It looks like New Jersey and Illinois are being treated as ‘outliers’ rather than the inevitable consequences of a flawed public-plan funding system so I turned to some sessions on private plans and, in my world (and maybe yours), I came across a bombshell.
It is Enrolled Actuary meeting number forty (supposedly the only number that spells out alphabetically) and I have been to about 25 of them. When I started in the business the typical scenario was that a defined benefit plan was set up by an ERISA attorney who got an IRS determination letter at a big one-time cost and an insurance agent came in to fund it with cash value life insurance and get that substantial first-year commission and then we took over administration at very reasonable annual fees.
These days the plan is likely to be a safe-harbor 401(k) plan with new comparability allocations and a broker will handle investments where the fees need to be transparent and more documents are pre-approved prototypes. By 2017 all documents may be prototypes if a panelist at one of the sessions at this meeting is correct:
In a closed-door meeting late last month the IRS advised the American Bar Association that around January 1, 2017 (though it might be sooner) they will stop issuing determination letters on individually designed plans.
User fees for these submissions are fairly stiff but apparently the cost to the IRS of personnel is even higher so ERISA attorneys will likely be out of the pension plan setup business. Though some may be able to transition to other lucrative related areas (suing or defending public plan actuaries?) it just won’t be the same.
PS: This was a bolt out of the blue at the end of one the sessions. Tomorrow there will be a dialogue with the IRS and Treasury at which I (or someone before me) will seek verification.