Offering a
Lump-Sum Payment Option to Retirees Currently Receiving Annuity
Payments under a Defined Benefit Plan
IRS | March 06, 2019 | Issue
number: N-2019-18
Notice 2019-18 informs taxpayers that the Treasury Department and
the IRS no longer intend to amend the required minimum
distribution regulations under § 401(a)(9) of the Internal
Revenue Code to address the practice of offering retirees and
beneficiaries who are currently receiving annuity payments under
a defined benefit plan a temporary option to elect a lump-sum payment
in lieu of future annuity payments.
Notice 2019-18 will be in IRB: 2019-13, dated March
25, 2019.
Click here to access document
PBGC Seeks Recovery of Investment
Losses for Terminated Retirement Plan
PLANSPONSOR | February 28, 2019 | By: Rebecca Moore
The lawsuit claims owners of
Freedom Communications made ill-advised, highly speculative
investments which caused the pension plan to lose tens of
millions of dollars.
The Pension Benefit Guaranty Corporation (PBGC) has
filed a lawsuit for breach of fiduciary duties and prohibited
transactions under the Employee Retirement Income Security Act
(ERISA) against owners and service providers of Freedom
Communications’ pension plan, which, after the company’s
bankruptcy, was terminated and transferred to the PBGC as
trustee.
The agency charges defendants with breaches of
fiduciary duties under ERISA, including the duties of loyalty,
prudence, and adherence to plan documents; transactions
prohibited by ERISA; and knowing participation in breaches of
fiduciary duties. The lawsuit claims owners of Freedom
Communications made ill-advised, highly speculative investments
which caused the pension plan to lose tens of millions of
dollars.
According to the complaint, one of the failed investments started when members
of Pension Advisory Group, based in North Carolina, approached
Freedom’s owners with a proposal which they claimed would
instantly improve the plan’s funding status. Under this program,
which the owners implemented, the plan purchased life insurance
policies with Freedom employees as the insureds. An actuary
retained and compensated by Pension Advisory Group then allegedly
inflated the value of the policies by valuing them at the net
present value of future death benefits, rather than using the
correct valuation method, the cash surrender value of the
policies. Freedom’s owners abandoned the program when they
realized that the plan was legally required to use the cash
surrender value, resulting in a loss to the plan of more than $7
million.
The lawsuit also alleges that Freedom’s owners
invested in another life insurance scheme, which involved a
complex program in which the pension plan purchased a portfolio
of loans used to finance life insurance premiums for people
unrelated to Freedom or the plan. PBGC says that although such
portfolios can have economic value when the insured persons are
in poor health with decreased life expectancies, members of
Pension Advisory Group failed to obtain the medical information
needed to make a meaningful evaluation. Rather than acquiring a
valuable asset, the defendants acquired a program with no market
value, and lost millions of dollars of pension plan assets.
Freedom’s owners are also accused of losing millions
of dollars in plan assets by investing in a highly speculative
and unproven foreign hedge fund, which is now worthless, and by
causing the plan to buy stock in Freedom when they knew that the
company was in financial distress. The stock is also now
worthless.
The PBGC is seeking to recover these losses. Click Here for full article
