Compliance August 23, 2017

Seniors at Risk of Financial Fraud

State securities regulators say most senior financial fraud goes undetected before it becomes a serious problem, according to a study by NASAA.
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A survey of state securities regulators by the North American Securities Administrators Association (NASAA) found that there is much more that can be done to protect seniors from investment fraud.

“It is imperative that we detect and prevent senior financial fraud before criminals who prey on our most vulnerable citizens steal from and devastate them,” says NASAA President and Minnesota Commissioner of Commerce Mike Rothman. “The clear message from our NASAA members, who are the securities regulators on the frontlines, is that we need everyone to step up and apply greater resources to stop financial fraud against seniors.”

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The survey found that 97% of the regulators say that most cases of senior financial fraud go undetected before they cause serious problems. However, ninety-seven percent also said there is greater awareness of senior financial fraud today than a year ago. Twenty-nine percent said their agency has seen an increase in senior fraud cases.

Seventy-five percent of the state securities regulators said broker/dealers and investment advisers can do more to prevent senior financial fraud, and more than three-fourths said their jurisdictions enforce laws like NASAA’s Model Act to Prevent Vulnerable Adults from Financial Exploitation and that in many cases, the laws prevented fraud. The regulators said that people age 70 and older are at the greatest risk of financial fraud.

Compliance August 22, 2017

IRS Issues Model Amendments to Add Bifurcated DB Distribution Options

The amendment suggests language a defined benefit sponsor might want to use.
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Following its issuance of a final rule on partial annuity distribution options in defined benefit plans (DBs), the Internal Revenue Service (IRS) has just issued model amendments including language that DB sponsors might want to use when offering such options.

To facilitate the payment of benefits partly in the form of an annuity and partly as a single sum, the Department of the Treasury and the IRS amended the regulations to simplify how sponsors would calculate the payments, in order to encourage sponsors to offer participants the additional option of an annuity. Their objective was to protect participants with an annuity in the event of unexpected longevity. The participant can decide to divide his benefit into two or more portions, and the IRS offers sponsors two methods to compute how the benefits would be distributed.

In addition, for pre-approved plans, some portions of the model amendment may be included in the basic plan document and others may be included in the adoption agreement.

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However, the IRS is also allowing plan sponsors to limit how the bifurcation is handled. For example, sponsors may limit bifurcation to only two forms. They could also set certain percentage parameters, such as 50/50 or 75/25. Sponsors could also limit bifurcation for the portion of an accrued benefit earned before a specific date and the portion earned after that date.

The IRS’s notice on model amendments to add bifurcated distribution options to DB plans can be downloaded here.

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