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PBGC Provides Web-Page Guidance on Reverse Spinoffs

"[T]he PBGC staff's reasoning makes some sense -- sponsors engaging in these transactions are (substantively) getting PBGC coverage for their DB plan participants for a full year while only paying for it (if at all) for a (generally small) part of the year. The rules that they (the sponsors) are relying on, however, seem to be intended to apply in situations where the sponsor is not getting coverage for the entire year, e.g., in the case of full funding in connection with a standard termination during a year or a (totally) new plan whose participants are only covered by the PBGC insurance system for part of a year." October Three Consulting

Strategies for Collecting Past Due Payments

The Collection Procedures Institute will provide information you need to fulfill your fiduciary responsibility to collect benefit payments. Learn best practices, trends, legal/legislative updates and the opportunity to network.

Main Street Employee Ownership Act Passes in House

"The bill ... [1] allows the [Small Business Administration (SBA)] to make loans to companies that can then reloan to ESOPs ... [2] allows ESOP loans to be made under the SBA's preferred lender program ... and [3] updates the definition of ESOPs in the current law governing SBA loans so that ESOPs do not need to have full voting rights to qualify. The bill also makes an exception to an SBA rule that sellers of a company cannot have an ongoing role in the firm." Morgan Lewis

Statute of Limitations Bars Claim That High Fees Made Plan's Investments Imprudent

"The employee claimed that the plan's fiduciaries breached their fiduciary duties under ERISA by authorizing and retaining the plan's actively managed 'lifestyle portfolio' investments, which charged higher fees, but had lower returns, than index funds. The plan's fiduciaries argued that the employee had actual knowledge of the portfolios' fees in 2012, so the claims -- which were filed in 2016 -- were time-barred because they were not commenced within 'three years after the earliest date on which the [employee] had actual knowledge of the breach,' as required by ERISA." [ Bernaola v. Checksmart Financial LLC , No. 16-684 (S.D. Ohio July 12, 2018)]
Thomson Reuters / EBIA

ERISA Fiduciaries Can Learn Lessons from NYU's Victory in 403(b) Fees Case

"NYU's victory was the first to come after a trial ... Despite a total defense verdict and a finding that the committee members managing NYU's plans did not violate their fiduciary duties, the trial court nonetheless found that some committee members who testified 'displayed a concerning lack of knowledge.' Here are some tips for ERISA fiduciaries culled from the case." Greensfelder

AT&T Overpaid Some Pensioners. Now It Wants the Money Back

"[A] former programmer and human-resources worker is among potentially hundreds of ex-employees whom AT&T Inc. has dunned in recent years for what it calls pension 'overpayments.' ... Among them are 17 retirees from whom AT&T and Fidelity Investments, the pension plan's record-keeper, have demanded a combined $1 million ... An AT&T spokesman says the pension overpayments affect 'significantly less than 1/10th of 1%' of its about 517,000 participants, with 'a very small percentage' referred to collections." The Wall Street Journal; subscription may be required

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Pension Finance Update, July 2018

"Pensions continued their upward march in July -- stocks were up and discount rates held steady last month -- and 2018 is shaping up to be one of the best years this century for pension finance. Both model plans we track gained ground last month -- traditional Plan A improved more than 1% while the more conservative Plan B gained less than 1%. For the year, Plan A is almost 8% ahead, while Plan B is up more than 1%[.]" October Three Consulting

Improving Asset Allocation Using Defensive Equity

"Risk Parity aims to balance risk contribution across diversifying assets to promote stability in a plan's funding status through various macroeconomic cycles. Second, it uses leverage to gear the diversified portfolio to a level of risk at which it can seek to achieve the plan's required return. From this perspective, it explicity provides a mechanism to achieve the required return as well as the need for stability in the funding status." PanAgora

California Supreme Court Finds San Diego's Pension Initiative Required Union Input

"San Diego was required to meet with unions before it allowed voters to weigh in on a proposal to switch newly hired city workers to a 401(k)-style retirement plan instead of a traditional pension plan, the California Supreme Court ruled ... [The] court left it to the appeals court to work out a state agency-ordered remedy for the workers who would receive lower benefits as a result of the change." [ Boling v. Public Employment Relations Bd. , No. S242034 (Cal., Aug. 2, 2018)]
Bloomberg BNA

Time for a Checkup for Your 457 Plan?

"[T]he fee structure and arrangement for most of these plans is based on the value of plan assets at the time the relationship is established. As, and when, plan assets grow through contributions and investment gains, the fees paid by participant accounts increase and grow as an absolute dollar amount, even though the cost of actually recordkeeping the plan has not. Since it generally costs no more for your bank to keep track of $50,000 than $5,000, why pay an 'accounting' fee that is based on the value of the account?" Best Best & Krieger LLP

Target Date Funds: The Dangers of Putting Your 401(k) on Autopilot

"The biggest issue with target-date funds is that they only focus one variable: your retirement age.... [D]efined contribution plan participants should focus on at least three variables: their contribution rate, company matching contributions or profit sharing, and how much progress they've made thus far toward their retirement goals." Investopedia

How Small Business Owners Overvalue 401(k) Plan Tax Deferral

"[In] the long run, it's often financially better for business owners to skip the small business retirement plan -- even with the tax savings -- and simply pay their own taxes and save the net proceeds instead.... [E]ven situations where as much as 90% of all dollars accrue to the owners, who in turn are saving taxes at a 32% marginal tax rate, may still need as much as 20+ years to 'recover' the hard cost of employee contributions with the long-term (and very slow) benefits of tax-deferred compounding growth." Nerd's Eye View

Denial of Tuition Benefits Did Not Breach Fiduciary Duties Under Early Retirement Plan

"The court ruled for the university, finding that the FAQ document clearly disclosed that it was only a summary description of the early retirement incentive plan and directed readers to further information and resources ... The professor had not obtained a copy of the retirement incentive plan ... before signing his early retirement agreement, and the court found his reliance solely on the FAQs unreasonable considering the numerous disclaimers and references to additional resources. The court further held that the university had no fiduciary duty to notify the professor of changes to the FAQs." [ Wasserstein v. Univ. of Chicago , No. 17-6567 (N.D. Ill. July 19, 2018)]
Thomson Reuters / EBIA

SEC Solicits Comment on Modernizing the Rules and Forms for Stock-Based Compensation

"The concept release is aimed primarily at evaluating whether to update and streamline the regulatory framework governing compensatory securities offerings to accommodate changes in the workforce related to the gig economy and evolving forms of equity-based compensation. While the substance and timing of any changes remains uncertain, any responsive amendments to Rule 701 and/or Form S-8 could significantly alter the ways, and to whom, companies compensate their service providers." Skadden

Deposit 401(k) Deferrals Before Payroll Date?

Attorney has her own plan, no employees. CPA has set up payroll for the end of each month, but plans to deposit 401(k) each month prior to the payroll date (e.g., the 20th). Is that allowed? BenefitsLink Message Boards

Owner Wants to Terminate Employment to Get Plan Assets Then Get Rehired

One of the owners in a business (not yet 59 1/2) has already gotten all the plan assets he can via hardship distributions. Now he wants access to more, but was told that he can't due to the terms of the plan. So, now he's decided to "terminate employment." The plan is that he will eventually be rehired. Of course, there's no way we can sanction this attempt to circumvent the plan provisions. Where do I look for guidance on this? BenefitsLink Message Boards

Can Alternate Payee Pay Cost of Having Plan Draft a QDRO?

An alternate payee would like an application prepared so that they can start receiving their benefit. Plan Sponsor is OK with this if the alternate payee pays for the application to be prepared. BenefitsLink Message Boards

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