Retirement Plans Newsletter

October 3, 2019

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401(k) / Pension Administrator

The MandMarblestone Group, LLC
Philadelphia PA / Telecommute

Benefits Specialist

Blue Benefits Consulting
Columbus OH

Manager of Compliance and Operation

Retirement Plan Consulting Firm
Pasadena CA

Compliance Analyst

Empower Retirement
Greenwood Village CO / WI / Telecommute

Employee Benefits Investigator

Employee Benefits Security Administration [EBSA]
Pasadena CA / Telecommute

Retirement Plan Regional Director

Retirement Plan Consultants
NC / Telecommute

Pension Plan Administrator

DeMars Pension Consulting Services, Inc.
Overland Park KS

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[Official Guidance]

Text of PBGC Proposed Regs on Administrative Review of Agency Decisions

25 pages. "The [PBGC] is amending its regulation on Rules for Administrative Review of Agency Decisions. The proposed rule would clarify and make changes to the review process for certain agency determinations and the procedures for requesting administrative review."
Pension Benefit Guaranty Corporation [PBGC]

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[Guidance Overview]

IRS Revenue Procedure 2019-39 Establishes Recurring Remedial Amendment Periods for 403(b) Plans

"Rev. Proc. 2019-39 creates recurring pre-approved 403(b) plan cycles. Each cycle will have a one-year submission window during which plan sponsors of pre-approved 403(b) plans may apply for opinion and advisory letters for pre-approved plans. The IRS plans to issue guidance on application procedures and timing of the cycles before each cycle's submission window. Additionally, the IRS will announce the deadline for employers to adopt the approved plan."
Thomson Reuters Practical Law

[Guidance Overview]

New Disaster Relief and Expanded Sources Available for Hardship Distributions

"[I]ndividually-designed 401(k) plans that currently permit hardship distributions will likely need to be amended to reflect the final regulations by December 31, 2021. The amendment deadline for pre-approved 401(k) plans is more complicated and depends on several factors; however, generally, the deadline to make changes for the final regulations would likely be the employer’s tax filing deadline (plus extensions) for 2020."
Proskauer Rose LLP

[Guidance Overview]

Best Interest Standard of Care for Advisors, Part 12

"Regulation Best Interest: An Overview of the Changes ... Since there is flexibility for broker-dealers to develop their mitigation measures, there is both opportunity and risk. The opportunity is that broker-dealers can design mitigation strategies that reflect their business models and cultures; the risk is that the SEC or FINRA may, upon examination, determine that the strategies are inadequate to properly mitigate the incentives."
FredReish.com

First Crack in the Armor of the Segal Blend?

"The matter was appealed to the United States Court of Appeals for the Second Circuit. In May 2019, oral argument was held. Last week the case ended. Surprisingly, the parties stipulated by which the appeal was withdrawn with prejudice and counsel fees were not sought. ... [T]he stipulation left intact [the District Court's] decision that using the Segal Blend violated ERISA. The Second Circuit approved that settlement on September 16, 2019." [The New York Times Co. v. Newspapers & Mail Deliverers'-Publishers' Pension Fund, No. 17-6178 (S.D.N.Y. Mar. 26, 2018)]
Jackson Lewis P.C.

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401(k) Plan Participant Cannot Pursue Claims on Behalf of Plans in Which She Did Not Participate

"The plaintiff sought to certify two classes: [1] a plaintiff class, represented by plaintiff, consisting of all participants in 401(k) plans that had similar recordkeeping agreements with Nationwide; and [2] a defendant class, represented by Andrus Wagstaff, PC, of all plan sponsors of 401(k) plans that had similar agreements with Nationwide.... The court found that plaintiff lacked standing to sue each of the allegedly thousands of similarly situated 401(k) plan sponsors because each plan had different agreements with Nationwide and therefore her alleged injury, i.e., excessive fees, was not traceable to one shared contract." [Brown v. Nationwide Life Ins. Co., No. 17-558 (S.D. Ohio Sep. 19, 2019)]
Proskauer

Retirement Plan Created for Creditor Protection Does Not Qualify as a Fully Exempt Private Retirement Plan Under California Code of Civil Procedure

"Judgment Creditor AMBS Diagnostics, LLC ('AMBS') originally sought to collect on its money judgment by levying the assets held in judgment debtor Timothy O'Brien's [Individual Retirement Accounts].... O'Brien formed a new limited liability company, had the new LLC form a 401(k) Plan, and then transferred all of the assets previously held in his IRAs into the newly formed 401(k) Plan.... [T]he Court of Appeal ruled that that the 401(k) Plan was not principally or primarily designed and used for retirement purposes, so the plan was not a fully exempt 'private retirement plan'[.]' [O'Brien v. AMBS Diagnostics, LLC, No. B288072 (C.A. 2nd, Aug. 8, 2019)]
Butterfield Schechter LLP

How a Financial Wellness Expo Became the Hottest Ticket in Town

"For Oregon PERS, engaging employees means re-imagining the traditional employee benefits fair concept, from the venue (renting a popular convention center rather than using its own facilities), to branding (this year's theme is 'Your Path to Financial Wellness'), to use of technology (including an Expo App), to creating compelling content (with new features added each year, such as 2019's prize wheel), to event staffing that fully capitalizes on the face-to-fact interaction with members. Each element of the Expo is designed to thoroughly engage as many people as possible."
Cammack Retirement Group

Convexity: The Forgotten Risk for Pension Plans

"Most of the time, just worrying about the difference in duration between pension assets and liabilities is sufficient. However, as interest rates fall, the sensitivity of liabilities to further changes in interest rates starts to increase: this is convexity.... Convexity exacerbates the asymmetry problem for plan sponsors. Not only does the sponsor lose if funding levels decline, but she loses even more if the underlying reason is because of a decrease in long term interest rates. As well, if rates rise, the benefits of the rise weaken (at the margin) as rates increase."
River and Mercantile Solutions

New York State Officials Open Probe Into 403(b) Sales to Teachers

"New York's top financial-services watchdog on [Oct. 1] dispatched letters to a dozen major insurers seeking details on how they market retirement-income products to teachers, opening a probe of industry practices ... The insurers have three weeks to respond ... It wasn't immediately clear which insurers received the letters."
The Wall Street Journal; subscription may be required

Where, Oh Where, Have My Retirement Benefits Gone?

"Former participants can take matters into their own hands and search for retirement benefits to which they believe they are entitled. [This article includes] a list of options for locating lost retirement plan assets. There may be other resources as well."
Retirement Learning Center, LLC

Railroad Retirement Board: Retirement, Survivor, Disability, Unemployment, and Sickness Benefits

"Similar to Social Security, the RRB provides retirement, survivor, and disability benefits to covered employees and their families who meet insurance requirements by working in covered railroad employment and paying RRA payroll taxes[.]"
Congressional Research Service [CRS]

[Opinion]

ICI Comment Letter to IRS on Proposed Modification to Unified Plan Rule for Multiple Employer Plans (PDF)

"The Institute supports the proposal and its goal of expanding usage of MEPs, particularly by small employers.... [We] believe the proposal would benefit from certain changes intended to streamline and simplify the requirements for addressing non-compliant employers."
Investment Company Institute [ICI]

Benefits in General

[Guidance Overview]

Don't Overlook Employee Benefit Plans When Considering Effect of the Final Overtime Rule

"Employee benefit plans with criteria for eligibility, contribution, etc. based on the classification of salary/hourly or exempt/non-exempt may see participant shifts ... The effects of employees shifting from one plan to another effective January 1, 2020, could create issues with non-discrimination testing, top-heavy results, or a reduction in certain benefits going forward (which may require advance notice to the affected participants)."
Jackson Lewis P.C.

Editor's Pick Employee Benefits in the Supreme Court (PDF)

33 pages. "[I]n the Court's last 44 terms starting with the October 1975 term -- [ERISA] in the main took effect on January 1, 1975 -- the Court has issued merits opinions in: 126 argued cases and two unargued cases directly involving employee benefit arrangements including IRAs, and two additional argued cases substantially implicating these arrangements even though employee benefits were not directly involved on the facts, for an astonishing total of 130 decisions. As of this writing, the Court has three employee benefit cases scheduled for argument during its October 2019 term, although other interesting petitions for certiorari are pending."
Eversheds Sutherland

To Disclose or Not During ERISA Administrative Review

"A recent 4th Circuit decision reiterates the importance of aligning a plan fiduciary's administrative claim and appeal review process with the standards for a 'full and fair review' under [DOL] regulations, including disclosing all documents considered in the course of determining a claim (absent compelling reasons not to)." [Odle vs. UMWA 1974 Pension Plan, No. 18-1398 (4th Cir. Jun. 20, 2019)]
Seyfarth Shaw LLP

Selected Discussions
on the BenefitsLink Message Boards

Changing Form of Distribution From DB Plan While in Pay Status

A married participant in a DB plan retired and elected a Joint-and-75% Survivor Annuity. Several years into retirement, he and his wife divorce. I was retained to draft a proposed QDRO, which split the participant's monthly payment 50/50. If the participant dies first, the alternate payee receives the survivor amount of 75%. If the alternate payee dies first, the participant reverts to his full benefit. The participant won't sign it, says it's unfair. The participant and the alternate payee would each receive a higher monthly benefit, which sounds like a life annuity. It's been my understanding that an elected DB benefit can rarely be changed once in payment status, especially by QDRO. Am I missing something?
BenefitsLink Message Boards

Open a SEP for a Commonly Controlled Business?

Individual owns 100% of an S corporation. Only two employees are husband and wife. They have a solo 401K plan. They both maxed their elective deferrals and the employer contributed max profit sharing. Husband also owns another business with no employees that is taxed as a sole proprietorship. Sole proprietorship is profitable in 2018. Can they also do a SEP for the sole proprietorship?
BenefitsLink Message Boards

Can a Cash Balance Plan Have a 6-Year Vesting Schedule or Is It Just a 3-Year Cliff?

Can a Cash Balance Plan have a 6-year vesting schedule or is it just a 3-year cliff?
BenefitsLink Message Boards

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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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