American Workers Shifting Their Plans and Expectations for Retirement (PDF)
"[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[.]" (Transamerica Center for Retirement Studies)
[Guidance Overview] Another Question is Answered in the Who's the Employer Q&A Column
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? (BenefitsLink.com)
Can Ford's Lump-Sum Buyout Technique Work for Other Pension Plan Sponsors?
"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." (Human Resource Executive Online)
Employers Can Have a Meaningful Impact on Employee Retirement Readiness
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. (Wolters Kluwer Law & Business / CCH)
Is Stock Market Recovery Providing Light at the End of the Tunnel for State and Local Pensions?
"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." (Center on Budget and Policy Priorities)
Getting Young Workers to Save: Selling Confidence in the Future
"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." (Plan Sponsor Council of America)
Retirement Plan Evaluation Evolves to Include Participant Investment Performance
"One feature of participant returns, whether calculated on a total return or personal return basis, is the tendency for results to be highly dispersed. For example, as of December 2010, the earliest data available, five-year personalized returns were positive for about 95% of Vanguard DC plan participants. But there was wide variation in returns among participants. Participants at the fifth percentile had five-year personalized returns of 0% per year in 2010. At the other extreme, participants above the 95th percentile had five-year personalized returns of greater than 8% per year." (Vanguard)
Ex-Government Officials Refuse to Cooperate with Delphi Pension Probe
"The special inspector general overseeing the $700 billion Troubled Asset Relief Program [SIGTARP] -- the fund used to bail out banks, insurance companies and automakers -- told Congress that former auto czar Ron Bloom will not answer questions about the Obama administration's role in the treatment of hourly and salaried pensions. Two other key auto task force advisers -- Harry Wilson and Matthew Feldman -- also won't cooperate.... The three 'have refused to meet with SIGTARP and provide information and answers to questions concerning the role they played. ... SIGTARP believes the Auto Task Force played a role in the pension decision and these individuals' failure to speak to SIGTARP on this issue poses a significant obstacle to SIGTARP's ability to complete its audit[.]'" (The Detroit News)
401(k)s Making Lifetime Monthly Payments Might Be Future of Retirement Design
"Big employers have begun exploring efficient ways for workers to shift 401(k) assets into an investment option that guarantees income for life -- making the 401(k) more like a traditional pension. One option, which has been around for a long time, is an insurance product known as an annuity, where you pay maybe 30% of your 401(k) balance in return for a lifetime income stream. But more sophisticated products are in the mix, too, seeking to offer more generous income streams for similar amounts of money and risk." (TIME)
Longtime Chief of Colorado State Pension Plans Resigns, Calls 401(k) Savings Model a 'Failure'
"We can no longer talk in terms of 'plain vanilla' defined benefit or defined contribution plans. Instead, we see a blending of features to meet the unique needs of particular jurisdictions. However, pooling of investment and longevity risk in a base-defined benefit plan remains the low cost provider of a retirement dollar.... The real story is that Americans in general are unprepared for retirement. They typically have no resources to support them if they should become unable to work, let alone sustain them in retirement. The 401(k) experiment is a failure. The social service cost implication of this situation is not being acknowledged and will become a huge burden in the future [said Meredith Williams, former executive director of the Colorado Public Employees� Retirement Association]." (Governing)
Retirement Readiness Crisis Spurs Interest in Government-Managed Pension Plans for Participating Private Employers
"About half of Americans working in the private sector have little retirement savings, and no pension plan on which to depend. For them, the so-called three-legged retirement stool -- pension plan, personal savings, government pension income -- has collapsed, with state income the only leg remaining. This is the reality that lies behind talk of a pension crisis.... It�s all leading to a crisis built from senior poverty, people working longer, increased demand on government programs � or a combination of all these factors." (Pension Pulse)
[Opinion] Text of Letter to Congress by American Benefits Council and Others, Urging DB Funding Interest Rate Stabilization (PDF)
"The undersigned organizations, which represent thousands of pension plans providing retirement benefits to millions of workers and retirees, urge immediate Congressional action to stabilize funding interest rate rules for private-sector pension plans. Without legislation to adjust for current economic conditions, the current plan funding regime will undermine job retention and growth and limit companies' ability to invest in capital improvements needed to be competitive worldwide and to maintain the economic recovery here at home. Moreover, failure to address on-going funding issues will threaten the long-term retirement security of workers and retirees." (American Benefits Council)
401(k) Option Still a Sore Point in Kansas Public Employees Retirement System Talks
"A six-member legislative panel negotiating House-Senate differences on reform of the state's public employee pension system plans to meet again Tuesday after House members have mulled over a Senate offer of a cash balance plan.... [T]he Senate isn�t offering employees even an option of a 401(k)-style plan coveted by conservatives.... [A Kansas Representative] said that while the guaranteed benefit that the cash balance provides would likely be more attractive to older employees closer to retirement, younger employees, if given the choice, might want to take on the risk of a 401(k)-type plan for the shot at a higher return. " (cjonline.com)
Research Supports Limits on Number of Concurrent Loans from a 401(k) Plan
"The research, which analyzed 2010 data for roughly a quarter million participants in seven large, defined-contribution retirement plans that are administered by Vanguard, found that 401(k) loans are much more common in plans that allow multiple loans." (The New York Times; free registration required)
Examining Income Replacement During Retirement in a DC Plan System (PDF)
"The Council is examining the topic of income replacement in a predominantly DC plan retirement system. The examination will focus on: A. What are the challenges participants face in making their account balances in DC plans last for the length of their retirement years, including improved longevity? B. What are some of the alternative options available to participants that would be helpful in their efforts to make their accumulated savings last over their retirement lives or the lives of their spouses? C. What are the considerations and challenges plan sponsors encounter when making some alternative options available to plan participants? D. What are the considerations and challenges faced by plan sponsors in providing education outreach for participants regarding the available income replacement options?" (2012 ERISA Advisory Council)
Managing Disability Risks in an Environment of Individual Responsibility (PDF)
"As employer-sponsored retirement benefit programs have shifted from DB plans to [DC Plans], and as people have become more responsible for their own retirement planning, the responsibility to secure disability benefits has also shifted to employees/retirees. In the employment relationship context, the shift away from providing disability benefits through DB plans to providing the disability benefit through the use of employer-offered insurance has produced differences with respect to coverage, waiting periods, and gaps in coverage." (2012 ERISA Advisory Council)
Drastic Ohio Public Pension Overhaul Biggest in State History
"Retirees will see their cost of living allowances cut and workers will be told to put in more years, pay more money into the system and accept a lesser benefit at the end of a long career, if the bills become law. Pension officials, who have been begging lawmakers to take action for nearly three years, say the changes are needed to shore up their finances for the long haul and to allow them to avert drastic cutbacks in health care benefits for current and future retirees." (Dayton Daily News)
Use of Voter-Approved Initiative to Scale Back Pension Benefits Wins First Court Test in California
"A superior court judge ... upheld a voter-approved initiative giving lower pensions to all city of Menlo Park new hires except police, the first court ruling as unions challenge similar measures in Pacific Grove and Bakersfield.... Being able to bypass a city council, where members may rely on union support, is one argument for ballot-box pension reform. Critics say setting pensions through local bargaining, rather than statewide legislation, tends to drive up employer pension costs. If one local employer raises pensions, unions ask other employers to match the benefit to remain competitive." (Calpensions)
Providence Pension Reforms Will Save $19 Million Over the Next Year
"The new [Providence ordinance] halts COLAs until city pensions are 70 percent funded ... caps individual pensions at 150 percent of the state's median household income and cracks down on the liberal awarding of disability pensions. And it calls for employees to continue paying into the pension system as long as they continue to accrue benefits, rather than stopping after 25 years as they can now.... [These changes echo those adopted at the state level Last November, when] Rhode Island also went after COLAs, providing them only once every five years until 80 percent of expected pension expenditures are funded.... [T]he state raised the retirement age to the age at which workers are eligible for Social Security ... [scaled] back the traditional defined-benefit portion of the pension plan and [added] a defined-contribution element that requires workers to contribute 5 percent of salary to an individual retirement account, matched by a 1 percent employer contribution." (Governing)
Federal Government Rolling Out Roth Option to 3.3 Million Employees This Week
"The sign-up rate for workplace Roth accounts in the federal government's huge Thrift Savings Plan (TSP) could be higher than in the private sector because of a twist on the Roth benefit that will be available to military personnel stationed in combat zones. Military personnel are granted a 'combat zone tax exclusion' for any month served in a combat zone, meaning their pay for that month is excluded from gross income subject to income tax.... While the TSP is ready to receive Roth contributions as of this week, availability to federal workers depends on rollouts by more than 100 government payroll offices." (Reuters)
Reviewing Your 401(k) Plan's Hardship Distribution Procedures
"Once the plan document sufficiently provides for hardship distributions, the main traps for the unwary administrator are the failure to follow the terms of the plan and the failure to adequately document the decision to grant (or deny) the request for a distribution. Your documentation of each decision should include: The participant's application with the participant's written representations as to the hardship involved and whether other resources have been exhausted; and Your determinations regarding (i) whether the participant has an immediate and heavy financial need, (ii) whether the need can be met by other resources reasonably available to the participant, (iii) whether the amount to be distributed is not in excess of the amount needed, and (iv) the source of the distribution." (Chang, Ruthenberg & Long PC)
[Opinion] Text of Comments by ASPPA on Use of 401(k) Plan Forfeitures as Safe Harbor Contributions
"ASPPA respectfully requests that the IRS consider issuing additional guidance clarifying that forfeitures can be used to fund ADP safe harbor contributions. Furthermore, ASPPA requests that the IRS consider issuing additional guidance clarifying that forfeitures may be used to fund ADP safe harbor contributions that are qualified automatic contribution arrangements." (American Society of Pension Professionals & Actuaries)
Arizona Public Workers to Be Reimbursed for Increased Pension Contributions
"The new legislation [returns the Arizona State Retirement System] contribution rate back to an equal 50/50 split between the state and its workers. The bill also appropriates $40 million to state agencies and school districts to reimburse employees for the return to the old formula.... The state law that went into effect on July 1, 2011, increased the portion of contributions state employees must make to their pension from 50% to 53%, while lowering the state's portion to 47%." (PLANSPONSOR.com)
Chicago Mayor Proposes Freeze in Pension Cost-of-Living-Adjustments, Wants to Raise Retirement Age
"The changes that the mayor outlined to reduce the city's unfunded pension liability by a projected 40 percent mirror the reforms proposed by Gov. Pat Quinn to solve the state's pension crisis. But [the mayor]'s 'roadmap to retirement security' go even further[.]" (Chicago Sun-Times)
A False Objection When Public Employers Consider a Switch from DB Plan to DC Plan: 'GASB Won't Let Me' (PDF)
"Defined Contribution, Cash Balance and Hybrid plans are all proposals that tie benefits more closely to contributions.... In the legislative arena, such proposals face a set of objections commonly called Transition Costs -- claims that structural reforms will raise employer costs in the short run, even if they lower them in the long run. Advocates for traditional pensions argue that it would be especially unwise to incur these Transition Costs in times of fiscal duress, and legislatures, with short time horizons and balanced budget requirements, are deterred by these claims from undertaking structural reform. This paper examines the most common of these claims, that structural pension reform requires an acceleration of payments to amortize the old plan's unfunded liability." (Laura and John Arnold Foundation)
Can Part-Time Retirement Save the U.S. Postal Service?
"[P]olicymakers are closely watching recent proposals that would institute work-retirement hybrid programs for all federal workers. Both the House and Senate have approved proposals to help ease eligible employees into retirement slowly -- allowing agencies such as [the U.S. Postal Service] to delay hiring and training new employees. While the House bill would amend U.S. code to allow [federal employees] to continue working part time while partially retired, a lesser-known but similar setup already is available under an Office of Personnel Management regulation." (Government Executive)
Buyout Offer is Risky Gamble for Ford's Pension Plan
"[One attorney says], 'I think this will come back to bite Ford. Plan assets gain when people die 'on time' or earlier than the actuarial projection, thereby leaving money in the plan. If you take all the unhealthy ones out of the picture, you may have a larger potential liability in the end because you have to put more money into the system in order to fund the benefits for longer-lived retirees.'" (CFO)
Pension Funding Index, April 2012 (PDF)
"The funded status of the 100 largest corporate defined benefit pension plans dropped by $39 billion during April 2012.... The deficit increased to $267 billion from $228 billion at the end of March, and the funded ratio fell from 85.0% to 82.9%. April's funded status decrease, the first of 2012, was due primarily to a decrease in the corporate bond interest rates that are the benchmarks used to value pension liabilities." (Milliman)
IRS Page on Correcting Plan Errors: VCP Submission Kits for Pre-Approved Plans
"[The page provides links to [1] Pre-approved defined benefit plans -- sponsors who missed the April 30, 2012, EGTRRA plan adoption deadline; [2] Pre-approved 401(k) profit sharing and other defined contribution plans -- sponsors who missed the April 30, 2010 EGTRRA plan adoption deadline[.]" (Internal Revenue Service)
[Opinion] 401(k)s Are Too Risky for Retirement
"Retirement experts find that [401(k)-style defined contribution] plans have numerous shortcomings, including high operation costs and low investment returns. The biggest problem with defined contribution plans is that alone they do not provide retirees with guaranteed retirement income. If employees don't make the right large contributions into the right investment mix at the right time, they are at high risk for poverty during retirement." (CNN)
N.Y. State Pension Comptroller Continues Criticism of 401(k) Option for Public Employees
"[The Comptroller] repeated his criticism of 'anti-pension advocates' who try to blame public pension plans for damaging state and local budgets and for handing out allegedly inflated payments. 'Another well-worn line of attack on public pension funds -- an argument that particularly disturbs me -- is that they are bloated with retirees making six-figure pensions,' he said. 'The vast majority of retirees in our system are receiving modest benefits.'" (Pensions & Investments)
Employee Benefits Are Good for Employers, Too
"Harvard Business Review Analytic Services surveyed 58 of the 100 companies named to 'The Principal 10 Best' list over the past decade ... Three quarters of those polled reported that benefits contributed to employee retention and 72 percent said they impacted employee loyalty.... When asked to identify the most significant thing they are doing to impact employees' financial security, nine out of 10 respondents mentioned retirement programs and cited generous employer contributions." (MSNBC)
Federal Employees Would Pay More for Pensions Under House Bill
"The legislation ... incorporates measures approved by the House Oversight and Government Reform Committee in late April requiring current federal employees to pay 5 percent more toward their retirement over the next five years, beginning in 2013. Members of Congress would have to contribute an additional 8.5 percent to their defined benefit plan during the same time period." (Government Executive)
'Institutionalizing' DC Plans: Reasons Why and Methods How (PDF)
"Using DB plans as the institutional model for retirement, institutionalization of DC plans can encompass a broad spectrum of practices, including: Managing toward a financial target (e.g., income replacement percentage); Recognizing the role of funding (in DC plans, funding equates to contribution levels) in achieving the financial target; Use of institutional investment vehicles that enable scale pricing (separate accounts, collective trusts); Improving diversification by offering exposure to alternative asset classes; Managing risk -- specifically risk to achieve an income target through the DC account [and more]." (Defined Contribution Institutional Investment Association)
California Counties Deciding to Stop 'Picking Up' Employee Pension Contributions
"Yolo County along with many other local governments in California began, more than a decade ago, the practice of paying employees' share of pension contributions to CalPERS. The theory was that by taking on those contributions, which are a percentage of employees' salaries, cities and counties could help hold the line on future salary inflation. That backfired after 2008-09, when CalPERS suffered a 24 percent investment loss and began boosting required pension contributions." (The Modesto Bee)
Will San Jose and San Diego Voters Approve Pension Changes Lowering Future Accruals?
"The San Jose measure would give current workers the option of switching to a lower pension or staying in the current plan and paying off pension debt with annual contribution increases of 4 percent of pay, capped at 16 percent or half the debt cost. The San Diego proposition could impose a six-year freeze on the amount of pay used to calculate pensions and would switch all new hires, except police, to the 401(k)-style individual investment plans now common in the private sector." (Calpensions)
States Scaling Back Worker Pensions to Save Money
"For years, state governments lured workers with the promise of lucrative pensions that provide nearly the pay that employees earned on the job. But after years of budget crunches, nearly every state has revamped public retirement benefits in an effort to shrink the long-term obligations that are billions of dollars short of what is needed to cover benefits. The moves have triggered a legal and political battle over whether states are reneging on their promises to millions of public-sector workers." (The Salt Lake Tribune)
Virginia Governor Wants Mandatory Employee Contribution Requirement for Legislators' Pensions
"'Similar to requirements passed in 2011 for state employees, this amendment would require elected officials to contribute 5 percent of their income toward their Virginia Retirement System pensions, offset by a 5 percent increase in compensation when constitutionally permitted[.]'" (goDanRiver.com)
Broken ARC, Broken Promises: Underfunded Public Pension Plans
"It divides underfunded public pension plans into two categories those whose sponsors make the full Actuarially Required Contributions (ARC) and those who do not. While state and plan bankruptcy is being discussed, the author prefers a more incremental approach for the vast majority of plans whose sponsors make the ARC each year. However for the ones who have broken the ARC and are in deep trouble he introduces a new type of Federal Supervision under the PBGC as an alternative to Federal Bankruptcy." (Stable Value Consultants)
Another Reason for Offering Annuity-Type Distributions From 401(k) Plans: Cognitive Impairment of Older Participants
"The battle to get annuities into 401(k) plans has been hard-fought, and it's not over yet. Insurance companies see a need to get 'lifetime income products' into retirement plans, and have had some success making the case that most plan participants aren't prepared to create an income plan on their own.... But [one economist] pointed to an as-yet-unheard argument for including them in D.C. plans: the decline in cognitive ability as we get older." (insurancenewsnet.com)
When Should Workers Take a Pension Buyout?
"In deciding whether a lump sum is a good deal, [a retirement expert] advises retirees to consider three key factors: Mortality.... Interest rates.... The amount you're getting." (Reuters)
Road Trip: Traversing the Country in a Yellow VW Bus to Advocate 401(k) Reform
"On April 16, [Chad Parks, CEO and founder of The Online 401(k),] and his team set out for six weeks in an orange 1970s VW bus, on a mission to shoot a documentary about Americans' soured retirement dreams and 401(k) miscues, [to be entitled] 'Broken Eggs: The Looming Retirement Crisis in America.' They'll also be hunting for solutions to the crisis -- ideas for how we can successfully navigate our way to a comfortable retirement." (Daily Finance)
Kansas Senate Endorses New Cash Balance Plan for State Employees
"[The proposal] would create a 'cash balance' system in which employees pitch in 6 percent and the state adds 4 percent. The state would guarantee employees' investments earn 6 percent. Employees would be vested after five years." (Chicago Tribune)
[Opinion] Text of Comments by Eight Women's Organizations and the Pension Rights Center on Proposed IRS Regs for Lifetime Retirement Income Options (PDF)
"The joint comments addressed the groups' concerns about protecting women, who generally live longer than men, who tend to accumulate less retirement income during their working years, who can be more dependent on a spouse's pension, and who face gender bias in the annuities market." (Pension Rights Center)
[Guidance Overview] IRS Notice Suggests Changes to Normal Retirement Age Rules for Governmental Plans (PDF)
"The Notice ... leaves open several questions related to normal retirement age for governmental plans, including: Should an additional rule be provided under which retirement after 20 or 30 years of service may be a reasonably representative normal retirement age for qualified public safety employees and would this also be reasonable for other categories of governmental employees? What information is available to assist the IRS and Treasury in determining the earliest age that is reasonably representative of the typical retirement age for governmental employees?" (Gabriel Roeder)
Avoiding Surprises in Pension Contribution Liability: How Public Employers Can Anticipate and Evaluate 'Pension Risk' (PDF)
"The most significant risks include investment, inflation, and longevity risk. Left unmanaged, adverse experience from any of these can cause the retirement system to drift into a costly and perhaps unsustainable position. Certain circumstances may increase the likelihood that this may occur, including: Significant investment losses; Volatility in contribution rates; and Contribution levels that are inadequate when compared to the level of benefits promised to members." (Gabriel Roeder)
[Guidance Overview] 'Unrelated Business Taxable Income' Did Not Spoil Tax-Exempt Organization's Exemption from Excise Tax on Plan Asset Reversion
"[A 20%] excise tax is imposed on employer reversions [of assets] from a 'qualified plan,' defined ... as a plan that is qualified under Code Sec. 401(a) or Code Sec. 403(a), 'other than ... a plan maintained by an employer if such employer has, at all times, been exempt from tax under subtitle A[.]' ... The IRS maintained that the plan was a 'qualified plan' [and hence subject to the excise tax despite the aforesaid exemption for tax-exempt employers] because the taxpayer had paid unrelated business income tax, which is a tax under Subtitle A, for certain years.... The court held that the employer was an organization that had, at all times, been exempt from tax under Subtitle A. Thus, the employer�s pension plan was not ... liable for the Code Sec. 4980 excise tax." (Wolters Kluwer Law & Business / CCH)
[Opinion] ERIC Offers Recommendations to Improve Treasury Lifetime Income Guidance
"[ERIC] submitted to [Treasury and IRS] a series of three comment letters in response to their February 2012 package of proposed regulations and revenue rulings regarding lifetime-income options for participants and beneficiaries in retirement plans.... ERIC's three comment letters offer recommendations addressing the longevity annuity contract regulations, the partial annuity regulations, and the revenue ruling concerning rollovers from defined contribution [plans to defined benefit] plans[.]" (The ERISA Industry Committee)
First Quarter 2012 Pension Plan Funded Status Experience (PDF)
"During [this period], the funded status of the model pension plan examined ... improved by five percentage points: from 74 percent to 79 percent. This improvement was driven by asset growth of 7 percent." (Sibson Consulting)
[Opinion] Text of Comments by American Benefits Council to IRS on Proposed Regs on Longevity Annuity Contracts (PDF)
"The Council respectfully suggests that Treasury and the Service could provide clarification and additional guidance on a few related issues that the Council believes would encourage more plan sponsors to consider adding longevity insurance to their plans. These related issues include (1) the need for a correction program, (2) clarification of potential forfeiture or cutback issues, (3) clarification that these rules also apply to IRA annuity rollovers and (4) interaction of the Qualified Longevity Annuity Contract (QLAC) rules with the qualified joint and survivor annuity (QJSA) rules." (American Benefits Council)
[Opinion] Text of Comments by American Benefits Council to IRS on Proposed Regs on Modifications to Minimum Present Value Requirements for Partial Annuity Distribution Options under DB Plans (PDF)
"Clarifying that the regulations permit a plan to treat both portions of a partial annuity distribution option as two separate forms of benefit for purposes of applying the requirements of section 417(e)(3) is a significant step in assuring that more participants have the opportunity to elect to receive benefits in this manner." (American Benefits Council)
[Opinion] Text of Comments by ASPPA on Proposed Modifications to Minimum Present Value Regs for Partial Annuity Distribution Options under DB Plans
"ASPPA COPA applauds the addition of specific rules for dealing with bifurcated benefit distributions. However, final regulations should acknowledge that plan sponsors and plan administrators have had to develop plan language and administrative procedures to address bifurcated benefits in light of the minimum present value requirements ever since those specific requirements were added to the Code in 1984, and the absence of specific formal guidance has led to divergent practices." (ASPPA)
Louisiana Legislators Decide Switch from DB to 401(k) for State Employees Might Be More Expensive Overall
"The [Louisiana House of Representatives] dealt a significant setback to a plan to enroll new state employees in a 401(k)-style plan [recently,] with members requiring that those placed in the new system also be put into Social Security. House Bill 61 would replace the pensions for most new employees with one based mainly on market returns as has been pitched as a way of keeping retirement costs in check for state government. But requiring that state employees, who are not now part of the Social Security system, enroll in the program could more than double the costs the state pays for each employee." (nola.com)
Managing the Volatility of Defined Benefit Plan Funded Ratios and Contributions
"[I]t requires an in-depth analysis of asset allocation and the role it plays in creating risk within a plan. A first step to a finance team's managing against unexpected volatility is understanding the unique circumstances of the plan by identifying several key characteristics: current asset allocation, liability profile, funded ratio, contribution policy, status of the plan, the plan's 'end game,' and, most importantly, the plan sponsor's risk tolerance." (CFO)
Risks and Rewards of Opening a Lump-Sum Distribution Option to Already-Terminated Pension Plan Participants
"Before 2012, a lump-sum window generally would have carried with it considerable incremental cost due to the legally required basis for calculating lump-sum payments, which included Treasury bond rates as well as corporate bond rates. Beginning with the 2012 plan year, however, the amount of a lump-sum payment is based solely on corporate bond rates.. . . This [article] discusses the role that a lump-sum window could play in DB plan de-risking by making the financial footprint of the plan smaller." (Sibson Consulting)
[Official Guidance] Did Your DB Plan Miss the April 30, 2012 EGTRRA Amendment Deadline? IRS Web Site Describes Correction Needed
"Generally, if you have a pre-approved defined benefit pension plan document and you did not sign an EGTRRA plan document by April 30, 2012, your plan does not comply with the tax laws and may be ineligible for tax benefits.... When completing Schedule 2, Part 1 [in the IRS Voluntary Correction Program Submission Kit], go to the �Other� box at the end of the list of law names. Check this box and type in the following failure description: The changes required by the 2006 Cumulative List (Notice 2007-3, 2007-1 C.B. 255) for an employer using a pre-approved defined benefit plan who failed to adopt the pre-approved plan by 4/30/2012, as required by Announcement 2010-20[.]" (Internal Revenue Service)
Taking Auto-Enrollment One Step Further: Bill Would Provide Auto-Increase in Employee Contributions by Federal Employees
"Sen. Daniel Akaka, D-Hawaii, has sought input on a bill tying automatic enrollment in the government's 401(k) style retirement plan to annual increases in the amount of money employees contribute to those retirement accounts." (Government Executive)
[Opinion] Text of ICI Comments on Proposed IRS Regs Under Foreign Account Tax Compliance Act (PDF)
"[ICI suggests an alternative approach for improving further on the many positive changes made by the Proposed Regulations in the treatment of retirement accounts. Specifically, the Final Regulations should state that, except to the extent provided by the Secretary, any retirement plan organized under a country's laws for the principal purpose of saving for retirement will be eligible for treatment as a certified deemed compliant FFI, will be treated as an exempt beneficial owner, and will be excluded from the definition of financial account[.]" (Investment Company Institute)
[Guidance Overview] Financial Regulators Clarify Reg Z and Compensation Rules as Applied to Retirement Plan Contributions
"The Consumer Financial Protection Bureau ... recently released CFPB Bulletin 2012-02 clarifying the compensation rules applicable to loan originators under Regulation Z, 12 C.F.R. Section 1026.36. Generally, loan originators may not receive compensation, directly or indirectly, that is based on any term or condition of a mortgage transaction.... Mortgage companies receive profits based on selling mortgages, however. Often times they fund their qualified profit sharing plan, 401(k) or employee stock ownership plans (together referred to as 'qualified plans') with such profits." (SunGard Relius)
Wyoming Might Not Be Finished with Changes to Retirement Plan for State Employees
"Legislators plan to study further changes to the pension programs for state employees during the interim session to see if more legislation is needed in 2013. The Legislature passed multiple laws earlier this year that blocked cost-of-living adjustments for most retirees and modified the benefits for new employees." (WyomingNews.com)
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