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ACTION18: Where Regulation, Operations & Technology Meet
May 9, 2018 in DC
Insured Retirement Institute [IRI]

Top-Heavy Testing
May 29, 2018 WEBCAST
FIS Relius Education

Rollovers as Business Startups: Here to Stay?
May 31, 2018 WEBCAST
FIS Relius Education

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DOL 'Clarifies' Its Guidance on Proxy Voting and Social Investing

"[This] guidance both reflects and channels the ongoing debate ... on whether ERISA fiduciaries should take into account only conventional risk/return factors, or may also consider, or even put a thumb on the scale in favor of, additional factors. In principle, guidance that changes with the occupancy of the White House is hard on the rule of law and hard on the fiduciaries charged with the investment of US private retirement plans. In practice, the absence of enforcement or private litigation on these matters suggests that plan fiduciaries are managing substantially to meet their obligations under ERISA." Eversheds Sutherland

Last Days to Save -- Trustees and Administrators Institutes

Register by May 14 to save $300 -- Attend the Trustees and Administrators Institutes to receive timely and relevant education on the issues that face the benefits industry including the opioid crisis, ACA Updates, Rx Management and Fraud in Benefits.

The Fate of the Fiduciary Rule: What's Not Affected

"Discretionary investment management for ERISA plans or IRAs is and will continue to be a fiduciary service.... Firms also need to make sure that compensation for services to ERISA plans or IRAs is reasonable, because unreasonable compensation is a prohibited transaction under both the Code and ERISA.... Even if the DOL fiduciary rule does not survive, some rollover recommendations may still be fiduciary acts.... Providing ongoing investment advisory services to ERISA plans or IRAs based upon the particular needs of the retirement investor will continue to be a fiduciary act even if the DOL fiduciary rule is vacated." Drinker Biddle

DOL (Again) Clarifies Standards on Economically Targeted Investments and Shareholder Activities (PDF)

"This guidance reiterates the need for fiduciaries to carefully scrutinize any ETI-related investments -- and to be sure to document their review. They should also take a close look at any expenses connected with shareholder activism that could be viewed as routine or substantial, and prepare to defend the benefits of these actions in light of their costs." Conduent

PPA Supersedes NLRA Right to Unilaterally Implement Pension Proposal

"In a case of first impression, the Fourth Circuit held that the Pension Protection Act's (PPA) obligation on bargaining parties to continue to follow a multiemployer pension fund's rehabilitation plan schedule trumps an employer's right, upon lawful impasse, to unilaterally implement a proposal to move new hires to a 401(k) plan." [ Bakery & Confectionary Union & Industry International Pension Fund v. Just Born II, Inc. , No. 17-1369 (4th Cir. Apr. 26, 2018)]
Seyfarth Shaw LLP

Eighth Circuit: Calculation of Section 415 Limit for DB Funding Requires Actuarial Equivalence

"The IRS concluded that from 2002 to 2006, Pizza Pro incorrectly calculated the limitation on the annual benefit, and therefore made nondeductible contributions to the plan.... Pizza Pro argued that ... the Tax Court erred in holding that the word 'equivalent' in IRC Section 415(b)(2)(C) should be read as 'actuarially equivalent.' ... The 8th Circuit said that the Tax Court was correct in its finding that the method the IRS followed is in accordance with actuarial practice[.]" Pizza Pro Equipment Leasing, Inc. v. Comm'r , No. 17-1297 (8th Cir. Apr. 23, 2018)]
American Society of Pension Professionals & Actuaries [ASPPA]

Evaluating Your Third-Party Administrator: Are You Getting What You're Paying For?

May 2 webinar will enable entities responsible for identifying, selecting, and monitoring their TPA to track performance and assess results, as well as identify opportunities to create additional value. Discount for BenefitsLink readers .

Private Equity Seeks Second Chance on ERISA Liability Ruling

"The court could send the matter to arbitration, which is the standard method for resolving multiemployer plan withdrawal liability. It could hear the case and distinguish its facts to rule that Trilantic was a passive investor without explicitly approving or rejecting the higher investment-plus standard. It could adopt the investment-plus test but find that the facts here fall short of plus, or alternatively that Trilantic did have the required level of involvement to constitute a trade or business. Or it could reject the higher standard, finding that even hands-on management is consistent with the status of a passive investor, resulting in circuit split." Kaufman & Canoles, P.C.

Stable Value Fund Withstands ERISA Challenge

"The participants claimed that the manager of the fund was too conservative in the choice of investment options utilized within the stable value fund ... [which meant] that this portion of the fund had very small investment returns ranging from 0.28% to 0.17%.... The First Circuit Court held that the Plaintiff's claims were based on a type of 'hindsight' analysis of past performance and held that those allegations are not sufficient to support a claim that plan fiduciaries were imprudent in making conservative investment decisions." [ Barchock v. CVS Health Corp. , No. 17-1515 (1st Cir. Mar. 23, 2018)]
Hodgson Russ LLP

Trends in the Expenses and Fees of Funds, 2017 (PDF)

"In 1996, equity mutual fund expense ratios averaged 1.04 percent, falling to 0.59 percent in 2017. Hybrid mutual fund expense ratios averaged 0.95 percent in 1996, falling to 0.70 percent in 2017. Bond mutual fund expense ratios averaged 0.84 percent in 1996 compared with 0.48 percent in 2017.... In 2017, average expense ratios for equity mutual funds fell 4 basis points to 0.59 percent.... The average expense ratios for money market funds rose 5 basis points in 2017 to 0.25 percent.... Expense ratios of target date mutual funds averaged 0.44 percent in 2017." Investment Company Institute [ICI]

Pension Funds and Tax Reform: How to Deal with a Double-Edged Sword (PDF)

"[T]ax reform will be transformational for credit markets, and defined benefit pension plan sponsors need to ensure that they are prepared to confront the challenges that could arise.... [C]orporate credit supply, particularly on the long end of the curve, could become strained during a time when these same assets could see rising demand. In this scenario, many plans may have unintended risks embedded in their hedging portfolios as a result of under-diversification that could lead to issues down the road." Willis Towers Watson

Investment Returns in 2017: A 'Sigh of Relief' for Corporate Pension Plans' Funding

"The average funding ratio of the 100 largest U.S. corporate defined benefit plans jumped 4.7 percentage points to 89.2% in 2017 ... The increased funding ratio in 2017 stopped a trend that saw the average decline to 84.5% at the end of 2016 from 85.1% in 2015 and 85.7% in 2014.... Aggregate assets of the top 100 plans rose 9% to $1.245 trillion and the aggregate funding deficit fell to $207.7 billion, down 19.5%, despite the plans using lower discount rates? to project benefit obligations." Pensions & Investments

California Senate Committee Kills Bill Allowing Employees to Opt Out of CalPERS

"The committee also rejected a bill that would have ... allowed the employer to be able to reduce its employees' and retirees' benefits, terminate its CalPERS contract without paying the amount necessary to ensure payment of pension obligations for its employees and retirees, or transfer the money to an outside pension provider. [A] third rejected bill would have barred state pension plans from providing retirees cost-of-living adjustments for employees hired on or after Jan. 1, 2019 ... for any year in which the unfunded actuarial liability of the pension fund is more than 20%." Pensions & Investments

The 'Pension Palace' for Illinois Lawmakers

"When he retired from the General Assembly, [Illinois State Senator John Friedland] received a one month full-time pay spike at the water district for $8,000 -- causing his legislative pension to start at $80,856 instead of $30,312. Today, Friedland is pulling down $172,981 per year, due to lucrative 'cost of living' adjustments. Although the 'Friedland loophole' was closed, Illinois state legislators still have one of the sweetest retirement deals in the country -- and it's at an amazing cost to taxpayers." Forbes

Text of IRS Notice 2018-43: Public Comment Invited on Recommendations for 2018-2019 Priority Guidance Plan (PDF)

"The Treasury Department's Office of Tax Policy and the Service use the Priority Guidance Plan each year to identify and prioritize the tax issues that should be addressed through regulations, revenue rulings, revenue procedures, notices, and other published administrative guidance. The 2018-2019 Priority Guidance Plan will identify guidance projects that the Treasury Department and the Service intend to work on as priorities during the period from July 1, 2018, through June 30, 2019.... Please submit recommendations by June 15, 2018, for possible inclusion on the original 2018 -2019 Priority Guidance Plan." Internal Revenue Service [IRS]

Recent Updates to Medicare and Social Security: Why They Matter (PDF)

"As a direct result of [recent] changes ... a 55-year-old couple each earning $70,000 in 2018 will face the following retirement challenges: [1] The cumulative cost of the delay in Means Testing indexing, combined with the lowering of brackets three through five, will increase their lifetime surcharges by almost $122,000 (over $272,000 in future value). [2] The elimination of 'File Restricted' and 'File and Suspend' claiming strategies will result in the loss of over $36,000 (nearly $78,000 in future value) in potential lifetime Social Security benefits.... If future COLAs are consistent with the latest Social Security Trustee projections (2.6%), the couple will require 123% of their Social Security income to meet their future health care expenses." HealthView

Delaware Court of Chancery Excuses Pre-Suit Demand for Derivative Complaint Alleging Wasteful Compensation

"The Delaware Court of Chancery held ... that a stockholder plaintiff was excused from making a pre-suit demand on the board to pursue his claims that certain compensation payments made to the executive chairman were excessive, because the allegations exposed the board to liability for waste of corporate assets." [ Feuer v. Redstone , No. 12575-CB (Del. Ch. Apr. 19, 2018)]
Thomson Reuters Practical Law

In-Service Distributions Allowed Only if Rolled Over?

Can a retirement plan allow for in-service distributions, but limit the distribution to a rollover to an IRA? BenefitsLink Message Boards

Participant Loans Only Allowed for Grandfathered Participants, Not Subsequent Entrants

What if a plan offers a BRF but only to employees who are participants as of a certain date, but not to any new participants. For example, participant loans. Is BRF testing required? BenefitsLink Message Boards

Loan Interest Rate Equals Prime Lending Rate Plus 1%?

A 403(b) plan would like to establish a loan interest rate of the prime lending rate, in effect as of the first day of each calendar quarter, plus 1%. Do you see any problems with this policy? BenefitsLink Message Boards

Can a 409A Plan Use a More Restrictive Definition of Separation from Service?

I have two related companies but they're not part of a controlled group. The plan says separation from service is determined according to 409A, but a transfer between the companies is not a separation from service. Is that allowed under the regulations? BenefitsLink Message Boards

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Conduent Announces Agreement to Sell Non-Core Consulting and Actuarial Segment of Human Resource Services Business Conduent

Health Value Awards Winners Announced World Congress

Julie Humphries Named U.S. Mercer Digital Leader for Mercer Mercer

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