Retirement Plans Newsletter

October 11, 2019

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[Official Guidance]

Text of IRS Notice of Hearing on Proposed Regs for Multiple Employer Plans

"This document provides a notice of public hearing on proposed regulations relating to the tax qualification of plans maintained by more than one employer. These plans, maintained pursuant to section 413(c) of the Internal Revenue Code, are often referred to as multiple employer plans or MEPs.... The public hearing is being held on Wednesday, December 11, 2019, at 10:00 a.m. The IRS must receive speakers' outlines of the topics to be discussed at the public hearing by Monday, November 25, 2019."
Internal Revenue Service [IRS]

[Sponsored]

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Sponsored by Pension Rights Center

Join us to celebrate the 45th anniversary of ERISA, the 43rd anniversary of the Pension Rights Center, and to honor our Retirement Superheroes! Tuesday, Oct. 29, Washington DC. Learn more


[Official Guidance]

Text of PBGC Interest Rate Update for Benefits Payable in Terminated Single-Employer Plans, November 2019

"The November 2019 lump sum interest assumptions will be 0.25 percent for the period during which a benefit is (or is assumed to be) in pay status and 4.00 percent during any years preceding the benefit's placement in pay status. In comparison with the interest assumptions in effect for October 2019, these assumptions represent an increase of 0.25 percent in the immediate rate and are otherwise unchanged."
Pension Benefit Guaranty Corporation [PBGC]

[Guidance Overview]

Multiple Changes for Multiple Employer Plans

"These regulations help alleviate some of the uncertainty and risk that have made MEPs unpopular in recent years, but a number of questions remain unanswered.... Will the DOL issue subsequent regulations that permit financial institutions to sponsor MEPs on behalf of related or unrelated employers? How safe are the DOL's final regulations on MEPs now that a court has vacated the DOL's final regulations on association health plans (which used a nearly identical interpretation of the term 'employer' under ERISA)? ... What fiduciary exposure does an MEP administrator have where it spins off assets attributable to a noncompliant employer's employees, without the consent of such employer and in accordance with the proposed IRS regulations?"
Morgan Lewis

Ninth Circuit Enforces Pension Fund's New Interpretation of Plan In-Service Distribution Rules

"On appeal, the Ninth Circuit held that the Trustees' new interpretation based on the IRS guidelines was not unreasonable or an abuse of discretion ... According to the Court ... the Plan here was not imposing an additional condition for receipt of post-retirement benefits, but rather was reinterpreting an existing provision addressing the requirements for retirement, as defined by the Plan." [Meakin v. California Field Ironworkers Pension Trust, No. 18-15216 (9th Cir. Jun. 5, 2019; unpub.)]
Proskauer Rose LLP

District Court Allows Plaintiffs to Proceed with Claim That Home Depot Fiduciaries' Fund Selection Was Imprudent

"It would seem that plaintiffs' theory asks the court to conclude that offering the LifePath funds as part of a fund menu is akin to saying that $25 billion worth of investors are imprudent. Which, of course, the Home Depot court is not (on this motion to dismiss) doing -- it is simply letting the plaintiffs proceed with discovery, based on its conclusion that such a claim is 'plausible.' " [Pizarro v. Home Depot, No. 18-1566 (N.D. Ga. Sep. 20, 2019)]
October Three Consulting

[Sponsored]

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Oct. 24 webinar. Equity compensation is not just for executives, employees at every level can benefit from an incentive plan that rewards individual performance, business unit performance, and company performance. BenefitsLink discountLearn more


Supreme Court Case Creates Jitters for Defined Benefit Plan Managers

"You might assume that retirement plan participants cannot sue their plan provider if they have not lost money. A case in front of the U.S. Supreme Court could, however, challenge such an apparently common-sense argument. While the legal action may result in greater protection for participants in a range of US retirement savings vehicles, such a win could further threaten the willingness of U.S. employers to offer defined benefit [plans] -- a type of pension plan already in steep decline." [Thole v. U.S. Bank, N.A., No. 16-1928 (8th Cir. Oct. 12, 2017; cert. pet. granted Jun. 28, 2019)]
Financial Times

Pension Investing: Hedging Interest Rate Risk with a Collar

"Hedging against interest rate movements does not need to be an all or nothing decision. Nor does it mean that return-seeking assets need to be shifted to long bonds, thereby reducing expected future investment returns. Collars can be used, in combination with a reduction in traditional interest rate hedging, to retain some benefit if interest rates rise, while maintaining some protection if rates go the other way."
River and Mercantile Solutions

Third Quarter Pension Funding Status Monitor

"During the third quarter, the funded status of typical corporate pension plans declined approximately 4.5% ... for a total-return focused-plan, while an LDI-focused plan saw a smaller decline of roughly 0.4%[.]"
NEPC

PBGC 2018 Actuarial Report (PDF)

28 pages. Aug. 2019; released Oct. 2019. "The 2018 Annual Report of the [PBGC] contains a summary of the results of the September 30, 2018 actuarial valuation. The purpose of this separate Actuarial Valuation Report is to provide greater detail concerning the valuation of future benefits than is presented in PBGC's Annual Report."
Pension Benefit Guaranty Corporation [PBGC]

[Opinion]

Illinois Bright Idea: Put a Bunch of Underfunded Pension Plans in One Pile

"Most of the Illinois state funds are already 'consolidated' and quite large. If we go to the Public Plans Database page for Illinois funds, you'll see two of the state funds are missing -- the judges and the General Assembly. Those two are very small. But which funds, exactly, do they think they'd be consolidating? Chicago. And Cook County."
STUMP

Selected Discussions
on the BenefitsLink Message Boards

Compensation -- Schedules C and K-1 Combined?

A sole proprietor gets 1099 income and reports it on a Schedule C. The person also has a 2.25% interest in an LLC and gets income reported on a Schedule K-1. While both are subject to self-employment tax, If the sole proprietor sets up a new retirement plan, can they be combined to result in a larger level of compensation?
BenefitsLink Message Boards

Should My Husband and I Start a Defined Benefit Plan?

I'm an S Corp owner. My company was incorporated in 2018. It was an LLC before that. My husband and I have received W-2 income since 2018 of around $150,000, but dividends for this year will be about $400,000. We had a profit sharing 401k plan last year. Only my husband and I are eligible to participate. [1] Should we implement a defined benefit plan for the larger tax deduction? [2] How much can we have put into a DB plan? I know we will need an actuary if go forward. Both of us are 54 years old this year. Any advice would be greatly appreciated.
BenefitsLink Message Boards

Employer Contributions Made via One-Time Salary Reduction?

It seems to me that I remember seeing 401k plans where there were "employer" contributions by salary reduction. The employee signs a employment contract that specified that they would not receive a percentage of their compensation. It would instead be deposited into the 401k plan but not considered an employee deferral. Can that be right?
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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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