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Retirement Plans Newsletter October 15, 2019 |
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Webcasts, Conferences Spending Patterns of Retirees
Mergers & Acquisitions
Beneficiary Designations: Avoiding Costly Issues [2019]
Multiple Employer Plans (MEPs): The Very Latest [2019.11]
2019 Retirement Plans: Design Considerations and Administration
Cybersecurity Risks for Employee Benefit Plans
ERISA Claims & Procedures - Mastering the Full and Fair Review
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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]
2020 Increases for Retirement Plans, Social Security "These changes will affect benefits for currently retired individuals, as well as those contemplating retirement. Employers who sponsor retirement plans that are 'coordinated' with Social Security in some fashion will also see an impact on benefits earned and payable under such plans."
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[Sponsored]
Join the Pension Rights Center's Celebration of Superheroes!
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. |
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Retirement Plan Cybersecurity at Issue in New Lawsuit "The lawsuit claims that the defendants breached their fiduciary duties of loyalty and prudence by causing or allowing the unauthorized distributions of plan assets; failing to confirm authorization for distributions with the plan participant before making distributions; failing to provide timely notice of distributions to the plan participant by telephone or email; failing to identify and halt suspicious distribution requests ... failing to establish distribution processes to safeguard plan assets against unauthorized withdrawals; and failing to monitor other fiduciaries’ distribution processes, protocols and activities." [Berman v. Estee Lauder, No. 19-6489 (N.D. Cal. complaint filed Oct. 9, 2019)]
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ESOP Valuation Court Case Questions Fiduciary's Diligence in Buy-Out of CEO's Shares "It appeared that the appraiser had backed into the company representative's estimate through the use of questionable inputs in his valuation model ... [1] No forecasts of the Company's performance were considered ... [2] Adjusting Sentry's earnings to remove a portion of health care benefits above typical industry levels even though management did not intend to discontinue this benefit.... [3] Reducing the capitalization rate to 12.2% for the transaction valuation when the rates used in prior years' valuations ranged from 15%-18%." [Pizzella v. Vinoskey, No. 16-062 (W.D. Va. Aug. 2, 2019)]
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Controlled Group Rules for Church Plans "Generally, an organization that is otherwise eligible to participate in a church plan will not be aggregated with another such organization and treated as a single employer for a plan year unless [1] one of the organizations provides (directly or indirectly) at least 80% of the operating funds for the other organization during the preceding taxable year, and [2] there is a degree of common management or supervision between the organizations such that the organization providing the operating funds is directly involved in the day-to-day operations of the other organization. However, there are two exceptions[.]"
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Retirement Literacy: A Series of Briefs from the Society of Actuaries "The Society of Actuaries Aging and Retirement Strategic Research Program and Financial Finesse are pleased to make available a series of briefs focused on retirement literacy issues.... [Retirement Health & Happiness] explores retirement from a holistic perspective looking at non-financial issues. ... [Retirement Planning from Start to Finish] looks at retirement planning and the things to consider throughout one’s career. [A
Spending Plan for Retirement: Estimating Expenses] explores the types of expenses that may occur in the first year of retirement. [Retirement Planning Tools] provides a resource for better understanding retirement tools."
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[Sponsored]
SPARK Forum - November 3-5, 2019 -- The Breakers, Palm Beach, FL
Join us at the retirement services industry's leading event for top marketing, sales, administration and record keeping professionals. Comprehensive agenda includes topics for Record Keepers, 401(k) Plan Providers, Financial Advisors and Cyber Security Professionals. |
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How Much Would People Take Out of Retirement Accounts If Left on Their Own? "The time has come when the first cohort of workers will retire entirely reliant on the accumulations in their 401(k) and IRA accounts (mostly rollovers from 401(k) plans) to supplement their Social Security benefit.... [S]everal recent studies suggest that people will not draw down their accumulations for fear that they will exhaust their money and be unable to cover end-of-life health care costs.... [A] new study provides further evidence on this reluctance to spend by showing that much of the withdrawals occur only because of the IRS required minimum distribution (RMD) rules."
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[Opinion]
What's Changed (And More!) with 401(k) MEPs "[E]mployers who are currently subject to an annual plan audit ... will be among the first to embrace these programs, either through an industry association or a Chamber of Commerce in their state or metro area.... A MEP plan sponsor needs to inquire as to the level of experience that each of the various service providers tied into a MEP arrangement brings to the table. The interaction between the MEP recordkeeper varies tremendously depending upon which recordkeeper is being utilized and whether or not the recordkeeper is also providing plan administration (bundled) services to the plan."
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Benefits in General |
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Federal District Court Sheds Light on ERISA's Fiduciary Exception to Attorney-Client Privilege "The court explained that when the interests of the ERISA plan fiduciary and the plan beneficiaries have diverged sufficiently such that the fiduciary seeking legal advice is no longer acting directly in the interests of the beneficiaries, but in its own interests to defend against plan beneficiaries, then the attorney-client privilege remains intact. The court noted, however, that the mere prospect of potential litigation over a claim decision is insufficient to defeat the fiduciary exception because denying benefits to a beneficiary -- and any related pre-decisional legal advice -- is as much a part of the administration of a plan as conferring benefits to a beneficiary." [Duncan v. Minnesota Life Insurance Co.,
No. 17-0025 (S.D. Ohio Jul. 10, 2019)]
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"The court's conclusion is not extraordinary; indeed, most courts to have considered the right to a jury in a fiduciary breach case have concluded the same. What's interesting about this decision is the depth of the court's analysis of the historical practice of jury trials and ERISA's text in rejecting the participants' arguments in favor of a jury trial for their claims." [Moitoso v. FMR LLC, No. 18-12122 (D. Mass. Oct. 8, 2019)]
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Student Loan Guidance Added to Treasury Priority Plan "While the plan does not specify what the agencies are considering, the guidance - which could be issued in the first half of 2020 - improves the outlook for those interested in combining a student loan component with their retirement plans."
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Is Your Company's Severance Arrangement Subject to ERISA? "Instead of formal severance plans, many companies have informal guidelines that are applied when an individual's employment is involuntarily terminated. These arrangements provide more flexibility than a formal plan ... It is less likely that a company will treat an informal severance arrangement as an ERISA plan. However, ... informal severance arrangements may be subject to ERISA and failure to recognize that ERISA applies could result in significant penalties."
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Selected Discussions |
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ADP vs. 402(g) Failure -- Precedence? In a controlled group where they handle payroll internally, an HCE under age 50 was allowed to defer from multiple companies and ended up with $29K deferred for 2018. This plan also happens to fail the ADP test (partially because I had to include all those deferrals), and he will need to get an ADP Test refund that exceeds the amount of the 402(g) violation (yes, I'm only getting the information to do this today)... until I apply the earnings allocation, which is actually a loss for 2018, which brings it back to less than the 402(g) excess. So what comes first here? If I apply the net $10,000 ADP refund, then there's still a $500 402g issue. What about taxation -- 402(g) violations not corrected by 4/15/19 are double-taxed, so running them through as an ADP correction seems as if it would not make that clear. Thanks for the last-minute advice.
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Owner Participating in Several Plans of Non-Controlled Businesses Unless there is a controlled group issue, is there any reason why an owner/highly compensated employee/key employee cannot max out his deferrals in each company's plan, as well as maxing out other kinds of employer contributions in each plan in total ($56,000 total for 2019)?
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Final Hardship Regs: What You Need to Know
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How to Survive Retirement with Your Spouse
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401(k) Service Provider Contract Considerations (PDF)
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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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