Retirement Plans Newsletter

November 12, 2019

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Stop the Madness! Effective Ways to Protect Your Organization Against FMLA Abuse
December 11, 2019 WEBCAST
Littler

Plan Sponsor Roundtable
December 12, 2019 in OH
Worldwide Employee Benefits Network [WEB] - Northeast Ohio Chapter

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[Official Guidance]

Text of PBGC Notice of Proposed Modifications to Annual Reporting (Form 5500 Series)

"PBGC is proposing modifications to the 2020 Schedule R (Retirement Plan Information) and its related instructions. Schedule R is part of the Form 5500 Series. The proposed modifications to Schedule R affect multiemployer defined benefit plans covered by title IV of ERISA. PBGC also is proposing minor modifications to the Form 5500 Series to improve the accuracy of reported information."
Pension Benefit Guaranty Corporation [PBGC]

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[Guidance Overview]

Proposed Regs Update Tables Used to Calculate Required Minimum Distributions

"If finalized, the proposed regulations would allow individuals who currently receive RMD amounts from their retirement plans to lessen the amount of their RMD amounts.... IRA providers and employer-provided retirement plans ... would have to update the administration of their plans to reflect the updated life expectancy tables."
RSM US

[Guidance Overview]

DOL Takes Steps to Modernize ERISA's Electronic Disclosure Rules

"Employers that don't issue email addresses or smartphones to new employees and don't request email addresses or phone numbers from new hires should consider doing so, as this will facilitate their ability to use the New Safe Harbor. Employers should also consider asking terminating or retiring employees for email addresses or phone numbers that can be used to electronically provide plan-related documents, as that will ensure such employees remain covered individuals who can electronically receive covered documents."
Foley & Lardner LLP

[Guidance Overview]

ERISA Disclosures: DOL Proposes a More Practical Rule

"The beauty and danger of the DOL proposed rule is that it is purposely and purposefully broadly-worded to allow for innovations in technology. For instance, the requirement that the participant have an email address or a smartphone number allows for creative methods of notice: Email? Text? In-app or push notifications? So long as the safe harbor is met, it would seem all of the above are acceptable to the DOL. But just because you can do something, doesn’t mean you should. To avoid DOL scrutiny, administrators should be careful not to push participants past their technological comfort zones."
Porter Wright Morris & Arthur LLP

[Guidance Overview]

Administering Lifetime Income's Joint and Survivor Annuity Rules Requires Understanding of Revenue Ruling 2012-3

"[Rev. Rul. 2012-3] is an actuary's dream, with specific, almost painful details outlining the machinations of how the J&S rules apply when making lifetime income payments from a plan which otherwise is designed to avoid this issue.... [F]our of the most basic concerns are addressed by 2012-3: [1] The annuities are investments, not protected plan benefits.... [2] The joint and survivor rules apply only to the elected annuity contract, not to the entire plan-or even to the entire account balance of the participant.... [3] The J&S rules won't apply until the 'annuity starting date.' ... [4] Making the annuity the default method of payment under the plan won't trigger the J&S rules if the participant can elect out of it before the annuity starting date."
Business of Benefits

Biggest Worries of 401(k) Plan Sponsors, and What to Do About Them

"A retirement savings plan has become a standard benefit, with the 401k plan long ago replacing the pension plan as the preferred vehicle.... [Plan] administration takes time. Larger companies could afford to hire dedicated staff for this purpose. Other companies, well, the proverbial buck stopped at the president's desk.... [It] may take more than auto-enrollment to boost employee savings rates.... The underlying structure of the plan requires fiduciary oversight.... Picking the right service provider becomes critical should the plan sponsor face a lawsuit. "
Fiduciary News

How Core Investment Menu Size Impacts Participant Investment Decisions in Defined Contribution Plans

"[D]efault-investment acceptance increases by approximately 0.7% for each additional fund that a plan adds to the core investment menu (moving from 10 to 30 funds).... [P]articipants in plans with about 10 funds had an average of 4.4 holdings in their portfolio; participants in plans with around 30 funds had an average of 8.6 holdings.... [I]ncreasing a fund menu from 10 funds to 30 funds, which would result in an average increase in holdings of approximately three funds per participant, would result in an estimated increase of alpha of 11 basis points for those participants self-directing their accounts."
Morningstar Advisor

Schwab to Offer TDF-Managed Account Hybrid for 401(k) Plans

"The service, currently in development, would automatically shift 401(k) participants invested in their plan's target-date fund into a managed account upon reaching a certain age, generally around 55 or 60, that is chosen by the plan sponsor. Employees can opt out if they wish.... The logic is that near-retirees have a more complex financial situation than younger investors and would benefit from the more personalized nature of a managed account."
Investment News; subscription may be required

Society of Actuaries Publishes New Mortality Tables

"Sponsors will want to consult with their actuaries about the effect of the new SOA mortality tables/improvement scale on their plan valuation. The new tables/improvement scale may affect valuations for financial disclosure more or less immediately. The effect on ERISA-related valuations -- for minimum funding, PBGC variable-rate premiums, and lump sums -- may be (perhaps considerably) delayed."
October Three Consulting

Editor's Pick State and Local Employees' Views on Their Jobs, Pay and Benefits (PDF)

46 pages. "Benefits are among the most important job features for state and local employees.... [T]he vast majority agree they could earn a higher salary in the private sector, and a pension factors into the competitiveness of their compensation.... State and local government employees overwhelmingly have favorable views of pensions ... Most public workers feel they will be financially secure in retirement, but the vast majority of state and local employees are highly concerned about cuts to retirement benefits and government officials underfunding of pension plans.... Millennials working in state and local government generally share the views of Baby Boomers and GenXers on their job, serving the public, pay, and benefits."
National Institute on Retirement Security [NIRS]

Selected Discussions
on the BenefitsLink Message Boards

Choosing Which Assets to Distribute to HCEs -- Discrimination Problems?

"401(k) has assets held in pooled account from inception -- no participant direction. Plan sponsor has decided to move assets to American Funds platform and allow participant direction beginning 2020. Some assets in the plan will not transfer to the AF platform and must be liquidated or distributed. They include a Certificate of Deposit and some corporate bonds. Two of the three owners are over age 70-1/2 and must take RMDs. Can they choose which assets are distributed for the RMDs? And if the plan allows in-service distributions for participants who are NRA [65] or older, can those participants (the HCEs) select which assets can be distributed/rolled over to IRA (after satisfying RMD requirement)?"
BenefitsLink Message Boards

Minimum Distribution Timing for Surviving Spouse

"We have a plan that has a participant who died in 2019 after attaining age 70-1/2. Had he survived, his first RMD would have been due by 4/1/2020. His spouse is his sole beneficiary. Treas. Reg. section 1.401(a)(9)-3 allows her to delay commencing benefits until 2020, but she is electing a distribution now. Does a distribution now trigger an RMD requirement for 2019?"
BenefitsLink Message Boards

Not-Quite-Complete Correction of Failed ADP Test

"A plan fails the ADP test for 2018 and refunds are made by March 15, 2019. Later it's discovered that there was an error in the test and additional refunds need to be processed. Is the excise tax due on the total refunds or only those made after March 15?"
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Press Releases

Applications Now Open for Steven H. Sandell Grant Program
Center for Retirement Research at Boston College

Applications Now Being Accepted for Dissertation Fellowship Program
Center for Retirement Research at Boston College

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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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