Hit to Retirement Plan Investors:
Financial Transaction Tax
PlanSponsor | September 10, 2018 | Rebecca Moore
An analysis shows a new bill
introduced in the Senate would result in a significant financial
hit to retirement plan investors. Modern Markets Initiative is
pushing back on a tax provision in the bill.
The Inclusive Prosperity Act of 2017 has been introduced
in the Senate and includes a financial transaction tax (FTT).
According to Modern Markets Initiative (MMI), the
FTT would be applied to every stock traded, including a 0.5% rate
on equity, a 0.1% rate on debt and a 0.005% rate on derivatives.
MMI, an education and advocacy organization, which is strongly
opposing this tax, has done an analysis of what its costs would
be for pension funds and all investors.
While MMI’s analysis focuses specifically on public
pension funds, an op-ed by CEO Kirsten Wegner notes that the tax will affect all defined
benefit (DB) plans, individual retirement accounts (IRAs),
defined contribution (DC) plans and individual investors.
For example, using asset allocations in 2015 for the
California Public Employees’ Retirement System (CalPERS), as well
as published data about its trades, MMI calculated the FTT would
be $508,374,705. “That’s not a typo - CalPERS and the hardworking
public employees it invests for would have paid more than half a
billion dollars in tax in 2015 alone,” Wegner writes. Click Here for full article
Makes Recommendations for Finding Missing Participants
PlanSponsor | Lee Barney
If there are missing participants that plan
sponsors have not made a genuine effort to find, “the entire plan
could be disqualified under the tax code and the plan fiduciaries
may be found to have breached their ERISA duties,” says Norma
Sharara, a partner with Mercer.
In a recent Mercer podcast, “Missing Participants -
Risks and Remedies,” Norma Sharara, a partner with Mercer,
discussed the serious ramifications that sponsors could face if
they don’t find missing participants and why the government is
more focused on this issue than ever before.
Because of the massive number of Baby Boomers
retiring, Congress, the Government Accountability Office (GAO)
and the three agencies that regulate retirement plans—the
Internal Revenue Service (IRS), the Department of Labor (DOL) and
the Pension Benefit Guaranty Corporation (PBGC) - are focused on
the problem of missing participants.
“With 10,000 Baby Boomers retiring every day, an
increasing number of participants in these plans who are turning
65 or 70-1/2 are going to be required to take out benefits from
the defined benefit (DB) or defined contribution (DC) plan,”
Sharara said. “That’s why it is such a hot topic right now.”
If there are missing participants that plan sponsors
have not made a genuine effort to find, “the entire plan could be
disqualified under the tax code and the plan fiduciaries may be
found to have breached their ERISA [Employee Retirement Income
Security Act duties.”. Click Here for full article
Best Practices for Handling
PlanSponsor | Rebecca Moore
A review of ways retirement plan fiduciaries can
handle returned, uncashed participant benefit checks.
May 16, 2014 - Some plan sponsors
are unsure about best practices for handling uncashed retirement
plan benefit checks, but a new paper aims to help.
There is no clear guidance from the U.S. Department
of Labor (DOL) or the Internal Revenue Service (IRS) on all
aspects of the uncashed checks issue (see “Unanswered Questions About Uncashed Checks”). Regulations allowing plan sponsors to roll
participant accounts of less than $5,000 were passed in 2001 and
put into effect in 2004 (see “DOL Announces New Automatic Rollover Regulations”), but Lowell M. Smith, Jr., president of Inspira,
an individual retirement account (IRA) record keeper based in
Pittsburgh, Pennsylvania, that offers an automatic IRA solution
for plan sponsors, tells PLANSPONSOR at the time there were few
providers available for plan sponsors to work with, and
especially few that would take amounts less than $1,000.
Although there are more providers in the automatic
rollover market now, many plan sponsors never adopted a policy
for automatically rolling over participants’ balances due to the
lack of providers at the time, and even those plan sponsors that
are now automatically rolling over small balances, may not have
put cash-out provisions in their plan documents, Smith says. He
recommends that as plan sponsors are now amending their plans for
Pension Protection Act and other legislation provisions, they
should consider adding cash-out provisions. “I would say, even
though they can still just issue a check for amounts less than
$1,000, they should roll those over too.” Click Here to continue reading