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Benefits in the News

Older News | October 25, 2014


arrow icon Analyzing the Reinsurance / Risk Corridor / Risk Adjustment Accruals in the First Half of 2014
Citi Research
10/24/2014

15 pages. "After the first quarter, there were lots of insurers assuming a risk adjustment receivable, and very few expecting to pay out. That has changed, as there are now some insurers (primarily the Blues and Health Net) accruing sizeable risk adjustment payables. However, there are still lots of insurers making no assumption on risk adjustment, a position that will likely change in the third quarter now that the risk status of April/May enrollees is better understood.... With no change in assumptions, we estimate the full year liability to HHS could exceed $1 billion. There won't be nearly enough plan contributions to fund these requests[.]"
arrow icon IRS, EBSA Give Boost to TDF/Deferred Annuity Combinations
Nevin Adams, for American Society of Pension Professionals & Actuaries [ASPPA]
10/24/2014 [Guidance Overview]

"What [the DOL] letter also makes clear is that the fiduciary of the plan is not responsible for selecting the annuity provider, so that the annuity purchase safe harbor rules have no application. The current annuity purchase safe harbor rules are often cited as an impediment to plans offering annuities because many see them as providing little protection to fiduciaries.... The IRS notice explains that this special rule provides that, if certain conditions (specified in the Notice) are satisfied, a series of TDFs in a DC plan is treated as a single right or feature for purposes of the nondiscrimination requirements of Code Section 401(a)(4). According to the IRS, this permits the TDFs to satisfy those nondiscrimination requirements as they apply to rights or features even if one or more of the TDFs considered on its own would not satisfy those requirements."
arrow icon The Transitional Reinsurance Program: Overview and Procedures for Reinsurance Contributions
Center for Consumer Information & Insurance Oversight [CCIIO], Centers for Medicare & Medicaid Services [CMS], U.S. Department of Health and Human Services [HHS]
10/24/2014 [Official Guidance]

"HHS is implementing a streamlined approach to complete the contributions process through Pay.gov. To successfully complete the reinsurance contribution process, contributing entities, or third party administrators or administrative services-only contractors on their behalf, must register on Pay.gov. Using Pay.gov, the contributing entity (or third party administrators or administrative services-only contractors on their behalf) will access the 'ACA Transitional Reinsurance Program Annual Enrollment and Contributions Submission Form' to enter the annual enrollment count. The ... Form will auto-calculate the annual contribution amount to be remitted based on the annual enrollment count and the contributing entity will then schedule payment for the calculated reinsurance contributions on the payment page."
arrow icon Online Form: ACA Transitional Reinsurance Program Annual Enrollment Contributions Submission
Centers for Medicare & Medicaid Services [CMS], U.S. Department of Health and Human Services
10/24/2014 [Official Guidance]

"Use this form to submit your annual enrollment count and remit the contribution amount owed for the ACA Transitional Reinsurance Program." [This page starts the process of completing the online submission form; registration and log-in is required.]
arrow icon Text of DOL Information Letter to IRS: Fiduciary Guidance with Respect to a Series of Target Date Funds That Seek to Provide Lifetime Income Using Unallocated Deferred Annuity Contracts
Employee Benefits Security Administration [EBSA], U.S. Department of Labor [DOL]
10/24/2014 [Official Guidance]

"This responds to [the Treasury Department's] request for the [DOL's] views on whether a series of target date funds (Funds) could serve as 'qualified default investment alternatives' within the meaning [of the QDIA regulation], in light of the Funds' investments in unallocated deferred annuity contracts, described in [IRS Notice 2014-66]. You also ask whether, and to what extent, the Department's 'annuity selection safe harbor,' is available in connection with the selection of the unallocated deferred annuity contracts as investments of the Funds.... The use of unallocated deferred annuity contracts as fixed income investments, as described in the Notice, would not cause the Funds to fail to meet the requirements of paragraph (e)(4)(i) of the QDIA regulation. The selection of the unallocated deferred annuity contracts satisfies the requirements of section 404(a)(1)(B) of ERISA if the designated investment manager satisfies each of the conditions of the annuity selection safe harbor. The plan sponsor, as the appointing fiduciary, must prudently select the investment manager and monitor the selection at reasonable intervals, in such manner as may be reasonably expected to ensure that the investment manager's performance has been in compliance with the terms of the Plan and statutory standards, and satisfies the needs of the Plan."
arrow icon Pension Firms Accuse EU Regulator of Over-Reaching Authority
The Wall Street Journal; subscription may be required
10/24/2014

"Europe's pensions industry has accused its European Union regulator of overreaching its authority by pursuing plans to develop what pension funds say amounts to a new and onerous capital regime that could hurt their investing decisions.... The rules would force funds to use European instead of national standards in calculating the value of their assets and liabilities, allowing for comparison of the state of pension funds in different countries."
arrow icon Text of EBSA Revised Notice of ERISA Advisory Council Meeting on November 3-4, 2014
Employee Benefits Security Administration [EBSA], U.S. Department of Labor
10/24/2014

"[T]he 174th open meeting of the Advisory Council on Employee Welfare and Pension Benefit Plans (also known as the ERISA Advisory Council) will be held on November 3-4, 2014. No votes will occur until November 4. Despite our efforts to get this meeting notice published early, we were unable to do so. The Advisory Council meeting notice appeared on the public inspection desk of the Federal Register on October 20, 2014. This revised notice clarifies that final votes on the Council's recommendations to the Secretary will occur on November 4, 2014 ... The Council recommendations will be on the following issues: [1] Issues and Considerations around Facilitating Lifetime Plan Participation, [2] PBM Compensation and Fee Disclosure, and [3] Outsourcing Employee Benefit Plan Services."
arrow icon Text of IRS Notice 2014-66: Lifetime Income Provided Through Target Date Funds in Section 401(k) Plans and Other Qualified DC Plans (PDF)
Internal Revenue Service [IRS]
10/24/2014 [Official Guidance]

"This notice provides a special rule that enables qualified defined contribution plans to provide lifetime income by offering, as investment options, a series of target date funds (TDFs) that include deferred annuities among their assets, even if some of the TDFs within the series are available only to older participants. This special rule provides that, if certain conditions are satisfied, a series of TDFs in a defined contribution plan is treated as a single right or feature for purposes of the nondiscrimination requirements of Section 401(a)(4) of the Internal Revenue Code. This permits the TDFs to satisfy those nondiscrimination requirements as they apply to rights or features even if one or more of the TDFs considered on its own would not satisfy those requirements."
arrow icon How Big Is the Problem? The High Cost of Accounts Left Behind (PDF)
Millennium Trust Company
10/24/2014

"[1] 9.5 million employees change jobs each year. [2] 38 million retirement accounts connected with former employees left with previous employers. [3] $92/year: Average recordkeeping, custody, and administration fee per account. [4] $3.5 billion: Estimated annual cost of DC plan accounts belonging to previous employees. [5] $43.5 billion: Estimated cost of former employees over a 10-year period."
arrow icon Another Church Plan Lawsuit Is Filed Over PBGC-Exempt DB Plan
PLANSPONSOR
10/24/2014

"According to the lawsuit, the Daughters of Charity Health System plan is underfunded by more than $229 million. In addition, on October 10, 2014, the health system announced it would sell its six California hospitals and medical foundation to Prime Healthcare Services and Prime Healthcare Foundation. 'Plaintiffs fear the sale threatens their earned pension benefits,' the complaint says."
arrow icon Text of CMS Guidance on Paper-Based Appeals Process (PDF)
Centers for Medicare & Medicaid Services [CMS], U.S. Department of Health and Human Services [HHS]
10/24/2014 [Official Guidance]

"[CMS] has determined that the flexibility to use a paper-based process to conduct eligibility appeals should be extended an additional year, through December 31, 2015.... This extended flexibility enables appeals entities to operate the appeals process as current capabilities allow, protecting the due process rights of appellants while providing additional time for appeals entities to complete the systems development work necessary to implement the electronic requirements of the process.... [T]his approach strikes a balance between safeguarding appellant's rights and the demands on appeals entities."
arrow icon Navigating the New Retirement World
John Rekenthaler, for Morningstar Advisor
10/24/2014

"Many years to navigate, with (it appears) punk returns on the horizon. What's an investor to do? ... [1] Save more/retire later -- prosaic and unappealing, but undeniably effective.... [2] Lower fees -- another simple idea, and less painful to do.... [3] Diversification -- moving away from the core.... [4] Flexible withdrawal strategies."
arrow icon Retirement Plan's Venue Selection Clause Held Enforceable and Applied to Dismiss Participant's Benefit Claims
Williams Mullen
10/24/2014

"The Federal courts ... have repeatedly held that adherence to the written terms of a plan in enforcing ERISA rights and obligations is of paramount importance. These decisions often demonstrate the extent to which the courts will enforce a plan sponsor's design choices provided they fit within ERISA's statutory and regulatory boundaries. Those boundaries are not endlessly elastic, but [this case] shows that they may be broader than some participants expected." [Smith v. Aegon Companies Pension Plan, No.13-5492 (6th Cir. Oct. 14, 2014)]
arrow icon Employer Shared Responsibility Payments and Reporting Requirements Under the ACA
Bloomberg BNA
10/24/2014 [Guidance Overview]

"Recognizing the burden these reporting requirements imposed on employers, the IRS has provided a simplified reporting method for large employers that make qualifying offers of coverage to FTEs, their spouse and their dependents for all 12 calendar months of the reporting year. A simplified alternative that allows the employer to report without identifying or specifying the number of FTEs is also available for employers that offered, for all 12 months of the calendar year, affordable health coverage ... providing minimum value to at least 98% of its employees and their dependents for whom it is filing a Form 1095-C."
arrow icon Employer-Provided Housing: What's Taxable and What's Not?
Moss Adams LLP
10/24/2014

"Employers may provide housing to employees for a variety of reasons, including not-for-profit organizations that maintain institutions of higher education, historic sites, housing facilities, and other premises that require on-site staff. Unless an exception applies, the full value of the housing is treated as additional taxable compensation to the employee. Full or partial exceptions apply if the housing is: [1] Provided for the convenience of the employer; [2] A temporary work location; [or] [3] Lodging furnished by an educational institution."
arrow icon Federal Agencies Issue Final Guidance on Excepted Benefit Standards
Towers Watson
10/24/2014 [Guidance Overview]

"The final regulations give employers more flexibility in their EAPs and stand-alone limited-scope dental and vision programs. The criteria for EAPs to qualify as excepted benefits are largely the same as in the proposed regulations. The final guidance does not address limited wraparound coverage; the departments intend to publish regulations in the future on such coverage, 'taking into account the extensive comments received on this issue.'"
arrow icon What's the Impact of the 2015 IRS Retirement Plan Limits?
Van Iwaarden Associates
10/24/2014

"Plans may see better nondiscrimination testing results (including ADP results) if there are fewer participants at the low end of the HCE range, especially those with big deferrals. It could make a big difference for plans that were close to failing the tests. Fewer HCEs means that there are fewer participants who must receive 401(k) deferral refunds if the plan fails the ADP test."
arrow icon 'Work Martyrs' Turning U.S. Into 'PTO Graveyard'
CFO
10/24/2014

"The average worker earns 21 days of PTO each year but uses only 77% of that time, forfeiting 4.9 days ... Permanently lost PTO days totaled 169 million, or 1.6 per employee, in 2013 ... Employees who left 11-15 days of PTO unused last year are actually less likely to have received a raise or bonus in the past three years than those who used all of their PTO. The only thing they may gain, in fact, is stress."
arrow icon Citigroup Decision's Warning for 401(k) Fiduciaries
The Prudent Investment Adviser Rules
10/24/2014

"The court noted that Citigroup had not even attempted to offer any evidence that the plan participants had been provided with or possessed the necessary fee data. Without such data, the court held that the plan participants 'could not have known that the fees were excessive, and thus a basis for an ERISA claim.' ... [F]ew, if any, 401(k) plans provide the type of fee comparison data mandated by the court's decision. The court seems to suggest that the required fee comparison data includes comparison data on both the unaffiliated funds with a plan, but also on comparable alternative funds with similar types of assets and equivalent performance available in the marketplace." [Leber v. Citigroup 401(k) Plan Investment Committee, No. 07-Cv-9329 (S.D.N.Y. Sept. 30, 2014)]
arrow icon Text of 2015 Dollar Limitations on Benefits and Contributions
Internal Revenue Service [IRS]
10/24/2014 [Official Guidance]

"The Internal Revenue Code provides for dollar limitations on benefits and contributions under qualified retirement plans. IRC Section 415 requires the limits to be adjusted annually for cost-of-living increases. The IRS announced on October 23, 2014 cost-of-living adjustments applicable to dollar limitations for pension plans and other items for tax year 2015." [Also available in PDF format.]
arrow icon Five Hot Topics in the Health Plan World
Quarles & Brady LLP
10/23/2014 [Guidance Overview]

"[1] Mental Health Parity rules require immediate attention.... [2] HPID? OMG! ... [3] Whose employees are they? Temporary workers and the employer shared responsibility.... [4] Reinsurance fee deadlines looming.... [5] Reference-based pricing and MOOP limits."
arrow icon 32% of Employers Delayed Health Plan Renewal Date to December 2014 to Avoid Rate Increases
United Benefit Advisors
10/23/2014

"The number of employers delaying their health plan renewal dates until December 1 increased 322 percent from 2013 to 2014, with 32 percent of all employers postponing their renewal date, according to ... [this] survey of nearly 10,000 employers. Of the 32 percent, 94 percent were small businesses in the under 100-employee market. Based on current renewal rates coming in from carriers, in the states that did not allow renewal of pre-PPACA plans, many small employers are facing rate increases of 30 percent to 160 percent[.]"
arrow icon Text of Reply Brief for Petitioners to Supreme Court on Appeal of Sixth Circuit Decision Upholding Lifetime Retiree Health Benefits Under Collective Bargaining Agreement (PDF)
Via Joint Committee on Employee Benefits [JCEB], American Bar Association
10/23/2014

28 pages. "At a minimum, this Court should insist on affirmative language in the agreement that can be reasonably construed as a promise of unalterable lifetime benefits. Silence is not enough. This Court should reject the Sixth Circuit's Yard-Man presumption of unalterable, lifetime health-care benefits (along with its various corollaries) and reverse the judgment below.... Yard-Man is many things, but 'ordinary contract interpretation' is not one of them. There is nothing ordinary about manufacturing ambiguity out of vague notions of 'context' and then using that same context to 'resolve' the purported ambiguity." [M&G Polymers USA, LLC v. Tackett, No. 13-1010 (on appeal from 6th Cir., cert. granted May 5, 2014)]
arrow icon Americans Make Hard Choices on Social Security: A Survey with Trade-Off Analysis (PDF)
National Academy of Social Insurance [NASI]
10/23/2014

72 pages. "[R]ather than maintain the status quo, 71% of respondents would prefer a package of changes ... The preferred package would: [1] Gradually, over 10 years, eliminate the cap on earnings that are taxed for Social Security.... [2] Gradually, over 20 years, raise the Social Security tax rate that workers and employers each pay from 6.2% of earnings to 7.2%.... [3] Increase Social Security's cost-of-living adjustment (COLA) ... [4] Raise Social Security's minimum benefit so that a worker who pays into Social Security for 30 years can retire at 62 or later and have benefits above the federal poverty line ... These four changes together would eliminate 113% of Social Security's projected long-term financing gap[.]"
arrow icon IRS Simplifies Rules for Participants in Canadian Plans -- or Does It?
Osler, Hoskin & Harcourt LLP
10/23/2014

"IRS has simplified the rules for those who filed U.S. tax returns, even if they failed to attach Form 8891. Under the new procedures, the deferral will be available for those who filed U.S. income tax returns and didn't include earnings on the accounts in income, and for those in this situation in the future.... What about those who were eligible to defer the tax on their accounts but did not file income tax returns for every year? The new rules seem to leave them in limbo. Even worse, they may become subject to a $10,000 penalty for not filing a form reporting participation in Canadian plans."
arrow icon Final Regs Clarify When Dental and Vision Benefits and Employee Assistance Programs Are Not Subject to the ACA
Segal Consulting
10/23/2014 [Guidance Overview]

"Benefits that meet these tests are not subject to group health plan mandates under the [ACA], including the ban on annual or lifetime dollar limits. Nor would the pediatric dental or vision benefits offered under these limited-scope arrangements have to count toward the out-of-pocket limit applicable to non-grandfathered plans ($6,600 single/$13,200 family in 2015). In addition, to the extent these benefits are not already exempt, they will also be exempt from certain fees, such as the comparative effectiveness research fees7 and the transitional reinsurance fees. Treating these benefits as excepted benefits may also assist the plan to avoid the excise tax on high-cost health plans."
arrow icon Millennials Prioritizing Retirement and Health Saving Through Workplace Benefits
Merrill Lynch
10/23/2014

"Health savings account (HSA) usage grew 33 percent during the first six months of the year, with more than 384,000 workers now utilizing these tax-advantaged vehicles to prepare for qualified near- and long-term medical expenses. While Baby Boomers (38 percent) and Gen Xers (39 percent) make up the majority of account holders, Millennials (23 percent) are also using HSAs early in their careers. Millennials are also taking positive retirement savings actions. Nearly 40,000 of these younger workers enrolled in their employer's 401(k) plan for the first time during the first half of the year -- a 55 percent increase from the same six-month period last year. Across all generations, the report found a 37 percent increase among first-time contributors."
arrow icon Checklist for Evaluating Private Exchanges
Findley Davies
10/23/2014

"Important considerations include: What are my company's benefit plan objectives and does it make sense to move to a private exchange based on these objectives? Is moving to an exchange cost effective for my organization and my employees? What does moving to a private exchange entail? What are the options for both insured and self-funded arrangements? How will offering benefits through an exchange impact my company's health management strategy? What additional fees and commissions are built into the rates under a private exchange?"
arrow icon Text of IRS Information Release 2014-99: 2015 Pension Plan Limitations (PDF)
Internal Revenue Service [IRS]
10/23/2014 [Official Guidance]

"The elective deferral (contribution) limit for employees who participate in 401(k), 403(b), most 457 plans, and the federal government's Thrift Savings Plan is increased from $17,500 to $18,000. The catch-up contribution limit for employees aged 50 and over ... is increased from $5,500 to $6,000. The limit on annual contributions to an [IRA] remains unchanged at $5,500.... [T]he limitation on the annual benefit under a defined benefit plan under Section 415(b)(1)(A) remains unchanged at $ 210,000.... The limitation for defined contribution plans under Section 415(c)(1)(A) is increased in 2015 from $52,000 to $53,000."
arrow icon Shades of Green: Key Questions for Multiemployer Plans to Ask About Being in the Green Zone
Segal Consulting
10/23/2014

"[B]ecause being in the green zone on a particular measurement date just means not being in the red zone (critical status) or the yellow zone (endangered status), it is not a measure of a plan's long-term financial well-being. In essence, there are many shades of green. The variance in hue only emerges as additional projections of the zone criteria are performed. Understanding shades of green is an important part of plan stewardship. An increasingly positive trend indicates a continuously stable, and perhaps improving, financial condition. A downward trend may signal a need for preemptive board action, particularly when a more modest present action mitigates the likelihood of more drastic future actions."
arrow icon As Virus Spreads, Insurers Exclude Ebola from New Policies
Reuters, via The Baltimore Sun
10/23/2014

"As fear of Ebola infections spreads to developed economies, U.S. and British insurance companies have begun writing Ebola exclusions into standard policies to cover hospitals, event organizers and other businesses vulnerable to local disruptions. As a result, new policies and renewals will become costlier for companies opting to insure business travel to West Africa or to cover the risk of losses from quarantine shutdowns at home[.]"
arrow icon Pharma Pays $825 Million to Doctors and Hospitals, ACA's Sunshine Act Reveals
The Brookings Institution
10/23/2014

"Teaching hospitals and physicians together received $669,561,563 in general payments from 949 different medical manufacturers. Interestingly, close to 70 percent ($460,369,403) of this amount was paid to individual physicians and the rest was paid to teaching hospitals. More than half of the total general payments were made by only 20 companies led by Genentech, which paid $130,065,012 in general grants to various hospitals and doctors and in particular, City of Hope National Medical Center."
arrow icon Open Enrollment: Insights from Medicare for Health Insurance Marketplaces
Henry J. Kaiser Family Foundation
10/23/2014

"Health insurance plans often change from one year to the next, and some of these changes could have a real impact on costs and coverage, including changes in premiums, cost-sharing, benefits, formularies and choice of doctors and hospitals. Consumers are advised to review their options carefully before deciding whether to renew their current plan or enroll in a new one. But will they?"
arrow icon Edison International Case Highlights a Needed Reform: Share Class Restrictions in 401(k) Plans
Employee Fiduciary
10/23/2014 [Opinion]

"Fund companies use the different share classes to provide varying levels of compensation to intermediaries, such as financial advisors and recordkeepers. The underlying investment management is the same, the only difference between share classes is the amount of additional fees that are charged to shareholders. This 'revenue sharing' shifts costs to plan participants and creates a layer of complexity in plan fees that sponsors and participants find confusing. Because these fees are included in the fund expense ratio and deducted before calculating net returns, these fees can be easily overlooked when evaluating total fees."
arrow icon Treasury Inspector General Report: Additional Measures Needed to Provide Greater Assurance That Tax Information Provided to Health Exchanges Is Protected (PDF)
Treasury Inspector General for Tax Administration [TIGTA], U.S. Department of the Treasury
10/23/2014

"This audit was initiated to determine whether IRS Office of Safeguards has implemented sufficient policies and procedures to ensure that ACA Exchanges are adequately protecting [Federal Tax Information (FTI)] received from the IRS.... The current documentation on which the Office of Safeguards bases its approval decision for release of FTI does not provide sufficient evidence that required controls have been implemented. TIGTA also found deficiencies in procedures related to obtaining signed system security authorizations and ensuring that on-site reviews of agencies that have deployed new systems occur in a timely manner." [Report is dated Sept. 16, 2014; released Oct. 23, 2014.]
arrow icon The State of U.S. Employee Retirement Preparedness (PDF)
Financial Finesse
10/23/2014

15 pages. "Twenty-eight percent of employees reporting $100,000 or more in household income are confident they are on track to achieve their income-replacement goals, up from 23% in 2012. All other income cohorts experienced little or no change in retirement confidence. Seventeen percent of women are confident they are on track to achieve their income-replacement goals, up from 13% in 2012. However, women are still trailing men in this area, as 26% of men reported being on track[.]"
arrow icon Longevity Insurance in DC Plans: Paving the Way for QLACs (PDF)
Aon Hewitt
10/23/2014 [Guidance Overview]

"Treasury's QLAC regulations are a step in the right direction toward helping individuals better manage longevity risk. Deferred income annuities like the QLAC offer an efficient way to target longevity exposure by guaranteeing income in the later years of an individual's life. Plan sponsors may want to consider QLACs as an option when they review available retirement income solutions. In the long term, these regulations likely will spur innovation and potentially may create a more diverse marketplace with broader solutions for plan sponsor consideration. In the short term, sponsors will need to carefully review alternatives and may have limited available choices."
arrow icon Borrowing Money to Reduce PBGC Premiums (PDF)
Milliman
10/23/2014

"Factors to consider when borrowing funds include: ... Method of borrowing: Two primary options are a direct loan from a financial institution or issuing bonds. Plan sponsors should consider whether accounting treatment may vary depending upon the method of borrowing.... [A]mortizing payments like a mortgage or issuing a bond with periodic interest payments and full principal repayment at maturity ... What is the interest rate on the debt? ... What is the plan sponsor's marginal tax rate?"
arrow icon Can Dependents Trigger an ACA Employer Penalty Under Section 4980H(a) or 4980H(b)?
Health Care Attorneys P.C.
10/23/2014 [Guidance Overview]

"The final regulations make it clear to utilize the 95 percent rule, a full-time employee's dependents must be offered coverage along with the full-time employee. Therefore, an employer not offering a full-time employee's dependents coverage would not have the protection of the 95 percent rule."
arrow icon ACA Issues in Mergers and Acquisitions: New Guidance from IRS
Saul Ewing LLP
10/23/2014

"[In] a stock deal, Buyer will assume any unpaid ACA penalties owed by Target. Although this is generally true for any taxes or other liabilities assumed in a stock deal ... the ACA penalties are not due until the Service issues a notice and demand. Thus, for cash basis taxpayers, the ACA penalty will not be reflected on Target's financial statements ... Second, whether or not Target is acquired in a stock sale or asset sale, if Buyer hires Target's employees, any such acquired employees who are 'full-time' must be offered health insurance that provides minimum value and is affordable if Buyer wants to avoid potential ACA penalties."
arrow icon Retirement Savings Flows and Financial Advice: Should You Roll Over Your 401(k) Distribution? (PDF)
Benefits Quarterly, published by the International Society of Certified Employee Benefit Specialists [ISCEBS]
10/23/2014

"Pension rollovers are an important source of revenue for money managers.... [As] well as addressing an issue of personal finance and the quality of financial advice that individuals receive, this article addresses the issue of the limits of the effects of inertia.... It then considers a behavioral economics explanation for why rollovers have occurred. It considers advertising and advice on rollovers as part of that explanation and examines reasons why participants may not be considering fees in their decision."
arrow icon October's Volatile Markets Hit Pension Plan Funding
Russell Investments
10/23/2014

"On October 1 alone, the representative plan funded status fell more than 1%. By October 10th, it was down to 81.1%. It dipped below 80% the following week before closing October 17th at 80.7%. Volatile funded status can, of course, be the result of volatile asset values or the result of volatile liability values. In this case, it's been the liability values that have been the bigger factor, something that may be a little surprising given the big movements in the equity market so far this month."
arrow icon ISS Seeks Comments on Proposed Changes to Proxy Voting Guidelines
Schiff Hardin
10/23/2014

"Two of the proposed changes are applicable to U.S. companies -- one to revise the methodology used when evaluating shareholder proposals to require an independent board chair, and one to implement an 'Equity Plan Scorecard' for evaluating equity plans. The comment period is open until 6 p.m. EDT on October 29, 2014."
arrow icon Chief HR Officers Give Negative Reviews to ACA's Impact on Employee Health Care
Wolters Kluwer Law & Business
10/23/2014

"Fifty-two percent of the Chief Human Resource Officers (CHROs) responding to the survey reported that, as a direct result of the ACA, they have raised employee contributions toward health insurance. Eleven percent have cut back coverage eligibility, but few have moved employees to either private exchanges (1 percent) or public exchanges (.5 percent)."
arrow icon Social Security Benefits to Increase in 2015 (PDF)
Buck Consultants at Xerox
10/23/2014

"The Social Security taxable wage base will increase in 2015 to $118,500, up from $117,000 in 2014. The Medicare payroll tax rate of 1.45% will continue to apply on all wages in 2015.... The average of total wages for 2013 (the most recent year) is $44,888.16.... For 2015, the primary Social Security monthly benefit formula will be 90% of the first $826 of [Average Indexed Monthly Earnings], plus 32% of the next $4,154, plus 15% of any excess over $4,980."
arrow icon Knowledge of Annuities Boosts Ownership
LIMRA Secure Retirement Institute
10/23/2014

"Peace of mind, stable income and lessening the risk of running out of money in retirement were cited as the top three reasons to create a guaranteed lifetime income among households that owned annuities, as well as those that did not. Among annuity owners, 4 out of 5 said they are a 'good fit' for their financial needs and 70 percent are willing to recommend annuities to friends and family members."
arrow icon How to Maximize Value of Your DC Plan -- Consider These (Non-Decumulation) Strategies (Part IV)
Osler, Hoskin & Harcourt LLP
10/23/2014

"Any strategy aimed at maximizing DC plan value should be sensitive to the particular needs and circumstances of plan stakeholders.... [W]here, as is most often the case, the majority of an employer's workforce are not sophisticated investors, pooled, administrator-managed DC investments may be seen as a considerable value-add, increasing DC benefit security. By contrast, this strategy may be viewed as overly 'paternalistic' to participants in an institutional investors' DC plan."
arrow icon More States Recognize Same-Sex Marriages But No Mandate Yet for Self-Funded ERISA Plans to Extend Coverage to Same-Sex Spouses
Lockton
10/23/2014

"Although states may have insurance, domestic relations, and nondiscrimination laws that require recognition of same-sex marriages, ERISA preemption appears to invalidate those requirements as they would apply to a self-funded ERISA plan. Plan sponsors choosing an insured plan might not have a choice, because of the way these laws impact insurers."
arrow icon Verizon Wins Challenge to Pension Transfer; Fifth Circuit Says Investment Guidelines Need Not Be Disclosed
Bloomberg BNA
10/23/2014

"The court rejected claims that a Verizon spinoff ... violated [ERISA] by failing to turn over its pension plan's investment guidelines. Instead, the court found that these documents weren't binding on the plan and therefore didn't qualify as formal plan instruments subject to ERISA's mandatory disclosure requirement. The court's ruling specifically left open the possibility that binding investment guidelines could be subject to mandatory disclosure in another case." [Murphy v. Verizon Communications, Inc., No. 13-11117 (5th Cir. Oct. 15, 2014) (unpublished)]
arrow icon Your Roth IRA Calculator May Be Lying to You
Slott Report
10/23/2014

"How many people, after running such a calculation and determining it was advisable to opt for the traditional IRA, actually put aside the amount of money they would have used to pay the tax on the conversion and invest it in a similar manner? Would/do you? Each and every year?"
arrow icon Updated GAO Report: Preliminary Information on IRA Balances Accumulated as of 2011
U.S. Government Accountability Office [GAO]
10/22/2014

"In 2014, the federal government will forgo an estimated $17.5 billion in tax revenue from IRAs. Congress limited annual contributions to IRAs to prevent the tax-favored accumulation of unduly large balances, but concerns have been raised that tax benefits accrue primarily for higher income individuals. This statement provides preliminary observations based on ongoing work on information on IRA balances in terms of reported fair market value aggregated by taxpayers. GAO analyzed 2011 IRS statistical data." [Originally released Sept. 16, 2014; reissued Oct. 22, 2014.]
arrow icon Employers Looking at 'Skinny' Health Plans to Avoid ACA Penalties
The Wall Street Journal; subscription may be required
10/22/2014

"[S]ome benefits administrators are pitching somewhat-less-skinny plans that they claim protect employers against the $3,000 penalty as well -- by meeting the law's standard of covering at least 60% of the cost of health care. Yet one such 'minimum value plan' that is being sold to employers still lacked coverage for inpatient hospital treatments, procedures at ambulatory surgery centers or most maternity care[.]"
arrow icon Proposed Bankruptcy Fairness and Employee Benefits Protection Act of 2014 Would Place Significant Restrictions on Employers in Bankruptcy
Thompson Coburn
10/22/2014

"Various changes to the Bankruptcy Code would place greater restrictions on corporations going through a bankruptcy by limiting reductions in the compensation and benefits of employees and retirees, requiring funding of retiree health benefits in excess of that approved by the bankruptcy court, increasing the amount of unpaid wages that receive priority treatment, limiting payments and bonuses to insiders, and forcing employers to continue funding pension plans after filing for bankruptcy protection."
arrow icon District Court Determines that Employer's FMLA Notice Sent by Email is Not Reliable
FMLA Insights
10/22/2014

"[T]he court noted that the FMLA regulations only require that the employer provide the employee oral notice of the need to provide recertification. The court apparently found this method to be the most desirable, since it guarantees person-to-person communication. (Of course, the court glosses over the fact that this method sets up a he-said/she-said situation virtually every time.) As to FMLA notice sent by email, the court framed it up this way: ... 'The transmitting of an email, in the absence of any proof that the email had been opened and actually received, can only amount to proof of constructive notice.' And with that quick stroke, the court refused to dismiss [the employee's] FMLA claims." [Gardner v. Detroit Entertainment, LLC dba MotorCity Casino, No. 12-14870 (E.D. Mich. Oct. 15, 2014)]
arrow icon Text of Social Security Announcement of COLA and Taxable Wage Base Amounts for 2015
U.S. Social Security Administration [SSA]
10/22/2014 [Official Guidance]

"The 1.7 percent cost-of-living adjustment (COLA) will begin with benefits that more than 58 million Social Security beneficiaries receive in January 2015.... [T]he maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $118,500 from $117,000. Of the estimated 168 million workers who will pay Social Security taxes in 2015, about 10 million will pay higher taxes because of the increase in the taxable maximum."
arrow icon Ebola and the FMLA
Benefits Bryan Cave
10/22/2014

"[W]hat about the employee who is exposed or potentially exposed to Ebola, and, as a result, is requested or required -- or even just volunteers, based on potential exposure -- to be in quarantine? And what about employees who have not been exposed but who are fearful of contracting Ebola in the workplace and refuse to come to work?"
arrow icon What's an Employer to Do with Marketplace Notices?
Mintz Levin
10/22/2014 [Guidance Overview]

"Some employers may get hundreds, even thousands, of Section 1411 Certifications, many of which may relate to variable hour employees who have not yet reached (and may not ever reach) full-time status.... While the reporting rules are designed to recognize these employees for purposes of the assessable payment calculations, the process may not work perfectly. Thankfully, an employer may wait until the IRS contacts them to inform them of their potential liability to explain why a tax is not owed with respect to one or more employees. Thus, an employer may -- but is not obligated to -- appeal each and every Section 1411 Certification as it is received. Or, to put it another way, the employer is not prejudiced for failing to engage in the initial appeals process under Code Section 36B."
arrow icon Saving for Retirement Is Not Happening for a Third of Middle Class
Wells Fargo
10/22/2014

"While a majority of middle-class Americans say that they are not sacrificing a lot to save for retirement, 72% of all middle-class Americans say they should have started saving earlier for retirement, up from 65% in 2013.... 56% say they would give up treating themselves to indulgences like spa treatments, jewelry, or impulse purchases; 55% say they'd cut eating out at restaurants 'as often'; and 51% say they would give up a major purchase like a car, a computer or a home renovation. Notably, fewer people (38%) report that they would forgo a vacation to save for retirement."
arrow icon The Misleading Arguments of Those Who Fight Against Public Sector Pension Reform
UnionWatch
10/22/2014 [Opinion]

"Those who fight against pension reform ... continue to claim public sector pension benefits average only around $25,000 per year, ignoring the fact that pension benefits for people who spent 30 years or more earning a pension ... average well over $60,000 per year. Public safety unions still spread the falsehood that their retirees die prematurely, when, for example, CalPERS own actuarial data proves that even firefighters retire today with a life-expectancy virtually identical to the general population. Propagandists who oppose urgently needed reform should recognize that pension reform is bipartisan, it is a financial imperative, and it is a moral imperative."
arrow icon 71% of Obamacare Signups Traced to Expansion of Medicaid
Melissa Quinn, in The Daily Signal
10/22/2014

"In the states that adopted and implemented Medicaid expansion under Obamacare, enrollment skyrocketed as an additional 5.7 million Americans signed up for coverage. In 21 states opting out of Medicaid expansion, however, enrollment was strikingly lower.... 355,674 Americans signed up for Medicaid in those states. In all, Medicaid enrollment increased by 6 million individuals for the first half of 2014."
arrow icon Financial Independence in Lieu of Retirement, and Other Phrases That Should Be Banished from Retirement Planning
Michael Kitces in Nerd's Eye View
10/22/2014 [Opinion]

"[T]he focus of generating retirement spending from retirement 'income' creates ... unnatural distortions, as retirees potentially stretch for income (especially in low-yield environments!), introducing new risks, and possibly confusing appealing-sounding retirement 'income' products that are actually just returning principal ... If we talk about retirement 'cash flows' instead, and move away from an income-centric conversation, it opens the door to looking more holistically at the retirement portfolio and how it can support retirement spending. But perhaps the most crucial change in our language of retirement planning is simply to rename 'retirement' itself."
arrow icon Five Things to Tell 401(k) Participants About Volatile Markets
Lawton Retirement Plan Consultants
10/22/2014

"Plan Sponsors and their investment advisors should help participants remain calm during these periods of intense market fluctuations by sharing the following: Don't stop contributing.... Don't make significant changes in your account.... There is always help.... Stick with your plan.... Volatile markets do not last forever."
arrow icon Are Out-of-Plan Annuitization Options Overlooked?
Vanguard
10/22/2014

"Offering an annuity in-plan sounds like such an elegant idea because it would be an easy way for DC participants to transition almost seamlessly into a predictable lifetime income stream. In reality, however, there are several obstacles to providing in-plan annuity options that make plan sponsors hesitant to include them, such as fiduciary oversight, the long-term nature of guarantees, and low participant usage."
arrow icon Understanding the Qualified Health Plan Federal Exchange Participation Agreement
Health Affairs
10/22/2014 [Guidance Overview]

"The agreement expressly recognizes that QHP insurers have developed their products based on the assumption that advance premium tax credits and cost-sharing reduction payments will be available through the marketplace and that QHP insurers could have cause to terminate the agreement if this assumption ceases to be valid. This could be interpreted as a reference to the Halbig/King litigation which currently threatens the availability of tax credits and cost-sharing reduction payments through the FFE, but could also have been included in recognition of the likely Republican takeover of the Senate and the possibility that the Republicans may accomplish through budget reconciliation or otherwise their longstanding goal of repealing the ACA."
arrow icon Few Self-Insured Plans Will Avoid Paying ACA Reinsurance Fee
Thompson SmartHR Manager
10/22/2014

"[S]elf-insured plans will lose the exemption if the plan uses a TPA for even one of four core claim-paying and adjudication functions. These include: [1] repricing claims; [2] sending out explanations of benefits; [3] cutting checks for providers; and [4] negotiating provider discounts. Nov. 15 is the deadline for submitting information and scheduling payments for the fee. The payments are not due on Nov. 15, but employers must upload their information by that date."
arrow icon IRS Issues Favorable Guidance on After-Tax Rollovers
Towers Watson
10/22/2014 [Guidance Overview]

"Starting in 2015, participants can avoid current taxes on retirement plan distributions that include after-tax amounts. The rules apply to defined benefit, defined contribution, 403(b) and governmental 457(b) plans. Until now, participants had to allocate pro rata portions of pre-tax and after-tax contributions to each direct rollover."
arrow icon Higher Education Institutions Implement Changes to Improve Retirement Readiness of Employees
Transamerica Retirement Solutions
10/22/2014

"Higher Education institutions are responding to the shifting retirement landscape by adopting practices more commonly seen in the corporate sector, such as working with plan advisors, monitoring the retirement readiness of employees, implementing automatic enrollment features and streamlining retirement plans[.]"
arrow icon New California Paid Sick Leave Law May Cause Headaches for Employers
Ford & Harrison LLP
10/22/2014 [Guidance Overview]

"The new law requires any employer -- however large or small -- to provide most of their employees with at least three paid sick days. The law provides any employee who works at least 30 days in California within his or her first year of employment with paid sick leave, regardless of whether the employer is located in California or where the employee resides. While there are exceptions to the new law, the exceptions are very narrow."
arrow icon To Have an Expert or Not: The Fiduciary's Quandary
Fox Rothschild LLP
10/22/2014

"[A] fiduciary is not required to substitute their own knowledge for that of another if the fiduciary has a certain skill.... [T]he process of selecting and relying on an expert requires a fiduciary to go deeper than simply selecting someone who claims to know more than the fiduciary.... The due diligence of investigating and selecting someone who does in fact have an expertise defines whether a fiduciary can rely on the advice. Simply put, you can't rely on an expert if you have not first determined them to be an expert and that is only done through investigating their qualifications."
arrow icon PBGC Topics for Single-Employer Pension Plans (PDF)
Morgan Lewis
10/22/2014

39 presentation slides. Topics include: [1] PBGC and legislative initiatives regarding 4062(e) and plant shutdown liability; [2] PBGC's early warning program and involvement in corporate transactions, including financings and capital restructurings; and [3] Plan termination issues in voluntary bankruptcies.
arrow icon Mortality Assumptions in Benefit Obligations: Effects of Anticipated New Mortality Tables (PDF)
PricewaterhouseCoopers
10/22/2014

"For companies with significant defined benefit pension and OPEB obligations, longer life expectancies could significantly increase the reported value of those obligations. And, for companies that immediately recognize the impact of changes in actuarial assumptions at the measurement date, that improved mortality experience could have a significant impact on fourth quarter results of operations."

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