From an EBSA email distributed on May 17: "The Department of Labor's Employee Benefits Security Administration made a technical correction to recently released Field Assistance Bulletin No. 2012-02, which contains frequently asked questions and answers about the Department's participant-level fee disclosure regulation (29 CFR section 2550.404a-5). It has come to the Department's attention that, as initially released on May 7, 2012, a sentence in the answer to Question 19 concerning quarterly Web site updates to 'average annual total return' information inadvertently referred to the most recently completed calendar 'year' rather than the most recently completed calendar 'quarter.' The Department corrected this error on May 17, 2012 in order to accurately restate the requirements of the regulation. The word 'calendar' also was removed from the phrase '... 10-calendar year periods ...' in the same sentence. See Q-19, n.2."
"[The] majority of workers plan to work past age 65 (56 percent) and the majority (54 percent) plan to continue working after they retire. Despite workers' demonstrated commitment to saving, just 39 percent believe they are building a sufficient nest egg[.]"
"The May 15, 2012 Wall Street Journal editorial entitled 'The Union Pension Bomb' and the Credit Suisse report to which it refers may provide an eye-catching headline, but it contains numerous factual inaccuracies and misleading statements regarding multiemployer plans.... Rather than acknowledging the long-term nature of pension obligations and the market fluctuations that will produce periodic and transitory periods of over- or underfunding, [the editorial] chose to capitalize on the anomalies produced by artificially low interest rates, overly influenced by monetary policies intended to stimulate low-cost borrowing, at the expense of those institutions and individuals whose long-term financial survival is dependent on savings and historically dependable fixed income instruments. The sensationalism of these conclusions may play well to those whose interests are served by eliminating any sense of corporate responsibility to the workers whose efforts are as much a contributing factor to the companies' success as those who provide the capital, but no one should be fooled by this shameless and opportunistic characterization of the current rates as market driven 'risk-free' rates, appropriate for such conclusions."
I heard the DOL has sought a temporary restraining order against Matthew Hutcheson in connection with the open MEP he dealt with. Does it clarify the approach the DOL is taking in dealing with open MEPs?
Rather than a 401(k)-type plan, a defined contribution account will be established for newly hired employees to which the state will credit 5.25% in guaranteed earnings on both employee and employer contributions, with additional credits possible if the existing KPERS plan has an investment return of more than 8%.
"Schwab's survey found that 35 percent of Americans consider protecting retirement assets more important than growing those assets, while only eight percent consider growing retirement assets more important than protecting them.... The 2008 downturn may have had a particular impact on younger Americans [because the] survey found 29 percent of those age 18-34 plan to pull money out of the market, with only 11 percent of older Americans indicating they would take this action."
"Although public plans are not subject to ERISA, many times the guidelines are used as a best practice. ERISA section 404(a) requires that fiduciaries elicit information necessary to assess not only the reasonableness of the fees to be paid for services, but also the qualifications of the service provider and the quality of the services that will be provided. Benchmarking allows plan sponsors to do a fee to services comparison of other plans in their benchmarking group. Among other things, this will help determine if the plan is receiving the right amount of fiduciary support from the current service providers."
"A massive 38 percent of [Chesapeake Energy's] main 401(k) retirement plan's assets were in company stock, despite only 5 percent of those assets still being tied up in a vesting period. It is no wonder that employees jumped at a generous offer to match, dollar-for-dollar, the first 15 percent of their salary with shares of stock. What makes a heck of a lot less sense is why they held on to them after they were free to diversify. While this has been a bit of a disaster for employees, as Chesapeake shares have fallen by nearly half, [the author says] holding more than 5 percent of your financial assets in your employer's stock is bad policy whatever the returns and no matter how well run the company."
"The staff of the [State Board of Administration], which manages investments for the $121.6 billion [Florida Retirement System (FRS)] fund, advised the House and Senate leadership of potential problems this week. In a required annual review of the FRS actuarial valuation, the financial analysts also said the state could consider cutting the fund's 7.75 percent expected earnings target by a half-percent."
"In all, 122 of the 199 city workers with take-home vehicles make more than $100,000 a year, including nine who earned over $200,000. At least 36 employees with take-home cars live outside the city, including officials who reside in Duxbury, Marshfield, Hingham, Norwell and Framingham, among other suburban towns."
Jurisdictions covered are CA, CO, CT, DC, DE, HI, IA, IL, MD, ME, MA, NH, NJ, NV, NY, OR, RI, VT and WA. Issues described in this nicely done 3-page chart include: type of relationship addressed, whether or not health insurance coverage is mandated; whether a leave law applies; scope of state tax exclusion for health coverage; scope of rights (same as opposite sex vs. limited); and recognition of out-of-state relationships.
"Ford is offering to make a one-time, voluntary lump-sum payment to nearly all of its salaried retirees by the end of 2013. It appears to be the first such program to specifically target retirees without being part of a broader plan termination, experts say. According to those same experts, the impact on HR departments could be substantial, especially in areas of due diligence, communications and education, if this becomes a trend."
"The Legislature created Houston's firefighters pension system and gives it the authority to unilaterally establish what taxpayers owe the system each year. Fund representatives are not even obligated to meet with city officials to discuss possible changes to the system."
"The court held that the taxpayer would not have been subject to the 10% tax if he had taken the distribution directly from the 401(k) plan upon termination because of the exception in section 72(t)(2)(A)(v) of the Internal Revenue Code for post-separation distributions to an employee who has attained age 55, but because he chose to roll over his balance, the exception no longer applied to a distribution from an IRA."
"Supporters say without action from lawmakers the pension funds will fall short of meeting their 30-year solvency requirement. The teachers' pension fund alone would need 38 years to do so. One of the largest funds, the Ohio Public Employees Retirement System, estimates that delaying reform costs their fund nearly $1 million a day. That same daily impact is nearly $2 million for the Ohio Police and Fire fund. And the State Employees Retirement System is losing $27 million in savings annually."
"In the past, bankruptcy allowed fiduciaries to essentially abandon their plan administration duties. The Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) ... explicitly imposed plan administration duties on panel trustees and put an end to the abandonment of retirement plans by bankrupt employers.... BAPCPA [also] allowed the [DOL] to change its role in bankruptcy from retirement plan 'caretaker' to retirement plan 'collector.' In bankruptcies in which employee contributions are missing due to defalcation, the DoL is now using its resources very effectively to recover those missing monies."
"$72 billion. That's the collective unfunded liabilities of Ohio's five defined-benefit public-pension plans. That's more than Ohio's biennial budget. Under current law, three out of the five plans never will be able to pay off those liabilities. Those are the stakes."
"[T]he measure aims to hold steady city workers' pensionable salaries over the next five years to save on pension costs. But voters can't mandate city employee salaries at the ballot box so the measure provides a strong recommendation for City Council to impose the freeze. The pensionable pay freeze is so essential to the initiative's savings that with it supporters can claim the measure saves $1 billion over 30 years and without it opponents can claim it saves $0."
"The overall point of the disclosure of pension funding obligations is to indicate whether the state or local government will likely struggle in meeting such obligations without making difficult financial decisions. One of those decisions may be related to the payment of debt service on bonds. Thus, in circumstances where there is expected to be financial strain caused by an issuer's pension funding obligations, being clear and plain about this point to investors is very important."
"Of firms with fewer than 50 workers and that offer health benefits, 65 percent last year said they had not explored their eligibility for the tax credit, according to a national survey by ... Henry J. Kaiser Family Foundation. Of similarly sized firms that don't offer health insurance, 48 percent said they were not aware of the tax credit, the survey said. The tax break will expand to cover 50 percent of health premium costs in 2014[.]"
"Most states cover retiree health benefits on a pay-as-you go basis. They don't set aside money annually to pre-fund the obligations, as they do with pensions. Last year, New York, the third-biggest U.S. state by population, spent $3.3 billion on health care for active and retired employees as health-care spending rose 6 percent."
"Say on Pay gives shareholders [of large private corporations] a vote on executive compensation at least every three years. Paradoxically, the financial performance of many public pension funds in the past decade has been downright dismal and deserves equal attention from stakeholders. If these were private companies, their stock market prices would be running a course similar to what happened to many of the banks and Wall Street brokerage houses in recent years."
According to a recent analysis of Fidelity's 11.8 million accounts, the number of participants taking advantage of annual increase programs (AIP) increased nearly nine-fold over the past five years. Also, 20 percent more participants attended workplace workshops and 45 percent more used online webinars in 2011, compared to 2010.
"This investigation has confirmed the existence of a deal between the White House and [the Pharmaceutical Manufacturers of America, or 'PhRMA'] that explicitly bound both parties to certain commitments.... [The deal] was so clearly understood to be binding that White House Deputy Chief of Staff Jim Messina made direct contact with PhRMA's chief lobbyist for the negotiations regarding the deal to express his displeasure with an apparent violation of the agreement more than two months before the legislation was given final approval by Congress."
"The inquiry [by the House Energy and Commerce Subcommittee on Oversight and Investigations] aims to answer the following: Did the Obama administration and outside stakeholders make deals that exchanged policy outcomes for public support of the law; if so, who made such deals; was Congress left out of the discussions; what issues were negotiated; and what, if anything, did the White House gain in the arrangement."
"[According to a recent NAIFA study,] agent commissions have declined dramatically since the medical loss ratio (MLR) provision of the health care reform law went into effect, forcing many agents to reduce their services to clients, consider charging fees for services they had been providing at no additional charge and in some cases, laying off employees and leaving the health insurance market."
"This study compared out-of-pocket spending on health care between individual and employment-related insurance, controlling for numerous characteristics such as health status. Then it simulated the impact of full implementation of provisions of the Affordable Care Act on adults who currently have individual insurance ... [Among other findings, the study determined that the] likelihood of having out-of-pocket expenditures on care exceeding $6,000 would have been reduced for all adults with individual insurance, and the likelihood of having expenditures exceeding $4,000 would have been reduced for many."
"The stock market's rebound from its depths in the recession has lifted pension assets substantially over the past two and half years ... The effects of the recovering market haven't yet shown up in most state pension funds' financial reports, but they will over the next few years. When most funds estimate their available assets, they phase in the impact of investment gains and losses over several years in order to minimize year-to-year changes in the amount of money that the state must deposit in the fund."
"While brokerage windows, self-directed brokerage accounts and other similar plan arrangements (for simplicity, referred to here after as 'brokerage windows') are not considered designated investment alternatives and are therefore excluded from the annual investment disclosures, brokerage windows must still make certain annual plan-related disclosures to each participant eligible to use the window, whether or not he or she chooses to use the window. A plan administrator offering a brokerage window must furnish a general description of the brokerage window and any fees or expenses that may be charged against an individual participant's account. The quarterly disclosure must reflect the dollar amount of fees and expenses that were charged against that individual participant's account over the preceding quarter[.]"
"One popularly expressed motive, 'live for today, because who knows what tomorrow will bring?' puts thoughts of retirement a very, very long way into the future.... We live in a world that causes [young people] to question their safety, security, and especially the future. In fact, they are constantly provided with excuses not to save. If we want more young workers to choose to save, we have to sell the benefits of paying themselves first and getting the free employer money."
Begins at 2 PM; see the linked web page for registration information. The IRS is inviting requests for coverage of a specific issue; let them know via e-mail at ep.phoneforum@irs.gov on or before June 1, 2012.
"Plaintiffs [in Skinner v. Northrop Grumman Retirement Plan B] argued the plan documents should be reformed to match the terms of the 2003 SPD. The Court held that reformation is appropriate only in cases of fraud or mistake. The Court found there was no evidence that: (a) the Plan participants were intentionally and materially misled, or that (b) plaintiffs actually relied on purportedly misleading information."
"[The three Dewey & LeBoeuf] plans PBGC has taken over are all cash balance plans that cover only past and current partners and they are relatively well funded.... What's the PBGC doing taking over a plan for partners-only, one of which is reported to be over-funded? Is this agency, strapped for cash itself, looking to prey on these lawyers by appropriating the approximately $150 million in assets in the plans and having to pay out substantially less (based on PBGC calculations) in monthly installments at later dates?"
Member health decisions now the #1 cost issue; Plan sponsors look to online tools and mobile apps to lower costs; Healthcare reform raises questions about future coverage options; Employer Group Waiver Plans may soon outnumber Retiree Drug Subsidy plans; Consumer-Directed Health plans gaining momentum again; Mail strategies growing and delivering results; Comprehensive management key to mitigating specialty trend; Drug coupons raise cost concerns; and Plan sponsors embrace data-driven pharmacy care.
"The final rule said that requiring the notices to be sent when MLRs are met 'will ensure that all consumers, not just those owed a rebate, are informed whether their issuer meets the minimum MLR standards established by the Affordable Care Act,' and it will 'reduce confusion as to why certain individuals receive rebates, while others, such as coworkers or family members with different plans, do not.'"
"Assuming the pension funds are managed conservatively, how much money would have to be set aside to fund a single pension/benefits payout of $120,000 a year and one of $60,000? The yield on 10-year Treasury bonds is less than 2%, about in line with the average dividend on stocks. That means that a conservatively managed portfolio of stocks and bonds now yields around 2%.... To fund 100 senior retirees and 200 less-senior retirees, the city pension fund would need $1.2 billion, roughly equal to 10 years of the city's entire general-fund annual budget. To fund 600 retirees, the fund would need $2.4 billion."
"'We believe that this mandate is unjust and unlawful - it is bad health policy, and because it entails an element of government coercion against conscience, it creates a religious freedom problem,' wrote Anthony Picarello, USCCB associate general secretary and general counsel, and Michael Moses, associate general counsel. 'These moral and legal problems are compounded by an extremely narrow exemption that intrusively and unlawfully carves up the religious community into those that are deemed 'religious enough' for an exemption, and those that are not.'"
"Before you make a move, compare the fees of your 401(k) plan's funds with any retail funds you're considering at the IRA rollover institution. The new 401(k) fee-disclosure rules that become fully effective in August will make this comparison easier. [The author's] recent post showed average and median fees for various types of mutual funds. You'll want to invest in funds with expenses well below these averages, and there's a good chance your 401(k) plan will accomplish this."
"The U.S. Court of Appeals for the Ninth Circuit agreed with a district court ... that the former CFO of semiconductor concern Maxim Integrated Products ... would be on the hook for backdating stock options without expensing them. The case is notable for two reasons: it has been one of the few times that an options-backdating case actually went to trial, and it shows that CFOs and chief executives have no way to hide from improper expensing, even years later."
"You need to communicate differently with a 25-year-old than with a 62-year-old. The older worker doesn't need to hear about the benefits of a company match. If you're looking to change behavior, make it easier. For example, call a meeting to explain how to enroll, and then let employees check a box on a card so you can enroll them. Don't make them do it themselves later -- they may never do it."
"If the law is upheld, Republicans will take to the floor to tear out its most controversial pieces, such as the individual mandate and requirements that employers provide insurance or face fines. If the law is partially or fully overturned they'll draw up bills to keep the popular, consumer-friendly portions in place -- like allowing adult children to remain on parents' health care plans until age 26, and forcing insurance companies to provide coverage for people with pre-existing conditions. Ripping these provisions from law is too politically risky, Republicans say."
"The power of CalPERS to give the governor and the Legislature an annual bill that must be paid can be a friction point. In the dispute over paying off part of the new rate increase over 20 years, board members said they were giving lawmakers an option. 'We voted for the phase-in option to make things less painful for all employers during these difficult economic times,' said ... the CalPERS board president. 'If the Governor feels the state can make the payment in full, then I'll be happy to have someone come pick up his check today.'"
"The chart ... illustrates the types of coverage that employers must report on the Form W-2. Certain items are listed as 'optional' based on transition relief provided by Notice 2012-9 (restating and clarifying Notice 2011-28)."
The Advisory Committee on Tax Exempt and Government Entities (ACT) will hold a public meeting on Wednesday, June 6, 2012, from 9:30 a.m. to 11:30 a.m. [in Washington]. An ACT subgroup will provide analysis and recommendations regarding the scope of the employee plans examination process.
"Last week, the agency said it would seize control of three Dewey pension plans covering 1,776 current and future retirees that the PBGC said were underfunded by $80 million.... Dewey is liquidating and winding down outside of bankruptcy, according to the lawsuit. Many of the firm's associates were told on May 10 that Tuesday would be their last day."
"The disagreement was over the pace at which [the California Public Employees' Retirement System, or 'CalPERS'] is lowering its assumptions about future investment returns from 7.75 percent to 7.5 percent, called the discount rate.... When the rate of return assumption goes down, governments must contribute more. The [CalPERS] board agreed to phase in the change over two years at a onetime $137 million savings ($78 million general fund), but [Governor Brown] had wanted the board to drop the discount rate immediately."
The Rural Health Panel analyzed federal health reform proposals, the Patient Protection and Affordable Care Act ('ACA'), and related government papers and documents and produced nine reports for federal policy-makers and stakeholders. The reports analyze the impacts of the various coverage proposals and of the ACA on rural people, places and providers.
"A Treasury Department proposal to expand retirement income options is on the right track, but it requires some revisions to achieve the objectives outlined in the proposed regulation ..., a variety of interest groups said in public comment letters.... In drafting a final regulation, Treasury should strike a better balance between keeping QLACs simple to maximize monthly income and offering features that would make them more attractive to more people[.]"
"Buying stock that then falls sharply is painful, especially for investors who also happen to be company employees.... Financial advisers say employees like to invest in their employers for several reasons, including loyalty, hopes to profit from their work and a sense that they have a better read on the company than ordinary investors. But many advisers say that the practice increases the risk of losing your job and your retirement savings at the same time if your employer fails."
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