Retirement Plans Newsletter

November 20, 2019

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[Guidance Overview]

IRS Plans To Update Mortality Tables for Required Minimum Distributions

"The new tables reflect longer life expectancies -- on average, between one and two years longer than the current tables.... The proposed tables would apply for distribution calendar years beginning on or after Jan. 1, 2021. The distribution calendar year is the year to which the RMD relates, and not necessarily the year in which it's paid."

Mercer

Suit Against Estee Lauder Spotlights 401(k) Distribution Fraud

"[T]he facts of the Berman case 'expose some ugly truths' for the 401k industry 'about the potential vulnerability of 401(k) plan assets to theft.' ... Historically, 401k plan administrators and record keepers have responded to such fraud incidents by making the victim whole without involving distributions from the plan itself. [T]he Berman case may suggest that 'at least for some plan service providers, the willingness to cover fraudulent withdrawals may have run out.' "

The Security Ledger

Editor's Pick 2020 Key Administrative Dates and Deadlines for Calendar-Year Single-Employer Defined Benefit Plans (PDF)

A 5-page chart describes important administrative dates and deadlines for single-employer defined benefit plans that are subject to ERISA and the Internal Revenue Code.

Milliman

Best Interest Standard of Care for Advisors, Part 18

"[T]he requirement to act in the best interest of a plan participant for rollover recommendations is not limited to broker-dealers; it also applies to investment advisers.... The SEC explained that the investment adviser best interest standard covers the recommendation to rollover, the account type for the rollover, and the investments in the IRA.... [A] rollover recommendation almost always involves a conflict of interest which must be disclosed by the investment adviser.... [T]he SEC Interpretation, unlike the DOL fiduciary rule, applies to all plans, not just ERISA-governed plans. "

FredReish.com

Millennials Want Student Loan Benefits Over 401(k)s -- Here's Why That's a Problem

"Although employees may want student loan benefits, employers aren't entirely sold. While many industry insiders point to the growing appeal of student loan benefits, just 4% of employers currently offer a student debt repayment program ... [T]here are benefits for employers to increasing access to financial education and student loan repayment offerings[.]"

Voya

Can Your Plan Participants Find the Cost of Their Retirement Plan Investment Fees?

"Only after some deep digging and reading the fine print on fund fact sheets, was I able to find the expense ratios for my investments, as a percentage of assets.... In this day and age of the internet, it should not be this difficult to find the dollar amount of plan fees that I pay each year. And remember - we’re the ones who work with retirement plans. If it’s this difficult for us, what about participants? "

Cammack Retirement Group

Liability-Hedging Strategies for Plan Sponsors in the Low Interest Rate Era

"As sponsors of U.S. single-employer defined benefit plans know all too well, interest rates have experienced dramatic swings in recent years. While many plan sponsors have adapted to this environment by strategically hedging their liability interest rate risk, many are still questioning the efficacy of doing so -- especially when interest rates appear to be low. Yet, failing to hedge long-duration liabilities with long-duration assets is a risky endeavor that exposes the plan sponsor to significant downside risk."

Cambridge Associates

Stochastic Modeling to Reflect Investment Risk in Funding Liabilities for Pension Plans (PDF)

"Until now, explicit disclosures about plan-specific risks have rarely been included in funding valuation reports.... ASOP 51 has changed this ... By tweaking existing familiar concepts -- the funding liabilities -- we can leverage the understanding that employers already have about their pension plans to explain various risks, some of which are very pertinent to plan decision making."

Milliman

Overview of Public Pension Plan Governance (PDF)

10 pages. "Public retirement systems are established under state statutes, local ordinances, or both, and subject to fiduciary, investment, and administrative laws, which both grant authority to, and place restrictions on, entities responsible for one or more key areas of plan governance. This overview is intended to summarize the laws and rules that govern public plans, and the range of entities typically responsible for them."

National Association of State Retirement Administrators [NASRA]

To Roth, or Not to Roth, That Is the Question

"70% of company plans now offer a Roth option, up from 59% just three years ago. But few take advantage. Just 12% of those who are eligible for a Roth 401(k) contribute to one[.]"

MarketWatch

Editor's Pick Navigating the Social Security Windfall Elimination Provision with a Government Pension

"[W]hile WEP can significantly alter an individual's total retirement income, there are several strategies that an advisor can employ to minimize that impact, including increasing the number of years with 'substantial' earnings from a 'covered' employer, or taking a lump-sum distribution of a non-covered pension before becoming eligible for the benefit (thus reducing the length of time the WEP penalty is applied to the Social Security benefit)."

Nerd's Eye View

[Opinion]

DOL Proposes to Send You Down a Rabbit Hole to Find Your Retirement Information

"Sure, the world is changing, and many more people are using computers and smartphones to access the internet, but this doesn't mean that everyone should be forced to read on screens.... [A]ccess to the internet is nowhere near uniform or equitable ... [It] still varies substantially by education, age, income and geography. Clearly, the rule was written for financial institutions, employers and plan trustees, not for consumers."

Pension Rights Center

Selected Discussions
on the BenefitsLink Message Boards

Effect of Multiple Extensions of a 457(f) Substantial Risk of Forfeiture

"457(f) plan provides for substantial risk of forfeiture solely on the condition that the participant perform substantial services for the employer through the initial or extended vesting date. In addition, the plan permits participant and employer to agree to an extension of the substantial risk of forfeiture in accordance with the requirements of the proposed 457(f) regs. More than 90 days before the initial vesting date of January 1, 2020, the parties in fact agree to a materially greater benefit that will vest on January 1, 2022. It would seem that the proposed regs would permit the participant and the employer to once agree to extend the risk of forfeiture in the same fashion provided they enter into the agreement at least 90 days prior to the January 1, 2022 vesting date. Yet, there is no explicit statement to that effect and all of the examples provided only deal with the first extension. Any limitations on (or traps inherent in) doing a second extension?"

BenefitsLink Message Boards

12/31 PYE Plans Getting 5558 Denials for 02/28 PYE?

"Have just recently had 3 or 4 different clients who are 12/31 PYE get notices from the IRS stating that their Form 5558 for 02/28/19 has been denied. Extensions were filed for the 12/31/18 PYE for these clients, and their respective 5500s were filed timely. No extension was ever submitted for these clients for a 02/28/19 PYE. Anyone else encountering this, or am I just really lucky?"

BenefitsLink Message Boards

Mortgages as a Self-Directed 401(k) Plan Investment

"The Plan Sponsor has a DB and a 401k PS plan with individual accounts. Husband, Wife and one employee participate in both plans. The husband currently has an investment in his 401k account for a mortgage to an unrelated party. The Plan Sponsor would like to issue another mortgage to another unrelated party for $200,000 from both the Husband and the Wife's accounts. We do not recommend real estate investments within a plan but if they wanted to proceed with this, how should they go about it?"

BenefitsLink Message Boards

Move Accounts of Terminated Participants Into Separate (More Conservative) Fund?

"Plan has a pooled account. Would there be a concern with placing terminated participants into a separate pooled account that just contains, say, a money market fund?"

BenefitsLink Message Boards

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Should You Offer Only Index Funds in Your 401(k) Plan?
Lawton Retirement Plan Consultants

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Lois Baker, J.D., President  loisbaker@benefitslink.com
David Rhett Baker, J.D., Editor and Publisher  davebaker@benefitslink.com
Holly Horton, Business Manager  hollyhorton@benefitslink.com

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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