same manner as limits are coordinated under present law for
elective deferrals to 401(k) and 403(b) plans.
Related to this, the proposal repeals the special rules
allowing additional elective deferrals and catch-up contributions under 403(b) and 457(b) plans. So the same limits apply
to elective deferrals and catch-up contributions under 401(k),
403(b) and 457(b) plans. The proposal repeals the special rule
allowing employer contributions to 403(b) plans for up to five
years after termination of employment.
IRS, Treasury Present Priority Guidance Plan
The Treasury Department and the Internal Revenue Service
(IRS) released the 2017–2018 Priority Guidance Plan, listing
projects the two agencies hope to complete during the
12-month period that started this past July 1 and ends June
Among the retirement-plan-related projects on the agencies’ list is completion of some long-awaited guidance—for
example, the final regulations concerning application of the
normal retirement age regulations stated in Section 401(a)
to governmental plans. Proposed regulations were published
on January 27, 2016. In addition, the agencies hope to issue
regulations on the definition of governmental plans under
Internal Revenue Code (IRC) Section 414(d). An advanced
notice of proposed rulemaking (ANPRM) was published on
November 8, 2011.
The guidance plan also includes final regulations
regarding qualified nonelective contributions (QNECs) and
qualified matching contributions (QMACs).
GE Faces Second Self-Dealing Suit
Another participant in the GE (General Electric Co.) Retirement Savings 401(k) Savings Plan has filed a lawsuit alleging
self-dealing by the company in offering investments
managed by GE’s investment management arm, General
Electric Asset Management (GEAM).
The complaint says 401(k) plan fiduciaries violated the
Employee Retirement Income Security Act (ERISA) fiduciary and prohibited transaction regulations by offering
and failing to follow five investment fund options offered
by the plan: GE Institutional International Equity Fund, GE
Institutional Strategic Investment Fund, GE RSP US Equity
Fund, GE RSP US Income Fund and GE Institutional Small
Cap Equity Fund.
The plaintiff says these funds were among the 15 investment options, other than target-date funds (TDFs), offered
in the plan during the class period, and all were managed
by GEAM. The complaint further states the GEAM funds are
the only non-index funds offered to plan participants, so if
someone wants to invest in actively managed funds, he is
forced by GE and the plan trustees to invest in GEAM funds.
Treasury Calls for More In-Plan
Lifetime Income Products
In a new report, “A Financial System That Creates Economic
Opportunities,” the U.S. Treasury Department discusses the
advantages of lifetime income products—i.e., annuities.
The department says that research from the Center
for Retirement Research at Boston College has shown that
half of working-age households may be unable to maintain their standard of living in retirement, primarily due
to longevity risk.
“Although 401(k) plans and other defined contribution
IRS Guidance on Loan Repayments
[DC] plans are important retirement savings vehicles, they
differ from traditional pension plans in that 401(k) plans
are designed and used primarily for asset accumulation
rather than as a source of guaranteed income,” the Trea-
sury Department says in its report. “In addition, only about
two-thirds of private-sector workers have access to any type
of employer-sponsored retirement plan, and even workers
enrolled in a 401(k) have limited access to guaranteed life-
time income under the plan.”
The department notes that annuities are the only
products on the market that offer guaranteed income,
but employers “cite concerns over legal liability under the
Employee Retirement Income Security Act [ERISA] as the
principal deterrent to offering an in-plan annuity option.”
The Internal Revenue Service (IRS) issued a memorandum
on defined contribution (DC) plan loan cure periods for
participants who have failed to make installment payments.
On a regular basis the IRS notes that loans, as long as not
for the purchase of a primary home, must be repaid in five
years and that payments are due at the end of each month
for the term of the loan.
But if a participant misses a payment, according to
the memorandum, he can make it up by the last day of
the calendar quarter following the quarter in which the
payment was due, the IRS says. He may also refinance the
loan—but the original loan’s due date stands.
U.S. Bank Wins Appellate Confirmation
The latest decision in a complicated example of Employee
Retirement Income Security Act (ERISA) litigation involving
the pension plan of U.S. Bank comes out of the U.S. 8th
Circuit Court of Appeals.
Plaintiffs originally challenged the bank’s “adoption of a
risky strategy of investing plan assets exclusively in equities and its continued pursuit of that strategy in the face
of a deteriorating stock market; the bank’s investment of
plan assets in its subsidiary FAF Advisors; and FAF Advisors’ actions with regard to a securities lending portfolio.”
The plaintiffs sought to recover plan losses, disgorgement
of profits, injunctive relief and/or other relief under ERISA.
Reviewing the compliant, the U.S. District Court for the
District of Minnesota initially dismissed certain allegations
having to do with the pension’s exclusive use of a higher-risk equity strategy. The court also granted summary
judgment for U.S. Bank on the securities lending program
claims. However, the court held that the affiliated funds
allegations would survive in part and should be argued. The
court found that, “the plan lacked a surplus large enough to
absorb the losses at issue.” —PA