Retirement Plans Newsletter

September 17, 2019

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Director, NQ Client Services

Newport Group
Lake Mary FL

Plan Administrator

Newport Group
Lake Mary FL / Los Angeles CA / Dallas TX / Richmond VA

Defined Benefits Analyst

Retirement Planning Services
Littleton CO / Telecommute

Pension Administrator - Retirement Plans

Steidle Pension Solutions, LLC
Lebanon NJ

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DOL Amicus Brief Supporting ERISA Preemption of CalSavers Program (PDF)

25 pages. "The California Secure Choice Retirement Savings Trust Act takes away the freedom of choice that lies at the core of ERISA by forcing employers either to establish their own ERISA plan or to maintain an equivalent plan under the Act.... [The Act] disregards Congress's careful determination that employers should not be required to maintain employee pension benefit plans. Because the Secure Choice Act disregards and runs afoul of ERISA's statutory scheme by effectively requiring employers to maintain such plans, it is preempted by ERISA's broad, express preemption provision that disallows any state laws that 'relate to any employee benefit plan.' " [Howard Jarvis Taxpayers Assoc. v. The California Secure Choice Ret. Savings Prog. (CalSavers), No. 18-1584 (E.D. Cal. Mar. 28, 2019)]
Office of the Solicitor General, U.S. Department of Labor [DOL]

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It May Be a Global Economy, But ERISA Wants You to Keep Your Plan Assets in the United States

"The Section 404(b) regulations provide a narrow exception to its blanket prohibition on holding assets outside the jurisdiction of the district courts of the United States.... Section 404(b) offers two basic avenues by which this narrow range of assets can be held."
Morgan Lewis

Keys to a Successful Employee Financial Wellness Program in 2019

"[Y]our financial wellness program should ... be able to come up with personalized solutions designed to meet [your employees'] specific needs.... [A] financial wellness program has to inspire employees to take action.... If you're an employer of educated professionals under 40, you should make student debt a priority ... [A] best-in-class retirement plan might be the most important component of an employee financial wellness program."
ForUsAll

Editor's Pick Assessing the Value of Financial Advice (PDF)

12 pages. "[Working with an advisor] materially altered equity risk-taking for two-thirds of the sample, reduced cash holdings for nearly three in ten investors, and eliminated home bias for over 90%. ... Eight in ten [investors who have established a retirement goal] have an 80% or greater probability of achieving a secure retirement... [E]motional outcomes account for 45% of total perceived value."
Vanguard

Johns Hopkins University Settlement with 403(b) Participants

"Going forward, an independent investment consultant is required to work with plan executives to issue requests for proposals from at least three record keepers. These record keepers must identify their fee policy as a total fixed fee per participant instead of a percentage of plan assets. Future record keepers will not be allowed to solicit plan participants to cross-sell products and services for individual retirement accounts, non-plan managed accounts, life or disability insurance, investment products, or wealth management services, unless initiated by the plan participant."
Bolton

The Importance of Implementing Best Practice Standards for Investment Fees

"The practice of not offering participants the lowest cost share class available for a given investment strategy is out of alignment with industry best practices standards because it reduces the transparency of fees for participants and may cause certain participants to pay more for the operation of the plan than others, simply as a result of selecting certain investment alternatives."
Schneider Downs

The Improper Use of Governmental 'Pre-Approved' Plans

"It is critically important for local governments and public agencies that use such plans to understand that the document provider (your recordkeeper and investment provider) does not always review and confirm that your operation or administration of the plan (as completed in the adoption agreement) complies with applicable federal and local law. Many local agencies incorrectly assume that, because they are using a pre-approved plan document, nothing can go wrong with it."
Best Best & Krieger LLP

[Opinion]

Three Promising Policies to Reduce 401(k) Cashout Leakage

"A sure-fire solution to cashout leakage is to eliminate participant choice by prohibiting pre-retirement 401k withdrawals altogether.... A promising solution comes in the form of emergency-savings plans ... Facilitating portability evens the scales for job-changers by making portability easy -- and in the case of small balances -- an automatic default."
401(k) Specialist

[Opinion]

Reg Bi 'Unlikely to Be Implemented'

"The SEC's Regulation BI is terribly disappointing. It not only fails to protect consumers; it actually makes the situation worse.... But the rule is unlikely to be implemented; it's being challenged not only by financial advisors who are fiduciaries, seven states and the District of Columbia have filed lawsuits against the SEC. And dozens of states are drafting their own regulations and legislation to do what the SEC has so far failed to do."
Fiduciary News

[Opinion]

Michael Kitces and Alan Moore Plan to Sue the SEC -- on XY Planning's Dime

"Michael Kitces and Alan Moore are risking their time and treasure by suing the SEC (and chiding the FPA for failing to do so.) ... [T]he question [is] not whether these guys will win; even if they lose, they'll win the more important branding and PR war. The bigger question, then, is why nobody else stepped into this breach on RIAs' behalf? Conflicts, uncertainty, inertia and short memories[.]"
RIABiz

[Opinion]

Why Everyone Should Care About This Report on Social Security

"[A] report recently released by the Social Security Administration that contains a comprehensive menu of actions that Congress can take to fix those problems.... You'll learn what those measures cost or save. You'll be able to read brief and understandable explanations of each of them.... [And] you'll be able to see which member of Congress or organization proposed them."
The Brookings Institution

Benefits in General

Can Employee Agreements Mitigate ERISA Fiduciary Exposure?

"[The district court] opened the door to a few questions, such as how much education and experience does it take for someone to be sophisticated enough to sign a release, the extent to which the release was valid against plan trustees, and whether a shorter timeline for signing would be equally sufficient. Further, the court noted that the employee's release did not bar the plan itself from asserting claims against the plan fiduciaries in the future." [Innis v. Bankers Trust Co. of South Dakota, No. 16-650, (S.D. Ia. Apr. 30, 2019)]
Hall Benefits Law

Selected Discussions
on the BenefitsLink Message Boards

Unused Paid Time Off Contributed to 457(f) Plan?

We have a 457(f) plan. An executive with a lot of PTO banked has asked whether the unused PTO can be transferred into his 457(f) plan account. Is this permissible? Currently the plan is silent to this, but I imagine it could be amended (if it's legally permissible).
BenefitsLink Message Boards

RMD When Spouse Is More Than 10 Years Younger

A vested terminated participant has been taking RMDs the last few years from the qualified DC plan using the ULT table (the one that assumes a 10-year younger spouse). Suppose this year we are told that, all along, their spouse (and designated beneficiary) is actually 20 years younger than the participant. Does that mean the joint table (with its larger divisor factors) is required to be used for determining the RMD? If so, was 20% mandatory withholding missed on the non-RMD portion of the amount distributed for the prior years because those amounts could have been rolled over?
BenefitsLink Message Boards

Safe Harbor Match Plan Based on Compensation from the Date of Entry

Is there ever a disadvantage in having a safe harbor match plan based on compensation from the date of entry?
BenefitsLink Message Boards

Participant Dies; Who Is Responsible for Investments Now?

A participant in a large 401(k) plan passed away earlier this year. There is a legal dispute regarding his beneficiary designation. [1] What fiduciary duty would there be for the account when the participant has died and beneficiary is unknown? (This plan has full participant-directed accounts.) [2] Should access to the deceased participant's account be closed to others? (It appears the participant's girlfriend still has view-only access to the deceased participant's login information.)
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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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