Retirement Plans Newsletter

August 23, 2019

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Retirement Plan Administrator
McHenry Advisers, Inc.
in New Albany OH

Experienced Plan Consultant
Randall + Hurley
in Helena MT

401(k) Plan Services Sales Representative
San Francisco - Bay Area TPA firm
in Burlingame CA

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[Official Guidance]

Text of IRS Notice 2019-49: Extension of Temporary Nondiscrimination Relief for Closed Defined Benefit Plans Through 2020 (PDF)

"This notice extends the temporary nondiscrimination relief for closed defined benefit plans that is provided in Notice 2014-5 ... by making that relief available for plan years beginning before 2021 if the conditions of Notice 2014-5 are satisfied."

Internal Revenue Service [IRS]

[Advert.]

SPARK Forum - November 3-5, 2019 -- The Breakers, Palm Beach, FL

Sponsored by SPARK

Join us at the retirement services industry's leading event for top marketing, sales, administration and record keeping professionals. Comprehensive agenda includes topics for Record Keepers, 401(k) Plan Providers, Financial Advisors and Cyber Security Professionals.


[Guidance Overview]

IRS to Retirees: The Check's in the Mail -- and It's Taxable

"Rev. Rul. 2019-19 addresses the situation where the distribution check is in fact 'received' by the participant. It does not reach the more challenging set of related tax recognition, reporting and withholding issues that arise when plan disbursements are transmitted but not 'actually' received due to death or an incorrect address. In fact, employers and recordkeepers are rarely able to distinguish these situations from the facts in Rev. Rul. 2019-19 unless and until the check is returned as undeliverable[.]"

Eversheds Sutherland

Ninth Circuit Ruling Opens Door to Use of Arbitration Clauses to Avoid ERISA Class Actions

"[P]lan sponsors may want to consider adopting arbitration clauses combined with class action waivers.... But arbitration clauses that forbid class actions are not a panacea ... In recent years, the plaintiffs’ bar has brought large numbers of individual arbitrations against ... companies that have arbitration clauses in their contracts, creating challenges for defendants that in some ways can be more onerous than class actions." [Dorman v. Charles Schwab, Inc., No. 18-15281 (9th Cir. Aug. 20, 2019; also unpub. memo. opinion)]

Sidley Austin LLP

Ninth Circuit Changes Its Position on the Enforceability of Arbitration of Breach of Fiduciary Duty Claims

"The Court concluded that plaintiff 'agreed to be bound' to the arbitration clause because the plaintiff participated in the plan while the arbitration clause was in effect. The Court also reasoned the class action claims of plan-wide breach of fiduciary duty applied to the scope of the arbitration provision because the claims were asserted under ERISA and alleged that plan fiduciaries breached their duties to the plan on the whole." [Dorman v. Charles Schwab, Inc., No. 18-15281 (9th Cir. Aug. 20, 2019; also unpub. memo. opinion)]

The Wagner Law Group

Transamerica Fails to Get Self-Dealing Suit Dismissed

"[The federal district court] found that the plaintiffs’ complaint sufficiently asserts the underperformance of the challenged funds in comparison to both comparable funds and the relevant market indices. Transamerica Asset Management’s substitution of its sub-advisers may indicate that defendants acted prudently, but ... substitution of sub-advisers is not a concrete, obvious explanation for the poor performance of the challenged funds throughout the applicable period." [Karg v. Transamerica Corp., No. 18-134 (N.D. Iowa Aug. 20, 2019)]

planadviser

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Recordkeepers' Plan Sponsor Portals Have Much Room for Improvement

"[W]hen a DC plan is up for bid and an organization is deciding on a recordkeeper, 91% of plan sponsor survey respondents say that the plan sponsor site experience is either of equal importance to, or more important than, the participant site experience.... [A] number of items related to the plan sponsor website ... are cited in RFPs, such as the mere existence of the site, cybersecurity systems, participant wellness metrics, plan analytics and retirement readiness tools."

Corporate Insight

Case Study: Growth Through Acquisition and the Impact on Retirement Plans

"[C]ombining the retirement plans of newly acquired entities is complicated. There are many considerations related to plan provisions and making sure that the integrated program will remain compliant.... [T]he determination of the impact to participants, and the potential options for the plan going forward, often must be assessed and implemented very quickly.... Plan sponsors can ease this transition with clear messaging, and by using many communication channels to enable all participants to receive information via the medium they prefer[.]"

Cammack Retirement Group

Widening the Scope of Training for Retirement Plan Committee Members

"[M]ost plan committee members are given some formal fiduciary training on joining the committee. However, fewer receive follow-up training on a regular schedule.... In the past, fiduciary training often focused almost exclusively on overseeing plan investment performance and investment manager selection. Today, fiduciary training is often broader in scope, covering responsible supervision of all plan vendors and operations."

ORBA

Pension Financial Impact of Record Low Treasury Bond Rates

"Since lump sum payments are projected to increase significantly in 2020, offering a lump sum window to terminated vested or retired participants during 2019 could be a cost effective way to reduce the overall liability of the plan. Contributions to the plan in excess of the mandatory required amount will help offset rising PBGC premiums since the premium is based on the underfunded amount, not the total liability."

Findley

PBGC Methods: Think Before You Switch

"Pension plan sponsors have less than eight weeks to re-visit a 2019 cost-reduction decision that could end up coming back to bite them in 2020. PBGC premiums for 2019 are coming due soon, and there are two options to determine the interest rate used when calculating a plan’s premium based on underfunding. One option will reduce the premium this year, but at the likely cost of a higher premium next year."

River and Mercantile Solutions

403(b) Retirement Plan Fee Litigation: An Update

"The claims in these lawsuits cover a broad range of topics and issues. However, most are focused on the fees charted and investments used in retirement plans."

Cammack Retirement Group

[Opinion]

Critics Claim Retirement Savers Aren't Behaving Rationally, But the Data Say They Are

"[M]ore people benefit from employer plans than is commonly understood.... First, the most widely cited statistics undercount participation. Second, many younger and lower-income participants who are not participating in retirement plans today will do so later in their careers or have a spouse who participates."

Investment Company Institute [ICI]

Benefits in General

Editor's Pick Life Expectancy in 2019 (PDF)

"One page shows life expectancies for people who are age 65 in 2019. The other page shows life expectancies for people who are age 25 in 2019. Differences in life expectancy between the ages reflect two competing forces[.]"

Society of Actuaries

How Employers Can Help With Student Debt

"Get to grips with the student debt situation at your business by finding out the following: [1] What proportion of your workforce is dealing with student loan debt? [2] If they have student debt, is it their own, or are they working parents who are also borrowing to send their kids to college? [3] What is more important to your employees: saving for retirement, or paying off student loans? [4] What level of student debt are your employees generally dealing with? [5] What student debt solutions are your employees already using?"

ForUsAll

Selected Discussions
on the BenefitsLink Message Boards

NHCEs Are Currently Eligible: Amend Plan to Exclude Some of Them Going Forward?

Small employer has a a fairly vanilla 401(k) plan with deferrals, safe harbor, and profit sharing. Would like to reduce the contribution to the NHCE by adding an excluded class. The one HCE also would be excluded from everything except deferrals. A number of the eligible NHCE would be excluded from the plan. Assuming coverage testing passes, this feels like a cut-back, or a violation of BRF, but I know the ability to defer is not protected, nor is right to receive an employer contribution. Usually if initially setting up a plan we are proactive in class exclusions as part of the design process, so I don't see requests for exclusions after the fact and just feel like I am missing something. Is there something that would prohibit or make this type of amendment problematic?

BenefitsLink Message Boards

Educational Material for Retirement Plan Industry Newbies

Any thoughts on particular books or materials for someone new to the retirement plan industry? Please share any other recommendations you may have.

BenefitsLink Message Boards

Employee Refusal to Allow Corrective Contribution to 403(b)?

I am working with a church that is in the midst of an EPCRS correction. One of the areas they are working to correct is failure to offer participation in the plan to all eligible employees. Per the written plan document, part-time employees must be offered participation. They are looking at needing to provide a 1.5% corrective contribution on behalf of these PT employees. The question the church has proposed is, "what if an employee refuses the corrective contribution?"

BenefitsLink Message Boards

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The Roth Conundrum
Cammack Retirement Group

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Lois Baker, J.D., President  loisbaker@benefitslink.com
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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