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Retirement Plans Newsletter July 12, 2019 |
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Webcasts, Conferences |
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This Newsletter:
BenefitsLink Health & Welfare Plans Newsletter:
Message Boards Digest:
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[Official Guidance]
"This notice provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under Section 417(e)(3), and the 24-month average segment rates under Section 430(h)(2) ... In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under Section 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008 and the 30-year Treasury weighted average rate under Section 431(c)(6)(E)(ii)(I)."
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[Official Guidance]
"The August 2019 lump sum interest assumptions will be 0.50 percent for the period during which a benefit is (or is assumed to be) 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 July 2019, these assumptions represent a decrease of 0.25 percent in the immediate rate and are otherwise unchanged."
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[Guidance Overview]
Long-Awaited IRS Proposed Regs Would Alleviate 'One-Bad-Apple' Rule for Multiple Employer DC Plans "Treasury and IRS have released proposed rules ... which complement the [DOL's October 2018] proposed rule by providing an exception to the 'unified plan' rule.... [The IRS] proposed regulations provide detailed rules to address longstanding issues raised by the 'unified plan' rule -- but would impose comprehensive administrative procedures and plan amendment requirements in the process."
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[Guidance Overview]
The Illusory Benefit of the IRS's Proposed Correction to the MEP 'One Bad Apple' Rule "The 'bad apple' problem has always sounded worse than it is and may have been able to be fixed by a simple adjustment to the Maximum penalty Amount rules under EPCRS, and to the rules as to who should be responsible for that penalty.... The most difficult logistical and legal challenges facing MEPs ... are in the forced spin-off of a recalcitrant participating employer. The IRS proposal only really addresses small part of what actually happens under these circumstances[.]"
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New SEC Guidance Has Limited Impact on Retirement Plans "The package targets the retail investor space, which includes individual retirement accounts (IRAs), health savings accounts (HSAs) and most retirement plan rollover advice. The new guidance will have little direct impact on benefit plan sponsors but could affect how plan participants receive advice on their plan funds."
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34 pages. "In 2018, the average expense ratio for equity mutual funds offered in the United States was 1.26 percent.... The average expense ratio that 401(k) plan participants incurred for investing in equity mutual funds fell from 0.45 percent in 2017 to 0.41 percent in 2018. The average expense ratio that 401(k) plan participants incurred for investing in hybrid mutual funds fell from 0.51 percent in 2017 to 0.49 percent in 2018."
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A Closer Look at Legislative Proposals Impacting Retirement "Expanding retirement plan eligibility by requiring a plan for all employers except those with fewer than 10 employees would make a substantial impact on the youngest employees simulated (ages 35-39) ... There is an overall positive impact in using half of 401(k) or 403(b) balances at age 65 to purchase an immediate annuity."
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"GAO was asked to describe the trends in corporate restructuring over the last 20 years, and what is known about the effects, if any, they have on pension benefits for employees and retirees. This report provides information on the trends in corporate restructuring -- in particular, M&A activity -- since 1999, and the implications for such events on employee and retiree pension benefits." [GAO-19-447R, Jul. 12, 2019]
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Providers Reluctant to Serve Newly Allowed 401(k)s Sponsored by Cannabis Companies "With the passage of the 2018 Farm Bill by President Donald Trump, hemp and cannabidiol, or CBD, companies can sponsor 401(k) plans for employees and take advantage of the related tax deductions.... The real obstacle to implementing 401(k) plans for otherwise legal marijuana producers are the industry retirement plan providers who are nervous and jittery about dealing with 'traffickers.' ... They have dug in their heels, refusing to do business with cannabis companies technically engaged in trafficking under federal law."
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How Many Shares Should an Owner Sell to the ESOP? "Figuring out how many shares to sell to the ESOP is a fundamental decision in planning for an employee stock ownership plan (ESOP). Owners are often surprised that this decision-making process helps them clarify their short- and long-term goals for both themselves and their companies. A number of factors help determine how many shares to sell and how many shares the ESOP can prudently buy."
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Terminating an Overfunded Pension Plan: Who Gets the Excess? "[P]ossibilities to consider if the terminating plan document does not permit a reversion ... Return of mistaken and nondeductible contributions ... Have all reasonable plan expenses been paid from the trust? ... Possibilities to consider if the terminating plan document permits a reversion ... Take a reversion ... Transfer the excess to a qualified replacement plan ... Provide pro rata benefit increases ... A possibility that's always available: ... [A]llocate all of the excess among participants and beneficiaries."
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"[This study explores] universal defined contribution (DC) coverage, and the other extreme, in which defined contribution retirement plans are completely eliminated.... Under the 'Universal DC Plan' scenario, the improvement (decrease) in average deficits exceeds $10,000 for all but the lowest income quartile.... Under the 'Elimination of DC Plans' scenario, the increase in average deficits is largest for the second and third income quartiles."
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[Opinion]
What Would a National Retirement Policy Look Like, and How Would It Help Readiness? (PDF) 16 pages. "A national retirement policy does not need to result in a sweeping overhaul of our retirement system to be successful. Rather, it could serve as a guide for future incremental changes that would promote the principles of the policy. Over time, consistently using a well-developed national retirement policy to evaluate existing retirement programs and proposed changes to those programs could help our retirement system become more efficient and effective, while minimizing unnecessary complexity and overlap."
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Benefits in General |
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[Guidance Overview]
2018 Disability Claims Regs Apply to More Than Just Disability Plans "They also apply to any plan that conditions a benefit upon a showing of disability, such as a: [1] 401(k) plan that allows a distribution upon the participant's disability; [2] Defined benefit pension plan that provides an immediate benefit, rather than a benefit deferred until normal retirement age, if the participant has a disability retirement; and [3] Nonqualified deferred compensation plan that provides for 100% vesting and a distribution upon a participant's disability under Code section 409A."
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Seventh Circuit Says Substantial Compliance Doctrine Inapplicable to Missed Claim Deadlines "After a plan administrator failed to issue a final decision on a participant's disability claim within the deadline set forth in DOL regulations, the participant sued. Eight days after the suit was filed, the plan administrator issued its final decision denying the participant's claim.... According to the [Seventh Circuit], the regulatory deadline imposes a 'hard stop,' providing that 'in no event' may the deadline be extended beyond a specified number of days." [Fessenden v. Reliance Standard Life Ins. Co., No. 18-1346 (7th Cir. Jun. 25, 2019)]
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Selected Discussions |
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Does an Extension of Time to File Also Extend the 402(g) Distribution Date? Participant has an extension of time to file his personal federal income tax return. He had a 402(g) violation -- he had two jobs in 2018 and deferred $14,000 to each. Does the personal extension also extend the April 15 filing deadline for removing the 402(g) excess?
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Ability of Sponsor to Reimburse Plan's Trust for Annuity Surrender Charges The plan transferred assets and there were significant surrender charges related to annuity investments. The sponsor is trying to reimburse the plan for those charges. Can they?
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Permissive Transfers of Uncashed Checks from ERISA Plans to State Unclaimed Property Funds
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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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