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Retirement Plans Newsletter October 2, 2019 |
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Webcasts, Conferences Regulatory Focus: Impacts to Retirement Plans in 2019
Roping In Retirement With Self-Directed IRAs: Fall Conference
Mid-Sized Retirement & Healthcare Plan Management Conference
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Discussions |
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This Newsletter:
BenefitsLink Health & Welfare Plans Newsletter:
Message Boards Digest:
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[Guidance Overview]
PBGC Issues Proposed Regs on Guaranteed Benefits, Asset Allocation, and Interest Rate Assumptions "The proposed regulations ... provide that the PBGC may use either fair market value or, in certain cases, fair value to determine the value of plan assets, for purposes of determining an employer's liability to the PBGC for the unfunded benefits.... [A] second set of proposed regulations would modify the assumptions used in determining whether a benefit is de minimis ($5,000 or less) for purposes of lump sum payments in PBGC-trusteed single-employer plans."
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[Guidance Overview]
Final Regs on Hardship Distributions Make Few Changes to Proposed Regs "The regulations eliminate this facts and circumstances test and replace it with a three-part test ... Plan administrators have been allowed to apply the Three-Part Test since January 1, 2019, but the requirement to obtain a participant's representation of insufficient liquid assets becomes mandatory for hardship distributions made on or after January 1, 2020."
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[Guidance Overview]
PBGC Proposal Would End Publication of Old Lump Sum Rates "Plans that specifically reference the private-sector rates shouldn't need amending if they want to continue to use those rates.... [S]ome employers may find using the final legacy rates for all future determination dates unpalatable since the immediate rate will be locked in at 1.5% (and the deferred rates at 4%), even if market rates return to higher levels. An employer that wants to avoid this result (for example, by switching to the 417(e) basis) will need to grandfather the legacy rates for accrued benefits to avoid violating the anti-cutback rules. "
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"If you're an employer who has adopted a pre-approved defined benefit pension plan, it's time to amend and restate your plan. All defined benefit plans using pre-approved plan documents must restate their plan before April 30, 2020. It's important that you understand why your plan document must be restated. [This article provides] a non-technical explanation in Question and Answer format."
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"[P]lan fiduciaries may want to ... [1] Inquire about participant data needed by the service provider.... [2] Inquire about the service provider's cross-marketing practices.... [3] Limit use of participant data for marketing non-plan products and services.... [4] Monitor the service provider's use of participant data."
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"Notwithstanding Dorman's efforts to seek further review of the Ninth Circuit's decision, the Dorman opinion will likely encourage plan sponsors to consider amending their plans to require arbitration of ERISA statutory claims. Note, however, that Dorman did not involve any claims for benefits, and therefore the Ninth Circuit did not address whether a challenge to a denied benefit claim could be limited to binding arbitration." [Dorman v. The Charles Schwab Corp., No. 18-15281 (9th Cir. Aug. 20, 2019; also unpub. memo.
opinion)]
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Employers: The Retirement Security Challenge -- 19th Annual Transamerica Retirement Survey (PDF) 68 presentation slides. "At a time, when fewer than one in five workers (18 percent) are very confident they will be able to fully retire with a comfortable lifestyle and a similar percentage of employers (17 percent) are very confident that their employees will be able to achieve a financially secure retirement, this report highlights opportunities for employers to do even more to help their employees prepare for retirement."
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Participation, Contributions Climb in 403(b) Plans "Top trends: [1] Increased average contributions promoting retirement readiness: Plan sponsor contributions up to 5.5%, from 4.7%; Participants now contribute 6.6% of pay, up from 6.3%. [2] Retirement advisors needed: Nearly half (46.6%) don't currently work with one. [3] Financial wellness programs gaining momentum: A quarter (26.7%) already have a formal plan in place; nearly half (47%) have plans or interest in implementing one."
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Shared Payment vs. Separate Interest QDROs "[A] QDRO offers some flexibility in planning strategies for both the Participant and the Alternate Payee. While the Shared Payment method must be used if the Participant has already begun payments when the QDRO is implemented, either the Shared Payment or Separate Interest strategy can be chosen if the QDRO is implemented before pension benefits begin. These choices allow for more flexible planning for both parties, possibly lowering at least one hurdle for older couples who choose to divorce."
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Overconfidence Versus Extreme Caution: Irrationality in Retirement Planning "Concerned future retirees sometimes invest conservatively in order to protect their savings, but the over-cautious can miss out on growth opportunities available in a riskier asset mix .... [I]nsufficient retirement education and financial literacy contributes to the confidence-preparedness gap in retirement planning. ... [R]ecordkeepers, plan sponsors and employers must understand the types of cognition that lead to damaging financial behaviors and provide those in need with targeted advice and education. "
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September 2019 Pension Finance Update "Both stocks and interest rates moved higher in September, helping plans partially recover from an awful August.... Plan A improved 2% last month but remains down almost 5% for the year, while Plan B gained less than 1% and remains down 1% through the first three quarters of 2019[.]"
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Funded Status of State and Local Pension Plans in FY 2018 (PDF) "[F]rom 2017 to 2018, actuarial assets grew by 4.7 percent (from $3.65 trillion to $3.82 trillion), while liabilities grew by 3.8 percent (from $5.05 trillion to $5.25 trillion). The larger percentage change in assets increased the funded ratio slightly from 72 percent to 73 percent."
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[Opinion]
SPARK Comment Letter to IRS on Proposed Regs for Multiple Employer Plan Relief (PDF) "[SPARK] believes that Treasury and IRS can improve the proposed exception to the unified plan rule by streamlining its conditions, broadening its availability, and providing additional clarity."
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Benefits in General |
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Some Independent Contractors in California Will Become Employees "The new law will reduce worker misclassification, 'which erodes basic worker protections like the minimum wage, paid sick days and health insurance benefits,' the governor said in his signing message.... The legislation codifies and expands the use of criteria established in the 2018 Dynamex [decision which] created a presumption that a worker who performs services for a hirer is an employee for wage and benefit claims under wage orders issued by the Industrial Commission."
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Selected Discussions |
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Mid-Year Amendment to Safe Harbor Plan to Exclude Sole Proprietor from Allocation Sole proprietor. Plan is a 3% SH plan. HCEs are NOT excluded. It's being proposed that the plan be amended to exclude the sole prop from receiving the SH for 2019, the idea being that, because the sole prop isn't required to receive a SH (if the plan had been set up that way initially), this would be OK. This seems aggressive to me. Anyone have a different view?
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Make Further Contributions for More-Than-5%-Owner Despite Being Over 70-1/2? My understanding is a more than 5% owner of a business who is still actively working has to take a minimum distribution each year. Does it make sense to contribute to their retirement plan? If they have an IRA, can they aggregate the 401k balance and IRA balance, taking the RMD out of their IRA? Thoughts?
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Can Plan Loan Be Made to Participant on Active Duty? If plan allows for loans, can an employee who is on active duty (and has been 3 years) take a loan? Plan does allow for distribution for deemed severance of employment, but client wants to give loan option to employee if allowed.
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Press Releases |
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DOL Investigation Results in Tennessee Transportation Provider Paying $454,545 in Restitution to Employee Stock Ownership Plan
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Pentegra Releases New Book on Retirement Planning for Small Businesses
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Minnesota Health Action Group Announces Findings from First-ever eValue8TM Mental Health Deep Dive Survey in Minnesota
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Most Popular Items in the Previous Issue |
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IRS Finalizes Changes in Hardship Distribution Rules
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IRS Changes 401(k) and 403(b) Hardship Withdrawal Rules
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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 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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