Retirement Plans Newsletter

October 29, 2019

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Webcasts, Conferences

Visualize Retirement
November 5, 2019 WEBCAST
fi360

ASPPA Annual Conference Recap
November 12, 2019 in MN
ASPPA Benefits Council [ABC] of Greater Twin Cities

How Financial Wellness Can Lead to Higher Employee Retention and Less Stress
November 13, 2019 WEBCAST
ADP

Deal "Horror Stories" Related to Employee Benefits and Executive Compensation
December 3, 2019 WEBCAST
American Bar Association Joint Committee on Employee Benefits [JCEB]

IRA Reporting
December 10, 2019 WEBCAST
Ascensus

2019 In Review - A Legislative and Regulatory Update [2019]
December 18, 2019 WEBCAST
FIS Relius Education

Employee Benefits and Executive Compensation Symposium
April 21, 2020 in IL
Ogletree Deakins

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Discussions

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[Official Guidance]

Text of PBGC Notice of OMB Submission and Request for Comments: Payment of Premiums

"PBGC is modifying the 2020 filing and instructions to require that plans offering a lump sum window separately report the number of participants in pay status who were offered and elected a lump sum in addition to the related current requirement with respect to participants not in pay status.... PBGC is changing the reporting period for risk transfer activity (lump sum windows and annuity purchases). Rather than the period falling between 60 days before the prior filing and 60 days before the current filing, the reporting period will be the prior premium payment year. PBGC also is modifying the filing instructions for a plan that reports that a premium filing will be the last for the plan and checks the 'cessation of covered status' box as the reason.... PBGC is adding to the instructions that a plan that claims cessation of coverage status should complete a coverage determination request. PBGC also is updating the premium rates and making conforming, clarifying, and editorial changes to the premium filing instructions." [Also available: Draft Reporting Instructions (PDF; 70 pages) and My PAA Screenshots (PDF; 11 pages)]
Pension Benefit Guaranty Corporation [PBGC]

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[Guidance Overview]

A Website for Sore Eyes: DOL Proposes Electronic Disclosure Regs

"Although mobile retirement plan administration is relatively new, it is quickly gaining popularity. The proposed rule signals that the DOL does not intend to stand it its way. ... Although the proposed regulations make it clear that certain notices can be combined for a given plan, it is not as clear whether notices for multiple plans can be combined."
Eversheds Sutherland

[Guidance Overview]

Electronic Disclosures: DOL Discovers E-Mail and the Internet

"In a bold move proposing their latest regulations (last issued in 2002 as most people were beginning to use electronic means of communication), the DOL has proposed new rules that would enable employers and plan sponsors of retirement plans ... to use electronic communications as a safe-harbor means of providing certain ERISA-required notices. Of course, there are a number of requirements in order to use these new e-mail and internet thingys."
Kushner & Company

[Guidance Overview]

Delivering DOL Disclosures May Get Easier

"Participants who want to receive free paper documents must be allowed to opt out of the e-delivery method for some or all of the covered documents. Those who opt out must receive paper documents until they opt in to receive the covered documents online again. Employers must have reasonable procedures in place to track opt outs and requests for paper copies."
Ascensus

Minimum Participation Rule Puts Pension Benefits at Risk

"One set of compliance rules for most pension plans are the minimum participation requirements. As some defined benefit pension plans continue operating, these rules are causing compliance concerns."
Findley

Editor's Pick What 401(k) Borrowers Can Add to the Loan Conversation (PDF)

16 pages. "How do participants feel about loans, how are they using them, and how are participants affected by plan sponsor decisions related to the loan feature? Addressing the 'voice of the participant' -- and what we can learn from these voices -- is the purpose of this report."
Retirement Loan Eraser

Cashing Out: The Systemic Impact of Withdrawing Savings Before Retirement (PDF)

18 pages. "At least 33% and as many as 47% of plan participants withdraw part or all of their retirement plan assets following a job change. The lost savings due to cash -outs amounts to between $60 billion and $105 billion annually. Approximately 4.5 to 6.4 million participants cash- out annually, which is approximately 6.5% to 9.5% of 401(k) plan participants ."
Savings Preservation Working Group

Tips and Traps of 'Compensation' Definition in Retirement Plan Documents

"Each plan sponsor must consider their business goals in conjunction with the administrative capabilities of their payroll software and their personnel when selecting what types of compensation to include or exclude. Most employers are able to make the selection on their adoption agreements, which generally offer the following options, with an 'Other' option in case they need to customize the definition to exclude specific items not mentioned on the standard list."
Belfint Lyons Shuman

Editor's Pick IRS Creates Program for 403(b) Plan Document Compliance

"The new guidance gives 403(b) plan sponsors a system to maintain compliant documents -- and their plans' tax-favored status -- after the initial [remedial amendment period] for 403(b) plans expires on March 31, 2020."
Mercer

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A Closer Look at 403(b) Remedial Amendment System Guidance

"[Rev. Proc. 2019-39 outlines] deadlines for different types of plan amendments for ongoing 403(b) plans. These deadlines are accelerated for a terminating 403(b) plan, which must adopt an amendment to reflect all applicable 403(b) requirements (including federal legislative and regulatory changes) no later than the date of the plan’s termination."
Voya Financial, via National Tax-Deferred Savings Association [NTSA]

Pitfalls of Using an Investment Rate of Return as the Cash Balance Plan's Interest Crediting Rate

"[T]here are a number of potential issues that a plan sponsor may face if they use the investment rate of return as the plan's interest crediting rate.... [1] Passing the nondiscrimination in the amount of benefits test under Internal Revenue Code Section 401(a)(4).... [2] Minimum participation testing problems under Internal Revenue Code Section 401(a)(26)."
Watkins Ross

How Good Are Default Investment Policies in Defined Contribution Plans?

"Using data from the Chilean system, [the authors] discuss an investment model with fixed contribution rates and compare the results with the default policy under multiple objectives.... [R]esults indicate that the Chilean default policy has a good overall performance, but specific closed-loop policies have a higher probability of achieving desired retirement goals and can reduce the expected shortfall at retirement."
Daniel Duque, David Morton, and Bernardo Pagnoncelli, via SSRN

Executive Compensation
and Nonqualified Plans

Time to Check Your Equity Incentive Plan Share Reserve

"[C]ompanies should consider modeling the duration of the existing share reserve to project how many grant cycles remain in the plan and stress test the modeling at various stock prices. If there are only enough shares to get through one or perhaps two more grant cycles at current or lower stock prices, management should alert its Board of the upcoming need for more shares and develop a timeline of activities between now and the annual meeting in which the new or amended equity plan will be proposed."
Meridian Compensation Partners, LLC

Don't Jump the Gun on Post-Merger Compensation Arrangements

"[P]laintiffs' lawyers file lawsuits following the announcement of every public company merger or acquisition (so-called 'strike suits'). Occasionally, the allegations in one of these lawsuits involve potential conflicts of interest created by compensation arrangements proposed or negotiated before the stockholder vote -- and not disclosed to stockholders. Earlier this year, a federal appellate court decided such a case[.]" [Regents of the University of California v. Willis Towers Watson PLC (In Re: Willis Towers Watson PLC Proxy Litigation), No. 18-1874 (4th Cir. Aug. 30, 2019)]
Winston & Strawn LLP

Selected Discussions
on the BenefitsLink Message Boards

Sample Amendment Under ERISA Section 4281

"My client is a multiemployer pension plan that has terminated in a mass withdrawal. It is projected to become insolvent and run out of funds in the next plan year. Its only sources of funds are two employers who made complete withdrawals and are making installment payments of withdrawal liability. As you likely know, in that situation, the plan has to be amended to eliminate benefits in excess of the greater of the amount of the plan's assets or the extent of the PBGC's guarantee. See ERISA Section 4281(c). Has anyone seen a sample amendment to reduce/suspend benefit levels of the type described here? If so, could you please supply me with a copy?"
BenefitsLink Message Boards

401(k) Deferral Election Made Many Months After Entry Date

"401(k) plan allows for entry/change to employee deferral contributions on Jan 1st and July 1st each year. An employee was eligible to start deferring on 07/01/19 and was given notice of eligibility to defer. The employee did not inform the Plan Sponsor that he wanted to defer until the end of September 2019. The Plan Sponsor starting withholding with the next payroll. Would this be OK based on the SH brief exclusion rule, or should the employee deferral contributions be refunded and the employee informed that they may start deferring on 01/01/20?"
BenefitsLink Message Boards

Participant Says, 'Stop My Loan Repayments!' -- So Employer Must Comply?

"Participant took a loan two years ago (5-year note) and has been making payments as required via payroll deduction. Participant has told the employer she cannot afford the payments and to stop the withholding and that she will default on the loan. The loan program requires payments be made via payroll deduction until the loan is paid in full. Can a participant just stop their deferrals? I have read some states mandate that, if the employee tells the employer to stop a withholding, the employer is legally required to stop, even though this is contrary to ERISA."
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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