Retirement Plans Newsletter

February 13, 2020 logo logo
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[Official Guidance]

Text of PBGC Interest Rate Update for Benefits Payable in Terminated Single-Employer Plans, March 2020

"The March 2020 lump sum interest assumptions will be 0.00 percent for the period during which a benefit is (or is assumed to be) in pay status and 4.00 percent during any years preceding the benefit's placement in pay status. In comparison with the interest assumptions in effect for February 2020, these assumptions represent a decrease of 0.25 percent in the immediate rate and are otherwise unchanged."

Pension Benefit Guaranty Corporation [PBGC]


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[Guidance Overview]

Editor's Pick SECURE Act: Impact on 401(k) Plan Sponsors

"Starting with the 2021 Plan Year, 401(k) plan sponsors will need to track hours of service performed by part-time employees for eligibility and vesting purposes under a special rule, and will be required to permit certain part-time employees to make elective deferrals in a 401(k) Plan beginning in the 2024 Plan Year.... For plan sponsors with a nonelective employer contribution safe harbor plan, there is no longer an annual safe harbor notice requirement to provide to participants ... [T]his safe harbor may be worth a closer look, particularly as it can be adopted retroactively in the event that ADP/ACP testing failures arise."

Groom Law Group

[Guidance Overview]

PBGC Regs Put the Kibosh on Spin-Term Premium Reductions

"PBGC final regulations put a definitive end to the once-popular 'spin-term' variable-rate premium reduction tactic, while also formalizing the agency's ban on using the de minimis spinoff exemption to reduce flat-rate premiums. The final regulations ... provide a small number of new offerings aimed at simplifying requirements for ERISA Section 4010 filings and 4043 event reporting."


Outdated Mortality Assumptions Case Survives Motion to Dismiss

"Rockwell contended that a plan pays actuarially equivalent benefits so long as it calculates actuarial equivalence using actuarial assumptions that were reasonable at the time they were written into the plan.... [Judge Lynn Adelman] pointed out that Section 401(a)(25) does not prohibit employers from amending a plan's actuarial assumptions to bring them up to date.... Adelman also noted that plans can minimize conflict between the actuarial-equivalence requirement and ERISA's anti-cutback rule by adopting variable actuarial assumptions that self-adjust to reflect changes in mortality and interest rates. " [Smith v. Rockwell Automation, Inc., No. 19-505 (E.D. Wis. Feb. 10, 2020)]

PLANSPONSOR; free registration may be required

Hybrid Plans Seeking Determination Letters Still Have Time to Act

"Hybrid defined benefit plan sponsors have just under seven months left to take advantage of the temporary window for requesting IRS determination letters under Rev. Proc. 2019-20. This is the first opportunity for hybrid plan sponsors to get IRS approval for changes relating to the final hybrid plan regulations ... This article discusses some reasons why sponsors might consider taking advantage of the window."


Choosing Target Date Funds: A Suitability Assessment

"The absence of standard performance benchmarks, coupled with the wide and varied landscape of target date funds, makes comparing the performance of TDFs challenging.... [F]iduciaries who focus on short-term performance and fees without considering a TDF's strategic design and how that interacts with participants' real-world behaviors may be missing the mark."

J.P. Morgan Asset Management

The Past Decade in 2020 Hindsight: Pension Investing

"In 2019 plan sponsors witnessed a familiar, albeit more extreme, combination of returns that has also been the theme of the entire previous decade. Equities rallied, long term interest rates fell, and funding levels didn't increase to levels that plan sponsors expected for a typical pension plan. However, some sponsors utilized equity derivatives to make the investment portfolio work harder while managing risks more efficiently, and consequently saw their plans' funded ratios materially increase over the same time period."

River and Mercantile Solutions

Trends and Insights of Those Saving for Retirement Across America: Fourth Quarter 2019 (PDF)

22 slides. "90% of employees who are auto enrolled don't opt out. Participation among millennials has increased by 55% over the last 10 years in part due to employers adopting auto-enrollment.... Of those employers offering auto-enrollment, a record 47% are now auto enrolling at 4% or higher, up from 29% five years earlier. Average employee contributions have increased $1,080 in the last five years, while average employer contributions have hit an all time high, increasing $500."

Fidelity Investments

Financial Well-Being and Retirement Readiness in the Higher Education Workforce

"Retirement plan participation is nearly universal among full-time academic employees, but many are concerned about how they will manage their savings in retirement. Only 20% of higher education employees have received advice within the past three years about drawing income from savings in retirement, but 77% of those interested in receiving financial advice are interested in this topic. Additional areas of concern include covering out-of-pocket medical expenses in retirement and potential long-term care expenses."

TIAA Institute

Decumulation Confusion: Social Security Claiming Strategies

"While delaying Social Security benefits can result in higher benefits, that is not always the case ... [T]he earnings test can through a monkey wrench into any phased retirement plans.... [T]he amount of retirement plan distributions received in a year can affect Social Security taxation. ... [H]igh income earners can also pay higher premiums for Medicare, since retirement plan distributions affect income for this purpose as well."

Cammack Retirement Group

Benefits in General

Preemption Case Highlights Different Definitions of 'Employee' Under the Code and ERISA

"Since none of the field representatives participating in the plan were common-law employees, and it was undisputed that participation in the plan was limited to field representatives, the court concluded the plan was not an ERISA plan. Given these 'unambiguous' limitations on ERISA's scope, the court was unpersuaded by the [DOL's] argument that the program should still be treated as an ERISA plan 'because the IRS has long treated independent contractors as employees for tax purposes and Congress' objective was to harmonize ERISA with longstanding tax provisions.' " [Kilfoyle v. Hill, No. 19-1831 (N.D. Ohio Jan. 10, 2020)]

Thomson Reuters / EBIA

Benefits Tech: Top Trends for Employers to Watch in 2020

"Tech is [1] helping the right people get into the right plans ... [2] proactively reminding employees when they may be eligible for a claim ... [3] helping organizations manage change ... [4] starting to simplify leave management ... [5] becoming more efficient and consistent."


Selected Discussions
on the BenefitsLink Message Boards

Combined Plan Deduction Limit

"Client makes profit sharing deposits during the year and also has a Cash Balance Plan. In 2019, the profit sharing contribution deposited into the plan was greater than was deductible for combined plan purposes (e.g., profit sharing exceeded 6% due to it being a service company). Because the owner's portion is not deductible and is below the 415 limit, can the money stay in his account and be treated as after-tax basis for taxation purposes?"

BenefitsLink Message Boards

Stretch IRA Alternatives?

"With the 10 year payout requirement for non-designated beneficiaries, what are your thoughts on using a charitable remainder trust to facilitate a lifetime (or 20 year) income stream? Obviously, it does not have all the advantages of the stretch, but it does provide for tax deferred growth and income stream beyond the 10 years."

BenefitsLink Message Boards

Plan Termination Amendment Incorporating Changes Required by the SECURE Act

"I have a non-Safe Harbor 401(k) Plan that will be terminating by 04/01/2020. According to the ERISApedia webcast, an amendment is required for terminating plans ('presumably' -- their word). I have not seen any language for such an amendment. Anybody?"

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BenefitsLink Retirement Plans Newsletter, ISSN no. 1536-9587. Copyright 2020, 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, 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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