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Retirement Plans Newsletter January 16, 2020 |
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Webcasts, Conferences Closer Look at the SECURE Act PEP / MEP, and "Group of Plans" Provisions
Student Loan Debt + Financial Health + Savings Rates: A Change in Design Focus
Retirement Plans Legislative and Regulatory Update
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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] SECURE Act Rules Related to Safe Harbor Plans "Under the SECURE Act, if employees have been automatically enrolled during the year at levels that meet QACA requirements, then the plan will have additional time to amend to add a safe harbor nonelection contribution for the plan year and effectively convert the plan from an ACA to a QACA. However, this additional flexibility in the timing requirement for the amendment is only allowed if the employer is adding a safe harbor nonelective contribution, not a safe harbor matching contribution." Retirement Management Services, LLC |
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[Guidance Overview]
"Many of the provisions in the SECURE Act ... will require significant changes to plan administration and recordkeeping.... [1] Lifetime minimum required distributions delayed ... [2] Post-death minimum required distributions accelerated ... [3] Safe harbor 401(k) plan ... [4] Expanded small employer plan tax credits ... [5] Nondiscrimination, coverage and minimum participation relief ... [6] Expanded disaster relief ... [7] New in-service withdrawal right for child birth and adoption expenses ... [8] In-service withdrawal right from pension, 457(b) plans ... [9] Part-time participation for 401(k) plans ... [10] Form 5500 changes and increased penalties." Groom Law Group |
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[Guidance Overview] The Good News and Really Bad News for IRA Owners Under the SECURE Act: Next Steps for IRA Providers "Individual retirement annuities funded by annuity contracts face some special challenges in implementing the SECURE Act restrictions on stretch IRAs.... Amending existing annuity contracts or developing new annuity products to offer annuity alternatives that comply with the new restrictions ... generally requires that the amended annuity contract be submitted for approval by applicable state insurance departments before use.... Although the new law provides a helpful exception for certain existing annuity contracts, the exception is limited in scope.... IRA providers should consider taking [specified] steps in light of the SECURE Act changes[.]" Morgan Lewis |
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[Guidance Overview] New Regulation Best Interest FAQs Address Topics Familiar to DOL Fiduciary Rule Veterans "While much of the information within the FAQs is not new and was taken from the SEC's Adopting Release, the FAQs are significant for three reasons: [1] The FAQs provide an example of a type of sub-regulatory guidance that the Federal Agencies may issue notwithstanding President Trump's October 9, 2019 [Executive Order] ... [2] The FAQs provide helpful insight into how programs developed in response to the now vacated 2016 [DOL] Fiduciary Rule may assist broker-dealers with their Regulation Best Interest compliance efforts. [3] The FAQs are a new data point for developing theories around what DOL may do in any new fiduciary rule proposal." Groom Law Group |
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"Justice Kagan stated in a concurring opinion that 'Dudenhoeffer ... recognizes that a fiduciary can have no obligation to take actions 'violat[ing] the securities laws' or 'conflict[ing]' with their 'requirements' or 'objectives.' At the same time, the decision explains that when an action does not so conflict, it might fall within an ESOP fiduciary's duty -- even if the securities laws do not require it.' " [Retirement Plans Committee of IBM v. Jander, No. 17-3518 (S. Ct. Jan. 14, 2020)] National Center for Employee Ownership [NCEO] |
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Immediate Risk for Distributions for Older Participants (PDF) "If an older participant receives a lump sum or partial distribution and some of that distribution constitutes an RMD, the RMD portion may not be rolled over ... The problem exists because a participant in 2020 who receives a distribution might understand that there is an RMD that may not be rolled over, but which under the new law indeed may be rolled over and avoid taxation.... How will participants know this in time, for example, a distribution occurring in January, February, etc.?" The ERISA Law Group |
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Why Employers Need a Fiduciary Calendar "Employers that sponsor retirement plans keep a similar but separate calendar specifically to track fiduciary duties associated with managing a defined contribution plan, defined benefit plan or both. Many of the dates are critical, meaning that the potential problems caused by missing a to-do on the calendar can make a New Year's Day hangover welcome by comparison." MassMutual |
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The Decade That Was: Running Bull Can't Catch Pension Liabilities "Despite an entire decade of stampeding secular bull market returns, a typical pension plan likely has very little to show in the way of funding status improvement. That's because liability returns did some stampeding of their own thanks to gradually declining bond rates throughout the past ten years." The Principal Blog |
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A 'Miner' Change to the Government 457(b) May Make a Major Difference to Teachers "Included in the [SECURE Act] is a provision that allows in-service 457(b) withdrawals at age 59 1/2 leveling the playing field with the 403(b) on access.... Currently, the favored defined contribution plan for teachers is the 403(b). But because the K-12 403(b) is not subject to ERISA fiduciary oversight, most plans feature high-cost products sold by high-commission sales agents.... By design, the 457(b) requires more fiduciary oversight which has generally led to better, lower cost investment options. It now might make more sense for teachers to contribute to the 457(b) before contributing to a 403(b)." The Teacher's Advocate |
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[Opinion] The SECURE Act Facts: What You Need to Know Now "[A]nnuity providers were a big winner under the SECURE Act, as a lot of annuity-friendly provisions were added, such as a simple safe harbor that plan sponsors can use to select a lifetime income annuity provider for their plan, as well as a required inclusion of lifetime income projections on benefit statements. Will more plans actually offer annuities due to these changes (many of which are high-cost and difficult to understand)? Will more historically annuity-hesitant participants use them?" Cammack Retirement Group |
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Benefits in General |
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One More ERISA Supreme Court Case But Also One Less "Having already accepted three ERISA cases for the current term, on January 10, 2020, the high court agreed to hear a case involving preemption.... The case surrounds an Arkansas statute regulating pharmacy benefit managers' drug-reimbursement rates, which is similar to laws enacted by most states.... [Separately,] the Justices passed on the opportunity to clarify the standard for what plaintiffs must plead in their complaint for breach of the fiduciary duty of prudence when a plan is invested in employer stock[.]" Murphy Austin |
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Is My Employee Common-Law Married? "Oklahoma remains one of about only a dozen states that recognize common law marriages.... If you're an Oklahoma employer and you believe there's any question as to whether an employee is married (thereby creating a situation in which you're required to provide benefits or time off under the FMLA), have your employee and the spouse sign a simple one-page Common Law Marriage Affidavit[.]" McAfee & Taft |
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Executive Compensation |
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Latest Trends in Compensation Practices at the Top U.S. Oil and Gas Oilfield Services Companies "On average, incentive compensation -- including annual and long-term incentives (LTI) -- comprises approximately 83% of a CEO's and 77% of a CFO's total compensation package.... Annual incentive plan metrics are varied and diverse. EBITDA is the most prevalent metric, followed by health, safety and environmental, cash flow, and return on capital." Alvarez & Marsal |
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"On average, incentive compensation -- including annual and long-term incentives (LTI) -- comprises approximately 83% of a CEO's and 81% of a CFO's total compensation package.... Annual incentive plan metrics are varied and diverse. Production is the most prevalent metric, followed by health, safety and environmental, lease operating expenses, and general & administrative expenses." Alvarez & Marsal |
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Selected Discussions |
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Maximum Contributions for K-1 Partners "In a discussion with a CPA. He says a partner who receives a K-1 cannot exceed the 2019 limit of $56,000 -- that catch-up contributions never come into play because they have no salary from which to defer. Correct?" BenefitsLink Message Boards |
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"If I submit a 2019 Schedule SB before receiving my EA renewal letter, do I use the 17 prefix or the 20 prefix?" BenefitsLink Message Boards |
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Use Cross Tested Formula Even Though Document Calls for Integrated "I have a client whose plan document states the profit sharing formula is integrated with SSTWB at 100%. They have never made a profit sharing contribution and have decided they want to do one for 2019. There is no one with compensation in excess of the SSTWB. Could we do the profit sharing using a cross tested formula with everyone in their own groups as long as we pass ABT? I don't think we can." BenefitsLink Message Boards |
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Do You Prepare Form 8822-B for Your Retirement Plan Clients? "If not, do you notify them that it is required when there's a change that would require it? In your opinion, is this (or should it be) the job of the TPA, or the CPA, etc.?" BenefitsLink Message Boards |
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Press Releases |
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Plan Sponsor of the Year - Winners for 2019
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Innovative Investment Fiduciaries, LLC is Certified for Fiduciary Excellence
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Most Popular Items in the Previous Issue |
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Highlights of the SECURE Act
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The SECURE Act in 2020
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SECURE Act and Guaranteed Income, Part 2
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David Rhett Baker, J.D., Editor and Publisher
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