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September 27, 2019 logo logo
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[Official Guidance]

Text of PBGC Proposed Regs: Lump Sum Payment Assumptions

14 pages. "This rulemaking ... is intended to modernize the methodology used to determine de minimis lump sums in terminated underfunded single-employer plans.... PBGC would adopt the interest and mortality assumptions from section 417(e)(3) of the Internal Revenue Code for this purpose. It would also discontinue PBGC's monthly calculation and publication of the interest rates used for this purpose. Because some private-sector plans use PBGC's lump sum interest rates, the proposal would provide a final interest rate set for private-sector plans to use for valuation dates on or after the effective date of the final rule."
Pension Benefit Guaranty Corporation [PBGC]

[Official Guidance]

Text of PBGC Proposed Regs: Benefit Payments and Allocation of Assets

33 pages. "This proposed rule would: [1] Clarify that PBGC's rules on payment of a lump sum are unaffected by election of a lump-sum distribution before plan termination. [2] Change wording that refers to the dollar amount currently subject to cashout by statute ($5,000) so it refers instead to the statutory provision that specifies that dollar amount. [3] Clarify that a de minimis benefit of a participant who dies after plan termination will be paid as an amount due a decedent, not as a qualified preretirement survivor annuity. [4] Clarify that benefits will be paid to estates only as lump sums. [5] Clarify that accumulated mandatory employee contributions may not be withdrawn if benefits are in pay status when a plan becomes trusteed. [6] Clarify that the form of benefit in pay status when a plan becomes trusteed will not be changed. [7] Clarify that pre-trusteeship partial distributions are considered in determining benefits. [8] Require that fair market value or fair value, as appropriate, be used for purposes of valuing assets to be allocated to participants' benefits and in determining employer liability and net worth."
Pension Benefit Guaranty Corporation [PBGC]

[Guidance Overview]

Final Hardship Distribution Regs: Implementation Considerations

"The regulatory preamble confirms that the prohibition on suspension of contributions applies only to a qualified plan, 403(b) plan, and most 457(b) plans. Plans subject to section 409A may retain existing suspension provisions ... The regulatory preamble confirms that ESOP dividends that have been paid to the plan and that are available for the employee to elect to receive in cash are generally considered 'available' plan distributions that must be taken prior to a hardship distribution."
Proskauer Rose LLP

Petition for Rehearing and Supporting Amicus Briefs Filed in Schwab ERISA Arbitration Case

"The relevant questions if a rehearing is granted might be whether the plan itself, through a provision in the plan document, can agree to arbitration -- and if it can, whether an arbitration provision in the plan document can serve to waive the rights to the remedies prescribed under ERISA Sections 409 and 502(a).... [W]hether LaRue, an individual account case, controls or is even relevant in a case involving plan-wide allegations, could be fertile ground to accept a rehearing also to the issue of whether a plan document is subject to the FAA and can waive ERISA statutory remedies."
[Dorman v. The Charles Schwab Corp., No. 18-15281 (9th Cir. Aug. 20, 2019; also unpub. memo. opinion)]
The Wagner Law Group

Withdrawal Liability Developments

"Employers participating in multiemployer plans should carefully review their CBAs, participation agreements, and the plan documents and rules before ... withdrawing from a pension plan, to determine whether the plan may impose liabilities or utilize certain rights of which the employer may not otherwise be aware.... [Recent cases also] provide a clear understanding of the 'bargaining-out' partial withdrawal liability rule for employers considering certain restructuring or strategies and looking to avoid incurring withdrawal liability.... [E]mployers that have withdrawn from pension plans or are about to [withdraw] should monitor their payment schedules to avoid inadvertent payment accelerations."
Clifton Budd & DeMaria, LLP

Beware Potential Benefit Plan Impacts of the Final Overtime Regs

"Employers should [1] review the eligibility and compensation definitions in their benefit plans so that they can determine whether changes to an employee's exempt status and overtime eligibility triggered by these final regulations impact the benefit plans.... [2] consider the impact of the changed classification on discrimination testing.... [3] consider the impact of the change on all benefit plan compensation definitions."


Creative Planning Gets Personal Capital's Former 401(k) Company, Simplifies Its ADV

"RIAs have stayed away in droves from the 401(k) market and particularly from trafficking in small plans for good reason. But the worm has turned, in part, because more big players can play the scale game in a low margin business.... Millennials prove elusive but are smart enough to opt into their employer 401(k) plan. Creative Planning ... [is] ready to go deeper on small plans, even micro plans, by controlling AB401(k)'s software that it absolutely knows works. Technology means more profits can be made with less scale."

Benefits in General

Senate Confirms Eugene Scalia as Labor Secretary

"The Senate on [September 26] confirmed Eugene Scalia to succeed Alex Acosta, the labor secretary who resigned in July ... Scalia is a partner at the Washington law firm Gibson Dunn, where he has represented companies such as Walmart, Ford and UPS in workers rights claims. He is also the son of the late Supreme Court justice Antonin Scalia."
The Washington Post; subscription may be required

2019 Employer Approaches to Financial Wellbeing Solutions

"More than half [of surveyed employers] reported currently offering financial wellness initiatives to employees (51 percent). Another 20 percent were actively implementing and 29 percent were interested in implementing such initiatives.... There was little consensus on what financial wellbeing looks like.... A third (34 percent) of employers reported either currently offering student loan debt assistance (11 percent) or planning to offer (24 percent) such initiatives."
Employee Benefit Research Institute [EBRI]

Employment of People Ages 55 to 79

"After declining for decades, the share of people in the United States ages 55 to 79 who were employed began to increase in the mid-1990s: In 1995, 33 percent of people in that age range worked, but by 2018, 44 percent did.... The changes in employment of people ages 55 to 79 -- the period during which many people stop working -- were related to changes in their demographic characteristics and the jobs they held, as well as to changes in Social Security."
Congressional Budget Office [CBO]

Executive Compensation
and Nonqualified Plans

Council of Institutional Investors Overhauls Its Policy on Executive Compensation

"CII's revised policy reflects its goal of encouraging companies to simplify plan design, use defensible performance metrics that are linked to long-term company performance and clearly articulate the terms of their executive pay programs.... [S]ome of the suggested 'solutions' will likely be viewed as a bridge too far that could put some companies at a competitive disadvantage in recruiting and retaining top talent."
Meridian Compensation Partners, LLC

Selected Discussions
on the BenefitsLink Message Boards

Need Solution to Successor Plan Problem

There are two entities -- A and B -- in a controlled group. Each has its own 401(k). We want to eliminate B's plan at the end of the year, but over the course of the next few months, a bunch of B employees will be moving to A and will be immediately eligible for A's plan. So, we are going to violate the 2% rule under the successor plan rule because at least 2% of the participants in the B plan will have participated in the A plan in the 12 months leading up to terminating the B plan. Is there a way we can spin off the accounts in the B plan of the people we expect to transfer to the A plan? That way we'd have B1 holding those accounts and B2 holding the other accounts. At the end of the year, we can terminate B2 without any successor plan issues, and merge B1 into the A plan. Any thoughts or issues?
BenefitsLink Message Boards

Crediting Prior Service for Persons Employed at Acquired Business

A current physician practice bought another practice in an asset sale. The assets of the benefits plans were not included in the sale. May the new employer bring the employees of that plan into their plan immediately and count service with the prior employer for eligibility and vesting? Is a plan amendment needed?
BenefitsLink Message Boards

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Press Releases

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Deadlines to Deposit Elective Deferrals
Retirement Learning Center, LLC, Inc.
1298 Minnesota Avenue, Suite H
Winter Park, Florida 32789
(407) 644-4146

Lois Baker, J.D., President
David Rhett Baker, J.D., Editor and Publisher
Holly Horton, Business Manager

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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