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Important Dates & Deadlines

March 15 –

  • Deadline for corrective distributions for failed ADP/ACP tests without the 10% excise tax for calendar-year plans without eligible automatic contribution arrangements (EACA). For non calendar year plans, the deadline is 2 ½ months following the end of the plan year.
  • Deadline for corporate tax return, requesting automatic extensions for corporate tax return, and deductible employer contributions to qualified plans (without extension)

 

April 2 –

  • Deadline to distribute first required minimum distribution (RMD) to participants and IRA (traditional, SEP and SIMPLE) holders who have reached their required start date
  • Deadline for filing Form 1099-R electronically with the IRS for each IRA holder, plan participant or beneficiary who received a distribution during 2017

 

April 17 –

  • Deadline for individual and/or partnership tax returns
  • Contribution deadline to traditional and Roth IRAs for 2017
  • Deadline for requesting automatic extensions for individual and/or partnership tax returns
  • Contribution deadline for unincorporated entities (without extension)
  • Deadline for corrective distributions of 402(g) excess deferrals from 2017 (calendar and non-calendar year plans)

 

May 15 –

  • Deadline for providing Q1 2018 participant benefit statements (including fee disclosure) to participants in participant-directed plans. For non-calendar-year plans, quarterly benefit statements are due no later than 45 days following the end of the quarter to which the statement relates.
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An Eye on DB Plans

As we approach the second quarter of 2018, we continue to see activity with defined benefit plans to reduce plan sponsor long-term liability (i.e., de-risking).  Many companies have implemented changes to how future benefits accrue, what forms of distributions are available (e.g., adding a lump sum) and what entity (e.g., an outside insurance company) is responsible for paying promised benefits. Three primary pressures contribute to these decisions: continued low interest rates, longer participant life expectancies and increased Pension Benefit Guaranty Corporation (PBGC) premiums. We can expect a continuation of plan de-risking in the future.  

 

Another trend we have seen recently is the large number of companies voluntarily contributing amounts above the required contribution to their defined benefit plans.  Many of these companies capitalized on the low interest rate environment and issued debt to pay down the funding shortfalls of the plan. History has shown that fully funding a company’s pension plan could be a precursor to a de-risking decision by the company.  These decisions could lead to opportunities for discussions with clients to help them understand what may be happening with their pension plans. If the company decides to offer a lump sum option, there may be money-in-motion opportunities. Likewise, if a company decides to transfer risk to an outside insurer it is an opportunity to educate clients and strengthen your relationship.

 

Pension De-Risking Activity 2018  
Graphic Packaging Lump-sum & transfer
L3 Technologies Plan Freeze eff. 1/1/2019
Alcoa Plan Freeze eff. 1/1/2021 & 3% contribution to DC plan for affected employees
Arconic Plan Freeze eff. 4/1/2018
DuPont Plan Freeze eff. 11/30/2018

 

 

Excess Pension Contributions 2018
FedEx $1.5 billion
Exelon $652mm
3M $500mm
Alcoa $300mm
Mondelez $289mm
United Technologies $100mm
Lockheed Martin $5 billion
AbbVie $750mm
Huntington Ingalls $508mm
Motorola $500mm
DTE Energy $200mm
Consolidated Edison $473mm
Graphic Packaging $75mm

Sources:  SEC Forms 8-K and 10-K filings

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The Bipartisan Budget Act’s Impact on Hardship Distributions

The rules applicable to hardship distributions from qualified plans have been relaxed as a result of the Bipartisan Budget Act, which was passed February 9, 2018.  Effective for plan years beginning January 1, 2018, hardship distributions are modified in the following ways.

 

  • Participants no longer have to exhaust plan loans prior to receiving a hardship distribution.
  • Participants are now able to include qualified nonelective contributions (QNECs) and qualified matching contributions (QMACs) (as well as earnings attributable) when determining the amounts available for hardship distribution.
  • The bill directs the IRS to modify the regulations governing hardship distributions to eliminate the requirement to suspend employee deferrals for six months following a hardship distribution.
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Recharacterization Of Roth Conversions – Going, Going, Gone

Since their inception in 1998, taxpayers have had the ability to accumulate tax-free wealth for retirement in Roth IRAs.   Eligible individuals can fund Roth IRAs through annual, after-tax contributions or taxable conversions from qualified retirement plans and traditional IRAs.  What’s more, Roth IRA owners could undo or “recharacterize” their contributions and conversions for any reason within a set timeframe and not suffer any tax consequences.  The deadline for completing a recharacterization is the individual’s tax filing due date, plus extensions. Individuals who file their return by the deadline have an automatic six month extension (October 15 of the year following the tax year).

While tax payers are still able to recharacterize contributions, time is running out for them to recharacterize conversions.  When the Tax Cuts and Jobs Act was enacted it included a provision that eliminates recharacterizations of converted amounts effective for 2018 and later years.  The IRS has clarified that individuals can still recharacterize amounts converted in 2017 as long as they do so by October 15, 2018. Amounts converted after December 31, 2017, can no longer be recharacterized.

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