September 2014 Looking Forward to 2015 The Legislative Outlook and the Impact of Recent Legislation 2 What We ll Cover The Dudenhoeffer Case The Current Washington Landscape Legislative Proposals ID: 760648
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Jennifer E. EllerDavid N. LevineSeptember 2014
Looking Forward to 2015: The Legislative Outlook and the Impact of Recent Legislation
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What We’ll Cover
The
Dudenhoeffer
Case
The Current Washington Landscape
Legislative Proposals
Department of Labor and IRS Priorities
Slide3The Dudenhoeffer Case
Pre-Dudenhoeffer Landscape For almost 20 years, most federal appeals courts have applied a legal presumption that offering a company stock fund is “prudent” under ERISA provided that the plan document mandated that the company stock fund be among the plan’s investment options. See, e.g., Moench v. Roberson, 62 F.3d 553, 568 (3d Cir. 1995).
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Slide4The Dudenhoeffer Case
Pre-Dudenhoeffer StrategyHardwire company stock in plan documentSelective monitoring of stock fundAdministrative and operational aspectsLack of plan sponsor “dire circumstances”Monitor “inside information”
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Slide5The Dudenhoeffer Case
Observations about DudenhoefferExpect more lawsuits“Overvaluation” claims, such as those addressed in the case may still be vulnerable to a motion to dismiss based on the Court’s discussion of the very limited duties of fiduciaries to second guess the price of a publicly traded security and the relevant considerations for fiduciaries who possess non-public information
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Slide6The Dudenhoeffer Case
Observations about DudenhoefferPlaintiffs may well try to re-craft allegations away from “overvaluation” and toward “poor performance” over time against peer stocks or in absolute termsIf there exist “poor performance” situations not clearly subject to Dudenhoeffer’s framework, they may be more difficult to defend in the absence of a presumption of prudence
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Slide7The Dudenhoeffer Case
Post-Dudenhoeffer strategy must address:“Special circumstances” where Dudenhoeffer suggests market price may not be relied upon The potential for a “poor performance” or other claim not clearly addressed in Dudenhoeffer, and How to handle inside information
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Slide8The Dudenhoeffer Case
Strategy Considerations:Continue to “hardwire” company stockDuty of prudence is contextual – it should be tailored to the unique structure of participant-directed individual account plansKeep participants informed of the special risks associated with company stock
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Slide9The Dudenhoeffer Case
Strategy Considerations (con’t):Engage in regular and tailored monitoring based on a review of publicly available information to address whether “special circumstances” would cause a fiduciary to question whether public pricing is accurate.Thinly traded vs. active and efficient marketMaterial deterioration in sponsor financial condition (credit rating, debt to equity ratio, liquidity or SEC filings)
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Slide10The Dudenhoeffer Case
Strategy Considerations (con’t):Monitor administration of company stock fund (fees, trading execution, liquidity)Consider composition of fiduciary committee and likelihood of inside informationConsult with legal counsel regarding non-public informationConsider adopting tailored investment guidelines in line with strategy
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Slide11The Current Washington Landscape
Divided GovernmentThe Political PlayersDemocratic White House / AdministrationRepublican House (Ways & Means / Education & Workforce)Democratic Senate (HELP / Finance)Changing Congressional Leadership
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Slide12The Current Washington Landscape
2014 Midterm ElectionsWhat Do The Midterms Mean to Retirement Plans?Potential Impacts on Legislative Agenda in 2014Looming 2016 Presidential Elections and Lame Duck Status
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Slide13The Current Washington Landscape
The Current Obama Administration PositionRegulation Versus LegislationAnnual Budget ProposalsAuto IRAsSavers CreditMyRA'sLimiting Tax DeductibilityA Retirement Legacy?
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Slide14Legislative Proposals
Understanding The Legislative “Cost” ProcessThe Image of Congress – And The RealityAre There Areas of Agreement?
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Slide15Legislative Proposals
Themes of Potential AgreementThe System is “Broken”Retirement Policy as a Revenue SourceSavings Caps“All Roth”Limited Deductibility
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Slide16Legislative Proposals
Themes of Potential AgreementSpecific TopicsMultiemployer Plan ReliefPlant Shutdown and the PBGCFiduciary Definition Legislation401(k) EnhancementsMultiple Employer PlansOther Plan and Retirement Vehicle DesignsGovernmental PlansConvergence?
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Slide17Legislative Proposals
So What Happened To Tax Reform?Congressman Camp’s ProposalA Grand Bargain?If? When? The MidtermsHow Retirement May Be Impacted
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Slide18Legislative Proposals
Before The New Congress – Anything?How Might Legislation Move ForwardTag AlongRevenue RaisersHigh Priority AreasState InitiativesInteraction With Federal Legislation and Regulation
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Slide19DOL and IRS Priorities
Basic ItemsTime is Starting to Run OutResources Are ThinThe IRS Is Restructuring
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Slide20DOL Priorities
The Conflict of Interest RuleService Provider Fee Disclosure SummaryTarget Date GuidancePension Benefit StatementDC Plan Annuity Safe Harbor Brokerage Window RFIUpdate of VFCP Program
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Slide21IRS Priorities
IRS DB Plan PrioritiesFrozen Plan GuidanceHybrid / Cash Balance Guidance Cash Balance Preapproved PlansIRS DC Plan PrioritiesLifetime Income GuidanceESOP GuidanceMultiple Employer Plans Guidance
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Contact Information
Jennifer E. Eller
Groom Law Group, Chartered
jeller@groom.com
(202) 861-6604
David
N. Levine
Groom Law Group, Chartered
dlevine@groom.com
(202) 861-5436
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Disclaimer
These materials have been prepared for informational purposes only and constitute neither legal nor tax advice
Transmission of the information is not intended to create, and receipt or attendance at any presentation does not create or constitute, an attorney-client relationship
Anyone viewing this presentation or reading these materials should not act upon this information without seeking professional counsel
In response to new IRS rules of practice, we hereby inform you that any federal tax advice contained in this writing, unless specifically stated otherwise, is not intended or written to be used, and can not be used, for the purpose of (1) avoiding tax-related penalties or (2) promoting, marketing or recommending to another party any tax-related transaction(s) or matter(s) addressed herein