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Evaluating Controlled Groups
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Technical Answer Group - Review of FAQs
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Text of IRS CCM 201810008: Application of Sections 401(a)(4) and 401(a)(26) to Cash Balance Plan That Offsets Benefits with Benefits Under a Defined Contribution Plan (PDF)
"The special rule of Section 1.401(a)(4)-3(f)(9) (under which an employee's accrued benefit under a plan includes that portion of the benefit that is offset by benefits under another plan) applies only to the extent that the benefit is attributable to pre-participation service or past service.... Because, after the offset, NHCEs receive no benefit under the defined benefit plan, the DB/DC plan is not primarily defined benefit in character.... Because the offset must be taken into account and reduces the benefits of NHCEs under the defined benefit plan to zero, the NHCEs do not benefit under the defined benefit plan within the meaning of Section 401(a)(26)(A) and Section 1.401(a)(26)-2(a) and do not have a meaningful benefit under the plan's prior benefit structure as specified in Section 1.401(a)(26)-3(c). Accordingly, the NHCEs are not taken into account for purposes of satisfying the requirements of Section 401(a)(26)."
Internal Revenue Service [IRS]

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IRS Expands Missing Participant Guidance for 403(b) Plans (PDF)
"IRS ... examiners will not challenge a qualified plan, including a 403(b) plan, for a violation of the minimum distribution requirements if the plan sponsor has taken the following steps: [1] Searched plan and related plan, sponsor, and publicly available records or directories for alternative contact information. [2] Used any of [three specified] search methods ... [3] Attempted contact via U.S. Postal Service certified mail to the last known mailing address and through appropriate means for any address or contact information."
Schulte Roth & Zabel LLP, via Bloomberg Tax Daily Tax Report

Tax Reform and Budget Deal Affect Hardship Distributions from 401(k)s
"One possibility would be to follow the letter of the law and limit hardship distributions to home repair costs arising from a federally declared disaster. Or, sponsors of individually designed plans might consider switching to the more flexible facts-and-circumstances approach to granting hardship distributions (although the switch could complicate plan administration). Finally, some sponsors may choose to adopt a wait-and-see approach as the IRS might modify its regulations to continue permitting hardship distributions in accordance with the prior law. The fact that the budget deal directs the IRS to amend the hardship distribution regulations increases the chances that the agency will address the casualty loss issue as well."
Willis Towers Watson

Ninth Circuit: Plan Service Provider Not Subject to Fiduciary Duties When Negotiating Fees or Collecting Predetermined Compensation
"According to the court, ... claims that fully disclosed fee agreements are unreasonable lie against the hiring fiduciary, not the provider.... [T]he court dismissed claims related to the revenue-sharing payments because they were fully disclosed before the provider agreements were signed and did not come from plan assets. Finally, the court held that the provider's withdrawal of its predetermined, formula-driven fees from pooled accounts was a ministerial act that did not give rise to fiduciary liability." [ Santomenno v. Transamerica Life Ins. Co. , No. 16-56418 (9th Cir. Feb. 23, 2018)]
Thomson Reuters / EBIA

Investment Advisers and Conflicts of Interest
"[The] Share Class Selection Disclosure Initiative ... continues the SEC's focus on investment advisers who receive compensation or financial incentives in connection with their selection or recommendation of mutual fund share classes. For employers that sponsor retirement plans, the Initiative also raises the issue of whether plan fiduciaries, who engage the services of an investment adviser, have the appropriate information to fulfill their fiduciary obligations."
Spencer Fane

Spotlighting Self-Directed IRAs - Conference

Retirement Industry Trust Association (RITA) -- the voice of the Self-Directed IRA Industry -- conference in DC, March 26-28. Get the latest regulatory and legislative updates from experts and newsmakers vital to the industry. Learn more and sign-up

Changing DC Plan Recordkeepers: Steps for a Smooth and Successful Transition
"Risks associated with a conversion include the potential for unexpected disruption to participant accounts, lengthy blackout periods, lost data, costly reconciliations and misunderstood communications.... Risks ... can be effectively managed under a well-developed transition plan as part of a plan's overall approach to managing operational risk. An additional benefit of the transition process is that it presents an opportunity to review plan operations and processes with an eye toward improvement."
Segal Consulting

Americans: In Defined Contribution We Trust
"[A]lmost three-quarters of US households (74 percent) had favorable impressions of DC plan accounts ... Americans also expressed confidence that DC retirement plan accounts can help individuals achieve their retirement goals: 77 percent of US households indicated that they were either 'somewhat confident' or 'very confident' that 401(k) and other employer-sponsored retirement plan accounts can help people meet their retirement goals[.]"
Investment Company Institute [ICI]

How Will Tax Reform Affect DB Plan Sponsors?
"Thus for companies in the 35 percent corporate income tax bracket, the potential tax savings by advance funding a contribution for 2017 is not only the 14 percent difference in corporate tax rate, it essentially includes the 3.8 percent variable premium rate on unfunded vested benefits in 2018, a 4.2 percent variable premium rate in 2019, and higher variable premium rates in future years so long as the plan stays in effect."
Findley Davies | BPS&M

Retirement Registry Proposed Again
"The Retirement Savings Lost and Found Act of 2018 would direct the Social Security Commissioner and the Treasury Secretary to create ... a new searchable database containing account and contact information. The registry would use the data employers are already required to report ... on Form 8955-SSA, and would expand reporting requirements to include mandatory reporting of distributions (including automatic IRA rollovers) and transfers so that individuals would be able to track funds to current vendors and know whether funds had previously been delivered to them."
Conduent

Senate Bill Aims to Boost 401(k) Annuities, Small Employer Retirement Plans
"One of the more significant provisions would create pooled employer plans ... The provision would, among other things, eliminate a 'nexus' requirement that only allows related businesses (law firms, for example) to join an open MEP, effectively opening plans to a broader group."
InvestmentNews

Massachusetts Launches Investigation Into Wells Fargo Advisors Sales Practices
"Wells Fargo itself disclosed in a recent regulatory filing that it is 'assessing whether there have been inappropriate referrals or recommendations, including with respect to rollovers for 401(k) plan participants, certain alternative investments, or referrals of brokerage customers to the company's investment and fiduciary services business' ... [The Massachusetts Secretary of the Commonwealth] is seeking additional information to determine the scope of Wells Fargo's internal investigation as well as reasonable assurances that any Massachusetts investors affected by unsuitable recommendations will be made whole."
Financial Advisor

DOL Says New Disability Claim Regs to Apply April 1
"The 2016 amendments add a new requirement applicable during the claim appeal phase: a plan must give a claimant reasonable time to review and respond to 'new or additional evidence' or a 'new or additional rationale' for denying his or her claim.... [The DOL] places no limits on the amount of back-and-forth required. Nor is there any adjustment in the time allowed for rendering a decision in order to accommodate this additional procedure.... [T]he preamble also suggests that when the claimant does respond, if the response prompts further review by a medical professional, which is likely (and may be required by the regulations), the plan may need to send the matter to the claimant for another response, and so on."
Ogletree Deakins

Implications of Tax Cuts and Jobs Act for Public Company Executive Compensation Programs
"Before making any changes to existing covered employee compensation arrangements, consider whether such changes are material modifications that will make the transition relief unavailable. Revise the standard tax discussion that appears in proxy statements and other securities filings to reference the changes to Section 162(m) and the impact of such changes on existing executive compensation programs and future compensation decisions. In new compensation plans, consider omitting language that was previously intended to comply with the old 'performance-based compensation' exception."
Snell & Wilmer

Walt Disney Shareholders Reject Executive Compensation in Non-Binding Vote
"Fifty-two percent of shareholders rejected the compensation package of CEO Robert A. Iger and four other executives, including [CalPERS] ... [CalSTRS] ... Texas Teacher Retirement System ... [and] Florida State Board of Administration ... Disney said ... after the meeting that it would take the non-binding vote 'under advisement for future CEO compensation.' "
Pensions & Investments

Shared Employees in Dental Group; Controlled Group Status?
Three dentists share office space as well as a few employees. I assume this is a controlled group. One of the dentists split; he moved his practice to another location and is now totally unrelated to the others. One or two of the employees now work for this dentist part-time as well for two of the three remaining dentists part-time as well. Because this isn't a controlled group situation (common control is only 33.33%), must the part-time employee still be counted and receive a contribution from either plan?
BenefitsLink Message Boards

QACA Amendment: Blows Up Safe Harbor?
Not finding guidance on amending a QACA. Sponsor set up QACA in 2014 with initial rate at 3% and escalator of 1% after the end of the uniform period. Now sponsor wants to amend the plan 1/1/19 to set a 6% deferral rate to only the new hires on or after 1/1/19. I don't think this results in a uniform QACA or that it sets up two QACA designs in one plan. I think it blows the safe harbor. Agree?
BenefitsLink Message Boards

Is Corrective QNEC Counted in 402(g) Limit?
Let's say it's June and we see that we missed a deferral election for 4 months. The missed deferral was $2,000. The correction will be 25% or $500. Will the $500 QNEC be counted in his 402(g) limit for 2018?
BenefitsLink Message Boards

Can 'Unrelated' Employers Participate in the Same 409A Plan?
We have two companies that are only a little bit related -- in the 10-20% range. So they definitely wouldn't be considered a single employer under 409A. However, when certain employees leave company A to go to company B, they continue to participate in company A's nonqualified plan. I can't find any reason why this is a problem -- is there anything I might be missing?
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