Retirement Plans Newsletter

November 11, 2019

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Webcasts, Conferences

WEB Atlanta Annual Holiday Social
December 5, 2019 in GA
Worldwide Employee Benefits Network [WEB] - Atlanta Chapter

COBRA: Simple Concept - Complicated Rules
January 16, 2020 WEBCAST
Lorman Education Services

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Discussions

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[Guidance Overview]

PBGC Kills Premium Reduction for Mergers, Requires More E-Filings

"Draft 2020 premium payment forms and instructions feature a significant change from earlier drafts that signals the agency's opposition to a popular premium-reduction strategy involving de minimis mergers. A second proposal would require additional information when reporting missed contributions on Forms 10 and 200 and the use of PBGC's 4043 e-filing system for those forms."
Mercer

New Mortality Tables Released for Retirement Plans

"The change to the new table, from RP-2006 to Pri-2012, will impact liabilities generally within +/-1%.... Blue-collar workers may see decreases for females and older males (up to 1.5%) and increases for younger males (up to 1.7%). White-collar may see decreases (up to 1%) and larger decreases for the older population. Those with no-collar may see increases for younger participants (males up to 1% and females up to 0.3%) and decreases for older (over age 75) participants."
SEI

Stark Differences Between Generations in Funding Retirement

"More than 8 in 10 (86%) retirees fund their retirement primarily with Social Security or a pension. By contrast, 45% of Millennial workers say the top source of funding for their future retirement will come from a 401(k) or IRA, compared to just 25% who say they expect to rely on Social Security or a pension for their retirement income."
American Society of Pension Professionals & Actuaries [ASPPA]

Why Are 401(k)/IRA Balances Substantially Below Potential?

"401(k)s/IRAs have the potential to provide significant wealth. But a typical 60-year-old with a 401(k) in 2016 had less than $100,000 compared to a potential $360,000 in combined 401(k)/IRA assets. Four factors could explain this gap: the immaturity of the 401(k) system, the lack of universal coverage, leakages, and fees. The analysis finds that the main culprits are the immature system and lack of coverage. This story holds even if younger workers and those with traditional pensions are excluded. Even after the 401(k) system is fully mature, a large gap between potential and actual assets is likely to persist."
Center for Retirement Research at Boston College

Advocates Say DC Plans Should Be Considered 'Accredited Investors'

"[T]he DC Alternatives Association is ... making the case to the SEC and other regulators, such as the [DOL], that it is time to update the definition of 'accredited investors,' i.e., those who are eligible to participate in private offerings and to invest in certain other types of 'alternatives.' ... Voya recently joined the DC Alternatives Association in submitting a comment letter ... [which] encourages the SEC to ... consider modifying the definition of accredited investor to make private offerings more readily available to retirement plan participants, who benefit from fiduciary oversight under [ERISA] or a similar state or federal fiduciary standard."
planadviser

CalSTRS CEO on New SEC Proxy Voting Rules: They Would Create the Next Enron

"The SEC's proposed new guidance calls for proxy advisory firms to reveal how they arrive at their shareholder recommendations and warned that they need to ensure that information in their reports is accurate and 'materially complete.' CalSTRS said in a statement last week that it voluntarily contracts with proxy advisory firms 'to obtain cost-effective independent research to help inform our proxy voting and engagement decisions' and that the proposed rules would impair the proxy voting process, which it calls its 'fiduciary responsibility.' "
Institutional Investor

Corporate Pension Funding Rises by $11 Billion in October

"During October, the funded ratio for [the 100 largest U.S. pension] plans rose slightly, from 85.4% to 86.1%, while the funded status deficit improved by $11 billion. An investment gain of 1.08% helped boost the funded status ... in October, with the market value of assets improving by $13 billion ... Liabilities ... increased by $2 billion as a result of a one basis point drop in the discount rate, from 3.09% at the end of September to 3.08% as of October 31."
Milliman

The Windfall Elimination Provision (WEP) in Social Security: Proposals for a New Proportional Formula

"If the proportional formula had applied to current beneficiaries in 2018 ... about 1.1 million beneficiaries affected by the current WEP (or 69%) would have received a higher benefit and about 0.5 million (or 31%) would have received a lower benefit. In addition, 13.5 million beneficiaries with some noncovered earnings who are not affected by the current WEP would have received a lower benefit. Therefore, if the proportional formula were applied to new beneficiaries, it would generate program savings."
Congressional Research Service [CRS]

Benefits in General

High Hopes for Consistency and Guidance from New DOL Secretary

"A new [DOL] secretary with a background in ERISA, combined with a recent reorganization of the Employee Benefits Security Administration, could bring more needed guidance and uniformity in how regulations are enforced[.]"
Pensions & Investments

Executive Compensation
and Nonqualified Plans

Annual Reporting and IRS Filing for ISO Exercises and ESPP Stock Transfers

"For ISO exercises and ESPP transfers occurring in calendar year 2019, companies must file the applicable forms with the IRS no later than February 28, 2020 for paper filers, and no later than April 1, 2020 for electronic filers ... Companies must also provide the employees (or former employees) the information statements (Copy B of the applicable form) no later than January 31, 2020."
Haynes and Boone, LLP

Selected Discussions
on the BenefitsLink Message Boards

Cessation of Participation by a Participating Employer

"One of my plan sponsors had another company in their plan and they sold that company in June and it spun off into their own plan for 2019. The plan is failing the 410b testing for ERPS due to those individuals. Do I need to include those people who were with the employer that was sold off? Please tell me there's some special rule that those employees don't count."
BenefitsLink Message Boards

Employer Sponsoring Solo K Had Statutory Employees

"One of our customers' Solo K excludes non-owners but the employer in fact employed 'statutory employees' during 2018. October 15 is many weeks ago (the 11(g) amendment deadline). Do the latest EPCRS procedures regarding self-correcting retroactive discretionary amendments help us without having to go through VCP?"
BenefitsLink Message Boards

ROBS Exit Strategy?

"If I use a ROBS and open up a corporation with $300k, so let's say then my 401K plan gets 300K shares @ $1 each. Fast forward 5 years and now my corporation is worth $600k, so my 401k plan now has 300K shares @ $2 each for a total value of $600k. How do I exit the ROBS in this scenario? Do I need to pay $600k (assuming the valuation comes in at that number or close to it)? I'm fairly certain I won't have $600K sitting around."
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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