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February 25, 2020 logo logo
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[Guidance Overview]

The SECURE Act's 403(b) Custodial Account 'Distribution' Does Not Create IRAs

"[T]he IRS let it be widely known that it felt that 403(b) custodial accounts could NOT be 'distributed' in the same manner as an annuity contract. This had the effect of freezing plan terminations if you could not convince ALL of your participants (even ex-employees) to liquidate and take a distribution of their investments being held in those custodial accounts. SECURE Act Section 110 fixed this.... According to the statute, those funds maintain their status as 403(b) contracts, not IRAs, and are subject to the 403(b) rules in effect at the time of the 'distribution.' "

Business of Benefits

ARA Report: Sources Say IRS Planning Big Changes to VCP

"Driven by an apparent desire to clean up its case backlog, the IRS is planning a shift in procedure that might mean the end of the VCP program and subject a massive number of plans to audit. Word of the dramatic shift in focus was brought to the attention of the American Retirement Association by an anonymous IRS whistleblower. The existence of the forthcoming shift in procedure was confirmed independently.... Information indicates that in the next couple of weeks procedures in the VCP program will be updated in a manner that will subject substantially more cases to the Examination function within IRS."

American Retirement Association [ARA]

Multiple Employer Plans as a Solution to Retirement Savings Access -- and What Plan Sponsors Think About Them (PDF)

"Topping the list of features sponsors find attractive is the belief that participating in a MEP would mean lower plan costs. Three quarters of all plan sponsors are drawn to reduced plan costs, and 8 in 10 of those respondents are 'very' interested in pursuing a MEP.... [T]he second most powerful feature is the potential to reduce administrative burdens, an attractive concept to 47 percent of sponsors."


Are PEPs Available to 403(b) Plan Sponsors?

"The new PEP rules, do not apply to 403(b) plans (nor to 457(b) governmental plans, multiemployer plans for collectively bargained groups, and defined benefit plans). Thus small 403(b) plans are still somewhat limited in their opportunities to band together into a single plan to increase their purchasing power."

PLANSPONSOR; free registration may be required

Another Lawsuit Challenging ERISA Mortality Assumptions Survives Motion to Dismiss

"The Huntington Ingalls complaint states that the defendants calculate an annuity conversion factor -- and thus the present value of the non-single life annuities -- for the legacy part of their pension plan using a so-called '1971 Group Annuity Mortality Table.' Beyond projecting that both men and women will live shorter lives in retirement compared with newly prepared tables, the 1971 table assumes 90% of the company's employees are male and that 90% of contingent annuitants are female -- all while using a 6% interest rate." [Herndon v. Huntington Ingalls Industries, Inc., No. 19-052 (E.D. Va. Feb. 20, 2020)]



SPARK Global Public Policy Forum -- June 23-24, Washington DC

Sponsored by SPARK

The retirement services industry's leading event: comprehensive agenda designed to meet the needs of 401(k) Plan Providers, Financial Advisors and Record Keepers -- focus on global retirement public policy and expansion of pension reform occurring worldwide. Learn more

When Do Index Funds Raise a Fiduciary Issue with 401(k) Plan Sponsors?

"Just because it's an index fund doesn't mean it can't contain various conflict-of-interest fees.... There are many factors that determine what retirement plan investment option reflects any particular retirement saver's best interest. Expense ratios and fees are just two of them.... Since an index represents an unadulterated exposure to undulating markets, any lack of investing discipline can lead to bad decisions."

Fiduciary News

How the SECURE Act Could Harm Retirees

"[1] Less wealth passed to heirs (and more taxes being paid) ... [2] Confusion leading to possible missed RMDs (and penalties) ... [3] Conduit or pass-through trust RMD failure (and a big tax bill if not corrected) ... [4] More money leaking out of retirement accounts ... [5] Improper annuity ownership in retirement plans"


Which Organizations are Good ESOP Candidates?

"ESOPs could work for just about any privately held company that expects to grow, has a strong leadership team in place and proven business success. But ESOPs have some disadvantages that prevent them from being suitable for all."

Meaden & Moore


Teacher Pension Plans Are Getting Riskier

"[T]eacher pension plans in the early 1990s were assuming rates of return that were about .50 or .75 percentage points higher than the risk-free rate, or a premium of about 10%. Today, the gap has grown to around 5 percentage points, a risk premium of more than 200%."

The Brookings Institution


The Moral Case for Public Pension Reform

"It is better to make adjustments in expectations for all stakeholders before the money runs out.... [The funds] that are doing well, in not over-promising, in making full payments, and in setting up systems that adjust when investments don't do well -- those aren't the ones that make the news. They're doing what they're supposed to do. But it is a moral failure to have set up systems that will inevitably fail due to bad governance, bad benefit design, bad management, and all-around bad policy."



The Bottom Line: Illinois' Public Pension Debt Is a Moral Issue

"[In] the same way in which it is not good enough for politicians merely to promise that they themselves will not be corrupt, it is also not enough for them to promise that they themselves will not sink the state/city further into debt by no longer promising benefit hikes, bigger COLAs, larger multipliers. In order to leave behind the legacy of corruption, the politicians of Chicago and Illinois and the city and state as collective entities, and the people of Illinois, must commit to saying, 'the time of passing costs on to our children and grandchildren is over.' "

Elizabeth Bauer, in Forbes

Benefits in General

Millennials and Money: The State of Their Financial Management and How Workplaces Can Help Them

"The proportion of young adults with outstanding student loan debt has increased from 34 percent in 2012 to 43 percent in 2018. Over 50 percent of Millennials are concerned that they may not be able to pay off their student debt. The proportion of young adults accruing high credit card fees increased from 54 percent in 2009 to 60 percent in 2018. Millennials are financially fragile; 37 percent report they would not be able to come up with $2,000 in 30 days. The majority (68 percent) of Millennials report feeling anxious or stressed about their personal finances."

TIAA Institute

Selected Discussions
on the BenefitsLink Message Boards

Withholding on ADP Refund -- Must Provide Participant with an Election?

"It is my understanding that 10% withholding is the default on ADP refund distributions, as a non-periodic payment. Most of the recordkeepers with whom we work allow the participant to elect the default, no withholding, or withhold an amount other than 10%. Is the Plan required to allow the participant to make an election? We are working with a new recordkeeper whose process for refund distributions is a spreadsheet that has no option for withholding. Upon questioning they have responded that 10% applies with no other options for withholding."

BenefitsLink Message Boards

When Is a Deferral Remittance Considered 'Late'?

"401(k) plan. Sponsor has bi-weekly payroll, every other Friday. Deferrals are withheld from payroll Friday, the 10th of the month. The due date, seven business days, would be Tuesday, the 21st. Plan sponsor writes a check for the deferrals and mails it on Monday, the 20th. It is received and posted to the brokerage on Thursday, the 23rd. Just looking at the activity in the plan brokerage account it appears the deferrals were late, but the payment was mailed timely. Does the check date count? The postmark on the envelope?"

BenefitsLink Message Boards

Rollover of Death Benefit by Beneficiary to Distributing Plan

"Husband and wife participate in the same plan. Reciprocal beneficiary designations (his to her and hers to him). Wife dies.. Husband has requested an immediate lump sum. He wants to roll over the distribution to his rollover account in the distributing plan. Can this be accomplished by an intra-plan transfer? Form 1099 would be issued with Code G. What am I missing?"

BenefitsLink Message Boards

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Press Releases

Upcoming Events About Retirement Plans or Executive Compensation

Feb. 26
Groom's IRS Comment Letter Group: SECURE Act Issues Impacting Qualified Plans and IRAs
Groom Law Group
Feb. 26
Breaking Down the SECURE Act's Impact on DC Retirement Plans
Multnomah Group
Feb. 26
Avoiding Nonqualified Plan Traps: Key Considerations for ERISA Counsel and Employers
Fee is required
Feb. 27
IRA and 401(k) Retirement Changes: Understanding the SECURE Act and How It Will Affect Your Business
Feb. 27
The Dirty Dozen: The Most Common Plan Mistakes and How to Fix Them
Feb. 27
Regional Benefits Forum
Southeast Benefits Education Network [SBEN]
Fee is required
Feb. 27
Retirement Plans Legislative and Regulatory Update
Feb. 27
Multiple Employer Plans Under the SECURE Act
Wagner Law Group P.C.
Mar. 2
IRA Institute
Fee is required
Mar. 2
IRA Seminar
Fee is required
Mar. 3
Navigating Change in an Evolving Government Retirement Industry
CBIZ, Inc.

Most Popular Items in the Previous Issue, Inc.
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(407) 644-4146

Lois Baker, J.D., President
David Rhett Baker, J.D., Editor and Publisher
Holly Horton, Business Manager

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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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