Employee Benefits Headlines
Gathered from the web by the editors at BenefitsLink.com.
[Guidance Overview] Plan Sponsors Working Diligently and in Good Faith on Summary of Benefits And Coverage Will Not Face Penalties During First Year
"The Departments will not impose penalties for failure to provide an SBC or Uniform Glossary on plans and issuers that are working diligently and in good faith to comply.... Plan sponsors with 'carve-out' arrangements, such as a carved-out outpatient prescription drug program or mental health program, may provide multiple partial SBCs during the first year, as long as the multiple SBCs together provide all relevant information to meet SBC content requirements.... The Departments will not enforce penalties for failure to provide an SBC with respect to expatriate coverage during the first year of applicability." (The Segal Company)
[Guidance Overview] Common Plan Mistake: Miscalculating Matching Contributions
"If your 401(k) plan document calls for an annual matching contribution, you should consider one of the following options: Waiting until year-end to make the matching contribution; Contributing each pay period, but then making a true-up contribution at year-end (if necessary); [and] Amending the plan to provide for the calculation of matching contributions on a pay-period basis.' (Spencer Fane)
[Guidance Overview] Court of Appeals Rejects Equitable Remedies When SPD Promises More Generous Benefits Than Pension Plan Document
"In some ways, the Ninth Circuit's recent decision in Skinner v. Northrop Grumman Retirement Plan B is a garden-variety example of a classic fact pattern: the terms of a summary plan description ('SPD') promise better benefits than the plan document it summarizes, and participants sue for the difference. Skinner demands our attention, however, because it is the first decision by a federal court of appeals to interpret the Supreme Court's most recent high-profile decision on ERISA remedies: CIGNA Corp. v. Amara." (Spencer Fane)
[Guidance Overview] IRS Regs Describe New Fees Payable by Health Plan Sponsors and Insurers
"The fees payable by health insurers [to finance research into comparative clinical effectiveness, required by the health care reform law] are described in a new Section 4375 of the Tax Code, while a new Section 4376 describes the fees imposed on sponsors of self-funded health plans. Regulations recently proposed by the IRS would apply substantially similar rules under both of these provisions. This article will therefore focus on the fees payable by self-funded plans." (Spencer Fane)
CalPERS Looks at Investments in Job-Creating Infrastructure
"In a happy convergence, pension funds are moving into infrastructure to reduce inflation and market risk, while deficit-ridden governments are deep in bond debt and looking for new ways to rebuild and expand crumbling public works.... Part of the 'fiduciary' duty of pension boards to protect pension recipients may extend to preserving the financial health of governments, the pension plan sponsors, through infrastructure investments needed to maintain and improve the economy." (Calpensions)
Health Reform Would Bring a Windfall for Insurers
"Health insurers will gain $1 trillion in new revenue over the next eight years under the 2010 health care law, assuming it is upheld by the Supreme Court, according to a Bloomberg Government study.... About 9 percent of the insurance industry's total revenue from 2013 to 2020 hinges on whether the health law stands, according to the study." (Kansas City Star)
[Opinion] 401(k)s in The Crossfire
"Perhaps the most commonly cited concern about 401(k)s is the size of current account balances. The typical investor approaching retirement has around $100,000 saved in various tax-deferred accounts. That amount might generate $4,000-$5,000 a year in income. It's been 30 years since 401(k)s appeared on the scene, so the thinking is that older investors should have much more money in these accounts than they do. This argument, however, overlooks the rapid expansion of 401(k) plans over the past three decades. More people have come into the system over the years, and many who are ready to retire haven't spent their full working careers saving in these plans." (Vanguard Blog)
Making Gene Mapping Part of Everyday Care
"The price to get a full genetic map currently starts at about $3,000, and many experts predict this could quickly fall to $1,000, roughly equivalent to the cost of an MRI. Insurance is expected eventually to help cover the cost of doctor-ordered tests." (The Wall Street Journal)
[Guidance Overview] HHS Guidance Includes Draft Blueprint for State-Based Insurance Exchanges
"On May 16, 2012, HHS released new guidance on the health insurance exchanges established by health care reform... Among the new materials are: A draft blueprint for approval of affordable state-based and state partnership insurance exchanges; General guidance on federally-facilitated exchanges; and An updated website featuring an interactive map with state-by-state information on grants to establish insurance exchanges." (Practical Law Company)
McDonald's Recognized for its Strong Benefits Programs and 'Compelling' 401(k)
"McDonald's has achieved a wildly successful 401(k) plan, with 98 percent participation for restaurant managers and above. This broad coverage is the result of several initiatives: Automatic enrollment; A unique and generous, front-end loaded match, which provides for an employer contribution of 3 percent for the first 1 percent contributed by the employee and increases to a 11 percent employer contribution for employee contributions of 5 percent; Multi-layered communication approaches to targeted affinity groups; Educational seminars on topics ranging from retirement to investment advice; and Permitting only one loan at a time from the plan." (HR Policy Association)
How Did the Recession of 2007-2009 Affect the Wealth and Retirement of the Near-Retirement-Age Population?
"The retirement wealth held by those ages 53 to 58 before the onset of the recession in 2006 declined by a relatively modest 2.8 percentage points by 2010.... Although most of the loss in wealth is due to a fall in the net value of housing, because very few in this cohort have found their housing wealth under water, and housing is the one asset this cohort is not likely to cash in for another decade or two, there is time for their losses in housing wealth to recover." (University of Michigan Retirement Research Center)
Savings Fall Short for Most Retirees But Other Factors Can Compensate
"[Recent aggressive advertising and media attention to the importance of] asset allocation in misplaced, a new study argues. For the vast majority of savers, improved investment returns won't materially extend how long retirement money lasts. That's in large part because few investors have enough money in their retirement account to tilt the balance. Far more important, says the paper from the Center for Retirement Research at Boston College, are three variables that don't require a brokerage account: how long you work, controlling spending and tapping the value of your home." (The Wall Street Journal)
Health Care Savings Advice for Individuals
"Money magazine gives you strategies to cut your costs as much as 70% in six big areas -- from doctor visits to prescription drugs to dental care -- that are major sources of cash drains. This is the first of a two-part series on how to lower your medical expenses." (CNNMoney.com)
[Guidance Overview] ERISA Preempted State Claim That Employment Contract Promised Benefit Under Pension Plan
"[The Second Circuit Court of Appeals] rejected the employee's contention that the employment agreement created a right to the [pension plan's previous benefit formula in effect at the time of separation from service] separate and independent from the plan. The employment agreement did no more than describe the benefits ... that the employee would acquire upon his return to employment. The agreement made clear that such benefits arose from, and were governed by, the terms of the plan. Thus, ERISA preempted the breach of contract claim.' (Wolters Kluwer Law & Business / CCH)
Retirement Savings Shocker: For a Secure Retirement, Better Get Going on Your Savings Program
"[W]aiting even one year can have dramatic effects. If you invest $5,000 every year beginning at age 30 instead of 31, you will have $109,000 in additional savings, assuming an 8 percent compounded annual interest rate." (The Washington Post; free registration required)
Average 401(k) Balance 62% Above 2009, Fidelity Says
"The average account balance in the U.S. was $74,600 compared with $46,200 at the end of the first quarter of 2009, according to a report released [by Fidelity Investments].... The stock market recovery and renewed commitment to saving has driven the increase[.]" (Bloomberg)
Data Trove Might Shed Light on Health Care Cost Uncertainties
"How much do hospitals and doctors actually charge insurers for their services? How much and which of those services are privately-insured patients using? And, most significantly, what drives changes in health-care use, costs, and total spending? They are among the most vexing questions in American health care. And a recently amassed trove of data from insurance companies could soon shed new light on them." (The Washington Post; free registration required)
Consumer-Directed Health Plans Shown to Be Money-Savers
"A large study of the medical spending patterns of consumer-directed health plan enrollees, published in the May Health Affairs, found that CDHP enrollees did indeed spend less on care, saving them and their employers money. But the declines were not restricted to unnecessary and redundant tests. The drop also was due to fewer preventive tests and screenings." (American Medical Association)
[Opinion] Public-Sector Pensions: The Transition Costs Myth
"Public-sector employees -- who enjoy their generous retirement benefits -- and the pension industrial complex of plan managers, pension actuaries, and investment advisors don't like DC plans. They're pushing back with a novel argument: DB pensions' massive unfunded liabilities create 'transition costs' that make shifting to DC plans unfeasibly expensive. In other words, the more broke DB plans become, the more we have to stick with them.... Pension advocates rely on financial disclosure rules generated by the [GASB] regarding how quickly a DB plan must pay down -- or 'amortize' -- its unfunded liabilities." (The American Magazine)
[Opinion] Text of Morningstar Comment Letter to SEC on Need for More Disclosure to Investors in Target-Date Funds
"Target-date funds are quickly becoming Americans' primary -- if not only -- retirement-savings tool, so it's critical that investors understand how these dynamic funds are run. Also, plan sponsors, researchers, and fiduciaries need more data to evaluate target-date series side by side. Morningstar's specific suggestions for how to improve the funds' disclosure follows in the text of the letter." (Morningstar)
Actuarial Reality of 2003 Enhanced Pension Formula Comes Crashing Down on One California County
"Pensions for career Sonoma County government workers have more than doubled in the past decade, led by sheriff's deputies and other public safety workers who by 2011 were retiring with an average of more than $94,000 a year.... Taxpayer costs for county pensions, including payments on bond debt, meanwhile, have risen 401 percent in the past 12 years, to $87.2 million a year." (pressdemocrat.com)
[Official Guidance] Text of Final IRS Regs on Health Insurance Premium Tax Credit
Scheduled for publication in the Federal Register on May 23, 2012. Until then, view the document by clicking on the words "pre-publication PDF version' on the linked page. Excerpt: 'These regs 'provide guidance to individuals who enroll in qualified health plans through Affordable Insurance Exchanges (Exchanges) and claim the premium tax credit, and to Exchanges that make qualified health plans available to individuals and employers." (Federal Register)
[Guidance Overview] IRS Rule Addresses Affordability, Joint Tax Returns With Regards to Health Insurance Premium Tax Credits
"A new rule from the Internal Revenue Service addresses several issues with regards to the health insurance premium tax credits that individuals will be able to use to offset the cost of health care in the health insurance exchanges starting in 2014. The final rules follow the proposed rule issued on August 17, 2011. The regulations discuss the issue of affordability in employer-sponsored coverage, deferring a determination regarding potential changes to the proposed rule on that issue." (Kaiser Health Reform)
[Guidance Overview] EBSA Makes Small Clarifying Correction to FAB 2012-02 FAQs on Participant-Level Fee Disclosure
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." (Employee Benefits Security Administration)
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)
[Opinion] Wall Street Journal and Credit Suisse 'Union Pension Bomb' Is Long on Drama, Short on Insight (PDF)
"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." (National Coordinating Committee for Multiemployer Plans)
[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)
Kansas House and Senate Agree on Changes to State Employees Pension Plan
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%. (WSLS)
Many 401(k) Participants Show High Aversion to Risk
"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." (Charles Schwab)
ERISA Fee Benchmarking Rules and Practices Can Be Useful Even to ERISA-Exempt Public Plans
"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." (National Association of Governmental Defined Contribution Administrators)
[Opinion] Big Investments in Employer Stock Can Mean Big Losses for Retirement Plans
"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." (Reuters)
Florida Agency Says Legislators Should Consider Increase in Required Employee Contributions to Pension Fund
"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." (The Florida Current)
Highly-Paid Boston Public Employees Enjoying Free Commutes in Taxpayer-Funded Cars
"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." (BostonHerald.com)
[Guidance Overview] Chart of State Domestic Partner and Same-Sex Marriage Laws as of May 10, 2012
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. (Mercer)
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)
Houston Sues Firefighters Pension Board to Open Its Books
"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 Houston Chronicle)
[Guidance Overview] A Bridge Too Far: Early Retirement Exception from 10% Tax Was Available from Participant's 401(k), But Not After IRA Rollover
"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." (Haynes and Boone)
Ohio Senate Passes Public Pension Reform; Ohio House to Act This Summer
"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." (WIOT.com)
Personal Fiduciary Liability Under ERISA: Your Obligations Can Follow You Into Bankruptcy (PDF)
"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." (Lockton)
[Opinion] Ohio Public Retirement Systems Need Overhaul, Not More Tweaks
"$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." (Columbus Dispatch)
Auditor: San Diego Pension Initiative Overstates Savings
"[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." (Voice of San Diego)
Considerations in Preparing Disclosure in Official Statements on a Government Bond Issuer's Pension Funding Obligations (PDF)
"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." (Pension Disclosure Task Force, National Association of Bond Lawyers)
Health Tax Credit Could Mean Big Savings for Small Firms
"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[.]" (Crain's Chicago Business)
New York State Retiree Health Liability Rises to $72 Billion; NYC's Is $84 Billion
"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." (Bloomberg)
[Opinion] What If 'Say on Pay' Rule Applied to Public Pension Consultants and Managers?
"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." (Governing)
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)
[Opinion] Text of Memo to Republicans on Status of Congressional Investigation on Obamacare Negotiations with Drug Makers (PDF)
"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." (Majority Staff of Subcommittee on Oversight and Investigations, Committee on Energy and Commerce, U.S. House of Representatives)
Probe Continues Into Reform Law Dealings Between White House and Pharmaceutical Manufacturers
"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." (Modern Healthcare)
MLR Killing Off Business, Hurting Consumers
"[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." (John Goodman's Health Policy Blog)
Individual Insurance Benefits Becoming Available Under Health Care Reform Would Have Cut Out-Of-Pocket Spending In 2001-08
"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." (Health Affairs)
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)
DOL FAQs Address Participant Fee Disclosure Rules as Applied to Brokerage Windows, Calculation of Total Annual Operating Expense Ratio
"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[.]" (SunGard Relius)
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)
[Official Guidance] June 12 IRS Phone Forum to Address 403(b) Written Plan Requirement and Frequent Issues
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. (Internal Revenue Service)
[Guidance Overview] 9th Circuit Case Addresses Equitable Remedies Post-Amara and Says Mere Violations of Law Do Not Establish 'Harm' Creating Equitable Remedies
"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." (Lane Powell)
[Opinion] PBGC: Protector or Predator?
"[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?" (Burypensions Blog)
Nine Leading Trends in Rx Plan Management: Findings from a National Peer Study, 2012 Edition (PDF)
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. (Express Scripts)
HHS Finalizes Requirement to Notify Consumers When MLR Spending Targets Met
"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.'" (Bloomberg BNA)
[Opinion] That Which is Unsustainable Will Go Away: Pensions
"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." (Business Insider)
[Opinion] USCCB Submits Comments on Proposed HHS Rulemaking, Urges Re-Opening of Final Rule Defining Mandate, Exemption
"'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.'" (The Sacramento Bee)
Think Twice About Rolling Your 401(k) into an IRA -- Consider Investment Management Fees When You Receive New Disclosure Report
"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." (CBS MoneyWatch)
[Guidance Overview] Backdating Stock Options Still a Risky Play
"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." (CFO)
Six Smart Steps to Get Your Employees Ready for Retirement
"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." (Business Management Daily)
GOP Prepares Reform Plan for Ruling on Health Law
"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." (Politico)
CalPERS Ignores Governor Brown, Rejects Immediate Application of Lowered Earnings Assumption
"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.'" (Calpensions)
[Official Guidance] Form W-2 Reporting of Employer-Sponsored Health Coverage: IRS Informational Page Updated May 2, 2012
"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)." (Internal Revenue Service)
[Official Guidance] Text of IRS Notice of Meeting of Advisory Group for the Tax Exempt and Government Entities Division (PDF)
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. (Internal Revenue Service)
PBGC Sues to Take Over Pension Plans of Dewey & LeBoeuf
"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 New York Times; free registration required)
CalPERS Begins Applying Lower Earnings Assumption for Country's Largest Pension Plan
"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 Sacramento Bee)
How Does Health Reform Affect Rural America?
"The Rural Health Panel analyzed federal health reform proposals,[ACA], and related government papers and documents and produced nine reports for federal policy-makers and stakeholders. The reports analyzed the impacts of the various coverage proposals and of the ACA on rural people, places, and providers. The project informed the ideas in the ACA through discussions of its provisions and ways to implement the law." (Robert Wood Johnson Foundation)
Commenters Say Qualified Longevity Annuity Contract Rules Should Allow More Options (PDF)
"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[.]" (Bloomberg BNA)
Is It Safe to Own Company's Stock in a 401(k) or Profit Sharing Plan?
"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." (Reuters)
The Implications of SEC's Capital Buffer Proposals for Money Market Funds (PDF)
"Given the wide range of approaches that SEC requirements could take, this analysis considers several variations on the capital buffer idea, including requiring fund advisers to commit capital, requiring funds to raise capital in the market, or having funds build a capital buffer inside funds from fund income." (Investment Company Institute)
DOL Emailing Form 5500 Filers to Raise Awareness About Schedule C
"Scott C. Albert, chief of the reporting and compliance division at the Department of Labor's Employee Benefits Security Administration, said recently that DOL is sending emails to Form 5500 filers if they are large employee benefit plans that have not included a Schedule C. Plan sponsors are required to report on Schedule C each service provider that received $5,000 or more in direct or indirect compensation from a plan.... [A]lmost all large plans require Schedule C because of investments in mutual funds." (Bloomberg BNA)
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)
Spring 2012 Report of Results from the Segal Survey of Calendar Year Multiemployer Pension Plans' 2012 Zone Status
"[T]he proportion of calendar-year multiemployer pension plans in the green zone declined by four percentage points between January 1, 2011 and January 1, 2012: from 66 percent to 62 percent. In addition, the survey found that the average [PPA '06] funded percentage for those plans decreased by three percentage points over that period: from 89 percent to 86 percent. Prior to the market downturn that began in late 2008, more than three-quarters of calendar-year plans (83 percent) were in the green zone and the average PPA'06 funded percentage was 97 percent." (Segal)
Proskauer ERISA Litigation Newsletter, May 2012
Articles include: Health Care Reform Remains Alive and Well as DOL Enforces ACA through Plan Audits; Class Warfare -- ERISA Class Litigation in Light of Wal-Mart v. Dukes; and Rulings, Filings, and Settlements of Interest. (Proskauer Rose LLP)
DOL Begins Enforcing the ACA Through Plan Audits
"Generally, plan sponsors and administrators must be able to demonstrate that their plans comply with the ACA, which requires documentary evidence -- from plans, record keepers, and/or service providers. Written records of the steps taken to comply with the ACA since September 23, 2010, including detailed records of participation information and communications with participants about enrollment periods and coverage, should be retained in a readily accessible fashion. For example, plans should keep and be able to produce notices of coverage for children up to 26 years of age, and evidence of distribution. Likewise,any plan amendments or written policies that were adopted to implement the ACA mandates discussed above should be ready for production." (Proskauer Rose LLP)
Is a 'Simple Cafeteria Plan' Right for Your Company?
"[The 'Simple Cafeteria Plan'] was established by health care reform and is available for years beginning after December 31, 2010. It provides eligible employers an automatic 'pass' for many of the nondiscrimination tests that apply to cafeteria plans and their component benefits.... A Simple Cafeteria Plan is treated as automatically satisfying the three nondiscrimination requirements that apply to cafeteria plans ... The general rules for cafeteria plan eligibility apply, so self-employed individuals, partners in a partnership (this includes members in an LLC taxed as a partnership) and more-than-2% S-corporation shareholders may not participate." (McKenna Long & Aldridge LLP)
[Official Guidance] Text of CCIIO Announcement on Medical Loss Ratio Annual Reporting Form Reminding Health Insurers of June 1 Deadline (PDF)
"[The final regs require] an issuer to submit an annual report to the Secretary by June 1 of the year following the end of an MLR reporting year. The first annual report must be submitted to the Secretary by June 1, 2012.... Please refer to the Medical Loss Ratio (MLR) Annual Reporting Form Instructions at: http://www.cciio.cms.gov/resources/other/index.html#mlr for the complete set of instructions." (Centers for Medicare & Medicaid Services, Center for Consumer Information and Insurance Oversight)
[Official Guidance] Text of CCIIO Announcement on Medical Loss Ratio Rebate Notices, Reminding Health Insurers of August 1 Deadline (PDF)
"[The final regs require] an issuer to provide information in the form of a rebate notice to enrollees who are owed rebates, regardless of the form in which the rebate payment is made (e.g., check or future premium credit).... CMS has developed a standard form for the rebate notice that each issuer must send by August 1 of the following year to enrollees entitled to a rebate based upon the prior MLR reporting year. For example, notice of rebates based on the 2011 MLR reporting year must be provided by August 1, 2012.... Please refer to the Medical Loss Ratio (MLR) Rebate Notice Instructions at http://www.cciio.cms.gov/resources/other/index.html#mlr for the complete set of instructions." (Centers for Medicare & Medicaid Services, Center for Consumer Information and Insurance Oversight)
[Official Guidance] Text of General CCIIO Guidance on Federally-Facilitated Health Exchanges (PDF)
"This document outlines the [HHS] approach to implementing a Federally-facilitated Exchange (FFE) in any State where a State-based Exchange is not operating. In addition to describing [the] high-level operational approach, [the document discusses]: 1. How States can partner with HHS to implement selected functions in an FFE, 2. Key policies organized by Exchange function, and 3. How HHS will consult with a variety of stakeholders to implement an FFE. Subsequent guidance documents will include additional policy and operational details intended to inform State decision-making and preparation for Exchange participation, roles and responsibilities, and potential areas of collaboration." (Center for Consumer Information and Insurance Oversight)
California State Workers Might Face Shorter Work Weeks and Less Pay But No Adverse Effect on Pensions
"Under [Governor] Brown's plan, state workers would switch to a four-day workweek, working 9.5 hours a day, or 38 hours a week, instead of the current five-day, 40-hour workweek. The change would cut workers' pay by 5 percent, saving the state $401 million in general fund costs.... Brown's plan wouldn't affect California employees' pension calculations." (The Sacramento Bee)
Educational Web Page on Retirement Plan Fees Comes Online from The Principal
"The online resource offers: [1] An explanation of retirement plan costs; [2] Tips on how to review plan services; [3] Help navigating cost considerations; [4] Tips for evaluating fee reasonableness; [5] Tips for addressing participant questions[.] The Principal also offers a new Fee Reasonableness Review Checklist, a sample template financial professionals can share with plan fiduciaries to help guide them through the evaluation process." (The Principal Financial Group)
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)
Some Ford Retirees Facing Major Pension Decision: Take or Reject Buy-Out Offer
"Ford Motor Company is making tens of thousands of white-collar retirees decide whether they want to keep getting their pension in monthly installments, or get a lump sum payout. Ford sees the unprecedented move as a way to reduce the company's liabilities." (NPR)
More States Working to Implement Health Insurance Exchanges, HHS Announces
"[Illinois, Nevada, Oregon, South Dakota, Tennessee and Washington will receive more than $181 million in grants to help implement the new health care law by helping] states establish Affordable Insurance Exchanges. Starting in 2014, [the Exchanges will help consumers and small businesses in every state] choose a private health insurance plan. These comprehensive health plans will ensure consumers have the same kinds of insurance choices as members of Congress. [34] states and the District of Columbia have received Establishment grants to fund their progress toward building Exchanges." (Department of Health & Human Services)
Animated U.S. Map Showing Year-by-Year Increase in Obesity Among State Populations, 1985-2010
An effective use of animation to show a trend that substantially raises the cost of providing health care. "The number of states with an obesity prevalence of 30% or more has increased to 12 states in 2010. In 2009, nine states had obesity rates of 30% or more. In 2000, no state had an obesity prevalence of 30% or more." (Centers for Disease Control and Prevention)
[Opinion] Combination of Fee Disclosure DOL Regs and 'Strict Liability' Under Code Section 4975 Might Be Explosive
"Though [it is possible to] get lost in the detail of timely meeting the new disclosure requirements, the real impact will occur once the dust settles, and when [there are] all manner of prohibited transactions -- arising either from failure to properly disclose compensation or from what is revealed by the disclosure itself.... [One] of the most serious of the impacts of 408b2 promises to arise from application of Code section 4975, not from ERISA Section 406 to which 408b2 is connected.... Once the prohibited transaction occurs, the tax liability attaches, and there is a duty to report and pay that tax. The IRS has no ability to waive that tax -- unlike the prohibited transaction penalty under ERISA." (Business of Benefits)
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)
RAND Study of Effect of ACA on Enrollment and Premiums, Either With or Without the Individual Mandate (PDF)
The authors predict the effects of a possible Supreme Court decision invalidating the individual mandate while keeping the other parts of the law intact. They predict the effects of such a decision on health insurance coverage overall and for subgroups based on income. They also estimate where people will obtain insurance in scenarios with and without the mandate. Finally, they estimate how the elimination of the individual mandate will affect insurance premiums. (RAND)
Colorado Creating Online Price List of Health Care Procedures
"[14] states have or are setting up searchable databases designed to help people shop and compare health care options based on price and quality. Colorado is launching its All Payer Claims Database this fall. [The project] is the result of 2010 legislation and is expected to have data from most of the claims in the state in 2013." (Kaiser Health News)
[Official Guidance] Text of Official Corrections to Final HHS Regs on Standards for Reinsurance, Risk Corridors, and Risk Adjustment (PDF)
"This document merely corrects technical and typographic errors in the Health Insurance Premium Stabilization final rule that was published on March 23, 2012 and becomes effective on May 22, 2012. The changes are not substantive changes to the standards set forth in the final rule." (U.S. Department of Health and Human Services)
DOL Alleges Idaho Plan Administrator Misused Retirement Funds
"[DOL] has filed a complaint in the U.S. District Court for the District of Idaho against Matthew D. Hutcheson alleging that he violated [ERISA]. The complaint alleges that, toward the end of 2010, Hutcheson used more than $3.2 million representing the retirement plan savings of workers from multiple employers for his own personal expenses and in an attempt to purchase an interest in the Tamarack Resort -- a failed ski and golf resort in Idaho. [The DOL alleges that the resulting] prohibited transaction has left affected retirement plans without sufficient funds to pay participants all the benefits owed to them." (Employee Benefits Security Administration)
Delaware Court Dismisses 162(m) Claims and Denies Plaintiff's Request for Fees
"In Freedman v. Adams, a 'shareholder' brought derivative claims against the board of directors of XTO Energy alleging breaches of fiduciary duty and waste due to the board's alleged failure to structure over $40 million of executive bonuses over a three-year period in a manner that would have made them deductible under Code Sec. 162(m). Apparently, the board get religion after the lawsuit was filed and approved a Section 162(m) plan for cash bonuses shortly thereafter. However, the Delaware Chancery Court rejected all claims relating to Code Section 162(m)[.]" (Winston & Strawn LLP)
Same-Sex Partner Benefits Bill for Federal Employees Is Up for Consideration
"[The Senate Homeland Security and Governmental Affairs Committee is moving forward with a same-sex measure] for federal employees. The committee will hold a markup session for the 2011 Domestic Partnership Benefits and Obligations Act (S. 1910) ..., which opens retirement, health, transportation and other benefits to same-sex domestic partners of government workers." (Government Executive)
Time's Up on 401(k) Fee Disclosure Compliance: New Potential Breaches of Fiduciary Duty Looming
"[Ian Dingwall, EBSA's chief accountant,] suggested that auditors call their clients to make certain that they, as plan fiduciaries, have a list of service agreements and know which ones are not in writing by July 1. A service agreement that is not in writing is not considered �reasonable� under the DoL regulations, and therefore results in a prohibited transaction.... Putting plan auditors in the position of enforcer of the service-provider disclosure requirement is beyond the scope of an auditor�s responsibility." (CFO)
[Opinion] Looking at Single-Payor Health Care Efforts in Vermont, Montana and California
"In May 2011, [the Vermont governor] signed the single-payor bill into law, which laid the groundwork for creating a publicly funded health system in which the state would act as the main insurer by 2017. [Montana's Governor] also asked the federal government for a waiver this past September so Montana could set up its own single-payor health system based on what is used by its northern neighbor, Saskatchewan, although no waiver has been granted. Even California lawmakers proposed a bill in January that would have established a single-payor healthcare system, although it was ultimately defeated." (Becker's Hospital Review)
[Guidance Overview] HHS Notice Addresses Rules for Insurers That Meet or Exceed Medical Loss Ratio Standards
"The extended notice requirement will hopefully reduce confusion that may have otherwise occurred when some individuals received rebates and others, in different insurance plans, did not. Importantly, the electronic disclosure rules for providing SBCs, which are referenced in the extended notice requirements for MLRs, were recently addressed in DOL frequently-asked-questions[.]" (Practical Law Company)
[Guidance Overview] FAQs on Summaries of Benefits and Coverage Address Electronic Distribution and Coverage Example Calculator
"Although the latest FAQs do not delay the fast-approaching compliance date for providing [Summaries of Benefits and Coverage, or "SBCs"], plans, plan sponsors and insurers may nonetheless welcome the first-year policies provided in the new guidance. In particular, the rule permitting partial SBCs for plans with multiple insurers may be helpful in preparing initial SBCs, though the FAQ also underscores challenges for later years when information from separate insurers must be combined in the same SBC. In addition, plans and insurers may want to document their SBC compliance efforts in case they wish to use the Departments' one-year good faith compliance policy." (Practical Law Company)
[Guidance Overview] DOL, HHS and Treasury Guidance on SBC Requirements Provides Compliance Exceptions During First Year
"[T]he agencies acknowledged the administrative difficulties for issuers and plans in some circumstances to provide such summaries. [For example, in] discussing a question about health plans that use two or more issuers to provide various types of coverage, the departments said issuers have no obligation to provide coverage information for benefits that it does not insure, but that group health plans �are responsible for providing complete SBCs with respect to a plan.�" (Bloomberg BNA)
Redefining Retirement: The New 'Retirement Readiness' (PDF)
"[T]he 13th Annual Transamerica Survey found low levels of 'retirement readiness' among workers, and for many, saving enough to retire by age 65 may be unrealistic.... Most workers plan to either work past age 65 and/or work part-time in retirement ... however, few workers (20 percent) have a back-up plan if they are forced into retirement sooner than expected due to life�s unforeseen circumstances.... [T]he survey results illustrate important actions that can be taken by employers, the retirement industry, and policymakers to help workers achieve �retirement readiness�[.]" (Transamerica Center for Retirement Studies)
[Guidance Overview] Final EBSA Fee Disclosure Requirements Addressed in Field Assistance Bulletin 2012-02
"The [Field Assistance Bulletin (FAB)] contains 38 questions and answers relating primarily to participant-level disclosure but also addressing service provider disclosure. It includes many helpful and practical solutions to uncertainties in the final disclosure regulations. It is clear from the text of the FAB that the DOL has no intention of extending either of disclosure deadlines. However, in Q&A 37, the DOL recognizes that many service providers and plan administrators may have initiated or even made disclosures prior to publication of the FAB based on interpretation of the regulations and may be unable to modify their disclosures by the deadlines without unreasonable difficulty or cost." (Warner Norcross & Judd LLP)
[Guidance Overview] FAB Addresses Investment Disclosures to Participants About a Plan's Designated Investment Alternatives
"Do the investment disclosure requirements apply to alternatives closed to new investments? Yes. If participants are allowed to retain current investments in a given fund, then the comparative chart of investments must include the fund, even though participants cannot move money into the fund. The plan administrator could (but need not) limit the disclosures to those participants invested in the fund." (SunGard Relius)
Is Your Target-Date Fund's Glide Path Unstable?
"[A] little-recognized aspect of target-date funds is their glide paths -- the way an investor's asset allocation changes over time -- may change. This is not the expected change in allocations from year to year as stocks decline and bonds increase; rather it's when the entire glide path itself shifts up or down, so an investor who is 25 years old today does not have the same stock allocation as a 25 year old did five years ago. Researchers ... identified this phenomenon and assigned a metric to it, called the Glide Path Stability Score[.]" (MorningstarAdvisor)
Health Care Costs for American Families in 2012 Exceed $20,000 for the First Time
"The annual Milliman Medical Index (MMI) measures the total cost of healthcare for a typical family of four covered by a preferred provider plan.... The 2012 MMI cost is $20,728, an increase of $1,335, or 6.9% over 2011. The rate of increase is not as high as in the past, but the total dollar increase was still a record." (Milliman)
[Guidance Overview] Recent Case Highlights Split of Authority on Whether Corporate Agreements Can Amend Employee Benefit Plans
"In Sterling Chemicals v. Evans, the U.S. Court of Appeals for the Fifth Circuit found that a paragraph in an asset purchase agreement satisfied the technical requirements for an employee benefit plan amendment, [and even though] it did not state it was intended to amend the plan....[the language] did, in fact, serve to amend the benefit plan.... [T]he First and Sixth Circuits have held that a corporate agreement cannot amend an employee benefit plan without explicitly setting forth the intent to do so. Last month, the Supreme Court of the United States declined to review the Sterling decision, so the question of whether and how a corporate agreement may amend an employee benefit plan will continue to be an issue that employers must consider when drafting and reviewing corporate agreements." (McDermott Will & Emery)
At April Meeting, GASB Simplifies Accounting for State Retirement System Liabilities (PDF)
"At the Governmental Accounting Standards Board (GASB) meeting April 18th through the 20th, the Board voted to greatly simplify the manner of apportioning the underfunding of typical state retirement systems among the individual participating employers. But the Board retained its original proposal that those apportioned liabilities should appear as liabilities on each participating employer's balance sheet beginning as early as 2014.... What remains uncertain is what the precise effects [will be]. Of particular concern and uncertainty will be the impact of the additional liabilities on public bond markets, on the rating agencies, on legal or contractual limitations on liabilities on the part of such participating employers, and whether efforts to enact specific state laws reallocating liabilities or reducing benefits will come about as a result." (Groom Law Group)
[Guidance Overview] IRS Notice 2012-31 Addresses 'Minimum Value' Determination for Employer-Sponsored Health Plans (PDF)
"Basing minimum value on benefits generally offered in the large-employer market, which entails recognizing that those plans do not have to offer essential health benefits, is an important distinction that will help large-employer plans meet the minimum value threshold.... The guidance asks for comments on any other benefits (such as wellness benefits) that should be reflected in the calculation of minimum value.... The IRS guidance does not provide any further clarification on how the employer contributions to an HSA or HRA would be adjusted. If the full value is not reflected, a plan could fail to meet the minimum value threshold." (Buck Consultants)
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)
Three Ways to Make Corporate Wellness a Game for Employees
"Incorporating gaming techniques into company wellness programs greatly boosts engagement, a key ingredient for wellness program success.... Games have the power to engage people at a deep level and shift their priorities toward the behaviors rewarded by the games. For this reason, businesses increasingly are using games to train employees. [Three ways that company-sponsored wellness programs can use and benefit from gaming techniques are:] 1. Allow for autonomy and voluntary participation.... 2. Make it contextual, relevant and social.... 3. Start with a light touch; build in depth." (Society for Human Resource Management)
Resource Page on Implementation of Health Insurance Medical Loss Ratios by the States, Updated May 11, 2012
"The N.H. insurance department released its first health insurance premium rate report in April 2012, a study mandated by legislation enacted two years ago. According to the report, premiums grew 14 percent between 2009 and 2010, driven primarily by claims costs, as well as new medical technologies and the growth in outpatient facility costs." (National Conference of State Legislatures)
[Guidance Overview] Whether or Not Constitutional, ACA Is Creating Turbulent Times for HSAs and HRAs (PDF)
At page 4. "Health savings accounts (HSAs) avoid many of the regulatory requirements under the ACA because they are not generally considered to be health plan coverage. By way of direct regulation, the ACA did increase the penalty for using HSA funds for non-medical purposes to a 20 percent excise tax (plus applicable income taxes) and requires a prescription for OTC drugs. More dramatically, however, is the potential for collateral damage to HSA viability as a result of ACA's regulation of the underlying high deductible health plan (HDHP) coverage, especially in the fully insured market. Some of this concern has been allayed recently when the agencies indicated that a portion of an employer's contribution (but not salary reductions) to an HSA could count toward the actuarial valuation requirements for the underlying HDHP plans." (Employers Council on Flexible Compensation)
[Official Guidance] Text of Official Corrections to Interim Final CMS Regs for Health Insurance Issuers Implementing Medical Loss Ratio Requirements (PDF)
8 pages; the clarifications are more than typographical errors. "This document corrects technical errors that appeared in the interim final rule published in the Federal Register on December 1, 2010, entitled 'Health Insurance Issuers Implementing Medical Loss Ratio ... Requirements under the [PPACA]' and in the correction notice published in the Federal Register on December 30, 2010, entitled 'Health Insurance Issuers Implementing Medical Loss Ratio ... Requirements Under the [PPACA]; Corrections to the Medical Loss Ratio Interim Final Rule With Request for Comments.' ... We believe that it is unnecessary to provide for a public comment period or to delay implementing these corrections, as they clarify provisions of a final rule that has been subjected to notice and comment procedures and do not make any substantive changes to it." (Centers for Medicare & Medicaid Services)
GAO Testimony on Unemployed Older Workers Facing Long-Term Joblessness and Reduced Retirement Security
Testimony by Director, Education, Workforce, and Income Security, before the Senate Special Committee on Aging, May 15, 2012. "This testimony discusses the status of unemployed older workers. The most recent recession, which began in 2007 and ended in 2009, was the worst since the Great Depression, and has been characterized by historically high levels of long-term unemployment. While it is crucial that the nation help people of all ages return to work, long-term unemployment has particularly serious implications for older workers (age 55 and over). Job loss for older workers threatens not only their immediate financial security, but also their ability to support themselves during retirement." (Government Accountability Office)
New Online Resource Page by HHS: the 'Health System Measurement Project'
"The web-based tool ... will allow policymakers, providers, and the public to develop consistent data-driven views of changes in critical U.S. health system indicators.... The Health System Measurement Project brings together datasets from across the federal government that span topical areas, such as access to care, cost and affordability, prevention and health information technology. It presents these indicators by population characteristics, such as age, sex, income level, insurance coverage, and geography." (U.S. Department of Health and Human Services)
Employee Ownership Update for May 15, 2012
NCEO Executive Director Loren Rodgers discusses the appointment of 22 new employee ownership research fellows at Rutgers, the Employee Ownership 100 update, employees voting against executive pay, a creative approach to stock purchase plans, and multinationals setting up employee ownership plans in Zimbabwe. (National Center for Employee Ownership)
[Opinion] Text of Comments to IRS by Pension Action Center Urging IRS to Retain Strict Requirement of Providing Notices to Separated Plan Participants
"The Pension Action Center is writing to comment on the letter sent to your office by [ASPPA], dated December 20, 2011. ASPPA requested clarification of the Internal Revenue Code's notice requirement for separated plan participants who are listed on IRS Form 8955-SSA. ASPPA argued that plans should not have to provide separate notices of deferred vested pensions to plan participants because plans already satisfy this notice requirement with 'benefit statements and other documents.' The Pension Action Center strongly disagrees with ASPPA's interpretation[.]" (Pension Action Center, Gerontology Institute of the University of Massachusetts Boston)
Many Experience Challenges Regaining Employment and Face Reduced Retirement Security
"The number of workers age 55 and over experiencing long-term unemployment has grown substantially since the recession began in 2007. This raises concerns about how long-term unemployment will affect older workers' reemployment prospects and future retirement income.... GAO examined (1) how older workers' employment status has changed since the recession, (2) what risks unemployed older workers face and what challenges they experience in finding reemployment, (3) how long-term unemployment could affect older workers' retirement income, and (4) what other policies might help them return to work and what steps the Department of Labor has taken to help unemployed older workers." (Government Accountability Office)
Innovation in the Health Care Sector Continues
"The Galen Institute held a conference ... in which speakers from more than a dozen companies described the investments they are making in better health, better health care services, and more efficient care delivery. They demonstrated that the best solutions to the problems in our health sector come not from remote Washington bureaucrats trying futilely to re-engineer our health sector through costly, cumbersome, and confusing rules and regulations, but from innovators who are listening to doctors, patients, and consumers." (Galen Institute)
[Opinion] Provisions in Health Reform Law and Regs Will Reduce Access to Health Savings Accounts
"[1] ObamaCare's essential health benefits package contains new restrictions on deductibles and cost-sharing, which will prevent at least some current HSA plans from being offered. [2] ObamaCare's medical loss ratio regulations also impose new restrictions that studies show will hit HSA plans particularly hard, and could force individuals to change their current form of coverage. [3] The ObamaCare statute does not specify that cash contributions made to an HSA will be counted towards the new federal actuarial value standards. And a February bulletin released by HHS in advance of upcoming rulemaking indicates that under the Administration�s approach, not all contributions into an HSA will count towards the new minimum federal standards -- meaning some HSA policies will not be considered 'government-approved.'" (National Center for Policy Analysis)
IRS Proposals for Encouraging Longevity Annuities Might Not Impress 401(k) Sponsors
"[T]here are potential liability issues. For example, while many insurance companies offer such products (including several launched within the past year), each insurer offers only its own solution. That undermines a plan sponsor�s fiduciary duty to prudently select investment options.... The plan sponsor also has a duty to pick an insurer that will be able to make annuity payments long into the future. 'You�ve got to pick a provider that�s going to be around for 50 or more years,' says Robyn Credico, director of defined-contribution consulting at Towers Watson." (CFO)
[Official Guidance] Eighth Circuit Addresses Standard of Review in Long-Term Disability Insurance Dispute (PDF)
"Standard's [disability insurance] policy language reserving the power to 'resolve all questions . . . [of] interpretation' indicates the administrator has discretionary power to construe ambiguous terms. Thus, our standard of review is for abuse of discretion.' (Hankins v. Standard Insurance Company, 8th Cir., May 14, 2012). (Justia.com)
PBGC to Request Comments on Information Collection for Locating and Paying Participants
"The collection consists of information participants and beneficiaries are asked to provide in connection with an application for benefits. In addition, in some instances, as part of an effort to identify participants and beneficiaries who may be entitled to benefits, the PBGC requests individuals to provide identifying information that the individual would provide as part of an initial contact with the PBGC. All requested information is needed to enable the PBGC to determine benefit entitlements and to make appropriate payments." (Wolters Kluwer Law & Business / CCH)
Good-Faith Efforts Already Taken to Comply with Participant Fee Regs Won't Be Penalized, EBSA Says
"[Phyllis C. Borzi, assistant secretary of labor for the Employee Benefits Security Administration] said plans that have already distributed, or are getting ready to distribute, their participant-level fee disclosures under Section 404(a) of [ERISA] will not be subject to DOL enforcement action if they acted in good faith to comply with the rule [prior to the recent issuance by the EBSA of 'Frequently Asked Questions' about the fee disclosure regulations].... However, Borzi cautioned that plans that discover they were not in totally in compliance with the participant disclosure rule in light of the FAQs will need to develop a plan to comply with the law before their next participant disclosure." (Bloomberg BNA)
ML Strategies Health Care Reform Update, May 14, 2012 (PDF)
Weekly update on federal and state health care reform legislation, regulations and initiatives. (ML Strategies)
Federal Guidance and Regulation of State Health Benefit Exchanges
"[Information on the Final Rule which i]mplements standards for states related to reinsurance and risk adjustment, and for health insurance issuers related to reinsurance, risk corridors, and risk adjustments consistent with the ACA. These programs will lessen the impact of potential adverse selection and stabilize premiums in the individual and small group markets as insurance reforms exchanges are implemented, starting in 2014. The rule becomes effective May 23, 2012." (National Conference of State Legislatures)
Arizona Now Allowing Some Religious Employers' Health Plans to Opt Out of Contraceptive Drug Coverage Mandate
"[The new law] applies only to 'religiously affiliated' employers, which are defined as non-profit groups that primarily employ and serve individuals of the same religion or religiously motivated organizations with articles of incorporation clearly stating that religious beliefs are central to the organization's operating principles." (The Arizona Republic)
Trends from the 2012 Fiduciary Survey of Investment Advisors and Registered Representatives
"The survey not only sought advisors' opinions on the fiduciary standard but also gauged their understanding of what such a standard means now, or would mean, to their businesses. Key findings in the first report on the survey pointed out that registered reps and investment advisors in the field believe that extending the fiduciary standard would not cost investors more for advice, limit access to advice or products nor price investors out of the market for advice." (AdvisorOne)
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)
President's Support of Same-Sex Marriage Has No Legal Effect on Employers' Decisions to Offer Benefits to Workers' Domestic Partners
"Last year, a little more than half of employers offered health benefits for domestic partners.... That's up from a little less than one-third in 2010. The biggest factors driving that change are employers' views on whether such benefits help them attract and retain desirable workers." (NPR)
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)
Young Workers Want Guaranteed Income Option in 401(k) Plans
"Fully 95% of workers under 30 who don't have access to a guaranteed income option at work said that they'd like to be able to do so, according to a poll ... by The Hartford Financial Services Group Inc. Those numbers remained high for individuals in their 30s and 40s, too. About nine of 10 individuals in both age cohorts said that they would like to turn some portion of their retirement savings into guaranteed income[.]" (Investment News)
Does Employer-Provided Health Insurance Cause 'Hours Lock'? New Evidence on Women Diagnosed with Breast Cancer
"Employment-contingent health insurance creates incentives for ill workers to remain employed at a sufficient level (usually full-time) to maintain access to health insurance coverage. [The authors'] study employed married women, newly diagnosed with breast cancer, comparing labor supply responses to breast cancer diagnoses between women dependent on their own employment for health insurance and women with access to health insurance through their spouse's employer." (The National Bureau of Economic Research; paid subscription or individual purchase required to retrieve full text)
Some States Mandating Better Coverage of Oral Medications Used for Cancer Treatment
"In contrast to conventional IV chemotherapy, which often kills both cancer and healthy cells alike, many of the new oral oncology drugs target specific biologic processes in cancer cells and block their growth. In addition to being highly effective, they're convenient, especially for patients who live far from a treatment facility.... Health plans, however, have been slow to adjust to the change. People who get traditional IV chemotherapy on an outpatient basis often pay a flat co-payment that covers the drug as well as the cost of administering it. Annual out-of-pocket costs are also typically capped. Oral anti-cancer medications, on the other hand, are generally considered a pharmacy benefit. Instead of a co-payment, plan members often pay a percentage of the drugs' cost -- up to 50 percent in some cases -- with no annual out-of-pocket limit." (Kaiser Health News)
Many Businesses Offer Health Benefits to Same-Sex Couples Ahead of Laws
"'There's been a steady growth for a long time,' says ... a partner at Mercer. In the early days, some employers worried that adding coverage for domestic partners could make their costs skyrocket by attracting people with higher-than-average health risks, ... but 'that did not happen.' ... In the Mercer survey, coverage of same-sex partners was most common in the West, with 79 percent of large employers offering such benefits. It was least common in the South, at 28 percent. Big differences were also noted within industries. Among manufacturing firms, for example, the coverage rate ranged from a high of 96 percent for pharmaceutical companies to 18 percent for machinery and heavy equipment makers." (Kaiser Health News)
Employer Agrees to Restore $1.3 Million to Employee Retirement Plan
"In a consent judgment entered this month in the U.S. District Court's Central District in Los Angeles, officers of ... Western Mixers Inc. agreed to restore $802,901 to participants' accounts within 10 days. During the course of the investigation leading up to the lawsuit, the company repaid to the plan $485,000 of the total funds identified as missing. The consent judgment fully recovers unpaid contributions and unauthorized withdrawals, plus interest." (Employee Benefits Security Administration)
[Guidance Overview] DOL Addresses Definition of Designated Investment Alternatives for Purposes of Required Participant Fee Disclosures
"The issue that has generated more attention and discussion regarding both the participant (404a-5) and the service provider (408b-2) regulations is the issue of what constitutes a designated investment alternative (DIA).... The issue is significant because an employer annually must provide participants a significant amount of investment information with respect to each DIA. Furthermore, under the 408b-2 regulations, a covered service provider that provides a platform of DIAs in connection with recordkeeping or brokerage services would need to make annual investment disclosures about the DIAs to the plan fiduciary. In this technical update, [the authors] discuss clarifications of the definition of a DIA provided by the recently released FAB 2012-2." (SunGard Relius)
Reinhart Employee Benefits Update, May 2012 (PDF)
Items include: Summary of Description of Material Modifications for Calendar-Year Plans; HHS Announces Proposed Regulations to Establish Health Plan Identifiers for Health Plans; IRS Publishes Proposed Regulations Imposing Fees to Fund Patient-Centered Outcomes Research; CMS Releases Guidance on Medical Loss Ratio Regulations; Ninth Circuit Rejects Claim for Equitable Relief Following SPD and Plan Document Discrepancies. (Reinhart)
Recent Case Emphasizes Importance of the Retirement Plan Fiduciary Decision-Making Process
"[T]he recent district court decision in Tussey v. ABB, Inc., which levied a $35.2 million judgment against the employer-fiduciary (ABB), emphasizes the importance of a prudent decision-making process. Here are some of the major missteps made by ABB and the key takeaways for other plan fiduciaries[.]" (Poyner Spruill)
Independent Contractor Misclassification: How Companies Can Minimize the Risks
"This white paper ... examines the risks posed to private businesses and governmental entities that have business models reliant upon the use of [independent contractors, or "ICs"] and other contingent workers.... address[es] how those risks typically arise and the costly consequences those risks may pose to companies and organizations using ICs.... [and] discusses the steps businesses can take to avoid or minimize IC misclassification liability, including restructuring, re-documenting, and re-implementing their business models, voluntary or government-sponsored reclassification, or redistribution of ICs through the use of a knowledgeable workforce management or staffing firm." (Pepper Hamilton LLP)
[Opinion] Health Care Reform: What Employers Should Be Considering Now
"As employers anxiously await the Supreme Court's decision on health care reform (expected by late June), there are many things employers should be thinking about now. The Supreme Court will most likely make one of four decisions on health care reform. [This article describes] how each of those possible decisions may affect employers." (Faegre Baker Daniels)
Deloitte Health Care Reform Memo, May 14, 2012
Describes recent developments in various health plan and health insurance matters at the federal and state levels. This issue includes a discussion of the ACA Primary Care Provisions and a chart of the provisions by section number. (Deloitte)
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)
Current Challenges and Best Practices Concerning Beneficiary Designations in Retirement and Life Insurance Plans (PDF)
"The complexity of the rules under ERISA may, in some cases, lead to beneficiary designations that do not accurately reflect the participant's intent, and can frequently result in disputes over who is entitled to ERISA plan benefits following the death of the participant.... [E]ven when the beneficiary designation correctly indicates the participant's intent, beneficiaries may be unaware of what to do to obtain the benefit or to determine the benefit to which they are entitled.... The Council is examining this topic and intends to draft recommendations to the Secretary of Labor for consideration." (2012 ERISA Advisory Council)
[Opinion] Slippery-Slope Logic, As Applied to Health Care Reform
"The idea is that while Policy X may be acceptable, it will inevitably lead to the terrible Outcome Y, so it is vital that we prevent Policy X from ever being enacted. The problem is that such arguments are often made without any evidence that doing X makes Y more likely, much less inevitable.... Justice Scalia is arguing that if the court lets Congress create a mandate to buy health insurance, nothing could stop Congress from passing laws requiring everyone to buy broccoli and to join a gym." (The New York Times; free registration required)
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)
Massachusetts May Impose 'Luxury Tax' on the State's Most Pricey Hospitals
"The penalty is not included in the Senate's version of health-care reform, which instead calls for a special commission to determine acceptable and unacceptable factors contributing to price variation. [One state senator] has said the House's fee could 'force those folks that are higher cost to make decisions that aren't well-thought-out.' But [a state representative] said steps must be taken to address the differences in how hospitals are paid." (lowellsun.com)
10th Annual Study of Employee Benefits Trends
"A key finding this year is that 60% of surveyed employers recognize the precarious economic climate, rather than reducing business focus on employee benefits, actually creates opportunity for benefits to drive human capital. In addition, the Study found employees are less committed to their employers, but at the same time, highly dependent on their workplace benefits." (MetLife)
State and Local Pensions Face New Accounting Rules
"The changes will alter how liabilities are calculated and how assets are reported on financial statements. Pensions would begin using the rules for fiscal years starting after June 15, 2013, and employers such as school districts would follow a year later. [GASB,] which decides how states and municipalities must keep their books, is set to issue the new rules next month.... The rules may raise government costs in the $3.7 trillion municipal market as investors demand more yield to compensate for higher pension risk and possibly lower ratings." (Bloomberg News)
New York City and State Pension Fund Chiefs Sing Praises of DB Plans and Offer Reforms
"[The chief of the New York City funds], backed by New York City Mayor Michael Bloomberg, advocates an independent investment board composed of representatives of the mayor, comptroller and unions that would set pension strategy and hire managers for all five city pension funds. Additionally, the proposal calls for an independent Bureau of Asset Management headed by a chief investment officer who only answers to the investment board and not directly to any elected official. [T]he combined board and CIO proposal would lower costs of the five pension funds by $30 billion over 30 years without reducing benefits." (Pensions & Investments; free registration required)
[Opinion] Techniques Used by Obamacare Could Support Proposed Taxation of Employer-Provided Health Care Benefits
"On November 4, 2011, [two Congressmen] sent a letter to the Congressional Supercommittee on federal debt reduction, urging the committee 'to oppose new taxes on employer-sponsored health benefits.' ... The letter argues that [imposing taxes on] employer-sponsored insurance ... is unfair, because it disproportionately affects those who, by virtue of being older or living in the Northeast, face higher health costs ... Obamacare's 'Cadillac tax' on high-value health plans* worked out a number of these issues. Let's go through them[.]" (Forbes)
10 Sources of Income in Retirement
"In retirement, you're ... likely to have a variety of sources of income, including Social Security, a 401(k) or IRA, and other savings or investments. Here are 10 of the most common ways to pay for retirement[.]" (U.S. News & World Report)
America's Employers Controlling Health Care Costs and Improving Employee Lifestyles with Wellness Initiatives
"Seven in 10 American employers offer wellness initiatives such as flu shots, health screenings, and weight management programs ... according to the International Foundation of Employee Benefit Plans� (IFEBP) survey ... The survey suggests a definite decrease in health care costs when wellness initiatives are offered, according to the 21.6 percent who have analyzed return on investment (ROI). Of the organizations that are analyzing ROI, 83 percent indicated a positive return. For every dollar spent on wellness initiatives, most organizations see between $1 to $3 decreases in their overall health care costs." (Wolters Kluwer Law & Business / CCH)
[Guidance Overview] Roth IRA Was Not Eligible Shareholder of S Corporation
"An individual incorporated his business and elected subchapter S status. The corporation's sole shareholder in 2003 was a custodial Roth IRA for the benefit of the individual. The IRS issued a notice of deficiency, determining that the corporation was taxable as a C corporation for 2003.... [The] Tax Court sided with the IRS, finding that the Roth IRA did not qualify as an eligible shareholder of the S corporation." (Wolters Kluwer Law & Business / CCH)
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)
[Official Guidance] Text of Final PBGC Regs on Benefits Payable in Terminated Single-Employer Plans; Interest Assumptions for Paying Benefits (PDF)
"The interest assumptions are intended to reflect current conditions in the financial and annuity markets. Assumptions under the benefit payments regulation are updated monthly. This final rule updates the benefit payments interest assumptions for June 2012." (Pension Benefit Guaranty Corporation)
[Opinion] Why Employer-Paid Health Insurance Drives Up Health Care Costs
"Stanford Nobelist Kenneth Arrow famously described third-party insurance as one of the principal flaws in America's health-care market. That is to say, because patients don't pay for their health care directly, they're insensitive to the cost and value of that care. But the 155 million Americans with employer-sponsored insurance in fact have fourth-party insurance. Not only do they not directly pay for their care, but they don't directly pay for their third-party insurance." (Forbes)
Should You Purchase Long-Term Care Insurance?
"Buying a long-term-care insurance policy can be a way of making sure your future physical needs will be met. Policies designed in partnership with state governments also give individuals and their families a way to protect savings in the event of burdensome care costs that stretch on for years. Critics, however, say insurers are using scare tactics to sell their products, which come with a hefty price. For most people, these critics say, long-term-care policies are either unnecessary or cost more than their benefits are worth. They believe that a great many people would be better off essentially self-insuring or relying on government-funded programs." (The Wall Street Journal)
Are Variable Annuities a Good Investment?
"Critics say these annuities are too costly. The relatively high fees annuity investors pay can eat up a significant amount of money over the long term, they say, and investors also can get more-favorable tax treatment with some other investments. Proponents say the cost of annuities is worth it for the security they offer. No other investment, they say, can protect investors as well and still give them the chance to earn something more than a nominal return on their investment." (The Wall Street Journal)
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)
Workplace Wellness Programs: Trends, Changes in the Law Starting in 2014, and Issues to Watch
"Employer wellness programs must comply with a number of federal and state requirements, such as the Americans with Disabilities Act of 1990, the Genetic Information Nondiscrimination Act of 2008, and the Health Insurance Portability and Accountability Act of 1996 (HIPAA). The issues discussed in this brief relate mostly to HIPAA provisions that prohibit employer health benefit plans from discriminating against individuals based on any factor connected with their health status." (Health Affairs)
Paid Sick Leave is 'Basic Human Right,' Senator Says
"Senate HELP Committee Chairman Tom Harkin (D-IA) held a hearing this week on the Healthy Families Act ... which would require employers to offer 56 hours of paid sick leave. Republicans ... argued that it would be counterproductive and make it harder for employers who choose to provide paid leave to continue to do so, particularly in the current economy. [The chairman], however, disagreed, characterizing 'paid leave [as] a basic human right' and he argued that 'we need a one-size-fits-all-approach that ... sets a floor that we won't let people go below.'" (HR Policy Association)
U.S. House Bill Would Expand 'Reasonable Accommodation' Obligations by Employers to Include Pregnancy and Childbirth
"Democrats [in the U.S. House of Representatives] introduced legislation that would place an affirmative duty on employers to provide 'reasonable accommodations' to pregnant employees and applicants unless doing so would cause an 'undue burden' for the employer. Employers are already prohibited from discriminating on the basis of pregnancy under the Pregnancy Discrimination Act. The 'Pregnant Workers Fairness Act' (H.R. 5647) would impose new requirements based on the robust accommodation obligations under the Americans with Disabilities Act (ADA), which do not apply to pregnancy because it is not considered a disability under the ADA." (HR Policy Association)
[Guidance Overview] Preauthorization of Surgical Procedure Not Covered by the Plan Was Not a Fiduciary Breach
"This case is another example of how participants may be left without a remedy for harm caused by the actions of a plan fiduciary. The U.S. Supreme Court's decision last year in Cigna v. Amara ... suggested that courts may be more inventive in using equitable principles to fashion remedies for fiduciary breaches. However, this court found no breach of fiduciary duty and therefore did not address the issue of remedies." (Thomson Reuters/EBIA)
[Guidance Overview] COBRA Notice Deadline Runs from Employment Termination Date
"This case illustrates COBRA's general rule that the deadline for providing an election notice runs from the date of termination, even if plan coverage extends beyond that date. The statute does provide an alternative, however. If the plan so provides, the notice period (and the maximum coverage period) may instead run from the date that coverage is lost. Given the court's silence on this point, we assume the plan in question was not written to take advantage of this delayed notice rule. The case also contains a helpful discussion of the factors that a court may consider in deciding whether to award attorney's fees or unreimbursed medical expenses incurred during the violation period." (Thomson Reuters/EBIA)
[Guidance Overview] Tax Treatment of Executive Compensation Clawbacks
Addresses tax issues raised by clawbacks and their solutions. Topics are: (1) repayment of same year's compensation; (2) repayment of prior year's compensation; (3) retroactive clawbacks; (4) bad boy clawbacks; (5) retirees and other former employees; (6) Section 409A; (7) employer stock; (8) FICA taxes; and (9) practical conclusions. (Ivins, Phillips & Barker)
[Guidance Overview] DOL FAQs Address Implementation of Participant-Level Retirement Plan Fee Disclosures
"These long and detailed FAQs underscore the complexity of the new disclosure requirements.... The DOL also indicated that it is working on a second set of FAQs focused on the service provider fee disclosures. As a reminder, calendar-year plans are required to make their initial annual disclosure to participants no later than August 30, 2012 and provide their first quarterly statements no later than November 14, 2012." (Thomson Reuters/EBIA)
[Guidance Overview] Connecticut's Group Health Plan Would Lose Governmental Plan Status by Covering Employees of Non-Profit Contractors
"[T]he DOL concluded that a group health plan sponsored by the State of Connecticut for state employees, retirees, and dependents would lose its ERISA exception as a governmental plan if it extended eligibility to employees of nonprofit entities providing public services through state contracts or funding.... [T]he 175,000 nonprofit employees estimated to become eligible under the new law (compared to 100,000 state employees and retirees currently in the plan) would far exceed the 'de minimis' number of private employees permitted under prior DOL guidance addressing the governmental plan exception." (Thomson Reuters/EBIA)
PSCA President David Wray Announces His Retirement
"'After more than 25 years of service to PSCA members and the participants in the retirement plans they sponsor, David himself is ready to retire,' said Ira Finn, the chairman of the Plan Sponsor Council of America's board of directors. 'We cannot thank David enough for his tireless efforts to keep the 401(k) system intact. The system today is stronger as a result of David's hard work.' ... Wray will serve as a member of PSCA's Board of Directors and will continue to advise and consult PSCA staff on public policy issues, research, and programs." (Plan Sponsor Council of America)
The Small Business Tax Credit in the ACA Is Good Business Sense
"[The] analysis found that more than 3.2 million small businesses, employing 19.3 million workers across the nation, will be eligible for this tax credit when they file their 2011 taxes. In total, these small businesses are eligible for more than $15.4 billion in credits for the 2011 tax year alone, an average of $800 per employee." (Families USA)
Measuring Social Security Proposals by More Than Solvency: Impacts on Poverty, Progressivity, Horizontal Equity, and Work Incentives
"[The authors] apply the measures to simulation output from the Urban Institute's Dynamic Simulation of Income Model under the National Commission on Fiscal Responsibility and Reform Social Security proposal. A series of exhibits illustrates how they work and could inform policymakers about the relative merits of varied options to restore the program's long-run solvency and meet other objectives." (Center for Retirement Research at Boston College)
[Guidance Overview] Eleventh Circuit Becomes Latest to Adopt Rebuttable Presumption That Fiduciaries Act Prudently by Investing in Employer Stock
"[This] decision is an adaptation of the presumption of prudence first announced in Moench v. Robertson, ... which is commonly referred to as the 'Moench presumption.' ... [but the Eleventh Circuit here] determined that the Moench presumption was more appropriately viewed as a standard of review rather than an evidentiary presumption. ... [A]ffirming the application of the presumption at the pleading stage is in marked contrast to a recent Sixth Circuit decision to the contrary in Pfeil v. State Bank ... The resolution of this circuit split is a developing issue in ERISA litigation, and it is likely to have a significant impact on the viability of ERISA stock drop law suits going forward. It may also eventually lead the United States Supreme Court to consider the application of the Moench presumption." (Jenner & Block)
[Official Guidance] Text of IRS Notice 2012-36: April 2012 Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates (PDF)
IRS-updated figures for pension plan administration as prescribed by Code sections 412, 417, 430 and 431. (Internal Revenue Service)
[Official Guidance] Agencies Revise Summary of Benefits and Coverage Template and , Sample Completed SBC, and Coverage Example Calculations
Q&A 14 in Part IX of "FAQs About ACA Implementation" explains the changes: "In the diabetes treatment scenario, the version originally posted contained a typographical error, listing the allowed amount for insulin as $11.92, rather than $119.20 -- a difference that impacts the total cost of care for diabetes in the coverage example calculations. To correct this error, the Departments have posted updated versions of the SBC template, the sample completed SBC, and the guide for coverage examples calculations - diabetes scenario. The updated SBC template and sample completed SBC also include sample taglines for obtaining translated documents ... as well as updated Sample Care Costs amounts for the diabetes coverage example, due to more accurate rounding in making these calculations. Finally, the updated versions include some appearance modifications (such as changes in bolding, underlining, shading, capitalization, margin justification, use of hyphens, and row and column sizing) to ensure the document is accessible to individuals with disabilities, consistent with section 508 of the Rehabilitation Act. Plans and issuers may use either version, or may make similar modifications to their own SBCs, without violating the appearance requirements for an SBC. The updated versions of these documents are labeled �corrected on May 11, 2012� in the lower right corner of the first page and are available at www.dol.gov/ebsa/healthreform and cciio.cms.gov. These three documents replace the prior versions issued contemporaneously with the final regulations in February 2012." (Employee Benefits Security Administration)
[Official Guidance] Text of Final CMS Regs for Medical Loss Ratio Requirements (PDF)
"[T]his final rule establishes a simple, straightforward notice requirement for health insurance issuers that meet or exceed the [Medical Loss Ratio, or 'MLR'] standards established by the Affordable Care Act, but only requires the notice for the 2011 MLR reporting year, the first year that the MLR rules are in effect, and does not require issuers to include information about the current or prior year MLR. The notice will direct enrollees to the HHS Web site for specific information about issuers' MLRs." (Centers for Medicare & Medicaid Services)
[Official Guidance] Affordable Care Act Implementation FAQs -- Set 9 -- The Summary of Benefits and Coverage
"[Question]: A previous FAQ provided a link where written translations for the SBC template and the uniform glossary would be available in the future. Are these translations available? [Answer]: Written translations in Spanish, Chinese, and Tagalog are now available. Navajo translations will be available shortly." (U.S. Centers for Medicare & Medicaid Services, The Center for Consumer Information and Insurance Oversight)
The Case for Indexing as an Investment Strategy vs. 'Active' Investment Management
"This ... research paper explores both the theory behind indexing as an investment strategy and the evidence to support its use in investor portfolios. The research compares actively managed funds with unmanaged benchmarks weighted by market capitalization. It shows that the average U.S.-domiciled actively managed fund has underperformed a style benchmark with greater volatility over long time periods. The paper also finds that reported performance statistics can change markedly once survivorship bias is accounted for, and that persistence among past winners is no more predictable than the flip of a coin." (Vanguard)
Should You Choose a Lifetime Annuity at Retirement?
"The lifetime income annuity, what many insurance companies call a SPIA (Single Premium Immediate Annuity) is one tool that can help cover your expenses. Quite simply, in exchange for one, upfront, lump-sum payment, the insurance company provides you with a guaranteed monthly paycheck. The payments can be for a specific time period (e.g., five years) or for life. Essentially, the lifetime payment option allows you to create your own pension from your savings." (Fox Business)
Providing Incentives for Healthy Behaviors for Employee While Theading the HIPAA Privacy Needle
"[T]here are exceptions within the HIPAA regulations when it comes to discrimination. You can still protect employee privacy while administering programs that actually do single out particular of individuals, as long as you meet the standards. Participation-only programs and standards-based programs are how you do it. Participation-only programs are programs that offer a reward to anyone who participates - regardless of the outcome of that participation. These are exempt from the non-discrimination requirements with the HIPAA regulations, as long as participation is available to all similarly-situated individuals." (HR.BLR.com)
A Look at Legally Required Accommodations for Pregnant Women in the Workplace
"Just seven states -- Connecticut, Hawaii, Louisiana, Alaska, Texas, Illinois and California -- have some sort of pregnancy accommodation legislation; New York is in the process of trying to pass a law. California's is among the most protective for pregnant women: it guarantees the right to job-protected -- albeit unpaid -- leave and mandates a pregnant woman's right to be transferred to another position if medically necessary." (TIME)
[Opinion] Even If Obamacare Survives Supreme Court Scrutiny, Employers May Do It In
"How big employers now control costs will depend on two giant decisions. First is the Supreme Court's ruling on the constitutionality of the individual mandate. If the justices give it a thumbs-down, employers are in a quandary. They like a mandate because it could lower their insurance costs by forcing more people into the risk pool, and in a world where everyone is legally required to maintain insurance, employers may feel less pressure to offer it. If the mandate is upheld, then everything depends on the second big decision: the voters' choice in November. A Republican sweep would probably mean Obamacare's repeal, while a more muddled election result probably wouldn't. Either of the two big decisions could kill Obamacare." (CNN Money)
Trend in Massachusetts Experience: Small Employers Moving to Less Generous Health Insurance Plans
"A new analysis ... found that 27 percent of people in Massachusetts who got their insurance through the small group market at the end of 2010 were in a plan with a lower 'actuarial value,' meaning the deductibles and copayments were the highest among plans on the market. That's up from just 2 percent in the first quarter of 2008." (The Boston Globe)
Panel of Investment Advisers Recommends Annual Savings Rate of 10% to 16% Over Entire Career
"The Position Paper concludes that for many, target income replacement ratios should be higher than the 70-75% conventionally accepted as a rule of thumb. The higher ratio is to account for the projected cost of healthcare in retirement, and traditional financial planning concerns such as personal health, children education needs, and the cost of caring for elderly relatives. Regardless of target income ratio, the six panelists call for consistent contribution levels in the range of 10% to 16% of pay over a 30-year or 40-year career." (Retirement Advisor Council)
[Guidance Overview] Despite Husband's Beneficiary Designation, Second Wife Not Entitled to Annuity When Husband Never Divorced First Wife
"If the participant never divorced his first wife, then she would be his surviving spouse under the plan. As such, her status as the participant's surviving spouse would take precedence over the participant's express election of the second wife as his spouse and beneficiary. This is because the first wife never waived her rights to receive spousal benefits as required by ERISA Section 205." (Wolters Kluwer Law & Business / CCH)
New Jersey Governor Vetoes Health Insurance Exchange
"Democrats in the Legislature had billed the exchange as one-stop shopping for people or businesses seeking health insurance, allowing consumers to compare the benefits and the costs of participating plans. The Web site it proposed would have also allowed people to apply for tax credits or other subsidies toward the cost of insurance. In his veto message, the governor said he was concerned about the potential costs of the exchange." (The New York Times; free registration required)
Income Tax Strategies as You Get Older: Retirement Tax Tips at Ages 59-1/2, 69-1/2 and Beyond
By prominent attorney Natalie Choate. "Many tax moves regarding retirement benefits are dictated by age. The 'big years' are age 59-1/2 (everybody knows that) and also, surprisingly, age 69-1/2. Here's a review of age-based tips ... If you inherited a traditional retirement plan from your spouse, don't roll it over to your own IRA until you are over 59-1/2. Leave it in your deceased spouse's plan and withdraw funds from it penalty-free if you need money." (Morningstar)
Massachusetts Politicians Taking Different Tacks Pursuing Containment of Health Care Costs
Provides an interesting list of proposed programs, technologies, expenditures and tax relief. "The current legislative session's policy focus has been health care payment reform, and the Massachusetts Senate, House of Representatives and governor have each proposed their own unique approach to transition the market away from fee-for-service and to contain cost growth." (ML Strategies)
[Guidance Overview] Hey Boss, Buy Me a Bike? A Look at Unusual Qualified Transportation Fringe Benefits
"For employees who commute to work by bike, a qualified transportation plan can be set up to reimburse reasonable expenses incurred by employees for the purchase of a bicycle and bicycle improvements, repair, and storage. The amount which can be reimbursed is limited annually to $20 per month multiplied by the number of qualified bicycle commuting months during the year." (The Pension Protection Act Blog)
ERISA Advisory Council to Examine Disability Coverage, Retirement Income and Beneficiary Designations (PDF)
"[The Advisory Council on Employee Welfare and Pension Benefit Plans (also known as the ERISA Advisory Council) [meeting] will be held on June 12-14, 2012 [in] Washington, DC].... The Advisory Council will study the following issues: (1) Managing Disability Risks in an Environment of Individual Responsibility; (2) Current Issues Regarding Income Replacement During Retirement Years; and (3) Current Challenges and Best Practices Concerning Beneficiary Designations in Retirement and Life Insurance Plans." (Employee Benefits Security Administration)
[Opinion] Where's the Fire? Administration's Implementation of Health Care Regs Is Disorderly Mess
"In a series of papers [the authors] provide evidence to suggest that 'the involvement of both White House and high-ranking agency staff' suggests that 'the administration likely got the [ObamaCare] rules it wanted written.' To do this, it overrode the normal checks and balances used to ensure that federal regulations impose the smallest possible burden on the private sector. Rather than posting required regulatory impact analyses ... with interim rules and allowing time for analysis and comment, the White House and its agency heads dictated the rules that would be written, curbed the Office of Management and Budget ... review function, and then simply declared that the interim rules were final." (National Center for Policy Analysis)
Actuarial Techniques to Manage Pension Risk (PDF)
Slides used in a presentation by a prominent actuarial firm with a large public plan practice, from the 2010 National Conference on Public Employees Retirement Systems. (Gabriel Roeder Smith & Company)
Working Moms Taking Less Maternity Leave
"One in four (26%) working moms who have had a child in the last three years reported they did not take the full maternity leave allowed by their company. One in 10 took two weeks or less.... As more moms assume the sole or primary breadwinner role in their households, they�re feeling increasingly torn between providing financial security for their families and having quality time at home[.]" (PLANSPONSOR.com)
2012 Industry Survey of Target Date Funds (PDF)
"Flows into target-date funds continued to cool off in 2011, though they remain one of the most consistent sources of new assets in the industry. While net assets rose only 11% to $378.5 billion in 2011, compared with a year-overyear rise of 33% in 2010, much of that difference can be attributed to 2010's superior market performance." (Morningstar)
Employers� Outreach Methods Fail to Engage Employees in Retirement Savings
"Employers and their employees in the U.S. hold different perspectives on how to achieve retirement preparedness through 401(k) plans ... [D]espite efforts by employers to educate workers on the 401(k) offering, most workers remain disengaged and unprepared financially for retirement.... Relatively few 401(k) participants have the desire to manage their workplace savings plan ... [and] many employers are doubling down on outreach efforts that have not been effective:" (Society for Human Resource Management)
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)
Illinois House Votes to Require Former State Employees to Pay Part of Health Care Premiums for First Time
"The measure ... takes aim at an $876 million annual subsidy that had been one of the most lucrative perks of public employment. 'Not only are these benefits unaffordable given today's fiscal situation, but they are far more generous than those provided by other governments to their employees and those provided by the private sector,' said [the Illinois] House Speaker[.]" (Chicago Sun-Times)
[Guidance Overview] DOL FAQs Address Retirement Plan Fee Disclosures (PDF)
"DOL acknowledges that it may be unduly difficult or expensive to bring such disclosures into compliance ... before the Regulations' respective effective dates [so the agency stated that] it generally will take no enforcement action against a covered service provider or plan administrator who has acted in good faith based on a reasonable interpretation of the Regulations and who also establishes a plan for complying with the requirements ... in future disclosures.... The Bulletin provides additional guidance with respect to the following topics:" (Sutherland)
[Guidance Overview] Describing Plan Administration Expenses When Making Participant Fee and Investment Disclosures
"Plan administrators annually must furnish an explanation of any fees and expenses for general plan administrative services (e.g., legal, accounting, recordkeeping), which may be charged against a participant's individual account, as well as the basis on which such charges will be allocated (e.g., pro rata, per capita) to, or affect the balance of, each individual account. The DOL explained that the annual administrative expense disclosure may be expressed in terms of an amount, formula, percentage of assets or a per capita charge, but must be written in a manner calculated to be understood by the average plan participant. How specific the disclosure must be depends on the facts and circumstances of the service and the fee or expense being disclosed." (SunGard Relius)
[Guidance Overview] DOL FAQs Clarify Participant-Level Disclosures, 'Good Faith' Standard for Enforcement Purposes
"The [ERISA section 404(c)] disclosure conditions -- which were effective for plan years beginning after November 1, 2011, and are therefore already in effect for many plans -- generally operate by reference to the participant disclosure rules. With the delay in the initial disclosure date, it was unclear whether the failure to provide the initial disclosures after the effective date of the section 404(c) changes would be considered noncompliance with the section 404(c) rules. DOL has now clarified that a plan need not furnish the participant disclosure information before it must be furnished under the new regulation to maintain section 404(c) status." (Morgan Lewis)
[Guidance Overview] Foreign Parent Company Was Properly Joined in PBGC Suit Against U.S. Subsidiary's Pension Plan
"The [U.S. District Court for the District of Columbia found that] PBGC's claims against Asahi were not based on the pension plan's termination or underfunding, but were predicated solely on Asahi's status as a member of the controlled group through its acquisition of Metaldyne. The court [ruled] that, notwithstanding the absence of any affirmative conduct by Asahi with respect to the U.S. subsidiary's pension plan, personal jurisdiction for the purpose of determining liability under ERISA attached once Asahi became a member of the Metaldyne controlled group." (Haynes and Boone)
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)
[Official Guidance] Text of Official Notice to Pension Plan Participants; PBGC Takes Over Responsibility for Payments at Large Law Firm of Dewey & LeBoeuf (PDF)
"PBGC is taking this action because your plan meets the criteria for termination under federal pension law. In general, this means that your employer is unable to keep up the plan and the plan may not have enough money to pay all the promised benefits. PBGC has determined that the plan should terminate as of May 11, 2012. As of that date, you will not earn any further benefits from the plan." (Pension Benefit Guaranty Corporation)
PBGC Working to Help Employers Maintain Pensions In Addition to Role as Pension Payment Insurer
"To help counter the growing retirement crisis for today's workers, the [PBGC] has recently begun to spotlight its often-unnoticed mission 'to encourage and preserve retirement plans of U.S. companies.' ... That's what it did recently by working with AMR Corp. ..., the parent of American Airlines, to convince the airline to freeze, instead of terminate, its traditional pension plans covering 130,000 workers and retirees, as part of its bankruptcy proceedings." (Human Resource Executive Online)
Growing Power of Some Providers to Win Steep Payment Increases from Insurers Suggests Policy Remedies May Be Needed
"Interviews in 12 U.S. communities indicated that so-called must-have hospital systems and large physician groups -- providers that health plans must include in their networks so that they are attractive to employers and consumers -- can exert considerable market power to obtain steep payment rates from insurers. Other factors, such as offering an important, unique service or access in a particular geographic area, can contribute to provider leverage as well." (Health Affairs)
Factors to Use When Considering a Defined Pension Benefit Buyout Offer from Your Employer (PDF)
The information sheet provides a basic understanding of a buyout offer and the things that an individual needs to consider when making the decision on whether or not to accept the lump sum buyout. It is not exhaustive but provides important considerations to think about before accepting a lump sum offer. (National Retiree Legislative Network)
Plan Management Issues for State, Partnership and Federally Facilitated Health Insurance Exchanges (PDF)
"Based on [their findings, the authors] conclude that exchanges' plan management responsibilities represent a considerable expansion of states' oversight of insurers. The law requires oversight that in some cases expands on what states currently do and in other cases represents a wholly new activity. However, to fulfill their responsibilities, state exchanges can leverage the authority and skills of multiple state agencies, including departments of insurance, departments of health, and Medicaid agencies." (National Academy of Social Insurance / The Center on Health Insurance Reforms)
North Carolina Voters Amend Constitution to Limit Marriage to Persons of Opposite Sex: Implications for Employers
"The new amendment to the North Carolina constitution reemphasizes that employers in North Carolina will not have to adjust their policies, plans and documents to accommodate or provide for same-sex spouses. Employers may, however, offer benefits to the same-sex spouses of employees who enter into those marriages in states where it is legal -- the amendment does not prevent that. Employers also may provide benefits that are not taxable to employees' same-sex spouses. But the amendment does mean that it remains the case that for purposes of state taxation, if an employer in North Carolina provides coverage in a health and welfare plan to the same-sex spouse of an employee, that coverage is taxable income to that employee." (Thompson / Smart HR Manager)
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)
Wellness Programs Credited with Keeping Eau Claire City Employee Insurance Costs Down
"Since the city began a wellness program through Group Health Cooperative of Eau Claire about five years ago, those on the city's insurance program have lost 2,243 pounds.... After two years of no cost increases to the city, Group Health offered a renewal with a 3.5 percent increase." (insurancenewsnet.com)
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)
A Review of Employee Benefits Trends and Results Among 'The Principal 10 Best' Companies
"During the recent economic challenges, [companies named by The Principal Financial Group to a list of 'The Principal 10 Best Companies'] maintained robust benefits packages, with more of them increasing rather than decreasing retirement contributions during the past 10 years. Some shifted health insurance expenses onto employees, but a majority absorbed the cost themselves. Investing in wellness programs is a significant trend, driven by concern about the steadily rising cost of health care and hence the cost of health insurance. Another concern was how the changing health policy landscape will affect what benefits they can offer and what those benefits will cost." (Harvard Business Review)
Indexed Target Date Funds Hitting the Mark with Plan Sponsors
"[A]ssets are pouring into passive series at nearly twice the rate of their actively managed cousins. Last year, passive target date funds grew by 19%, while the active series grew 11%. There are several factors behind that rising interest in these funds. 'Plan sponsors are looking for different options, particularly fund lineups with lower tracking error and less volatility compared with actively managed funds,'.... The cost equation is another motivation as index-based offerings have lower costs and fees continue to exert competitive pressure in the target date fund industry[.]" (Investment News)
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)
Bill Introduced to Make Health Care a Right in New York State
"More than 70 state lawmakers are co-sponsors.... The proposal would provide comprehensive health coverage for all New Yorkers. Every New York resident would be eligible to enroll, regardless of age, income, wealth, employment, or other status. There would be no premium, deductibles, or co-pays. Coverage would be publicly funded. The benefits will include comprehensive outpatient and inpatient medical care, primary and preventive care, prescription drugs, laboratory tests, rehabilitative, dental, vision, hearing, etc." (Physicians for a National Health Program)
The ACA Small Business Tax Credit Makes Good Business Sense
"[This analysis finds] that more than 3.2 million small businesses, employing 19.3 million workers across the nation, will be eligible for this tax credit when they file their 2011 taxes. In total, these small businesses are eligible for more than $15.4 billion in credits for the 2011 tax year alone, an average of $800 per employee." (FamiliesUSA)
[Guidance Overview] New Q&As in DOL Field Assistance Bulletin 2012-2 Clarify, Expand Fee Disclosure Regs
"In 23 pages, the FAB provides a series of 38 FAQs addressing a variety of topics in the regulation. The answers provide examples and discussion on the disclosure requirements, amplifying many points that were previously unclear. They also set forth new rules, some of them quite surprising to those who have studied the regulation over the last year and a half, as well as some valuable exemptions. Sprinkled throughout is DOL commentary on fiduciary practices. Without a doubt, the FAB will mandate fine-tuning of programs and systems to comply with the new rules." (SunGard Relius)
Restricted Health Insurance Enrollment Periods As an Alternative to Individual Mandates
"[Healthcare Town Hall] recently ran a poll on the best course of action to reduce adverse selection if the PPACA individual mandate is struck down by the Supreme Court. The number one answer was 'use limited enrollment windows to reduce the occurrence of people joining a plan only when they become sick.'" (Healthcare Town Hall)
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)
Executive Travel on Corporate Aircraft: Strategies for Regulatory Compliance and Tax Efficiency
"This newsletter describes in plain English the basic requirements and strategies for dealing with the myriad rules presented with respect to executive and guest travel on company aircraft, and recommends as a solution the adoption of a carefully drafted executive aircraft use policy." (McDermott Will & Emery)
[Guidance Overview] Proposed IRS Regs Address the PPACA Comparative Effectiveness Fee (PDF)
"The proposed regulations provide very practical alternatives for determining the number of covered lives for the purpose of determining the [Patient-Centered Outcomes Research Institute] fee. Plan sponsors should review the options available for determining the fee to determine the most effective approach for their plans." (Buck Consultants)
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)
[Guidance Overview] The Final 408(b)(2) Regulation: Impact on Investment Managers (PDF)
"The new disclosure rules apply to any discretionary asset manager for an ERISA-covered retirement plan who reasonably expects to receive $1,000 or more of direct or indirect compensation in connection with its services to a plan.... Discretionary managers include those hired directly by the plan to manage all or some of its assets, and also the fiduciary managers of 'plan asset vehicles' -- investments that are themselves subject to ERISA, and in which a plan invests. Such investments include collective investment funds or trusts offered by banks, the separate accounts of insurance companies or certain other investment vehicles (e.g., hedge funds) if more than 25% of the funds being managed come from ERISA plans and other 'benefit plan investors.'" (Drinker Biddle)
Text of Spring 2012 Issue of 403(b) Advisor Magazine
Articles include 'Philadelphia Story: Affirming Choice in 403(b) Plans' and 'The Evolution of the K-12 403(b) Marketplace.' (American Society of Pension Professionals & Actuaries; National Tax Sheltered Accounts Association)
[Guidance Overview] More Welcome 403(b) Relief from DOL
"The DOL, in its final 408(b)-2 regulation, issued relief for 403(b) plans, under which information related to certain contracts would not be subject to the the new fee disclosure rules. Though this was very helpful, it did not specifically address the 404a-5 participant disclosure regulations for the same type of contracts.... [The recently issued FAQs in Field Assistance Bulletin 2012-2 make] it clear in Question 2 ... that the 408b-2 relief for 403(b) plans also is extended to the 404a-5 requirements for said plans, on the same terms and conditions." (Business of Benefits)
[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)
Couples Retiring in 2012 Will Need $240,000 to Pay Medical Expenses Throughout Retirement
"Fidelity has calculated an annual estimate of medical expenses for retirees for more than a decade.... The estimate ... does not include any costs associated with nursing-home care and applies to retirees with traditional Medicare insurance coverage." (MarketWatch)
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)
California Pension Nightmare Worsens: Thousands More Are Joining '$100,000 Club' Annually
"Juxtapose the recent headcount of 12,119 [retired California government workers receive pensions in excess of $100,000] next to the at 9,812 released in June 2011. That mental image of California sliding into the Pacific Ocean under the weight of these pension obligations is becoming ever more real. Look at thes trend lines." (Wall Street Pit)
Analysis: Public Pension Fixes Face Stout Legal Challenges
"Any quick fixes would be hard to carry out. Each state has its own constitution, courts, case law and retirement systems that affect how they can try to rein in pension costs.... There are at least eight lawsuits nationwide contesting attempted pension fixes, such as one in Florida that is aimed at saving $1 billion a year by reforming public pensions. These lawsuits generally are brought by public sector unions." (Chicago Tribune)
State and Local Governments Belatedly Put Pension Deficits on Their Books
"The [GASB accounting] rules may raise government costs in the $3.7 trillion municipal market as investors demand more yield to compensate for higher pension risk and possibly lower ratings. Illinois became Moody's Investors Service's lowest-rated state in January because it hadn't dealt with its underfunded pensions." (Bloomberg BusinessWeek)
The Morning Line: Most Are Betting Health Reform Law's Mandate Will Be Thrown Out
"Over at Intrade, a 'prediction market' for current events, the betting Tuesday morning gave chances of about 58 percent that the court will disallow the mandate, which requires people to obtain health coverage or pay a fine." (National Public Radio)
Bill Revising Pension Benefits Goes to Alabama Governor for Signature
"[Alabama Governor Robert Bentley], legislative leaders and David Bronner, chief executive officer of the Retirement Systems of Alabama, worked together on the proposal ... Most state employees would have to work until they are 62 to begin receiving benefits ... Currently, a state employee may retire after 25 years of service, no matter the age of the employee, or retire at 60 after 10 years of service and begin receiving benefits." (The Montgomery Advertiser)
[Opinion] Time to Control Runaway Military Personnel Costs
"[W]hile the military's retirement program serves only a small minority of the force, it provides an exceedingly generous benefit, often providing 40 years of pension payments in return for 20 years of service. As a result, the program now costs taxpayers more than $100 billion per year, an exceedingly steep price tag for a program hampered by serious flaws. This number is projected to double by 2034." (Tuscon Sentinel)
[Guidance Overview] DOL FAQs Address Retirement Plan Fee and Expense Disclosure Rules
"EBSA is working on a second set of FAQs that focuses specifically on the disclosure rules for covered service providers under ERISA Section 408(b)(2). However, these current FAQs are relevant to covered service providers as they offer guidance on what information covered service providers must give plan administrators to help the administrators comply with their disclosure requirements." (Practical Law Company)
Louisiana Governor's Pension Reform Proposals Watered Down by Senate Committee
"Watered down versions of the most controversial portions of Gov. Bobby Jindal's proposed retirement overhaul are headed back to the Senate floor after passing their second committee Monday. The bills increase the amount employees contribute to the pension plans, delay the retirement age for many workers and increase the number of years used to calculate an average salary for retirement purposes." (The Times-Picayune)
North Carolina Voters Approve Same-sex Marriage Ban
"North Carolina voters on Tuesday approved a state constitutional amendment that bans same-sex marriage and civil unions ... North Carolina law already blocks gay and lesbian couples from marrying, but the state now joins the rest of the Southeast states in adding the prohibition to its constitution." (Yahoo! News)
Proposed Meaningful Use Stage 2 Regs Draw Strong Reaction
"[A few paragraphs in the 68-page comment letter from the American Hospital Association have] drawn the attention and ire of patient and consumer advocate groups. Citing HIPAA concerns, the AHA disagrees with the Centers for Medicare & Medicaid Services proposal 'to provide patients with the ability to view, download, and transmit large volumes of protected health information via the Internet.'" (HealthLeaders Media)
The ABCs of Beating Obesity: Schools Called 'Focal Point' for Prevention by Advisory Body
"The report by the Institute of Medicine, an influential independent body that advises the federal government on health policy, recommended requiring at least 60 minutes of physical activity a day in schools and considering excise taxes on sugar-sweetened beverages. It urged food companies to improve nutritional standards for foods marketed to people under 18[.]" (The Wall Street Journal)
Actuaries Recommend a $213 Million Increase in Annual State Pension Payments to CalPERS
"But $149 million would be added to the increase if the impact of a lower earnings forecast, dropped by the board in March from 7.75 percent to 7.5 percent a year, is not phased in over 20 years. Either way, the annual state payment to CalPERS next fiscal year would still be less than the $3.9 billion payment expected two years ago when major investment losses began to push up rates from $3.3 billion." (Calpensions)
More Than Half of Patients Consider Budget Before Making Medical Visits
"[One survey] found that 57% considered their budget before making health-related decisions. Nearly 31% attempted to be frugal by skipping or reducing annual visits to their primary care physician, and 32% passed up or cut back on follow-up appointments. Almost 27% went without or decreased visits to specialists. When it came to blood work and lab tests, almost 21% refrained from them because of cost concerns. Nineteen percent went without an imaging test." (amednews.com)
Employee Knowledge and Attitudes about Employer-Provided Disability Insurance
"The survey revealed that most employees underestimate the amount of time individuals will be away from work due to illness and injury. On average, the surveyed employees thought that 25 percent of those who become disabled and are unable to work for at least three months remain disabled for at least two years. But in actuality, it's twice that. Half of the disabled workers who are out of work for three months remain disabled for more than two years." (Consumer Federation of America and Unum)
Funded Status of U.S. Pensions Declines to 76.3 Percent in April
"The drop was due to a 4.5 percent rise in liabilities, resulting from falling interest rates, and a decline in the equity markets, according to the BNY Mellon Pension Summary Report for April 2012. BNY Mellon attributed the increase in liabilities to the 29-basis-point drop in the Aa corporate discount rate to 4.29 percent. The decline in the equity markets was the primary reason for the 0.1 percent drop in plan assets during the month, BNY Mellon said." (BNY Mellon)
Benefits Administration: To Outsource or Manage In-House?
"The goal of the survey was to gain insight into what employers views are on the topic of benefits administration to include: What employers are thinking about the various trade-offs inherent to insourcing and outsourcing benefits administration? What employers are actually doing -- what functions are they outsourcing and which are insourced? What employers are planning on doing -- in light of the changing technological and legal landscape, are employers planning on insourcing or outsourcing more functionality?" (ADP; free registration required)
[Guidance Overview] ML Strategies Health Care Reform Update, May 7, 2012
Weekly update on federal and state health care reform legislation, regulations and initiatives. (Mintz Levin)
[Opinion] Innoculate the Budget Deficit from Health Care Reform
"As we work to restrain health care cost growth, we must, at the same time, inoculate the future deficit from the inevitable failures of health reform. We can do this by choosing a federal health care spending level and stipulating that any spending above that amount must be financed on a current basis with a tax. For example, if federal health care spending were allowed to grow at the rate of GDP plus 0.5 percent (a rate proposed by both President Obama and Rep. Ryan), any health spending in excess of that growth rate would be financed with tax revenues in the next year." (Brookings)
[Opinion] Text of Comments by Committee of Annuity Insurers on Proposed Qualifying Longevity Annuity Contract Regs (PDF)
"First, [the Committee suggests] certain modifications to the regulations that would increase flexibility in QLAC designs.... Second, [the Committee offers] suggestions for modifying the limits that the proposed regulations place on QLAC premiums.... Third, [the Committee asks] for several technical clarifications to the regulations in anticipation of questions that may arise in the future as taxpayers and the government implement the final rules. Finally, [the Committee asks] that the [IRS] coordinate with [DOL] on certain reporting and recordkeeping issues." (Committee of Annuity Insurers)
[Official Guidance] 11th Circuit Adopts Moench Standard in Suit Over Home Depot ESOP (PDF)
"Because the purpose of a plan is set by its settlors (those who created it), that is the same thing as saying that a fiduciary abuses his discretion by acting in compliance with the directions of the plan only when the fiduciary could not have reasonably believed that the settlors would have intended for him to do so under the circumstances. That is the test.... The defendants were not required to depart from the Plan's directives regarding Home Depot stock just because they were aware that the stock price likely would fall." (Justia.com)
[Opinion] Text of Comments by Investment Company Institute on Proposed Required Minimum Distribution Exception for Longevity Annuity Contracts (PDF)
"[ICI does] not believe it would be appropriate to expand the exclusion beyond strict longevity insurance, within the parameters outlined in the proposal. [The ICI's] comments also include some general concerns relating to incentivizing the use of annuities." (Investment Company Institute)
In Japan, All-Payer Rate Setting Under Tight Government Control Proving to Be Effective at Containing Costs
"Japan's single payment system contains spending while retaining the advantages of multiple health insurance plans. Combining hospital and physician fees -- not typically done in the U.S. -- also helps achieve these objectives. Applying a single rate to U.S. providers, a growing number of whom are employed by hospitals, would simplify billing, provide incentives for physicians to practice more efficiently, and possibly encourage more physicians to locate in medically underserved areas." (The Commonwealth Fund)
Washington State's 1993 Experiment with Health Insurance Reforms (PDF)
"In 1993, Washington adopted one of the most extensive health care reforms ever enacted by a state. The law promised the grail of near-universal coverage while controlling costs. But the law was not implemented as intended, and as Washington residents soon discovered, unless [reforms such as premium caps] are paired with an effective personal coverage requirement, real problems emerge for employers, families and individuals." (America's Health Insurance Plans)
[Opinion] Fee-for-Service Model: Culprit Behind Exponential Health Care Cost Growth?
"Moving away from fee-for-service requires realigning the care delivery and payment incentives in the health care system. [Reimbursement should be] based on the quality and utility of care provided, not just the sheer volume of services. This idea -- paying for 'value over volume' or 'paying for performance' -- is now a common refrain in the world of health policy. Some experts even go so far as to say that too much care can be detrimental to health, such as unnecessary or redundant medical imaging scans[.]" (The Atlantic)
[Opinion] How to Fix Our Enormous, Inefficient Health Care System
"[C]hange will require new structures and institutions, not tweaks to the current system. That's the only way to disrupt the wasteful habits of the status quo. [The author offers] two specific proposals for new frameworks. The first ["Create Special Heath Care Courts"] is now broadly accepted by health care thought and political leaders of both sides ... but has been stymied so far by a powerful special interest. The second [" Replace Public Health Care with Comprehensive Providers"] is radical, and would be considered politically suicidal. It would also solve much of the problem of misaligned incentives." (The Atlantic)
[Opinion] Text of Comments by Consumer-Purchaser Disclosure Project to CMS on Health IT Meaningful Use Program (PDF)
"Stage 2 of Meaningful Use marks a significant step toward national commitment to effective management of health information to improve health outcomes. [The Project urges] CMS to finalize the progressive strides it makes in the proposed rule, especially those that enhance patient and family engagement. However, the proposed rule does not do enough to: (1) drive providers to share information with each other and (2) build the capability to report on quality measures that indicate whether providers are improving their ability to deliver high-value, coordinated care. [This letter elaborates and offers] recommendations on these points[.]" (Consumer-Purchaser Disclosure Project)
[Opinion] Text of Comments by ASPPA on Proposed Changes to IRS Regs on Purchase of Qualifying Longevity Annuity Contracts Under DC Plans
"While [ASPPA appreciates] the desire to be consistent with the intent of Code Section 401(a)(9) and not to permit greater deferral of distributions than would otherwise be permitted under the required minimum distribution rules, ASPPA believes that increasing the percentage limitation would provide greater flexibility and encouragement for participants to utilize longevity annuity options. As proposed, only participants with account balances of $400,000 or larger would be able to pay premiums up to the full dollar limit for a QLAC. The result may be that those participants with smaller account balances, who may be the people most in need of income security in the later years, will not have the ability to secure a significant income stream through a QLAC and may not take advantage of this opportunity." (ASPPA)
[Guidance Overview] IRS Announcement of 2013 HSA Contribution Limits and HDHP Minimum Deductibles and Out-of-Pocket Maximums
"Although all of the inflation-adjusted amounts will increase for 2013, the increases within each category (i.e., self-only or family) are not identical. This has some practical consequences. For example, some individuals may have to pay more out-of-pocket expenses in 2013 without the benefit of the HSA tax break, because the increase in the HSA contribution limit is not keeping pace with the increase in the out-of-pocket maximum. In addition, the greater difference in 2013 between the minimum required deductibles and the out-of-pocket maximums ($5,000 for self-only coverage and $10,000 for family coverage) will allow plan sponsors a wider range of potential deductibles because, at least before 2014, HDHP deductibles can be set as high as the out-of-pocket maximum for that coverage." (Thomson Reuters/EBIA)
Why Your Drug Co-Pay Could Change
"What if how much you paid for a drug was based on how much it might help you, instead of the sticker price? Some big employers are already taking this tack, known as value-based insurance design, by lowering copayments for medicines to manage chronic conditions like diabetes, high cholesterol and high blood pressure." (NPR)
Long-Term Care Insurance: Who Needs It?
"Out of more than 313 million Americans, only about 8 million have any such protection, according to the American Association for Long-Term Care Insurance. The low participation rate largely reflects the high cost of long-term-care insurance.... Experts say the insurance can be a huge help, especially for people without children and relatively small retirement savings. But it's far from a perfect solution to all problems. For example, a policy typically covers three years of care, but many people live long beyond that cap. And the new policies are being written with more restrictions to limit insurers' risks." (NPR)
Investment Advisers Often Tell Customers What They Want to Hear, Tout Higher-Fee Products, Finance Professors Conclude
Professor Mullainathan (Harvard) is the Assistant Director for Research at the Treasury Department's Consumer Financial Protection Bureau. Excerpt: "Do financial advisers undo or reinforce the behavioral biases and misconceptions of their clients? [This study uses] an audit methodology where trained auditors meet with financial advisers and present different types of portfolios. These portfolios reflect either biases that are in line with the financial interests of the advisers (e.g., returns-chasing portfolio) or run counter to their interests (e.g., a portfolio with company stock or very low-fee index funds). [The authors] document that advisers fail to de-bias their clients and often reinforce biases that are in their interests. Advisers encourage returns-chasing behavior and push for actively managed funds that have higher fees, even if the client starts with a well-diversified, low-fee portfolio." (Sendhil Mullainathan, Markus Noeth and Antoinette Schoar via National Bureau of Economic Research; paid subscription or individual purchase required to retrieve full text)
$57 Billion in Annual Health Care Savings Possible If Consumer-Directed Health Plans Were 50% of All Employer-Sponsored Insurance
"Enrollment is increasing in consumer-directed health insurance plans, which feature high deductibles and a personal health care savings account. [The authors] project that an increase in market share of these plans -- from the current level of 13 percent of employer-sponsored insurance to 50 percent -- could reduce annual health care spending.... That decrease would be the equivalent of a 4 percent decline in total health care spending for the nonelderly." (Health Affairs)
Co-Pays Rising for Expensive Specialty Drugs
"Health plans' spending for each patient using these drugs often exceeds $1,200 per month, according to the center's report. Although they account for just 1 percent of prescriptions, specialty drugs make up 17 percent of drug spending[.]" (Kaiser Health News)
Essential Health Benefit Packages Under Health Care Reform Have Employers Wary
"Employers and consumer groups are tracking state efforts to craft insurance benefit packages for individuals and small businesses as required under the federal health care reform law.... Large and small employers have banded together to form the Essential Health Benefits Coalition to voice concerns in Washington and statehouses across the country on the issue.... 'Employers want to make sure the benefits aren�t so expensive that they can�t cover the cost,' [said a spokesman] for the Essential Health Benefits Coalition. " (Workforce)
Are Employers Expecting Too Much from Self-Directed Plan Participants?
"More than half (54%) of employers report that employees participating in plans are not taking full advantage of the investment options, features and services offered in connection with their 401(k) plan.... More than half (52%) [of employees, on the other hand,] say they don't have the time, interest or knowledge to properly manage their 401(k) portfolio. Nearly three-quarters (73%) spend less than eight hours per year managing their 401(k) plan account." (MarketWatch)
PBGC and American Airlines Strike Deal on Frozen Underfunded Pension Plans
"The agreement removes PBGC's threat of litigation as long as the pension plan freezes do not unravel as the airline addresses other parts of its collective bargaining agreements. According to the [PBGC], [American]'s four defined benefit plans have assets of $8.3 billion and liabilities of $18.5 billion, and officials at the agency, which sits on the airline's creditors committee, have pressed American to avoid terminating the plans." (Pensions & Investments)
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)
How Supreme Court Vote Could Affect Health Industry's Cash Flow
"[T]he net effect of a thumbs-up decision is likely to be a brighter free-cash profile (FCP) for the industry and many of its individual companies, according to [the] professor of accounting at Georgia Tech who invented the metric. The FCP is designed to forecast the ability of a company or an industry to produce cash as it grows.... 'If national health care goes through, I view it as a positive for the health-care industry, because we'll have more people covered by insurance,' .... 'If they were to get more care, better care, I would think that somebody's got to provide that care -- and it's the health care industry.'" (cfo)
Critics Say Health Insurance Industry Should Be Replaced by Single-Payer System
Dr. Arnold Relman, a former editor of the New England Journal of Medicine, spoke at an event sponsored by two advocacy groups: Mad As Hell Doctors, and Physicians for a National Health Programs. 'We run our healthcare system as if it's a business in the free market... and not like the social service it ought to be.... [and we] believe in the myth that the private market -- private capitalism -- can work as well in healthcare as it is reputed to work in other areas [of the economy].'" (The Lund Report)
House Ways and Means Panel Mulls FSA Coverage for OTC Medicines
"The House Ways and Means Oversight Subcommittee ... considered a $5-billion provision ... in the [ACA] that prohibits using certain tax-favored spending plans to reimburse taxpayers for the cost of over-the-counter ... medicines. GOP lawmakers said requiring taxpayers to visit a doctor is tantamount to a tax increase that would clog physicians' offices, thereby reducing health care access for millions of American families." (Wolters Kluwer Law & Business / CCH)
[Guidance Overview] Employer No Longer Contributing to Multiemployer Plan Cannot Use Sale of Assets Exemption Under MPPAA
"In HOP Energy, L.L.C. v. Local 553 Pension Fund, the key issue decided by the US Court of Appeals for the Second Circuit was whether an employer that stopped contributing to a multiemployer pension plan ... after it sold the assets of one of its divisions to another company can use the sale of assets exemption under the Multiemployer Pension Plan Amendment Act ... to avoid the obligation to pay withdrawal liability." (Practical Law Company)
Health Care Access Already in Steady Decline for Past Decade, Could Get Worse If Health Care Reform Repealed
"This paper's analysis of national survey estimates found that access to health care and use of health services for adults ages 19-64 -- the primary targets of the ACA -- deteriorated between 2000 and 2010, particularly among those who were uninsured. More than half of uninsured US adults did not see a doctor in 2010, and only slightly more than a quarter of these adults were seen by a dentist." (Health Affairs)
Reinhart Employee Benefits Update, April 2012 (PDF)
Articles include: Clarification on Reasonable Interest Rate for Participant Loans; Final Interim Rule on Health Insurance Exchanges; Adoption of Preapproved Defined Benefit Plans; and Departments Issue New FAQs on SBC Requirements. (Reinhart)
Health Care Reform Timeline for Employers
Timeline of employer action items having effective dates during 2010-2018. (Mercer)
[Guidance Overview] Considerations for Employers Having Both an HSA Program and Health Flexible Spending Accounts
"Special considerations apply if you currently offer health flexible spending accounts ('health FSAs') that allow up to an extra 2-1/2 months after the end of the plan year in which participants can spend their money (known as a 'grace period'). If you are considering offering an HSA in 2013, you may want to take steps now to inform your employees who currently participate in your health FSA (or the health FSA of their spouse, if the employee is eligible to be reimbursed under that FSA), that if the health FSA contains a grace period, they need to have spent all of the money in their health FSA (even if they have not yet submitted the claim or been reimbursed) on or before December 31, 2012 if they want to qualify for an HSA for the entire 2013 taxable year." (McKenna Long & Aldridge LLP)
Health Care Reform: What If They Throw the Whole Thing Out?
"[If the Supreme Court finds the individual mandate is not constitutional and that it is not severable from the rest of PPACA, it] would mean that the entire law would be voided and employers would no longer have to continue to comply.... [The situation would then be that] employers will no longer have to comply with any of the PPACA mandates, and various PPACA provisions that affect employers will no longer apply. This includes portions of PPACA that are already effective, as well as those that are becoming effective over the next several years." (Jones Day)
Deloitte Health Care Reform Memo, May 7, 2012
Describes recent developments in various health plan and health insurance matters at the federal and state levels. This issue includes a discussion of the Senate Committee on Finance announcement of a bipartisan effort to combat waste and fraud. (Deloitte)
Using an Incentive Strategy (Rewards or Penalties) to Drive Wellness Program Participation (PDF)
"A large percentage of organizations are turning to incentive-driven plan designs because these approaches are no longer a leap of faith. The evidence show that incentives work to motivate employees to get screenings, comply with drug regimens, participate in disease or case management programs, and pursue other activities and outcome-based goals." (Buck Consultants)
The Funding of State and Local Pensions: 2011-2015 (PDF)
"The stock market hovers around pre-crisis peaks, tax revenues have rebounded, and plan sponsors have raised employee contributions for all workers and/or reduced benefits for new workers, yet the funded status of state and local pension plans has once again slipped. ... Because of [actuarial] smoothing, the funding results looked much better in 2009 and 2010 than developments warranted, but less good than developments in 2011. In order to highlight the impact of asset smoothing in the short run and the stock market in the slightly longer run, this brief provides an update on the funded
status of state and local plans in 2011 and also reports projections for the period 2012�2015." (Center for State & Local Government Excellence)
Governmental Pension Plans: Can Peter's Sponsor Borrow From Peter To Pay Peter?
"Whose skin is in the game when pension plans make loans to plan sponsors to pay pension contributions, and is the answer different if the plan sponsor is a government body? Those questions come to mind on learning that last year the highest elected officials in New York State authorized financially distressed local governments in the state to use a problematic borrowing scheme to defer a portion of their pension liabilities, by, in effect, borrowing from the state pension system to satisfy significant percentages of contributions owed to the pension trust for the retirement benefits of their respective employees." (By Alvin D. Lurie, Esq. on BenefitsLink.com)
[Official Guidance] Text of DOL Field Assistance Bulletin 2012-02: FAQs on Participant-Level Fee Disclosures and Service Provider Fee Disclosures
38 Questions and Answers, supplementing the final regulations. Example: "Paragraph (c)(2)(i)(A) of the [final participant-level fee disclosure] regulation requires an explanation of any fees and expenses for general plan administrative services which may be charged against participants' and beneficiaries' accounts and the basis on which such charges will be allocated. How specific does this explanation have to be in order to comply with this requirement?" (Employee Benefits Security Administration)
'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)
15 Features to Expect from Your HRA Administration Software Provider
"The Employer should be automatically protected and the HRA administration made HIPAA Compliant through technology rather than the training of [your] employees. For example, employers should not be able to view HIPAA-protected employee information, and HRAs reimbursing for personal health policy premiums should automatically follow Department of Labor HIPAA and ERISA guidelines for employers allowing insurers access to their employees." (Zane Benefits)
Nearly Half of Soon-to-Be-Retired, High-Net-Worth Americans 'Terrified' of Health Care Costs in Retirement
"While 45 percent expect health care to be their biggest expense throughout retirement, when asked to estimate how much they anticipate spending each year on health care, they said, on average, $5,621. This represents a drastic underestimation based on a 2010 study that estimates out-of-pocket health care expenses for a 65-year-old couple retiring today and living for 20 years to range from $250,000 to $430,000. That could mean as much as $10,750 a year per person in out-of-pocket health care expenses." (Nationwide Financial)
Combining Life Insurance with Long-Term Care Insurance as an Employee Benefit
"One of the more interesting plan designs presents the worker with an affordable product, which is a combination of term and universal life insurance. The life-insurance benefit drops to one-third of the original face value when the retired employee reaches age 70, but the LTC rider remains at the original amount. Employees can tap into the LTC payment -- if they've lost the ability to perform two or more activities of daily living -- at the rate of 4 percent a month, for up to 25 months." (Human Resource Executive Online)
[Official Guidance] Text of IRS Rev. Rul. 2012-13 for Federal Rates; Adjusted Federal Rates; Adjusted Federal Long-Term Rate and the Long-Term Exempt Rate
"This revenue ruling provides various prescribed rates for federal income tax purposes for May 2012 (the current month). [Table] 5 contains the federal rate for determining the present value of an annuity, an interest for life or for a term of years, or a remainder or a reversionary interest for purposes of section 7520." (Internal Revenue Service)
How Is Economic Hardship Avoided by Those Retiring before the Social Security Entitlement Age?
"[Four] out of five people who have zero earnings at pre-entitlement ages are able to find a way to lift their incomes over the poverty line. For men, pension and annuity income is important while for women, spousal income helps most to get them over the line. Reaching the early retirement entitlement age at 62 also has a significant impact on poverty avoidance." (The National Bureau of Economic Research; paid subscription or individual purchase required to retrieve full text)
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)
[Guidance Overview] IRS Notice Requests Comments on Minimum Value and Reporting Requirements for Group Health Plans
"The [IRS is requesting comments on] three potential approaches to determining minimum value under consideration: 1. Use of an actuarial value calculator (for insured small group plans) or minimum value calculator (for self-insured and insured large group plans) created by [HHS] and the Treasury ... 2. Creation of various design-based safe harbor checklists describing deductibles, co-pays, coinsurance, out-of-pocket maximums and other cost-sharing attributes for the four core categories of benefits and services [and] 3. For non-standard plan designs, determination by a certified actuary that the plan provides minimum value." (McDermott Will & Emery)
[Guidance Overview] IRS Guidance Addresses Upcoming Research Fees on Many Health Plans and Insurers
"These research fees are scheduled to start with the first plan or policy year ending on or after October 1, 2012, and will affect the health plans of many employers. Although the regulations currently are in proposed form, health insurance issuers and plan sponsors may rely on the proposed regulations for guidance pending the issuance of final regulations." (Bond, Schoeneck & King)
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)
[Opinion] A Policy Argument for Treating Individual 403(b)(7) Custodial Accounts As Distributable Assets Upon Plan Termination
"The IRS�s ongoing position is that an individual 403(b)(7) custodial account cannot be distributed from a 403(b) plan upon its termination, while a �fully paid� annuity contract is permitted to be distributed [because] it will not deem the custodial account to be an annuity for these purposes. This has the practical effect of preventing termination of any 403(b) plan which is funded with individual custodial accounts. As time wears on, and this position begins to get long in the tooth, its 'unworkableness' becomes more and more apparent as it causes difficulties beyond the actual plan itself." (Business of Benefits)
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)
DOL Ruling Puts Kibosh on Connecticut's Idea for Pooling Private and Public Employers' Health Risk
"The U.S. Department of Labor has advised the Malloy administration that opening Connecticut's state employee and retiree health plan to nonprofits and small businesses could jeopardize the legal protections it now enjoys as a government plan." (CT Mirror)
[Opinion] The Health Care Mandate Is Clearly a Tax and Therefore Constitutional
"The mandate is an amendment to the Internal Revenue Code, and it is calculated based on a percentage of adjusted gross income or a fixed amount, whichever is larger. Starting in 2014, it will be collected on your form 1040 just like your other taxes.... [Justice] Roberts and [Justice] Kennedy are no doubt aware of the political meaning of a 5-4 vote along party lines that gives Republicans what they could not get through the democratic political process. That concern, and the long history of deference to Congress on economic legislation, give the justices strong reasons to uphold the act. The tax argument offers them a way out. " (The Atlantic)
Smart Employers Accommodate Needs of Parents in the Workplace
"Smart businesses will recognize that all employees, regardless of their family status, require work/life balance, and that 'families' can be defined in many different ways. Efforts need to be made to accommodate all reasonable requests, and across-the-board fairness has to be our goal. Benefit packages today can be designed with flexibility and choice, ensuring that family situations don't result in inequality." (Kitsay Peninsula Business Journal)
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)
Massachusetts Lawmakers Unveil Ambitious Plan to Cut Health Care Costs
"[State lawmakers announced a new proposal to control rising medical costs], including new ways to pay doctors and hospitals, a specific cap on health-care spending tethered to economic growth and a tax on the state's most expensive hospitals if they can't justify their prices." (Kaiser Health News)
[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)
Administration Might Consider Additional Federal Regulation of Use of Stop-Loss Insurance
"[T]he Obama administration issued a request for information on whether new rules are needed to make it harder for small employers to choose to self-insure employee health care, citing concerns that this practice could lead to higher costs for small group plans in PPACA's exchanges. While any new rule would not likely be directed at large employers, it would open up discussions to regulate other features of self-insured plans, which could directly impact large employers." (HR Policy Association)
[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)
DOL Reports to Congress on Self-Insured Health Plans; Agencies Seek Information on Stop-Loss Coverage
"Will health care reform's insurance mandates (which indirectly burden plan sponsors ... prompt more employers to consider self-insurance? It's too soon to tell -- particularly from a report based on 2009 data. But employers considering a change to a self-insured plan should understand both the risks and the advantages." (Thomson Reuters/EBIA)
[Guidance Overview] Guidance Addresses Minimum Value for Employer Plans, Information Returns, and Exchange Eligibility Determinations
"Most of the minimum value details remain to be worked out (through development of the calculator and checklists), but one interesting point is highlighted with respect to the four categories of benefits.... According to Notice 2012-31, although employer plans are not required to cover all these benefit categories, ... a plan will not satisfy any design-based safe harbor if it fails to do so." (Thomson Reuters/EBIA)
A Republican Health Reform Plan Might Look a Lot Like Obama's
"Republicans would have the chance to pass a plan of their own if the Supreme Court strikes down all or some of the current law or if they gain control of Congress and the White House in the next election. [If so,] prominent Republicans believe the party will have to come up with something. Almost certainly, Republicans would drop the mandate that all individuals have health insurance.... But what other changes would they make? ... Current proposals put forth by Republicans in Congress run the gamut from doing almost nothing to creating a system that looks surprisingly like Obama's." (philly.com)
Five Exceptions to the Health Care Reform Law for Small Employers
"If your company employs fewer than 250 employees, at least one and possibly more requirements under healthcare reform may not apply to you. Before you spend unnecessary time or money, check out these five exceptions to the law." (Compensation.BLR.com)
[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)
[Guidance Overview] Does Your 401(k) Plan Have an Investment Policy Statement and Do Your Fiduciaries Follow It?
"There is an important lesson in [Tussey v. ABB. Inc.]: it can be very expensive to depart from your investment policy. [The authors] find that many employers adopt 'canned' investment policies that they received from their outside service provider without much explanation or analysis. The best defense against the kind of award won by the plaintiffs is for investment fiduciaries to make sure that they have read and understand the [investment policy statement, or 'IPS'] and determined whether it is appropriate for them, and, where appropriate, made any changes to customize a canned IPS." (Osler)
Tuning Up Your Company's Severance Plan (PDF)
"This article reviews the history of severance plans, explains how supplemental unemployment benefit (SUB) plans work, provides plan sponsors with questions they should ask when reexamining their severance offerings, and suggests options for plan sponsors to consider in terms of optimizing their severance plan's cost control and certainty, tax savings and appropriate cost sharing with employees." (Buck Consultants)
'Co-Sourcing' Trends of DC Plan Management
"Under the co-sourcing model, the adviser plays an inside role, side by side with the plan sponsor, often acting as an extension of the sponsor�s staff. As insiders, advisers have access to details and background information that allow them to proactively identify problems and risks." (Mercer)
'We Care, But We're Not Doing Enough to Help Employees Prepare for Retirement,' Employers Say
"While plan sponsors feel a strong sense of responsibility in educating participants about retirement preparedness, only 43% are confident that their participants are saving enough to get the monthly income they need in retirement." (Black Rock)
[Guidance Overview] Former Trustee Liable for over $4 Million for Breach of Fiduciary Duty
"The [Court of Appeals for the Third Circuit] said that [the retirement plan's trustee] breached his ERISA-imposed duty and caused a loss to the Plan. He fraudulently reported an inaccurate account balance ..., improperly distributed the Plan's assets to himself, and otherwise used the assets for his personal benefit. These fraudulent actions resulted in a loss when the Plan participants received an amount smaller than their proportionate shares in the [trust fund]." (ERISA Lawyer Blog)
CalSTRS Brings Shareholder Derivative Suit Agains Wal-Mart Directors
"[T]he California State Teachers' Retirement System owns about 5.3 million shares in Wal-Mart, worth about $313 million. Although that is a small stake -- far less than 1 percent -- the suit was filed on behalf of Wal-Mart itself against people the pension plan identified as having failed in their duties to the company.... [The plan] has never brought such a lawsuit before.... [It] asks that damages from the result of any violations be awarded to Wal-Mart, and that the company reform and improve its corporate governance and internal procedures.... Since derivative suits ask that damages be returned to the company, there is not usually a great monetary reward for plaintiffs." (The New York Times; free registration required)
Defined Benefit Fans Tout Cash Balance Pension Plans for Public Employees
"Across the country, the pension reform debates have spurred a lot of talk about how to fix the mess created by runaway defined benefits plans that promised more than they could deliver. So it's no wonder that pension skeptics are suspicious about the latest scheme to emerge from traditional pension advocates, notably the labor groups and many in the actuarial community, who have proposed 'cash balance' plans as the new panacea.... For those unfamiliar with cash balance plans, they are sometimes known as 'defined-benefit plans in drag.'" (Governing)
[Guidance Overview] Minnesota State Agency to Pay Damages Plus Insurance Coverage to Resolve Case of 'Age 55 Cliff' Discriminatory Early Retirement Plans
"This decree ... resolves the last in a series of cases brought by the EEOC against Minnesota state agencies regarding early retirement incentive plans contained in collective bargaining agreements for certain employees. The incentive plans provided that the employee had to retire by age 55 to obtain the incentive, and would lose it if he or she worked longer, according to an EEOC statement. For an employee who did retire by age 55, the employer continued to pay the employer's share of the insurance premiums which generally ranged from 85 percent to 100 percent of the total amount of the premium -- and continued to do so until the retiree reached age 65. For an employee who retired after age 55, the employer paid nothing, and the cost of retiree insurance fell entirely on the retired employee." (Wolters Kluwer Law & Business / CCH)
Public Opinion on Gender Rating for Health Insurance Premiums
"While relatively few Americans are aware that the ACA [already includes a provision prohibiting gender rating in health insurance beginning in 2014], many Americans like the idea of leveling the playing field for health insurance premiums. Overall, six in ten (61 percent) have a favorable view of this provision, a number that rises to seven in ten (69 percent) among women as a group, and about three-quarters among women under age 50 (73 percent of whom back it)." (The Henry J. Kaiser Family Foundation)
[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)
'It's Good to Be the King!' -- CEO Pay Is 231 Times Pay of Average Worker
"From 1978-2011, CEO compensation grew more than 725 percent, substantially more than the stock market and remarkably more than the annual compensation of a typical private-sector worker, which grew a meager 5.7 percent." (Economic Policy Institute)
Most Self-Directed Plan Participants Avoid Extreme All-Equities or No-Equities Positions
"Over the last ten years, there has been a definite trend away from extreme equity positions in [DC] participants' portfolios.... Research from CRR shows that fewer participants are at the tail ends of the spectrum -- with either their entire plan portfolios in stocks or no position in equities at all." (Vanguard)
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)
[Guidance Overview] IRS Proposed Regs Address Comparative Effectiveness Research Fee on Group Health Plans
"Insurers and plan sponsors must report and pay these fees annually on IRS Form 720, which will be due by July 31 of each year. The first due date is July 31, 2013. A return will generally cover policy or plan years that end during the preceding calendar year. In other words, fees for a plan year are due by July 31 of the calendar year following the calendar year containing the plan year end. Form 720 may be filed electronically. The IRS has not yet updated Form 720 to reflect the reporting of these fees." (Proskauer)
Potential Accounting Implications of Upcoming Supreme Court Decision on the Affordable Care Act
"A court decision that invalidates all or part of the ACA would likely become immediately effective. As a result, [PwC believes] certain accounting and reporting implications would need to be reflected in the period of the Court's decision.... If the ACA's treatment of Medicare Part D subsidies were among those provisions invalidated by the Supreme Court's decision, the increase in deferred tax assets resulting from the change for those employers receiving retiree drug subsidies (RDS payments) would be immediately recognized in the income statement in the quarter during which the provision was invalidated... The effect of this ... would be to effectively unwind the tax write-off that was taken in 2010." (PricewaterhouseCoopers LLP)
[Guidance Overview] Proposed IRS Regs Address Fees to Be Paid by Health Insurers and Sponsors of Self-Insured Health Plans
"If the Supreme Court agrees that the individual mandate is unconstitutional and cannot be severed from the rest of the Act, the Section 4375 and 4376 fees [on health insurers and plan sponsors for the Patient-Centered Outcomes Research Trust Fund] would be invalidated along with the PCORI. The Court's decision is expected this June." (McGuireWoods)
[Guidance Overview] SEC Guidance Addresses Scaled Disclosure and Other Emerging Growth Company Issues under the JOBS Act
"Certain provisions of the JOBS Act conflict with SEC form requirements, Regulation S-X and Regulation S-K. An [Emerging Growth Company] may comply with the JOBS Act disclosure provisions in its registration statements, periodic reports and proxy statements, even if doing so would be inconsistent with existing rules and regulations. The disclosure provisions in the JOBS Act supersede, in relevant part, existing rules and regulations." (Hinshaw)
Trends in Employee Financial Issues, 2st Quarter 2012
"Despite an increased focus on retirement planning, employees still report being woefully unprepared for retirement, and recent stock market performance has done little to change employees' confidence in their investments. This could be the result of lost momentum coming out of a 'soft' recovery, or the early signs of an impending second recession." (Financial Finesse; free registration required to download copy of the brief)
[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)
Using Workplace Flexibility As a Business Strategy
"Whether it's telecommuting, compressed work weeks, alternative scheduling or other arrangements, [a conference speaker] called workplace flexibility -- granting employees autonomy to control when, where and how they will get their work done -- 'close to the "silver bullet" among nonfinancial rewards.' But while studies indicate that 80 percent of U.S. businesses say they have implemented workplace flexibility, most have done do so ad hoc rather than establishing a 'flex culture' and embedding flexibility as part of the talent management strategy." (Society for Human Resource Management)
[Opinion] Text of Comments by American Academy of Actuaries to CMS on Revised MLR Annual Reporting Form (PDF)
"The Medical Loss Ratio Work Group sent a letter to CMS offering comments on the revised annual reporting form, specifically on the definition of premiums, contract reserves, and the definition of pre-tax underwriting gain/(loss)." (American Academy of Actuaries)
PBGC Statement on the Bankruptcy of Hawker Beechcraft, Inc.
"'[PBGC is] committed to working with Hawker Beechcraft and its creditors so that the company can reorganize successfully, while also maintaining the retirement security of its nearly 20,000 workers and retirees.' Collectively, Hawker Beechcraft's three pension plans are 56 percent funded, with $769 million in assets to cover $1.4 billion in benefits. If Hawker Beechcraft ended the plans, PBGC would pay $533 million of the $611 million shortfall." (Pension Benefit Guaranty Corporation)
New Trade Association for Retirement Plan Advisors Grows Much More Than Expected
"The National Association of Plan Advisors (NAPA) -- an individual membership organization created by and for retirement plan advisors ... announced it has exceeded its first-year membership goal just six months after its launch." (ASPPA)
Value Investing: Investing for Grown Ups?
"While value investing looks impressive on paper, the performance of value investors, as a whole, is no better than that of less 'sensible' investors who chose other investment philosophies and strategies. We examine explanations for why 'active' value investing may not provide the promised payoffs." (Stern School of Business, New York University)
As a Plan Sponsor, Are You Prepared to Provide Fee Disclosures to Participants?
This 39-minute video includes a description of the format of Vanguard"s reporting of its fees as a service provider to its plan sponsor customers, and what Vanguard will be doing to assist its customers with the participant-level fee disclosures. (Vanguard)
[Opinion] Ford's Retiree Cashout: A Trap for the Unwary
"If enough retirees accept the cashout offer, Ford will reap significant financial benefits. First, it would reduce the volatility on the company's financial statements that results from its pension obligations. Second, Ford wouldn't need to pay premiums to [PBGC], ... on behalf of any retirees who accepted the lump-sum deal. Ford also would likely be able to extinguish its pension liability at below-market rates for retirees who accept the offer." (CBS money watch)
10 Worst-Off State Pension Funds
"How bad is the funding gap? The study calls it "a matter of debate," but according to the funding-status measure prescribed by the Government Accounting Standards Board, the nation's largest 126 pension plans were underfunded by around $800 billion in 2010, while critics of GASB's accounting methods estimate the aggregate pension fund shortfall to be as much as $4 trillion." (The Street)
Tax Benefits of Opening a Health Savings Account
"These accounts, commonly referred to as HSAs, are tax-advantaged medical savings accounts and were created to encourage people to save for future health problems, but there are other reasons to open such an account." (Fox Business)
Online Health Care Price Transparency Tools Trend Upward
"[Castlight] certainly isn't the only online comparison tool available to consumers. Insurance company Cigna unveiled a similar tool for its customers in February that allows patients to search costs for 200 common medical procedures and estimate prices for specialists, doctors and hospitals based on their coverage, and WellPoint has offered similar resources to some of its customers since 2009." (FierceHealthIT)
[Guidance Overview] Terminated Employees of Successor Employer Not Entitled to Separation Benefits under Prior Employer's Pension Plan
"ERISA Section 204(g) does not protect from cutback an early retirement benefit for a plan participant who has not satisfied and can never satisfy the conditions for receiving the benefits that are subject to the cutback. The legacy employees would never be eligible for the PJS benefit because they had been offered continued employment by the successor." (Wolters Kluwer Law & Business / CCH)
'Accountable Care Organizations' Could Have Medicare Muscle to Transform the Health System
"The drawbacks of fee-for-service reimbursement are hardly secret. In 1909, the playwright George Bernard Shaw wondered why 'any sane nation, having observed that you could provide for the supply of bread by giving bakers a pecuniary interest in baking for you, should go on to give a surgeon a pecuniary interest in cutting off your leg.' A century later, McKinsey Global Institute identified 'payment for more care rather than more value' as one reason U.S. medical spending is more than 25 percent higher per person than even in other industrialized nations." (Kaiser Health News)
[Opinion] Text of Investment Company Institute's Recommendations for the 2012-2013 IRS Guidance Priority List (PDF)
The comments largely address certain regulatory issues that remain unsettled for 403(b) retirement plans. (Investment Company Institute)
How to Explain High U.S. Health Care Spending? A Look at Supply, Utilization, Prices and Quality in Other Countries
"[The] high spending cannot be attributed to higher income, an older population, or greater supply or utilization of hospitals and doctors. Instead, the findings suggest the higher spending is more likely due to higher prices and perhaps more readily accessible technology and greater obesity. Health care quality in the U.S. varies and is not notably superior to the far less expensive systems in the other study countries." (The Commonwealth Fund)
AHIP Says Health Insurers Will Continue to Innovate
"'To say that health insurers will go out of business by 2020 is totally inconsistent with what's going on in the real world,' [says Karen Ignagni, President and CEO of the 'America's Health Insurance Plans' trade association]. 'Since the 1990s, health plans have been the engine of change. All around the country, you can see the evidence of how health plans are innovating in any number of areas.'" (Managed Care)
[Opinion] Text of Comments by Insured Retirement Institute on Proposed Regs on Longevity Annuity Contracts (PDF)
"First, it is [the Institute's] understanding that, under the regulation, the failure to comply with the 25% or $100,000 limits would void the entire contact as a QLAC. [The Institute suggests] that a system could be developed that would allow for a correction to a mistake in calculations. The amount that would be over the limits would be applied to the participant's required minimum distribution calculation. However, the remainder of the QLAC would remain intact and would still ensure longevity protection for the participant." (Insured Retirement Institute)
Is the Fact that I Am a Woman Considered a Pre-Existing Condition?
"When they buy their own health insurance in the individual market, women must lay out an extra $1 billion a year, simply because they are women. Some argue that this is fair: after all, a woman could become pregnant, and labor and delivery are costly. But the truth is that, even when maternity benefits are excluded, one-third of all health plans charge women at least 30 percent more, according to a report released just last month by the National Women's Law Center." (The Health Care Blog)
Study Looks at Financial Habits and Retirement Planning for Women Who Are Moms (PDF)
"Clearly the 'sacrifices' of child care responsibilities may have long-term effects on retirement preparedness. Lower contribution levels, for example, can have a snowball effect over time and the effect can be magnified further for women raising children, who seem to have the lowest retirement contribution levels, and balances, of all." (ING)
Benefits and Challenges of Offering Retirement Income Strategies in Your DC Plan
"[A panel of industry experts share] their insights and perspectives on what's going on in the retirement industry to address the retirement income needs of participants." (Invesco)
[Opinion] Revenue Sharing on Trial: Complex, Inefficient and Unnecessarily Expensive
"The basic problem with revenue-sharing is that it is an inefficient and opaque way to compensate service providers. Its needless complexity leaves many plan sponsors unable to line up costs with the value of services so that they can prudently fulfill their fiduciary duty to determine the reasonableness of costs. In this way, revenue-sharing is like any other third-party payer system. In cases such as Tussey, revenue-sharing costs incurred by plan participants went unnoticed by the plan sponsor and therefore remained unknown, harming plan participants while generating [what a court called] 'unreasonable' profit for Fidelity." (Morningstar)
[Guidance Overview] Failure to Offer Comparable Severance Package Can Be Prohibited Gender Discrimination under Title VII
"The [Fourth Circuit Court of Appeals] reversed and remanded a district court's dismissal of a claim by a former employee that she was not offered the same severance benefits as other similarly situated male counterparts when they were terminated from employment. In this case, the employee was offered three months of continued pay and health benefits when her employment ... was terminated. The employee claimed that males in similar positions were customarily offered six months of pay and benefits, or were transferred to positions with less responsibility while continuing their pay and benefits." (Haynes and Boone)
[Guidance Overview] Another Question is Answered in the Who's the Employer Q&A Column
My wife (age 70, born September 1, 1931) and I both work for a small company (C corp) that had an SEP IRA but has recently switched to a calendar year 401(k) plan. My wife would like to roll over funds from the SEP IRA into the 401(k) plan. She would also like to roll other 'regular' IRA funds into the plan, as well as some 403(b) funds saved while working for a former employer. The goal is to avoid required minimum distributions. Can we? She is the President of the C corp and owns 4.96%. I am the CEO and own 4.5%. (BenefitsLink.com)
[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)
Pension Plan Underfunding Rises Slightly During April
"The decrease in funded status in April [and commensurate increase in the level of underfunding] was attributable to an increase in liabilities due to declining interest rates. Interest rates on high quality corporate bonds, which are used to measure the pension liability, fell 22-32 basis points during the month, as measured by the Mercer Pension Discount Yield Curve. Assets were relatively flat during the month as US equity markets were down about 0.6 percent for the month, offset by positive returns for fixed income investments." (Mercer)
Ford Aims to Trim Pension Risk by Buying Out Salaried Retirees and Former Employees
"'This involves retirees in a plan that's not terminating,' [and Towers Watson is] unaware of any other large plan that has done this.' Other organizations have offered lump sums to former employees who are vested in the pension plan but not yet retired[.]" (Treasury & Risk)
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)
Employers Becoming More Generous with Corporate Relocation Benefits
Provides the text of the 2012 Atlas Moving Companies Corporate Relocation Survey. "For new hires [during 2011], full reimbursement [of relocation costs, as an employee benefit,] retakes the top spot as the most popular method, reversing its progressive decline from 2009-2011. The percentage of firms using full reimbursement is [57%]. This method is followed closely by lump-sum payments (50%) ... The percentage using partial reimbursement [was 40%] and is at its lowest level since 2006." (Atlas)
Final IRS Regs on Cash Balance Plans to be 'Meaningfully' Altered from 2010 Proposal (PDF)
"The Treasury Department will soon release final rules on cash balance and pension equity plans that will be significantly different from the proposed rules.... [IRS official Mark Iwry] said the Obama administration is open to creating hybrid plans that mix characteristics and features of defined benefit plans and defined contribution plans in innovative ways. For example ... collective investments and professional investment management could be used in plans that have characteristics of defined contribution plans. Similarly, defined contribution plan investing could be done with institutional shares, not retail shares[.]" (Bloomberg BNA)
Retirement Issues Particular to Women: Patterns of Saving, Spending and Effectiveness of Incentives (PDF)
"This paper explores how women save and invest for retirement, what motivates them and how they feel about their own situations, where they look for information and how they save and spend. These insights can help employers, financial professionals, and financial providers offer solutions that might help address the risk women currently face in being prepared to care for themselves in retirement." (ING Retirement Research Institute)
[Guidance Overview] Electronic Delivery of Disclosures under the Participant Fee Disclosure Regulation (PDF)
"The interim e-delivery guidance under Technical Release 2011-03R provides more liberal and user friendly options for e-delivery of plan-related information than for investment-related information. To provide all required disclosures using the same e-delivery option one of the two general e-delivery options described ... must be used, however both are complex and challenging to administer." (ING)
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)
Take Steps to Ensure Effectiveness of Stock-Based Pay
"Is it time for employers to rethink stock-based compensation for broad groups of employees? The answer depends on what the company wants to accomplish and whether stock-based pay is the best way to spur the employee performance to achieve those goals." (Society for Human Resource Management)
[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)
A Survey of Current Recordkeeping Practices for 'ERISA Budget Accounts' (PDF)
At page 6 of this 20-page document. "More recently, the broader marketplace began forcing recordkeepers to offer access to non-proprietary investments. These funds enter agreements with recordkeepers to share revenue in the form of sub-transfer agent (Sub-TA) fees, and as part of that process, recordkeepers began agreeing to cap their annual fee on plans at a certain level. As revenue was received, either all, or a portion of the amount in excess of the cap was in turn set aside in what many call an 'ERISA Budget Account.'" (CAPTRUST)
PBGC and Bendix Reach Settlement and End Litigation on Pension Debt
"Under the settlement, PBGC won't require Bendix to put up collateral for the remaining $8.4 million in pension liability, provided the company remains financially strong until the end of the year. If the company's financial position significantly weakens during that time, Bendix will provide a letter of credit for $8.4 million." (Pension Benefit Guaranty Corporation)
How Much Do Private Industry Employers Pay for Government Employee Benefits Such as Social Security? (PDF)
"The legally required benefits covered in this issue of Program Perspectives are Social Security, Medicare, federal and state unemployment insurance, and workers' compensation. The focus here is on the employer's portion of the cost of these benefits." (Bureau of Labor Statistics)
Health Care Law Creates Financial Incentives for Employers to Drop Health Coverage
"More than 70 percent of America's Fortune 100 companies detailed their health care costs for the Committee, providing the ability to analyze how those self-reported costs would compare to ending employer-sponsored insurance and paying the employer mandate penalty. Based on an aggregation of the data received, if the 71 Fortune 100 companies that replied to the survey ceased to offer health care coverage and paid the employer mandate penalty, they could save a total of: $28.6 billion in 2014 (an average savings of over $400 million per company) and $422.4 billion from 2014-2023 (an average savings of nearly $6 billion per company)." (U.S. House of Representatives, Committee on Ways and Means)
How to Benchmark Your Benefits Package to Ensure It Is Economical and Competitive
"Knowing how other employers plan to address these benefit decisions can be advantageous, as these decisions could mean the difference between maintaining a competitive benefits package to attract the best and brightest and declining ability to recruit and retain quality employees. Careful strategic planning includes ongoing evaluation of your organization to ensure that a comprehensive and competitive benefit package is offered to employees." (Smart Business)
Specialty Drug Spending Accounted for 20% of Total U.S. Drug Expenditures in 2009
"Spending for specialty drugs has grown between 15 percent and 20 percent for the last several years ... -- despite the fact that such drugs are used by only 1 percent to 5 percent of the U.S. population, according to a recent report from the Pharmacy Benefit Management Institute.... The report -- the 2011-2012 PBMI Prescription Drug Benefit Cost and Plan Design Report -- projects the growth in spending on specialty drugs will continue to outpace non-specialty drug spending." (Human Resource Executive Online)
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)
Trends in Employment-Based Health Insurance and the Effects of Public Policy on Access to Coverage in the 1990s (PDF)
"There was substantial variation among employers from different communities in the rate at which they offered health insurance and in the share of premiums they expected workers to pay. From 1993 to 1997, the share of workers enrolled in their employer's health plan remained essentially constant overall and the employer contribution for both individual and family coverage did not change significantly. However, this stability masked the variability among employers and individual workers." (Robert Wood Johnson Foundation)
2012 Investment Company Fact Book (PDF)
"The growth of individual retirement accounts ... and defined contribution ... plans, particularly 401(k) plans, in conjunction with the important role that mutual funds play in these plans, explains some of households' increased reliance on investment companies during the past two decades. At year-end 2011, 9 percent of household financial assets was invested in 401(k) and other DC retirement plans, up from 7 percent in 1991." (Investment Company Institute)
IBM Phased Retirement Program Offers Benefits and Employment through 2013 in Exchange for Reduction in Hours
"IBM is offering employees who are nearing retirement -- and may be worried about a layoff -- a one-time voluntary program that would ensure their employment through Dec. 31, 2013. The program, called 'Transition to Retirement,' would cut a workers schedule and pay, but continue providing full benefits until the job guarantee's expiration date. The program, described in a letter addressed to IBM managers, 'offers participants 70% of their pay for working 60% of their schedule.'" (Computer World)
[Guidance Overview] How to Protect Your Company's 401(k) Plan Committee under New Service Provider Fee Disclosure Regs
"First, consult with your company's attorney to find out if you are the fiduciary of your company's 401(k) plan. Second, get a fiduciary liability policy before the rule goes into effect July 1. These plans are typically not expensive and can cover all individuals, trustees and board members who act as fiduciaries of the company's retirement plan. Finally, get a new [third-party] administrator for your plan that has low fees and accepts fiduciary responsibilities." (Smart Business)
Stockton, California Bankruptcy Would Public Employee Pensions and Bondholders Nationwide
"Under a new California law governing municipal distress, Stockton has entered into a mandated mediation period before it can file for bankruptcy under Chapter 9.... Stockton faces an avalanche of obligations that it cannot meet. Foremost among them are contributions to public employee pensions, as well as debt service on bonds earlier sold to fund its pension contributions." (Governing)
[Guidance Overview] CMS Guidance Addresses Medical Loss Ratio Requirement
"In response to [a] question about whether 'premium holidays' are permissible in lieu of providing rebates if an issuer finds that its MLR is lower than the standard required, the guidance explains that this is a state regulatory issue not addressed by the MLR regulations." (Littler)
[Guidance Overview] HHS Guidance Addresses 'Minimum Value' Calculation by Employer-Sponsored Health Plans and Reporting Requirements
"After considering stakeholder comments, HHS proposes to provide a standardized way for employees and employers to voluntarily collect and communicate employer-sponsored coverage information needed to complete an Exchange application. HHS proposes to allow Exchanges to verify employer-sponsored coverage for the 2014 and 2015 plan years through use of limited pre-enrollment verification based on data sources available to an Exchange and a post-enrollment verification screening process where data sources are not available during the eligibility determination process." (Littler)
[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] IRS Proposes Methods for Valuing Employer Health Coverage
"The IRS has just issued three notices concerning key aspects of the 2010 Affordable Care Act ('ACA'). Notice 2012-31 proposes three different methods by which sponsors of self-funded health plans could value the coverage they provide to plan participants and their dependents. Notice 2012-32 and Notice 2012-33 then solicit comments on two related employer reporting requirements.... All three of these Notices solicit comments. Unfortunately, the deadline for submitting those comments is June 11, 2012. This is likely to be before the Supreme Court has issued its ruling on the constitutionality of the individual mandate - and perhaps the entire ACA." (Spencer Fane)
[Guidance Overview] Final DOL Regs Address Fee Disclosures to Participants in Self-Directed Retirement Plans
"Plan sponsors of covered participant-directed individual account plans should review their summary plan descriptions, plan prospectuses, benefit statements, plan websites and other plan communications to determine what additional information must be provided under the final regulations and how they will comply with the information and disclosure requirement." (Pillsbury)
[Guidance Overview] DOL Issues Final Regs on Pension Plan Service Providers; Health & Welfare Plan Service Providers Next in Line?
"Failure to comply with the final regulations will cause the plan and service provider arrangement to be a prohibited transaction and subject the service provider to certain excise taxes under Code section 4975.... In light of the DOL's intention to include welfare plans under these regulations in the future, it may be wise for service providers and plan fiduciaries to begin reviewing any service provider arrangements under these plans as well." (Pillsbury)
[Guidance Overview] Action Items for Plan Fiduciaries: Handling Fee Disclosures by Service Providers, and Fee Disclosures to Participants
Includes a useful chart of the various deadlines that apply to participant-Level fee disclosures. (Pillsbury)
[Guidance Overview] Employers Sponsoring Health Plans Must Pay New Annual Health Plan Fee
"Plan sponsors of self-insured group health plans covering individuals residing in the U.S. must pay the fee. Governmental entities, including federally-recognized Indian tribal governments, must also pay the fee unless they operate certain exempt governmental programs." (McKenna Long & Aldridge LLP)
Would Raising Social Security Covered Compensation Cap Be Harmful or Helpful to System in the Long Run? (PDF)
"Analysts have proposed raising the maximum level of earnings subject to the Social Security payroll tax ... to improve long-term Social Security Trust Fund solvency. This article investigates how raising the tax max leads to the 'leakage' of portions of the additional revenue into higher benefit payments." (Social Security Administration)
Raising Household Saving: Does Financial Education Work? (PDF)
"This article highlights the prevalence and economic outcomes of financial illiteracy among American households, and reviews previous research that examines how improving financial literacy affects household saving. Analysis of the research literature suggests that previous financial literacy efforts have yielded mixed results. Evidence suggests that interventions provided for employees in the workplace have helped increase household saving, but estimates of the magnitude of the impact vary widely. For financial education initiatives targeted to other groups, the evidence is much more ambiguous, suggesting a need for more econometrically rigorous evaluations." (Social Security Administration)
How Social Trends in Marriage Duration Affect Women's Eligibility for Social Security Wife and Widow Benefits (PDF)
"[A]nalysis reveals substantial changes in women's marital patterns among baby boomers and generation Xers [from 1990 through 2009]. Those changes have prompted a decline in qualifying marital histories for Social Security spouse and widow benefits. The findings also reveal substantial variation by race/ethnicity." (Social Security Administration)
The Sensitivity of Proposed Social Security Benefit Formula Changes to Lifetime Earnings Definitions (PDF)
"Several Social Security proposals have included benefit formula changes that apply to earners above a specified percentage of the combined male and female (unisex) lifetime earnings distribution. The unisex distribution is an average of two disparate groups with large lifetime differences in labor market participation. This study finds that if Social Security's median unisex average indexed monthly earnings (AIME) amount is used to define an earnings threshold below which benefits will be held roughly unreduced, the percentage of fully insured men subject to benefit reductions (70 percent) exceeds the unisex estimate of the population subject to benefit reductions (50 percent) by 20 percentage points. If policymakers wish to adjust future benefits and focus benefit reductions on middle or high primary or full-time wage earners in a household, the male, rather than unisex, AIME would come closer to achieving such a goal." (Social Security Administration)
[Official Guidance] Text of EBSA Advisory Opinion 2012-01A on Allowing Private Employers Into Connecticut's Group Health Plan
"[The state of Connecticut asked w]hether the status of the Group Health Plan for Employees of the State of Connecticut as a 'governmental plan' within the meaning of section 3(32) of ERISA would be adversely affected if the State permitted participation by certain private nonprofit employers who perform public service functions under contract with the State or receive substantial funding from governmental sources.... [T]he Department would view the participation of private nonprofit employers in the Connecticut State Plan described in your letter as more than de minimis, and, therefore, such participation would adversely affect the status of the State Plan as governmental under ERISA section 3(32)." (Employee Benefits Security Administration)
DOL and IRS Intensify Focus on Worker Misclassification
"The [DOL's] employee misclassification initiative is making noticeable progress. Since September 2011, the Department has entered into agreements with twelve states (and is pursuing agreements with others) to reduce employee misclassification, help reduce the tax gap, and improve compliance with Federal labor laws. So far, agreements have been entered into with California, Colorado, Connecticut, Hawaii, Illinois, Louisiana, Maryland, Massachusetts, Minnesota, Missouri, Montana, Utah and Washington." (Deloitte)
[Guidance Overview] Research Fees to Be Imposed on Self-Insured Health Plans Beginning October 2012
"New proposed regulations identify the plans and policies that are subject to the fee, specify how the fees will be calculated, and prescribe the filing and payment requirements. The proposed regulations explicitly provide that plan sponsors and issuers are entitled to rely on their terms until final regulations are issued." (Deloitte)
Disability Income Protection Needs and Opportunities for Employees and Their Families
"In the CFA-Unum survey, only 13 percent of all employees say they know 'a lot' about this insurance, and less than half of those who say they have coverage know how much it costs (41%) or what its benefits are (47%). When given information about disability insurance, a very large majority (90%) say they want this coverage, and nearly as many (86%) say that, if required, they would pay half of a $30 monthly premium, with more than half (56%) saying they would pay all of this premium, to gain income protection." (Consumer Federation of America)
For Some Boomers, Delaying Retirement Isn't Worth It
"[The first wave of baby boomers -- Americans born between 1946 and 1964 -- have reached traditional retirement age and wasted little time before saying goodbye to the working world. It's a group that a new study by MetLife Inc says so far has defied the popular belief that baby boomers will be working longer than planned because their retirement savings got trashed in the stock market downturn." (The Salt Lake Tribune)
California State Officials Launch 'Health Happens in the Workplace' Program
"The health and wellness program evolved from a study ... of health care expenditures for state employees by the Urban Institute, in partnership with CalPERS, the largest purchaser of public employee health benefits in California. The study found that 22.4 percent of CalPERS' medical expenditures in 2008 were spent treating chronic diseases that could be prevented through changes in diet and increased physical activity." (The California Endowment)
Michigan Senate Bill Would Raise Lawmakers' Share of Retiree Health Contribution to 20% of Total Premium
"The Michigan Senate is currently debating legislation that would require retired public school, community college and university employees to shoulder 20 percent of [the total cost of] health insurance premiums. The requirement mirrors a new law requiring existing public employees to contribute 20 percent of health insurance premiums from their paychecks. The [Detroit News reported May 1, 2012,] that just seven months ago the Legislature and Gov. Rick Snyder approved a new law ensuring all but two of the 38 senators would get lifetime health insurance at age 55 at a cost of 10 percent." (The Detroit News)
Employee Ownership Update for May 1, 2012
NCEO Executive Director Loren Rodgers discusses congressional testimony on defined contribution plans, record-breaking attendance at the NCEO/Beyster conference, the Innovations in Employee Ownership awards, the We the Owners film trailer, and upcoming employee ownership conferences. (National Center for Employee Ownership (NCEO))
DOL Updates Interactive Health Plan Compliance Website for Laws Other than Health Care Reform
"While the Advisor provides useful information, employers will need to exercise caution when using it. Because health care reform is not integrated into the information provided in the Advisor or used in its evaluation of whether a plan is in compliance, users should not rely on the results of the interactive tool without first checking to see if health care reform affects the analysis." (Thomson Reuters/EBIA)
Unhappy with Scandal, New York Municipal Pension Funds to Vote Against Wal-Mart Directors
"Concerned about Wal-Mart's reported cover-up of bribery in its Mexico operations, leaders of New York City's pension funds said ... they would vote their 4.7 million company shares against five directors standing for re-election to the retailer's board at its annual shareholder meeting next month." (The New York Times; free registration required)
The Evolving Say on Dodd-Frank's Say-on-Pay
"While shareholder disapprovals remain uncommon, it is clear that compensation and the manner in which it is awarded should be carefully considered before subjecting the compensation to a shareholder vote. CEOs often engage counsel to advocate for a compensation package. It is increasingly obvious, however, that compensation committees must also receive independent counsel to evaluate performance objectives and analyze executive compensation in similarly-situated companies." (Employee Benefits Counsel)
Obesity Adds $190 Billion in Health Costs
"The nation's rising rate of obesity has been well-chronicled. But businesses, governments and individuals are only now coming to grips with the costs of those extra pounds, many of which are even greater than believed only a few years ago: The additional medical spending due to obesity is double previous estimates and exceeds even those of smoking, a new study shows." (msnbc.com)
A Labor Lawyer's Guide to Avoiding Multiemployer Pension Plan Withdrawal Liability
"As traditional bargaining units throughout the country continue to shrink and evolve, and as underfunded multiemployer pension plans continue to feel the crippling effects of the capital markets collapse of 2008, the specter of substantial withdrawal liability assessments against employers which contribute to multiemployer pension plans ... grows." (Bryan Cave)
How Employers Can Address Challenges of Health Care Cost Containment
"There are two starting points. First, as an employer, you want to have your arms around your data. Maybe you've done a health risk questionnaire and you have medical claims data in such a way that you can stratify it to say that, of the eight greatest risk factors (such as smoking, lack of health screenings, poor diet, etc.) and the 15 most prevalent chronic conditions, these are the ones that are most prevalent in your population. From that, you can target those two or three greatest risk factors that will lead to the best improvement in health status and a lessening of the frequency and severity of chronic disease." (Smart Business)
Average 401(k) Balance 62% Above 2009, Fidelity Says
"Stock market performance accounted for about 80 percent of the average $5,500 increase in the first quarter of 2012 compared with the prior quarter, while the remaining 20 percent was from employer and worker contributions, Fidelity said." (Bloomberg)
Better Returns for 401(k) Investors: Looking Back at First Quarter 2012
"With such a broad reach and appeal, one would think investing in such plans would be streamlined and simplified. Unfortunately, it is anything but. The very nature of 401(k) plans is to blame: plans are specific from one company to the next, and within each plan, only a small -- and again, unique -- number of investment options are made available. For most investors, this translates into confusion and a lack of a systematic way to go about and properly allocate their 401(k) contributions." (Seeking Alpha)
The Fiduciary Assessment of an Investment Advisor (PDF)
"An assessment should begin with a background check, including civil lawsuit databases and a review of public information such as the AdvisorCheck from the SEC and the Financial Industry Regulatory Authority's (FINRA) BrokerCheck if applicable. Since the assessment is likely to be used to increase client trust, the background check is a necessary starting point." (ASPPA)
[Guidance Overview] Medical Professional Association Hit with HIPAA Penalty Over Health Information in Insecure Emails and Text Messages
"The small size of the covered entity is notable, and the News Release delivers the message clearly: '[The Office for Civil Rights] expects full compliance no matter the size of a covered entity.' As usual, the CAP's provisions exceed the regulatory requirements, reminding us that compliance may be more onerous after an alleged violation. But the allegations and CAP provisions regarding email are somewhat surprising." (Thomson Reuters/EBIA)
[Opinion] Employers Rolling Up Sleeves on Health Care Cost Containment
"The primary employer challenge becomes, and the genius lies in, execution. In brief, the employer community needs a combination of bold leadership and disciplined, evidence-based intervention strategies in both population health management and in value-based purchasing to accomplish their bold aims. In addition, employers must understand that their leadership and actions need to be exerted not only within their own organizations, but also in communities where they do business and where their current and future workforce resides." (Human Resource Executive Online)
Making Workers Healthier: Employers and Insurers Using Carrots, Sticks, and Online Games
"A growing number of workplace programs are borrowing techniques from digital games in an effort to encourage regular exercise and foster healthy eating habits. The idea is that competitive drive -- sparked by online leader boards, peer pressure, digital rewards and real-world prizes -- can get people to improve their overall health." (The Wall Street Journal)
Too Much Reliance on Limited-Scope Audits Is Harming Benefit Plan Participants, EBSA Chief Says
"'The limited-scope audit is practically useless,' said [Phyllis Borzi], assistant secretary of [DOL's EBSA]. Speaking April 30 at the American Institute of CPA's conference on employee benefit plans, Borzi said limited-scope audits do not protect participants, and yet about 65 percent of employee benefit plan audits are limited-scope audits." (Bloomberg BNA)
[Guidance Overview] Tussey v. ABB, Inc. Shows Importance of Implementing Process for Prudent Decision-Making and Following Plan Documents
"This case serves as a reminder to fiduciaries wrestling with decisions that may impact the use of plan assets of the importance of ensuring that they go through a documented process of determining whether the fees incurred by their plan are reasonable. Ensuring that a fiduciary has engaged in a prudent process with respect to fees paid to plan vendors will become even more important when the [DOL's] revised Section 408(b)(2) regulations become effective July 1, 2012." (Miller Chevalier)
Text of U.S. Census Bureau Summary Report on State and Locally Administered Pensions, 2010 (PDF)
"This survey covers the following retirement system activities: revenues by state (earnings on investments, employee contributions, government contributions); expenditures by state (benefits, withdrawals, other payments); cash and investment holdings by state (governmental securities, corporate stocks and bonds, foreign and international securities, etc.); and membership information by state (number of retirement systems, total members, beneficiaries receiving periodic payments)." (U.S. Census Bureau)
[Guidance Overview] IRS Mulls Meaning of 'Minimum Value' Coverage
"[M]ost large employers that don't provide plans offering 'minimum value' (thereby sending their employees to an Exchange to seek coverage) may be liable for a penalty payment under Code Sec. 4980H. So, for the IRS to determine which individuals are eligible for the tax credit or not, and which employers will get socked with the penalty, it must get a handle on what it means under the ACA to provide minimum value." (Wolters Kluwer Law & Business / CCH)
Potential Savings Through Prevention of Avoidable Chronic Illness Among CalPERS Active Members
"In this report, we present estimates of the burden of preventable chronic disease on active members of the California Public Employees Retirement System and describe the distribution.... The estimates show that a 1 percent reduction in the prevalence of the common conditions included in the analysis could save the state $3.6 million per year." (Urban Institute)
[Guidance Overview] IRS Requests Comments on Calculation of 'Minimum Value' and Associated Reporting Requirements
"On April 26, 2012, the [IRS] issued three notices in connection with health care reform employer penalty and reporting requirements. Notices 2012-31, 2012-32 and 2012-33 invite comments on potential approaches to determining whether an employer-sponsored plan provides minimum value, and reporting requirements under [IRC] Sections 6055 and 6056." (Practical Law Company)
[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)
[Opinion] Jack Brennan on Financial Reform and his 30 Years at Vanguard
"[Question] You've long advised investors to have a plan and stick to it. Is that getting harder, given the proliferation of products, pundits, and other influences? [Answer] The expression 'tune out the noise' sounds cute, but it really is intended to be advice for your financial well-being. The 24-hour-a-day availability of market news and commentary tends to shorten people's investment time frame, unless they are committed to a plan." (Vanguard)
Vanguard Reports April 2012 Expense Ratio Changes
"From time to time, a mutual fund's expense ratio -- in essence, operating expenses that are passed on to shareholders, expressed as a percentage of assets -- can change in response to changes in fund assets and any changes in the cost of managing the funds. For example, economies of scale resulting from an increase in a fund's total assets because of market appreciation or investor cash flow can result in a reduction, while a decline in assets can cause the expense ratio to rise. Because investment costs directly affect net returns, [Vanguard believes] it's important for you to be aware of such changes." (Vanguard)
Federal Agencies Investigate Self-Funded Health Plans and Stop-Loss Insurance
"Helping to push this inquiry have been the states, working through the National Association of Insurance Commissioners.... They've been looking for a way to regulate self-insured ERISA plans (which do not have to abide by state insurance laws), in a potential bid to strengthen regulatory power over employer plans, self-funding proponents say." (Thompson Smart HR Manager)
Preparing for the U.S. Supreme Court's Health Care Decision
"By taking a number of interim steps, employer group health plans can position themselves to respond quickly and appropriately -- whether healthcare reform is upheld, partially upheld, or struck down.... These interim steps take into account the full range of possibilities and should position employer group health plans to react to the possible outcomes, respond to inquiries and requests from internal stakeholders, and consider administrative and design issues presented by the eventual Supreme Court decisions." (Morgan Lewis)
[Guidance Overview] Final Regulations on Health Exchanges (PDF)
"The framework proposed in these final rules is complex. The federal government intends to create a streamlined, single-point enrollment stop for Medicaid, CHIP, Exchange coverage, premium assistance and cost-sharing subsidies. This single stop will require tremendous coordination among a number of governmental agencies and insurance carriers. Hopefully, many of the requirements will be successfully automated." (McGraw Wentworth)
PBGC Softening Its Stance on 4062(e) Liability (PDF)
"PBGC has changed its stance on enforcement by applying criteria that distinguish among companies based on their level of financial strength when pursing Section 4062(e) liabilities, Harold Ashner, a partner with Keightley & Ashner, Washington, said April 26 during a session of the program Pension, Profit-Sharing, Welfare, and Other Compensation Plans, sponsored by the American Law Institute-American Bar Association." (Bloomberg BNA)
Issues that Must Be Addressed to Prevent Your 401(k) Plan from Becoming an Easy Target for Knowledgeable Plaintiffs' Attorneys (PDF)
"If anyone doubts that ERISA class action litigation is alive and well, they should read the decision in Tussey v. ABB Inc. ... Not only were the plaintiffs awarded $36 million, the arguments the plaintiffs' attorneys ... made were quite sophisticated and clearly resonated with a judge who did her homework. The takeaway from this case is that fiduciaries must document what they did, why they did it, and that their actions were in the best interests of the plan and the participants." (Investment Horizons, Inc.)
401(k) Fee Litigation, April 2012
"Initially, the lawsuits were brought by plan participants against plan sponsors and alleged that, by allowing plan service providers to receive revenue sharing payments, the plan sponsors caused the participants to pay excessive fees, in breach of the sponsors' fiduciary duties to the participants. The focus of these lawsuits against the plan sponsors has evolved over time to include broader challenges to, among other things, the plan sponsors' selection of actively managed mutual funds as plan investment options. [The target page links to the Groom chart of 'Participant Claims Against Sponsors and Related Fiduciaries' and 'Plan Fiduciary Claims Against Plan Providers' and 'Plan and Participant Claims Against Plan Providers.']" (Groom Law Group)
Ten Things Plan Fiduciaries Should Avoid (PDF)
"In recent court case, Tussey v. ABB, Inc., ... the judge found that the plan fiduciaries breached their fiduciary duties and were jointly and severally liable for $13.4 million lost by the Plan due to failure to monitor recordkeeping fees and negotiate rebates and $21.8 million lost by Plan due to mapping one investment fund to another. In addition, the service provider was held jointly and severally liable for $1.7 million for lost float income. Lessons learned from this case are at least 10 things Plan fiduciaries should avoid[.]" (ERISAdiagnostics, Inc.)
Deloitte Health Care Reform Memo, April 30, 2012
Describes recent developments in various health plan and health insurance matters at the federal and state levels. This issue includes a discussion of health policy and costs. (Deloitte)
[Opinion] American Benefits Council Comment Letter to IRS on Priority Guidance Plan (PDF)
"The Council is writing to recommend items relating to employee benefit matters that should be included on the [IRS] 2012-2013 Guidance Priority List. The Council is submitting a letter separately recommending a project to modify the current nondiscrimination and minimum participation regulations to protect older, long-service participants. This letter focuses on other recommendations for the Guidance Priority List." (American Benefits Council)
Compensation Costs for Private Industry Workers, March 2011 to March 2012
"Compensation costs for private industry workers increased 2.1 percent from March 2011 to March 2012, essentially unchanged from the 2.0 percent increase from March 2010 to March 2011.... The increase in the cost of benefits (which make up ... 30 percent of compensation costs) was 2.8 percent for the 12-month period ending March 2012; the increase from March 2010 to March 2011 was 3.0 percent. Within the benefits category, employer costs for health benefits increased 3.0 percent for the 12-month period ending March 2012. From March 2010 to March 2011, the increase was 3.4 percent." (Bureau of Labor Statistics)
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)
[Opinion] ASPPA Letter to EBSA on Asset Allocation Strategies, Model Portfolios and Need for Transitional Relief
"The American Society of Pension Professionals and Actuaries ..., the Council of Independent 401(k) Recordkeepers ... and the National Association of Plan Advisors ... are writing to request that [DOL] provide guidance which clarifies that asset allocation strategies and models are not themselves Designated Investment Alternatives ... under both DOL Regulation Section 2550.408b-2(c) (the '408(b)(2) regulation') as well as DOL Regulation Section 2550.404a-5 (the '404(a) regulation') ... and to provide for a good faith transition period in recognition of the uncertainties that remain in regard to the regulations' application." (ASPPA)
[Guidance Overview] HHS Issues Additional Questions and Answers Guidance on Medical Loss Ratio Requirements
"Insurers are required to make the first round of rebates by August 2012 based on their 2011 MLR. While many details in the guidance relate to the actual calculation and reporting of MLRs by insurers, these rules also affect employers (e.g., in terms of handling any rebates provided)." (Thomson Reuters/EBIA)
[Guidance Overview] CMS Issues Medicare Part D Benefit Parameters for 2013
"These parameters will be used by group health plan sponsors to determine whether their plans' prescription drug coverage is creditable for 2013. The information is needed for the disclosures that must be made annually and at other specified times to Part D eligible individuals and to CMS." (Thomson Reuters/EBIA)
Online Resources About the Supreme Court's Review of the Health Reform Law
Handy links to key documents and coverage of the issues by trade publications and law professors. "This resource center serves as an objective gateway to a wide range of credible information, including general background materials, details about the lawsuit, arguments and key issues, gauges of public sentiment, predictions, and, in due course, summary and analysis of the ruling and assessment of its implications" (MedeAnalytics)
Mental Health Spending By Private Insurance: Implications for The Mental Health Parity and Addiction Equity Act
"More than 90% of enrollees used well below the maximum 30 inpatient days or outpatient visits typical of health insurance plans before parity. Simulations indicated that even large increases in utilization would increase total health care expenditures by less than 1%. [The study concludes that the Mental Health Parity and Addiction Equity Act] is unlikely to have a large effect on the growth rate of employers' health care expenditures.' (PsychiatryOnline is charging $35 for a full-text download of the article.) (PsychiatryOnline)
Hedging Nonqualified Deferred Compensation Plans (PDF)
"NQDC Plans create both economic and accounting volatility; companies who sponsor plans may decide a hedge of the NQDC liability is prudent to offset these risks. The NQDC Plan appears as an operating expense on the employer's income statement ... and creates an increasing liability on its balance sheet until benefits are paid. The eventual payment of the benefits will result in a funding requirement. The change in the size of the NQDC Plan due to change in value of the underlying reference investments creates volatility on the plan sponsor's income statement." (BNY Mellon)
[Guidance Overview] New Guidance on Computing Taxes Payable by Health Plan Sponsors and Insurers
"The Research Tax generally will apply to major medical benefits. Many other benefits -- such as a dental plan, vision plan and health flexible spending arrangement -- will often be an 'excepted benefit' and not subject to the tax. [The chart in this article] discusses how the Research Tax applies to various benefits that may be offered by an employer. See [also a description of] an important 'non-duplication' rule, which can reduce the tax owed by an employer." (Quarles & Brady LLP)
Objective-Based Approach to Participant DC Investing Is Needed
"[P]lan sponsors might want to think about presenting investment options to participants in a different way -- one that aligns more closely with the way participants think about their own retirement needs. The typical participant does not think about those needs in terms of asset categories: growth vs. value; large cap vs. small; international vs. U.S. Rather, they tend to think in terms of their own basic objectives and needs. Broadly speaking, these can be divided into four key categories: growth, income, inflation protection and liquidity." (Pensions & Investments)
Federal Reserve Bank Is No Friend of Defined Benefit Retirement Plans
"In the past five years, the sponsors of the largest plans have poured $164.4 billion into the plans, and yet their aggregate funding shortfall has increased by $368 billion to $258.3 billion and their average funded status has fallen to 81.6% from 108.6%.... Certainly, the stock market plunge in 2008 and 2009 is partly to blame, although the losses have largely been recovered. The larger culprit is the Federal Reserve and its low interest rate policy, which has driven down the discount rate companies must use in valuing their future liabilities, and thus has increased the current value of those liabilities despite substantial corporate contributions." (Pensions & Investments)
Large Connecticut Public Employee Union Rallying Support for State-Run Retirement Plan for Private Companies
"One of Connecticut's largest public employee unions is trying to rally support in the waning days of the General Assembly session for a study of whether state government should offer a retirement plan to private citizens.
But one of the key lawmakers behind the proposal conceded late last week that the chances of passage this year are poor with the legislature scheduled to adjourn in less than two weeks." (CT Mirror)
Switch from DB to DC for New Hampshire Retirement System Taking Shape Despite Opposition
"A bill to transition the state's retirement system into a 'defined contribution' plan will be finalized by House lawmakers in the coming weeks, despite strong opposition from public employee unions and an uncertain reception in the Senate. House Republicans have been considering the move since last year's pension reform effort, which increased contribution rates for employees and has been challenged in court by a coalition of unions." (Concord Monitor)
Ford's Lump-Sum Buy-Out Offer Is a First for a U.S. Pension Plan
"The Ford executives didn't explain the timing, but observers said they believe Ford is making the offer now because it will cost less than in the past. Under a provision of the Pension Protection Act, new corporate bond rates were recently phased in, replacing 30-year Treasuries.... 'I'm not aware of anyone who has done this without terminating or annuitizing their plan,' said Jeremy Gold, president of Jeremy Gold Pensions, New York, an actuarial consulting firm. 'All your lump summing for employees is part of that (kind of) event, but ... I'm not aware of this being done on an optional basis[.]'" (Pensions & Investments)
[Guidance Overview] IRS Describes New Fees Coming Next Year for Group Health Plans
"The Patient Protection and Affordable Care Act (PPACA) created the [Patient Centered Outcomes Research Institute] fee to promote research to evaluate and compare health outcomes and the clinical effectiveness. It will apply to some, but not all, health plans with years ending on or after Sept. 30, 2012. The excise tax will be $1 times the average number of covered lives for the plan year. The tax increases to $2 per covered life for plan years ending on or after Oct. 1, 2013[.]" (Thompson / SmartHR Manager)
New Jersey Politicians Grandfather Own Benefits But Limit Those of New Workers
"[Figures obtained as part of a Star-Ledger analysis of sick and vacation time records for lawmakers and other public employees across the state] show that politicians can reap generous rewards from the same system they are charged with policing. The payouts also take sizable chunks out of local budgets that are already under duress." (nj.com)
Oregon Group Backs Human Rights Status for Health Care
"Oregon reform advocates plan to launch a major campaign to have health care declared a human right.... Now, [a spokesman said,] it�s time for a new tactic: a broad-based effort to mobilize public support for the notion that everyone deserves access to health care." (gazettetimes.com)
[Opinion] Saving for Future Health Care Expenses
"Newly announced regulations under the [PPACA] threaten the very existence of consumer directed health plans in the individual market (including the anticipated health insurance exchanges) ... Yet according to a RAND study, these plans have the potential to reduce health care spending by 30% without causing any harm, even to vulnerable populations. [This article reviews] some of the advantages and disadvantages of the various health savings options." (National Center for Policy Analysis)
Pensions for Elected State Officials: Target for Reform?
"It's the latest quirk in the hodge-podge of laws and practices, drawing the attention of a [California] legislative committee, that gives some elected officials pensions, prohibits pensions for other elected officials and allows some to choose no pension. Elected official pensions are 'under consideration' and 'may be included' in the proposal made by a two-house legislative committee on pension reform[.]" (Calpensions)
[Opinion] Illinois Pension Reform Plan: Taxpayer Costs Must Be Fixed, Not Unlimited
"The discussions going on in Springfield regarding pension reform still have not addressed the key concern: taxpayers must have a reasonable, fixed annual cost going forward. They cannot be on the hook for everything that can and will go wrong between now and 2062. Any increased pension costs beyond the agreed, affordable fixed taxpayer portion must either be paid for by other employees or result in automatic pension decreases." (Champion News)
[Opinion] How Retirement Benefits Might Sink the States
"Chicago Mayor Rahm Emanuel recently offered a stark assessment of the threat to his state's future that is posed by mounting pension and retiree health-care bills for government workers. Unless Illinois enacts reform quickly, he said, the costs of these programs will force taxes so high that, 'You won't recruit a business, you won't recruit a family to live here.' We're likely to hear more such worries in coming years." (The Wall Street Journal)
Illinois Legislators Take Aim at Subsidy for Public Employee Retiree Health Insurance
"State employees earn a subsidy toward their retiree health insurance premiums based on the number of years they worked for the state. Employees get a 5 percent reduction in premiums for each year of service. As a result, employees who work 20 or more years pay nothing for their own health insurance in retirement." (Galesbury.com)
San Jose Leaders to Vote on Shrinking New Worker Pensions
"The vote on reducing pensions for future hires comes as San Jose has emerged as a key battleground in a nationwide fight over public employee retirement benefits with a controversial June ballot measure.... [The] vote would establish a pension benefit for all new hires except police officers and firefighters -- who have arbitration rights over their pay and benefits[.]" (MercuryNews.com)
401(k) Salary Deferrals: Better as Single-Sum, or Divided Per-Paycheck?
"If your plan allows you to max out with one contribution or just a few over several pay periods -- and still get your full match -- well, then, putting your money to work sooner than later is likely a wise move, particularly if you have a bullish outlook for the year. But you may find restrictions or drawbacks at the plan level. Seventy-one percent of employers issue their match on a payroll basis, calculating it as a percentage of your compensation during that payroll period[.]" (CNN Money)
Can a Public Pension Plan File Bankruptcy? Historic Northern Mariana Islands Chapter 11 Case Might Tell
"[A motion was filed recently] on the behalf of two anonymous retirement plan participants, arguing that the plan cannot file for Chapter 11 restructuring because it's not a person under the bankruptcy code and because it's a governmental unit.... [An attorney said] that by filing for bankruptcy, the fund was permitting the local government to avoid its obligation to its retirees." (Investment News)
ERISA Section 408(b)(2) Is about Plan Sponsors' Continued Fiduciary Obligations
"Financial advisers to retirement plans need to recalibrate their thinking about Section 408(b)(2) of [ERISA]. Rather than focusing on what it means for their own disclosure obligations, they need to remember that the law is truly about the due-diligence obligations of plan sponsors." (Investment News)
'Choosing Wisely' Campaign Aims to Curb Wasteful Medical Spending by Consumers
"The American Board of Internal Medicine, in collaboration with Consumer Reports, has recently launched an initiative called Choosing Wisely, which aims to reduce unnecessary medical treatments. Some organizations have estimated that up to one-third of all medical spending in the United States is unnecessary; this spending includes unnecessary hospitalizations, money spent on unproven treatments and ineffective new drugs, and futile end of life care." (The American Journal of Managed Care)
Would Tax Increases at the Top Affect Savings and Investment?
"Capital gains tax increases do reduce after-tax returns to saving, and this may cause some taxpayers to save and invest less. But, other people may save and invest more in order to reach a certain savings goal, balancing out those who scale back. On the whole, the Congressional Research Service ... concludes that capital gains tax rate increases appear to have 'little or no effect' on private saving." (Center on Budget and Policy Priorities)
[Opinion] Why Limiting Health Flexible Spending Accounts Makes Sense
"Under the ACA, starting in 2011, people can use FSAs and other accounts to buy over-the-counter items only with a doctor's prescription. There are several reasons to limit the purchase of over-the-counter health products with tax-favored accounts." (Center on Budget and Policy Priorities)
Wellness = Retirement Savings
"[Principal proposes] that plan sponsors and their financial professionals consider an alternative approach to help undersaving participants contribute more towards retirement. Instead of focusing only on urging employees to save more, you might want to expand the focus to include helping employees find ways to spend less. Specifically, [Principal proposes] helping employees spend less on the major expense that is linked to the workplace -- the cost of their healthcare." (Principal)
Advances in Managing Pension Asset Volatility
"Defined benefit ... pension plans face significant and complex risks as they struggle to recover both from the asset losses sustained during the financial crisis and from the negative impact of today's low interest rate environment. Current portfolios -- commonly consisting of equities, bonds and alternative assets -- do not employ sophisticated risk management techniques, leaving pension plans exposed to material losses in the event of a severe or sustained market decline." (Milliman)
[Guidance Overview] Tax-Exempt Common Control Rules of the Final 403(b) Regulations of July 26, 2007
"These regulations address control group rules for tax-exempt entities. There are four tax-exempt common control rules. They generally do not apply to church or church-controlled organizations." (McKay Hochman)
Employee Benefits Developments, April 2012
The newsletter covers recent rulings, opinions, and cases; the two cases both involve Retained Asset Accounts. (Hodgson Russ LLP)
[Guidance Overview] 2011 Tax Year FATCA Reporting by U.S. Persons of Participation in Foreign Retirement Plans and Deferred Compensation (PDF)
"[One] major part of FATCA requires reporting of foreign accounts by individual US persons, generally beginning with the 2011 tax year. Such reporting involves a requirement to file new IRS Form 8938, which accompanies the individual's US tax return, usually one of the 1040 series, and which is due at the same time.... For purposes of the Form 8938, non-US. pensions and deferred compensation, whether funded or not, and including equity-based compensation and stock options, may be treated as a foreign account subject to reporting." (Groom Law Group)
[Opinion] The Medical Loss Report: Fiddling While Rome Burns
"The Wall Street Journal, citing a Goldman analysis, is reporting that Aetna will be paying out $177 million in rebates. But Aetna has $11 billion in premium so that's only a 1.6% rebate. UnitedHealth will be paying out $307 [m]illion but that is only 1% of its $28.8 billion in premium. Wellpoint will pay out $94 million in rebates but that is only .28% of its premium for the year. The average cost of employer-provided family health insurance is now about $13,000 per year. A family rebate of perhaps $200 will amount to only about 1.5% of premium for the relatively few people who will even get one." (The Health Care Blog)
Reality Check on IRA Investments in Real Estate
"The IRS applies a term -- prohibited transaction or 'PT' -- to any use of IRA assets for personal gain other than preservation of a retirement income stream. The prohibited transaction rules disallow a number of specific transactions, such as selling real estate to or buying it from your IRA, or personal or immediate family member use of real estate owned by an IRA, but they also generally prohibit 'self-dealing' which is defined to include any act of a fiduciary (i.e., you) by which IRA income or assets are used for the fiduciary's own interest." (E Is for ERISA)
[Opinion] Text of Comments from American Academy of Actuaries on LTC Reform Options (PDF)
"[These comments are] in response to the National Conference of Insurance Legislators' ... request for information on strategies to reduce costs related to LTC coverage. The task force that developed this response includes actuaries with a broad spectrum of expertise in LTC financing and Medicaid -- actuaries who understand and can explain the advantages and disadvantages of various approaches to LTC, including providing an analysis of the Community Living Assistance Services and Supports (CLASS) Act." (American Academy of Actuaries)
Multiple Employer Plans: An ERISA Enigma (PDF)
"Although the basic concept has been with us for many years, multiple employer plans (MEPs) have been growing in public awareness. Formerly the domain of Professional Employer Organizations ... and shared employee situations, several plan administration and investment firms are promoting multiple employer retirement plans of otherwise unrelated employers (sometimes called 'open MEPs') as a mechanism to reduce costs and fiduciary exposure while providing various benefits to employees." (Journal of Pension Benefits)
Ohio Lawmakers Ready to Consider Reforms for Public Employee Retirement Systems
"More than two years ago, the pension boards [of each of Ohio's five public employee retirement systems] submitted new funding plans to the General Assembly that called for employees working longer for fewer pension benefits. The proposals do not call for taxpayers to pay more. [Senate President Tom Niehaus] said legislation is being drafted based on those plans and updated." (Dayton Daily News)
Examining the Difference in Health Insurance Premiums between Ages 20 and 60 (PDF)
"Simply put, age rating is the practice of varying health insurance premiums based on age. Much like medical underwriting, which varies premiums based on health condition; age rating is another way health insurers can segment risk. For example, in some states, an elderly person could be charged a health insurance premium over five times more than a young person, solely based on age. Currently, age rating exists to a certain degree in every state." (GoHealth Insurance)
[Official Guidance] Text of IRS Revenue Procedure 2012-26: The 2013 Inflation Adjusted Amounts for Health Savings Accounts (PDF)
"For calendar year 2013, the annual limitation on deductions under Section 223(b)(2)(A) for an individual with self-only coverage under a high deductible health plan is $3,250. For calendar year 2013, the annual limitation on deductions under Section 223(b)(2)(B) for an individual with family coverage under a high deductible health plan is $6,450." (Internal Revenue Service)
[Guidance Overview] IRS Proposes Regs Allowing Deduction for Some Employee Local Lodging Expenses
"Despite the characterization of local lodging as a personal expense, employers could still take a compensation deduction for local lodging. However, the working condition fringe rules (for lodging provided in-kind) and the accountable plan rules (for lodging reimbursements) could not be used to provide local lodging on a tax-free basis when the exception created by Notice 2007-47 for temporary lodging did not apply. The proposed regulations provide more certainty for employers wanting to provide local lodging on a tax-free basis." (Thomson Reuters/EBIA)
Health Care Spending Flattening Out
"Much of the slowdown is because of the recession, and thus not unexpected, health experts say. But some of it seems to be attributable to changing behavior by consumers and providers of health care -- meaning that the lower rates of growth might persist even as the economy picks up." (The New York Times; free registration required)
[Official Guidance] Text of Request by IRS, DOL, HHS for Information on Stop Loss Insurance (PDF)
"This document is a request for information regarding the use of stop loss insurance by group health plans and their plan sponsors, with a focus on the prevalence and consequences of stop loss insurance at low attachment points.... Employers and plans that purchase stop loss insurance generally are not subject to State health insurance laws including coverage laws, rating policies, and other State and Federal consumer protections applicable to health insurance, including certain patient protections under the Patient Protection and Affordable Care Act.... It has been suggested that some small employers with healthier employees may self-insure and purchase stop loss insurance policies with relatively low attachment points to avoid being subject to these requirements while exposing themselves to little risk. This practice, if widespread, could worsen the risk pool and increase premiums in the fully insured small group market[.]" (Internal Revenue Service)
Clickable Cross-Reference Table for ERISA and United States Code Title 29
When ERISA became law in 1974, it was codified as part of Title 29 of the United States Code. By that time Title 29 already contained the codified version of many other labor laws. (Title 29 section 1 was already "taken,' for example.) So the Title 29 section numbers assigned to the provisions of ERISA do not line up with the section numbering in the original Act. For example, the fiduciary duty provisions of ERISA section 404 are found in Title 29 section 1104. The table on the linked page shows the ERISA sections and their corresponding Title 29 section numbers, with clickable links to the text of each section. (BenefitsLink.com)
[Guidance Overview] Another Question is Answered in the Who's the Employer Q&A Column
A lawyer friend of mine says the U.S. Department of Labor requires association-based Multiple Employer Plans to have 'commonality'; but does not require it generally, such as with open MEPs. Is that true? (BenefitsLink.com)
Ford Offers Retirees a Lump Sum Pension Buy-Out
"Ford announced [April 27, 2012, that it is offering] a lump sum to its 90,000 salaried retirees as well as U.S. salaried former employees' due pensions to get them to voluntarily give up all rights to monthly payments. The company called its program a first of its type and scope by a major U.S. company." (USA TODAY)
8 Tips to Gain the CFO's Buy-In for Wellness Programs
"CFOs who understand the link between employee health and productivity are more likely to embrace a wellness initiative as a financial priority for the company, a new study reveals. In fact, in a survey of CFOs by the Integrated Benefits Institute ..., three-quarters said they believe providing health benefits is important for the company's financial strategy. Even so, most CFOs still regard employee health as less of a driver of productivity than other benefits like training, the survey shows." (Business Management Daily)
What's It Take to Be a 'Bronze' Health Plan Under the Affordable Care Act?
"The study projects what deductibles and coinsurance would meet the requirements of a Bronze plan, presenting two alternatives: One with a deductible per individual of $4,375, with consumers paying 20% of their health care expenses once meeting the deductible. The other with a deductible of $3,475 and patient coinsurance of 40%. Under both plans, total patient out-of-pocket costs would be capped at $6,350, as required by the health reform law. Deductibles for families would be double these amounts." (The Henry J. Kaiser Family Foundation)
[Guidance Overview] SEC Issues FAQs on JOBS Act: Relaxed Disclosure Requirements for Emerging Growth Companies
"A company that qualifies as an EGC will be able to maintain that status until the earliest of: five years when annual gross revenues exceed $1 billion when the issuer has issued more than $1 billion of non-convertible debt in a three-year period, or the date on which the issuer is deemed to be a 'large accelerated filer' as defined in the rules promulgated under the Exchange Act[.]" (Ballard Sphar LLP)
[Guidance Overview] Availability of Class Actions Narrows, Could Mean Fewer 401(k) Fee Cases
"[T]he U.S. Supreme Court's 2011 decision in Wal-Mart Stores v. Dukes ... and other recent cases have led to a more rigorous application of the rules for establishing a bona fide class. This has likely contributed to the waning of new excess fee cases and may have been a factor in recent settlements." (The Wagner Law Group)
Text of EBSA's Annual Report on Self-Insured Group Health Plans, April 2012 Issue (PDF)
"Along with this second annual Report, [DOL] is submitting two detailed appendices produced under contract. Appendix A, Group Health Plans Report: Abstract of 2009 Form 5500 Annual Reports Reflecting Statistical Year Filings, provides detailed statistics describing group health plans that file a Form 5500. Appendix B, Self-Insured Health Benefit Plans 2012, presents a study that explores statistical issues associated with Form 5500 health plan data and analyzes available data on the financial status of employers that sponsor group health plans filing the Form 5500." (Employee Benefits Security Administration)
[Official Guidance] 2012 Inflation-Adjusted Amounts for Health Savings Accounts (PDF)
For calendar year 2013, the annual limitation on deductions for an individual with self-only coverage under a high deductible health plan is $3,250; for an individual with family coverage, it is $6,450. A "high deductible health plan' for calendar year 2013 is a health plan with an annual deductible that is not less than $1,250 for self-only coverage or $2,500 for family coverage, and the annual out-of-pocket expenses (deductibles, co-payments, and other amounts, but not premiums) do not exceed $6,250 for self-only coverage or $12,500 for family coverage. (Internal Revenue Service)
Target-Date Funds Increasingly Popular Option in Self-Directed Retirement Plans
"While the foothold that TDFs has gained in retirement plans seems indisputable, the cause of this growth may be misinterpreted. Most attribute the popularity of TDFs to the increased use of automatic enrollment plan design as sponsors seek an autoenrollment default investment, and also to the fact that TDFs are eligible as qualified default investment alternatives (QDIAs) under the Pension Protection Act of 2006." (Vanguard)
[Guidance Overview] OK to Levy Recordkeeping and Investment Management Fees Only on Certain 401(k) Participants? Federal Case Asks But Doesn't Answer
"A significant issue raised but not resolved in the ABB case -- a matter that may very well be the next frontier in fiduciary oversight litigation -- is, whether the record keeping costs of a 401(k) plan may be borne exclusively by those participants whose investment funds enjoy revenue sharing (also known as 12b-1 fees) while participants whose accounts are invested in investment funds with no revenue sharing pay little or nothing." (Troutman Sanders)
Does ERISA's 6-Year Statute of Limitations Apply Only When Fiduciary's Alleged Fraud is Concealed?
"In a case of first impression, in Cataldo v. United States Steel Corporation, No. 10-3583 (April 12, 2012), the Sixth Circuit says that it will address whether ERISA's 6-year statute of limitations applies when plaintiffs have simply alleged an underlying breach sounding in fraud, or whether application of ERISA's 6-year statute of limitations only applies where the fiduciary has attempted to hide its breach from the injured party, and then sidesteps this question." (The Pension Protection Act Blog)
[Official Guidance] Text of Proposed IRS Regulations Pertaining to the Disclosure of Return Information to Carry Out Eligibility Requirements for Health Insurance Affordability Programs (PDF)
"This document contains proposed regulations relating to the disclosure of return information under section 6103(l)(21) of the Internal Revenue Code, as enacted by the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010. The regulations define certain terms and prescribe certain items of return information in addition to those items prescribed by statute that will be disclosed, upon written request, under section 6103(l)(21) of the Internal Revenue Code." (Internal Revenue Service)
The State of Retirement Planning by Americans: Issues of Longevity and Preparedness
"The [study] is a series of research examining what kind of planners people are, how their plans may have changed over time, whether they feel they're moving in the right direction, how they assess their ability to stay on course, and how this all fits against the larger backdrop of what is taking place in America today.... Centers for Disease Control data shows that average life expectancy for Americans today is 78.2 years, with women living to more than 80 years old on average. The second phase of the State of Planning in America Study revealed that Americans are startlingly unprepared financially to live to these average life expectancies." (Northwestern Mutual)
[Opinion] Louisiana Pension Reform Opponents Proffer Misleading Arguments
"Critics of Governor Jindal's proposed 'cash balance' pension plan for state employees have made a number of inaccurate claims. The current retirement systems have amassed an astonishing $18.9 billion in unfunded liabilities, but reform opponents defend the status quo with scare tactics while relying on a flawed report from the Legislative Auditor. These critics claim that switching from the current defined benefit plan to a cash balance plan would increase costs to the state, drive up taxes, and even force people into poverty. In fact, this reform would put Louisiana's retirement systems on a more sustainable path, protecting state employees and taxpayers alike." (The Pelican Post)
Retirement Plan Sponsor, Union and Plan Administrator Sued by Hundreds of Former Employees; Fraud is Alleged
"Alleged violations of [ERISA] provisions involved a lawsuit with 225 plaintiffs, all current or former workers at an Ohio steel mill and members of the United Steelworkers of America ... They sued the union, their employer and the plan administrator.... The current and former employees filed suit in 2009, alleging eight counts: breach of ERISA fiduciary duty, equitable relief, equitable estoppel, failure to furnish requested plan documents, and four state-law charges asserting similar claims." (Human Resources Journal)
Bill Would Impose Federal Cap on Malpractice Awards in Federal and State Courts in Order to Lower Health Costs
"CBO expects that [changes proposed under the 'Help Efficient, Accessible, Low-cost, Timely Healthcare Act of 2011' recently reported out of the House Committee on the Judiciary] would, on balance, lower costs for health care both directly and indirectly: directly, by lowering premiums for medical liability insurance; and indirectly, by reducing the use of health care services prescribed by providers when faced with less pressure from potential malpractice suits. Those reductions in costs would, in turn, lead to lower spending in federal health programs and to lower private health insurance premiums." (U.S. Congressional Budget Office)
Get Proactive, Don't Wait for Legislation to Enhance 401(k) Savings Vehicle, Says Treasury Policymaker
"Mark Iwry, senior advisor to the Secretary of the Treasury for retirement policy, acknowledges that automatic 401(k) features have gone a long way to improve retirement saving opportunities for American workers.... Rather than settling for the standard 3% default rate for the initial salary deferral of new employees who are automatically enrolled in their company 401(k) plan, Iwry suggested starting at a higher level, perhaps 5 or 6%. And instead of limiting auto enrollment to new employees, why not expand it to existing employees who are not participating in the retirement plan?" (Investment News)
[Opinion] Company Stock Ought Not Be Legal as Defined Contribution Retirement Plan Investment
"It's time to end the tax deduction for a contribution of company stock to qualified retirement plans. It's bad for employees, bad public policy, bad accounting and bad tax policy. Here's a modest suggestion: If you hold your employer's stock in your 401(k) dump it; if you are a plan sponsor you should terminate any option for company stock in your plan. In fact, the SEC and Department of Labor should prohibit it." (Forbes)
Freeing Boomers from Social Security Cuts Blows Up Math
"Retiring Baby Boomers are swelling the program�s rolls, with 10,000 turning 65 every day ... By 2035, there will be only two workers paying taxes to finance benefits for every retiree. While lawmakers have no solution, they generally agree they can�t make significant cuts for those in or near retirement. The longer Congress waits to act, the more people will be shielded -- and the more heavily cuts will fall on younger Americans. The result could be a two-tiered system raising questions about generational fairness[.]" (Bloomberg)
Bill Requiring Higher Employee Contributions Under Federal Retirement Plan Advances in House
"The legislation requires 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)
State Legislation and Actions Challenging Certain Health Reforms 2011-2012, Updated April 25, 2012
Updates include a detailed index of Supreme Court Actions, with hypertext links; a summary of new 2012 pending state lawsuits opposing various federal health care reforms; and updated information about legislation in Kentucky, Utah, and Wyoming. (National Conference of State Legislatures)
Estimating the 2012 Health Insurance Rebates Under the Medical Loss Ratio Rules
"This analysis looks at the latest estimates provided by insurers to state insurance commissioners. The analysis finds that consumers and businesses are expected to receive an estimated $1.3 billion by this August in rebates from health insurers who spent more on administrative expenses and profits than allowed by the ACA. The rebates include $541 million in the large employer market, $377 million in the small business market, and $426 million for those buying insurance on their own." (The Henry J. Kaiser Family Foundation)
[Guidance Overview] Recent ERISA Fee Litigation: Key Lessons for Plan Fiduciaries
"A recent Federal District Court decision [out of Missouri] dealing with ERISA plan fees is generating substantial discussion in plan fiduciary circles, not only because of the significant liability imposed on fiduciaries (almost $40 million), but because of its discussion of some key fiduciary issues.... Tussey v. ABB, Inc. ... may provide significant guidance to plan fiduciaries in their determination of the 'reasonableness' of an arrangement when a service provider engages in revenue sharing. The Tussey case also contains some important general lessons for plan fiduciaries." (Orrick)
[Guidance Overview] Calculating and Paying the Fee on Health Insurers and Self-Insured Health Plans to the Medical and Outcomes Research Fund
"Plan sponsors will have to pay the fee for seven years, as the fee applies to plan years ending after October 1, 2012, and before October 1, 2019. For the first year, the fee is $1 multiplied by the number of covered lives under the plan. For the second through seventh years, the amount increases to $2 times the number of covered lives. Plan sponsors must remit the fee to IRS annually along with an IRS Form 720. The payment and Form will be due July 31 for all plan years ending in the preceding calendar year." (HighRoads)
Employers Making Distinctions Among Employees in Offering Flexible Work Schedules
"Some organizations have created flexible work arrangements [for select populations: disabled workers, veterans, low-wage hourly workers, and parents with dependent care responsibilities] such as telecommuting/working from home, traditional flextime, and reduced work hours, to accommodate these populations. Examples of obstacles to implement these flexible work arrangements include concerns about providing equal treatment for employees, ensuring that the work is done, and the impracticality of such arrangements given the nature of jobs in the organization's industry." (Society for Human Resource Management)
[Official Guidance] Text of CCIIO Bulletin: Verification of Access to Employer-Sponsored Coverage (PDF)
"Verification of access to employer-sponsored coverage is a necessary part of the process for determining eligibility for advance payments of the premium tax credit available to support the purchase of qualified health plans through Affordable Insurance Exchanges. The purpose of this bulletin is to request comment from the public on a proposed interim strategy and potential regulatory approach for verification of an applicant's access to qualifying coverage in an employer-sponsored plan under section 1411 of the Affordable Care Act. The [HHS] also solicits comments on the development of a long-term verification strategy." (U.S. Centers for Medicare & Medicaid Services, Center for Consumer Information and Insurance Oversight)
Ten Real-World Tips for Retirement Plan Practitioners in Taming the Beast: Getting Your Continuing Professional Education (PDF)
"How to get the most out of conferences, webcasts, seminars, and your colleagues when fulfilling your continuing professional education requirements.... [Tip Number One:] Make recorded webcasts seem live. Watching recorded webcasts alone at your desk or on your iPad at home, no matter how riveting the subject matter, can be a CPE chore. Organize a group session of colleagues and watch the webcast together, stopping it every 15 or 20 minutes to discuss case studies relevant to the points presented in the webcast." (Simoneaux Consulting Services)
Tennis, Anyone? Country Club Remains a Perk for Many CEOs
"While many companies are stripping away some of the costly perks bestowed on CEOs, one remains a staple of many executive compensation packages: the country club membership.... Of more than 130 companies paying for clubs, nearly 50% are local or regional financial firms. The cost can be eye-popping." (USA TODAY)
CalPERS Releases First Report on Its Environmental, Social and Governance Work
"The report explains the fiduciary framework [CalPERS has] adopted to integrate sustainability across the total fund, illustrates achievements from the last few years, and outlines [the] vision for the future. [Contents include] CalPERS views on Sustainable Investing; The '3 Ps' of the CalPERS program: Priorities, Performance and Procurement; How CalPERS integrates ESG in its own operations; [CalPERS] strategic themes of alignment of interest, climate change and human capital[.]" (CalPERS)
Text of Petition for Certiorari: Jurisdiction for Enforcement of State Law Health Insurance Requirements
Blue Cross and Blue Shield of Montana, Inc. v. Fossen (9th Cir. 2011). Issue: "Whether a substantive state-law insurance standard saved from preemption under the insurance saving clause of [ERISA], 29 U.S.C. Section 1144(b)(2)(A), can be enforced through state-law remedies or instead is enforceable exclusively through ERISA's enforcement scheme, 29 U.S.C. Section 1132." (SCOTUSblog)
DOL Issues Second Annual Health Care Reform Report on Self-Insured Plans
"The [report] contains aggregate information on self-insured employee health plans and financial information on the employers sponsoring the plans.... The report also includes a table comparing aggregate statistics for self-insured and combination self-insured/insured plans for 2008 and 2009 plan years. According to the report, more than 50,000 health plans filed Form 5500s for the 2009 plan year, an increase of almost 7% over the 47,000 filings in the 2008 plan year." (Practical Law Company)
[Opinion] Testimony of Center on Budget and Policy Priorities Applauding Cutbacks Under Health Care Reform on FSA, HSAs
"The Affordable Care Act ... includes a number of spending reductions and tax increases designed to assure that expanding health coverage does not drive up the deficit. Some provisions limit the use of tax-advantaged accounts to pay for health-related expenses. These limitations make sense both as tax policy and as health policy, and repealing any of them would be unwise." (Center on Budget and Policy Priorities)
Text of GAO Testimony on Role of Federal Government in Promoting Financial Literacy Among Americans
"This testimony discusses (1) the federal government's role in promoting financial literacy, including GAO's role; (2) the advantages and risks of financial literacy efforts being spread across multiple federal agencies; and (3) opportunities to enhance the effectiveness of federal financial literacy education efforts going forward. This testimony is based on prior and ongoing work, for which GAO reviewed agency budget documents, strategic plans, performance reports, websites, and other materials; convened forums of financial literacy experts; and interviewed representatives of federal agencies and selected private and nonprofit organizations." (Government Accountabilty Office)
Text of GAO Report Estimating Number of Americans with Pre-Existing Health Conditions at 36 Million to 122 Million
"Depending on the list of conditions used to define pre-existing conditions ..., GAO found that between 36 million and 122 million adults reported medical conditions that could result in a health insurer restricting coverage. This represents between 20 and 66 percent of the adult population, with a midpoint estimate of about 32 percent. The differences among the estimates can be attributed to the number and type of conditions included in the different lists of pre-existing conditions." (Government Accountability Office)
[Official Guidance] Text of IRS Notice 2012-33: Reporting by Applicable Large Employers on Health Insurance Coverage Under Employer-Sponsored Plans (PDF)
"[Internal Revenue Code] Section 6056 requires reporting of certain information on employer-provided health care coverage provided on or after January 1, 2014 and the furnishing of related statements to employees. The first information returns will be filed in 2015. The Internal Revenue Service will use the information that employers report under section 6056 to verify employer-sponsored coverage and to administer the shared employer responsibility provisions under sections 4980H(a) and (b)." (Internal Revenue Service)
[Official Guidance] Text of IRS Notice 2012-32: Reporting of Health Insurance Coverage by Plans Providing 'Minimum Essential Coverage' (PDF)
"This notice invites comments concerning the reporting requirements under section 6055 of the Internal Revenue Code for health insurance issuers, government agencies, employers that sponsor self-insured plans, and other persons that provide minimum essential coverage to an individual. Section 6055 was added by ... the Patient Protection and Affordable Care Act ... The reporting requirements apply to coverage provided on or after January 1, 2014. The first information returns will be filed in 2015." (Internal Revenue Service)
[Official Guidance] Text of IRS Notice 2012-31: Minimum Value of an Employer-Sponsored Health Plan (PDF)
"This notice describes and requests comments on several possible approaches to determining whether health coverage under an eligible employer-sponsored plan ... provides minimum value within the meaning of Section 36B(c)(2)(C)(ii). Beginning in 2014, eligible individuals who purchase coverage under a qualified health plan through an Affordable Insurance Exchange may receive a premium tax credit under Section 36B unless they are eligible for other minimum essential coverage, including coverage under an employer-sponsored plan that is affordable to the employee and provides minimum value. Under Section 36B(c)(2)(C)(ii), a plan fails to provide minimum value if 'the plan's share of the total allowed costs of benefits provided under the plan is less than 60 percent of such costs.' If the coverage offered by the employer fails to provide minimum value, an employee may be eligible to receive a premium tax credit. An applicable large employer (as defined in Section 4980H(c)(2)) may be liable for an assessable payment under Section 4980H if any full-time employee receives a premium tax credit." (Internal Revenue Service)
Despite Proliferation of Service-Providers and Monitoring Firms, Plan Sponsors Can't Shed Ultimate Liability
"Consider the cautionary tale of several small plans that entrusted fiduciary responsibility to someone once considered a stalwart in the field. Matthew Hutcheson, who co-wrote the book 401(k) Ethos, was regarded as a go-to person for all things fiduciary and testified before Congress, recently was indicted for wire fraud after allegedly stealing money from the plans for which he acted as fiduciary." (Treasury & Risk)
[Guidance Overview] Post-Distribution Enforcement of Waiver of Benefits Does Not Violate ERISA
"A participant's estate may bring suit against a former spouse to enforce a waiver of benefits and recover the benefits following distribution by the plan, the Court of Appeals ... has ruled. Allowing the enforcement of a waiver after the distribution of benefits, the court explained, would not undermine ERISA's objective of assuring certainty in the final distribution of benefits." (Wolters Kluwer Law & Business / CCH)
Characteristics of the Population with Consumer-Driven and High-Deductible Health Plans, 2005-2011 (PDF)
"Generally, the population of adults within high-deductible health plans (HDHPs) and traditional health plans is split 50-50 by gender. In contrast, consumer-driven health plan (CDHP) enrollees were more likely to be female in 2010 and 2011. CDHP enrollees were roughly twice as likely as individuals with traditional coverage to have a college or post-graduate education. HDHP enrollees were also more likely than traditional-plan enrollees to have a college or graduate degree." (Employee Benefit Research Institute)
Performance Improvement in Health Care
"[The author] suggests that the federal government should first aim, by 2016, to hold the rate of increase in national health spending per capita to the annual projected growth in gross domestic product per capita plus 0.5 percentage points, and to maintain this rate through 2021. Achieving this target, [he] says, would reduce spending by $893 billion over 10 years." (The Commonwealth Fund)
Think Tank Proposes Plan to Improve Care for the Chronically Ill, Reduce Health Spending
"Noting the 'unprecedented opportunity' provided under the Affordable Care Act, the Health Information Technology for Economic and Clinical Health ... Act, and other recently enacted federal laws, the Commonwealth Fund Commission on a High Performance Health System today unveiled a community-based plan to enhance health and reduce spending by improving care for chronically ill patients and targeting quality improvement efforts to conditions that can yield the greatest benefit in a relatively short time. The 'Health Improvement Community' initiative proposed by the Commission has the potential to help those who most need more coordinated care and save $184 billion in health spending over the next 10 years." (The Commonwealth Fund)
Sample Glossary of Investment-Related Terms for Disclosures to Retirement Plan Participants (PDF)
April 26, 2012 version. "The document is organized in two parts. Part 1 covers a broad group of general investment-related terms. Part 2 covers terms that are specific to insurance products." (The SPARK Institute)
Encouraging Employees to Push Savings to the Code Section 402(g) Maximum (PDF)
"How do you respond when an employee asks you 'how much should I be contributing to my 401(k) plan?' If you are like most plan sponsors, providers or advisors, you will typically respond by beginning a dialogue about how employees should be deferring at least a certain 'percentage' of pay, that this 'percentage' should be high enough to capture the employer match and that this 'percentage' should be increased annually. But if you ask us, our answer is simply this: '$17,000...the maximum the law allows.'" (MJM401k)
Across the States, Teacher Pension Problems, and Changes, Fuel Political Debate
"It is very difficult to directly compare public-employee pensions; individual states each have their own rules, and funds, cautioned Gary Olson, a former Senate Fiscal Agency director currently preparing a paper on Michigan's school-employee pension bind. But, in general, elsewhere in the Midwest, states are taking the same steps Michigan is deploying in trying to shore up underfunded pension systems: increasing contributions and changing eligibility rules." (MLIVE)
DOL Ramps Up 401(k) Plan Provider Examinations
"Over the last 12 months, [DOL] has quietly ratcheted up its examinations of firms that serve retirement plans, including brokerage firms, registered investment advisers and third-party administrators, said attorneys representing these firms. [DOL] is examining how these companies get paid and whether their compensation poses a conflict of interest, they said. A Labor Department spokesman confirmed the examinations and said the effort is part of bigger push by the agency to examine all areas of employee benefits, including health and welfare plans." (The Economic Times)
Senate Passes U.S. Postal Service Overhaul
"The legislation ... allows the agency to offer buyout and early retirement incentives to 100,000 employees, switches to five-day delivery if officials cannot come up with other cost savings within two years, and restructures a requirement that the Postal Service prefund its retirement health benefits with more than $5 billion annually.... New amendments passed into the bill this week scale back workers� compensation benefits, curtail USPS executive compensation to a level on par with Cabinet secretaries and address the backlog of USPS retirement claims at the Office of Personnel Management." (Government Executive)
'What, Me Worry?' -- Shareholders Overwhelmingly Sanguine about Executive Comp Practices
"With the second proxy season of the 'say on pay' era now under way, it should be obvious that intense public outrage over supposedly excessive executive compensation is nothing more than a myth. Only 5 of 177 companies that held the shareholder advisory votes by April 20 received the dreaded thumbs-down. Last year just 45 companies -- less than 2% of those required to hold the nonbinding polls -- were hit with 'no' votes." (CFO)
Where They Stand: Platform Planks of the 2012 Presidential Candidates on the U.S. Health Care System (PDF)
"Publication has been updated as of April 17, 2012, to reflect any new changes in the list of candidates and/or their policy positions." (Council for Affordable Health Insurance)
[Guidance Overview] CCIIO Issues Guidance on Medical Loss Ratio Rules
"The [Center for Consumer Information and Insurance Oversight (CCIIO)] bulletin provides MLR guidance on the following topics: applicability of the MLR to certain types of plans, employer groups of one, counting employees for determining market size, individual association policies, offering policyholders a 'premium holiday,' reinsurance and reporting, Exchange user fees, states with a higher MLR standard, 'mini-med' experience and application of the adjustment, and form of rebate." (Wolters Kluwer Law & Business / CCH)
[Opinion] Text of Pension Rights Center Policy Director's Speech at 2012 Latino Retirement Security Summit
Speech by Karen Friedman. "[P]eople need to have a secure retirement and, sadly, technology can't fix that issue -- only having adequate income can.... Half of the nation's private-sector workers have neither a pension or savings to supplement Social Security and, as [the] study for National Council on La Raza shows, the situation is even more acute among the Latino population." (Pension Rights Center)
Telecommuting Creates 'Nexus' in Many States, Subjecting Products and Services to Sales Tax
"Telecommuting and maintaining in-home offices are among the activities that can create state tax liabilities, a Bloomberg BNA survey found. Potential Impact: Employers may be exposed to unexpected taxes when allowing employees to telecommute from other states. Few states have adopted nexus policies aimed at fostering alternative-work arrangements, according to a survey of state revenue agencies by Bloomberg BNA[.]" (Bloomberg BNA)
[Guidance Overview] Which Employees Are 'Full-Time' for Purposes of the Health Care Reform Employer Mandate?
"Importantly for employers that might be subject to the employer shared responsibility mandate, the guidance issued to date suggests that the agencies intend to allow a look-back/stability period during which an employer may determine which of its employees are full time. This means that, for current employees, the agencies are considering allowing employers to determine whether an employee has averaged at least 30 hours a week by looking back up to 12 months. Employers with highly mobile employees or work that varies seasonally may find that this look-back approach helps avoid classifying temporary or seasonal employees as full time." (Bloomberg BNA)
Dismissal of Shareholder's 'Say on Pay' Lawsuit Provides Opportunity for Executive Compensation Counselors
"[W]hat makes the court's dismissal of In re Jacobs Engineering Group Inc. Consolidated Shareholder Derivative Litigation ... so interesting, is that the court quoted directly from the CD&A section of the proxy statement the company's explanation [of] its 2010 compensation decisions as evidence that the compensation committee of the board had clearly exercised its business judgment in settling the compensation." (Winston & Strawn LLP)
[Guidance Overview] 401(k) Plan Fees in Turmoil: District Court in Tussey Case Finds Fiduciary Breaches but Third Circuit Does Not
"Overall, the courts' decision in Tussey and Renfro appear to show that the ... outcome is less dictated by the choices made by plan fiduciaries than by the thoroughness and care by which the plan fiduciaries investigated, considered and compared their investment selections and fees. Accordingly ... it is critical for plan sponsors to understand and follow their plan's investment policy procedures and guidelines, to understand their plan's fees and compare them to the marketplace, to document all actions taken with respect to investment selections and plan fees, and to act for the exclusive benefit of plan participants and beneficiaries." (Trucker Huss)
[Guidance Overview] Some Programs Are Exempt from Patient-Centered Outcomes Research Trust Fund Fee Obligation
"Health insurance policies that are not subject to the fee include: Any insurance policy if substantially all of its coverage is of excepted benefits (e.g., accident- or disability-only plans or limited-scope dental or vision plans); Any group policy issued to an employer specifically to cover employees who are primarily working and residing outside of the United States (e.g., an expatriate health plan or policy), which is determined on a facts and circumstances basis; and, Stop loss and indemnity reinsurance policies[.]" (McDermott Will & Emery)
A Look at the Funding of 'ERISA Accounts' Using Mutual Funds
"[I]f the plan had the legal right to [a 12b-1 payment of plan fees, is] that payment ... a plan asset (or is the right to the payment an asset)? If the 12b-1 payment is made to the plan's trust, it is a plan asset. But what if, instead, it is paid directly to the TPA, who uses it to offset administrative costs under its contract with the plan? Is it a plan asset? What about the advisor, or the plan's investment manager (particularly if it also manages the underlying mutual fund?)." (Business of Benefits)
[Opinion] Text of Consumer-Directed Health Coalition's Letter Urging Repeal of Prescription Requirement for HSA-Eligible OTC Drugs (PDF)
"[The Coalition supports] ... H.R. 2529, which would repeal ... the PPACA's restriction that Health Savings Account ... or Flexible Spending Account ... dollars may only purchase over-the-counter ... medical items when a physician prescription is obtained by an individual.... [which] trigger[s] additional but unnecessary health care costs to the consumer." (Consumer Directed Health Coalition)
[Opinion] Text of American Benefits Council's Letter to IRS Pushing for Transition Relief for FSAs with Non-Calendar Year Plans (PDF)
"[The Council urges] the Service to issue transition relief that makes clear that health [Flexible Spending Accounts] with non-calendar plan years will not be subject to the limitation on salary deferral contributions for plan years beginning before January 1, 2013. ... [A]bsent the requested relief, such non-calendar year plans ... could be required to undertake costly and burdensome actions to the detriment of employees who participate in such plans." (American Benefits Council)
Best Governance Practices for Public Retirement Systems (PDF)
"NCPERS encourages fiduciaries who have not done so to consider adopting the [practices in this document] with the understanding that flexibility in implementation is one hallmark of effective governance." (National Conference on Public Employee Retirement Systems)
[Guidance Overview] DOL Files Suit to Recover Losses to ESOP of California-Based Parrot Cellular
Quoting from the government press release: "The department's suit is based on an investigation conducted by [EBSA] that found violations of [ERISA].... The suit alleges that the defendants caused or permitted the ESOP to purchase ... stock for more than fair market value and that [the principal owner of that stock] enriched himself by millions of dollars at the expense of the plan and its participants." (Employee Benefits Security Administration)
'Take This Job and Love It' -- Most Older Workers Say They Are Happy at Work
"The focus of this year's survey was working adults in their 50s and 60s with household income between $40,000 and $90,000, in which more than three-quarters (76 percent) say they are sticking with their jobs because they want to, not because they're stuck and can't leave (24 percent)." (Charles Schwab)
[Guidance Overview] HHS Releases Approach to Be Taken in Determining Actuarial Value
"The Patient Protection and Affordable Care Act (Act) requires the Department of Health and Human Services to determine how the actuarial value of qualified health plans (QHPs) and other nongrandfathered coverage in the individual and small group markets will be calculated.... The Bulletin emphasizes that the calculation is based on the provision of [essential health benefits] to a standard population, not the population covered by the plan, since the [actuarial value] is expected to be used by consumers in comparing the relative value of plans with different cost sharing designs." (Deloitte)
[Guidance Overview] Tax Treatment of Employee MLR Rebates Is Clarified
"Plan sponsors are subject to restrictions in handling the MLR rebates. [DOL] issued a Technical Release explaining the analysis and procedures required by ERISA group health plan sponsors. [HHS] issued similar but distinct requirements for non-Federal governmental group health plans. The first round of rebates, based on financial data for 2011, is due from the issuers by August 1, 2012." (Deloitte)
[Guidance Overview] HHS Releases Approach to Be Taken in Determining Actuarial Value
"The Patient Protection and Affordable Care Act (Act) requires the Department of Health and Human Services to determine how the actuarial value of qualified health plans (QHPs) and other nongrandfathered coverage in the individual and small group markets will be calculated.... The Bulletin emphasizes that the calculation is based on the provision of [essential health benefits] to a standard population, not the population covered by the plan, since the [actuarial value] is expected to be used by consumers in comparing the relative value of plans with different cost sharing designs." (BenefitsLink.com)
'Can't We All Just Get Along?' -- Combining DB and DC Retirement Plans to Minimize Longevity Risk (PDF)
"Based on average life expectancy statistics, [half] of the population will survive beyond its life expectancy and half of the population will not. This creates challenging circumstances for people to manage withdrawals from their retirement accounts. In addition, there is the added challenge of managing investments. This article is not meant to compare the advantages and disadvantages of DC and DB plans; rather, it is meant to promote a new retirement paradigm where both types of plans can coexist and complement one another. This paper offers this new retirement model as a solution to the longevity risk problem." (Milliman)
Longevity Risk and Retirement (PDF)
"Based on average life expectancy statistics, [half] of the population will survive beyond its life expectancy and half of the population will not. This creates challenging circumstances for people to manage withdrawals from their retirement accounts. In addition, there is the added challenge of managing investments. This article is not meant to compare the advantages and disadvantages of DC and DB plans; rather, it is meant to promote a new retirement paradigm where both types of plans can coexist and complement one another. This paper offers this new retirement model as a solution to the longevity risk problem." (Milliman)
[Guidance Overview] Changes Announced for Normal Retirement Age in Governmental Plans
"[T]he Notice announces that the effective date of the 2007 NRA regulations for governmental plans will be changed to 'annuity starting dates that occur in plan years beginning on or after the later of: (1) January 1, 2015, or (2) the close of the first regular legislative session of the legislative body with the authority to amend the plan that begins on or after the date that is 3 months after the final regulations are published in the Federal Register.' Governmental plan sponsors are entitled to rely on this announced extension until the 2007 regulations are amended." (Deloitte)
Michigan Legislature Eyes Pension Changes to Narrow $45 Billion Gap in Teacher Retirement Fund
"Of the $45 billion in unfunded liability, the state estimates about $17 billion comes from the pension side of the benefit package. Such pensions are constitutionally protected. The rest comes from health care, which is not funded actuarially, i.e., pre-funded according to statistics and estimates of demand, but on a pay-as-you-go basis, a decision made in the 1990s during the administration of Gov. John Engler." (Bridge Magazine)
Public Pensions Won't Work Until Hard Structural Impediments Are Solved
"If reform is to succeed, it must tackle head-on the following structural factors that caused pension costs to explode in states across the nation: ... Pension payouts based on final year pay. ... Collective bargaining and binding arbitration. ... Politicized pension fund boards. ...[and] Faulty accounting standards." (The American)
South Carolina Senators 'Working Through' State Pension Underfunding Problem
"[W]orkers are eligible for full benefits after working at least 28 years for the state, regardless of their age. The problem, [State Senator Danny Verdin] said, is people are getting jobs in state government as young as age 17, meaning they can retire with full benefits at age 45 and 'live to 95,' he said -- a long time to earn a state retirement check." (The State)
Obamacare Collapse Would Put Employers Back in Charge of Controlling Health Costs
"First, employers would push harder to control their own costs by shifting more financial responsibility to workers. Data from Mercer's employer survey suggests that a typical large employer can save nearly $1,800 per worker by replacing traditional preferred provider plans with a high-deductible policy combined with a health care account.... It won't stop there. Many employers are convinced they have to go beyond haggling over money, and also pay attention to the health of their workers." (Bloomberg BusinessWeek)
'Choice Architecture' Can Improve Wellness Results
"To benefit from improved outcomes that spring from being a Healthy Enterprise ..., organizations must advance their health promotion initiatives by motivating employees to take action to improve their health by losing weight, stopping smoking, eating nutritiously, exercising, becoming better health care consumers and taking other actions. 'Choice architecture' -- a technique from the field of behavioral economics that organizations use to become Healthy Enterprises -- frames employees' health care decisions and presents choices to them in a very deliberate manner." (Sibson Consulting)
More Employers Providing Incentives to Employees for Healthier Habits
"At Safeway, ... it started with a $3 salad dish -- compared to the purposely higher-priced $6 burger -- at the company's cafeteria. At Disney, it may have started with its $100 offering for its employers to perform a personal health assessment.... These incentives are increasingly inventive, raising a flock of questions: How much financial incentive is enough? Is negative reinforcement OK? Who should be targeted: the well, the at-risk or the sick? Do financial incentives distract from what some experts say is the ultimate incentive, the employee's intrinsic desire for health?" (Human Resource Executive Online)
[Guidance Overview] Ninth Circuit Rejects Claim for Equitable Relief under ERISA in Dispute Over Summary Plan Description
"In Skinner, the plaintiffs sued under ERISA, claiming the terms of their SPDs were misleading and that the administrative committee issuing the SPDs failed to provide them with an SPD that was sufficiently accurate and comprehensive. After the Supreme Court's decision in Amara foreclosed their primary theory of relief (damages under ERISA), the plaintiffs sought to obtain equitable relief under ERISA Section 502(a)(3). Specifically, the plaintiffs asked the court to reform the terms of their retirement plan's master documents to be consistent with the terms of the SPD they received." (Ford & Harrison LLP)
[Guidance Overview] Planning for the Affordable Care Act's Comparative Effectiveness Research Fee
"Plan sponsors should include an estimate of these fees in their budget projections and should review the options for counting covered lives to determine the most suitable for their plan. Plan sponsors that want to provide input on the proposed rule must submit their comments no later than July 16, 2012." (Segal)
Real Estate Investments Gaining Popularity as Self-Directed Investment Option
"If your employer-sponsored plan has a real estate investing option and you're trying to decide whether to include real estate in your asset class allocation, you'll need to do some research. Use your risk tolerance, investing timeline, personal preferences, and the economic climate to determine how aggressive or conservative your allocation should be." (U.S. News & World Report)
Examining Exchange-Traded Funds (PDF)
"ETFs [Exchange-Traded Funds] don�t work in the same way as mutual funds. What are ETFs really, and how do they work? [T]his paper ... review[s] the history and construction of ETFs which, although hugely popular, are little-understood by most investors ... [and] explore[s] in greater depth the potential risks and advantages of exchange-traded funds." (Arnerich Massena, Inc.)
How Retirement Plan Sponsors and Participants Can Make the Most of Matching Contributions (PDF)
"[M]ore than 93 percent of companies make some sort of contribution to employees' retirement savings, and nearly 40 percent use a matching formula in order to do so. An employer match has a clear value to employees, but how do employers maximize that value? Match amounts, match formulas, and vesting schedules vary widely across plans. The match formula may affect safe harbor, participation, non-discrimination testing, contribution rates, automatic features, employee retention, and, perhaps most importantly, retirement outcomes. [The authors] take a look at some of the options and how they're currently used, and then explore the ways that you and your employees can reap the greatest benefit from a match." (Arnerich Massena, Inc.)
Palm Beach Lowers Employee Retirement Benefits
"Each employee's pension payments are computed based on his or her final pay, length of employment and a multiplier that sets the benefit level. The town was able to drive down its costs largely by lowering the multiplier, freezing employee pay for three years and reducing average pay increases going forward. Overtime and special duty pay will no longer be counted when calculating final average pay. Automatic survivor benefits and cost-of-living increases have been eliminated. Public safety employees, who have been able to draw their pensions upon retirement (after as few as 20 years of employment) will have to wait until age 65 to collect them." (Palm Beach Daily News)
Teachers' Union-Supported Proposal to Ohio Legislature Would Raise Employee Contributions, Lower Benefits
"Under the new plan, unanimously OK'd last week by the board of the 470,000-member State Teachers Retirement System, teachers could retire at any age until mid-2015 and get a full benefit if they have worked 30 years. The years-of-service requirement would gradually rise, though, so that after mid-2026, teachers could not stop working and receive a full benefit until they are 60 and have 35 years in." (The Columbus Dispatch)
Senate Votes Down Forced Retirement for Postal Service Employees
"A measure that would have required eligible postal service employees to retire without buyout incentives failed in the Senate.... The amendment ... would have reduced the cash-strapped agency's expenses by reducing its large percentage of retirement-eligible workers. It failed in a 33-65 vote." (Government Executive)
[Opinion] Text of Pension Rights Center's Criticism of U.S. Chamber's White Paper on the Private Retirement Plan System
"Like the Chamber, the Center is committed to financial literacy, but financial literacy is not just teaching people about compound interest and asset allocation. It is also about empowering employees and retirees by providing them with timely and plain-English information that helps them understand the terms of their plan the amount of benefits they have earned and how much they are paying in administrative and investment management fees. Hence, [the Center finds] it a bit of a contradiction that the Chamber recommends greater financial education, while at the same time advocating for the reduction or elimination of information -- such as quarterly statements in 401(k) plans -- that is necessary for people to be financially literate." (Pension Rights Center)
Putting Social Security's 2012 Financial Outlook in Perspective (PDF)
"The Social Security actuaries project the system's financial outlook over the next 75 years under three assumptions - high cost, low cost, and intermediate. This brief focuses on the intermediate assumptions.... The 2012 Trustees Report confirms what has been evident for two decades - namely, Social Security is facing a long-term financing shortfall which now equals 2.67 percent of taxable payroll or 0.9 percent of GDP." (Center for Retirement Research at Boston College)
[Guidance Overview] Considerations for Plan Sponsors and Fiduciaries in Minimizing Potential Fiduciary Liability After Tussey v. ABB, Inc.
"[The Tussey v. ABB, Inc. case] suggests that plan sponsors and fiduciaries should press service providers/recordkeepers to provide enough information about revenue sharing arrangements to allow them to: [i] Calculate total revenue sharing paid to service providers; [ii] Determine the plan administrative costs that would be charged in the absence of revenue sharing; [iii] Compare to the level of plan administrative costs paid by plans of comparable size; [iv] Determine whether revenue sharing payments provide the service providers/recordkeepers with compensation beyond the administrative cost in the absence of revenue sharing (i.e., beyond the �market rate�); and [v] Negotiate rebates of revenue sharing that exceed the market rate." (Porter Wright)
[Guidance Overview] New Michigan Motorcycle Helmet Law Could Impact Self-Funded Group Health Plans
"[T]he Michigan no-fault law, which requires fully-insured employer group health plans to pay primary to no-fault, doesn't apply to ERISA self-funded plans. However, since the no fault law doesn't extend to motorcycles, the typical Michigan employer's self-funded health plan doesn't exclude or pay secondary where a participant is injured in a motorcycle crash." (Miller Johnson)
[Guidance Overview] Fee Disclosure Wasn't Enough to Shield Retirement Plan Fiduciaries from $35 Million Judgment
"[T]he [Missouri District] court ruled that the corporate fiduciaries of a 401(k) plan violated their fiduciary duties by failing to monitor third-party administrative costs, negotiate plan rebates and prudently select and monitor investment options. The court held the fiduciaries liable for $35 million in damages, concluding that, although the fiduciaries' actions conformed to DOL regulations relating to fee disclosure, their failure to follow their investment policy statement, understand the payments being made under the plan and to investigate the best available investment alternatives resulted in a breach of fiduciary duties." (Littler)
[Guidance Overview] Puerto Rico Tax Amnesty Program Extension Could Help Retirement Plans Correct Failures with Former PR Code's Withholding and Reporting Requirements (PDF)
"[The] Tax Amnesty Program is ... available to Puerto Rico qualified retirement plans, both Puerto Rico-only qualified plans and dual-qualified plans (i.e., plans qualified both in Puerto Rico and the U.S.), that may have failed to comply with the 1994 PR Code's tax withholding (i.e., 5%, 10%, 20% Puerto Rico income tax withholdings, as applicable depending on the type and time of distribution) and reporting requirements (i.e., Forms 480.6A and 6B, and Form 480.7C, as applicable depending on the type and year of distribution) on distributions to participants in Puerto Rico." (Groom Law Group)
[Guidance Overview] IRS Takes Steps to Resolve Issues Related to Normal Retirement Age under Governmental Plans
"Entities should carefully review Notice 2012-29 and the intended changes for the possible impact on their plans, and then consider if they want to submit comments, which are due by July 30, 2012.... If the IRS approves plans with normal retirement ages consistent with the announced changes, we expect that many determination letter requests that had been pending with the IRS would move forward." (Cherion)
[Opinion] American Benefits Council Letter to IRS Requesting Guidance for Frozen Plan Transition Approaches (PDF)
"Pursuant to IRS Notice 2012-25, [the American Benefits Council asks Treasury and the IRS to] consider adding a regulatory project to the 2012-2013 Guidance Priority List. Very generally, the project would involve modifying the current nondiscrimination and minimum participation regulations to protect older, long-service participants from very adverse and unintended effects." (American Benefits Council)
Trends in Proxy Statement Disclosure for the 2012 Season (PDF)
"Disclosure in proxy statements is evolving, reflecting efforts by boards to strengthen communication on topics of investor interest.... [S]ome boards are maximizing proxy statement disclosures and maintaining ongoing communication with investors. Boards must balance these trends with the obligation to ensure that the company's governance practices are appropriate for its specific circumstances." (Ernst & Young LLP)
Stock Compensation at Facebook: What Its SEC Registration Statement Reveals
"The move to granting restricted stock units instead of stock options may have been better for the company for many reasons, including the prospect of minimizing share dilution, along with the relief of having fewer post-IPO multi-millionaire employees to retain and motivate. Depending on the size of the RSU grants relative to previously made stock options grants at Facebook, a basic calculation shows that, given the stock-price appreciation, employees with RSUs would be sitting on much larger gains if they had received stock options." (myStockOptions.com)
[Guidance Overview] JOBS Act FAQs Address Pay-Related Disclosures
"Since the enactment of the Jumpstart Our Business Startups Act on April 5, the SEC staff has been busy posting FAQs to assist companies in interpreting the new law. The most recent round includes guidance on the act's scaled pay disclosure provisions. These 17 FAQs also clarify the definition of 'emerging growth company' and address other questions of general applicability." (Mercer)
Glide Path Strategies to Reach Funding Goals
"Like a GPS for defined benefit plans, an effective glide path strategy (GPS) offers plan sponsors a valuable, multi-period guide to reaching funding goals while gradually de-risking the pension portfolio. The end result is a balanced solution, incorporating often-competing return, risk, contribution and time frame objectives." (J.P. Morgan)
City Leaves Tennessee's Defined Benefit Plan, Switches to Its Own Defined Contribution Plan
"The city will change to a 401(a) retirement plan with a 457(b) supplement to accommodate voluntary employee contributions, according to The Kingsport Times-News. Leaders say the new retirement plans will give the city more predictable and stable retirement costs. Full-time city and non-teacher employees hired after June 30, 2012, would be eligible for the retirement plans the first day of employment and would be fully vested after five years working at the city. The change will not affect current employees." (PLANSPONSOR.com)
Preparing for a Future that Includes Aging Parents
"Experts say any serious plan for caring for aging parents must begin -- not with discussions about money -- but with a legal document designating someone as having 'power of attorney.' That paperwork grants authority to another individual to handle decisions if a loved one can't make them as a result of illness or memory loss.... Once the legal paperwork is done, families can turn to an array of sources for legitimate advice on boosting savings, buying appropriate insurance and maximizing home equity. For example, many employers offer workplace benefits that include free financial planning services." (NPR)
Illinois Organizations Team Up to Promote Employee Wellness Contest
"Two of Illinois' powerhouses -- Blue Cross and Blue Shield of Illinois ... and the Illinois State Council of the Society for Human Resources -- are teaming again for the Third Annual WOWIEs' Award, to recognize excellence in employee wellness programs among Illinois businesses. The WOWIE Awards honor Illinois-based organizations or companies that take a creative approach to inspire employees to make healthy, active choices during working hours." (BlueCross BlueShield Association)
Deloitte Health Care Reform Memo, April 23, 2012
Describes recent developments in various health plan and health insurance matters at the federal and state levels. This issue includes a discussion of the proposed IRS regs on fees to be paid by health insurance plans to fund the Patient-Centered Outcomes Research Institute. (Deloitte)
Employment-Based Health Benefits: Trends in Access and Coverage, 1997-2010 (PDF)
"Both the offer rate (the percentage of workers offered a health benefit) and the coverage rate for employment-based health benefits declined between 1997 and 2010. Between 1997 and 2010, the percentage of workers offered health benefits from their employers decreased from 70.1 percent to 67.5 percent, and the percentage of workers covered by those plans decreased from 60.3 percent to 56.5 percent." (Employee Benefit Research Institute)
Florida Governor Signs Measure to Reduce State's 401(k) Contributions
"[The bill will] lower contribution rates for optional retirement programs at colleges and universities.... This will save the state and local governments an estimated total of more than $175 million in the upcoming year[.] The measure will bring the investment plan's costs to state and local governments more in line with those of the defined benefit ... plan." (PLANSPONSOR.com)
Employers Try Health Gaming and the Power of Social Responses
"Many companies, both new and established, have recently entered the market with health-related games that incorporate a social component, whereby people collaborate, compete and support one another in reaching a specific goal. In addition to startups, employers and health insurers have worked to capitalize on this popular trend." (iHealthBeat)
U.S. Postal Service Reform Being Considered in Senate Would Affect Pay and Benefits
"Measures that would prohibit collective bargaining at the U.S. Postal Service, require retirement-eligible employees to retire, and increase the amount workers contribute to their health benefits and life insurance are among the 39 amendments the Senate plans to vote on as part of the 21st Century Postal Service Act (S. 1789). Other amendments would limit executive pay at USPS, remove language scaling back workers' compensation benefits, and curtail the amount agencies can spend on government conferences." (Government Executive)
Report on State Employee Health Benefits, Updated April 23, 2012
The update provides links to the various states' web sites describing their programs' premiums and benefits for 2012 (in a chart entitled "List of State Employee Health Plan Agencies with Links"). (National Conference of State Legislatures)
Medicare Finances: Findings of the 2012 Trustees Report (PDF)
"According to the 2012 Trustees Report, expenditures from Medicare's HI Trust Fund exceeded revenues by $27.7 billion in 2011. Without a policy change that would increase revenues or reduce expenditures, the accumulated surplus in the HI Trust Fund will be depleted by 2024, the same as last year's projection; after that, the HI Trust Fund would rely on the annual revenues from Medicare payroll taxes, which are projected to cover 87 percent of annual expenditures." (National Academy of Social Insurance)
Social Security Finances: Findings of the 2012 Trustees Report (PDF)
"The 2012 Trustees Report shows that Social Security is 100 percent solvent until 2033, but faces a moderate long-term shortfall. In 2011, Social Security had a surplus -- revenue plus interest income in excess of outgo -- of $69 billion. Reserves are projected to grow to $3.1 trillion by the end of 2020. Then, if Congress takes no action in the meantime, reserves would start to be drawn down to pay benefits. In the highly unlikely event that Congress does not act before 2033, the reserves would be depleted and revenue coming into the trust funds from workers' and employers' contributions would cover about 75 percent of scheduled benefits (and administrative costs, which are less than 1 percent of outgo)." (National Academy of Social Insurance)
Trustees Issue Warnings on Medicare, But Make No Changes to Solvency Projections
"Overall, the outlook for the Medicare program which covers nearly 50 million elderly and disabled people was only slightly worse than findings from last year. Once again, trustees forecast that Medicare's hospital fund would begin to run out of money beginning in 2024, but many experts place little importance on the trustees' projection since the program's insolvency has been forecast from as little as two years away to as many as 28 years since 1970." (Kaiser Health News)
Sample of Enhanced All-In Fee Report
"[This sample annual fee report] has been enhanced to provide additional fee information in accordance with the Department of Labor�s (DOL) rules under ERISA section 408(b)(2).... This fee disclosure document is comprised of three components: (i) a Summary Fee Report that provides a consolidated view of [the] plan's fee information; (ii) [the] enhanced All-in Fee Report, which contains the detailed fee information ...; and (iii) an Appendix containing important information required by the DOL fee disclosure regulation." (Vanguard)
[Guidance Overview] Summary of Final DOL Regs on Service Provider Fee Disclosures (PDF)
"The final rules modify the interim rules by providing that frozen 403(b) annuity contracts or custodial accounts that are subject to ERISA will not be considered covered plans and are not subject to the fee disclosure rules [if the plan sponsor] had no obligation to make, and did not make contributions (including employee salary reduction contributions) to such contracts or custodial accounts after January 1, 2009; the contract or account was issued to a current or former employee before January 1, 2009; [and other prescribed conditions are met]." (Prudential)
ML Strategies Health Care Reform Update, April 23, 2012 (PDF)
Read this week's update on health care reform legislation, regulations, and initiatives. (ML Strategies, LLC)
Operational Changes in Defined Benefit Plans for Plan Sponsors to Consider in 2012: Making Lump Sum Payments
"This year, 2012, marks the first year that the 417(e) interest rate required to calculate the minimum present value of a DB pension is equal to the interest rate used to calculate its liability for [PPA] minimum funding purposes (ignoring the 24-month averaging). In the past, the lump sum was based in part on 30-year Treasury rates, which often resulted in the payout of lump-sum amounts greater than the corresponding liability funded for in the plan's funding target. With this no longer the case, the settlement of lump sums might be an attractive way to eliminate longevity risk from DB plans." (Milliman)
Operational Changes in Defined Contribution Plans for Plan Sponsors to Consider in 2012
"Many plan fiduciaries may not be aware that it is both a fiduciary breach and prohibited transaction to allow the plan to pay more than what is considered reasonable expenses. In practice, how does a fiduciary determine if plan fees are reasonable? If you've taken your plan out to bid within the last three years, you should have current market information and documentation for your due diligence files to support the fees you are paying, or have taken action by going back to your service provider(s) to negotiate lower fees on behalf of plan participants." (Milliman)
Creating a Hybrid DC Retirement Plan (PDF)
"The authors believe that recently issued retirement plan regulations have given employers an option that captures the best of DB and DC plans and represents a win-win for employers and employees. The authors call this type of plan the Low Volatility Pension Plan (LVP)." (Buck Consultants)
[Guidance Overview] Summary of Proposed IRS Regs on Comparative Effectiveness Fee Charged to Health Plans (PDF)
"The rules provide helpful guidance on the life counting requirement for determining the amount of the fee, especially given the short time frame for compliance. However, some of the nuances are sufficiently subtle to create potential compliance pitfalls." (Bryan Cave)
Small but Significant 401(k) Fixes Urged at House Hearing
"'There is no need for dramatic changes, but measures should definitely be considered to make it easier for employers, particularly small businesses, to offer a workplace savings plan to their employees,' [Judy A. Miller of ASPPA] advised, noting that some complications are statutory and some are regulatory." (Society for Human Resource Management)
Analyze Compensation Programs to Reveal Business Risks
"The new corporate governance environment and legislative imperatives have ratcheted up complexity and transparency to a new level, placing much greater demands on the HR function and the board's compensation committee. In addition, companies face continued changes in proxy disclosure rules, which provide investors and other stakeholders with a far more detailed understanding of the committee's decision-making processes." (PricewaterhouseCoopers LLP)
Present Law and Background Relating to Tax Treatment of Cost of Over-the-Counter Medicine as Medical Care Expense
Scheduled for a Public Hearing before the Subcommittee on Oversight of the House Committee on Ways and Means on April 25, 2012. "Specifically the summary discusses the law before and after the enactment of section 9003 of the Patient Protection and Affordable Care Act ... which provides that any exclusion from income for such reimbursement or use of HSA funds only applies to the cost of over-the-counter medicine if the medicine is prescribed by a physician. This document also discusses issues related to the tax treatment of the cost of over-the-counter medicine as a cost of medical care and provides selected data on over-the-counter medicine." (Joint Committee on Taxation)
[Opinion] U.S. Chamber Outlines Path Forward for Private Retirement Benefits
"The Chamber's white paper [titled: 'Private Retirement Benefits in the 21st Century: A Path Forward'] lays out a path to continue the success of the private employer-provided retirement system and increase retirement security for millions of workers. Specifically, it recommends: Encouraging employers to create and maintain retirement plans by growing plan sponsorship among small businesses, streamlining notice requirements and allowing for greater use of electronic disclosures, reforming multi-employer defined benefit funding rules to prevent bankruptcy among small employers, reforming single-employer defined benefit funding rules to allow for greater predictability, and clarifying the hybrid plan rules and regulations." (U.S. Chamber of Commerce)
California Lawmakers Considering Tax-Free HSA Contribution Bill
"California is one of three states that don't currently follow the Internal Revenue Code for HSA tax benefits. Alabama allows pre-tax contributions only if made through a cafeteria plan; New Jersey generally prohibits all pre-tax employee contributions and doesn't allow a deduction. Wisconsin recently amended its tax code to allow tax-free HSA contributions. If enacted, the state tax exclusion or deduction would apply to tax years beginning on or after Jan. 1, 2013." (Mercer)
GAO Report on Defined Contribution Plans: Approaches in Other Countries Offer Beneficial Strategies in Several Areas
"GAO was asked to examine, for selected countries' DC systems, (1) how are service providers overseen by regulatory agencies; (2) what key strategies are used to improve fee disclosure to participants; and (3) what key strategies are used to reduce fees? GAO selected Australia, Chile, Sweden and the United Kingdom based on, among other factors, the importance of the DC plans to the country's retirement system and the use of strategies to address service providers' fees." (Government Accountability Office)
Official Report on Social Security: Text of the 2012 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds (PDF)
"In 2011, Social Security's cost continued to exceed both the program's tax income and its non-interest income, a trend that the Trustees project to continue throughout the short-range period and beyond. The 2011 deficit of tax income relative to cost was $148 billion, and the projected 2012 deficit is $165 billion. The sizes of these deficits are largely due to a temporary reduction in the Social Security payroll tax for 2011 and 2012." (Social Security Administration)
Official Summary of the 2012 Annual Reports of the Social Security and Medicare Boards of Trustees
"The long-run actuarial deficits of the Social Security and Medicare programs worsened in 2012, though in each case for different reasons. The actuarial deficit in the Medicare Hospital Insurance program increased primarily because the Trustees incorporated recommendations of the 2010-11 Medicare Technical Panel that long-run health cost growth rate assumptions be somewhat increased. The actuarial deficit in Social Security increased largely because of the incorporation of updated economic data and assumptions. Both Medicare and Social Security cannot sustain projected long-run program costs under currently scheduled financing, and legislative modifications are necessary to avoid disruptive consequences for beneficiaries and taxpayers." (Social Security Administration)
Official Report on Medicare: Text of the 2012 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds (PDF)
"The financial outlook for Medicare is ... uncertain because some provisions of current law that are designed to reduce costs may not be sustained. The clearest example of this issue is the sustainable growth rate ... formula for physician fee schedule payment levels. The projections in this report assume that, as required by current law, CMS will implement a reduction in Medicare payment rates for physician services of more than 30 percent at the start of 2013. However, it is a virtual certainty that lawmakers, cognizant of the disruptive consequences of such a sudden, sharp reduction in payments, will override this reduction just as they have every year since 2003." (The Boards of Trustees, Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds)
[Official Guidance] Text of CCIIO Technical Guidance 2012-002: Questions and Answers Regarding the Medical Loss Ratio Regulation (PDF)
"[Question:] Are self-funded plans subject to the MLR reporting and rebate requirements? [Answer:] A self-funded plan (sometimes referred to as a self-insured plan) is not a health insurance issuer, as defined by Section 2791(b)(2) of the PHS Act, and thus is not subject to the MLR requirements. It does not matter if the self-funded plan is subject to the Employee Retirement Income Security Act of 1974 (ERISA) or if it is a non-ERISA plan." Other Q&As provide MLR guidance on the following topics: Applicability of the Medical Loss Ratio to Certain Types of Plans; Employer Groups of One; Counting Employees for Determining Market Size; Individual Association Policies; Offering Policyholders a "Premium Holiday"; Reinsurance and Reporting; Exchange User Fees; States With a Higher Medical Loss Ratio Standard; "Mini-Med" Experience -- Application of the Adjustment; [and] Form of Rebate. (U.S. Department of Health & Human Services, Centers for Medicare & Medicaid Services, Center for Consumer Information & Insurance Oversight)
[Guidance Overview] New IRS Regs Impose Fees on Self-Insured Health Plans and Health Insurance Policies
"The fee is equal to $1 per covered person for the first year and $2 per covered person for the second year. The fee increases each year thereafter in an amount equal to the increase in the projected per capita amount of the National Health Expenditures most recently released by the Department of Health and Human Services before each October 1." (Katten Muchin Rosenman LLP)
[Guidance Overview] Another Question is Answered in the Who's the Employer Q&A Column
Three individuals are the owners of a medical company (LLC). Each owner has his own PLLC, which is an S-Corporation. The medical company has 4 employees. Can any one of the PLLCs sponsor a qualified plan that is not a prototype and that does not include the employees of the affiliated service group? (BenefitsLink.com)
[Opinion] UnitedHealth Reports $1.4B 1st Quarter Profit, a 3% Increase; Prepares to Increase Premiums on Californians Up to 17%
"UnitedHealth Group, which runs the fifth-largest health insurance company in California, reported $1.39 billion in profits in the first quarter of 2011, a 3% increase over last year, as it raises premiums on 84,000 Californians with small business coverage as much as 17% on May 1st. The insurance company is funding the fight against a ballot initiative proposed by Consumer Watchdog Campaign in California that would require health insurance companies to publicly disclose and justify spending and profits when applying for a rate increase, and get approval before any rate change takes effect." (Consumer Watchdog)
Nine Tips for Creating a Culture of Health at the Workplace
"64 percent of employers surveyed indicated that wellness initiatives are among the top three most effective tactics for controlling health care costs.... To mark Global Employee Health and Fitness Month, Healthyroads offers the following tips to help companies begin building a fit company:" (MarketWatch)
Bipartisan Scrutiny of Income Tax Breaks for Retirement Plans Means Reason to Worry
"[During a recent hearing], Democrats and Republicans on the House Ways and Means Committee expressed support for provisions of the tax code that allow workers to put money into 401(k) and individual retirement accounts on a tax-deferred basis. But the special treatment is under pressure as Congress takes the first small steps toward tax reform. The bipartisan mantra for reform is to lower rates and broaden the base." (Investment News)
Are Public Pension Obligations Debt, or Are They Values?
"'I don't think pension benefits are a debt,' said [Richard] Brodsky, a former New York State Assemblyman.... '[A distinction has to be made] between debt and social and legal obligations we have to fill.... Who are you going to hit and who�s going to suffer?' [but a stark reality is that] New York City and others face soaring pension, Medicaid and retiree health care costs. Yonkers is teetering. Suffolk County just declared a fiscal emergency. Its Long Island neighbor, Nassau County, is under a fiscal control board." (The Bond Buyer)
American Airlines to Make Its Case Against Union Contracts Before Bankruptcy Judge
"American wants to eliminate 13,000 union jobs -- about one in every four union workers -- freeze or terminate pension plans, curb health benefits, reduce time off, and impose many other cuts. The airline's unions say company leaders are unfairly blaming workers instead of doing something to make American grow and bring in more revenue." (The Sacramento Bee)
Smaller Employers Increasingly Explore Partial Self-Funding of Health Benefits
"Many large, Fortune 1000 companies already self-insure their employee benefits, and the concept is far from new. But the option for smaller groups has received more attention lately, and brokers ... said they've seen an uptick in inquiries about partial self-funding models as means of creating a bit more flexibility in an otherwise inflexible, tightening marketplace." (North Bay Business Journal)
Illinois Governor Wants Public Employees to Contribute More toward Retirement and Work Longer
"[The governor] called for employees to pay 3 percent more and to work until 67 instead of 65 or even earlier in some cases. The governor also would reduce yearly cost-of-living increases for retirees to 3 percent or half of the consumer price index, whichever is less. Pension calculations would be based on simple interest rather than compound interest, the more costly method now in place. Cost-of-living adjustments also would start at either age 67 or five years after retirement, whichever is earlier." (Chicago Tribune)
[Guidance Overview] Pension Contribution by Self-Employed Taxpayer Not Deductible for Self-Employment Tax
"Self-employed taxpayers may deduct expenses associated with their trade or business when determining self-employment income. However, the court explained, a pension contribution is not an expense attributable to a self-employed taxpayer's trade or business. The exception under Code Sec. 404(a)(8) is limited to income tax." (Wolters Kluwer Law & Business / CCH)
Trends in the Expenses and Fees of Mutual Funds, 2011 (PDF)
"Over the past two decades, on an asset-weighted basis, average expenses paid by mutual fund investors have fallen significantly.... In 1990, investors on average paid 99 basis points, or 99 cents for every $100 in assets, to invest in equity funds. By contrast, expenses averaged 79 basis points for equity fund investors in 2011, a decline of over 20 percent from 1990." (Investment Company Institute)
Does Nation's Second-Largest Public Pension Plan Need Higher Contributions?
"Actuaries estimate that the total annual contribution to the [California State Teachers' Retirement System], 19.4 percent of payroll, would have to be increased by an additional 12.9 percent of pay (about $3.25 billion) to fully fund pensions promised over the next three decades." (Calpensions)
Video: House Ways and Means Hearing on Tax Reform and Tax-Favored Retirement Accounts (April 17, 2012)
Excerpt from Committee chairman Camp's opening statement: "Some [people] have questioned whether the large number of [types of tax-favored retirement plans] with different rules and eligibility criteria leads to confusion, reducing the effectiveness of the incentives in increasing retirement savings. In addition, many commentators have offered ideas for increasing participation in retirement plans and better targeting the incentives. These ideas range from simplification and consolidation of existing plans and accounts, to changing the default rules governing whether an employee participates, to additional incentives such as the Saver's Credit." (Committee on Ways and Means)
[Guidance Overview] Failure to Monitor Fees Is Breach of Fiduciary Duty by 401(k) Plan Sponsor
"In Tussey v. ABB, Inc., [the federal district court for the Western District of Missouri] found that a plan sponsor breached its fiduciary duty to plan participants because it failed to monitor record keeping fees and revenue-sharing payments and paid record keeping fees in excess of the market cost to subsidize other record keeping services.... ABB sponsored two 401(k) plans that offered Fidelity Investments mutual funds as investment options. Fidelity was also the investment adviser and the record keeper. Fidelity then used some of those fees to offset losses it was taking on other services provided to ABB." (Fox Rothschild LLP)
Monitoring the Risks to the U.S. Economy of Weaknesses in State and Local Government Finance
"The Municipal Financial Monitoring Team [of the Federal Reserve Banks of Cleveland and Atlanta] has been looking at how shocks to the municipal bond market, continued problems with pension funding, and general fiscal stress could ripple into something much larger�either in the form of a (rather unlikely) threat to financial stability or perhaps as an aggravation of regional economic woes. To understand these issues, the Monitoring Team has been exploring a number of areas where risks may be building." (Federal Reserve Bank of Cleveland)
Navigating the Legal Landscape for Public Pension Reform
"In at least 27 states, pension members' past and future accruals are protected, but to different degrees ... [thereby complicating] the task of modifying current members' pension plans. These states treat public pension plans as contracts that must conform to constitutional, statutory, or common law (the last of these was developed through court decisions interpreting statutes or constitutions)." (Federal Reserve Bank of Cleveland)
Public Pension Funds and Public Finances
"[T]he Federal Reserve Banks of Cleveland and Atlanta have formed a Financial Monitoring Team to study pension funds and municipal finance with an eye toward implications for the wider economy and financial system.... In this article ... [the authors] explain where risks could be building and how reforms might help forestall their impact on the broader economy and financial system." (Federal Reserve Bank of Cleveland)
Los Angeles Mayor to Propose Going-Forward Reduction in Retirement Benefits of City Employees
"When he releases his annual budget, Villaraigosa is to propose an end to the practice of allowing city employees to receive as much as 100% of their salaries once they retire, and decrease overall benefits given to retiring workers." (Los Angeles Times)
ERISA Fiduciaries Can Be Liable for Misdeeds of Others
"Financial advisers and plan sponsors, beware: If you recommend a fiduciary to perform plan services, you may be held responsible if something goes wrong. That is the opinion of legal experts commenting on the case of high-profile 401(k) fiduciary Matthew D. Hutcheson, who was indicted April 11 on federal charges of diverting money from clients in multiple-employer plans for his own purposes." (Investment News)
Federal Legislators Consider Cutbacks to Special Income Tax Treatment for Retirement Funds
"Capitol Hill politicians are assessing tax changes that could let the Internal Revenue Service lay claim to a portion of the $18 trillion sitting in 401(k) accounts and other tax breaks used by middle-class workers, including cutting the mortgage tax deduction. A commission looking for ways to close the deficit, and, noting the extent of 401(k) tax breaks, recommends an examination of the system as one way to prevent government bankruptcy." (New York Post)
Congress Eyes Cutbacks to 401(k)s As It Looks for Ways to Raise Revenue
"As policy makers gear up for the tax-reform effort expected after the presidential election, they are asking: Can 401(k) plans, individual retirement accounts, and other tax-deferred vehicles be streamlined while getting more traction among people with lower incomes? ... At the very least, the increasing focus on retirement savings is a reminder that tax treatment of the accounts, once considered permanent, is anything but." (The Wall Street Journal)
California Regulators Consider New Restrictions on Use of Stop-Loss Health Insurance Policies
"The California Department of Insurance is pushing legislation that calls for new rules on a type of company self-insurance that's growing more popular as small businesses seek alternatives to ever-rising premiums for conventional health coverage.... Normally, larger employers tend to self-insure because they would have the financial resources to pay for expensive medical claims. Now insurers are pursuing smaller customers with new plans designed to limit employer payouts for big claims through stop-loss policies." (FOX40)
'Tailored Network' Would Give New York State Employers More Say with Health Plans
"Calling it the first integrated network of its kind in the [western New York] region, officials say employers will for the first time have a seat at the table in creating customized health-care plans for their workers. They say tailored network health insurance products have significant cost savings for members who utilize a designated network of physicians and hospitals. 'It's re-framing how you think about the dollars available to spend on health care[.]'" (Buffalo Business First)
[Guidance Overview] Cracks in the Piggy Bank: 401(k)s Are Inadequate for Many Americans
"The financial crisis is partly to blame. It knocked $1.6 trillion, or about a third of the total value, off the nation's 401(k) accounts. But the larger truth is that most Americans do a poor job of anticipating the future and saving money. People don't seem to grasp that the pensions their parents' generation enjoyed have been almost entirely supplanted by 401(k)s, leaving them largely on their own to fund the final stage of their lives." (The Week)
Social Security and Medicare Annual Trustee Reports Expected April 23, 2012
"Experts said they expect the trustees' conclusions to be similar to their findings last year.... [when] the trustees projected Social Security could pay promised benefits in full through 2036, after which the program could only afford to pay 77% of them." (CNN Money)
Capping Benefits and Rising Costs of Employer-Sponsored Retiree Health Coverage
"Companies often say spiraling health-care costs force them share the pain with retirees. But that isn't the whole story. Many employers have been shifting more costs to retirees even as they receive billions of dollars in government subsidies to offset their own costs. Knowing what's really driving up the amounts you pay can help you anticipate what's ahead." (The Wall Street Journal)
[Guidance Overview] IRS Issues Guidance on Fees Employers Must Pay to Fund Patient Research Institute
"The annual fees are due July 31 of the year following the year of assessment. Thus, the first payments and reports must be submitted by July 31, 2013. Information regarding the fees must be reported on Form 720, which may be submitted electronically." (Ballard Sphar LLP)
Update on IRS Governmental Plans Definition Effort
"If a public plan fails to meet this definition, [technically it will become subject to] ERISA titles I (Federal protection of employee benefit rights, administered by the DOL�s Employee Benefits Security Administration) and IV (plan termination insurance, enforced by the PBGC) ... [T]he nondiscrimination and minimum participation rules of the Federal tax code would also apply, as would the minimum funding standards.... [I]ndividual systems are strongly encouraged to consider filing comments where it appears that specific issues will arise, providing examples and explaining the impact on the individual plan.... [F]ormal comments ... are due by June 18, 2012, and there will be a public hearing in Washington, DC on July 9, 2012[.]" (National Council on Teacher Retirement)
[Guidance Overview] Fourth Circuit Determines Appeal Not Available from District Court Remand to Plan Administrator
In a case of first impression, the Fourth Circuit followed the majority of other Circuits in determining that "a district court order remanding [a claim denial] to an ERISA claims administrator for reconsideration does not constitute a final decision" and held that the Court therefore had no jurisdiction to rule on Aetna's appeal of that remand. Dickens v. Aetna Life Ins. Co. (Justia.com)
Employees Want a Say on the Boss's Pay
"Here and there this proxy season, executive pay is coming under attack from the people who actually own public companies, which is to say, stockholders.... One potentially powerful class of shareholders -- employees -- seems to be rousing, too. And, to the degree that employee-shareholders band together to have their say on the boss's pay, they can be a formidable force." (The New York Times; free registration required)
[Guidance Overview] New York District Court Rules No Title VII Retaliation Claim for Employee Who Received Late COBRA Notice
"This former employee had a difficult case to make under Title VII for post-employment retaliation, given that she was not seeking future employment. She apparently did not make a claim for COBRA penalties for the late election notice.... [C]ourts generally hold that a plan administrator can be liable for the penalties regardless of whether the qualified beneficiary was injured or prejudiced, although some courts have declined to award penalties where the qualified beneficiary suffered no actual harm from the late election notice." (Thomson Reuters/EBIA)
[Guidance Overview] IRS Proposes Regulations on Fees to Fund Patient-Centered Outcomes Research
"The proposed regulations ... offer guidance regarding who must pay the fee, the amount of the fee, how the fee is reported, and other matters.... [The fee] may be most significant with respect to health FSAs and HRAs, since failing to adequately integrate one of these account-based plans with a sponsor's self-insured major medical coverage (or to restrict the plan to excepted benefits) can result in effectively doubling the amount of the fee." (Thomson Reuters/EBIA)
Missouri House of Representatives Declares Federal Health Care Reform Law Is Void and Unenforceable in the 'Show Me' State
"Federal officials could be charged with a misdemeanor if they take steps in Missouri to enforce the law, and state workers would not have authority to implement any provision in the health care overhaul. The House health measure ... now moves to the state Senate." (St. Joseph News-Press)
DOL Questioning Certain Welfare Plans' Form 5500 Participant Information
"[T]he Requests require plan administrators to provide a response as to why the number of persons covered, as reported in Schedule A 'Insurance Information,' varies from the participant count reported on line 6 of Form 5500, although this is often due to the existence of various plan options. The Requests also solicit information regarding stop loss insurance. Stop-loss insurance is coverage for employers that self-fund their employee health benefit plans." (HighRoads)
Traveling4Health Unveils Interactive Map of Medical Travel and Retirement Health Destinations
"America's leading travel resource for discovering vacationing, destination locations, international health, and medical travel news, Traveling4Health & Retirement unveils first-ever online travel and tourism map for travelers, baby boomers, and everyone seeking affordable alternatives to the rising costs of healthcare while learning about the many advantages of international travel." (Traveling4Health)
Health Care Remains a Key Concern for Americans; Wellness Near Top of List
"Nearly half (42 percent) of people prefer to receive preventive care appointment reminders via email; however, preference for text messages providing reminders doubled in the past year, from eight to 16 percent. While the use of technology is growing, the research also indicates that more traditional forms of communication such as direct mail and print newsletters are still a valued resource for consumers." (Krames StayWell)
[Guidance Overview] Sixth Circuit Makes It Harder to Contribute to 401(k) During Bankruptcy
"[A]ppellants were going through Chapter 13 bankruptcy, and as part of their Chapter 13 repayment plans, they were repaying 401(k) loans. At the time they filed bankruptcy petitions, none of the appellants were making contributions to their employer-sponsored 401(k) retirement plans. Well before the end of their repayment plan terms, the appellants were projected to have their 401(k) loans fully repaid. At that point, they proposed that the income made available by repayment of the 401(k) loans be contributed directly to their 401(k) retirement accounts." (Jeffrey D Best Attorney at Law)
Enhance Incentives for Employees Through 'Individualizing'
"What incentives and rewards most motivate workers to do their best? ... The latest answer is 'individualization,' according to [a study] by St. Louis-based Incentive Research Foundation, which analyzed existing research, scanned incentive industry and business publications, and sought input from industry leaders." (Human Resource Executive Online)
[Opinion] Is Dual Registration the Cause of Opposition to the Fiduciary Standard?
"Does the opposition to a universal fiduciary standard stem from a big-time Wall Street company's ingenious ploy and a Washington regulator's botched response? In 1999, an upset but wily Merrill Lynch sought to prevent itself from becoming exposed to the onerous regulation of [the SEC]. In a series of Keystone Kops maneuverings, the SEC blundered through a series of missteps through two administrations, each flying under the banner of a different political party. The absent regulator allowed the birth of an entirely new industry until, almost a decade later, a harsh court ruling sent the entire house of cards tumbling down." (Fiduciary News)
[Guidance Overview] Fifth Circuit Rejects Health Plan's Claim for Reimbursement from Plan Participant's 'Special Needs' Trust
[The Fifth Circuit in its opinion in ACS Recovery Servs. v. Griffin (Apr. 2, 2012) stated] "Even if we were to find that [the group health plan participant who had successfully settled a suit against a tortfeasor in an automobile accident that injured the participant] had fleeting possession of the funds, we are still bound by our prior precedent, which requires the ... beneficiary to have either possession or control of the funds at the time that the [group health plan] is seeking equitable relief." (Health Plan Law Blog)
[Opinion] Health Care Reform in Peril: Elected Officials, Not Supreme Court, Should Be Deciders of Who Pays
"Rights are nice, but someone has to pay the bills. Looking around the world reveals a wide range of health-care payment systems. On a spectrum ranging from 100% payment by the state to 100% payment by private parties, many advanced countries cluster near the 100%-government pole. None is near the 100%-private pole. The United States probably comes closest, with about half the bills paid privately." (The Wall Street Journal)
[Guidance Overview] Federal Agencies Work Hard to Provide New Lifetime-Income Options for Qualified Plans
"This past February, the Treasury and the IRS released two proposed regulations, and the IRS issued two revenue rulings, that provide different strategies for achieving [a balance between lump-sum cash distributions (which provide liquidity) and lifetime-income options (which provide a steady stream of income over the participant's lifetime and protect against financial risk)].... The agencies have emphasized that this guidance is a first step, and encourage further comments and innovations from plan sponsors, providers of investment and financial products, participants and other stakeholders." (McGuireWoods LLP)
Implications of the Payroll Tax Holiday for Social Security
"This 'payroll tax holiday' is scheduled to end on December 31. This fact sheet describes an 'exit strategy' that could attract broad public support and help strengthen Social Security for the long term. The fact sheet notes that Social Security now has four dedicated sources of income, including reimbursement funds from general revenues that replace dollar-for-dollar the revenue not collected during the temporary tax reduction. Therefore, Social Security's trust funds are unaffected by the payroll tax holiday." (National Academy of Social Insurance)
Bailout by U.S. Taxpayers Could Resolve Northern Mariana Islands Retirement Fund Bankruptcy
"There are times when a pension story is one thing for the general public, and a totally different thing for the ERISA community, or in this case the employee benefits community because the plan involved is not truly an ERISA plan, it is a governmental plan, and not really even a governmental plan but a retirement fund for a commonwealth of the United States." (The Pension Protection Act Blog)
[Guidance Overview] Seventh Circuit Sides with Fiduciaries on Question of Out-of-Network Disclosures
"The dispute in this ... case arose out of the group health plan's refusal to [pay] out-of-network charges of $80,000. The Plaintiff claimed that there was no adequate proof in the record that the providers were out-of-network, and furthermore that, even if they were, the Defendants breached their fiduciary duty to inform him of that material fact." (Health Plan Law)
Two Federal Reserve Bank Reports Scream Softly in Warning about Public Pension Crisis
"One reality the Fed delicately tiptoes around is that public-employee union voter drives and campaign contributions coupled with general voter ignorance, apathy and low turnout can be impenetrable barriers to reform until it is too late.... Bottom line: Rotten state and municipal finances hit by pensions 'whose troubles with chronic underfunding predate the financial crisis' could threaten the economic recovery necessary to save states and municipalities from their rotten finances." (State Budget Solutions)
Louisiana Elected Officials and Public Employees Would Lose Pensions with Felony Convictions If Bills Become Law
"The latest attempt to prevent corrupt state employees from drawing state retirement narrows the scope of the crimes that would lead to a forfeiture of benefits and would give judges the final say in determining how much of a convict's pension must be given up." (nola.com)
Enrollment in Health Savings Accounts Increasing Dramatically
"Enrollment in these specialized tax-deductible, tax-free accounts has exploded: In March 2005 there were slightly more than 1 million accounts; a year ago there were 11.4 million, according to America's Health Insurance Plans, a trade group. Since then, the growth has been exponential, with Fidelity Investments saying its HSA business grew 61 percent in a year." (Reuters)
Generation Y Facing Retirement As Go-It-Alone Affair
"Roughly between 18 and 34 years old, [Generation Y's] table is wobbling on its last two legs: a job and a 401(k), which are co-dependent. Thus instead of protection, Gen Yers have inherited a great deal of pressure. More than ever, they know they better be employable, and they better be skilled 401(k) investors. The trouble is, it is quite difficult to do this when faced with high unemployment, and ever-higher student loan debt." (msnbc.com)
San Diego to Save More than Expected on Retiree Health
"Agreements were reached last year with the city's unions on the new retiree health care package, which offered three options for workers. City officials expected about 3,000 of the eligible employees -- those hired before 2005 -- to opt for the plan that is similar to a 401(k) and is cheaper for the city in the long run. Instead, about 5,000 did[.]" (KUSI News)
Defined Contribution Plan Executives Say Fee Disclosure Rules Won't Help Much
"When asked the 'likely outcomes' of the fee-disclosure regulations for participants, 49% said the participants will be confused by the regulations, and 48% said the disclosure will have 'little impact' on participants, said a report on the survey.... Only 5% said the regulations would help participants make better investment choices, while 20% said participants would exercise greater scrutiny of fees." (Pensions & Investments)
Virginia to Switch to Hybrid Retirement Plan for New Employees; All Employee Contributions to Rise
"VRS will launch a mandatory hybrid plan for new employees by Jan. 1, 2014, according to the legislation. The hybrid will have defined benefit and defined contribution components; the total employee contribution for both will be 5% of pay. Beginning July 1, the start of Virginia's fiscal year, school and local employees for the first time will be contributing to their pension plans. The hike in employee contributions will be offset by salary increases." (Pensions & Investments)
Trouble in Paradise: Public Pension Plan of U.S. Commonwealth in Pacific Files for Bankruptcy
"[The Northern Mariana Islands Retirement Fund, Saipan] is only 38.8% funded, thanks to low investment returns and a benefit structure that's been increased without raises in funding, according to the bankruptcy filing.... [The f]und has been bedeviled by the commonwealth's inability to make its share of contributions to the pension plan, according to court documents and an April 17 letter to participants." (Pensions & Investments)
[Opinion] On Public Pension Reform, Politicians Can't Fix Pension Abuses with Voting Rules Alone
"[It] should be illegal by statute or constitution -- whatever is necessary -- to award retroactive pension and retiree medical benefits or benefits increases ... [and] state laws must be changed to provide that ... any increase in a retirement plan benefit can be subsequently rescinded or modified downward with respect to future service.... If these two essential reforms are not included in the legislative package, it doesn't matter whether the voting rule requires a majority or a supermajority ... In many instances, a powerful union can push through a benefits increase with supermajority votes, so the voting rule is really just shuffling the deck chairs on the Titanic." (Governing)
Lessons for 457 Investors and Administrators on Stable-Value Funds
"Today, public employees enrolled in a workplace savings program like a 457 plan or a 401a defined contribution plan are looking at far lower rates on the stable-value products available to them. Interest rates in the 2 to 3 percent range are much more commonplace these days.... The big selling point today for a stable value fund is that they won't lose money for the investor if interest rates go up. At least in theory. And therein lies the rub.... The insurance company making a primary guarantee can default, and the portfolio guaranteed by a "wrapper" company can suffer losses so bad that the market-price stabilization is not sufficient." (Governing)
[Guidance Overview] Court Finds a Neglected Investment Policy Statement Can Be Costly
"In 2000, without informing plan participants, the plans� investment committee took several steps that proved to be in conflict with its [investment policy statement, or "IPS"] and fatal to its legal defense.... The lengthy [Missouri District court] opinion holds additional lessons in how a company failed to follow a prudent process in its investment decisions, in monitoring plan costs, and in the penalties involved in ignoring its own IPS. Although it did not find that [the employer] concealed its fiduciary breaches, the court seemed troubled by what it called a �conflicted relationship� with [the plan's investments provider (Fidelity)]." (fi360 blog)
[Opinion] The Power of Universal Health Care
"T.R. Reid, Pulitzer Prize-winning journalist and author of the best-selling book 'The Healing of America,' makes three powerful observations: First, all other leading countries provide universal health care at half the cost and higher quality than the United States does. Second, he points to the remarkable variety of health care systems in those successful countries. Third, and most important, what those successful systems have in common is universal health care." (nj.com)
Health Insurance Declining in Low-Income Working Families and Small Businesses
"Employer-sponsored insurance (ESI) rates are lower and declines in ESI in the past decade are higher for low-income individuals and small businesses relative to high-income individuals and larger businesses. In this brief, [the authors] show that even high-income people in small firms and low-income people in large firms both have experienced relatively large declines in ESI, while higher income people in larger firms have experienced relatively small declines in ESI." (Urban Institute)
[Opinion] Statement of Consumer, Labor, Women's and Retiree Organizations Opposing Efforts to Eliminate Paper-Based Disclosures to Retirement Plan Participants
"Receiving clear and accessible information about 401(k) fees and investment options is critical if people are to be able to protect and understand their 401(k) benefits. In our view, [DOL] has already provided employers and financial institutions with sufficient latitude by allowing them to automatically provide information electronically to those people who work with their employer's computer network as an integral part of their day job. This is a compromise we support. But where employees do not use a computer in their everyday work, it must be up to them to decide -- not financial institutions or their employers -- whether they should get this critical information by mail or electronically." (Pension Rights Center)
Financial Impact on Governments and Institutions of People Living Longer (PDF)
"Threats to financial stability from longevity risk derive from at least two major sources. One is the threats to fiscal sustainability as a result of large longevity exposures of governments, which, if realized, could push up debt-to-GDP ratios more than 50 percentage points in some countries. A second factor is possible threats to the solvency of private financial and corporate institutions exposed to longevity risk; for example, corporate pension plans in the United States could see their liabilities rise by some 9 percent, a shortfall that would require many multiples of typical yearly contributions to address." (International Monetary Fund)
[Guidance Overview] Health Plan Sponsors Assessing Effect of 2013 Medicare Part D Indexed Amounts
"[This publication provides] charts comparing the 2013 [Medicare Part D standard defined benefit and Retiree Drug Subsidy (RDS) amounts] to the 2012 numbers. It also reviews changes to the Part D benefit, which were made by the Affordable Care Act, and illustrates the impact of those changes on the 2013 benefit.... Plan sponsors should note the new benefit amounts for planning purposes for 2013 � both with respect to expected RDS income and to the design of any Medicare Part D prescription drug plan that is offered to retirees." (Segal)
[Guidance Overview] Some Non-U.S. Retirement Plans Exempted from FATCA by Proposed IRS Regulatios (PDF)
"During 2012, non-US retirement plans should review the availability of the applicable exemptions under FATCA with US employee benefits counsel and, if an exemption applies, begin to prepare the supporting documentation and statements necessary to avoid withholding. Where an exemption does not clearly apply, the plan should consider its alternatives. Among other options, it may be possible to seek further changes or other relief from the Treasury, including by submitting comments (by April 30) or by requesting to testify (on May 15) at the hearing in Washington, DC." (Groom Law Group)
[Guidance Overview] ERIC and Epstein Becker Green Team Up to Begin Publication of 'Benefits Litigation Roundup' (PDF)
The inaugural issue of this quarterly publication contains six case summaries and a featured article: "Benefit Claim Denial Litigation After Glenn and Conkright." (Epstein Becker Green / The ERISA Industry Committee)
Working Americans Facing Significant Drop in Income in Retirement
"Americans have responded to the financial turmoil of recent years with a shift to thrift that has helped bolster their personal household economy and boost their retirement readiness�just not enough to fully finance the lifestyle they envision.... [A]djusting your asset allocation, saving more in a workplace savings plan or [an IRA], delaying or working part time in retirement, or tapping into home equity ... [can have a] powerful impact ... when they are used in certain combinations or all together. The potential results of utilizing these actions in strategic ways may surprise you." (Fidelity)
[Guidance Overview] Another Question is Answered in the Who's the Employer Q&A Column
My wife and I own and operate a hardware store as an S corporation and maintain a SIMPLE plan for our 12 employees. The corporation is a member of a buying cooperative of which I am a member of the board of directors. I receive fees in my name for my service as a director, and I report them as a sole proprietorship on my individual Federal income tax returns. Am I a SLOB? (BenefitsLink.com)
Obesity Surpasses Smoking in Employee Health Care Costs
"The study ... provides new insights into the long-term costs of obesity and smoking, showing that both risk factors lead to persistently higher health costs throughout a 7-year follow-up period." (insurancenewsnet.com)
Medical Tourists Getting Root Canals, Knee Surgeries and Hip Replacements at Foreign Hospitals
"For Americans, the attraction is obvious: medical care is a lot cheaper abroad. At CIMA Hospital, in Costa Rica, for instance, hip-replacement surgery costs around fifteen thousand dollars, roughly a sixth of the average here." (The New Yorker)
Gaps in Health Insurance: Why So Many Americans Experience Breaks in Coverage and How the Affordable Care Act Will Help
"The Commonwealth Fund Health Insurance Tracking Survey of U.S. Adults finds that one-quarter of adults ages 19 to 64 experienced a gap in their health insurance in 2011, with a majority remaining uninsured for one year or more. Losing or changing jobs was the primary reason people experienced a gap." (The Commonwealth Fund)
One-Quarter of Working-Age Adults Had Gap in Health Care Coverage in 2011, According to Survey
"Among those who were uninsured at the time of the survey or who had experienced an insurance gap, 41 percent said they had previously had employer-sponsored coverage. Two-thirds (67%) of those who lost their employer-sponsored coverage cited a loss or change of a job as the primary reason for losing coverage." (The Commonwealth Fund)
[Guidance Overview] Northwest Airlines Post-Bankruptcy Retirement Plan Did Not Violate ERISA or ADEA
"[The] Pilots Association and [Northwest Airlines] created [a target benefit plan] which allocated contributions so that all pilots, in combination with the frozen pension plan, would receive 'an aggregate replacement income equal to approximately 50 percent of their final average earnings as an active pilot (or frozen pension plan benefit if higher).'" (Haynes and Boone)
Major Reported PHI Breaches Hits 400 with Theft as Primary Type of Breach
"As the first postings on the HHS List occurred on March 4, 2010, it took almost exactly two years to reach the 400 level, which means that an average of 200 postings of List Breaches have been occurring each year." (Fox Rothschild LLP)
[Guidance Overview] IRS Seeks Public Comment on Applicability of Normal Retirement Age Rules to Governmental Plans
"The IRS and the Treasury Department specifically request comments on: [1] Whether an additional rule should be provided under which retirement after 20 to 30 years of service may be a normal retirement that is reasonably representative for qualified public safety employees. [2] Other categories of governmental employees who have career spans similar to qualified public safety employees (commencing at a young age and continuing for a limited period) that would justify a similar rule. [3] The overall retirement patterns of other government employees to assist them in determining the earliest age that is reasonably representative of the typical retirement ages for such employees." (Practical Law Company)
Actuaries Report Extremely High Job Satisfaction
"According to US research by website Careercast.com, reported in the Wall Street Journal, actuaries have the second best job in 2012. They are eclipsed only by software planners.... According to the survey, newspaper reporters are down in 196th place - soundly beaten by sewage plant operators, sheet metal workers and janitors." (Financial News)
CO-OPs Gaining Traction in Seven States
"Consumer Operated and Oriented Plans (CO-OPs), the not-for-profit health plans envisioned in the PPACA, have been gaining traction, with CMS announcing hundreds of millions of dollars in loans to help establish such plans in seven states, including organizations in Maryland and Oregon and the Freelancer's Union." (Healthcare Town Hall)
District Court Refuses to Dismiss Claim Against Plan Alleging Failure to Execute Participant's Investment Direction
"[The participant in a self-directed retirement plan] alleged the plan and its committee breached their duty of loyalty by failing to correctly execute his request to transfer part of his plan investments between funds ... and to credit his account for losses allegedly caused as a result.... [The] U.S. District Court for the Northern District of Texas found the plan is a proper defendant[.]" (PLANSPONSOR.com)
[Guidance Overview] Fiduciaries Can Consider Impact on Whole Plan When Responding to One Participant's Demand for Benefits
"In Wakamatsu v. Oliver [in the federal Northern District of California], ... a former employee of a dental practice sued the plan administrator of the practice's profit sharing plan ... asserting that her benefit should have been determined based upon a December 31, 2007 valuation ... rather than upon a later valuation that reflected the impact of the economic downturn on overall plan assets (resulting in approximately $60,000 less)." (Seyfarth Shaw LLP)
CalPERS to Require Higher Employer Contributions
"The increase stems from a lower assumed rate of return on investments adopted in March by the $235.7 billion fund's board. That lowered the presumed annual gain to 7.5 percent from 7.75 percent. The rate is used to calculate how much money the plan ... will have, how much it will need to cover promised benefits, and what employers must contribute." (Bloomberg)
Reasons Why Employees Can Benefit from Using IRAs and 401(k) Contributions to Defer Income Until Retirement
"You likely won't have a huge amount of income when you retire, which means a portion of your IRA withdrawals may be taxed at low rates, even if you consider income from Social Security. Part of your traditional IRA and 401(k) withdrawals may be taxed at 0 percent, some at the next tax bracket, and only some will be taxed at your marginal tax rate.... [Further, those] who live in a state with a high income tax can potentially save money if they defer income tax on their retirement savings and then move to a state with no income tax when they start withdrawing their retirement funds." (U.S. News & World Report)
Delay in Implementing Roth Feature Affects Most Federal Employees
"The Defense Finance and Accounting Service, which administers payroll services to several agencies, including the White House, will not be ready to offer employees the added retirement investment option by May 7, the date of the official launch, as we have reported. A Washington Post report put the hold-up into perspective, noting, 'at least three-fifths of federal workers' will face delays." (Government Executive)
House Panel Approves Part-Time Retirement for Federal Employees
"A House panel voted unanimously Wednesday to advance legislation that would allow retirement-eligible employees to work part time ... The bill, H.R. 4363, would amend U.S. law to allow federal employees to continue working part time while partially retired [meaning that retirement benefits can begin without the need to separate from service first and then become rehired]." (Government Executive)
[Guidance Overview] IRS Proposes Rules on Comparative Effectiveness Research Fees on Health Plans
"With respect to fee calculation, the fee imposed on an issuer of a specified health insurance policy and that imposed on a plan sponsor of an applicable self-insured health plan is to be based on the average number of lives covered under the policy or plan. The proposed regulations direct an issuer to apply a single method in determining the average number of lives covered under the policy or plan for the year. The proposed rule contains various examples as to how this calculation would work under differing circumstances." (Littler)
[Guidance Overview] Failure to Monitor Recordkeeping Fees Is Breach of Fiduciary Duty
"In Tussey v. ABB, Inc., the US District Court for the Western District of Missouri held that a company breached its fiduciary duty to its 401(k) plans when it failed to monitor recordkeeping fees and revenue-sharing payments, selected more expensive share classes when less expensive classes were available, replaced an investment fund in violation of the investment policy statement and paid recordkeeping fees in excess of the market cost to subsidize other recordkeeping services." (Practical Law Company)
Preparing Your Employees for a DB Plan Termination
"A DB plan termination involves many questions and issues such as funding, investments, government filings, securing a group annuity contract, data cleanup, and more. But it is equally important to consider how to help participants make this transition. As part of this daunting project, a well-planned and executed participant strategy can help maintain positive employee relations, and, importantly, can also help your participants stay on track for a more secure retirement." (Vanguard)
Investment Costs Hit Retirees with Double Whammy
"As [a table and chart show, at age 65, a high-expense portfolio] generates a withdrawal amount that's 8.3% lower than the amount for the low-expense portfolio[.] After 15 years, the gap grows to over 20%[.] This is a major reduction in spending power over time, and these numbers belie the seemingly innocuous single-digit-percentage point differences in expense ratios." (Vanguard)
Concerned Employers Seeking Plan Design Solutions to Help Employees Prepare for Adequate Retirement Savings
"According to [a 2012 survey] of more than 500 large U.S. employers, just 4% are very confident that their workers will retire with adequate retirement assets--compared with 30% who felt very confident in 2011. Only 10% in 2012 feel very confident that employees are taking accountability for their own retirement success." (Vanguard)
[Guidance Overview] Basics of QDROs and QMCSOs for Plan Sponsors (PDF)
Materials prepared for use in a webinar. Topics included: QDRO basics, including types of benefit divisions (segregated benefits, shared payments, and plan design alternatives); processes and procedures for QDRO administration; QDROs and nonqualified retirement plans; QDROs and equity compensation and other executive programs; and QMCSO basics. (Morgan Lewis)
[Guidance Overview] Failure to Monitor Revenue Sharing and Negotiate Rebates for Recordkeeping Fees Violated Governing Documents and Fiduciary Duties
"Although many of the [Missouri District] court's conclusions related to revenue sharing are grounded in its interpretation of a somewhat idiosyncratic [investment policy statement], its analysis strongly suggests that fiduciaries overseeing plans with revenue sharing arrangements really do need to know whether their service providers are receiving more than market compensation. This information allows plan fiduciaries to know whether requested hard-dollar service fees are reasonable, and when there are no hard-dollar fees, it allows fiduciaries with sufficient bargaining power to seek rebates." (Thomson Reuters/EBIA)
[Guidance Overview] Individually-Owned Health Insurance Policy Did Not Preclude Employee from Receiving COBRA Coverage
"As this [Pennsylvania District] court explained, early termination of COBRA coverage is permissible when a qualified beneficiary becomes covered under another group health plan (and other conditions are met). By the terms of the rule, the other coverage must be group health plan coverage -- coverage under an individual policy typically (unless there is certain employer involvement) will not permit termination of COBRA coverage." (Thomson Reuters/EBIA)
[Opinion] Testimony of EBRI at Hearing on Tax Reform and Tax-Favored Retirement Accounts (PDF)
"[The testimony deals] with the following questions: What is the size of Americans' retirement savings gap? What is the impact of tax favored retirement accounts on retirement income adequacy? What is the value of tax-favored retirement accounts under current tax incentives (with particular emphasis on 401(k) plans)? How might workers react to changing tax incentives? What is the potential impact of two recent tax reform proposals on retirement security?" (Employee Benefit Research Institute)
[Guidance Overview] Health Plans Must Pay Patient-Centered Outcomes Research Fee
"The PCOR fee applies to both health insurance and self-insured group health plans. Responsibility for the fee depends on funding. The insurer has to pay the fee for insured group health plans and individual health insurance policies (but not stop-loss policies issued in connection with self-insured health plans). The plan sponsor (generally, the employer) has to pay the PCOR fee for self-insured group health plans. The focus of this alert is how employers -- as health plan sponsors -- must calculate and pay the PCOR fee." (Vorys)
[Guidance Overview] Arizona Surgical Practice to Pay $100,000 in HIPAA Settlement
"A heart surgery group practice agreed to pay $100,000 to settle federal allegations that it chronically neglected standard HIPAA requirements such as risk assessment, training and business associate contracts, [HHS] announced April 17." (Thompson)
Identifying Opportunities in Employee Benefits and Executive Compensation Considerations in Private Equity Transactions
"In both asset and equity transactions, the treatment of equity plans, change in control agreements and other non-qualified deferred compensation arrangements can be the subject of significant negotiation. In addition to compliance with Section 409A, if the transaction triggers a change in control or a separation from service for the executive, executives can find themselves in possession of substantial payments earlier than desired. Often non-qualified deferred compensation arrangements and some equity plans are unfunded (with no associated 'rabbi trusts'), which results in significant payments made from the target's general assets." (McDermott Will & Emery)
[Guidance Overview] Compliance Deadlines for Participant Fee Disclosures (PDF)
"To help navigate the participant fee disclosure rules, this Client Letter provides questions and answers about the final rules and includes two sample disclosure charts. One chart is the Model Comparative Chart issued by the DOL with the final rules that demonstrates how to disclose investment-related fees. The other is a sample template we drafted that might be used to comply with the plan-related fee disclosure." (Kelly, Hannaford & Battles P.A.)
[Guidance Overview] Drinker Biddle's ERISA Litigation Newsletter, April 2012 (PDF)
Articles include: Court Limits Hospital's Rights to Recover Through Assignment; Confidentiality Has Its Limits: The Fiduciary Exception to the Attorney-Client Privilege; and, The ERISA Church Plan Exception. (Drinker Biddle)
Due Diligence When Acquiring Business with Multiemployer Pension Plan Means More than an Actuary's Certification
"The seller represents that it is a so-called 'green zone' plan and that you should not be concerned about making contributions to the plan beyond those the seller had been making. The plan's actuary provides a certification stating that the plan is 85 percent funded and that the plan is in neither 'endangered' nor 'critical' status. Should you feel comfortable that there is no risk associated with the plan?" (Chang, Ruthenberg & Long PC)
[Guidance Overview] Are You Ready to Comply with Rules Requiring Investment and Fee Disclosures to Participants?
"A word of caution: If your plan is being operated as an ERISA section 404(c) plan, such that the plan's fiduciaries are not intended to be responsible for the consequences of participants' investment directions, you must comply with these new rules or run the risk of losing your 404(c) protection." (Chang, Ruthenberg & Long PC)
[Opinion] Obama's Former OMB Director Blasts Report of Higher Costs Arising from Health Care Reform
"Charles Blahous, a senior research fellow at George Mason University ... claims to have shown that the 2010 health-care reform act will substantially increase the budget deficit, despite official estimates to the contrary.... What Blahous actually did was play a trick.... Another study receiving some recent attention is a much more serious one -- which is why it didn�t get a whole lot of attention." (Bloomberg)
Hearing Advisory: Impact of Limitations on Use of Tax-Advantaged Accounts for the Purchase of Over-the-Counter Medication
"Chairman of the Subcommittee on Oversight of the Committee on Ways and Means, [announced the Subcommittee will hold a hearing April 25, 2012,] on limitations on the purchase of over-the-counter ... medication with tax-advantaged accounts such as health care Flexible Spending Arrangements ..., Health Savings Accounts ... and Health Reimbursement Accounts[.]" (U.S. House of Representatives, Committee on Ways and Means)
Chrysler Keeping Health Care Costs in Check by Emphasizing Preventive Care and Wellness
"After a 9 percent increase in health care spending in 2010, the ... automaker in 2011 kept health care spending flat for most of its 13,000 salaried U.S. workers.... Chrysler is emphasizing a 'culture of health' by giving out 10,000 free flu shots at facilities annually.... It also has healthy offerings at employee cafeterias, fitness centers, and a health care clinic and pharmacy." (The Detroit News)
[Official Guidance] Text of IRS Notice 2012-29: Proposed Guidance on In-Service Distributions from Governmental Retirement Plans (PDF)
"This notice ... invites public comment [on potential IRS guidance that] (a) would clarify that governmental plans that do not provide for in-service distributions before age 62 do not need to have a definition of normal retirement age and (b) would modify the age-50 safe harbor rule for qualified public safety employees. The notice also provides that the IRS and Treasury Department intend to extend the effective date of the regulations relating to distributions from a pension plan upon attainment of normal retirement age for governmental plans." (Internal Revenue Service)
[Opinion] 'Father of Health Savings Accounts' Envisions the Ideal Health Care Reform
"In any rational health care system, public policies don�t encourage people to choose to be without health insurance. But for millions of people, that is what we are currently doing. Under the interim measures (2010 to 2014) of the Affordable Care Act ... those perverse incentives for some people have become even worse.... Think about that for a moment. For millions of people, public policy does nothing to encourage the purchase of private insurance. But if they choose to be uninsured, they can count on a system of public and private charity that is actually quite valuable." (National Center for Policy Analysis)
Illinois House Panel Wants to Make It Harder for State, Local Plans to Juice Up Pensions
"[The] plan would require a three-fifths vote of the General Assembly to approve any bill that enhances pension benefits for workers covered by the five state-funded pension systems. The supermajority requirement also would apply when local governments consider bonuses or other financial benefits that would enhance employees' pension benefits." (SJ-R.com)
Impasse over Highway Bill Holds Up Pension Funding Relief
"[E]ven if the highway bill stalls indefinitely, the pension interest rate provisions could be attached to other tax-related legislation that Congress would consider during its lame duck session that is likely to be held after the November elections.... [T]he pension provisions ... would boost federal revenue by several billion dollars ... because employers' pension plan contributions are tax-deductible, so reducing pension contributions would increase employers' taxable income." (Pensions & Investments)
[Guidance Overview] Early Retirement Supplement Found to Be a 'Protected Benefit' Due to Plan Drafting
"An employer's defined benefit pension plan defined 'accrued benefit' to include early retirement supplemental benefits. However, the plan was amended to eliminate the early retirement supplemental benefit. A participant erroneously received payment of the early retirement supplemental benefit after the amendment and was asked by the employer to repay it to the plan. The employee claimed that elimination of the supplement violated ERISA's 'anti-cutback' rule." (Haynes and Boone)
401(k) Excessive Fees Lawsuit against John Hancock Will Proceed
"In Santomenno v. John Hancock Life Insurance Company [3d Cir. April 16, 2012], the [U.S. Court of Appeals for the Third Circuit] vacated the district court's grant of summary judgment in favor of John Hancock regarding the plaintiffs' ERISA claims and remanded the case back to the U.S. District Court for the District of New Jersey for further proceedings." (The Pension Protection Act Blog)
[Guidance Overview] Perk Available Only to Retirees Was Not a 'Pension Plan' Subject to ERISA Requirements
"Plaintiffs brought an enforcement suit against defendants under [ERISA alleging] that defendants' practice of offering reimbursements for telephone services to retirees who lived outside of defendants' service region constituted a 'pension plan' under ERISA." (Justia.com)
Tax Breaks for U.S. Retirement Saving Should Be Simpler, Chairman of House Ways and Means Committee Says
"[The Chairman] and House Republicans have called for lowering tax rates and reducing breaks, prompting supporters of tax incentives for retirement, housing, charity and other items to defend their place in the code. Republicans are searching for ways to raise $4.6 trillion over 10 years to meet revenue targets and turn the six-bracket system with a top rate of 35 percent into a two-bracket structure with rates of 10 and 25 percent." (Bloomberg)
Most Citigroup Shareholders Oppose $15 Million Pay Package for CEO
"The shareholder vote, which comes amid a rising national debate over income inequality, suggests that anger over pay for chief executives has spread from Occupy Wall Street to wealthy institutional investors like pension fund and mutual fund managers. About 55 percent of the shareholders voting were against the plan, which laid out compensation for the bank's five top executives[.]" (The New York Times; free registration required)
What's Working Around the World: Global Insights on Employee Engagement
A "flipbook" that should open in your web browser. "The e-book provides a ... look inside the minds of today's employees, featuring insights and trends on benefits, retirement, pay, career, company, job and life. The e-book also discusses how survey findings vary by region and employee age group. Key findings of the research reveal a significant drop in employee engagement worldwide, a serious challenge to productivity and company performance." (Mercer)
Bringing Annuities to 401(k)s: Comments by Mark Iwry
"The federal government is proposing new regulations to make it much easier for annuities and other forms of steady income to be included in 401(k) retirement plans and individual retirement accounts (IRAs).... By pooling those who live shorter and longer than average, everybody can essentially put away what's necessary to reach the average life expectancy, and those who live longer than average will be protected. The longevity risk pooling means that an annuity might provide an annual income of more like 6 percent or 7 percent, rather than 4 percent, depending on interest rates and the terms of the annuity." (Bloomberg BusinessWeek)
New Suits over Do-It-Yourself IRAs: Custodial Accounts vs. Trust Accounts
"Custodian firms administer the accounts, sending investment statements and transferring money from investors to investment managers. It isn't clear how successful the suits will be, since even regulators note that custodians don't choose the investments or take fees based on the investments' success." (The Wall Street Journal)
U.S. Senate Considers Postal Service Pension Reform
"[The Senate has] began considering the 21st Century Postal Service Act, which would allow for cash buyouts up to $25,000 among incentives to get as many as 100,000 postal employees to retire early." (Pensions & Investments)
[Guidance Overview] Executive Compensation Disclosure Scaled Back under JOBS Act for Certain Companies
"The JOBS Act allows [emerging growth companies] to meet [SEC] executive-compensation disclosure requirements (under Item 402 of Regulation S-K) by providing the abbreviated form of disclosure otherwise permitted for companies with a market value of outstanding common equity held by nonaffiliates of less than $75 million." (CFO)
Study Examines Use of Loans and Hardship Withdrawals in Defined Contribution Plans by Black, Hispanic Participants
"In a sample of seven large defined contribution (DC) plans, blacks and Hispanics were more likely to take a loan or hardship withdrawal than whites or Asians. Yet the fraction of savings 'at risk' through loans was only slightly higher for blacks and Hispanics and, in the case of hardship withdrawals, was actually lower for blacks." (Vanguard)
DOL Begins Enforcing Mandated Benefit Requirements Under Affordable Care Act
"This ... marks the first appearance of ACA-related topics in DOL auditing practices. [U]nless and until the ACA is ruled unconstitutional by the Supreme Court, the Act ... will be enforced by the DOL. Thus, employer-provided group health plans must continue to comply and otherwise implement the ACA's various coverage and related mandates. Likewise, plan sponsors must comply with any ACA-related DOL audit requests[.]" (Proskauer)
[Guidance Overview] After 404a-5 Fee Disclosure Kicks In, When and How to Tell Participants About Changes to the Disclosed Information?
"For most plans, the plan administrator will need to make its first annual disclosure under the participant fee disclosure regulations by August 30, 2012 (some fiscal year plans will have additional time). The first quarterly disclosure for most plans will need to be made by November 14, 2012 (again, a little later for some fiscal year plans). If the plan makes certain mid-year changes to the disclosures, the plan administrator will need to provide a change notice to participants. In this Technical Update, [SunGard] will discuss the nature and timing of the change notice." (SunGard Relius)
Congress Bypasses Opportunity to Liberalize Commuter Reimbursement Cap
"[The House recently] approved a short-term, 90-day extension of a smaller transportation bill that did not contain the provision equalizing the pre-tax benefit cap for public transit costs and parking costs. Accordingly, the limit for employees who use public transportation remains at $125 per month versus the $240 for employees who drive and pay for parking." (HighRoads)
[Opinion] Consumer-Driven Health Care's Fatal Flaw: Non-Transparent Prices
"The possibility that the Supreme Court will strike down all or part of the Affordable Care Act has given new life to Republican calls to put market mechanisms to work in holding down health care costs. The public is certain to hear lots more about it on the campaign trail later this year. There's one big problem, though. Markets cannot work when consumers and patients have almost no information about the prices they pay for health care." (The Health Care Blog)
[Opinion] Testimony of American Benefits Council at Hearing on Tax Reform and Tax-Favored Retirement Accounts (PDF)
"[The Council urges] this Committee to continue its leadership in pursuing policies to improve our Nation's retirement system. But any changes that are made should build upon our existing and successful tax incentive structure so that it works even more effectively to facilitate retirement plan coverage and savings by American families [so as to] advance the goal of retirement income adequacy for American workers." (American Benefits Council)
[Opinion] Statement of 29 Business, Investment and Plan Administration Associations at Hearing on Preserving the Employer-Provided Retirement System
"The undersigned organizations ... urge the Committee on Ways and Means to preserve the current tax treatment that both encourages employers to offer and workers to contribute to retirement plans." (The SPARK Institute)
Screenings and Early Intervention Reduce Medical Costs
"As important as these screenings are, price remains a consideration as it varies widely. According to insurance claims data for Americans with employer-sponsored insurance, the costs for high-volume procedures such as mammograms, colonoscopies and MRIs can be two to three times higher than the median price in the same market, depending on the provider[.]" (Society for Human Resource Management)
The Future of Absence and Disability Management, Part 2
"[The white paper] illustrates how on-site consultants can play a key role in helping employers integrate early disability reporting and disability duration guidelines into return-to-work programs." (The Standard)
Employers Offering Paid Time Off for Special Circumstances
"Some U.S. companies are offering additional paid time off for special circumstances, which might help employees maintain their work/life balance[.]" (Society for Human Resource Management)
[Opinion] Statement of American Council of Life Insurers at Hearing on Tax Reform and Tax-Favored Retirement Accounts (PDF)
Presented to the House Committee on Ways and Means on April 17, 2012. "ACLI urges the Committee, first and foremost, to do no harm to the existing retirement system as it is considered in the context of tax reform. Policymakers should avoid disrupting a retirement system that works well for most Americans and instead focus on enhancing the system so that it works well for more Americans." (American Council of Life Insurers)
[Opinion] House Ways and Means Committee Chair's Opening Statement at Hearing on Tax Reform and Tax-Favored Retirement Accounts
"As this Committee considers tax reform, [chairman Dave Camp says he believes] there are three important principles to keep in mind when evaluating tax-favored retirement vehicles: (1) simplification; (2) increased participation, particularly by low- and middle-income taxpayers; and (3) whether the tax benefits are effective and properly targeted." (U.S. House of Representatives, Committee on Ways and Means)
[Official Guidance] Using the IRS' Voluntary Correction Program to Correct Errors Discovered During a Determination Letter Application
"[Question:] Can I reserve the right to use VCP to correct errors found during the determination letter application process by including a disclaimer in the application, stating, for example, that 'I elect to be treated under the VCP program if the IRS finds an error?' [Answer:] No.... [that] statement wouldn�t be acceptable because it�s too broad and fails to describe a specific error." (Internal Revenue Service)
[Opinion] Three Myths and a Fact about Public Pension Systems
"Myth 1: Public pension systems are about to run out of money.... Myth 2: A few good years in a bull market will bring the fund back to health.... Myth 3: Since the states are going to dramatically increase their contributions over the next few years, this should take care of the underfunding problem, as happened in the 1980�s.... Which leads us to a cold hard fact: the fix which worked in the past is unlikely to succeed in the future. Putting public pension systems on firm footing is going to require significant and unpopular changes to current policy." (LPL Financial)
Advisers Recommend Review of Non-Profit Employers' 403(b) Programs Before IRS Auditor Comes to Call
"The 2009 tax year is the first year that ... new regulations for documentation are truly in effect. And, of course, there's no guarantee that your plan will be audited. The plain fact of the matter is that the IRS gave plan sponsors more than sufficient time to bring their plans into compliance. And the simple truth is that it's the plan sponsor's responsibility to be in compliance, not the IRS's to enforce it." (The NonProfit Times)
[Guidance Overview] Final Medicare Part D Regulations Include Coverage Gap Discount Program
"The regulations include changes reflecting HHS' experience to date in administering Part D and will be of interest to sponsors of Part D prescription drug plans. In addition, some group health plans must coordinate with Part D prescription drug plans, among other reasons, to determine which coverage pays first and to disclose to Part D individuals whether the group health plan coverage is creditable." (Practical Law Company)
[Opinion] Testimony of ASPPA at Hearing on Tax Reform and Tax-Favored Retirement Accounts (PDF)
At hearing held by U.S. House Committee on Ways and Means on April 17, 2012. "The goals of simplification, efficiency, and increasing retirement and financial security for American families are goals [ASPPA shares] with the Committee. The primary message [ASPPA wants] to convey today is that the current tax incentives are working very efficiently to promote retirement security for millions of working Americans. The most important factor in determining whether or not taxpayers across the income spectrum save for retirement is whether or not there is a workplace retirement plan. If increasing retirement and financial security is the goal, increasing the availability of workplace savings is the way to get there, and modifications to the current incentives should be evaluated based on whether or not the changes will encourage more businesses to sponsor retirement plans for their employees." (ASPPA)
Measuring 'Tax Expenditures' -- Tax-Favored Retirement Plans Not as Expensive as Some Say
"Retirement savings provisions provide a deferral of tax, rather than an exemption from tax. Current tax expenditure estimates for retirement savings provisions overstate the size of these provisions relative to other tax expenditures because the current method for measuring tax expenditures measures retirement savings provisions on a cash flow basis rather than on a present-value basis." (ASPPA)
How Unequal Health Care Coverage for Women Increases the Gender Wage Gap, and How Health Care Reform Can Help Close It
"[W]omen earned 77 cents for every dollar earned by men in 2011, an average of $10,622 in lost wages every year. Yet that earnings ratio actually understates the extent of women's disparate treatment in the workforce. Why? Because women are also less likely than men to receive health care coverage though their employer and are more likely to have higher out-of-pocket medical costs, resulting in a health insurance compensation gap on top of the pay gap." (Center for American Progress)
Workers Willing to Trade Health Insurance for Raises?
"A minority of big companies offered extra pay to workers who waived their health benefits last year. This practice, which was common decades ago, could see a resurgence once the biggest parts of President Barack Obama's health care reform law take effect in 2014 and start to rearrange the health insurance market." (Huff Post)
NBCUniversal Takes Pieces from Parents Plus Some of Its Own for New 401(k) Plan
"The 401(k) plan at NBCUniversal, which started from scratch in early 2011, has grown to $340 million by adopting some ideas from its joint-venture parents while adding investment and plan design ingredients of its own." (Pensions & Investments)
The Unforgiving Compliance Clock of New 401(k) Rules
"Until now, sponsoring companies have been able to remain largely ignorant of the full extent of the fees coming out of their employees' accounts, though federal rules have long required awareness of these matters. New regulations from the U.S. Department of Labor seek to end this lack of compliance ... The quarterly account statements employees now receive from plan providers show returns net of fees. In the fall, these statements will show actual returns and fees in tabular form." (Smart Business)
Justice Department Responds to Judge's Request to Clarify President's Remarks on Scope of Judicial Review
"Responding to statements [the judge] apparently believes could be viewed as a challenge to the authority of the Federal courts or to the appropriateness of judicial review, he asked for a letter stating the position of the Attorney General and the Justice Department regarding the authority of the Federal Courts in that regard. The request was made of a Department of Justice lawyer who was before the Judge in another case in which different provisions of the Act (i.e., Medicare self-referral rules) are being challenged." (Deloitte)
U.S. Officials Issue Citations to Two Insurers for Excessive Health Premium Increases
"The insurance companies will be able to charge the higher amount, but they will be required to disclose on websites that reviewers found the rates to be unreasonable and explain why they are still imposing them." (Kaiser Health News)
GSA Boosts Mileage Reimbursement Rate for Federal Employees
"The General Services Administration is increasing the 2012 mileage reimbursement rate for federal employees who use their private vehicles for work, according to the agency. The rate for cars will be 55.5 cents per mile, an increase of 4.5 cents over the current rate." (Government Executive)
[Guidance Overview] Stovepipe Model in Target Benefit Plan Did Not Violate ERISA or ADEA
"If your company has undergone dramatic changes, a target benefit plan may be an appropriate means of integrating prior benefit arrangements and providing a benefit that satisfies reasonable benefit expectations and goals of the company and employees. Courts [such as a recent decision from the Eighth Circuit] recognize that retirement plans do not need to be age neutral or age-blind in order to avoid running afoul of the ADEA. Plan designs can employ age and age-affected elements so long as they are not animated by an intent to discriminate because of age." (Littler)
[Guidance Overview] Waiver of 60-Day Rollover Requirement Granted to Taxpayer Who Mistakenly Requested Duplicate IRA Distribution
"The taxpayer's failure to accomplish a timely rollover was due to the error by the financial institution which caused her to request the duplicate distribution. Therefore, the IRS waived the 60-day rollover requirement and the taxpayer was given 60 days to roll over the duplicate distribution." (Wolters Kluwer Law & Business / CCH)
2011 and 2012 Health Insurance Reform Enacted State Laws Related to the Affordable Care Act, Updated April 16, 2012
"A dozen features have already taken effect under the ACA, along with permissible exceptions and optional federal grants to states. Future provisions include preventive screenings and services with no co-payments, more uniform mandated or required 'essential benefits,' no lifetime or annual limits on standard policies and options for multi-state or out-of-state health insurance purchasing." (National Conference of State Legislatures)
Focusing on Quality of Life Helps Medical Providers See Big Picture, Produces Healthier, Happier Patients
"People are more likely to manage their condition properly when they have more accessible, personal goals, like being able to do more at work or keep up with their kids, instead of focusing only on comparatively abstract targets like blood-sugar levels. And that, in turn, leads to much better health. Numerous studies show that when people have a higher sense of well-being, they have fewer hospitalizations and emergency-room visits, miss fewer days of work and use less medication. They're also more productive at work and more engaged in the community." (The Wall Street Journal)
[Guidance Overview] Court Agrees with Participants and DOL Regarding Pre-Suit Demand under ERISA
Santomenno v. John Hancock Life Insurance Co. (3d Cir. Apr. 16, 2012). "Key Holding: Breach-of-fiduciary-duty claims under ERISA Sections 502(a)(2) and (a)(3) do not require pre-suit demand or joinder of parties. Key Takeaway: ERISA Sections 502(a)(2) and (a)(3) contain no preconditions on a participant's right to bring a civil action to remedy a fiduciary breach." (Bloomberg BNA)
Idea of 'Small Rules Meaning Much' Has Relevance in the Multiple Employer Plan World
"One of the risks in adopting a MEP is that, under IRS rules, a single bad plan can disqualify the entire MEP. What minutiae is critical here, though, is Section 10.12 of EPCRS ... As a practical matter, this means the risk of an economic catastrophe from a single employer disqualifying an entire MEP can be cost effectively managed." (Business of Benefits)
Health Care Reform Memo, April 16, 2012
"The health care reform memos are issued on a weekly basis, highlighting news from the previous week's activities in the administration and implications for the C-suite and various stakeholder groups." (Deloitte)
ERISA Stock Drop Lawsuit Against BP over Gulf Oil Spill Might Rise from the Dead
"National Law Journal has an article about the ERISA stock drop lawsuit against BP, indicating that this lawsuit may not be dead yet.... [It] says the plaintiffs will be attempting to salvage their lawsuit by filing an amended complaint with the court." (The Pension Protection Act Blog)
[Guidance Overview] When Is Exhaustion of Administrative Remedies Required? A Reappraisal of the Division of Authority
"The district court found Morales-Cotte v. Cooperativa de Ahorro y Credito Yabucoena ... instructive. There, the court examined a similar denial of COBRA benefits and found that the exhaustion requirement applies only where the matter in contention concerns an interpretation of the terms of the plan ('plan-based' claims), and not the terms of the statute itself ('statute-based' claims)." (Health Plan Law)
[Guidance Overview] Third Circuit Rebuffs 401(k) Participants' Suit Under Investment Company Act Asserting Excessive Fees on Annuity Insurance Contracts
"The district court dismissed the [Investment Company Act of 1940] claims because only those maintaining an ownership interest in the funds could sue under the derivative suit provision and the participants are no longer investors in the funds in question. As to the ERISA claims, the [Third Circuit in Santomenno v. John Hancock Life Ins. Co.] dismissed because participants failed to make a pre-suit demand upon the plan trustees to take appropriate action and failed to join the trustees as parties. The Third Circuit affirmed with regards to the ICA claims, but vacated on the ERISA counts, holding that the statute does not require pre-suit demand or joinder of trustees." (Justia.com)
Out-of-Network Care Is Expensive but Some New Options Help
"Some recent developments put consumers in a slightly stronger position if they go out of network: A new database lets consumers learn the prevailing rates for medical procedures in their area, and the 2010 health-care overhaul provides better protection when people receive out-of-network emergency care." (Kaiser Health News)
Examining the Requirement for Offering Multi-State Plans under the Affordable Care Act (PDF)
"New state health insurance exchanges that are developing under [ACA] will offer consumers a choice of private health plans known as qualified health plans (QHPs). Under the law, in every state, two of those must be multi-state plans or MSPs.... This paper, based on interviews with federal and state policy makers and others, examines key implementation issues." (The George Washington University Medical Center)
Preventive Health Services under the Affordable Care Act: Role of Delivery System Reform
"The Affordable Care Act will have a powerful effect on the delivery of preventive services. The authors estimate that through expanded access to insurance coverage, reduced financial barriers to care, and improved quality of care delivery, an additional 9.8 million patients will receive recommended preventive services." (The Commonwealth Fund)
[Opinion] Economists Ask, 'Is the Health Care Mandate a Tax?'
"The legal distinction between the individual mandate and a tax is an important one. To satisfy two different legal standards, the federal government argued first that the penalty associated with the individual mandate is not a tax but the next day argued that it is. But as economists, we also know there is also an economic distinction between a mandate and a tax that is at the heart of the rationale for the individual mandate: efficiency." (Brookings)
Vanguard's Sample Notice for Plan Sponsors, Providing Fee Disclosure to Participants
"This document provides sample language, intended as a general guide, for the participant notice." (Vanguard)
Proposed Health Plan Identifier Requirement Could Cost Health Plans More Than $1 Billion
"'The [Health Plan Identifier] is expected to yield the most benefit for [health care] providers, while health plans will bear most of the costs,' HHS flatly states in the preamble to the proposed rules. 'Costs to all commercial and government health plans together ... are estimated to be $650 million to $1.3 billion,' the agency explained, but 'plans are expected to make up those costs in savings.'" (Thompson)
[Guidance Overview] Proskauer's ERISA Litigation Newsletter, April 2012
Articles include: Ninth Circuit Issues Significant Post-Amara Ruling on Equitable Remedies; Limiting ERISA's Limitations Period through the Use of Contractual Accrual Dates; and Rulings, Filings, and Settlements of Interest. (Proskauer)
[Guidance Overview] It's Time to Comply with the New Retirement Plan Fee Disclosure Regulations
"Starting July 1, 2012, covered service providers for ERISA pension and 401(k) plans must provide plan fiduciaries with written information on fees and expenses 'reasonably in advance' of the date the contract is entered into, extended or renewed. For contracts or arrangements entered into before July 1, 2012, covered service providers must provide the required information to the responsible fiduciary before that date. In other words, plan fiduciaries need to make sure they have received written fee disclosures from existing plan vendors before July 1." (Poyner Spruill)
Health Plans Invest in Trigger-Based Communications With Focus on Health and Wellness
"More than 50 percent of health plans will invest in trigger-based communications to prompt consumers to take action, according to a new IDC Health Insights research study ... Trigger-based communications use data analytics to detect a consumer's current status, and automatically initiate relevant communications to inspire consumer action." (MarketWatch)
Views Differ on Adequacy of Federal Antitrust Policy for Collaboration Among Health Care Providers
"[The health care] providers in a collaborative arrangement may be able to negotiate higher prices with health plans than would otherwise be expected in a competitive market merely because they have agreed to act together in setting fees. While higher prices benefit providers, consumers are adversely affected if higher prices for providers result in higher health plan premiums." (U.S. Government Accountability Office)
Update on Section 415 Regulations Related to Governmental Defined Benefit Plans (PDF)
"[This memorandum] updates our original memorandum (published July 2, 2007) with regard to the Section 415 dollar limits and expands and clarifies items discussed in the original version. In addition, Appendix A has been added to concisely summarize key [section] 415 provisions." (Gabriel, Roeder, Smith & Company)
[Opinion] U.S. Chamber of Commerce Testimony on the Individual and Employer Mandate (PDF)
"The [Chamber] applauds [House Committee on Ways and Means Subcommittee on Health chairman's] efforts to highlight the harmful economic impact that the employer mandate is having on our country now two years after the enactment of [PPACA], despite the fact that the mandate will not become fully effective for another two years. Your hearing regarding the Individual and Employer Mandates in the Democrats' Health Care Law on March 29, 2012 importantly showcased the ongoing harm that the mandate is having on business, jobs and the economy. The Chamber continues to support the repeal of the employer mandate and agrees that the employer mandate is discouraging employers from hiring, a fact that our members have verified in survey after survey." (U.S. Chamber of Commerce)
Committee on Ways and Means Hearing on Tax Reform and Tax-Favored Retirement Accounts, April 17, 2012
"The hearing will consider the current menu of options for retirement savings -- both with respect to employer-based defined contribution plans and with respect to IRAs. The hearing will explore whether, as part of comprehensive tax reform, various reform options could achieve the three goals of simplification, efficiency, and increasing retirement and financial security for American families. [Background information is at http://waysandmeans.house.gov/News/DocumentSingle.aspx?DocumentID=289709.]" (Committee on Ways and Means)
[Guidance Overview] Fiduciary Exception to Attorney-Client Privilege Does Not Apply to Top Hat Plan
"The court considered an employee's motion to compel documents with respect to her employer's nonqualified pension benefit plan called the 'Wealth Accumulation Plan.' The employee asserted that the lawsuit turned on the single issue of whether the Wealth Accumulation Plan was a valid 'top hat' plan exempt from certain ERISA requirements." (Haynes and Boone)
[Guidance Overview] JOBS Act Expands Registration Exception for Private Companies and Employee Stock Plans
"The JOBS Act also requires the SEC to adopt safe harbor provisions that companies can follow when determining whether holders of their securities received the securities pursuant to an employee compensation plan in transactions that were exempt from the registration requirements of Section 5 of the Securities Act." (Haynes and Boone)
[Guidance Overview] Jobs Act Exemption for an 'Emerging Growth Company' from Executive Compensation Reporting Requirements
"The SEC is also required to review Regulation S-K to determine which requirements can be simplified for emerging growth companies." (Haynes and Boone)
Bad Math Could Lead to Bad Retirement Policy
"New Research by a former Joint Committee on Taxation (JCT) economist and tax expert outlines how current faulty congressional budget scoring could derail the retirement savings incentives American workers depend as Congress begins its overhaul of the U.S. tax code." (ASPPA)
Pennsylvana Company to End Retiree Health Care for 900
"Consol Energy Inc. plans to end company-sponsored medical benefits for 900 retirees and instead will provide fixed annual payments and force retirees to shop for coverage beginning on Jan. 1, 2014." (TRIB-LIVE)
Cyber Liability Insurance: Protecting Public Sector Plans against Inappropriate Participant Information Disclosures (PDF)
"Plan sponsors that are considering purchasing cyber liability insurance should review the different coverage options available in the market to help make the proper choice for their unique needs. This is important because policies can be very different in the scope of coverage they provide." (Segal)
[Guidance Overview] Post-Amara Appellate Decision Rejects Equitable Remedies for Inaccurate Pension Plan SPD
"This appears to be the first post-Amara appellate court to explore the elements needed to prevail on an equitable claim in connection with an inaccurate SPD. This decision from the Ninth Circuit may indicate that the standard imposed by the courts will be a difficult one for claimants to meet. Great care should continue to be taken, of course, when drafting SPDs and other plan communications, as liability for misstatements and omissions remains possible." (Thomson Reuters/EBIA)
Employee Ownership Update for April 16, 2012
NCEO Executive Director Loren Rodgers discusses new employee ownership fellowships at Rutgers University, two films on employee ownership, the Certified Equity Professional (CEP) exam, a new CEO at SAIC, and the OEOC conference. (National Center for Employee Ownership)
Brokerage Company Agrees to Pay $630,000 to Retirement Plans
"Morgan Keegan and Co. Inc. has agreed to pay $633,715.46 to 10 pension plans covered by [ERISA]. This agreement follows an investigation by the U.S. Department of Labor's Employee Benefits Security Administration that [asserted] the full-service brokerage company violated federal law when it recommended certain hedge funds of funds as investments to its ERISA-covered employee benefit plan clients. These recommendations resulted in the hedge funds of funds paying Morgan Keegan revenue-sharing and other fees." (Employee Benefits Security Administration)
[Opinion] Medical Costs Are a Mystery But Microanalysis Is Not the Solution
"Robert Kaplan and Michael Porter are correct when they say that we need to understand costs rather than prices if we are to improve value in our health care spending. But is their approach on analyzing our costs an efficient method that can be applied throughout our health care system? ... Instead of using market principles with package prices for individuals based on meticulous cost analysis, we should dump the market nonsense and take advantage of the efficiency and equity of global budgeting of hospitals. That is really only possible if we get rid of our fragmented financing system and establish our own single payer national health program." (Physicians for a National Healthcare Program)
[Guidance Overview] Another Question is Answered in the Who's the Employer Q&A Column
Can the spouse of a limited partner in a limited partnership be treated as an employee? (BenefitsLink.com)
How Rising Health Care Costs Affect Families with Employment-Based Private Insurance
The article concludes that rising health costs reduce employment-based health insurance availability and enrollment, and the financial protection provided by it, especially for middle-class families. (RAND)
The Effectiveness of Prompting Employees About Preventive Health Care
"[The authors] study whether prompts to form and recall a plan can increase individuals' responsiveness to reminders to make and attend beneficial appointments. At four companies, all employees due for a colonoscopy were randomly assigned to receive either a control mailing or a treatment mailing." (The National Bureau of Economic Research; paid subscription or individual purchase required to retrieve full text)
Critics Say Regs on 'Unaffordable' Employment-Based Health Insurance Would Make Millions Ineligible for Tax Credits
"At issue is a section of the law that outlines when low- and moderate-income employees can opt out of their employer's coverage and instead get federal subsidies to buy insurance through new state-based marketplaces, called exchanges." (Kaiser Health News)
[Opinion] Dramatic Recent Falloff in Health Care Utilization
"If we are witnessing something other than the lingering effects of a weak recovery, then a likely explanation is the growth we have seen in cost-sharing and high-deductible plans. The share of workers in a plan with a deductible of $1,000 or more grew from 18% in 2008 to 31% in 2011, and from 35% to 50% in smaller firms." (The Henry J. Kaiser Family Foundation)
Pension 'Spiking' Continues in California Largely Due to Historical Court Decision
"In 1997 the [California] state Supreme Court issued a unanimous ruling in a suit filed by Ventura County deputy sheriffs that opened the door for more spiking. The court said that in addition to the salary any cash commonly received in a pay grade or class for other things, such as uniform allowances and unused vacation time (but not overtime), must be counted toward pensions ... Later court rulings made the Ventura decision retroactive[.]" (Calpensions)
[Opinion] Retirement Income: New Annuity Strategies Should Be Welcomed
"Today, it is left to retirees themselves to maximize retirement income and minimize risk from accounts. Several products and strategies have been put forward to help retirees. [The author suggests] a new strategy. At this time of development and experimentation, it is critical that the federal government not pick winners, but stay focused on the broader goals of removing obstacles and encouraging lifelong income flows from retirement accounts." (Pensions & Investments)
Two-Thirds of Pension Plans Now Using Liability-Driven Investment Strategies
"The survey results reflect a central tension in the current [Liability-Driven Investments, or "LDI"] discussion, between plan executives increasingly sold on the need to hedge their pension liabilities, but hesitant to accept the costs of better matching those bond-like liabilities now, with bond yields near historic lows." (Pensions & Investments)
[Guidance Overview] Alternative Investments Options Were No Shield from Fiduciary Liability for Failure to Divest Stock in Plan Sponsor
"Plan participants who invested individual account assets in a company stock fund established a causal link between a fiduciary's delay in divesting the plan of company stock and the harm suffered by the plan that was sufficient to survive a motion to dismiss[.]" (Wolters Kluwer Law & Business / CCH)
How Important Is Asset Allocation to Financial Security in Retirement?
"This paper proceeds in three stages. The first section reports a simple Excel spreadsheet exercise that provides a stylized example of the tradeoff between returns and time spent in the labor force. The second section uses data from the Health and Retirement Study (HRS) on pre-retirees aged 51-64 to see how the gap between retirement needs and retirement resources is affected by working longer, taking out a reverse mortgage, controlling spending, and shifting all assets to equities with no risk. The third section uses a simple dynamic programming model to calculate a risk-adjusted measure of the value for the average household of moving from a typical conservative portfolio to an optimal portfolio. The answer from all three exercises is the same: the focus on asset allocation is misplaced." (Center for Retirement Research at Boston College)
Premiums Climb for Long-Term Care Insurance
"The long-term care insurance market is struggling, and some companies are dropping out of selling the insurance to individuals. Others are raising premiums, but nobody is raising them as high as John Hancock, where some long-term care premiums in other states are jumping as high 90 percent. The actuarial numbers used to create these plans years ago turned out to be wrong." (Star-Telegram)
Illinois Panel Studying Underfunding Crisis Recommends Lower Benefits and Higher Contributions
"The proposal also would shift the employer costs of local teacher and university employee pensions from the state to school districts and universities[.]" (SJ-R.com)
Backlog Reduced for Starting Federal Pensions But Many Retirees Still Waiting
"OPM has struggled for decades to process federal retirees' pension claims quickly and accurately. As a result, tens of thousands of new retirees wait months to receive their complete annuities -- some wait more than a year -- and in the meantime they struggle to get by on reduced interim pensions. Some of those interim pensions are less than half of what retirees are owed." (Federal Times)
Worker Wellness Improve Employers' Bottom Line, Insurers Say
"The latest evidence in support of wellness is a survey of 600 U.S. employers in 2011 ... It showed that a group of 'high performing firms,' those which embrace health care cost control strategies, including wellness, reduced their rate of growth of health care costs over several years to about 1 percent annually in 2010 compared with an average of 10 percent rates of cost growth among 'low performing' employers, or those which did not adopt such strategies." (Alaska Journal of Commerce)
Florida Governor Might Approve Legislators' Recommendation to Reduce Contributions to State Retirement Plan
"On the last day of the 2012 Legislature, the House and Senate endorsed House Bill 5005, which cut government pension contribution rates for state workers, law enforcement officers, county workers, school employees and university workers who are part of a 401(k)-type retirement plan. The bill is awaiting the approval of Gov. Rick Scott, who has made cutting state pension costs one of his top priorities." (Gainesville.com)
Inherited IRAs Dodge a Bullet; Tax Deferral Opportunity Continues
"Inherited individual retirement accounts made news earlier this year when the Senate Finance Committee proposed to make heirs empty them within five years of the benefactor's death. The measure, which was abandoned shortly thereafter, would have upended a system that is highly advantageous to families. Under current rules, heirs get to stretch withdrawals from an inherited IRA across their own life expectancies, meaning the assets could potentially increase in value, tax-deferred, for decades." (The Wall Street Journal)
[Opinion] Medical Bills Continue to be a Mystery and Contribute to Escalating Health Care Costs
"When insurance companies or government bodies try to control costs, they usually make across-the-board reimbursement cuts that ultimately are unsustainable because they have no connection to the true costs of delivering care. Providers themselves do not measure their costs correctly. They assign costs to patients based on what they charge, not on the actual costs of the resources, like personnel and equipment, used to care for the patient. The result is that attempts to cut costs fail, and total health care costs just keep rising." (The New York Times; free registration required)
One Tax Deferral Per Customer, Please: How IRA Deduction Is Denied Due to Retirement Plan 'Active Participant' Status
"The law in this area is clear. If, for any part of a taxable year, a taxpayer or the taxpayer's spouse is an 'active participant' in a qualified plan under section 401(a), IRA deductibility is subject to income limits. For 2012, the in-come phaseout range for deducting a contribution to a traditional IRA is $92,000 to $112,000 for those married and filing jointly, and $58,000 to $68,000 for those who are single." (Investment News)
Thrift Savings Plan Roth Option Delayed for Pentagon Employees
"The Federal Retirement Thrift Investment Board, which oversees the TSP, said earlier this week that not all federal agencies have completed the transition required to implement the Roth 401(k) and some would need additional time after May 7. The Roth option will be available to Marine Corps members in June; to Defense and Veterans Affairs Department civilians in July; and to Army, Navy and Air Force service members by October; according to the Defense Finance and Accounting Service, which cites complicated pay systems as the reason for the delay." (Government Executive)
Is Acupuncture an 'Essential Health Benefit'?
"HHS has decided that health insurers will have flexibility to adjust specific covered services in all ten statutory EHB categories.... It's possible, then, that even if the HHS doesn't grant the [American Association of Acupuncture and Oriental Medicine]'s request, various health insurers could determine that acupuncture fits at least one of the above categories, or states could choose a benchmark such as the [Federal Employee Health Benefits Program] plan that would cover it." (Wolters Kluwer Law & Business / CCH)
[Guidance Overview] Proposed IRS Regs Address Mandatory Fees to Fund Patient-Centered Outcomes Research
"Specified insurers and plan sponsors will contribute $2 multiplied by the average number of covered lives under a policy or plan ... (for plan or policy years ending before October 1, 2013, the multiplier is $1). The proposed regulations clarify ... how health reimbursement arrangements (HRAs) and health flexible spending arrangements (health FSAs) will be treated under the fee rules [and] how plan sponsors and insurers may calculate the average number of lives covered under plans.... For plan sponsors of self-insured plans, must be filed by July 31 of the immediately following calendar year." (Practical Law Company)
Free Coverage of Health Care Costs for Uninsured in Massachusetts Not a 'Budget Buster'
"[The president of the Massachusetts Taxpayers Foundation] says the state has spent just $91 million more a year since 2006 to cover the uninsured, than it was spending before the law passed. The sum amounts to 1.4 percent of the state budget." (Kaiser Health News)
Retirement Planning and Financial Literacy Around the World
"Financial literacy is positively correlated to retirement planning, and a lack of financial knowledge results in fewer retirement savings, according to research[.]" (National Retirement Planning Coalition)
Strategies to Help CO-OPs (Consumer Operated and Oriented Plans) Compete in the Health Insurance Marketplace
"Despite their promise, CO-OPs face a number of business challenges that go beyond typical start-up hurdles. This issue brief lays out a number of innovative strategies CO-OP organizers are developing to increase the odds of long-term sustainability and economic success. These strategies--aimed at building market share, creating integrated provider networks, and achieving cost savings through payment reform--could establish CO-OPs as a viable new entrant in the health care field." (The Commonwealth Fund)
Consumers Still Struggling with Health Care Pricing
"As consumers shoulder a larger share of their healthcare costs, the ability to comparison shop is key to keeping that care affordable. Medical costs borne by U.S. employees have more than doubled since 2002 to more than $8,000 a year[.]" (Los Angeles Times)
Louisiana Weighs Deeper Pension Cuts
"[Governor Bobby Jindal's] proposal, which excludes school and law enforcement employees, is aimed at about 40,000 members of the Louisiana State Employee's Retirement System, which opposes much of what [he] wants to do. System officials stress that they support a cash balance plan in concept but not as offered by the governor. For one thing, they said, [he] proposes new hires could retire at 60 with full benefits but the age for current employees would be 67." (Stateline)
[Guidance Overview] Proposed HIPAA Regs Address Unique Health Plan Identifier and ICD-10 Compliance Date
"With little progress under the original HIPAA directive, health care reform prompted action by requiring HHS to implement a standard for a unique health plan identifier by October 1, 2012. The preamble to the proposed regulations notes that health plans will bear the administrative cost of complying with the HPID requirement, while providers (which must identify health plans for billing and other transactions) will likely reap most of the benefits through increased automation." (Thomson Reuters/EBIA)
Obesity Found Responsible for 21% of U.S. Health Care Spending
"The Cornell study reports that an obese person incurs medical costs that are $2,741 higher (in 2005 dollars) than if they were not obese. Nationwide, that translates into $190.2 billion per year, or 20.6 percent of national health expenditures. The study appeared in the January issue of the Journal of Health Economics (31:1). Previous estimates had pegged the cost of obesity at $85.7 billion, or 9.1 percent of national health expenditures." (Cornell University)
Massachusetts Legislature Eyes Mandatory Paid Sick Leave
"The Massachusetts Legislature's Joint Committee on Health Care Financing is considering [a requirement for] companies with fewer than six employees to provide unpaid sick time, and all other employers to offer paid sick time." (ML Strategies, LLC)
Geographically Based Differences in Health Care Costs
"Perhaps the best-known study of the topic is the Dartmouth Atlas, which has analyzed Medicare data for geographic cost differences for more than 20 years. Following the Dartmouth methodology, Milliman performed a pioneering study in 2010 to examine geographic cost differences in private claims data." (Milliman)
[Guidance Overview] $35.2 Million Joint and Several Liability on Fiduciaries In Case of Excessive Fees and Imprudent Investments
"The U.S. Federal District Court for the Western District of Missouri determined that plan fiduciaries breached their fiduciary duties by failing to monitor recordkeeping costs, negotiate rebates, and prudently select and retain investment options. This is a federal district court decision and it differs from positions taken by some federal circuit courts which are precedential, but whether this decision is judicial activism or a new trend will need to play out over time." (Haynes and Boone)
[Official Guidance] Joint Committee on Taxation Report: 'Present Law and Background Relating to the Tax Treatment of Retirement Savings'
"The Committee on Ways and Means has scheduled a public hearing on April 17, 2012, on Tax Reform and Tax-Favored Retirement Accounts. This document, prepared by the staff of the Joint Committee on Taxation, provides a summary of the present law tax rules applicable to retirement savings arrangements, discussions of selected proposals and economic issues relating to retirement savings, and data on qualified retirement plans and IRAs." (The Joint Committee on Taxation)
Aggrieved Former Steel Mill Employees Sue Employer, Union and Plan Administrator Under Variety of Theories But None Sticks
"The employees claim that their union, employer, and plan administrator violated [ERISA] and Ohio common law by intentionally misleading them regarding how pension benefits would be calculated, inducing some to retire early.... The district court dismissed, concluding that certain ERISA claims were time-barred, that the others failed to state a claim for relief, and that the common-law claims were preempted by federal law. The Sixth Circuit affirmed." (Justia.com)
[Official Guidance] Text of HHS Proposed Rule on Administrative Simplification: Adoption of a Standard for a Unique Health Plan Identifier; Addition to the National Provider Identifier Requirements; and a Change to the Compliance Date for ICD-10-CM and ICD-10-PCS Medical Data Code Sets (PDF)
"This proposed rule would implement section 1104 of the [PPACA] by establishing new requirements for administrative transactions that would improve the utility of the existing [HIPAA] transactions and reduce administrative burden and costs. It proposes the adoption of the standard for a national unique health plan identifier (HPID) and requirements or provisions for the implementation of the HPID. This rule also proposes the adoption of a data element that will serve as an other entity identifier (OEID), an identifier for entities that are not health plans, health care providers, or 'individuals,' that need to be identified in standard transactions." (Department of Health & Human Services)
Cuomo Orders New York Health Insurance Exchange
"Gov. Andrew Cuomo issued an executive order [April 12, 2012,] to establish a statewide health insurance exchange intended to reduce coverage costs for individuals, small businesses and local governments." (The Wall Street Journal)
[Opinion] Looking Ahead to Changes in the American Health Care Industry
"The question of government mandated commerce has captured much of the limelight when people discuss the Affordable Care Act. But the roots of the change that will result from this legislation will spread well beyond this point. A recent news story concerning Nine Medical Societies questioning the appropriateness of certain procedures should focus all users of our healthcare system ... on the need to better understand how we spend our healthcare dollars." (WGA InsureBlog)
IRS Audits: Complying with All of the Requirements under COBRA
"By recently posting updated standards for COBRA audits on its website, the IRS may be indicating that an audit initiative is under way relating to COBRA continuation coverage requirements. If so, such an initiative is likely intended to encourage plan sponsors to self-identify and report COBRA failures and pay the associated excise taxes.... The COBRA audit standards provide a preview of what an IRS auditor will do to determine whether a plan sponsor has complied with the COBRA continuation coverage requirements, including documents that will be requested and questions that may be asked." (Thompson Hine)
[Guidance Overview] Court Finds Jurisdiction Exists over Foreign Parent in Pension Plan Liability Suit
"A recent federal district court decision defeats a long-standing assumption that a foreign corporate parent would not be subject to personal jurisdiction for a suit seeking payment of pension liabilities merely by acquiring a U.S. subsidiary." (McDermott Will & Emery)
[Guidance Overview] Bank Is Not Fiduciary and Prohibited Transaction Does Not Occur When Sweeping Funds from Employer Bank Account
"The court found that the bank was not a fiduciary because it did not have discretionary control over plan assets nor discretion over administration of the plan. The court further found that the bank did not engage in a prohibited transaction because it did not engage in any transactions with the plan." (Haynes and Boone)
[Guidance Overview] Federal District Court Dismisses Fiduciary Liability Claims in BP Stock Drop Lawsuit
"In dismissing all claims, the court determined that plaintiffs failed to show that the plan fiduciaries had access to nonpublic information regarding the safety programs, and that the presumption of prudence applied." (Haynes and Boone)
[Guidance Overview] 11th Circuit Says Modification of Pension Plan's Social Security Offset Did Not Violate Anti-Cutback Rule
"Since the amendment only altered the offset formula for participants who were not yet 52, application of the formula depended on future services. As such, the offset was not yet accrued for those under 52 but was an expectation of a future accrual. Accordingly, the amendment did not violate the anti-cutback rule." (Haynes and Boone)
ERISA History: The April 13, 1999, Opinion in Commonwealth Edison Company v. Vega
"[T]he 7th Circuit settled a three-way tug-of-war between the State of Illinois, Commonwealth Edison and the Commonweath Edison Service Annuity Plan over $125,000 in plan assets which the plan had written distribution checks for but, for some reason, the participants and beneficiaries had not cashed the checks within a five year period." (The Pension Protection Act Blog)
[Official Guidance] Text of PBGC Final Rule: Rules for Administrative Review of Agency Decisions; Section 4071 Penalty Assessments (PDF)
"This final rule amends [PBGC's] administrative review regulation to make it applicable to assessments of penalties for failure to timely provide certain notices or other material information. Under the rule, such assessments will be subject to reconsideration in accordance with the provisions of the regulation." (Pension Benefit Guaranty Corporation)
[Official Guidance] Text of IRS Notice of Proposed Rulemaking and Notice of Public Hearing on Fees on Health Insurance Policies and Self-Insured Plans for Patient-Centered Outcomes Research Trust Fund (PDF)
"This document contains proposed regulations that implement and provide guidance on the fees imposed by [PPACA] on issuers of certain health insurance policies and plan sponsors of certain self-insured health plans to fund the Patient-Centered Outcomes Research Trust Fund. These proposed regulations affect the issuers and plan sponsors that are directed to pay those fees. This document also contains a request for comments and provides notice of public hearing on these proposed regulations." (Internal Revenue Service)
California Moves Closer to Setting Health Insurance Standards
"State lawmakers this week moved toward establishing a minimum standard of coverage that all individual and small-group health insurance policies will have to provide after federal health-care reform takes effect in 2014." (Ventura County Star)
On the Other Hand, There May Not Be Any Structural Impediments to Breach of Fiduciary Duty Class Actions in the Sixth Circuit
"An astute and clearly knowledgeable reader passed along the point that the recent Sixth Circuit decision in Pfeil v. State Street Bank implicitly rejected the structural barriers to bringing class actions over fiduciary breaches that had been created by the developing case law in other circuits and which were discussed in [Stephen Rosenberg's] recent article, Structural Impediments to Breach of Fiduciary Duty Claims." (Boston ERISA and Insurance Litigation Blog)
Boomers Flock to 'Longevity Insurance' for Retirement Security
"Is longevity insurance right for you? There's a good chance it is. It allows you to secure income for your much-later years with just a fraction of your portfolio today. The product is highly flexible; you can start your collection date in anywhere from one to 40 years and with each year you wait the monthly income grows. It makes planning much simpler because all that is left to figure out is income for a knowable period of time before you'll start collecting on the annuity." (TIME)
Stable Value Funds: Still Popular, Despite Fewer Guarantees
"Despite a low interest-rate environment, 401(k) participants at New York Life Retirement Plan Services haven't given up on stable value funds. In an analysis released Wednesday of its client base, the firm found half of all participants across its retirement platform have some of their 401(k) savings in a stable value investment." (AdvisorOne)
[Opinion] Waiting for Final Mental Health Parity Regs
"The final rule that would provide clarity to the millions who have a mental illness or substance-use disorder, and to their employers, has not been issued. This has created uncertainty and confusion for employers over what they must cover and when parity applies." (The Washington Post; free registration required)
States Seek To Limit Co-Pays for Costly Drugs
"[Lawmakers in at least 20 states] have introduced bills that would limit out-of-pocket payments by consumers for expensive drugs used to treat diseases like cancer, rheumatoid arthritis, multiple sclerosis and inherited disorders. Pharmaceutical companies would also benefit from such legislation because high co-payments discourage patients from taking their medicines." (The New York Times; free registration required)
Health Insurance Cost Growth Outpaces Everything Else
"But the rate of increase was less than 10 percent for the first time since 2001." (Kaiser Health News)
[Guidance Overview] EEOC Final Regs on Reasonable Factors Other than Age May Have Broad Impact on Employer Policies/Practices
"In light of these new regulations, employers should anticipate that employment decisions that are alleged to have an adverse impact on older employees will be challenged. Hence, in order to prepare for and rebut the inevitable litigation that is sure to follow, prudence dictates that employers consider the [steps listed in this article] now[.]" (Precept)
Video: FAQs Expected from DOL on Fee Disclosure Regulation
Total Run Time = 3:04. "Since the Department of Labor issued the final [regs], many questions have been raised on the exact impact of the new rule. In particular, the meaning of the term 'designated investment alternative' and whether asset allocation strategies should be classified as such. Michael Davis, Deputy Assistant Secretary of [DOL's EBSA], indicated at the ASPPA 401(k) SUMMIT held in March of 2012 that sub-regulatory guidance -- in the form of frequently asked questions (FAQs) -- should be available on the DOL website 'within weeks'[.] Although not yet released, it is expected shortly." (ASPPA)
Text of CBO and JCT's Estimates of Effects of Affordable Care Act on Number of People Obtaining Employment-Based Health Insurance
NOTE: On March 23, 2012, minor revisions were made on pages 2 and 11 (see footnote 21). (Congressional Budget Office / Joint Committee on Taxation)
10 Ways Boomers Can Avoid Savings Shortfalls in Retirement
"Despite the savings challenge, there are steps Boomers can take to avoid running out of money in retirement, according to ... an education and advocacy group for women. Here's a 10-point checklist ... developed to help Boomers save themselves from retirement shortfalls." (Financial Planning)
[Opinion] Health Care Reform Implementation: The Colorado Example
"With less than two years to go before the Affordable Care Act is fully implemented, the State of Colorado is reasonably well positioned.... Adopting a 'Colorado-specific' version of health reform has been critical for state policymakers in responding to the ACA, and was a key factor in the successful passage of exchange legislation. Strong leadership, bipartisan political support, and continued aggressive action will be needed for Colorado to succeed in implementing reform on time." (Urban Institute)
Consumers' Tools for Retirement Planning
"To help educate consumers as part of National Retirement Planning Week, IRI has developed a set of consumer tips highlighting ways to ensure their retirement savings last throughout their lifetimes. These FINRA-cleared, client-approved tip sheets cover crucial retirement topics such as Social Security, Medicare, retirement savings plans and retirement income, as well as more in-depth topics such as partial 1035 exchanges and specifically tailored advice for middle-income Boomers." (Insured Retirement Institute)
Fee Disclosure to Participants and from Service-Providers: Answers for Plan Sponsors
"This set of questions and answers can help sponsors sort through issues related to these new DOL requirements. The Q&A reviews aspects of two regulations -- one designed to provide transparency in plan fees and expenses to participants, and the other to enhance what service providers disclose to retirement plan fiduciaries." (Vanguard)
Higher Education's Response to the New Defined Contribution Plan Environment
"Many [private colleges and universities] are taking a hard look at how their 403(b) pension plans are designed and administered, and are taking action to control costs, comply with new regulations, mitigate risk and help their employees prepare for retirement.... [This article] provide[s] a checklist for plan sponsors and administrators." (Towers Watson)
China's New Foreign Exchange Control Rule on Equity Incentive Plans for Employees in Chinese Affiliates
"New requirements for foreign exchange registration of equity incentive plans are now in effect. Overseas-listed companies that grant equity awards to employees of their Chinese affiliates should review their registration status and periodic filing schedules to make sure they are in compliance, especially in view of the new, shorter deadline for filing quarterly reports and the need to file amendments." (Pillsbury)
EEOC Muddles the Reasonable-Factors-Other-Than-Age Defense to Disparate Impact Age Bias Claims
"Employers should consider how the EEOC and plaintiffs will use the revised regulations to attack employer policies that may be considered to have an adverse impact on older workers. In light of the five relevant 'considerations' identified by the EEOC, if your company is sued for disparate impact age discrimination under the ADEA, you can anticipate that your executives will be questioned by the EEOC and/or private counsel." (Paul Hastings LLP)
Inherited IRA Problems Problems After Death of IRA Owner
Natalie Choate answers questions about combining inherited IRAs, and about correcting missing or mistaken beneficiary designations. (Morningstar)
[Guidance Overview] Once Bitten, Twice Shy: COBRA Excise Tax Audits May Add to COBRA's Bite
"Now, after a 10-year task force study, the IRS has published revised audit guidelines (the 'Guidelines') for COBRA compliance. The stated purpose of revising the COBRA audit guidelines was to incorporate changes to account for new laws that have affected COBRA since the 1994 Guidelines, such as the Health Insurance Portability and Accountability Act (HIPAA) and the Family and Medical Leave Act (FMLA). The updated Guidelines apparently herald a new COBRA compliance audit effort by the Service." (Littler Mendelson)
Employee Advisory Committees Promote Benefits Buy-In
"Employee advisory committees, as the name suggests, are groups of employees who meet regularly or as needed to provide input on benefit programs and other issues affecting employees and the employment relationship. Some of these committees are highly formal, with set terms for members and with regularly scheduled meetings, with minutes taken and later shared. Many unions, colleges and universities, and public-sector employers maintain employee advisory committees. However, these committees can play a positive role in almost any organization." (Society for Human Resource Management)
401(k) Participant Fee Disclosure: The Collision of Fiduciary Duties, Social Media, and Say-On-Pay (PDF)
"[S]ponsors will be forced to demonstrate why their choice of recordkeepers and investment options ... create valuable benefits for participants and are well worth the fees the participants pay. Fiduciaries and sponsors should not discount the potential havoc that disgruntled participants can and will likely cause. After all, less than 30% of employees, age forty and over, are satisfied with their overall financial situation, and just 18% of employees who are not covered by a defined benefit pension -- participate in only a 401(k) or 403(b) plan -- are confident that they will be able to live comfortably during the first fifteen years of retirement." (Investment Horizons, Inc.)
Appeals Court in California Sides with Unions on San Jose Pension Reform Ballot's Wording
"Measure B is the June ballot measure that would reduce pension benefits for [San Jose] employees. Unions say that's illegal. The mayor says it's necessary to keep the city afloat.... The Sixth District Court of Appeal ruled in the unions' favor saying the wording on the ballot measure was unlawfully biased. The court took exception to the phrase 'pension reform' saying it implicitly characterized the existing pension system as defective. It suggested the phrase 'pension modification' instead, which the city has agreed to." (ABCNews)
Lung Cancer Screening Would Save Lives at Relatively Low Cost
"Using actuarial models, this study estimated the costs and benefits of annual lung cancer screening offered as a commercial insurance benefit in the high-risk US population ages 50-64. Assuming current commercial reimbursement rates for treatment, we found that screening would cost about $1 per insured member per month in 2012 dollars. The cost per life-year saved would be below $19,000, an amount that compares favorably with screening for cervical, breast, and colorectal cancers." (Health Affairs)
EP Exam Efforts Focus on 401(k) Compliance Problems
"EP has performed 401(k) plan examinations in three market segments: (1) the Accommodation & Food Services Industry, (2) the Administrative & Support, Waste Management & Remediation Industry, and (3) the Wholesale Industry. In each of these three projects, the two most common errors found were ADP/ACP discrimination testing results and untimely deposit of employee elective deferrals." (Wolters Kluwer Law & Business / CCH)
Institute of Medicine Panel Proposes New Tax to Pay for Public Health
"That tax -- amount TBD, but possibly a half-percent or so -- would go to replenish the coffers of the nation's state and local public health agencies. In so doing, according to the IOM panel, the public health workforce could renew its historic role in looking at population rather than individual health care, and thus 'offer efficient and effective approaches to improving the nation's health.'" (Kaiser Health News)
Social Security by Choice: The Experience of Three Texas Counties
"Galveston County opted out of Social Security in 1981, and Matagorda and Brazoria counties followed suit in 1982. County employees have since seen their retirement savings grow every year, including during the recent recession. Today, county workers retire with more money, and have better supplemental benefits in case of disability or an early death. Moreover, the counties face no long-term unfunded pension liabilities. If state and local governments -- and Congress -- are really looking for a path to long-term sustainable entitlement reform, they might consider what is known as the 'Alternate Plan.'" (National Center for Policy Analysis)
Interactive Tool Tracks Funds from Affordable Care Act to Variety of Public and Private Sources
"This funding will go to states, local governments, employers, community health groups and health care providers to implement various provisions aimed at transforming areas of the existing health system and making health insurance coverage more affordable.... The ACA Federal Funds Tracker allows users to compare and analyze the total funds authorized and appropriated to states, community organizations, employers and others to date." (The Henry J. Kaiser Family Foundation)
[Guidance Overview] Deceased Participant's Estate Can Sue to Recover Benefits Paid to Ex-Spouse
"The Third Circuit Court of Appeals ruled that ERISA does not bar the estate of a deceased 401(k) plan participant from suing the participant's ex-spouse to recover benefits distributed to her as the named beneficiary where she previously waived the right to those benefits as part of their divorce decree. The case is the first in which a federal Court of Appeals has addressed the issue." (Deloitte)
[Guidance Overview] Target Date Fund Disclosures: SEC Reopens Comment Period on Proposal
"The Securities and Exchange Commission has reopened the comment period on its 2010 proposal to require additional disclosures in connection with target date funds. The new opportunity is being provided in light of a study commissioned by the SEC on investor understanding of the funds and their related marketing materials." (Deloitte)
[Guidance Overview] SEC Issues First Guidance on JOBS Act
"[SEC] has published Frequently Asked Questions to provide initial guidance on the implementation and application of the law." (Ballard Sphar LLP)
Former Chief Fiduciary of Several 'Multiple Employer' Pension Plans Indicted on Charges of Misappropriation of Funds
"Matthew Hutcheson, former Chief Fiduciary of several multiple employer plans, was arrested [on April 11], charged with 17 counts of wire fraud and 14 counts of misappropriating pension funds. The indictment seeks to recover more than $5 million which the federal government claims Mr. Hutcheson misappropriated from the plans and spent making renovations to his house and buying two SUVs, a BMW convertible, two motorcycles, and a John Deere tractor, along with spending $3 million in a failed attempt to buy the Tamarack Resort in Donnelly, Idaho." (The Pension Protection Act Blog)
[Guidance Overview] Health Care Provider 'Balance Billing' of the Personal Injury Plaintiff
"A particularly unfortunate situation occurs when the provider learns that the liability settlement is insufficient for payment of the medical bills. At that point, the provider will turn back to the patient for payment. In many cases, the patient-plan member can no longer get the plan to pay since the time period for submitting claims has expired. It would seem that the provider, having obtained an assignment of benefits from the patient (typically, anyway), should be foreclosed from holding the patient accountable for non-payment when the provider failed to submit the bills to the plan. The wording of the assignment documents would be a factor in this situation, however." (Health Plan Law)
[Guidance Overview] Adapting and Complying in the New 403(b) Environment (PDF)
Recorded webcast. "Like many plan sponsors, Michigan State University ... used the resources offered by NAGDCA and others to help focus on the important and urgent issues that needed to be addressed: Creating a 403(b) Plan Document; Understanding and applying Universal Availability; Reviewing and deciding on the future of Loans and Hardship Withdrawals[.]" (National Association of Government Defined Contribution Administrators, Inc.)
The Affordable Care Act and African Americans
"New estimates from RAND suggest that 3.8 million African Americans who would otherwise be uninsured will gain coverage by 2016 through the expansion of Medicaid eligibility and the creation of Affordable Insurance Exchanges. Valuable benefits, including coverage for young adults and preventive services without cost-sharing, are already in effect and benefiting African Americans across the country." (U.S. Department of Health and Human Services, Office of the Assistant Secretary for Planning and Evaluation)
[Official Guidance] Text of PBGC Final Regs: Benefits Payable in Terminated Single-Employer Plans: Interest Assumptions for Paying Benefits (PDF)
"This final rule amends the Pension Benefit Guaranty Corporation's regulation on Benefits Payable in Terminated Single-Employer Plans to prescribe interest assumptions under the regulation for valuation dates in May 2012. The interest assumptions are used for paying benefits under terminating single-employer plans covered by the pension insurance system administered by PBGC." (Pension Benefit Guaranty Corporation)
San Francisco Annual Health Expenditure Report Due by April 30, 2012
"The form can be filled out and filed online. The [Health Care Security Ordinance], which first took effect in 2008, requires employers to spend a minimum amount on health care for certain San Francisco employees or pay the city to help fund its health care program. Employers will need to gather 2011 quarterly data to report eligible employees and qualified expenditures." (Mercer)
[Guidance Overview] IRS's Surprising Position on 415 Limits Could Mean Lower Pension Benefits
"A new IRS interpretation of Section 415 limits could sharply reduce pension benefits for some defined benefit plan participants whose distributions begin before normal retirement age or are paid as a qualified joint and survivor annuity." (Mercer)
Certain Executive Pay Mandates Eased for 'Emerging Growth' and Private Companies
"The Jumpstart Our Business Startups Act, signed into law April 5, eases executive pay compliance for a new category of issuers: 'emerging growth companies.' Qualifying companies that go public after Dec. 8, 2011, are temporarily exempt from the Dodd-Frank Act's shareholder say-on-pay mandates and its pay-for-performance and internal pay equity disclosures. While exempt, these start-ups can follow the limited executive pay disclosure rules for 'smaller reporting companies.' The act also eases registration triggers for private companies issuing equity awards under employee pay plans." (Mercer)
Noteworthy Developments of Interest to Sponsors of Multiemployer Health Plans, 2nd Quarter 2012 (PDF)
"[Includes] recent developments in health care and the multiemployer marketplace ... data including consumer price index (CPI) and Segal health trends ... a context for what's happening to multiemployer health plans ... [and] information about what other multiemployer plans are doing." (The Segal Group, Inc.)
Obama Declines to Order Ban on Anti-gay Bias by Employers with Federal Contracts
"The executive order, which activists said had support from the Labor and Justice Departments, would have applied to gay, bisexual and transgender people working for or seeking employment from federal contractors. Current law does not protect against discrimination based on sexual orientation or gender identity, and legislation to do so, which Mr. Obama endorses, lacks sufficient votes in Congress." (The New York Times; free registration required)
Constitutional to Cut Annual Pension Increases for South Dakota Employees, Court Rules
"The ruling ... rejected a retiree's claims that a 2010 cut in the annual inflationary adjustment was an unconstitutional violation of a contract between the state and members of the South Dakota Retirement System." (Bloomberg BusinessWeek)
Failed Municipal Pension Loan Tied to Alleged Bribe in Detroit
"The allegations offer insight into a secretive, ongoing FBI investigation of the city's pension funds, which in February resulted in the indictment of former city Treasurer Jeff Beasley. The allegations emerged as [a man] and his wife were on the run and holed up at a Caribbean resort while federal investigators and lawyers hunted for the South Carolina couple and the pension fund's money." (The Detroit News)
Seven Things Employers Don't Know About Health Care Plans
"The survey results ... reveal that when it comes to benefits, employees maintain a level of distrust toward their employer. [E]mployers need to work harder to avoid miscommunications about benefits. [A finding shows] that 33% of employees think employers plan to reduce benefits while only 10% of employers report that they plan to make that move. To avoid that disconnect 'employers need to deliver a clear message to employees about the status of benefits.'" (HealthLeaders Media)
Making the Most of the Retirement Plan Match (PDF)
"An employer match has a clear value to employees, but how do employers maximize that value? Match amounts, match formulas, and vesting schedules vary widely across plans. The match formula may affect safe harbor, participation, non-discrimination testing, contribution rates, automatic features, employee retention, and, perhaps most importantly, retirement outcomes. [Arnerich Massena looks at some of the options and how they're currently used, and then explores] the ways that you and your employees can reap the greatest benefit from a match." (Arnerich Massena, Inc.)
Stable Value Funds, Version 2.0: Fewer Investor Guarantees
"Insurers who guarantee the principal in [stable value] funds have significantly limited the type of investments they will insure in the last several years. Fund providers such as J.P. Morgan Asset Management and Pacific Investment Management Co, have responded by offering stable value funds that no longer guarantee principal or make it harder to get out of funds quickly. Some 401(k) plans have switched to funds that only guarantee a portion of a participant's investment, exposing them to the market volatility the funds used to shield them from." (Reuters)
Tech Nerds Create 'Fantasy League' for Investments by Federal Thrift Savings Plan Participants
"'The 2008 market crash pretty much led us into doing the site because people are out there looking for answers, and it's almost mind-boggling the number of federal employees who don't understand TSP,' said [a] federal employee. Participants create anonymous usernames and fake accounts and compete in groups to see whose TSP posts the highest returns.... As in fantasy sports, players make trades and transfers under the same rules as the real TSP[.]" (Government Executive)
Federal Thrift Savings Plan Sets May 7 Start Date for Roth Option
"The Roth TSP option offers an important new tool for federal civilian employees and uniformed service members in managing their retirement income by providing greater flexibility in the tax treatment of contributions now and in the future[.]" (Pensions & Investments)
Plan Sponsor Hit for $35 Million in 401(k) Excessive Fee Case
"In the first class action over 401(k) fees to be tried and decided on its merits, a Missouri federal district court ruled on March 31 that manufacturer ABB Inc. breached its ERISA fiduciary duties. The court's opinion is a must read for all plan sponsors and service providers." (CFO.com)
New ACA Streamlining Requirement Will Cost Insurance Plans, But Benefit Medical Providers
"HHS on April 9 [issued] a proposed regulation that conforms to the ACA's requirement that a series of regulations designed to streamline health care administrative transactions be issued over a five-year period. The regulations are meant to encourage greater use of standards by health care providers and make existing standards work more efficiently." (Wolters Kluwer Law & Business / CCH)
[Guidance Overview] Proposed HHS Regs Address Health Plan Identifiers and Delay Compliance Date for Use of Standardized Billing Codes
"In general, all health plans that transmit health information electronically in connection with HIPAA covered transactions must comply with transaction standards adopted under HIPAA. The transaction standards are intended to standardize the exchange of electronic data by reducing the use of multiple formats." (Practical Law Company)
Lack of Job Security Keeps Many Workers Worried About Retirement Savings
"Concerns about future employment are leading to low retirement confidence levels ... [W]orkers who are confident about continued employment are confident they will have enough money to live comfortably throughout retirement. But with 42 percent of workers identifying job uncertainty as the greatest concern for American workers today, it was no surprise that confidence in retirement remains at historically low levels." (Insured Retirement Institute)
Employee Financial Well-Being and Retirement Survey Finds Employees Feeling Pinched
"Competing financial issues are pressuring employees to deprioritize retirement funding by saving less or in some cases, not saving at all ... Key findings[:] Employee stress levels related to financial issues are on the rise; Cash flow issues continue to top financial concerns for employees; Retirement confidence is eroding despite more people putting at least some money away for retirement[.]" (PwC)
Young Investors Using New Tools to Weight Equities More Heavily in Asset Allocation
"Despite concerns about the global financial crisis and its impact on the willingness of younger investors to enter the stock market, twentysomethings actually have higher equity allocations in defined contribution (DC) plans than previous generations had at the same age." (Vanguard)
Executives Should Beware the Dark Side of Clawbacks
"[A recent Wall Street Journal article entitled] 'For Feds, "Lying" Is a Handy Charge,' illustrates the alarming increase in cases of prosecutorial abuse against executives. These are not clawback cases -- yet. However, they show why executives are rightfully concerned about the existence of unchecked clawback power in the hands of the board of directors or anyone else." (Winston & Strawn)
[Guidance Overview] Certiorari Denied So Court of Appeals Decision Stands; PBGC Must Pay Interest to Participants in Terminating US Airways Plan
"Though limited to the D.C. Circuit, Stephens v. US Airways now stands as a warning that delayed payouts of ERISA benefits may draw claims for interest -- unless those delays are tied to administrative processes." (Morgan Lewis)
[Guidance Overview] As Retiree Drug Subsidy Program Becomes Less Attractive, Employers Consider Using 'Group Waiver Program'
"Employers who currently receive a federal tax subsidy for providing retiree prescription drug coverage under the retiree drug subsidy program, or RDS, will no longer be able to take a deduction for that subsidy as of 2013 ... Therefore, many employers are considering an alternative subsidy program referred to as the Employer Group Waiver Program, or EGWP, as an attractive way to achieve significant plan savings and are weighing the benefits of the EGWP against the RDS." (Groom Law Group)
DB Plan Underfunding Means Investment Management Remains Challenging Despite Recent Stock Gains
"Despite the strong rally of equity markets in the first quarter of 2012 the financial status of pension plans has improved only slightly ... The median pension solvency funded ratio of a large sample of pension plans has increased from 68% at the end of 2011 to only 69% at the end of March, 2012. About 97% of pension plans in this sample had a solvency deficiency as at that date." (Aon Hewitt)
New publication: Alternative Paths to an ESOP Transition
ESOPs are flexible instruments, and there have been many varied and sometimes creative approaches to implementing them. In this issue brief, three companies that used ESOPs in three very different ways describe the process of implementing their plans and assuring a smooth transition. In the final article, a veteran ESOP consultant places these transactions in a broader context. (National Center for Employee Ownership (NCEO))
Alabama Senate OKs New Pension Plan for New State Hires
"Most state employees would have to work until they are 62 to begin receiving benefits, according to the [bill]. [C]orrectional officers, firefighters and law enforcement officers [could] retire at age 56 if they had at least 10 years of service. Currently, a state employee may retire after 25 years of service, no matter the age of the employee, or retire at 60 after 10 years of service and begin receiving benefits. Most employees would see their contribution rates lowered from 7.5 percent to 6 percent if the proposal [is signed by the governor]." (The Montgomery Advertiser)
Outgoing Montana Governor Proposes Increase in Employee and Employer Contributions to Fix Public Employees' Pension Plan
"[Gov. Brian Schweitzer's] plan calls for employees and their public employers to each increase their contributions an additional 1 percent of the salary paid. His plan would also funnel some revenue from natural resource development into the pensions, and require local governments to kick in more for their employees as well." (Great Falls Tribune)
Washington State Legislature Passes Budget Proposal to Scale Back Pensions
"Under the new bill, pension benefits for workers retiring at the age of 55 would be reduced by as much as 50 percent. The changes only apply to workers hired starting in May 2013. The plan would save the state an estimated $1.3 billion over 25 years." (The Seattle Times)
Another Question is Answered in the Who's the Employer Q&A Column
Enrique and Carmen each has a 100%-owned Sub-S corporation. A limited liability company (LLC) is owned 90% by Enrique and 10% by Carmen. Each receives guaranteed payments (no salary) from the LLC. Each Sub-S corporation also has a few part-time employees who are also paid from the LLC. Are all three (the two corporations and the LLC) a controlled group? An affiliated service group? (BenefitsLink.com)
[Guidance Overview] PBGC Announces New Enforcement Approach That Reduces Impact of ERISA Section 4062(e) on Financially Sound Employers
"Although the rules for determining what constitutes a 4062(e) event are in flux, the PBGC's new informal enforcement approach will include a risk assessment as a mitigating factor in assessing how to proceed with respect to a 4062(e) event.... The new approach apparently categorizes plan sponsors into three classes based upon their financial strength. After determining that a 4062(e) event has occurred, the PBGC will now classify the employer-plan sponsor as a 'strong company,' 'moderately strong company' or a 'weak company.'" (McDermott Will & Emery)
New Law Implements Changes to Virginia's Retirement System
"Gov. Bob McDonnell has signed into law sweeping changes to Virginia's retirement system, including reduced pension benefits for employees with less than five years of service and an entirely different type of retirement plan for state and local employees hired after Jan. 1, 2014." (Richmond Times-Dispatch)
Health Care Frequent Flyers: 'I Always Had to Call An Ambulance to Get Up'
"The San Diego Union-Tribune is in the middle of a fantastic series that looks at health care's 'frequent fliers': the 1 percent of Americans who account for 22 percent of national health-care spending. These heavy users tend to be disproportionately lower-income, with less access to health-care services[.]" (The Washington Post; free registration required)
Cook County Pension Fund Should Hike Contributions, Exec Contends
"Cook County Annuity & Benefit Fund, Chicago, needs drastic pension reform, including an increase to employee and employer contributions, to prevent the pension fund from becoming insolvent in 2038, according to a report by county Commissioner Bridget Gainer, chairwoman of the county's pension oversight committee.... The funded status has dipped to 60% from 90% in the last 10 years, according to the report." (Pensions & Investments)
[Opinion] Report Claming Higher Cost for Health Care Reform is Bogus Attack
"Nobody, and I mean nobody, tries to assess legislation against a baseline that assumes that Medicare will just cut off millions of seniors when the current trust fund is exhausted. And in general, you almost always want to assess legislation against 'current policy', not 'current law'; there are lots of things that legally are supposed to happen, but that everyone knows won't[.]" (Paul Krugman in the New York Times; free registration required)
Billion-Dollar Florida Battle Shows Challenge of Throttling Back Future Pension Accruals
"A court order forcing Florida to forgo $1 billion it planned to take from state workers to shore up its budget is the latest sign of how difficult it can be to reduce government-backed retirement benefits. Of 41 U.S. states that made significant pension changes in 2010 and 2011, at least 13, or almost 30 percent, have faced court challenges, according to the National Conference of State Legislatures." (Bloomberg.com)
Pension Guru Points Way to Painful, But Balanced, Future for Local and State Governments
"We ... have been telling you that a velvet revolution under way in public pensions -- i.e., steps toward reform are being voluntarily taken by the majority of cities in the great state of California. But ... while this revolution will reduce the pension bills many decades down the road, it won't do much of anything to reduce the tremendous liability state and local governments are facing now (some $4 trillion for pension and retiree health benefits). So for a reality check, and a road map on how to dig out of this hole, we turn to public pension guru Girard Miller[.]" (The Orange County Register)
[Opinion] IRS Stalls in Approving Proposed Change in Design of California Pension Plan: Why, Mr. President?
"[T]hree years have gone by [since a ruling was requested from the IRS allowing government employees to electively switch from the current defined benefit plan to a combination of a hybrid retirement plan and an increase in pay], and the assumption of Orange County Supervisor John Moorlach and other county leaders is that the delay is pure politics, with the Obama White House siding with union activists who want to preserve the defined-benefit pension status quo whatever the fiscal wreckage it causes." (U-T San Diego)
[Opinion] Will State Pension Crisis be the Tipping Point for the U.S. Economy?
"The thing that pushes the United States over the tipping point just might be the exploding state pension crisis.... It is clear that many states are now teetering on the brink of bankruptcy as a result of pension promises made to employees, the enormous bill for which is just beginning to come due.... [B]ankrupt states with huge pension obligations will look to the federal government to make up the difference. Are we prepared to offer a rescue to these states that will make the bailouts of the last few years look insignificant by comparison?" (The Hill)
Nearly 20% of Life Insurance Shoppers Went Through Workplace
"A recent LIMRA study of Americans' buying habits found that nearly 20 percent who shopped for life insurance went through their place of work, and 75 percent of workplace shoppers actually bought life insurance." (insurancenewsnet.com)
California Teachers Pension Fund Targets End-of-Career Spiking of Covered Compensation
"'CalSTRS has not yet developed a systemic method of identifying and verifying extraordinary late-career salary surges already being used to calculate retirement benefits,' [said a former analyst at the fund]. 'We should do so without further delay.'" (BloombergBusinessWeek)
Misconceptions Seen in Responses of Supreme Court Justices at Oral Arguments
A Deloitte consultant and an expert working for the Kaiser Family Foundation express their concerns that the attorneys and Supreme Court justices have assumed mistakenly that the health care reform law requires individuals to purchase "Cadillac' coverage rather than a lower-cost stripped-down version. (Chicago Tribune)
Better Coordination Between Agencies Could Spur Small Employer Plan Sponsorship, Says GAO
"The GAO report recommends that the Secretary of Labor convene an interagency task force with representatives from Treasury, IRS, and SBA, and other agencies deemed appropriate, to review, analyze, and address the challenges facing small business retirement security in the United States." (Wolters Kluwer Law & Business / CCH)
[Guidance Overview] First Steps to Modernizing DC Annuitization: QLACs and Revenue Ruling 2012-3 (PDF)
"This ... article discusses the technical application of the proposed [qualified longevity annuity contracts] regulation and the ruling on annuity starting dates.... Because distributions are paid out under the terms of the underlying annuity contract rather than under the terms of the plan document, major complications are avoided that would otherwise arise from efforts to include appropriate annuity language in the document's benefit structure. Instead, the plan document can provide general plan language concerning investment authority and in-kind distributions.... [Further, the] guidance effectively sets the stage, under standard DOL and state contract rules, for the 'nervous administrator' of a plan to delegate to annuity companies the role of administrator." (Robert J. Toth Jr., Esq.)
Highlights of Defined Contribution Consulting Support and Trends Survey, 2012 (PDF)
Survey of 39 consulting firms" opinions on the defined contribution consulting business (primarily investment advice); asset allocation and target-date strategy support; plan oversight; and core investment trends. (PIMCO)
The Impact of The Broker-Dealer Fiduciary Standard on Financial Advice
"It has been suggested that the imposition of a fiduciary standard on registered representatives would result in significant changes in how broker-dealers conduct business by limiting a representative's ability to recommend commission investments, provide advice to middle-market clients, and offer a broad range of financial products. We take advantage of differences in state broker-dealer common law standards of care to test whether a relatively stricter fiduciary standard of care impacts the ability to provide services to consumers. We find that the number of registered representatives doing business within a state as a percentage of total households does not vary significantly among states with stricter fiduciary standards." (Michael S. Finke and Thomas Langdon)
White House Blasts Obama-Appointed Republican Health Care Economist
"The White House has unleashed a torrent of criticism on a leading conservative economist -- approved by President Obama in 2010 as a Republican trustee overseeing Medicare and Social Security finances -- for concluding in a new study that the Affordable Care Act will add to the deficit instead of reduce it." (ABCNews)
[Opinion] Official Federal Government Sources Agree: The Affordable Care Act Reduces the Deficit
"Today, we are reading about another brand of "new math" in describing how the Affordable Care Act will affect our nation's Federal budget deficit. In another attempt to refight the battles of the past, one former Bush Administration official is wrongly claiming that some of the savings in the Affordable Care Act are "double-counted" and that the law actually increases the deficit. This claim is false." (The White House)
Many Patients Skip Recommended Colonoscopy: Study
"Although a colonoscopy is considered the 'gold standard' for colon cancer screening, a new study finds that many patients are reluctant to have the test Patients are more likely to opt for a simple fecal occult blood test -- a brief part of a medical exam -- that checks for bleeding, which can be a sign of colon cancer, the researchers said." (Blue Cross and Blue Shield Association)
[Guidance Overview] Form 8938 And FATCA: Considering Some of The Issues for 2011
"[I]ndividual U.S. taxpayers and their employers have been wrestling with issues in how to fill out new Form 8938, the individual reporting form under FATCA (Code section 6038D), which is due with the individual's income tax return for 2011, with extensions, concerning their participation in foreign pensions, deferred compensation and equity-based compensation plans." (Groom Law Group)
Corporate DB funded status climbs to 81% in March
"The funded status of a typical corporate defined benefit plan increased 1.8 percentage points to 81% at the end of March, sparked by a continuing increase in assets and a drop in liabilities, according to BlackRock's monthly pension funding update. Assets increased 0.3% for the month, while liabilities decreased 2%." (Pensions & Investments)
2011 State Laws Implementing Immediate Market Health Reforms
State legislation adopted or implemented in response to requirements of the Affordable Care Act. Updated April 10, 2012. (National Conference of State Legislatures)
[Opinion] The Two Worlds of Personal Finance: Implications for Promoting the Economic Well-Being of Low- and Moderate-Income Families (PDF)
"Many low- and middle-income households do not receive financial advice on when to retire, how to arrange Social Security benefits, and homeownership, despite these being their most important retirement decisions." (Urban Institute)
[Opinion] The Individual Mandate and the Math-less Health Reform Debate
"The Affordable Care Act attempted to cover new costs without adding significantly to tax burdens. The individual mandate was one way it tried to force us to pay, at least for ourselves. The law also included an employer mandate designed to prevent employers from dropping employee health insurance ... Congress also tried to box in states to contribute as much or more than they already do to Medicaid, another part of the constitutional debate. None of those efforts, however, tackle the original sin driving health costs." (Urban Institute)
Boomers' Eagerness May Limit Their Retirement Security
"By collecting benefits before their normal retirement age, nearly three-quarters of all current Social Security recipients are receiving reduced benefits and limiting their retirement security.... Those collecting Social Security at age 62 will reduce their benefits by 20 to 30 percent depending on their normal retirement age, which could amount to hundreds of thousands of dollars in lifetime payouts[.]" (Insured Retirement Institute)
Investment Costs Hit Retirees Twice
"[I]t's as critical for retirees (people spending money) to think about how costs hit their portfolios as it is for people who are still saving. In fact, you might say that by taking a bite out of both income and wealth over time, costs actually hit retirees with a 'double whammy.'" (Vanguard)
Avoiding 409A Pitfalls in Severance Agreements (PDF)
"[Materials from] the second installment in the 409A Basics Webinar Series, which centered on how to avoid pitfalls in severance agreements. Topics discussed included: Structuring severance benefits to be exempt from Section 409A; Separation from service requirements to commence severance; Six-month delay considerations for severance benefits payable to specified employees; Postemployment benefits and reimbursements[.]" (Morgan Lewis)
[Guidance Overview] 2012 List of Counties Requiring Culturally and Linguistically Appropriate Services Issued by HHS
"Employers with employees in the counties listed first need to arrange for translation services for the statement to be placed on the English version of the various notices and for the notices themselves, if requested. In addition, arrangements will need to be made to provide the oral, non-English language service to assist with questions and the filing of claims." (Troutman Sanders)
[Guidance Overview] Disclosing Changes under the 408b-2 Regulations
"With the exception of changes to the contract and the investment disclosures, a Covered Service Provider does not need to provide additional disclosures until the contract is extended or renewed. [This] technical update ... discuss[es] the timing of the disclosures for changes." (SunGard Relius)
Pension Plan Administration Can Inadvertently Trigger Fiduciary Liability: Steps to Help Mitigate that Risk (PDF)
"This Spotlight provides some basic background information about ERISA fiduciaries and their responsibilities, along with a number of suggested best practices for individuals responsible for plan administration." (Sibson Consulting / The Segal Group)
Expert Q&A on Fiduciary Training
"Many corporate officers do not feel comfortable with their level of understanding of even basic issues regarding plan governance. Frequently, plan documents do not accurately reflect day-to-day plan administration. In both of these circumstances, corporate officers and boards of directors could be exposed to potential ERISA liability for matters over which they inadvertently exercise improper control or for which they really do not have any functional control." (Proskauer Rose LLP)
Ninth Circuit Issues Significant Post-Amara Ruling on Equitable Remedies (PDF)
"[T]he U.S. Court of Appeals for the Ninth Circuit ... in Skinner v. Northrop Grumman Retirement Plan B ... held that employees who received an SPD that did not adequately explain that their benefits would be offset were not entitled to equitable remedies under Section 502(a)(3) of ERISA. In so doing, the Ninth Circuit became one of the first circuit courts to actually analyze reformation and surcharge as equitable remedies under Amara." (Proskauer Rose)
House Ways and Means Committee to Hold Hearing on Potential Reform of Tax-Favored Retirement Vehicles
"This tax reform hearing -- scheduled to occur on tax filing day -- will examine one source of complexity for individuals and employers by reviewing employer-sponsored defined contribution plans as well as Individual Retirement Accounts ("IRAs"). The hearing will take place on Tuesday, April 17, 2012[.]" (U.S. House of Representatives, Ways & Means Committee)
[Guidance Overview] HHS Releases Final Rules Regarding Transitional Reinsurance Program (PDF)
"Of particular interest to plan sponsors is the transitional reinsurance program ..., which will require health insurance issuers, as well as certain plan administrators on behalf of self-insured group health plans, to make contributions to a transitional reinsurance program for the three-year period beginning January 1, 2014. ...[S]ection 1341 is likely to result in additional costs for employer plan sponsors and, depending on whether the plan at issue is self-administered, certain additional reporting obligations." (Crowell & Moring LLP)
Floor Price Protection in ESOP Companies
The current excerpt from the Employee Ownership Report is Floor Price Protection in ESOP Companies, an article summarizing the issues raised by providing a floor price in an ESOP context. (The National Center for Employee Ownership (NCEO))
Bill Encourages Public Pension Plans to Put California Projects First; Advances on Unanimous, Bipartisan Vote
"Senate Bill 955, a bill allowing public pension funds to prioritize investments in California infrastructure projects over out-of-state projects, passed on a unanimous, bipartisan vote in the Senate's Public Employment and Retirement Committee today." (Studio City Patch)
[Guidance Overview] Official 'Fact Sheet': HHS Proposes HIPAA Standard for a Unique Health Plan Identifier
"[A committee in 2010] addressed the need for an identifier for entities such as health care clearinghouses, third party administrators (TPAs), and repricers, that are not health plans but that perform certain health plan functions. These entities are currently identified in the standard transactions in the same fields and using the same types of identifiers as health plans, but are not health plans and so cannot obtain a health plan identifier. Based on the [committee's] recommendations, HHS is proposing to adopt an 'other entity' identifier (OEID).' ... [C]overed entities, excluding small health plans, would be required to be in compliance with the HPID on October 1, 2014. Small health plans would be required to be in compliance with the HPID on October 1, 2015." (U.S. Department of Health and Human Services)
[Official Guidance] Text of Proposed HHS Regs Requiring Health Plan Identifiers and Extending Compliance Date for ICD-10 Code Sets for Billing (PDF)
"This proposed rule would implement section 1104 of the Patient Protection and Affordable Care Act ... by establishing new requirements for administrative transactions that would improve the utility of the existing [HIPAA] transactions and reduce administrative burden and costs. It proposes the adoption of the standard for a national unique health plan identifier (HPID) and requirements or provisions for the implementation of the HPID." (U.S. Department of Health and Human Services)
Winding Down Your Hard-Frozen Defined Benefit Plan
"Best practices for efficient management of hard-frozen DB plans leading up to and throughout the termination process should first focus on the protection of benefit security for participants and retirees and then reduction of plan sponsor financial risk. The objective of this white paper is to describe best practices for executing the termination of a hard-frozen DB plan." (Principal Financial Group)
[Opinion] Publicly Run Pensions for Private Employers Invite Trouble
"[G]overnment leaders in California, Rhode Island and New York City, among other places ... want to open state and metropolitan pension plans to employees at private companies. The idea is to create an idiot-proof, low-cost retirement plan run by top-flight managers.... The people behind this idea mean well. But they have come up with a plan that invites all sorts of political manipulation.... [P]articipants in these new pension plans ... might ask for higher guaranteed returns, or perhaps public contributions to their funds. They might even lobby to have their funds turned into defined benefit plans. Politicians, looking no further ahead than the next election, would comply." (The Town Talk)
GAO Reports on State Efforts to Improve Sustainability of Government Pension Plans
"35 states reduced pension benefits by either adjusting the benefit formula, raising the age or service requirement, or reducing postretirement increases -- or a combination of more than one of these.... 24 states adjusted the benefit formula, 29 states raised the age or service requirement, and 18 states reduced postretirement increases. Due to legal restrictions these changes tend to apply only to future employees[.]" (Deloitte)
CBO Projects Reduction in Employment-Based Health Coverage Under Affordable Care Act
"The March 2012 report projects that 3 to 5 million fewer people will obtain coverage through their employer each year during the period 2019 through 2022 than would have been the case without the Act. In 2010, the CBO similarly projected that 3 million fewer people would obtain employment-based coverage in 2019." (Deloitte)
[Guidance Overview] Another Question is Answered in the Who's the Employer Q&A Column
I am a pastor of a church. Am I considered an employee of the church, or instead am I a self-employed independent contractor? (BenefitsLink.com)
PBGC Enforcing Facility Closure Rule Despite Promise to Revise It, Practitioners Say (PDF)
"The [PBGC] is stepping up its enforcement efforts on violations of Section 4062(e) of [ERISA], speakers said during an actuarial conference March 28.... In a letter dated Dec. 16, 2011, several groups from the pension industry expressed concern to [the PBGC's directory] that agents of PBGC were enforcing the controversial proposed rule [issued in August 2010]." (Bloomberg BNA)
[Guidance Overview] Eighth Circuit Court of Appeals Affirms Summary Judgment in Favor of Plan Sponsor in ADEA Case Challenging Target Benefit Plan
In Northwest Airlines, Inc. v. Phillips, the 8th Circuit has rejected a claim of age discrimination by a group of older airline pilots, who challenged the formula used in a target benefit plan created as part of the airline"s bankruptcy proceeding in which benefits under the airline's defined benefit plan were frozen. (Justia.com)
[Opinion] Illinois is the Public Pension Basket Case You Forgot About
"My biggest fear ... is that the same 'debt lunatics' sounding the alarm on debt (it's not a debt crisis but an unemployment crisis!) calling for savage austerity will use Illinois' pension basket case and countless others to kill defined-benefit plans, reducing coverage, increasing pension poverty and exacerbating economic inequality. This is the crime of the century, one that will end up costing societies a lot more over the long-run." (Pension Pulse)
Many Public Workers Agree They Have It Better Than Private Sector Peers
"Nearly half of government workers in the survey -- 46 percent -- agreed they don't work as hard as their private sector counterparts ... The government employees did differ in how they viewed their pay. Just 35 percent of those who identified themselves as government workers said they thought the average public servant earns more annually than the typical private sector worker." (Government Executive)
Special Fund on Santa Clara County Property Tax Bill Pays for Employee Pensions
"Since 1945, Santa Clara County is the only county in California where taxpayers have been subsidizing [police department employee] retirements through a special fund that appears on your property tax bill. That fund also helps pay retirement costs for the county's other 14,550 employees.... In California, only residents in 24 cities and Santa Clara County pay extra property taxes for retirement programs[.]" (San Jose Mercury News)
California Teachers' Pension Plan Shortfall Grows
"The unfunded liability climbed 13 percent to $64.5 billion as of June 30, according to a report from actuaries released Monday. The system had about 69 percent of assets needed to cover promises to current and future retirees at the end of fiscal 2011, down from about 71 percent a year earlier." (San Francisco Chronicle)
Pension Reform Panel Looking at Alternative Hybrid Plan
"State lawmakers considering pension reform are ... looking at a hybrid pension plan offered by the state teachers retirement system as a possible model.... Assemblyman Warren Furutani ... said a concept his committee is considering would include a cap on defined benefits and, above that, provide a cash balance plan that would guarantee the principal and a rate of return tied to treasury bonds." (Los Angeles Times)
Stunning Academic Study May Cause DOL to Retain Original Proposal for Fiduciary Definition
"[A study by two professors entitled] 'The Impact of the Broker-Dealer Fiduciary Standard on Financial Advice' ... has revealed a stunning conclusion: IRA investors and the brokerage industry are both statistically unlikely to suffer --and some may actually benefit -- should the DOL adopt its new Fiduciary Rule as originally proposed." (Fiduciary News)
[Guidance Overview] ML Strategies Health Care Reform Update, April 9, 2012 (PDF)
Weekly update on federal and state health care reform legislation, regulations and initiatives. (ML Strategies, LLC)
IRS Issues 2011 Form 8955-SSA And Instructions
"The form is substantially the same as the 2010 form. The IRS notes that it has created a page on its website about Form 8955-SSA: www.irs.gov/form8955ssa" (Wolters Kluwer Law & Business / CCH)
Obama Health Care Law Could Worsen U.S. Debt, Says Republican Study
"A study by Charles Blahous, a George Mason University research fellow and the Republican trustee for the Medicare and Social Security entitlement programs for the elderly, challenged the administration's contention that the 2010 law would reduce healthcare costs." (The New York Times; free registration required)
Service Providers Finally 'Ahead of the Curve' for 401(k) Disclosures
"91 of 100 plan sponsors surveyed were satisfied with the fee disclosure communication they had received so far from plan service providers, including record keepers, fund providers and financial advisers." (Investment News)
Health Care Reform Law Will Add $340 Billion to Deficit, Study Says
"The 2010 law does generate both savings and revenue. But much of that money will flow into the Medicare hospitalization trust fund -- and, under law, the money must be used to pay years of additional benefits to those who are already insured. That means those savings would not be available to pay for expanding coverage for the uninsured." (The Washington Post)
Defined Contribution Equals Social Security in Retirement Importance to Baby Boomers
"Defined contribution retirement plans now equal Social Security in importance when it comes to retirement security among people ages 50 to 66, according to a new survey from the Insured Retirement Institute.... Even fewer baby boomers are relying on a defined benefit plan, according to the survey, with 42% relying on employer-provided defined contribution plans, compared to 36% last year." (Pensions & Investments)
Federal Employee Retirement Claims Backlog Is Down Since January
"The Office of Personnel Management processed more retirement claims in March than in the previous two months, making a dent in its backlog despite an increase in claims, according to agency figures.... The agency received 7,090 new claims in March, 2,090 more than it expected and 675 more than were submitted in February. OPM has received 34,984 new submissions since the beginning of the year." (Government Executive)
[Opinion] How to Replace Obamacare
"Proponents of Obamacare like to create the impression that there are tens of millions of Americans trapped by their pre-existing conditions, sick and stuck with lousy insurance and no options. In truth, the vast majority of working Americans have good and secure coverage today, including many millions of people with expensive health conditions." (Physicians for a National Health Program)
Social Security Claims Edged Down in 2011
"After peaking in the wake of the Great Recession, Social Security retirement and disability awards fell in 2011 as the economy improved. Only 27 percent of Americans age 62 and older began collecting retirement benefits that year, the lowest take-up rate since 1976. Disability applications and awards remained unusually high, however." (Urban Institute )
Majority of Boomers Lack Optimism in Their Financial Future
"With the economy still recovering from the financial crisis and recession, few Boomers are optimistic that their financial situation will improve during the next five year as 62 percent believe it will be about the same or that it will deteriorate. The study also found that confidence in retirement security is severely depressed with only 36 percent of Boomers being confident in having enough assets to live comfortably during retirement." (Insured Retirement Institute)
[Guidance Overview] Service-Provider Fee Disclosures Mean Plan Sponsors Must Be More Involved, More Scrupulous in 2012
"In reality, retirement plan sponsors are inheriting a sea change in their fiduciary role and responsibilities, and many will be seeking assistance to understand and appropriately implement effective practices for compliance. This paper ... provide[s] a brief background of the 408(b)(2) and 404(a)(5) rules, strategies plan sponsors may implement for compliance, as well as an overview of how plan sponsors' vendor relationships may be enhanced through these new regulatory mandates." (Roland|Criss and Life & Health Advisor Online)
Four Employee Benefit Plan Tips for HR and Finance Departments
"The Society of Actuaries exposure draft of a new mortality improvement scale, if adopted, is expected to result in increases in traditional pension plan liabilities of 2% to 4% and in retiree health care liabilities of 6% to 9%.... [I]f you have never had your [401(k)] safe harbor notice reviewed by counsel, now is a great time to make sure it is compliant.... The IRS has given employers an opportunity to correct deficiencies [under section 409A] in release language [in employment contracts and severance agreements] without any penalties or reporting requirements, but to be entitled to relief, agreements must be amended no later than December 31, 2012.... Some of the nation�s largest consulting firms (Aon Hewitt and Mercer), as well as other companies in the insurance business, are rolling out private health insurance exchanges for employers." (Poyner Spruill LLP)
Employers Should Not Delay Preparing for 2014 Health Care Reform Requirements Despite Pending Supreme Court Case (PDF)
"Absent a ruling that deems the Individual Mandate unconstitutional and not 'severable' from the remainder of the law, the employer-specific provisions of the ACA will likely remain as enacted.... [I]t is unlikely that Congress has the political will to reopen the law and make additional changes such as removing the Employer Mandate.... As a result, the Supreme Court decision itself should provide the impetus for employers who have not yet begun planning for 2014 to start such preparations." (Epstein Becker & Green, P.C.)
[Guidance Overview] What 'Plan Asset Funds' and Investment Managers Must Know About the DOL Fee Disclosure Regs
"[T]his alert ... discuss[es] how the final regulation, which was issued under Section 408(b)(2) of ERISA, applies to managers of investment funds that are deemed to hold the 'plan assets' of plans subject to ERISA and to investment managers or investment advisers to ERISA plans.... In the case of a plan asset fund, the general partner (if the fund is a partnership), the manager (if the fund is an LLC), and/or an investment manager or investment adviser to the fund usually will be covered service providers subject to the disclosure requirements, because usually these parties will be
'fiduciaries' under ERISA. Accountants and other non-fiduciary service providers to a plan asset fund are not subject to the disclosure requirements." (DLA Piper)
Deloitte's Health Care Reform Memo: April 9, 2012
This weekly publication summarizes recent developments including legislative developments and state and implementatation updates. The current issue includes discussions of a pending Texas Circuit Court case that addresses the physician ownership constraint in ACA; of the 2013 payment rule for Medicare Advantage and Prescription drug plans recently released by CMS; and Legislative updates, at both federal and state levels. (Deloitte Center for Health Solutions)
[Opinion] Much Ado About Broccoli
"The need to legislate behavior in an effort to help reduce costs is simply a lap too far. A government dedicated to reducing costs while preserving quality and competition would need to adopt practices currently employed and bearing fruit in the private sector to moderate medical trend and improve affordability. The reality is many of these efforts - biometric testing, health risk assessments, population based plan designs, value based reimbursements - require a more prescriptive level of engagement by employees." (The Health Care Blog)
[Opinion] What Private Markets Could Do on the Day After Obamacare, If Regulatory Burdens Were Lifted
"Most pathologies in the current system are creatures of previous laws and regulations. Solicitor General Donald Verrilli explained as much in his opening statement to the Supreme Court: 'The individual market does not provide affordable health insurance,' he noted, 'because the multibillion dollar subsidies that are available' for the 'employer market are not available in the individual market.' ... If we had a deregulated, competitive market in individual catastrophic insurance, that market would be so much cheaper than what's offered today that we would likely not even need the mandate." (The Health Care Blog)
What Level of Impact Fits Your Wellness Plan?
"Structure, monitor, measure and modify a wellness program that's appropriate for your organization ... As costs rise, plan administrators hope that their wellness programs will help stem and reduce rising health plan costs. Plan administrators might harbor over-optimistic expectations of what a wellness initiative can deliver, however." (Society for Human Resource Management)
In Chief Executives' Pay, a Rich Game of Thrones
"IS any C.E.O. worth $1 million a day? That's roughly $42,000 an hour. Or $700 a minute. Or $12 a second.... At Apple, the answer to that question is an emphatic yes, and then some.... [Timothy D. Cook] was paid a cash salary of roughly $900,000 in 2011. On its own, that would have been a ho-hum paycheck for a top American C.E.O. in recent years. But then came a wild extra, a one-time award, in the form of Apple stock. It was initially worth a staggering $376.2 million. As of the end of last week, it was valued at roughly $634 million[.]" (The New York Times; free registration required)
Governor Quinn, Mayor Emanuel: It's Time to Look at Little Rhody
"[Chicago mayor Rahm Emanuel] described the dishonesty of a pension system fomented by pols who committed taxpayers to dole out more than they can afford to pensioners. If Chicago does nothing, he said, property taxes will have to rise by 150 percent -- a prospect he rejected as unthinkable: 'You won't recruit a business, you won't recruit a family to live here.' ... Emanuel raised, and [llinois governor Pat Quinn] discussed, the best idea of the night: that Illinois consider pension changes that the similarly Democratic state of Rhode Island adopted in November." (Chicago Tribune)
How Delaying Retirement Can Help You
"The major financial benefits of deferring retirement are the ability to continue earning money, adding to your retirement assets, deferring drawing down those assets, and delaying the date you begin to receive Social Security benefits. Situations differ, of course, but here's a rough look at the impact of deferring retirement for five years, from age 65 to 70." (U.S.News & World Report)
Illinois Pension Reform Push Could Hinge on One Sentence in State Constitution
"Article XIII [of the Illinois constitution] says membership in any government worker pension or retirement system 'shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.' Republicans argue that legalese applies only to retirement perks that already have been earned by public employees. They say future benefits can be scaled back without a problem ... Democrats warn that path could be illegal and result in a legal battle with unions that puts the state back at square one after years in court." (Chicago Tribune)
How to Hedge 7 Retirement Risks
"Here's how to manage seven of the biggest retirement challenges: Inflation; Healthcare costs; Running out of money; Investment losses; Living longer than expected; Falling home values; [and] Forced retirement." (U.S.News & World Report)
[Opinion] Surprise, Illinois! You Owe Another $54 Billion
"Beyond that $83 billion in unfunded pensions, [Illinois] state government alone faces an unfunded liability of more than $54 billion in retiree health liabilities over the next 30 years.... [O]nly 8 percent of private-sector retirees are offered health insurance benefits, and those retirees pay an average of 54 percent of the cost. Similarly requiring Illinois retirees to pay an average of 54 percent of insurance costs ... would shrink the anticipated $54 billion shortfall by $21 billion." (Chicago Tribune)
[Guidance Overview] Structural Impediments to Claims for Breach of Fiduciary Duty (PDF)
"[T]here is no perfect correlation, or even close to perfect correlation, between the ratio of well-run plans to problem plans and the batting average of participants and their lawyers in breach of fiduciary duty suits brought against plans and fiduciaries. Interestingly, unlike in many areas of the law, we cannot attribute this to jury bias or the vagaries of the jury system, since, of course, there are no juries in such cases.... [T]he relatively high level of failure for such suits takes place predominately at a much earlier stage of the process, either at the motion to dismiss stage or at the summary judgment stage. So what accounts for that disjunct? ... I have come to think that it stems from several factors, which, in conjunction, create a structural barrier to the successful prosecution of such claims." (Journal of Pension Benefits, by Stephen D. Rosenberg, Esq.)
The Fact Checker: President Obama's Selective Memory of Supreme Court History
"[W]e don't know whether the president's factual error was a mere slip-up or a purposeful attempt to mislead, and we generally don't beat people over the head for off-the-cuff remarks. Let's take a look at the president's message in light of his clarifying remarks to see whether it holds up any better under scrutiny." (The Washington Post; free registration required)
Do You Really Need That Medical Test?
"Among items on [lists of tests and treatments whose elimination for major categories of patients would save the most money quickly without depriving any patient of meaningful medical benefit] are: cardiac stress tests for annual checkups in asymptomatic patients; brain imaging scans after fainting; antibiotics for uncomplicated sinus infections that are almost always caused by viruses, which are not treatable with antibiotics; imaging of the lower spine within the first six weeks after suffering back pain; and bone scans for early prostate and breast cancer patients at low risk of metastasis." (The New York Times; free registration required)
Should You Buy 'Longevity' Insurance?
"In the event of an insurer's insolvency, industry-backed guaranty associations in each state provide at least $100,000 in coverage of projected annuity benefits, with many covering up to $250,000 or more. Go to www.nolhga.com for links to the association and coverage limit in your state." (The Wall Street Journal)
Health Care Budget Deficit Calculator Shows Budget Deficits Will Explode
"The government, through programs like Medicare and Medicaid, pays for approximately half of the country's health care, almost all of which is actually provided by the private sector. Thus, the bulk of our projected rising budget deficits are due to skyrocketing private health care costs." (Center for Economic and Policy Research)
Study Finds 80 Percent Default Rate on Retirement Plan Loans By Terminated Employees
"A significant finding of the study, from the perspective of plan design, was the higher default rate of participants in plans that authorized multiple loans. While 74 percent of employees with one loan defaulted, 94 percent of employees with multiple loans defaulted." (Wolters Kluwer Law & Business / CCH)
Costs of Many Preventive Medical Exams Vary As Much As 700%
"Over the past year, health plans and self-insured employers began paying for wellness exams -- diabetes screening, mammographies, Pap smears and colonoscopies -- as required by the law, without charging consumers a deductible or co-payment. But in looking at 15,000 consumers, a research group has found cost differences of hundreds of dollars charged for the same tests. Colonoscopy costs, for example, ranged from $786 to $1,819." (USA TODAY)
Medicare Coverage Less Generous Than Coverage in Large Employer Plans, When Available
"Medicare requires multiple deductibles and coinsurance based on service type, whereas a typical large employer plan requires a single deductible for all medical services ... In 2011, for an inpatient hospital stay Medicare required a $1,132 deductible and no coinsurance for the first 60 days whereas the typical large employer plan required 20 percent coinsurance beginning from the first day." (Wolters Kluwer Law & Business / Health Reform Talk Blog)
[Guidance Overview] Health Plan Quality Improvement Strategy Reporting Under The Affordable Care Act: Implementation Considerations
"A provision of the [Affordable Care Act] requires health plans to submit reports each year demonstrating how they reward health care quality through market-based incentives in benefit design and provider reimbursement structures. By spring 2012, [HHS] is expected to develop requirements for health plans to report on their efforts to: improve health outcomes, prevent hospital readmissions, ensure patient safety and reduce medical errors, and implement wellness and health promotion activities. Both employer group health plans, including self-insured plans, individual market plans, and qualified health plans sold through the insurance exchanges are required to submit such reports. This report outlines key considerations for implementing these provisions of the health reform law." (The Commonwealth Fund)
Where to Get Social Security Help
Good article for use in helping employees with financial planning; includes several hypertext links to federal resources. "Many financial advisers have expertise in Social Security rules, including some who once worked at the Social Security Administration. Many are fee-based, like accountants, or provide the help as part of their financial planning or wealth-management practice. There also are some sophisticated online tools that let people crunch their own numbers under various scenarios." (The Wall Street Journal, by Ellen E. Shultz)
Retirement Account Balances, Updated April 2012
"The retirement savings of American households took a big hit when the stock market crashed in 2008. Recently, however, a good portion of these losses has been reversed. This fact sheet follows trends in retirement account balances since the beginning of 2005." (Urban Institute)
Wireless Medical Monitors May Transform Patient Care; Might Be Expensive for Health Plans
"Some experts predict that in the near future, tens of millions of Americans will use gadgets that automatically send their vital signs to medical professionals, relatives and concerned friends. The technology has already generated an industry worth well over $1 billion a year." (Dallas Morning News)
Generation Y: What You Need to Know About Financial Literacy
"[Late teens and early 20s:] This may be the time of your life when your earnings are at their lowest, so managing expenses should be a top priority.... [Mid- to late-20s: 401(k) plans] are portable, which is important, since many people in their 20s change jobs and even careers several times. They are also flexible, allowing you to make changes to your investments at any time or even put your contributions on hold if you run into dire financial straits.... [Early 30s:] If you have children whom you hope to put through college, now is a good time to start a college fund for them." (TIAA-CREF)
[Guidance Overview] Another Question is Answered in the Who's the Employer Q&A Column
A county government says it owns and controls a county hospital. An IRS letter to the hospital does not say it is qualified under Internal Revenue Code section 501(c)(3), although it says the hospital is an organization described in sections 509(a)(1) and 170(b)(1)(A)(iii). The hospital wants to establish a retirement plan to cover its employees. Can the hospital sponsor a 401(k) plan, or is it considered a "governmental" entity and hence ineligible to sponsor a 401(k) plan? (BenefitsLink.com)
Supreme Court Hears Oral Arguments on Health Care Reform: Will the Affordable Care Act Survive?
"What, if any, provisions of the sweeping health care reform law will survive remains very much in question after the historic arguments. The questioning revealed deep divisions within the Court about the constitutionality of the law's so-called 'individual mandate' and whether the rest of the Act should stand if the mandate is struck down. Even after the Supreme Court renders its decision, which is expected in June, the debate over the landmark legislation likely will continue for years to come." (Littler Mendelssohn LLC)
Providing 'Professional Courtesies' Can Land Health Care Facilities in Hot Water
"Many health care practices or facilities waive or discount co-pays or deductibles for other physicians, the physician's family members, or the physician's staff as a "professional courtesy." Although often well-intentioned, such practices can violate state and federal laws and managed care contracts." (Holland & Hart)
In Target-Date Funds, a Hodgepodge of Styles
"Assets in these funds have more than quadrupled since 2007. For employees, the funds appear very straightforward, requiring only the choice of an expected retirement date.... [W]hat T.D.F.'s do quite well is distance investors from their worst enemy: themselves. By hewing to a long-term investment allocation strategy and rebalancing whenever the markets throw the portfolio off that strategy, they insulate investors from many emotional and psychological barriers that can make it hard to stick with a given approach." (The New York Times; free registration required)
Milliman's Monthly Benefit News and Developments, April 2012 (PDF)
Very good summary of recent important legislation, plus a list of regulations and other activity by federal agencies affecting employee benefit plans. (Milliman)
Best Practices for Using the Talent and Experience of Older Workers (PDF)
"A report ... points to wide-ranging flexible workplace options that can retain older workers, tap into the experience of retired workers and help employers fill skills and knowledge gaps. Success is dependent, though, on matching flexibility initiatives with the needs of employers and their older employees." (Sloan Center on Aging & Work at Boston College )
Health Costs Projected to Increase Less Than 10% for 2012
"Costs for all types of medical plans in the U.S. are expected to increase by 9.9 percent for 2012, according to a survey by Buck Consultants. This is the first time since 2001 that Buck's survey has projected cost increases less than 10 percent for any type of plan." (Society for Human Resource Management)
Measuring a 401(k) Plan's Success: The Income Replacement Ratio
"Sponsors of defined contribution retirement plans often encounter the problem of how to measure the success of their plan in meeting the future needs of their employees. As part of offering a retirement plan, they need a gauge of results.... [A]n important metric used to help determine if a person is on track for adequate retirement savings is the income replacement ratio." (Society for Human Resource Management)
Employer-Provided Life Insurance Benefits, 2011
"In March 2011, 58 percent of private industry workers were offered life insurance benefits by their employers; of these, 97 percent chose to enroll in this benefit. Among full-time workers, 73 percent were offered life insurance and 97 percent participated in the benefit; among part-time workers, by contrast, 14 percent were offered life insurance and 91 percent participated." (U.S. Bureau of Labor Statistics)
Four Suggested Focus Areas to Complete a Prudent Fiduciary Review for the Selection and Monitoring of Target Date Funds
"This paper provides a practical fiduciary approach to analyzing target date funds by suggesting that plan fiduciaries focus on four specific areas: risk, risk-adjusted returns and expenses, underlying funds and reliability." (Securian Financial Services)
Union Pickets Tropicana Over Pension Termination
"Thousands of workers from the main Atlantic City casino union picketed outside and around the Tropicana Casino and Resort on Thursday night, trying to fend off an attempt ... to end their pension plan. The casino is terminating its employees' pension plan in favor of direct cash payments to workers. (CNBC)
Translate Retirement Concerns Into Action
"When even short-term planning is devalued, the notion of pausing to envision what you'll need years or decades from now is almost impossible, said [a consultant.] ... [A recent study conducted by the Society of Actuaries] ... noted increased concerns about keeping up with rising retirement costs, including health care.... just 35 percent of preretirees said they have a plan for how much they will spend in retirement and where the money will come from. Even among retirees, only 57 percent said they have a plan, though that number has risen from 44 percent in 2005." (Chicago Tribune)
Employer Barred from Modifying Collective Bargaining Agreement to Evade Duty to Contribute to Pension Fund
"Although the Participation Agreement stated that any agreement "that purports to prospectively reduce the contribution rate" payable to the fund by the employer would be invalid, the employer argued the word "prospectively" is ambiguous because it could reasonably be interpreted to allow for immediate action. In other words, the new CBA did not eliminate the duty to contribute prospectively; it did so immediately. This, the court ruled, was not a reasonable interpretation of the participation agreement, and indeed it defied "common sense and logic."" (Wolters Kluwer Law & Business / CCH)
More Small Businesses Take On Risk of Self-Insurance
"Some 20 percent of companies with 50 to 199 workers self-insured in 2010, up from 14 percent four years earlier ... That could spell trouble for the state insurance exchanges expected to launch in 2014. In those markets, premiums will reflect the total risk of all the people insured, so companies with younger and healthier workers may decide they're better off self-insuring to avoid subsidizing others with higher medical costs." (Bloomberg Businessweek)
Same-sex benefits denial is ruled discriminatory
"The denial of insurance coverage to the same-sex spouse of a federal court employee in San Francisco was an act of discrimination, the court's chief judge has ruled in an order that entitles the employee to compensation for the costs of private insurance. The payments may have to wait, however, while courts consider the constitutionality of the Defense of Marriage Act[.]" (San Francisco Chronicle)
Oliver Wyman Releases Data to DOL on IRA Fiduciary Costs
"Long-awaited data showed a new standard could limit retirement investing services ... Brokers ... are 'not opposed to being held accountable' under a fiduciary standard, but the concern they have, and the reason they want EBSA to revise its rule proposal, is 'that under ERISA, unlike under securities laws, if the broker-dealer is a fiduciary then they would be prohibited from giving the investment services they give today' to IRA investors." (AdvisorOne)
Retirement Reform Ii: Essential and Practical Steps to Take in 2012
"43 states have now adopted some kind of pension reform since 2009.... Retirement reform efforts are best grounded in stronger probabilities, instead of false hopes or hysteria. [This article has] detailed the necessary steps to put pensions and OPEB in a more stable condition -- before the next cyclical recession strikes sometime later in this decade. Many of these steps have yet to be taken." (Governing)
Retirement Portfolios Recovering, Investors Still Shook Up
"Most advisors say their clients' retirement portfolios have largely rebounded, and 10% say that portfolios are in even better shape now than before the recession. But even so, the biggest worry, for boomer clients at least, is the possibility of another significant stock market decline, according to the majority of the advisors (60%) surveyed." (Financial Planning)
Many U.S. Workers Unprepared to Handle Financial Consequences of Unexpected Health Issues
"When asked how they would pay for out-of-pocket expenses due to an unexpected illness, more than half (57 percent) of respondents said they would have to tap into savings, 30 percent would use a credit card and 19 percent -- nearly one out of five people -- would have to withdraw funds from their 401k plans to cover the costs." (Wolters Kluwer Law & Business / CCH)
[Guidance Overview] Emerging Growth Companies Exempted From Certain Compensation-Related Reporting Requirements
"[T]he JOBS Act makes it easier for emerging growth companies to go public by providing them with relief from certain executive compensation reporting requirements otherwise required by the Dodd-Frank Act. This update covers only the executive compensation provisions[.]" (Practical Law Company)
A New Chapter of Pension Plan Woes
"Given the embattled state of many pension plans, workers and retirees relying on these plans for steady income may need to do some detective work.... [In order to] gain a basic understanding of the plan's financial health, review benefit statements for accuracy and stay abreast of developments in your employer's industry. Those steps can at least give you advance warning that an income stream is running dry. Here's a look at the twists and turns that may affect your benefits, along with tips for pension sleuthing." (Kiplinger)
Baby Boomers vs. Generation Y
"[T]oday's 20-some year olds (Generation Y, as they are called), have seen the struggles of their baby boomer parents and do not wish to experience the same fate. The good news is: they want to prepare for retirement; the bad news is: they are not sure how." (National Center for Policy Analysis)
How Important Is Asset Allocation To Financial Security In Retirement?
"This paper ... provides a stylized example of the tradeoff between returns and time spent in the labor force[,] ... uses data from the Health and Retirement Study (HRS) on pre-retirees aged 51-64 to see how the gap between retirement needs and retirement resources is affected by working longer, taking out a reverse mortgage, controlling spending, and shifting all assets to equities with no risk[, and]uses a simple dynamic programming model to calculate a risk-adjusted measure of the value for the average household of moving from a typical conservative portfolio to an optimal portfolio. The answer from all three exercises is the same: the focus on asset allocation is misplaced." (Boston College, Center for Retirement Research)
[Opinion] The Fiduciary Exemption That Swallows the Rule
"[T]he proposed rule doesn't appear to be much better than the current rule in helping rein in the bad conduct it's aimed at curbing.... [I]f (1) the broker represents that it isn't an ERISA fiduciary, (2) the broker isn't an ERISA fiduciary under either ERISA sections 3(21)(A)(i) or 3(21)(A)(iii), (3) the broker isn't an RIA, and (4) the broker doesn't provide individualized advice that's understood to be in connection with investment or management decisions with respect to plan assets, then it won't be considered as providing ERISA-defined 'investment advice' and therefore won't be an ERISA-defined 'fiduciary.'" (Morningstar)
[Opinion] The Great Compromise to the Fiduciary Debate
"The best way to resolve the fiduciary dilemma lies in subjecting both RIAs and broker/dealers to the 'sole interest' fiduciary standard of care found in ERISA." (Morningstar)
Pension Funding Index, March 2012
"The funded status of the 100 largest corporate defined benefit pension plans improved by $58 billion during March 2012.... The funded ratio improved from 82.0% at the end of February to 85.1% at the end of March.... The funded status improvement during the quarter was the largest first quarter calendar year increase (in dollars) ever recorded in the 12-year history of the Milliman100 PFI (and third best quarter ever)." (Milliman )
Recent Sixth Circuit Decision Makes It Tougher to Defend Plan Investment Decisions
"These holdings by the Sixth Circuit distinguish it from the rulings of other Circuit Courts.... ESOP fiduciaries ... may have to wait to rely on the presumption [of prudence] until there is a fully developed evidentiary record. Consequently, ESOP fiduciaries should be prepared to demonstrate prudence and reasonableness in their decisions surrounding the ESOP's investment in company stock.... The Sixth Circuit [also] held that the ERISA Section 404(c) safe harbor defense does not apply in this case because it does not relieve fiduciaries of the responsibility to monitor investments." (McDonald Hopkins LLC)
[Guidance Overview] Regulations Clarify Summary of Benefits and Coverage
"One rule concerning the SBC that may surprise plan sponsors is the sponsor's obligation to coordinate vendors of carve-out arrangements, such as prescription drug coverage. To avoid unnecessary duplication and to provide a "complete" SBC, if a plan has medical coverage and prescription drug coverage through different vendors, the plan sponsor must combine each vendor's model SBC into one SBC to provide to participants and to beneficiaries." (Faegre Baker Daniels)
[Guidance Overview] Can an Employer Require an Employee to Make Up Time Taken as FMLA Leave?
"[R]egulations (and several court decisions) make two general principles very clear: 1) employers cannot engage in conduct that discourages or otherwise 'chills' an employee from requesting or taking FMLA leave; and 2) employers must provide privileges and benefits to employees who take FMLA leave in the same manner they offer benefits to those on non-FMLA leave.... [R]equiring employees to make up FMLA leave is fraught with problems and invites litigation, as a court would very likely find that such a policy causes employees to refrain from requesting FMLA leave" (Franczek Radelet P.C.)
Institutionalizing 408b-2 Compliance in Financial Service Firms: New Responsibilities for the Securities Compliance Professional
"Because 408b-2, in particular, is a prohibited transaction rule, ... financial service firms have a huge economic stake in not just making the initial disclosure [under the DOL regulations], but also in making sure that permanent compliance procedures are established, implemented and audited on a routine basis. A number of firms are also beginning to take a closer look at their myriad of revenues streams to make sure that not only are they reported correctly, but that there is a Prohibited Transaction Exemption that otherwise permits the revenue." (Business of Benefits)
[Guidance Overview] EEOC Issues Rule Amending Its ADEA Regulation
"The amended regulation confirms that (1) the plaintiff bears the burden of 'isolating and identifying the specific employment practice' that allegedly causes any observed statistical disparities, and (2) the employer bears the burdens of production and persuasion to demonstrate the RFOA defense.... The regulation also ... provides a nonexhaustive list of considerations that are relevant in determining whether a practice is based on a reasonable factor other than age." (Morgan Lewis )
Program Perspectives on Health Benefit Costs by Wage Category (PDF)
[M]edical care benefit data by wage category--focusing on participation rates, the share of premiums paid by employers, and average monthly employer and employee medical care premium contributions. Originally published January, 2012. (U.S. Bureau of Labor Statistics)
[Official Guidance] PBGC Disaster Relief Announcements 12-03, 12-04, 12-05 and 12-06
Disaster Relief Announcements relating to PBGC deadlines, issued April 3, 2012, in response to severe storms in West Virginia, Tennessee and Indiana. (PBGC)
Best Practices in Workplace Eldercare (PDF)
41 pages. Includes case studies of eldercare programs at 17 leading employers including Aetna, CBS Corporation, Fannie Mae, Intel, Johnson & Johnson, Johns Hopkins University, Kimberly-Clark, UnitedHealth Group and the U.S. Chamber of Commerce. (National Alliance for Caregiving)
Another Question is Answered in the Who's the Employer Q&A Column
When calculating a sole proprietor or partner's earned income for retirement plan purposes, the reduction for "deductions for retirement plans allowed under Code 404" would INCLUDE the salary deferrals contributed for common law employees. Correct? (BenefitsLink.com)
IRS Notice 2012-28: Monthly Update for Weighted Average Interest Rates, Yield Curves and Segment Rates (PDF)
IRS-updated figures for pension plan administration as prescribed by Code sections 412, 417, 430 and 431 (the corporate bond weighted average interest rate for April 2012, the three corporate bond segment rates for April 2012, the 30-year Treasury securities weighted average interest rate for April 2012, and the three minimum present value transitional segment rates for March 2012). (Internal Revenue Service)
Case Challenging Public Pension Plan Reforms Moves Directly to Florida Supreme Court
"The Florida Supreme Court accepted a public pension case last week that challenges a law passed in July that requires public employees to contribute 3 percent of their paychecks toward their retirement.... Cutting 3 percent from a teacher's salary is a big hit. In Florida, a teacher earns $10,000 less than the national average and retirement benefits are also lower." (StateImpact Florida)
Retirement Planning in 2012 and Beyond
"Enjoying golf and the good life in retirement may seem, for many, to be more like a long shot than a hole in one.... [T]he key to financial security in retirement is to save as much as possible as early as possible, consider stocks and diversify among asset classes.... [Here is some] advice -- not on how to perform on the green, but how to save enough 'green' to someday retire comfortably." (Fox Business)
What Plan Sponsors Should Know About Fiduciary Status Under ERISA
A splendid nutshell description of a complicated topic. "[This presentation] concisely describes the basic concepts of fiduciary status under ERISA, as well as the implications of being a fiduciary. Equally importantly, the presentation focuses on the differences in the types of investment fiduciaries -- both investment advisory fiduciaries under Section 3(21) and investment manager fiduciaries under Section 3(38).... ERISA recognizes four categories of fiduciaries: Named Fiduciary, Investment Manager, Trustee and Investment Adviser." (Principal Financial Group)
Chasing the Carrot, Not Running from the Whip: Obamacare Can Live Even If the Mandate Dies
"[W]ork being done by economists, health policy experts, and lobbyists suggests there may be alternatives to the individual mandate that would rope healthy people into buying insurance in ways that don't attract legal challenges." (Bloomberg Businessweek)
For Now, Kodak Backs Off on Retiree Health Benefit Cuts
"Eastman Kodak Co. retirees facing possible cuts to their company-provided health care coverage have some additional breathing room. The company, in a filing Wednesday, sought U.S. Bankruptcy Court approval for creation of a retirees committee to represent their interests through Kodak's Chapter 11 process. Kodak also said it was yanking a previous motion seeking to end the Medicare Advantage plan it provides to post-1991 retirees who are eligible for the government health insurance program." (Democrat and Chronicle)
Anti-Alienation Rule Won't Apply to Corrupt Congressional Representatives; No Federal Pensions for Future Blagojeviches
"The federal STOCK Act [signed by President Obama on Wednesday includes language] that would take away the federal pensions of people convicted of certain corruption crimes.... Though his state pension was stripped, [former Illinois Governor Rod] Blagojevich's family can continue to receive his pension from his time in Congress because his conviction didn't pertain to his time in the U.S. House. The [STOCK Act] doesn't take Blagojevich's pension away. But it would prevent pensions from being handed out in similar future cases." (Daily Herald)
Federal Government's Thrift Savings Plan Has Appeal, and a Few Holes, Too
"Whereas some 401(k) plans feature overwrought menus of options, extra layers of administrative fees, and costly, also-ran funds, the TSP is a marvel of rock-bottom costs and a utilitarian lineup. At the same time, however, the TSP doesn't offer exposure to a handful of important asset classes, and the lineup also features a few additional quirks of which participants should be aware." (Morningstar)
Health Care Will Get Cheaper When We Hold CEOs Accountable for Costs
"[E]mployee health costs have now become the third largest expenditure for U.S. businesses, comprising 8 percent of total compensation today. And they are rising sharply -- more than doubling in just the last decade to over $15,000 per year for family coverage, 73 percent of that paid by the employer.... Yet most CEOs remain strangely passive ... Here are seven things CEOs can do to make a difference[.]" (Business Insider)
HR Directors Need to Prepare for DOL Fee Disclosure Rules
"While the disclosures to plan participants don't begin until August, HR leaders should be communicating now with employees to make sure they understand that such fees already exist -- even if they haven't been disclosed before.... [And] HR leaders should plan to communicate with service providers as soon as possible, reminding them about the deadline; and create a punch list that includes who they expect to receive the information from, including fiduciaries, advisers, recordkeepers, etc." (HR Executive)
Denial of Retirement Benefits Not Arbitrary Where Lack of Evidence of Eligibility
"A retirement plan administrator's denial of benefits was not arbitrary or capricious because the claim for benefits was 'largely based on speculation and hearsay,' there was a lack of evidence as to the former employee's eligibility for benefits, the plan demonstrated a substantial effort in researching the claim, and the plan supplied a plausible explanation for the former employee's ineligibility, according to the U.S. Court of Appeals [for the First Circuit]." (Wolters Kluwer Law & Business / CCH)
Estimating the Impact of the Medical Loss Ratio Rule: A State-by-State Analysis
"Using insurers' MLR data from 2010, this issue brief estimates the rebates expected in each state if the new rules had been in effect a year earlier. Nationally, consumers would have received almost $2 billion of rebates ... Almost $1 billion would be in the individual market, where rebates would go to 5.3 million people nationally. Another $1 billion would go to policies covering about 10 million people in the small- and large-group markets." (The Commonwealth Fund)
Legislators Trying to Limit University of California Employees' Covered Compensation to a Quarter-Million Dollars
"[A] two-house [California] legislative committee on pension reform ... is expected to include a [cap of $250,000 on covered compensation for employees in the University of California pension plan] ... [The UC plan,] which went two decades without employer or employee contributions, was 132 percent funded in 1999 when the regents delegated authority to exceed [the Internal Revenue Code 401(a)(17) cap,] a move deemed 'critical' for retention and recruitment.... [F]ederal approval came in 2007[.]" (CalPensions)
ERISA Violated When Construction Company Failed to Make Promised 401(k) 'Fringe Benefit' Contributions Under Government Contract
"[T]he now-defunct construction company was required to pay its workers an hourly prevailing wage rate, including a fringe benefit for each participant in the form of contributions to the retirement plan, when it was contracted to perform work on projects financed by government agencies [but] the company failed to remit more than $300,000 to the plan, choosing instead to use the money for general operating expenses. In addition to that amount, the judge's order requires the company to restore lost earnings [of approximately $200,000] to the plan." (Employee Benefits Security Administration)
Section 414(d) Advance Notice of Proposed IRS Regs Raises Issues for Governmental Pension Plans
"[P]lans of purported governmental agencies or instrumentalities that have long complied with the governmental plan rules previously articulated and administered by the IRS could, if their sponsors fail the new factor test for determining governmental entity status, have thrust onto them the costly burdens of ERISA and PBGC compliance at a time when they can ill afford them. [Further,] individual participants in qualified retirement plans sponsored by governmental entities of all types whose personal status as governmental employees may be in question, for example some charter school teachers, could, absent adjustments to the draft proposed regulations, find themselves excluded from future participation in such plans because of the requirement of the draft proposed regulations not to include any nongovernmental employees." (Strasburger)
New EEOC Regs Ramp Up Burden of Proof on Employer Defenses under ADEA
"While it is too early to predict how courts will apply this regulation, the new rule prompts employers to ask [the questions listed in this article] when implementing a reduction in force or any other employment practice that may have an adverse impact on older workers[.]" (Wilson Sonsini Goodrich & Rosati)
Public Pension Funds: Tens of Billions at Significant Risk
"To meet ambitious investment return targets, some public pension funds must now swing for the fences. But many are down two strikes already, due to their previous big bets with hedge funds." (Elliott Wave)
[Opinion] Highway Bill's Pension Language Makes Taxpayer Bailout of PBGC More Likely
"Taxpayers are already likely to have to send $23 billion to the PBGC, and the Senate's Highway Investment, Job Creation, and Economic Growth Act of 2012 (S. 1813), which reauthorizes transportation programs for the next two years, would almost certainly increase that amount significantly." (The Heritage Foundation)
Inspect the Fees in Your 401(k)
"It isn't easy to find that information, yet those fees can amount to hundreds of dollars a year or more and significantly reduce what you'll have when you retire. An AARP survey of plan participants 25 and older found that seven of 10 didn't know they were paying any fees at all.... That will change this summer when new disclosure requirements from the Department of Labor take effect." (The Wall Street Journal)
Are ETFs and 401(k) Plans a Bad Fit?
"'When the average employee understands more about performance and the fees they're paying, you'll start seeing more plan providers, especially smaller ones, include ETFs,' says Tom Lydon, CEO of Global Trends Investments, an advisory firm that publishes the ETF Trends website. 'But there are some plumbing issues in getting ETFs into 401(k) plans.'" (The Wall Street Journal)
Public Pension Pitfalls: What Municipal Budget Troubles Mean for Bond Investors
"Retirement benefits for public workers are at the heart of the conflict between state and local governments and the unions representing their workers -- and how that conflict gets resolved will affect investors in the municipal bonds issued by those states and cities." (The Washington Post)
PBGC's Gotbaum: There's a Place for Pension Plans Other Than DB
"'We think that traditional pension plans serve people better,' [Gotbaum said]. 'But -- and this is where I think it is important to recognize the realities -- it is also important to offer alternatives so that, as circumstances change, as companies change, as lifestyles change, we still have those kinds of plans.'" (Pensions & Investments)
SEC Study Suggests More Disclosures Needed For Target-Date Funds
"Most American investors mistakenly believe that target-date funds provide guaranteed income in retirement, among other misconceptions of how the instruments work, the SEC found in a recent investor survey.... Fewer than 30% of all survey respondents were able to identify the correct meaning of the year in a target-date fund's name ... [and] just 30% of respondents knew that the funds do not provide guaranteed income in retirement[.]" (Financial Planning)
Health Insurance Premiums to Rise for 1 Million Californians on May 1
"Four of the largest health insurance companies in California have increased premiums for 1.1 million Californians and small business owners by as much as 20% on April and May 1st according to data filed with state regulators ... The rate increases are the second or third for most policyholders over the last two years." (Consumer Watchdog)
Great Recession Causes More People to Claim Social Security Early; Who Are They? How Much Do They Lose?
"[This study projects] that high unemployment rates during the Great Recession led to a 5-percentage-point increase in the probability of claiming [Social Security retirement benefits] early relative to a less severe recession such as the 2001-2003 downturn, and this increase was nearly uniform across socioeconomic groups.... [E]stimates also suggest that while the Great Recession did impact the claiming decision, it did not cause a dramatic change in benefits." (Center for Retirement Research at Boston College)
FATCA Filing Requirements Apply to Employees Due to Employer-Sponsored Plans
"FATCA's reach is broader than you might think, as 'foreign financial assets' include ... an interest under a foreign pension or deferred compensation plan.... [I]t is strictly the employee's responsibility to make the required filing. However, [because penalties for failure to file are significant,] companies with a multinational and mobile workforce should consider alerting their employees to the possible filing obligation, if they have not already done so." (Winston & Strawn)
Alternative Investments in Your Portfolio: It's Time to Ditch the 10% Allocation Rule
"The rapid growth of liquid alternative mutual funds and exchange-traded funds, both in number and asset size, has challenged all definitions of alternatives, the perception of who should invest in them, and most important, how much should be invested in them.... Advisors and retail investors can now choose from a bewildering array of investments touted as alternative, [including] mutual funds and exchange-traded products invested in commodities, Treasury Inflation-Protected Securities, REITS, emerging- markets equities and bonds, listed private equity, infrastructure securities, equity volatility, and active strategies used by hedge funds." (Morningstar)
The Importance of a 'Deliberative Process': Plan Fiduciaries Found Liable for Breach of Fiduciary Duty in Important Revenue-Sharing Case
"The Court in [Tussey v. ABB Inc. (W.D. Mo. Mar. 31, 2012)] explained that while the methods the fiduciaries used were not per se breaches of any fiduciary duty, the fiduciaries� failure to conduct basic research and follow the plan�s own Investment Policy Statement -- coupled with their failure to make decisions based solely on the merits of the investments -- resulted in a breach of fiduciary duty.... As is often true in ERISA fiduciary litigation, the decision is less about the propriety of any particular action in the abstract (e.g., the use of revenue sharing to pay for plan fees and costs), and more about the importance of using careful process and investigation, with an eye towards the best interests of the plan and its participants." (Dorsey & Whitney LLP)
American Benefits Council's Position Paper on Defined Benefit Plan Funding Stabilization Legislation (PDF)
"Over the last few years, the government has made a concerted effort to keep interest rates artificially low in order to stimulate the economy. Unintentionally, this effort is having an extremely adverse effect on pension plan sponsors by inflating pension plan liabilities and funding obligations.... The Senate-passed Moving Ahead for Progress in the 21st Century Act (S. 1813) addresses this issue effectively in the short-term by basing pension plan interest rates on historical averages.... This paper addresses several policy questions have been raised concerning this proposal." (American Benefits Council)
FedEx's 401(k) and Misclassification of Employees as Independent Contractors
"[The recent Huffington Post] article is a good read because it contains updates about the various lawsuits FedEx has faced over the years, and the ineffective response from Congress to address this situation.... [Plan language], which was included in many EGTRRA prototype and volume submitter plan documents pre-approved by the IRS, ... may kill any potential recovery for the FedEx drivers for retirement benefits if a court determines that they were improperly classified as independent contractors." (The Pension Protection Act Blog)
[Guidance Overview] DOL Field Assistance Bulletin Clarifies Use of Plan Assets by Employer-Sponsored Apprenticeship and Training Programs
"The bulletin should assist employers in determining which types of program-related expenses are consistent with ERISA fiduciary obligations. In particular, abuses may result from: Lack of oversight of plan vehicles, equipment and inventory; Unreasonable instructor salaries and bonuses; [and] Excessive employee meal stipends that are not reasonably related to a plan's training program." (Practical Law Company)
Catholic University in Ohio to End Contraceptive Coverage
"The controversy [over federally mandated coverage for contraceptives, sterilizations and abortifacient drugs] prompted Xavier President Michael Graham, a Jesuit priest, to review the health insurance plan offered to the university's 935 employees. Graham announced this week in a letter to the faculty that the plan will cease to cover contraception on July 1." (Reuters)
Creating a Successful Due Diligence Process for Evaluating Investment Options (PDF)
"Building and monitoring an investment array for a qualified retirement plan is a complex task with numerous difficult decisions.... [T]his paper ... shows employers what to look for in a service provider's due diligence process." (Securian Financial Group)
Text of Comments by American Academy of Actuaries on HHS-Proposed 'Actuarial Value Calculator' (PDF)
"The Health Practice Council submitted a comment letter to the Center for Consumer Information and Insurance Oversight (CCIIO) providing responses to questions ... on the structure of a proposed actuarial value calculator (for purposes of the ACA). The letter addresses cost-sharing inputs for the calculator, incorporation of induced demand, number of geographic pricing tiers, and incorporation of multiple network tiers." (American Academy of Actuaries)
Is There a Better Way to Regulate Financial Planners?
"The SEC and FINRA have responded to criticism over missing some famous, large-scale frauds by jumping ever harder on advisors who played no role at all in that ugly sequence of mistakes.... The profession needs to take the initiative and create a blueprint for better 21st century regulation." (Financial Planning)
Pension Funding in United Kingdom Gets Worse as Ours Improves
"Pension fund deficits on either side of the Atlantic are moving in opposite directions despite similar sponsoring employer efforts as economic forces take over ... The largest companies' pension funds in the United States improved their funding ratios over the first quarter of the year, while their counterparts in the United Kingdom slumped in the time[.]" (Asset International)
Many Medical Tests and Procedures Aren't Needed, Doctors Say
"The lists will be publicized by Consumers Union's Consumer Reports, AARP and other consumer groups ... Many of the examples on the initial lists, such as imaging scans, focus on services and situations that have long drawn concern about overuse." (The Wall Street Journal)
Many Americans Just Not Capable of Managing Their 401(k)s to a Successful Retirement
"Consider the hurdles between every American with a 401(k) and a decent retirement: ... enroll in a plan at your company.... save enough. (Imagine what you think is enough. Then save more.) ... manage your investments intelligently through stock market highs and lows, tending to your portfolio every year ... when you retire, ration your money at just the right rate: not so little that you live uncomfortably but not so much that you run out. The result has been a system that works well for people who know how to use it. For many others, it's better than nothing, but it still may not be enough." (The Washington Post)
Can Health Care Reform Survive Without the Individual Mandate?
"Some experts estimate that removing the individual mandate will raise premiums an estimated 30% and diminish the number of newly insured by two-thirds (from 27 million additional people insured to just over 16 million). [Here are] a few examples of why[.]" (William Gallagher Associates)
Form 5500 Filing: The Importance of an Email Address
"5500 preparers and practitioners were not only surprised at how quickly the DOL started using EFAST2 to fulfill its stated purpose but also how the DOL used email to communicate with plan sponsors.... However, use of the filing signer's email address may pose problems if the filing signer does not monitor his/her email regularly, did not use a regular email address to obtain filing signer credentials, or used the preparer signature option and the preparer is no longer engaged with the plan (or maybe no longer in the business)." (SunGard Relius)
In a Nutshell: Supreme Court Oral Arguments About the Affordable Care Act
Scroll down target page to item entitled "Special report: Supreme Court argument about the Affordable Care Act." (Deloitte Center for Health Solutions)
DOL Activity Increasing on Form 5500 Filings (PDF)
"Plan Sponsors are receiving notices regarding 5500 issues on both retirement and health and welfare plans. There is a 10 business day turnaround on requested information[.]" (ERISAdiagnostics)
The Ten Commandments for a Plan Sponsor's Selection of a Mutual Fund as a 401(k) Investment Option
"While the four steps to a well-documented 401k investment due diligence process just fell in our laps, getting into the nitty-gritty of the first two steps -- the identifying the selection and monitoring processes -- might prove a tad bit more laborious.... [The authors] trust this represents a Decalogue possessing both credence and compatibility." (Fiduciary News)
Drafting ERISA: What Were They Thinking?
An informative and entertaining video presentation entitled "ERISA: What Were They Thinking?" by three of the principal drafters of ERISA: Frank Cummings, Bob Nagle and Henry Rose. Presented at the Pension Rights Center's recent National Training Conference for the U.S. Administration on Aging's Pension Counseling and Information Program. (Pension Rights Center)
And Then There Were Two: Express Scripts Completes Medco Acquisition
"The three biggest [pharmacy benefit management companies] were reduced to two Monday when Express Scripts Inc., completed its $29.1 billion acquisition of Medco Health Solutions Inc.... The deal went through once the Federal Trade Commission said ... it would not block the move, but that decision was controversial and will not end a legal fight, if independent pharmacists have any say." (The Philadelphia Inquirer)
Strong Quarter Boosts U.S. Pension Plan Funding Ratios
"The funded status of U.S. corporate pension plans rebounded to around 80% as of March 31, buoyed by the strongest quarter for U.S. equity markets in more than a decade[.]" (Pensions & Investments)
Women: What You Need to Know About Financial Literacy
"As a woman, you need to assign a high priority to retirement planning, making your best effort to balance it with your other day-to-day and long-term priorities. With employer-paid pension and retiree health benefits being eliminated or scaled back, your retirement security is no longer something you can assume will be taken care of on your behalf. You need to take ownership, planning jointly with your spouse or partner if you have one." (TIAA-CREF)
Baby Boomers: What You Need to Know About Financial Literacy
"[F]or you, retirement is likely to be worlds apart from the old paradigm. Among other new challenges to your retirement security, you're faced with the decline of pension plans, a global economic downturn, an uncertain future for Social Security, rising health care costs and increasing life expectancies." (TIAA-CREF)
SEC Seeks Comments on Investor Testing for Target Date Retirement Funds
"The Commission [has reopened the comment period for a proposed rule] issued in 2010 intended to enhance the information provided to individuals investing in such funds. That proposed rule would generally require target date retirement funds to more prominently disclose the fund's asset allocation at the target date." (Securities and Exchange Commission)
Retirement Plans of African-Americans and Hispanics Hit Especially Hard During Tough Economy
"African-American employees took hardship withdrawals more than any other ethnic group. Fully 8.8 percent of African-Americans took hardship withdrawals in 2010, compared to 3.2 percent of Hispanics, 1.7 percent of whites and just 1.2 percent of Asian workers." (MarketWatch)
Employers See Wellness Programs as Key to Improving Employee Health and Containing Rising Health Care Costs
"[W]hile 79 percent of large and 44 percent of midsized companies offer wellness programs, over 60 percent of these companies do not measure their return on investment. Yet, the majority of midsized and large companies report their wellness programs met or exceeded their senior executives' expectations in regards to reducing overall healthcare costs." (MarketWatch)
Deferred Retirement Option Plan Is Good Deal for Employees But Draws Criticism in Jacksonville
"The guaranteed 8.4 percent annual return on investment [is] unusual among large Florida cities ... The DROP payments, experts say, aren't a huge portion of the [city's annual pension] contribution, which has been increasing because of poor investment returns, retroactive changes to benefits and funding decisions made in the past. But the size of the lump-sum payouts, combined with the guaranteed rate of return, creates difficulties." (The Florida Times-Union)
Merrill Lynch Jumps on Fiduciary Bandwagon But Critics See Lingering Conflicts
"Merrill Lynch recently announced that it will permit an elite group of its specialized consulting advisors the opportunity to become designated to provide fiduciary services to clients.... [Some] industry leaders question whether the firm can shed conflicted advice in favor of a strict fiduciary standard.... [O]thers see this as a huge game changer in the 401(k) arena and that RIAs in jeopardy of losing business will now need to step up their game in order to keep retirement accounts." (RIABiz)
Beyond the Affordable Care Act: An Economic Analysis of a Unified System of Health Care for Minnesota
"[This study] modeled a comprehensive plan covering medical, mental health and dental benefits, eliminating deductibles and coinsurance, while using only minimal copays on specialists, hospitalizations, procedures, and diagnostic tests, with coverage for all Minnesota residents.... Total state health spending [could] be reduced by nearly 9% under a unified single-payer plan ... while eliminating uninsurance in the state.... [and] despite covering the remaining 262,000 Minnesotans who would still be uninsured under the ACA." (Growth & Justice)
[Guidance Overview] Reg Z Doesn't Stop Mortgage Loan Originators from Participating in Tax-Qualified Retirement Plans
"[The Consumer Financial Protection Bureau] advises that the current loan originator compensation rule permits 'employers to contribute to Qualified Plans out of a profit pool derived from loan originations.' To emphasize the point, the CFPB also advises that the rule allows financial institutions to 'make contributions to Qualified Plans for loan originators out of a pool of profits derived from loans originated by employees.'" (Ballard Spahr LLP)
Effects of Employer Health Costs on the Trend and Distribution of Wages Subject to Social Security Payroll Tax
"The increasing cost of employer contributions for employee health insurance reduces the percentage of compensation that is subject to the payroll tax. Rising insurance contributions can also have a more subtle effect on the Social Security tax base because they influence the distribution of money wages.... [T]he effect of health cost trends [in 1996-2008] exerted a disproportionate downward pressure on money wages below the taxable maximum, reducing the percentage of compensation subject to the payroll tax.... The main long-term impact of reform on the taxable wage base is likely to be through its effect on the trend in underlying health care costs." (Boston College, Center for Retirement Research)
Court Says PBGC Owes Interest to US Airways Employees for Delay in Making Pension Payments
"[The U.S. Court of Appeals for the District of Columbia] affirmed a ruling that a 45-day delay [by the Pension Benefit Guaranty Corporation] in making a lump-sum payment from a U.S. Airways pension plan is unreasonable. An analysis U.S. Airways conducted during the 1990s found calculation of a lump-sum payment took, at most, 21 business days[.]" (PLANSPONSOR.com)
More Young Employees Seeking Jobs with Pensions
"A recent Towers Watson survey found that people under 40 are increasingly going to work for and staying with employers that provide better retirement benefits. The proportion of workers under age 40 who consider the retirement program an important factor in accepting their job more than doubled from 28 percent in 2009 to 63 percent in 2011[.]" (U.S. News & World Report)
Computer Modeling Exemption from Fiduciary Status Offers Broker-Dealers Big Opportunity
"A little-known Department of Labor regulation has the potential to expand the reach of investment advice, improve its quality and untap a substantial flow of retirement money in motion. So says Lou Harvey, head of the financial services market research firm Dalbar, with respect to ERISA 408(g), an exemption that permits advisors to use a certified computer model for advice delivery and be absolved of any fiduciary liability." (AdvisorOne)
Transforming Our Health Care System Is Not Going to Be Easy, But It Is Necessary
"[In a recent op-ed piece, America's Health Insurance Plan's] President and CEO Karen Ignagni ... explains the challenges facing the health care system including ever-increasing costs, and how health plan tools are helping change the system for the better. Here are some highlights from her essay[.]" (AHIP)
Contrary to Predictions, Boomers Are Retiring in Droves (PDF)
"The study reports that 59% of the first Boomers to turn 65 are at least partially retired -- 45% are completely retired and 14% are retired, but working part-time. Of those still working, 37% say they'll retire in the next year and on average plan to do so by the time they're 68. Half (51%) of those who are retired say they retired earlier than they had expected. Of those who retired early, four-in-ten say they did so for health reasons." (MetLife Mature Market Institute)
Curtailing Tax Treatment of 401(k)s Could Reduce Balances
"[The Employee Benefit Research Institute's] report is the first to analyze the response of both private-sector 401(k) plan sponsors and participants to a proposed scenario where the current tax treatment of employer and worker pre-tax contributions would be modified such that workers would have to pay federal taxes on these amounts currently, rather than on a deferred basis, and participants would receive an 18 percent government match on all contributions." (ERISA Industry Committee)
Text of MetLife Study on Baby Boomers: 'Transitioning Into Retirement'
"Almost one-half (45%) of 65-year-old Boomers are now fully retired (up from 19% in 2008)." (MetLife Mature Market Institute)
Federal Judge Takes U.S. Attorney to Task Over Obama's Comments on Supreme Court's Jurisdiction to Review Health Care Law
"During oral arguments in Houston in a separate challenge to another aspect of the federal health care law, U.S. 5th Circuit Court of Appeals Judge Jerry Smith said Obama's comments troubled a number of people who have read them as a challenge to the authority of federal courts.... Judge Smith ordered [Justice Department attorney Dana] Kaersvang to submit a letter to the appeals court by Thursday stating the position of U.S. Attorney General Eric Holder and the Justice Department on the concept of judicial review." (The Washington Post; free registration required)
Federal Judge Says Fidelity Made Participants Pay Excessive 401(k) Plan Fees
"[A federal district court in Missouri has ruled that a plan sponsor] violated its fiduciary duties to the plan when it had removed [a Vanguard fund] from the plan, ... replacing it with the Fidelity Freedom Funds, and paying Fidelity an amount that exceeded market costs for plan services in order to subsidize ABB's corporate services. [The judge also] ruled that Fidelity Trust breached its fiduciary duties by failing to distribute float income solely for the interest of the plan [and that] Fidelity Research violated its fiduciary duties when it transferred float income to the plan's investment options instead of the plan." (On Wall Street)
DOL Prompts Large Plans About Reporting of Mutual Fund Investment Management Fees
"Several weeks ago the DOL [contacted] over 600 ... plan sponsors requesting that the plan amend its Form 5500 filing to include a Schedule C or provide an explanation as to why the plan did not need to include a Schedule C with its filing. The letter noted that the plan reported investments in mutual funds on the Schedule H, and therefore normally would have investment management fees to report.... This Technical Update will address the mutual fund investment management fee reporting requirements." (SunGard Relius)
Supplemental Group Health Insurance Benefit Strategies for Retirees
"As employers consider alternatives to offering retirees traditional group Medicare insurance, they may evaluate more than one supplemental insurance solution. Employers often compare an Employer Group Waiver Plan (EGWP) solution with a private Medicare exchange ... Both solutions offer some clear benefits[.]" (Extend Health)
[Guidance Overview] EEOC Clarifies 'Reasonable Factors Other Than Age' Standard
"Although the EEOC purports to agree that Title VII's business necessity defense is inapplicable in an ADEA case -- and that the RFOA defense is less strict than the business necessity defense -- the EEOC's articulation of the above-listed RFOA factors could have the practical effect of requiring employers to meet the more demanding business necessity showing." (Ballard Spahr)
Wrap-Up on Constitutional Challenges to the ACA
"As volatile as the oral argument was at times, and as plainly as a few of the Justices displayed their apparent support of, or skepticism about, the ACA's constitutionality, the deliberations and drafting process may temper some of the more polarized views displayed in open court." (E for ERISA)
EBSA Issues Field Assistance Bulletin on Apprenticeship Funds' Graduation and Marketing Expenses
"EBSA stated that with few exceptions, apprenticeship or other training programs are considered employee welfare benefit plans subject to ERISA. The apprenticeship and training program fiduciaries must abide by the general fiduciary standards in Part 4 of ERISA.... [they] must be able to justify plan expenses as appropriate means of carrying out the plan's mission of training workers." (International Foundation of Employee Benefit Plans)
Videos on Retirement Security, as Recommended by the International Foundation of Employee Benefits Plans
"The current legislative and financial climate has generated unprecedented levels of concern about the future of retirement and financial security amongst all Foundation members. It stems from a confluence of events that include the country's worst financial crisis since the Great Depression, the changing role of the employer in the provision of retirement benefits, expanded accounting and regulatory disclosures and liabilities and the ever-increasing costs of health care." (International Foundation of Employee Benefit Plans)
Defined Benefit Plan Funding: A Downloadable Excel Spreadsheet for What-If Scenarios
"Because this model has distilled the mechanics of a pension fund to a single page of data and calculations, it offers a glimpse of how pensions operate that is relatively understandable and extremely transparent. This model is not intended in any way to replace the far more complex models used by actuaries, but it can be quite useful to illustrate, for example, how very sensitive the required annual contribution to a pension is to any change in other assumptions -- especially the rate of return." (Union Watch, a project of the California Public Policy Center)
Downturn Leads to Rise in Costly 401(k) Loans by Minorities
"While millions of workers used money from their retirement savings to pay expenses during the Great Recession, African Americans and Hispanics dipped into their 401(k) plans at a much higher rate." (USA TODAY)
Health Exchanges Already Offering Large Companies Cost Control
"While state insurance exchanges are mandated by healthcare reform to be up and running by 2014, some private health insurance exchanges that target corporations are already doing business, suggesting that healthcare benefits may follow retirement benefits' shift to a defined-contribution model." (Treasury & Risk)
Four Easy Steps 401(k) Plan Sponsors Can Take to Insure a Well-Documented Investment Due Diligence Process
"What the DOL desires, quite simply, is to see a clearly articulated process that the 401k plan sponsor faithfully implements and executes continuously. The DOL doesn't want to get in the middle of the active vs. passive debate or the value vs. growth argument. As long as 401k plan sponsors act consistently to an established due diligence process, they have fulfilled at least this portion of their fiduciary duty." (Fiduciary News)
Funded Status of U.S. Pensions Rises More than Three Percentage Points in March 2012
"The best quarter for U.S. equity markets in a decade helped to drive the funded status of the typical U.S. corporate pension plan in March 3.6 percentage points higher to 79.8 percent, according to BNY Mellon Asset Management. U.S. stocks have now risen for six consecutive months." (BNY Mellon)
ML Strategies Health Care Reform Update, April 2, 2012 (PDF)
Read this week's update on health care reform legislation, regulations, and initiatives. (ML Strategies, LLC)
Nearly Half of All Employer Plans Have Zero In-Network Deductibles
"[The 2012 Medical Plan Trends Report] revealed that the difference between in- and out-of-network costs employees face has increased substantially since 2011. For example, out-of-network primary care physician co-pays are now 53% higher than in-network co-pays, compared to a difference of just 16% in 2011." (HighRoads)
Bipartisan JOBS Act Provides Significant Reforms to Public and Private Securities Offerings
"Some provisions, such as the IPO-related ones, are effective immediately upon signing into law, and some, such as the elimination of general solicitation in Rule 506 offerings, crowdfunding and the new small issue exemption, will require adoption of related SEC rules." (Faegre Baker Daniels)
[Opinion] New York Public Workers Rush to Join Pensions
"Unions acted rationally and were right to inform their members of changes to the legislation, prompting this surge in applications. It was a no-brainier for members to lock in pensions." (Pension Pulse)
List of Key Tax Provisions in the Affordable Care Act
"The following is a list of provisions now in effect; additional information will be added to this page as it becomes available." Items listed on the page, with useful hypertext links to IRS official documents, include: Small Business Health Care Tax Credit; Reporting of Health Coverage for Employees Is Voluntary for All Employers for 2011 and Small Employers for 2012; Changes to Flexible Spending Arrangements; Health Insurance Premium Tax Credit; Health Coverage for Older Children; Group Health Plan Requirements; Medical Loss Ratio (MLR); and Limitation on Deduction for Compensation Paid by Certain Health Insurance Providers. (Internal Revenue Service)
Text of EBSA Field Assistance Bulletin No. 2012-01: Use of Plan Assets by Apprenticeship and Training Plans for Graduation Ceremonies and Program Marketing
"The Regional Offices have asked whether the use of plan assets for such purposes violates ERISA's exclusive purpose and fiduciary duty requirements.... [W]e would not treat the plan�s payment of expenses associated with a modest graduation ceremony attended by graduating apprentices, family, plan officials, and other persons connected with the program or industry outreach, including light refreshments, as an impermissible use of plan assets provided [these conditions are met: ...] Similarly, we believe that certain outreach expenses related to the program can be paid for by the apprenticeship and training plans consistent with ERISA�s fiduciary requirements." (Employee Benefits Security Administration)
Defining an Advisor's 'Fiduciary' Status: Legal, Behavorial and Principles Standpoints
"What does it mean when financial advisors say they are serving in a fiduciary capacity? Can they say they are fiduciaries even if they don't acknowledge it in writing? How similar are the best practices associated with a suitability standard to those of a fiduciary standard? Can an advisor who is subject to a suitability standard still offer clients a fiduciary standard of care?" (Financial Advisor)
The Anatomy of the Boomer Retirement Market
"Beginning in 2010, the first group of boomers reached retirement age. It is now time to properly characterize this generation of Americans born between 1945 and 1964 so that advisors can truly appreciate the colossal nature of the task at hand." (Financial Advisor)
The Role of REITs and Listed Real Estate Equities in Target Date Fund Asset Allocations (PDF)
"[W]e demonstrate that an allocation to U.S. or global listed REITs and real estate equities increases the expected long-term investment performance and diversification benefits of a retirement savings and investment portfolio, and in particular, a target date investment portfolio." (Wilshire)
Senate Bill Introduced to Extend Variety of Federal Employee Benefits to Same-Sex Partners
"Legislation that would allow a range of benefits for same-sex domestic partners of federal employees gained a boost last week with the announcement of 20 new Senate co-sponsors and the endorsement of 35 organizations.... In addition to health benefits, under the Lieberman/Collins Domestic Partnership Benefits and Obligations Act, same-sex domestic partners of federal workers living together in a committed relationship could get retirement, family and medical leave and long-term care benefits." (The Washington Post; free registration required)
Public Support for Individual Mandate Is Low, But Study Says It Would Affect Few, Stabilize Insurance Market
"A recent study by the Urban Institute found that 'if the ACA were in effect today, 94 percent of the total population (93 percent of the nonelderly population) or 250.3 million people out of 268.8 million nonelderly people -- would not face a requirement to newly purchase insurance or pay a fine.'" (Wolters Kluwer Law & Business / CCH)
Union Can Be Required to Indemnify Employer for Withdrawal Liability
"In Shelter Distribution Inc. v. General Drivers, Warehousemen & Helpers Local Union No. 89, the [court] held that it is not a violation of public policy for a union to indemnify an employer through a provision in a collective bargaining agreement (CBA) for contingent withdrawal liability under the Multiemployer Pension Plan Amendments Act of 1980 (MPPAA) to a multiemployer pension plan covered under [ERISA]." (Practical Law Company)
Retirement Assets Total $17.9 Trillion in Fourth Quarter 2011
"Total U.S. retirement assets were ... up 4.9 percent in the fourth quarter of 2011 and about unchanged for the year. Retirement savings accounted for 36 percent of all household financial assets in the United States at the end of 2011." (Investment Company Institute)
Defined Contribution Plan Participants' Activities, 2011 (PDF)
"The small share of participants that stopped making contributions in 2011 was slightly higher than the share that stopped contributing in 2010. In 2011, 2.7 percent of DC plan participants stopped contributing, compared with 2.4 percent during 2010." (Investment Company Institute)
Should Households Base Asset Decumulation Strategies on Required Minimum Distribution Tables? (PDF)
"Households managing wealth decumulation in retirement must trade off the risk of outliving their wealth against the cost of unnecessarily restricting their consumption. Devising an optimal decumulation plan, reflecting uncertain mortality and asset returns, is well beyond the abilities of most households, who likely rely on rules of thumb. Using numerical optimization, we compare one such rule of thumb -- consuming the age-related percentage of remaining wealth specified in the IRS Required Minimum Distribution ... tables -- with alternatives and with the theoretical optimal." (Center for Retirement Research at Boston College)
Why Health Care Isn't Broccoli: Some Basic Economics
"It isn't often that the course of history turns on principles taught in freshman economics. But the fate of the health reform legislation is now in jeopardy in part because some Supreme Court justices have so far failed to grasp such principles.... When someone consumes broccoli, one is not normally imposing costs on other consumers that make broccoli more costly or unaffordable. Furthermore, broccoli is not vital to preserving life or reducing pain." (Brookings)
Repercussions for Stock Plans in the JOBS Act
"The JOBS Act [Section 501] now greatly expands the exception for private companies and stock plan awards by amending [a section of the 1934 Act] to read as follows: (A) within 120 days after the last day of its first fiscal year ended on which the issuer has total assets exceeding $10,000,000 and a class of equity security (other than an exempted security) held of record by either -- (i) 2,000 persons, or (ii) 500 persons who are not accredited investors (as such term is defined by the Commission)[.]" (Winston & Strawn LLP)
* ERISA: What Were They Thinking in 1974?
* Video of an informative and entertaining presentation entitled "ERISA: What Were They Thinking?" by three of the principal drafters of ERISA -- Frank Cummings, Bob Nagle and Henry Rose. Presented at the Pension Rights Center's recent National Training Conference for the U.S. Administration on Aging's Pension Counseling and Information Program. (* Pension Rights Center)
ERISA -- What Were They Thinking in 1974?
View an informative and entertaining video presentation entitled "ERISA: What Were They Thinking?" by three of the principal drafters of ERISA -- Frank Cummings, Bob Nagle and Henry Rose. Presented at the Pension Rights Center's recent National Training Conference for the U.S. Administration on Aging's Pension Counseling and Information Program. (Pension Rights Center (Washington, D.C.))
House Ways and Means Committee to Hold Hearing on Potential Reform of Tax-Favored Retirement Vehicles
"This tax reform hearing -- scheduled to occur on tax filing day -- will examine one source of complexity for individuals and employers by reviewing employer-sponsored defined contribution plans as well as Individual Retirement Accounts ("IRAs"). The hearing will take place on Tuesday, April 17, 2012[.]" (U.S. House of Representatives, Committee on Ways and Means)
What's Working Around the World: Global Insights on Employee Engagement
A "flipbook" that should open in your web browser. "The e-book provides a ... look inside the minds of today's employees, featuring insights and trends on benefits, retirement, pay, career, company, job and life. The e-book also discusses how survey findings vary by region and employee age group. Key findings of the research reveal a significant drop in employee engagement worldwide, a serious challenge to productivity and company performance." (Mercer)
[Guidance Overview] Process for Confidential Submission of Draft Registration Statements for Emerging Growth Companies under the JOBS Act
"Until the SEC implements a system that provides for electronic transmission and receipt of confidential submissions, draft registration statements must be submitted in a text searchable PDF file on a CD/DVD. They may also be submitted on paper.... The EGC should include a transmittal letter in which it confirms its EGC status." (Hinshaw & Culbertson LLP)
[Opinion] U.S. Chamber Outlines Path Forward for Private Retirement Benefits
"[T]his white paper [offers] a path on initiatives and reforms that build on existing institutions and approaches to bolster the voluntary employment-based retirement benefits system and enhance retirement security for workers. The ideas in this paper represent a long-term view of retirement changes that are needed. While some steps can be implemented immediately, ... other steps may require additional time.... [R]ecommendations include ways to encourage employers to create and maintain retirement plans, to encourage workers to save more, and to identify ways to make retirement assets last for future retirees. " (U.S. Chamber of Commerce)
City Leaves Tennessee's Defined Benefit Plan, Switches to Its Own Defined Contribution Plan
"[C]ity and elected leaders say [the move to a 401(a) retirement plan with a 457(b) supplement to accommodate voluntary employee contributions will] give the Model City more predictable and stable retirement costs.... Over the past decade, Kingsport�s contribution rate to TCRS has doubled to about $6 million annually � or slightly more than 16 percent of its payroll." (timesnews.net)
California Lawmakers Considering Tax-Free HSA Contribution Bill
"California is one of three states that don't currently follow the Internal Revenue Code for HSA tax benefits. Alabama allows pre-tax contributions only if made through a cafeteria plan; New Jersey generally prohibits all pre-tax employee contributions and doesn't allow a deduction. Wisconsin recently amended its tax code to allow tax-free HSA contributions. If enacted, the state tax exclusion or deduction would apply to tax years beginning on or after Jan. 1, 2013." (Mercer)
Across the States, Teacher Pension Problems, and Changes, Fuel Political Debate
"It is very difficult to directly compare public-employee pensions; individual states each have their own rules, and funds, cautioned Gary Olson, a former Senate Fiscal Agency director currently preparing a paper on Michigan's school-employee pension bind. But, in general, elsewhere in the Midwest, states are taking the same steps Michigan is deploying in trying to shore up underfunded pension systems: increasing contributions and changing eligibility rules." (MLIVE)
[Guidance Overview] Employer Reporting under Health Reform: How Much Is Too Much, the IRS Wants to Know
"The agency requests comments on questions including: (1) how to determine when an individual's coverage begins and ends; and (2) how to minimize duplication in reporting." (Thompson / Smart HR Manager)
[Official Guidance] Text of 'Set 9' of Affordable Care Act Implementation FAQs: Additional Guidance on Summary of Benefits and Coverage
14 new Q&As, issued May 11, 2012. Excerpt: "Are there any additional safe harbors for electronic delivery of SBCs? [Answer:] Yes. The Departments have adopted the following additional safe harbor. SBCs may be provided electronically to participants and beneficiaries in connection with their online enrollment or online renewal of coverage under the plan. SBCs also may be provided electronically to participants and beneficiaries who request an SBC online." The FAQs also state that "[D]uring this first year of applicability, the Departments will not impose penalties on plans and issuers that are working diligently and in good faith to comply." (U.S. Department of Labor; U.S. Department of Health and Human Services; U.S. Department of the Treasury)
[Official Guidance] Agencies Publish Revised Summary of Benefits and Coverage Template and Related Documents
Q&A 14 in Part IX of "FAQs About ACA Implementation" explains the changes: "In the diabetes treatment scenario, the version originally posted contained a typographical error, listing the allowed amount for insulin as $11.92, rather than $119.20 -- a difference that impacts the total cost of care for diabetes in the coverage example calculations. To correct this error, the Departments have posted updated versions of the SBC template, the sample completed SBC, and the guide for coverage examples calculations - diabetes scenario. The updated SBC template and sample completed SBC also include sample taglines for obtaining translated documents ... as well as updated Sample Care Costs amounts for the diabetes coverage example, due to more accurate rounding in making these calculations. Finally, the updated versions include some appearance modifications (such as changes in bolding, underlining, shading, capitalization, margin justification, use of hyphens, and row and column sizing) to ensure the document is accessible to individuals with disabilities, consistent with section 508 of the Rehabilitation Act. Plans and issuers may use either version, or may make similar modifications to their own SBCs, without violating the appearance requirements for an SBC. The updated versions of these documents are labeled 'corrected on May 11, 2012' in the lower right corner of the first page and are available at www.dol.gov/ebsa/healthreform and cciio.cms.gov. These three documents replace the prior versions issued contemporaneously with the final regulations in February 2012." (U.S. Department of Labor; U.S. Department of Health and Human Services; U.S. Department of the Treasury)
[Guidance Overview] Final EBSA Fee Disclosure Requirements Addressed in Field Assistance Bulletin 2012-02
"It is clear from the text of the FAB that the DOL has no intention of extending either [the participant-level nor the service provider] disclosure deadlines. However, in Q&A 37, the DOL recognizes that many service providers and plan administrators may have initiated or even made disclosures prior to publication of the FAB based on interpretation of the regulations and may be unable to modify their disclosures by the deadlines without unreasonable difficulty or cost." (Warner Norcross & Judd LLP)
[Guidance Overview] Final EBSA Fee Disclosure Requirements Addressed in Field Assistance Bulletin 2012-02
Nicely describes each of the 38 FAQs. Excerpt: "The [DOL Field Assistance Bulletin, or 'FAB'] states that the DOL will take into account whether service providers and plan administrators acted in good faith based on a reasonable interpretation of the regulations and, if so, will refrain from enforcement actions as long as the service provider or plan administrator has a transition plan for conforming to the requirements of the FAB." (Warner Norcross & Judd LLP)
How Does Health Reform Affect Rural America?
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. (Robert Wood Johnson Foundation)
Personal Fiduciary Liability Under ERISA: Your Obligations Can Follow You Into Bankruptcy (PDF)
"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." (Lockton)
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