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Older News | July 23, 2014

Five Ways to Avoid a DOL Audit of Your 401(k) Plan
Lawton Retirement Plan Consultants More items by Lawton Retirement Plan Consultants

"[1] Respond to employee inquiries in a timely way. The most frequent trigger for a DOL audit is a complaint received from an employee.... [2] Improve employee communication.... [3] Fix your plan -- now.... Many times plan sponsors are aware that a certain provision in the plan is a friction point for employees.... [4] Conduct your own audit.... [5] Make sure your 5500 is filed correctly. The second most frequent cause of a DOL audit is problems which are identified on the annual Form 5500 filing. The most common 5500 errors include failing to follow EFAST 2 Electronic Filing Guidance, not attaching all required schedules and failing to answer multiple part questions."
Taking the 'Risk' Out of De-Risking a SERP
Groom Law Group More items by Groom Law Group

"Beyond the financial, legal and accounting factors that arise in de-risking a pension plan, [this article] addresses the potentially overlooked impact that such strategies may have on a company's related supplemental executive retirement plan (SERP). [The authors] provide an overview of the relevant tax rules under Section 409A of the Internal Revenue Code and a summary of Section 409A and other key issues to be considered in connection with de-risking a SERP."
Money Market Funds Getting New SEC Rules Aimed at Preventing Runs
Financial Planning More items by Financial Planning

"The SEC votes today to adopt new rules that will change the way prime money funds price their shares. Instead of a stable price of $1, which means a dollar invested can always be redeemed for $1, prime money funds would have to price their shares in a way that will reveal fluctuations. The SEC's vote concludes a four-year struggle by regulators to toughen rules after a run at one fund during the 2008 financial crisis brought the $2.6 trillion industry to near-collapse, halted only by a federal backstop."
All-Time High: Fidelity's Average Annual IRA Contribution Climbs to Over $4,000
Fidelity More items by Fidelity

"The findings ... show investors 50 years of age and over continue to save the most in Traditional and Roth IRAs. Younger investors, those in their 20s, 30s and 40s, are adopting strong savings behaviors and have made strong increases with overall average contributions -- 3.9 percent, 6.7 percent and 6.2 percent, respectively from 2012 tax year to 2013 tax year. Additionally, average contributions to Roth IRAs continue to outpace average Traditional IRA contributions on both ends of the age spectrum."
Trends in Nonqualified Deferred Compensation During 2013
Principal Financial Group More items by Principal Financial Group

"[N]onqualified deferred compensation (NQDC) plan participants expressed an awareness about accumulating enough retirement income for the future. More participants are taking steps to help shape what their 'retirement reality' will look like, and are increasingly planning ahead. As a result, key employees enrolled in NQDC plans increasingly recognize the role of these plans in saving for retirement." [Also available are a Research Summary and an infographic of key findings.]
The Fate of the Obamacare Subsidies in the Supreme Court
Tom Goldstein in SCOTUSblog More items by Tom Goldstein in SCOTUSblog
7/23/2014 [Opinion]

"It seems inevitable that the Supreme Court is going to take up the issue. The Obama administration has said that it will ask all the judges of the D.C. Circuit to rehear that case. And there is a good chance it will win there.... But even if that happens, the case seems too close and too important for the Supreme Court to pass it up.... And while the administration publicly argues that the challenge is meritless and politically motivated, the language of the statute actually makes the legal claim very serious."
Conflicting Appeals Court Decisions Create Additional Uncertainty for All ACA Stakeholders
American Benefits Council More items by American Benefits Council
7/23/2014 [Opinion]

"What actions might Congress take? ... What actions might the regulatory agencies take? ... How will the states react? ... What does this mean for individuals? ... What does this mean for employers?"
Text of Corrections to HHS Final Regs on ACA Exchange and Insurance Market Standards for 2015 and Later Years
U.S. Department of Health and Human Services More items by U.S. Department of Health and Human Services
7/23/2014 [Official Guidance]

8 pages. Excerpt: "This document corrects technical and typographical errors that appeared in the final rule, published in the Federal Register on May 27, 2014, entitled 'Patient Protection and Affordable Care Act; Exchange and Insurance Market Standards for 2015 and Beyond.' These corrections are effective on July 28, 2014."
Notice of ERISA Advisory Council Meeting: August 19-21, 2014
Employee Benefits Security Administration [EBSA], U.S. Department of Labor More items by Employee Benefits Security Administration [EBSA], U.S. Department of Labor

"The Advisory Council will study the following issues: (1) Outsourcing Employee Benefit Plan Services, (2) [Pharmacy Benefit Manager (PBM)] Compensation and Fee Disclosure, and (3) Issues and Considerations around Facilitating Lifetime Plan Participation. The schedule for testimony and discussion of these issues generally will be one issue per day in the order noted above.... Organizations or members of the public wishing to submit a written statement may do so by submitting 40 copies on or before August 12, 2014[.]"
Text of GAO Report: Preliminary Results of Undercover Testing of Enrollment Controls for Health Care Coverage and Consumer Subsidies Provided Under the ACA
U.S. Government Accountability Office [GAO] More items by U.S. Government Accountability Office [GAO]

"GAO was asked to examine issues related to controls for application and enrollment for coverage through the federal marketplace. This testimony discusses preliminary observations on (1) results of undercover testing in which we obtained health care coverage; (2) additional undercover testing, in which we sought to obtain consumer assistance with our applications; and (3) delays in the development of a system needed to analyze enrollment."
D.C. Circuit Decision Not Likely to Change Status Quo Any Time Soon
Timothy Jost in Health Affairs More items by Timothy Jost in Health Affairs

"The judgment of the D.C. Circuit states 'that the judgment of the District Court appealed from in this cause is hereby reversed and the case is remanded with instructions to grant summary judgment to appellants and vacate the IRS Rule for the reasons in the accompanying opinion.' In fact, however, under the federal rules, this judgment is automatically put on hold until seven days after the expiration of the 45-day period the government has to request a rehearing by all eleven judges of the D. C. Circuit (plus the two senior judges who were on the panel). If the government requests such 'en banc' review (and it already has said that it will); one judge requests a vote on the request; and a majority of the judges grant the request, the entire court will likely set aside the three judge panel decision and rehear the case itself. This will likely take several months.... In the interim, the White House has announced that the federally facilitated exchanges will issue premium tax credits."
IRA Withdrawals in the 'Crossover Zone' Can Trigger the Section 1411 Net Investment Income Tax
Michael Kitces in Nerd's Eye View More items by Michael Kitces in Nerd's Eye View

"[B]ecause the tax only applies to investment income above certain income thresholds, it's possible for 'non'-investment income like retirement distributions to cause the surtax on other investment income by pushing it over the line. The end result: even types of income not directly subject to the tax end out indirectly causing the 3.8% surtax after all! Given this dynamic, investors whose investment income is in the 'crossover zone' and straddles the income threshold -- such that only a portion of their investment income is subject to the surtax -- have a unique planning opportunity to shift income into other years where they do not face the crossover zone."
Obama Administration to Revise Part of Contraception Rule Applicable to Nonprofit Religious Organizations
The Wall Street Journal; subscription may be required More items by The Wall Street Journal; subscription may be required

"Justice Department lawyers said in a brief filed Tuesday with the U.S. Court of Appeals for the 10th Circuit that the federal government would issue new regulations in the next month that will apply to all nonprofit institutions that say the faith with which they are affiliated is opposed to the use of most forms of contraception.... [It] is likely that the Supreme Court's order will shape the new compromise arrangement, and that nonprofit institutions will be able to write a letter stating their objections, rather than filing a form. That would leave the federal government to work out how those employers get access to contraception coverage."
Has the ACA Slowed the Growth of Health Care Spending?
National Center for Policy Analysis More items by National Center for Policy Analysis

"[In] 2012, health care spending as a share of the economy declined slightly for the second year in a row ... But do these reports actually indicate that the ACA is curbing health care growth, relative to the growth of the rest of the economy? In fact, the recent slowing of health care expenditures is one of several similar slowdowns. Further, data for 2013 and the first part of 2014 indicate that the trend is already reversing and health care expenditures are rising."
Federal District Court Grants Summary Judgment to Plaintiffs in Church Plan Case
The Lowenbaum Partnership and FRA PlanTools More items by The Lowenbaum Partnership and FRA PlanTools

"In finding for the plaintiffs that the pension plan should be governed by ERISA, the court rejected defendants' argument that it was inequitable or unfair because of the long term reliance on the IRS rulings and that either the ERISA or a California state law statute of limitation applies. The court also found that there was no genuine issue of material fact as to Dignity Health's predecessor Catholic Healthcare West establishing the pension plan, rather than that they were either controlled by a church or that a church co-established the plan." [Rollins v. Dignity Health, No. 13-cv-01450-TEH (N.D. Cal. July 22, 2014)]
Court Overturns Obamacare Aid for Plan Buyers on Federal Exchange
Bloomberg More items by Bloomberg

"The decision, if it withstands appeals, may deprive more than half the people who signed up for Obamacare the tax credits they need to buy a health plan. The government will immediately seek review of the court's decision and in the meantime nothing has changed for people getting premium tax credits, Justice Department spokeswoman Emily Pierce said. A White House official said the U.S. will seek a review by the full appeals court, where seven of the 11 judges were nominated by Democratic presidents, including four by Obama." [Halbig v. Burwell, No. 14-5018 (D.C. Cir. July 22, 2014)]
IRS Provides Nonprecedential Guidance on De-Risking Transactions Involving Retirees
October Three Consulting More items by October Three Consulting
7/23/2014 [Guidance Overview]

"The [four Private Letter Rulings addressing de-risking] involve plans at four different companies that pay benefits in a variety of forms, including single life annuities, joint and survivor annuities, years certain and life annuities and lump sums. The plans involved include 'traditional' DB plans and cash balance plans.... There are some tricky elements to the approach IRS is taking. The lump sum offer is in effect a new benefit with a new annuity starting date."
Rethinking COBRA After Health Care Reform
Snell & Wilmer SW Benefits Update More items by Snell & Wilmer SW Benefits Update

"For many employees, coverage through a Health Exchange may be less expensive than COBRA coverage, but electing COBRA coverage may render an employee ineligible for Health Exchange coverage for some period of time.... [T]he new model election notice omits details about extending COBRA coverage due to disability or a second qualifying event.... A reduction in hours that causes a loss of coverage is a COBRA qualifying event. Employers using the look-back measurement method will need to determine when the qualifying event occurs and when the COBRA maximum coverage period begins."
A D.C. Court Ruled Against Obamacare. Here's What Happens Next.
The Advisory Board Company More items by The Advisory Board Company

"Responding to the news about Halbig, the Obama administration immediately stressed: Plan purchases through the marketplaces will continue as normal, and there will be 'no practical impact' on tax credits ... But at minimum, a case that some legal watchers initially dismissed as DOA suddenly is in position to deal a major blow to the [ACA].... If the Halbig ruling stands ... premium payments could rise by about 76% in states that rely on federally facilitated exchanges. Florida residents, for example, could see their insurance premiums go up by about 95%."
Modified COBRA Notices for the ACA Environment (PDF)
Morgan Lewis More items by Morgan Lewis
7/23/2014 [Guidance Overview]

27 presentation slides. Topics include: [1] New DOL Model COBRA Notices; [2] Contretemps and Conflicts: COBRA and Exchange Coverage; and [3] The Future of COBRA: A Practitioner's Perspective.
Death, Divorce and LaRue: Breach of Fiduciary Duty Claims as Assets in Divorce and Probate Cases
The Prudent Investment Adviser Rules More items by The Prudent Investment Adviser Rules

"The Supreme Court's LaRue decision [in 2008] recognizing the right of individual participants in defined contribution plans to bring an action for individual losses creates a potential cause of action for such plan participants and their beneficiaries. The creation of a cause of action also creates a property right, an asset, for participants and beneficiaries in defined contribution plans."
Does the Supreme Court's Bankruptcy Decision Affect IRAs Inherited by Spouses?
On Wall Street More items by On Wall Street

"Many experts believe that the Heffron-Clark decision will not apply to spouses who inherit an IRA. There are a number of special rules for spousal beneficiaries under the Tax Code that create a clear distinction between spouse and nonspouse beneficiaries. Another possibility, however, is that a spouse inheriting an IRA will be unable to claim an exemption for it. If so, it will make no difference from a bankruptcy perspective whether the client keeps the account as an inherited IRA or does a spousal rollover. Either way, the funds could be considered part of the surviving spouse's bankruptcy estate."
Why Your 401(k) Isn't Likely to Offer a Longevity Annuity
Reuters More items by Reuters

"Employers cited worry about the fiduciary responsibility of picking annuity options from the hundreds offered by insurance companies. Another key reason is administrative complication should the plan decide to change record keepers, or if employees change jobs."
Federal Undercover Investigation Signs Up Fake Applicants for ACA Coverage, Subsidies
The Washington Post; subscription may be required More items by The Washington Post; subscription may be required

"In undercover tests of the new federal health insurance marketplace, government investigators have been able to procure health plans and federal subsidies for fake applicants with fictitious documents ... The results of the inquiry by the [GAO] are evidence of still-imperfect work by specialists intended to assist new insurance customers and government contractors hired to verify that coverage and subsidies are legitimate."
Issa Statement on Federal Circuit Court Upholding Challenge to Obamacare
Committee on Oversight and Government Reform, U.S. House of Representatives More items by Committee on Oversight and Government Reform, U.S. House of Representatives
7/23/2014 [Opinion]

"'The court's decision is consistent with the Committee's oversight, which through multiple briefings and hearings, learned that neither the Internal Revenue Service nor the Treasury Department conducted a serious or thorough analysis of the statute or the legislative history and intent prior to cobbling an ad hoc legal rationale for a key provision of the President's healthcare law,' said [House Oversight and Government Reform Committee Chairman Darrell Issa, R-Calif]."
Unions Swim Against the Tide as Pension Tsunami Looms (PDF)
Epstein Becker Green, via Insurance Advocate More items by Epstein Becker Green, via Insurance Advocate

"Especially if the current [NLRB] moves forward with its initiatives to abbreviate severely the length of time from notice of an election petition to the date of employee voting, unorganized employers should be armed as early as possible with reliable information about 'union' defined benefit pension plans for their own decision-making and to share with employees. Similarly, employers entering a new round of collective bargaining should prepare by learning the basics of contributions relative to benefit value and business risk."
Subsidies in the Federal Marketplace: A Definite Maybe
Fox Rothschild LLP More items by Fox Rothschild LLP

"For employers, this split may have some significant impact on their ACA compliance planning.... [E]mployers are making decisions regarding offering coverage based on the assumption that it will be cheaper for employees to get subsidized coverage through the exchange. But if the subsidy is not available because there is no state exchange, that assumption may not be correct."
Two Circuits Issue Conflicting Rulings on ACA Subsidies Available Through Federal Exchange
Courthouse News Service More items by Courthouse News Service

"In the space of less than two hours, two federal appeals court panels issued conflicting rulings on whether the government can lawfully subsidize premiums for consumers in 36 states that use the federal insurance exchange.... 'We reach this conclusion, frankly, with reluctance,' wrote [D.C.] Circuit Judge Thomas Griffith in the majority's opinion. 'At least until states that wish to can set up Exchanges, our ruling will likely have significant consequences both for the millions of individuals receiving tax credits through federal Exchanges and for health insurance markets more broadly. But, high as those stakes are, the principle of legislative supremacy that guides us is higher still'[.] " [Halbig v. Burwell, No. 14-5018 (D.C. Cir. July 22, 2014); King v. Burwell, No. 14-1158 (4th Cir. July 22, 2014)]
Text of Fourth Circuit Opinion: ACA Subsidies ARE Legally Allowed for Policies Purchased on Federally-Run Exchanges (PDF)
U.S. Court of Appeals for the Fourth Circuit More items by U.S. Court of Appeals for the Fourth Circuit

46 pages. Excerpt: "Having examined the plain language and context of the most relevant statutory sections, the context and structure of related provisions, and the legislative history of the Act, we are unable to say definitively that Congress limited the premium tax credits to individuals living in states with state-run Exchanges.... What we must decide is whether the statute permits the IRS to decide whether the tax credits would be available on federal Exchanges. In answering this question in the affirmative we are primarily persuaded by the IRS Rule's advancement of the broad policy goals of the Act... Confronted with the Act's ambiguity, the IRS crafted a rule ensuring the credits' broad availability and furthering the goals of the law. In the face of this permissible construction, we must defer to the IRS Rule." [King v. Burwell, No. 14-1158 (4th Cir. July 22, 2014)]
Appellate Courts Issue Conflicting Opinions on Legality of ACA Subsidies
The New York Times; subscription may be required More items by The New York Times; subscription may be required

"The White House rejected the [District of Columbia] court's ruling and anticipated that the Justice Department will ask that the entire appeals court review it. Mr. Obama's aides noted that two district courts have thrown out similar lawsuits and therefore argued that judicial opinions have been mixed at worst. Moreover, they said the ruling Tuesday seemed to fly in the face of common sense."
How Will Audit Firms Implement Final PCAOB Rules on Executive Compensation Design?
Towers Watson More items by Towers Watson

"According to the [Public Company Accounting Oversight Board (PCAOB)], the final rules 'do not require the auditor to make any determinations regarding the appropriateness or reasonableness of the company's compensation arrangements with its executive officers.' Notwithstanding this statement, questions remain as to how audit firms will implement this change and what procedures they will adopt for assessing whether pay programs give rise to a risk of material misstatement. [The authors] also have questions about what the next steps might be when an auditor makes such a determination."
Multiemployer Trustee Selection and Orientation: 2014 Survey Results
International Foundation of Employee Benefit Plans [IFEBP] More items by International Foundation of Employee Benefit Plans [IFEBP]

[Infographic] "Of the 230 fund representatives that completed the survey, nearly 60% believe that it is more challenging to be a trustee today, as compared to decades ago due to personal liability, fiduciary liability, finding a work-life balance and constantly changing regulations. The majority also find that it is more difficult today to recruit both labor and management trustees, and that it takes between three and five years to develop a competent trustee." [The full survey results are online.\
Major New Blow to the Affordable Care Act
SCOTUSblog More items by SCOTUSblog

"Conceding that the ruling will sharply reduce the number of uninsured individuals who will be able to gain coverage under the Affordable Care Act, the Circuit Court majority said the plain language of the Act is that the subsidies -- in the form of tax credits to those with limited incomes were to be available only on marketplaces 'established by the state.'" [Halbig v. Burwell, No. 14-5018 (D.C. Cir. July 22, 2014)]
Robo-Advisors: 'Roadmap to a Rocky Future'
Fiduciary News More items by Fiduciary News
7/22/2014 [Opinion]

"[Question:] There's been a lot of chatter lately questioning the 'value' or 'worth' of using a financial adviser. This has led to the rise of the Robo-Advisor and a more general movement towards do-it-yourself investing. What do you see as the drawbacks of this trend ... [Answer:] Although good planning may not be rocket science, there is a reason that professionals spend years to become educated the field and continue annually to study and keep up with both new research and product trends. I would suggest to a do-it-yourselfer that planning the quality of the rest of their life with limited knowledge and blackbox software is a likely roadmap to a rocky future."
Text of D.C. Circuit Court of Appeals Opinion: ACA Subsidies Are NOT Legally Allowed for Policies Purchased on Federally-Run Exchanges (PDF)
U.S. Court of Appeals for the District of Columbia Circuit More items by U.S. Court of Appeals for the District of Columbia Circuit

72 pages. Excerpt: "We conclude that appellants have the better of the argument: a federal Exchange is not an 'Exchange established by the State,' and section 36B does not authorize the IRS to provide tax credits for insurance purchased on federal Exchanges. We reach this conclusion by the following path: First, we examine section 36B in light of sections 1311 and 1321, which authorize the establishment of state and federal Exchanges, respectively, and conclude that section 36B plainly distinguishes Exchanges established by states from those established by the federal government. We then consider the government's arguments that this construction generates absurd results but find that it does not render other provisions of the ACA unworkable, let alone so unreasonable as to justify disregarding section 36B's plain meaning. Finally, turning to the ACA's purpose and legislative history, we find that the government again comes up short in its efforts to overcome the statutory text." [Halbig v. Burwell, No. 14-5018 (D.C. Cir. July 22, 2014)]
Federal Appeals Court Deals Major Blow to ACA: No Subsidies for Insurance Purchased on Federal Exchanges
The Washington Post; subscription may be required More items by The Washington Post; subscription may be required

"The three-judge panel of the D.C. Circuit Court of Appeals sided with plaintiffs who argued that the language of the law barred the government from giving subsidies to people in states that chose not to set up their own insurance marketplaces. Twenty-seven states, most with Republican leaders who oppose the law, decided against setting up marketplaces, and another nine states partially opted out.... [If] subsidies for half the states are barred, it represents a potentially crippling blow to the health-care law, which relies on the subsidies to make insurance affordable for millions of low- and middle-income Americans." [Halbig v. Burwell, No. 14-5018 (D.C. Cir. July 22, 2014)]
Women, Low Earners Are Least Likely to Receive Full Retirement Savings Match from Employers (PDF)

"78 percent of Americans who contribute to an employer-sponsored retirement plan receive matching contributions from their employer, and 77 percent of those who have matching contributions save enough to receive the full employer match. However, only 72 percent of women contribute enough to receive the full employer match, compared with 82 percent of men, and only 64 percent of those earning less than $35,000 a year receive the full match. In addition, only 51 percent of those with less than $10,000 in assets receive the full match."
Planning for Retirement: The Role of 401(k)s in Retirement Income (PDF)
Prudential More items by Prudential

"[O]n average, 35 percent of retirement income must come from 401(k) plans in order for households to maintain their pre-retirement standard of living. This translates to 25 percent for low-income households, 32 percent for middle-income households, and 47 percent for high-income household.... Assuming retirement savings begins at age 35 and that retirement occurs at age 65, the average required savings rate to achieve the targeted income from a 401(k) plan is 14 percent of pre-tax household income per year."
State Law Reporting and Disclosure Mandates Under ERISA
Albert Feuer in Bloomberg BNA Tax Management, via SSRN More items by Albert Feuer in Bloomberg BNA Tax Management, via SSRN

20 pages. "ERISA permits a state-law reporting or disclosure mandate that implements a state law that is not otherwise preempted, but only to the extent the mandate is needed for the effective administration of such state law. ERISA preempts all other reporting and disclosure mandates. This article uses those principles to answer the question, 'Which State-Law Reporting and Disclosure Mandates Does ERISA Permit that Relate to State Criminal Laws, Insurance Laws, Health Care Laws, Tax Laws, Domestic Relations Laws, Labor Laws, or Other State Laws?'"
Case Study: Setting a New Funding Policy Independent of GASB Standards
Milliman More items by Milliman

"Ultimately, the client achieved an immediate improvement in its funding structure by closing the amortization period, which was due to an improved understanding of its current funding method, and how that compared to more generally accepted methods. The client also gained detailed knowledge about the mitigation of potential future contribution rate volatility for its plan, and a set of tools to address that down the road."
ConocoPhillips Best Among 401(k) Plans; Facebook Is Last
Bloomberg More items by Bloomberg

"The rankings [by Bloomberg News reporters] allow employees ... to see how their own 401(k) compares to others on such criteria as company match, investment options, and time to vest.... [M]ore than 40 percent of companies allow workers to vest immediately ... Retailers Home Depot Inc. and make employees wait three years, and software maker Oracle Corp., four."
North Carolina to Decide on New Health Insurance Option for Some State Workers
The News and Observer More items by The News and Observer

"[S]tate agencies must absorb the cost of covering temporary employees who work 30 or more hours a week. The category could include as many as 24,000 employees statewide, though that number may be reduced significantly once state agencies determine their personnel needs and workers' eligibility under federal guidelines.... The Senate budget allows the UNC system to go it alone and put out bids for its own plan for these workers ... The House budget requires that all employees in the category statewide be covered under a new option in the State Health Plan."
Detroit Retirees Approve Pension Cuts by a Landslide
ABC News More items by ABC News

"Pension cuts were approved in a landslide, according to results filed shortly before midnight [July 21]. The tally from 60 days of voting gives the city a boost as Judge Steven Rhodes determines whether Detroit's overall strategy to eliminate or reduce $18 billion in long-term debt is fair and feasible to all creditors.... General retirees would get a 4.5 percent pension cut and lose annual inflation adjustments.... Retired police officers and firefighters would lose only a portion of their annual cost-of-living raise."
Plan Sponsors Struggle with 401(k) Auto-Escalation Issue
Pensions & Investments More items by Pensions & Investments

"Most defined contribution plan experts say the opt-out approach is the best way to improve retirement savings when combined with auto enrollment. Although opt-out is gaining, some surveys show opt-in either dominates or still represents a large percentage of auto-escalation policies in DC plans."
Outcome-Focused Investment Strategies: The Benefits and Challenges of Looking Beyond Benchmark-Driven Investments (PDF)
The Wagner Law Group, via Plan Consultant More items by The Wagner Law Group, via Plan Consultant

"[I]nstead of weighting the component benchmark indices according to the portfolio's target allocations, ... the composite benchmark may be weighted according to ... the portfolio's volatility as it relates to the market.... Plan fiduciaries may also utilize risk-adjusted performance metrics, such as the Sharpe Ratio, to help them evaluate the extent to which participant investors are being well compensated for an outcome-focused portfolio's level of risk."
First Circuit Decision on Use of Retained Asset Accounts to Pay Life Insurance Benefits Could Have Broader Implications
BakerHostetler More items by BakerHostetler

"Conventional wisdom holds that ERISA's protections, and ERISA's daunting fiduciary and conflict of interest requirements, all cease to apply at the point at which the promised 'benefit' gets delivered.... [This case] adds support to the view that, so long as the benefit being promised clearly can consist of an account (rather than cash or its equivalent), delivery is complete when control over the account is delivered. That principle may well crop up in other contexts involving other types of ERISA plans, such as when employer stock (or perhaps an annuity contract) come to be distributed from a 401(k) plan or a similar savings plan." [Merrimon v. Unum Life Insurance Co. of America, No. 13-2128P-01A (1st Cir. July 2, 2014)]
Are 401(k) Funds Second-Rate?
Morningstar Advisor More items by Morningstar Advisor

"For decades, the retail funds available to 401(k) investors have been unfavorably compared with institutionally managed pension funds.... [One study] estimated fund performance from each company's required Form 5500 filings.... For both 401(k)s and pension funds, bigger was better. Plans from larger companies handily beat those of smaller companies.... A small-company 401(k) is on average only moderately worse than a big-company version. But the smaller pensions trail the larger pensions by almost 3 percentage points."
Sen. Rubio's Federal Thrift Savings Plan Proposal for the Uncovered
October Three Consulting More items by October Three Consulting

"A federal retirement savings alternative may be attractive to some employers who currently maintain 401(k) plans. If it becomes popular -- if a lot of Americans begin using the TSP as their preferred retirement savings vehicle -- it may put pressure on companies that sponsor their own 401(k) to conform to the TSP's low-cost, passive investment style. If the TSP begins to attract really significant amounts of money, it will have an effect on the market as a whole, raising issues about government management of capital and capital formation."
The 'Wedding' Planner: Considerations When Selling Your TPA Firm (PDF)
Simoneaux & Stroud Consulting Services, via Journal of Pension Benefits More items by Simoneaux & Stroud Consulting Services, via Journal of Pension Benefits

"Once a TPA owner decides to sell the firm, significant planning must take place before any deal is closed. You want to make sure you find the right 'mate,' because 'business divorces' can be very painful. The more you know about your own firm, the easier it will be to determine whether or not a prospective buyer is appropriate for your firm. Owners should inform their attorney and accountant of any plans to sell in advance of entering discussions with buyers to be alerted to special circumstances that could impact the sale of the firm."
Supreme Court Rewrites the Rules Governing ERISA Fiduciary Duty Claims Against ESOP Trustees
Crowell Moring More items by Crowell Moring

"The vast majority of complaints filed in stock-drop cases to date make broad allegations that the fiduciaries 'knew or should have known' the company's stock was an imprudent investment, based on publicly available information. The Court's suggestion that a 'special circumstances' pleading obligation applies ... will make it considerably more difficult for plaintiffs making such claims to survive a motion to dismiss.... Fiduciaries of ESOPs holding non-publicly traded stock may be particularly impacted by the Court's rejection of the Moench presumption."
DB Plan Provisions Influence the Way DC Plan Sponsors Think About Retirement Income (PDF)
ERISAdiagnostics via Thompson Pension Plan Fix-It Handbook More items by ERISAdiagnostics via Thompson Pension Plan Fix-It Handbook

"Typically, companies that offer only a DC plan focus on getting employees into the 'pipeline' as early as possible for the purpose of accumulating savings for retirement.... DC-only plan sponsors without a lifetime income annuity are discussing the option with their recordkeepers, with 70 percent taking preparatory steps to offer this feature. However, only 44 percent of DC-only organizations stated that retirement income is an important focus, while 98 percent said that retirement savings is an important focus of their plans' overall objectives."
San Francisco Bay Area Employers Must Provide Commuter Benefits by September 30
Jackson Lewis P.C. More items by Jackson Lewis P.C.
7/22/2014 [Guidance Overview]

"Employers with at least 50 full-time employees in the San Francisco Bay Area must offer commuter benefits, such as payments for commuter transit passes made with employees' pre-tax earnings, to any employee who works at least 20 hours per week no later than September 30, 2014. Covered employers also must communicate commuter benefits information to employees, designate a commuter benefits coordinator, and register with the Bay Area Commuter Benefits Program[.]"
GAO Report Addresses Use of Credit Cards to Pay for Medical Services Not Covered by Insurance
U.S. Government Accountability Office [GAO] More items by U.S. Government Accountability Office [GAO]

"Medical credit cards received increased attention after enforcement actions in 2013 against GE Capital Retail Bank in relation to its CareCredit product.... GAO was asked to review the marketplace for medical credit cards and related products. This report describes the participants and products in this marketplace. To address these objectives, GAO conducted a literature review and reviewed websites, product terms and conditions, and other publicly available information."
Long and Winding Road for Money Market Funds May End Soon
Association for Financial Professionals [AFP] More items by Association for Financial Professionals [AFP]

"After seven years of debate, one round of rules changes in 2010, followed by three more years arguing over yet another round of regulation, money market funds (MMFs) may get their final changes this Wednesday. Or, they may not. It all depends on whether the [SEC] actually votes on money market fund rule changes on July 23. The five commissioners have, to this point, not been unified on more MMF changes. They aren't even clear about what they will vote on."
Pension Derisking: Start with the End in Mind
Vanguard More items by Vanguard

"The end of a derisking glide path can be the best place to begin developing a derisking strategy for defined benefit (DB) plans.... [This article] discusses how the end is reached when a plan attains its maximum funding level and has a low-risk portfolio in place to maintain it.... [A] gradual path to achieve full funding can be mapped, starting from the current funding level and asset allocation. [This] approach helps avoid overfunding and stranding surplus assets in the plan."
Updated EEOC Enforcement Guidance Impacts Health Benefits
Practical Law Company More items by Practical Law Company
7/22/2014 [Guidance Overview]

"If the plan covers preexisting conditions, it must cover the costs of an insured employee's preexisting pregnancy.... If the plan covers a certain percentage of the medical costs for non-pregnancy-related conditions, it must cover the same percentage of recoverable costs for pregnancy-related conditions. If the medical benefits are subject to a deductible, pregnancy-related medical costs may not be subject to a higher deductible.... [Employers] need not provide the same level of medical coverage to their employees' wives as they provide to female employees."
Slow Process Seen in Naming Gotbaum Successor at PBGC
Pensions & Investments More items by Pensions & Investments

"Sources cited several reasons for there being no quick appointment. One is the political nature of the job ... Then there is the job itself, which requires both administrative and political skills, and comes with competing constituencies that guarantee criticism from plan sponsors or participants or both. The demands of the job have weighed heavily on past directors, with some serving for as short as nine months. Mr. Gotbaum will have served the longest, at four years, when he departs."
Plaintiffs Prevail in Halbig v. Burwell: Winners Outnumber Losers by More than Ten to One
Cato Institute More items by Cato Institute
7/22/2014 [Opinion]

[Editor's note: The article was written prior to the July 22 opinion finding in favor of the plaintiffs.] "In the 36 states with federal Exchanges, a Halbig victory would free 250,000 firms and 57 million employees from the PPACA's employer mandate.... The number of winners under a Halbig victory is therefore more than ten times larger than the 5 million people who would lose an illegal subsidy."
IT Strategist Says Health Insurance Exchanges Face More Pain
LifeHealthPro More items by LifeHealthPro

"[G]etting the public exchanges systems to work properly could take three to five years, in part because of the exchange systems will have to connect with what, at least for now, are antiquated systems that rely heavily on floppy disks and COBOL."
Why More Companies Want Pensions Off Their Books
The Washington Post; subscription may be required More items by The Washington Post; subscription may be required

"Now that the stock market is roaring and interest rates are expected to increase, buying annuities to get rid of pension obligations is becoming less expensive. That means interest in de-risking is rising.... With many traditional company pension plans frozen -- meaning employees are accruing no new benefits and plans are accepting no new members -- some advocacy groups worry that 'de-risking' will end up being yet another blow to retirement security."
How State Auto-IRA Legislation May Affect Employers
October Three Consulting More items by October Three Consulting

"These proposals generally do not cover employers who already have a plan. But, depending on how they deal with uncovered groups and uncovered employees (e.g., part-time or seasonal employees) and minimum standards for 'what is a plan,' they may wind up applying even to large plan sponsors. [This article reviews] three such initiatives: the National Conference on Public Employee Retirement Systems (NCPERS) Secure Choice Pension (SCP) proposal, the California Secure Choice Retirement Savings Trust Act and the Illinois Secure Choice Savings Program Act."
Thoroughly Vetting Service Providers Through an RFP Process (PDF)
The Wagner Law Group More items by The Wagner Law Group

"In plain English, a fiduciary must test the waters every so often to meet its ongoing monitoring responsibility. An RFP provides the structure for a well-thought-out evaluation and leaves a written document trail as evidence of the fiduciary process."
Seven Reasons for Hiring a Dedicated Retirement Plan Advisor (PDF)
Strategic Benefit Services More items by Strategic Benefit Services

9 pages. Topics covered: "[1] Meeting Fiduciary Duty ... [2] Establishing Investment Policies and Procedures ... [3] Managing a Request-for-Proposals for Service Providers ... [4] Investment Manager Search and Selection ... [5] Investment Manager Replacement ... [6] Performance Reporting ... [7] Conduct Ongoing Due Diligence on Service Providers and Investment Managers."
More Post-Windsor Tax Guidance: IRS Outlines Steps for Individuals to Obtain Tax Refunds for Same-Sex Spousal Health Coverage
Proskauer's ERISA Practice Center More items by Proskauer's ERISA Practice Center

"[A recent IRS letter] confirms what many believed to be the case -- employers are not obligated to automatically furnish corrected Forms W-2 to employees who had imputed income in years pre-Windsor for the value of employer-sponsored health coverage provided to same-same spouses. However, it serves as a good reminder that employers should be prepared to respond to such requests as employees continue to seek refunds."
ISS 2015 Policy Survey: Expanded Focus on Executive Compensation
Towers Watson More items by Towers Watson

"In contrast to last year's policy survey, which was notably light in compensation areas, this year's survey focuses quite a bit of attention on pay-for-performance alignment and equity plan evaluation. In addition, ISS is reviewing general governance questions related to areas like boardroom diversity and risk and audit oversight."
Form 5500 Season Is Well Underway -- Are You Prepared? (PDF)
The ERISA Law Group More items by The ERISA Law Group

"Some of the issues that may unnecessarily raise red flags and prompt attention from the government include ... Inconsistent and/or incorrect use of plan names and employer names... Schedule C completion in a manner that contradicts the instruction ... Anomalies in the participant counts from one year to the next ... Incorrect codes on Line 8 regarding the plan characteristics ... Misreporting the existence of a fidelity bond ... Late deposit reporting."
How Group Health Plans Can Ensure Compliance with HIPAA Privacy and Security Rules
Clearwater Compliance More items by Clearwater Compliance

"GHPs with fewer than 50 participants are not considered covered entities under HIPAA and, therefore, aren't required to comply with the Omnibus Rule. But all other GHPs, even fully insured ones, have specific obligations under the HIPAA Privacy and Security Rules and the HITECH Breach Notification Rule."
Keeping Up with the Trends in 401(k) Plans
Benefits Bryan Cave More items by Benefits Bryan Cave

"Being an ERISA plan fiduciary is hard work, particularly in the current landscape of evolving plan and investment structures -- coupled with increased regulation and scrutiny. There is no 'one size fits all' approach to 401(k) plan design; however, prudence may dictate regular review of the plan's structure and consideration of whether any changes may be desirable and appropriate for the plan's population."
ESOP Boundaries: Plan Design Versus Fiduciary Function
Porter Wright Morris & Arthur LLP More items by Porter Wright Morris & Arthur LLP
7/21/2014 [Opinion]

"The United States Supreme Court's Dudenhoeffer decision [was surprising] because the Supreme Court has repeatedly made this point about the distinction between settlor and fiduciary functions.... [It] seems like the decision to establish an ESOP to invest primarily in employer securities is a settlor function: plan design. But the Court treated the investment in employer securities as a fiduciary function."
The Impact of Employment Contract Terms on Variable Hour Employee Status
Mintz Levin More items by Mintz Levin
7/21/2014 [Guidance Overview]

"[W]hether a new employee is a variable hour employee is based on whether he or she is expected to work on average 30 hours of service per week or 130 hours of service per calendar month, not whether he or she is expected as of his or her date of hire to work 1,560 hours in a year. The 1,560 hour test is applied at the end of the initial measurement period to determine whether the employer must extend an offer of coverage during the corresponding stability period, and not at the beginning of the initial measurement period to determine whether the employee is variable hour."
Staying Ahead of the Curve: Anticipating Changes in the Target Date Fund Marketplace
Money Management Intelligence More items by Money Management Intelligence

"Traditionally, target-date funds were invested in underlying proprietary funds. Now managers are increasingly considering open architecture, incorporating funds of competitors with unique capabilities that complement their own. This 'unbundling' would mirror what has already occurred in the core investment lineup over the past two decades in the defined contribution plans."

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