Retirement Plans Newsletter

October 13, 2020 logo logo
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[Official Guidance]

Social Security Announces 1.3 Percent Benefit Increase for 2021

"The 1.3 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 64 million Social Security beneficiaries in January 2021. Increased payments to more than 8 million SSI beneficiaries will begin on December 31, 2020.... [T]he maximum amount of earnings subject to the Social Security tax ... will increase to $142,800 from $137,700." [See also: Fact Sheet: 2021 Social Security ChangesIcon to read more

U.S. Social Security Administration [SSA]


ASC Live Webcast: Clarifying Mergers & Acquisitions

Dealing with mergers & acquisitions can be complex and confusing. John Griffin, J.D., LL.M. discusses the unique issues that plan sponsors and practitioners must address when dealing with a merger or acquisition situation. Register now! Learn more

Sponsored by ASC

[Guidance Overview]

2020 Year-End Consideration: Partial Retirement Plan Terminations Related to Personnel Reductions

"Under recent IRS guidance, employees who are furloughed ... do not need to be counted as terminated participants when determining the turnover rate ... if they are recalled into service prior to the end of the plan year ... [E]mployers should continue to apply vesting schedules to mid-year distributions and forfeit unvested amounts but be prepared for the possibility of a partial plan termination at year-end." Icon to read more

Davis Wright Tremaine LLP

[Guidance Overview]

New Fiduciary Rule Provides More Protection for Rollover Advice

"If an advisor satisfies the five-part test and is making a rollover recommendation in a fiduciary capacity, the advisor must utilize a prohibited transaction exemption in order to receive compensation such as commissions or 12b-1 fees. This exemption requires the advisor to acknowledge fiduciary status in writing, disclose any conflicts and fees, and make a determination that a rollover is in the participant's best interest." Icon to read more


Court Again Finds No ERISA Fiduciary Act in DuPont Pension Case

"The plaintiffs in a case challenging the transfer of a pension plan during corporate restructuring of companies E. I. du Pont de Nemours and Co. and the Dow Chemical Co. have again failed to succeed in stating a claim for breach of [ERISA] fiduciary duties." [Thondukolam v. Corteva, Inc., No. 19-3857 (N.D. Cal. Oct. 7, 2020)] Icon to read more


401(k) and 403(b) Fund and Fee Litigation Heats Up

"[T]he pace of these lawsuits has increased this year, with more than 50 class action lawsuits filed since the beginning of 2020.... [N]ow is a good time for every plan sponsor to evaluate its own fiduciary processes related to investment funds and service providers.... [P]lan sponsors should consider and be able to answer four important questions: [1] How much? [2] Why/What? [3] How do you know? [4] Can you prove it?" Icon to read more

Dickinson Wright


Plan Advisor Checklist: Identifying the Best Retirement Plan Prospects

Retirement plan prospecting can be difficult. Successful advisors are targeted and focused on bringing new ideas to clients and prospects. Use this checklist to define your target audience, identify meaningful opportunities and communicate your value. Learn more

Sponsored by October Three

Why Are We Seeing So Little Being Written About 401(k) Fees Now?

"With all of the attention on excessively high 401k fees from lawsuits, plus the Fiduciary Rule that was passed in the wake of the Great Recession, everyday investors are much more aware of the types of fees in their plan as well as what's a reasonable fee to charge for the service.... All this enabled 401k plan sponsors to more easily discovered previously hidden fees.... Individual investors also understand how they can act as a better fiduciary for their own personal investments." Icon to read more

Fiduciary News; free registration required

Are Public Pension Plans Leaving Money on the Table?

"Investment fees for state pension funds equaled 0.33% of plan assets in 2016 ... [T]his comprises over $2 billion in total annual investment fees for the 73 plans examined.... [T]he following key metrics and considerations can be used to effectively examine plan fees: [1] Ensure an apples-to-apples comparison for the most effective analysis ... [2] Include performance as a metric in a fee review: ... [3] Account for the prevailing market environment ... [4] Consider a performance-based fee model." Icon to read more


What the Coronavirus Means for the Future of Financial Planning

"In addition to wreaking havoc on the economy at large, the pandemic has had sudden and significant repercussions for how individuals conduct their financial planning -- specifically, how they approach spending and saving goals.... The pandemic's economic side effects also have significant implications for when and how older adults plan their retirements.... While the COVID-19 crisis has brought these topics to the forefront, their importance is likely to persist post-pandemic as well." Icon to read more


401(k)/IRA Holdings in 2019

"For working households nearing retirement with a 401(k), median combined 401(k)/IRA balances rose from $135,000 in 2016 to $144,000 in 2019. $144,000 provides a married couple with only $570 per month in retirement. The bigger problem is that only half of households have any 401(k)-related assets. The main reason for low savings is the lack of continuous coverage, so the solution is for policymakers to mandate coverage for all workers." Icon to read more

Center for Retirement Research at Boston College

Plan Participant Interest in Guaranteed Retirement Income Options Remains High

"71% of employer-sponsored participants would like an option that offers guaranteed income for life in their plan 75% of Gen Xers expressed interest in protection options as part of their employer-sponsored plan 55% of participants are worried that money in their employer-sponsored plan will run out during retirement, with 69% of Gen Xers expressing the same concern." Icon to read more

Allianz Life Insurance Company of North America


DOL Says Private Pensions Are for Retirees, Not Proxy Advisory Firms

"On most proposals, the costs of properly assessing which way to vote to uphold retirees' best interests exceeds any theoretical benefit that would be anticipated by voting. Instead, pension managers should use their limited resources making basic decisions to optimize their portfolios such as thinking about their timeline and the amount of risk they can accept relative to their pursuit of returns. This is generally the expectation from retirees when they entrust these managers with their hard-earned savings." Icon to read more

Ike Brannon, via Forbes

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Projected 2021 Retirement Plan Limits: $290,000 in Comp, $58,000 in Annual Additions

Using the September 2020 CPI-U issued October 13, the 2021 compensation limit is projected to rise to $290,000 (was $285,000) and the annual addition limit is projected to rise to $58,000 (was $57,000). Other limits are not expected to change (the $19,500 deferral limit, $6,500 catchup limit, $230,000 DB limit, $185,000 Key Employee definition, or $130,000 HCE definition). Icon to read more

BenefitsLink Message Boards

Beneficiary Neither Resides in the United States Nor Is a U.S. Citizen

"Has anyone had a situation where the named beneficiary is not a US citizen or resident? I'm not sure what to use for a taxpayer ID number or whether I should be advising this person that they will have to file a US income tax return, because the funds being paid out are coming from a qualified retirement plan (not individual) where the participant lived/worked in the U.S. and had an SSN." Icon to read more

BenefitsLink Message Boards

Profit Sharing Plan But No Contributions Yet -- Can the Allocation Method Be Changed for 2020?

"Current profit sharing plan document provides no last day employment rule, no minimum hours requirement, and a comp-to-comp allocation formula. An attorney is saying that, because no PS contribution has been made during 2020, the allocation method can be changed now or before the end of the year, so that each participant can be their own group. The contribution for all of the groups would be made after December 31. Can that be done?" Icon to read more

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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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