PLANSPONSOR - December 2017/January 2018 - 6

Compliance Update
Summaries of the latest news from Washington and the courts-what's coming,
what's contemplated and what's critical for plan sponsors to know
Sponsors Have Ultimate
Fiduciary Liability
The U.S. District Court for the District of
Idaho has denied Idaho Hyberbarics Inc.
(IHI) a motion for leave to file a thirdparty
complaint. The case concerns a
Pension Benefit Guaranty Corporation
(PBGC) audit of the termination of IHI's
defined benefit (DB) plan. During the
audit, the agency found that full distribution
of assets to plan participants was not
made in a timely manner and that IHI
failed to pay them the full value of their
annuity contracts. The PBGC ordered IHI:
to calculate the underpayments due to
participants by determining the difference
between the amount each participant actually
received and the full cash surrender
value of that person's annuity contract,
adding a reasonable rate of interest to the
additional amount; to submit such calculations
for PBGC's review; and to pay
participants the additional amounts due
them. IHI neglected to do these things, so
the PBGC filed a lawsuit. IHI now argues
that a third party bears responsibility for
any improper administration of the plan
and seeks to file a third-party complaint
against CJA & Associates. IHI retained
A lawsuit
shows ... large
retirement plan
recordkeepers
and service
providers are
increasingly seen
as targets for
fraudsters.
CJA to assist it with establishing and administering the DB plan
for IHI's employees. PBGC's claim against IHI arises under Title
IV of the Employee Retirement Income Security Act (ERISA), and
liability is based upon IHI's acts or omissions, not the actions of
CJA. Under Title IV, the plan administrator alone, not a thirdparty
adviser, is responsible for proper termination of the plan.
Account Withdrawal Fraud Lawsuit
A lawsuit filed in the U.S. District Court for the District of
Colorado shows large retirement plan recordkeepers and
service providers are increasingly seen as targets for fraudsters.
As outlined in the text of the lawsuit, filed by the state's U.S.
Attorney's office, " on or about November 2016, the FBI Denver
Division was contacted by the vice president, internal audit,
Great-West Financial, with the referral of a matter involving
allegations of fraudulent transfers from clients' 401(k) accounts
6 PLANSPONSOR.com December 2017-January 2018
from J.P. Morgan. " At the time of the
report, the lawsuit states, Great-West
Financial had 20 participants affected
and a loss of at least $1 million with a
potential loss in excess of $2 million.
Based on the investigation, it appears
that unauthorized individual(s) have
been fraudulently using its call center
authentication process to obtain access to
funds held in retirement accounts. These
individuals have caused funds to be
transferred from those accounts to other
bank accounts without the knowledge
of the account holder. According to the
U.S. Attorney's complaint, analysis of
the stolen funds " reveals that [the ringleader
of this illegal activity] is receiving
wires from multiple fraud schemes and
appears to have no personal income
coming into the account other than
small cash deposits. "
Required Amendments List
The Internal Revenue Service (IRS)
began issuing required amendments
(RA) lists when it ended the determination
letter program for individually
designed retirement plans. In Revenue
Procedure 2016-37 the agency eliminated,
as of January 1, 2017, the five-year remedial amendment cycle
system for individually designed plans and also provided that the
Department of the Treasury and the IRS intend to publish annually
an RA list. IRS Notice 2017-72 contains the 2017 RA List and
has two parts. Part A covers changes in qualification requirements
that generally would necessitate an amendment to most
plans of the type affected by the change. Listed are final regulations
regarding cash balance/hybrid plans and benefit restrictions
for certain defined benefit (DB) plans that are eligible cooperative
plans or eligible charity plans described in Section 104
of the Pension Protection Act (PPA). Part B includes changes in
qualification requirements that the Treasury Department and
the IRS anticipate will not require amendments to most plans-
rather, possibly requiring one because of an unusual plan provision.
The list mentions only final regulations regarding partial
annuity distribution options for DB plans.
Art by Karen Ko
http://www.PLANSPONSOR.com
PLANSPONSOR - December 2017/January 2018

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