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.

Regulatory roundup

More retirement-related regulatory news for plan sponsors, including links to detailed information.

Retirees reminded of deadline to take required retirement plan distributions
The Internal Revenue Service (IRS) has reminded taxpayers who turned age 70½ during 2017 that, in most cases, they must start receiving required minimum distributions (RMDs) from their IRAs and workplace retirement plans by Sunday, April 1, 2018.

The deadline applies to all employer-sponsored retirement plans, including profit-sharing plans, 401(k) plans, 403(b) plans, and 457(b) plans. The RMD rules also apply to traditional IRAs and IRA-based plans such as simplified employee pension (SEP) plans, Salary Reduction SEP (SARSEP) plans, and Savings Incentive Match Plan for Employees IRAs (SIMPLE IRAs). However, they do not apply to Roth IRAs.

To learn more, click here.

Modifications to procedures for issuing opinion and advisory letter
The IRS has issued Revenue Procedure 2018-21, modifying the procedures for issuing opinion and advisory letters for preapproved master and prototype and volume submitter plans as provided in Revenue Procedure 2015-36, 2015-27 I.R.B. 20. In particular, this revenue procedure modifies sections 6.03(7)(c) and 16.03(7)(c) of Revenue Procedure 2015-36 to allow preapproved defined benefit (DB) plans containing a cash balance formula to provide for the actual rate of return on plan assets as the rate used to determine interest credits.

To read the entire Revenue Procedure, click here.

Regulatory roundup

More retirement-related regulatory news for plan sponsors, including links to detailed information.

Proposed rule amending regulations on guaranteed benefits and asset allocation
The Pension Benefit Guaranty Corporation (PBGC) proposed amendments to its regulations on guaranteed benefits and asset allocation. These amendments would incorporate statutory changes to the rules for participants with certain ownership interests in a plan sponsor.

To learn more, click here.

2018 Publication 15-B: Employer’s Tax Guide to Fringe Benefits released
The Internal Revenue Service (IRS) has released 2018 Publication 15-B Employer’s Tax Guide to Fringe Benefits. This publication was updated to reflect the changes made by the Tax Cuts and Jobs Act, an act to provide for reconciliation pursuant to Titles II and V of the concurrent resolution on the budget for fiscal year 2018.

For more information, click here.

Pension spring cleaning can start with required minimum distributions

One of the most daunting challenges a pension plan can face is distributing required minimum distributions (RMDs) at a terminated vested participant’s required beginning date (RBD). The RBD is akin to cleaning house for the Internal Revenue Service (IRS) because tax-deferred income must start being taxed by the statutory date. Ostensibly, this income will be taxed in full within the participant’s lifetime.

The fall is the perfect time to take stock of which participants (including alternate payees, spouses, and non-spouse beneficiaries) are required to commence payment by April 1 of the following year. Any corrective actions that need to be taken for those participants who missed their RBDs may be completed before filing Form 5500.

To read more about cleaning up with required minimum distributions, read Jennifer Godwin’s article here.

Corporate pensions’ investment losses in February buoyed by higher discount rates

Milliman has released the results of its latest Pension Funding Index (PFI), which analyzes the 100 largest U.S. corporate pension plans. Despite the market volatility in February, these pensions experienced a $13 billion improvement in funded status thanks to an increase in the corporate bond rates used to measure pension liabilities. While the market value of assets for these pensions lost $32 billion in February, plan liabilities also shrunk, narrowing the deficit from $219 billion at the end of January to $206 billion as of February 28. The funded ratio for the Milliman 100 PFI rose from 87.3% to 87.7% during the same time period.

Despite the recent market volatility, February’s 21 basis point discount rate increase buoyed pension funding this month. In fact, thanks to strong investment performance in January along with an increase in discount rates in both January and February, overall pension funding for these plans has risen $75 billion over the past two months—not a bad way to start 2018.

Looking forward, under an optimistic forecast with rising interest rates (reaching 4.45% by the end of 2018 and 5.05% by the end of 2019) and asset gains (11.0% annual returns), the funded ratio would climb to 99% by the end of 2018 and 114% by the end of 2019. Under a pessimistic forecast (3.45% discount rate at the end of 2018 and 2.85% by the end of 2019 and 3.0% annual returns), the funded ratio would decline to 82% by the end of 2018 and 75% by the end of 2019.

To view the complete Pension Funding Index, click here. To receive regular updates of Milliman’s pension funding analysis, contact us here.