Category Archives: Defined contribution

Bitcoin considerations for retirement plan sponsors

Bitcoin is a digital “currency” or cryptocurrency not tied to a sovereign or bank. It is mainly a tool for transactions (purchase of goods, payment of services), and the number of bitcoins is governed by the blockchain technology that underlies its use.

Bitcoin is most popular with people and institutions on the leading edge of technology, and a large number of investors, rather than the everyday consumer. Very few businesses currently accept bitcoin or other cryptocurrencies as payment, but cryptocurrencies are being used by a small number of companies and may be used more often in the coming years.

In this article, Milliman’s Charles Hodge discusses bitcoin and whether it is an appropriate investment vehicle for retirement plan sponsors.

Milliman receives PLANSPONSOR award for excellence in Defined Contribution Survey

Milliman is pleased to announce that it is the recipient of a PLANSPONSOR Silver award for excellence in the publication’s 2017 Defined Contribution (DC) Survey. The annual survey catalogued nearly 3,500 responses from defined contribution plan sponsors nationwide, who were asked how satisfied they were with their providers. Milliman is one of three organizations recognized as a “Survey Standout” in the midsize ($50 million to $200 million) asset class market, having received 18 Best in Class Awards in this category.

At Milliman, we strongly believe in providing high-quality service and responsiveness to our defined contribution clients, and work hard to exceed their expectations, so we’re pleased and gratified to once again receive an award for excellence from PLANSPONSOR.

Across the three asset class markets for which Milliman qualified ($25 million to $50 million, $50 million to $200 million, and $200 million to $1 billion), the firm won a total of 45 “Best in Class” awards—which includes the Silver Cup for the midsize market—and five “Service Commendations.” “Best in Class” awards are based on a PLANSPONSOR-designated “net satisfaction score” tabulated from survey responses. Since 2012, Milliman has won 11 Gold, Silver, and Bronze Cups in the DC Survey.

For more information about Milliman’s employee benefit services, click here.

Searching for missing plan participants per the U.S. Department of Labor

The U.S. Department of Labor (DOL), the Internal Revenue Service (IRS), the Social Security Administration (SSA), and the Pension Benefit Guaranty Corporation (PBGC) all review whether retirement plans have paid their participants on time. Last year, the Philadelphia office of the DOL conducted a pilot program that recovered $274 million owed to missing plan participants. Because of this success, DOL offices nationwide added “missing participant search compliance” to their plan audits. Plans failing to locate and contact plan participants regarding unpaid benefits could be found in breach of their ERISA duty to act on behalf of participants. Before receiving a letter of inquiry from the local DOL office, plan sponsors should review the protocols used to locate and pay their plans’ list of unpaid participants.

How do the various agencies learn of unpaid vested participants? Any terminated plan participant with an unpaid benefit at year-end is added to a plan’s running list of unpaid participants, one time, via IRS Form 8955. Terminated participants include alternate payees and beneficiaries. The IRS shares this information with both the SSA and the DOL, each of which maintains a running list of unpaid benefits from a plan. Once a vested participant starts a benefit, or cashes it out, an update via Form 8955 informs the IRS, SSA, and the DOL. Depending on whether the plan administrator removed participants as they were paid, the agencies may have an inflated list of unpaid participants.

When is a participant’s payment considered late? Just before age 65, the SSA sends letters to participants informing them that they “may have a benefit from their former employer.” The IRS considers payments late after a participant’s required minimum date. The DOL, however, reviews a plan’s overall list of vested participants regardless of age. Based on the participant’s earliest retirement age, the DOL could determine that a plan sponsor is not notifying and then paying participants in a timely manner. Please note that beneficiary or alternate payee required start dates can vary due to either 401(a)(9) rules or the participant’s, not the alternate payee’s, actual age.

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Auto plan features produce uptick in DC plan savings and participation

Defined contribution (DC) plan sponsors can struggle with employee enrollment and participation. This was the case with one safe harbor-designed DC plan offering participants 100% matching contributions up to 4% of pay.

The sponsor eventually set a new goal to help employees save at least 10% of pay while taking advantage of the employer match. Milliman worked with the sponsor to attain its goal by implementing auto plan features to effectively increase participation and retirement savings for individuals. Consultant Kevin Skow explains how in his article “Automatic enrollment with auto increase, re-enrollment, and fee equalization.”

Mall of America selects Milliman for retirement services

Milliman has announced it has added Mall of America® as a defined contribution client. Mall of America is a privately held corporation located in Minnesota.

“We chose Milliman for their reputation as a trusted service provider that values their clients. Partnering with Milliman provides our HR team the support and assistance to bring the best retirement plan and service to our team members,” says Sue Amundson, Human Resources Director at Mall of America.

Milliman will provide recordkeeping, administration, communication, and compliance services for the Mall of America Employee Retirement Savings Plan. Channel Financial is the independent investment adviser providing consulting services for the Plan and assisted with the recordkeeper search.

Our mission at Milliman is to serve our clients to protect the health and financial well-being of people everywhere, and we strongly believe in providing superior service and value that exceeds our client’s expectations. We look forward to a long-standing relationship with Mall of America.

For more information about Milliman’s employee benefit services, click here.

Hurricane Irma victims: Hardship and loan relief available

Good news: the Internal Revenue Service (IRS) announced that 401(k) plans and similar defined contribution (DC) employer-sponsored retirement plans can make loans and hardship distributions to victims of Hurricane Irma and members of their families. Similar relief was provided to victims of Hurricane Harvey. Plans will be allowed to make loans and hardship distributions before they are formally amended to provide for these features. This relief applies to 401(a), 403(a), 403(b), and certain 457(b) plans. Defined benefit (DB) plans and money purchase plans cannot make hardship distributions unless they contain either employee contributions that are separately accounted for or rollover amounts.

Loans and hardship distributions will provide the financial resources needed to those suffering in the wake of the hurricanes. Announcement 2017-13 states that both current and former employees are able to take loans or hardship distributions if their principal residences on September 4, 2017, were located in the Florida counties identified for individual assistance by the Federal Emergency Management Agency (FEMA) because of the devastation caused by Hurricane Irma, or whose places of employment were located in one of these counties on that applicable date, or whose lineal ascendant or descendant, dependent, or spouse had principal residences or places of employment in these counties on that date.

Plans can ignore the reasons that normally apply to hardship distributions, thus allowing the funds to be used, for example, for food and shelter. If a qualified plan requires certain documentation before a distribution is made, the plan can relax this requirement and still be considered qualified. The amount available for a hardship distribution is still limited to the maximum amount available under the IRS Code. In addition, there are no post-distribution contribution restrictions required as there normally are in plans, if the distribution is being made for hurricane relief. Employees still have to pay income taxes on hardship distributions and may have to pay the 10% early penalty tax. Loans, if not repaid, but rather defaulted, become taxable income to the participant.

There is a window of time in which employees can take advantage of this relief. The distributions must be taken from a qualified plan on or after September 4, 2017, but no later than January 31, 2018. Employers need to amend their retirement plans to provide for loans or hardship distributions generally by December 31, 2018.

Why this relief is important does not need debating, but the significant impact it may have on retirement plans and employee retirement accounts remains to be seen. It is challenging for employees to save money and, with an unforeseeable emergency in front of them, employees will turn to where they have most if not all of their savings. Employees may also stop saving for the future indefinitely because of their need for current income to survive now. All of this can’t help but compromise their future retirements.