Retirement Plans Newsletter

June 16, 2020

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Dunbar Bender & Zapf, inc.
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Philadelphia PA / Telecommute

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Primary Consulting, Inc
CA / CO / MT / TX / UT / Telecommute

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Bates & Company
Winter Park FL

View job as Experienced Plan Administrator
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Benefit Associates, Inc.
Huntington Beach CA / Ballston Lake NY / Telecommute

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View COVID-19 News and Resources

[Official Guidance]

Text of IRS Notice 2020-45: Weighted Average Interest Rates, Yield Curves, and Segment Rates for June 2020 (PDF)

"This notice provides guidance on the corporate bond monthly yield curve, the corresponding spot segment rates used under Section 417(e)(3), and the 24-month average segment rates under Section 430(h)(2) ... In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under Section 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008 and the 30-year Treasury weighted average rate under Section 431(c)(6)(E)(ii)(I)."

Internal Revenue Service [IRS]

[Guidance Overview]

DOL Offers Comfort to 401(k) Plan Fiduciaries Offering Private Equity Investments

"The investment alternatives for which the Information Letter provides relief involve asset allocation funds, such as target-date, target risk or balanced funds with a private equity component. In addition to the private equity component, these funds would have a sufficient pool of assets to ensure diversification among other asset classes with different risk and return characteristics."

Shearman & Sterling LLP

[Guidance Overview]

SEC Chairman Confirms June 30 Compliance Date for Reg BI and Form CRS, Announces New Website Page for Main Street Investors, and Highlights Current Investment Advice Concerns

"To help Main Street investors better understand Form CRS and its benefits, the Commission has established a new website page. This investor-focused resource also provides educational resources and additional tools for investors to assist them in reading and understanding as they begin to navigate Form CRS, and in researching firms and financial professionals.... [F]irms should ensure that, particularly under current conditions, focus is being applied in the following areas, to the extent they are included in a firm's recommendation or advice to a retail investor: [1] Rollovers and withdrawals from 401(k) and other plans.... [2] Complex or risky products.... [3] COVID-related investments.... [4] SPACs and other structured investment vehicles."

Jay Clayton, Chairman, U.S. Securities and Exchange Commission [SEC]

How DB Plans Can Respond to the COVID-19 Crisis

"Despite the continued uncertainty, [the authors] offer helpful guidelines for corporate pension plan sponsors based on past experience and the market data that is already in the books through the first quarter of 2020. Specifically, [they] [1] address the likely impacts on pension expense and funded status ... [2] discuss the impact of the CARES Act on required cash contributions in calendar year 2020 ... [3] point out some red flags to watch for over the next few years ... [and] [4] detail strategic steps plan sponsors can begin taking now to help mitigate some of the risks in these unprecedented circumstances."

Milliman

As Insurance Companies Take Over Defined Benefit Plan Assets, Is Your Pension at Risk?

"Pension obligations are costly and companies have been eager to jettison them in recent years. Insurers have been happy to take on their assets -- such deals have totaled $110 billion since early 2015. But pensions taken over by private insurers are not protected from default by the government-backed PBGC ... [I]nsurers are regulated by the states, not the federal government, and some are now affiliated with private equity firms, whose focus is often on short-term profits which can conflict with insurers' long-term obligations."

NBC News

The NCEO Captive Insurance Initiative: ESOP Companies Working Together to Reduce Costs

"The NCEO has been exploring ways that employee-owned companies can mutually benefit by working together around insurance. We have come to believe that an NCEO captive insurance program might directly benefit our members and allow them to have more control over and transparency into their insurance programs."

National Center for Employee Ownership [NCEO]

What Just Happened? An Insomniac's Guide to OCIO (PDF)

"World-class OCIO providers serve as an extension of your team, fully coordinated with other plan vendors and proactive with the timely analysis and perspective demanded in times of uncertainty.... Instead of the CIO or plan sponsor trying to mine for answers, the OCIO provider's portfolio management team provides clear visibility into the holdings of participant portfolios.... For organizations that have the right level of resources, the right level of sophistication, the right level of vision and the strength of will, it may be possible to meet investment objectives with a predominantly in-house tool set.... But for others who see the potential of a more robust approach, ... OCIO is a solution worth exploring."

Russell Investments

Fiduciary Obligations with Respect to a Brokerage Window

"While most do not believe that plan fiduciaries have any obligation to monitor-for-prudence the funds offered in 'brokerage windows,' 'self-directed brokerage accounts,' or similar plan arrangements, at least some courts are prepared to entertain the idea that they do have such a duty.... It is not entirely clear what sorts of arrangements qualify as ''brokerage windows,' 'self-directed brokerage accounts,' or similar plan arrangements.' ... It is not clear how damages (and the related issue of 'loss causation') might be determined where an ERISA prudence lawsuit is allowed with respect to a window arrangement.... [This article considers] each of these questions in the context of two recent cases[.]"

October Three Consulting

GAO Report: BLS Should Explore Ways to Improve the Accuracy, Timeliness, and Relevance of Its Cost-of-Living Measurements

"Federal retirement programs often have [COLAs] to ensure benefits keep pace with inflation. This includes Social Security for more than 60 million older Americans, workers with disabilities, and their families. These COLAs are typically based on consumer price indexes for certain groups of Americans. [BLS] produces these indexes, but it hasn't evaluated whether its data accurately reflect what these groups pay, where they shop, and what they purchase. We recommended that BLS evaluate the data they use, as well as explore using other data, to improve its indexes." [GAO-20-422, Jun. 16, 2020]

U.S. Government Accountability Office [GAO]

[Opinion]

NCEO Amicus Brief in Choate ESOP Case (PDF)

92 pages. "The amicus curiae supporting Plaintiff-Appellant, for example, maintains that ESOPs 'subject[] employees to enormous, uncompensated risk' and that ESOP transactions 'involve inherent risks' and are 'vulnerable to abuse.' While ESOPs, like any corporate structure, can be subject to abuse and risk, the implication that ESOPs are inherently excessively risky and abusive is contrary to the best academic research. These unsubstantiated statements undermine Congressional intent to encourage employee ownership." [Lee v. Argent Trust Co., No. 19-2485 (on appeal to 4th Cir.; amicus brief filed Jun. 9, 2020)]

National Center for Employee Ownership [NCEO]

[Opinion]

Phyllis Borzi on the SECURE Act, Fiduciary Rule, Target Date Funds, and 'Discredited Disclosure'

"I look at the enactment of Section 203 [of the SECURE Act] as a missed opportunity. It reverts back to the Hill's initial approach from many years ago, which in my estimation is not an even-handed approach to encourage various lifetime income alternatives, but rather clearly favors insurance products.... Today it is impossible for consumers to differentiate between investment advisers subject to a legal fiduciary duty of care from others who hold themselves out as providing investment and financial advice using the same marketing terms but who claim non-fiduciary legal status.... I believe the only reasonable course is [to]subject all those who provide 'recommendations' to investors to a legal duty of loyalty to their clients through a fiduciary standard."

Fiduciary News

[Opinion]

CalPERS Prepares for the Long Haul

"CalPERS must diversify and increase exposure to private assets, such as private equity and private credit. We refer to these as 'better assets' because they have the potential for higher returns and lower expected volatility when compared with publicly traded assets."

The Wall Street Journal; subscription may be required

Executive Compensation
and Nonqualified Plans

[Guidance Overview]

Tax-Exempt Organizations Executive Compensation Excise Tax Regs Released

"The [IRS] Proposed Regulations [released on June 5] provide welcome relief in the form of a number of new exclusions and exceptions (including a volunteer exception) to the excise tax. They are otherwise generally consistent with [Notice 2019-09] ... while providing increased clarity on a number of key issues."

Ropes & Gray LLP

Selected Discussions
on the BenefitsLink Message Boards

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New PPP 24-Week Period

"Curious to know if others agree that retirement contributions are almost certainly moot now with the 24 week period as opposed to 8 weeks? Obviously a company that has been shut down since March is a different story; I'm talking about a company for whom payroll over 24 weeks will exceed the amount needed for forgiveness."

BenefitsLink Message Boards

Erroneous Full Vesting of a Death Benefit -- Paid Too Much

"I have a large plan and the auditor caught the fact that a participant who died 2 months after he was terminated was paid out at 100%. Should have been paid out 40%. The 2 beneficiaries have already received their money. Any options other than asking for the non-vested portion back from the beneficiaries, which likely will not work at all?"

BenefitsLink Message Boards

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Press Releases

Working Women Bear Emotional Brunt of COVID-19
National Alliance of Healthcare Purchaser Coalitions

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