Subject:                                     BCG Pension Insider January 2019


The Pension Insider


The Pension Insider is a monthly newsletter developed for individuals who work in the pension arena. The Pension Insider was created to share ideas, success stories, coming events and industry specific articles.



January 2019 - Volume 87, Edition 1



Here's What a Federal Shutdown Means for the IRS and Taxpayers


Forbes | January 19, 2019 | Kelly Phillips Erb Senior Contributor


The 2018 filing season is slated to open on January 29, shutdown or not.


Millions of taxpayers expect to be ready on January 29 when tax season opens, but will the Internal Revenue Service (IRS) be ready? In anticipation of a federal government shutdown, the IRS released its contingency plan for the filing season because, yes, tax season will go on even during a shutdown.


The agency said it does not "anticipate utilizing the plan" but that may be optimistic. On Thursday, House Republicans approved a bill to keep the lights on until mid-February but a similar bill in the Senate failed to garner enough votes. While Republicans control the Senate, they only have 51 votes, but 60 votes are needed to pass an appropriations bill, which means they would have needed support from Democrats. It turns out they needed more than that: Five Republican Senators voted no and one abstained (it's worth noting that House Majority Leader McConnell (R-KY) cast a no vote as a procedural matter in order to raise the matter for reconsideration). You can see how your Senator voted Click Here.

Without a deal, the government officially ran out of money for the fiscal year and shut down at midnight. Of course, shutdown is a loaded word since not every facet of government shuts down. For example, the IRS will maintain some functions, and those are outlined in their contingency plan. Specifically, the agency notes that "If the IRS is confronted by a lapse in appropriations during the 2018 Tax Filing Season (January 1 – April 30, 2018) the IRS will need to continue return processing activities to the extent necessary to protect Government property, which includes tax revenue, and maintain the integrity of the federal tax collection process, along with certain other activities authorized under the Anti-Deficiency Act."


The Anti-Deficiency Act (text here) is a series of laws dating back more than 100 years. The Act is codified at Title 31 (Money and Finance) and is intended to stop federal agencies from spending federal dollars that aren't authorized, as well barring them from accepting voluntary services (meaning that employees can't work for free during a shutdown). The penalties for violating the Act are pretty severe, which is why federal agencies provide a written contingency plan.


During a shutdown, agencies are allowed to perform activities that are supported by funding that doesn't expire at the end of the fiscal year, as well as other activities that are either expressly permitted under the law or are deemed necessary. Sometimes those activities cross over. For example, Social Security payments are funded outside of an annual appropriation, so those employees will continue to work, as well as those IRS employees who support them (even though IRS funding is not outside of annual appropriation). For full article: Click Here



What Does The Plan Say?

PLANSPONSOR | By Summer Conley and Michael Rosenbaum


Understanding the documents is key.


A frequently overlooked fiduciary duty is that of acting in accordance with plan documents to the extent consistent with the Employee Retirement Income Security Act (ERISA). While it may not be light reading, committee members should be familiar with the terms of those documents governing the plan, including the plan document. Even though the committee may delegate daily plan administration, knowing the plan’s provisions is still relevant for retained responsibilities, as well as for monitoring the people delegated those administrative responsibilities.


Often clients call to ask us a question regarding how a benefit should be calculated or who should receive a benefit, etc. Our first response is always, “What does the plan say?” Just because something is legally permitted doesn’t mean it is permitted under the terms of the plan document. And just because “we’ve always done it this way,” doesn’t mean the plan is being administered in accordance with its terms.


Keep in mind that the plan document means the most recent restatement plus any subsequent amendments that have been adopted. Too often, clients look at a plan document only to discover they are missing an important amendment changing the provision in question. For prototype plans, the plan document generally means the base document, the adoption agreement and any amendments. Look at those adoption agreements carefully, as they reflect the key points of the plan. Frequently, a box is checked incorrectly, creating a drastically different result than intended. Additionally, these documents can be long and confusing, as they try to cover a variety of plan options - sometimes leading a committee to move toward a more streamlined, individually designed plan.


Committee members aren’t the only ones who should read the plan document. The company’s benefits employees who handle the plan’s day-to-day administration should also review it. They are the ones on the front line dealing with what compensation is included or excluded, how the match is calculated, who is eligible, and more.


The failure to follow the terms of the plan, even when it benefits the participants, is an operational error. If discovered on audit by the IRS, this can lead to costly penalties and possibly even plan disqualification. OK, plan disqualification is pretty draconian and rare - we’ve never seen it - but the cost associated with it is generally the IRS’s starting point when determining the appropriate penalty.


If you determine that the plan document hasn’t been followed, rather than run the risk of the IRS discovering a problem and imposing penalties, we recommend that the committee take appropriate steps to correct the error. The IRS’s Employer Plans Compliance Resolution System (EPCRS) sets out procedures to correct plan operational errors, either through self-correction - just what it sounds like - or a voluntary submission to the IRS for a fee. The easiest and least costly correction is generally to retroactively amend the plan document to reflect actual administration. However, subject to a few exceptions, this requires a submission to the IRS. Further, retroactively amending the plan to take away a benefit is generally not allowed.


In addition to understanding the plan document and what it provides, the committee should regularly review other plan-related documents including the investment policy statement (IPS). Investment policy statements are not required but can be a great guide path for the committee in selecting investment options and can be evidence of its good process. But - and this is a big but - having an IPS the committee doesn’t follow is worse than not having one at all. If the IPS says funds will be replaced after three quarters on the watch list and the committee doesn’t do that, you arguably have a fiduciary breach even if there’s a good reason not to replace the fund. To avoid issues like this, we recommend: 1) that investment policy statements be drafted as guidelines for the committee to use in its investment selection and monitoring process rather than as hard and fast rules, and 2) that the statement be reviewed on a regular basis.


Understanding what the documents governing the plan say is another tool to make sure the plan is operated appropriately. So pull up a comfy chair - not too comfy - and read away. For full article: Click Here





 Click Here









What Does The Plan Say?







Austin Office

Patrick McLean


(800) 832-7742



 Boston Corporate Office

Michael E. Devlin, Principal

(855) 432-7658  ext. 403


Steve Keating

(203) 955-1566


David Geloran


(855) 432-7658 ext. 401



Chicago Office

David Rumas


(855) 432-7658 ext. 406


Karen Ambrose

(855) 432-7658 ext. 410


Karl K. Oman


(312) 550-3844



Cincinnati Office

Debbie M. Sharp


(855) 432-7658 ext. 405



Boise/Los Angeles Offices

Sean O'Flaherty


(855) 432-7658 ext. 402



ANNUITY RATES Standard Pension Closeout/Terminal Funding Case Rates:

(No lump sums, no disability or unusual provisions)

Retirees - 3.23%

Term Vesteds - 3.28%

Actives - 3.35%

Annuity Purchase Rates as of January 21, 2019



BCG Pension Risk Consultants

We specialize in settling pension liabilities for terminating and ongoing pension plans.

Today’s Solutions for Tomorrow’s Needs. 




BCG Pension Risk Consultants | 100 Grandview Road, Suite 303, Braintree, MA 02184

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