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Best Practices for Vendor Management
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October 15, 2019 in CA
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[Guidance Overview]

The Enduring Value of Rev. Proc. 2007-71 in Dealing With Legacy 403(b) Contracts.... and Should it be Updated?

"The value of [Rev. Proc. 2007-71] endures; and is particularly helpful when plans restate their 403(b) plan docs and need to do things like name their vendors; have Information Sharing Agreements; and try to make plan redesign decisions.... The question for the IRS now ... is whether there really is any value in maintaining the different treatment between the pre-2005 legacy contracts and the 2005-2009 legacy contracts, and whether those 2005-2009 contracts should also enjoy that same broad exemption without any requirement to prove the 'good faith effort' of over a decade ago."

Business of Benefits


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[Guidance Overview]

Questions Remain After IRS Guidance on Uncashed 401(k) Checks

"A footnote in Revenue Ruling 2019-19 states that whether the individual 'keeps the check, sends it back, destroys it, or cashes it in a subsequent year is irrelevant.' Fair enough, but how can the plan administrator know whether the check was received and not cashed, or it simply never got to the participant because the participant was in a nursing home?"

Blank Rome LLP

IRS Issues Guidance on Uncashed Retirement Distribution Checks

"From a plan administrator's perspective, it is important to remember that uncashed distribution checks are plan assets, and that plan sponsors should consider taking proactive steps towards avoiding the problem."


401(k) Plan Loans: Balancing Fiduciary Concerns, Retirement Outcomes and Employee Perceptions

"[H]ardships are a worse alternative because at least a loan can be repaid, whereas a hardship distribution represents permanent leakage.... [K]eep the plan loan provision, make it as flexible as possible in terms of repayment after termination of employment, try to educate participants on using participant loans responsibly, but ... require loan insurance to at least plug the hole that's caused by an unexpected, involuntary termination."

Bruce Ashton in 401(k) Fridays

Tussey v. ABB Settlement Highlights the Costs of Litigation

"The Schlichter Bogard & Denton team said they put in 28,700 hours of work over more than a decade in a case whose outcome was 'uncertain, sharply contested, often protracted, and required willingness by class counsel to risk unusual resources in time and money,' Judge Laughrey wrote in support of the settlement terms. The settlement included an $18,331,500 award to the plaintiff's attorneys ... reimbursement of costs and expenses of $2,256,805 and $25,000 for the three named plaintiffs."

National Association of Plan Advisors [NAPA]


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Millennials and Retirement: What Do Employers Need to Know?

"While some of the research surrounding Millennials predicts a difficult financial future, many statistics show that this generation's retirement risks may not be so different from older generations. In fact, many complexities surround the financial wants and needs of Millennials. Employers may benefit from learning more about this generation's changing relationship with retirement planning."


Who Are All the Providers Servicing My Company's Small 401(k) Plan? What Do They Do?

"I sponsor a small 401(k) plan for my employees. Sometimes, I get confused about which service provider to go to for different plan-related questions.... Why wouldn't I go with the one-stop shop rather than enough separate folks for a pick-up game of basketball? If having separate providers is preferable, who are all the different players and what do they do?"


Is It Time to Replace Your SIMPLE IRA Plan or SEP with a 401(k)?

"A 401(k) Plan can offer you more options so that you can elect plan provisions that fit your situation. And, since a 401(k) Plan can be amended it provides you with more flexibility to make changes to the plan in the future as circumstances for your business or workforce change. The chart [in this article] compares some of the key features and differences of a SIMPLE IRA Plan, a SEP and a 401(k) Plan."


District Court Analyzes Church Plan Definitional Issues

"[P]laintiffs in the church plan litigation are generally fighting over the application of the traditional definition of church plan, rather than the novel definition unanimously knocked down by the Supreme Court ... [S]atisfaction of the traditional definition is a largely factual exercise, and this recent case particularly points out the importance of properly drafted plan documents." [Boden v. St. Elizabeth Medical Center, Inc., No. 16-49 (E.D. Ky. Jul. 25, 2019)]

Groom Law Group

Do Most 401(k) Plan Sponsors Use a 3(38) or a 3(21) Adviser?

"[S]ome 401k plan sponsors are playing 'catch-up' with regard to provider choice as the new emphasis on 'fiduciary' has them replacing service providers with outdated business models. A 3(21) option represents a smaller, bite-size step on the fiduciary ladder.... As the advantages to plan sponsors have become clearer to service providers, there's been a greater push by those on the vanguard towards the 3(38) arrangement. "

Fiduciary News

Editor's Pick The OCIO Movement: The Growth (or Rebirth?) of Discretionary Investment Fiduciaries (PDF)

"The modern financial industry led to a great diversity of money management options, including self-direction and the modern suite of financial products for sale by non-fiduciaries. [The] trend today is toward an increasing number of asset pools hiring a discretionary investment manager, under various names -- including [outsourced chief investment (OCIO)], 3(38), discretionary trustee, 'delegated management,' 'fiduciary management,' and 'implemented consulting.' But the catchiest label in the United States seems to be OCIO."

Pete Swisher, via Journal of Pension Benefits

Editor's Pick Survey of Capital Market Assumptions, 2019 Edition (PDF)

17 pages. "For less mature ongoing pension plans without solvency issues, we believe a horizon of 20 years or more is appropriate for evaluating the reasonableness of the long-term investment return assumption.... When compared to the 2018 edition of the survey, the expected returns for this 2019 edition were 15 basis points higher over a 10-year horizon and 11 basis points lower over a 20-year horizon. "

Horizon Actuarial Services LLC

Social Security Retirement Earnings Test: How Earnings Affect Benefits

"[Repeal of the Retirement Earnings Test (RET)] would likely incentivize the highest earners -- whose entire benefits were withheld due to the RET -- to decrease work, receive full benefits, and experience an increased income level overall. Research also suggests that a repeal of the RET would lead to earlier benefit claiming and increased poverty rates, especially among women and those aged 80-89." [R41242, updated Aug. 16, 2019]

Congressional Research Service [CRS]


Editor's Pick Are Public Pensions in a Crisis? Part 2 -- Is Pay-as-You-Go Sustainable?

"There are two aspects: the tax base has to keep growing or the pension benefits have got to quit growing so rapidly for pay-as-you-go to be stable. What if you're Detroit? Or Illinois? Or Chicago?"



Amicus Brief of ERIC and American Benefits Council in ESOP Fiduciary Breach Case (PDF)

37 pages. "By sustaining an imprudence claim based on these five generic allegations, the decision below would make it exponentially easier for plaintiffs to survive a motion to dismiss and proceed into costly discovery when bringing baseless imprudence claims against ESOP fiduciaries.... [T]he court below conflated the dual roles of the defendant fiduciaries and imposed securities law disclosure obligations on an ESOP fiduciary who also serves as a corporate officer." [Jander v. Retirement Plans Committee of IBM, No. 17-3518 (2d Cir. Dec. 10, 2018; cert. pet. granted Jun. 3, 2019)]

The ERISA Industry Committee [ERIC] and American Benefits Council

Selected Discussions
on the BenefitsLink Message Boards

Serving as a 3(16) TPA -- What's Been Your Experience?

Anyone offer 3(16) services as a TPA? What details can you provide with regard to experiences?

BenefitsLink Message Boards

404a-5: Do Quarterly Disclosures Meet Annual Disclosure Requirement?

If a quarterly participant statement reflects all fees and expenses deducted from a plan does that meet the annual 404a participant disclosure requirements?

BenefitsLink Message Boards

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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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