB issued Accounting Standards Update 2017-06 to provide additional guidance on disclosure of an employee benefit plan's interest in a master trust. The changes are aimed particularly at defined contribution plans, which generally have divided interests (rather than percentage interests) in master trusts. The guidance is effective for fiscal years beginning after December 15, 2018, and applies retrospectively to each period for which financial statements are presented."
McDermott Will & Emery

Executive Compensation
and Nonqualified Plans

Ninth Circuit Upholds Treasury Regulation on Stock-Based Compensation

"Last year, the Ninth Circuit withdrew its previous opinion in the case -- a 2-1 split decision -- due to one of the judges passing away prior to publication. Unfortunately for taxpayers, the newly assigned judge agreed with the deceased judge, and the court's new opinion reflects neither a change in outcome nor a change in the overall analysis. Nevertheless, the court refined and clarified its analysis on a few key points. The decision has particular importance for multinational companies in the technology sector that invest substantial sums in developing intangible assets." [Altera Corp. v. Comm'r, Nos. 16-70496, 16-70497 (9th Cir. Aug. 7, 2018)]
Shearman & Sterling LLP

Interesting Battles Over Compensation Clawback Shareholder Proposals

"Apparently, Alphabet does not currently have a clawback policy in place, and a number of union pension funds are leading the charge to make them adopt a plain vanilla policy.... The proposal filed at Mylan N.V. is more complicated and ... more interesting, as it presents the issue: Where does the buck stop, when it comes to alleged corporate wrongdoing?"
Winston & Strawn LLP

Selected Discussions
on the BenefitsLink Message Boards

Do Taxable Bonuses to Replace Forfeited Matches Violate the 1.401(k)-1(e)(6) Anti-Conditioning Rule?

If a 401(k) plan fails ADP, distributes the excess contributions as required to correct the failure, and in the process HCEs forfeit matches attributable to the distributed excess contributions, as they must, can the employer turn around and provide taxable (W-2 compensation) bonuses to the HCEs with the match forfeitures, for example exactly in the amounts of the individual match forfeitures, without violating the anti-conditioning rule of Treas. Reg. 1.401(k)-1(e)(6)?
BenefitsLink Message Boards

Failure to Start Deferrals in Auto-Enroll Plan

If a sponsor does not start somebody's deferrals in an auto-enroll plan, there is no QNEC needed if they start the deferrals no later than 9-1/2 months after the plan year in which the first deferral was missed, right?
BenefitsLink Message Boards

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Press Releases

Louisiana Couple Pleads Guilty to Operating Fraudulent Multiple Employer Welfare Arrangement
Employee Benefits Security Administration [EBSA], U.S. Department of Labor

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David Rhett Baker, J.D., Editor and Publisher  davebaker@benefitslink.com
Holly Horton, Business Manager  hollyhorton@benefitslink.com

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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