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Retirement Plans Newsletter

March 25, 2024

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[Guidance Overview]

DOL Releases Proposed Regs for Automatic Portability Transactions

"The decision to contract with an auto portability provider is optional; therefore the auto portability process will only be available to those plan sponsors who, along with their service providers (i.e., recordkeepers) choose to participate. ... There are several conditions that must be met for an automatic portability transaction to be covered by the statutory exemption in IRC Sec. 4975(d)(25)."  MORE >>


Molina Healthcare Close to Win in ERISA Lawsuit

"The plaintiffs' 2022 complaint ... challenged the selection and retention of ... the 401(k) plan's qualified default investment alternative.... [District court judge Stanley Blumenthal] ruled the plaintiffs failed to prove losses ... 'Even using the most profitable reasonable benchmark, the selection and retention of the flexPATH TDFs as the plan's QDIA did not cause a loss to the plan,' wrote Blumenthal." [Mills v. Molina Healthcare, Inc., No. 22-1813 (C.D. Cal. Mar. 20, 2024)]  MORE >>

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Supreme Court Asked to Establish Uniform Standards for Prohibited Transactions

" 'The lower courts are splintered on what service transactions between plans and providers are prohibited…unless exempt' under ERISA, said the March 13 petition ... The petitioners ... want the Supreme Court to address this 'circuit split' by establishing a uniform standard. Eight of 12 federal appeals courts have differing views on prohibited transactions and parties-in-interest, the lawsuit said." [D.L. Markham DDS, MSD, Inc. 401(K) Plan v. Variable Annuity Life Ins. Co., No. 22-20540 (5th Cir. Dec. 14, 2023; cert. pet. filed Mar. 18, 2024)]  MORE >>

Pensions & Investments

Digital Trends for Annuity Firms

"The digital landscape among annuity issuers witnessed a year marked by the commitment to delivering robust user experiences.... [F]irms revamping main navigations reflect[s] a focused effort to bolster customer interactions and usability.... [T]he trend of creating a seamless desktop and mobile app experience ... highlights the industry's recognition of the growing importance of the mobile experience."  MORE >>

Corporate Insight [CI]

How Advisors Build Retirement Income Portfolios

"[1] Financial advisors use specific portfolios for retirees.... [2] Retired clients prefer to live off portfolio income.... [3] Perspectives on using asset classes in retirement portfolios vary notably.... [4] Interest in income-focused portfolios is relatively high.... [5] Advisors are mostly building retirement portfolios themselves.... [6] Retirement portfolios are targeted toward the goal.... [7] Advisors are relatively tactical with bond allocations."  MORE >>


Plan Advisers Note Increased Demand from Participants for Individual Wealth Management

"[N]early 80% of firms now offer a hybrid model that offers both wealth and retirement services.... Proponents of the convergence of retirement and wealth management say it's simple: workplace savers increasingly want wealth management, and the trusted organizations already advising on their employer's plan are ideally situated to provide the service. "  MORE >>


Public Pension Funding Index, March 2024

"Positive overall asset performance during February 2024 increased the estimated funded status of the 100 largest U.S. public pension plans from 77.7% as of January 31, 2024, to 78.6% as of February 29, 2024[.]"  MORE >>


Munnell Proposes 'Auto Adjustments' to Address Social Security Shortfalls

"Alicia Munnell and William Arnone ... recently appeared in the Boston Globe to pitch yet another fix to [Social Security's] ongoing solvency issues. It would involve removing the human element, putting the funding increase on autopilot with a legislative 'backstop' that kicks in to avoid the uncertainty that comes with 11th-hour partisan political fights."  MORE >>

American Retirement Association [ARA]

Benefits in General

[Guidance Overview]

DOL Releases Final Rule Clarifying Employee or Independent Contractor Status

"The 2024 final rule provides a comprehensive test to determine whether a worker is considered an employee or an independent contractor. While the final rule does not directly impact retirement or health and welfare benefits governed under [ERISA] or the Internal Revenue Code, there are potential indirect impacts that employers should consider[.]"  MORE >>


Fiscal 2025 Budget Proposal Outlines Health, Retirement and Comp Changes

"The budget proposal ... would require that all health plans cover mental health and substance use disorder benefits and require plans to have an adequate network of mental healthcare providers. It also proposes to expand enforcement of the Mental Health Parity and Addiction Equity Act (MHPAEA).... The budget also proposes that health plans cover three primary care visits and three behavioral health visits without cost sharing.... The budget proposes a $10 million aggregate cap on accumulations in defined contribution (DC) plans and individual retirement accounts (IRAs).... The budget would also prohibit Roth rollovers and conversions by high-income taxpayers.... The budget proposes a national paid family and medical leave program that would be administered by the Social Security Administration.... Mental health parity, paid leave and prescription drug costs are among those that were in President Biden's campaign proposals in 2020 and could see additional campaign discussion this year."  MORE >>

Willis Towers Watson

Employee Benefits Jobs

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Document Specialist



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Selected New Discussions

Exclusion of NHCE as a Class

"This week in reviewing an existing 401(k) plan document there was a written in class exclusion for Non-Highly Compensated Employees. In the Other line option in the adoption agreement.... It is a small plan, likely owner only, but still. A few weeks earlier I saw a similar exclusion in a defined benefit plan for a small employer. Though that class exclusion did not use the term Non-Highly Compensated Employee. It was something like 'everyone except two of the owners, Jack Smith and Jill Smith are excluded'. That employer definitely had plenty of employees that are NHCE that have plenty of service and cause the testing to fail. And no, there did not seem to be any other plan with this one combined for testing and benefits.... Maybe these exclusions are written in more than I realize and I've just been fortunate enough to not see them up until now?"

BenefitsLink Message Boards

457(f) Substantial Risk of Forfeiture

"I have been presented with a 457(f) plan that relies on a noncompete provision to satisfy the SROF requirement. I understand that unlike the 409A rules, the 457(f) rules do permit the use of a non-compete as a SROF. This particular plan's SROF restricts the participant from working for a competing business while employed with the sponsor of the 457(f) plan. But the participant vests upon a separation from service for any reason. The participant is not subject to a post-employment non-compete obligation. As such, the participant is only subject to a forfeiture if they work for a competing business prior to separating from service from the sponsor of the 457(f) plan. I am also troubled by the fact that the payment is to be made 'within 3 months after separation from service and the appropriate distribution paperwork is submitted to the employer.' This would not appear to be exempt from Section 409A as a short term deferral and it lacks the required specified time for distribution."

BenefitsLink Message Boards

Webcasts and Conferences
(Retirement Plans / Executive Compensation)

Spring Into the Future with SDIRAs

April 29, 2024 in DC

Retirement Industry Trust Association [RITA]

Last Issue's Most Popular Items

IRS Provides Guidance on SECURE 2.0's Terminal Illness Distributions


Text of IRS Publication 5528: Nonqualified Deferred Compensation Audit Technique Guide (PDF)

Internal Revenue Service [IRS]

SECURE 2.0 Changes for 457(b) Plans

National Tax-Deferred Savings Association [NTSA]

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BenefitsLink® Retirement Plans Newsletter, ISSN no. 1536-9587.

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