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Statement of Paul Van de Water on the 2014 Medicare Trustees' Report

"Health reform, along with other factors, has significantly improved Medicare's financial outlook, boosting revenues and making the program more efficient. The HI trust fund's projected exhaustion date of 2030 is 13 years later than the trustees projected before the [ACA]. And the HI program's projected 75-year shortfall of 0.87 percent of taxable payroll is down from last year's estimate of 1.11 percent and much less than the 3.88 percent that the trustees estimated before health reform."

As Gasoline Prices Rise, Firms Get Creative -- Offer Telecommuting, Van Pools, More to Help Workers

Excerpt: As gasoline breaks the $2.50 a gallon barrier, creative energy-saving ideas are beginning to flow from US business that could help Americans spend less at the pump. More companies are helping employees cut out-of-pocket fuel expenses through telecommuting programs.

2020 PEPRA Compensation Limits for CalPERS and CalSTRS Pension Plans

"The 2020 PEPRA compensation limits are $126,291 for Social Security members and $151,549 for non-Social Security members. These limits are the maximum pay that a California public agency can recognize in a defined benefit plan for PEPRA members, i.e. those first hired by a public employer in 2013 or later. 'Classic' members hired from 1996 through 2012 are subject to the higher Section 401(a)(17) pay limit that applies to private sector employees."

Pension Lump Sums Less Expensive in 2019

"The lump sum mortality basis changed substantially in 2018, but there's only a minor update in 2019.... It's unclear which direction interest rates will move during 2019.... In addition to lump sum payout programs, plan sponsors should consider annuity purchases and additional plan funding as ways to reduce long-term plan costs/risks."

2019 PEPRA Compensation Limits

"The 2019 PEPRA compensation limits are $124,180 for Social Security members and $149,016 for non-Social Security members. These limits are the maximum pay that a California public agency can recognize in a defined benefit plan for PEPRA members, i.e. those first hired by a public employer in 2013 or later."

What's the Effect of 2019 IRS Retirement Plan Limits?

"Employers may find that slightly fewer participants meet the new HCE compensation criteria, which could have two direct outcomes: [1] Plans may see marginally better nondiscrimination testing results ... [2] Fewer HCEs means that there are fewer participants who must receive 401(k) deferral refunds if the plan fails the ADP test.... Individuals could potentially get up to $37,000 from employer matching and profit sharing contributions ($56K-$19K) if they maximize their DC plan deductions."

Professional Firm Retirement Plans and the New QBI Tax Deduction

"The combined effect of the retirement plan and QBI deductions can be astonishing. Let's take the example of Rachel, a 50 year old married partner in a successful LLC. Her share of the firm's profits is $376,000. If she maximizes her 401(k) deferral and the firm maximizes her profit sharing contribution (total of $61,000 with catchup), her taxable income has dropped to $315,000. She's entitled to the $61,000 deduction and, in addition, she can now deduct the entire 20% of QBI."

2018 California PEPRA Compensation Limits

"The 2018 [California Public Employees' Pension Reform Act of 2013 (PEPRA)] compensation limits are $121,388 for Social Security members and $145,666 for non-Social Security members. These limits are the maximum pay that a California public agency can recognize in a defined benefit plan for PEPRA members, i.e. those first hired by a public employer in 2013 or later."

What's the Impact of 2018 IRS Retirement Plan Limits?

"Highly-paid participants will now have more of their compensation 'counted' towards qualified plan benefits and less towards non-qualified plans. This could also help plans' nondiscrimination testing if the ratio of benefits to compensation decreases.... This is the fourth year in a row that the HCE compensation limit has been stuck at $120,000.... [E]mployers may find that more of their employees become classified as HCEs.... Plans may see marginally worse nondiscrimination testing results (including ADP results) if more employees with large deferrals or benefits become HCEs. It could make a big difference for plans that were previously close to failing the tests.... [I]ndividuals who have very large DB benefits (say, shareholders in a professional firm cash balance plan) could see a deduction increase if their benefits were previously constrained by the 415 dollar limit."

2017 Pension Lump Sums Are Looking More Affordable

"Although the projected 2017 lump sum costs are still higher than 2016, the increases are only half of what we were expecting a month ago. It remains to be seen if rates continue their upward trend, but the reduction in anticipated lump sum cost increases may encourage more plan sponsors to embrace pension risk transfer (PRT) strategies like lump sum windows for terminated vested participants."

2016 Pension Accounting Preview: A Positive Outlook

"Many [DB] plan sponsors are aware that interest rates dropped significantly in the first half of 2016 but staged a remarkable rise since the November election. Combined with relatively strong equity returns, 2016 year-end pension disclosures may not be as bad as expected 6 to 8 weeks ago."

Pension Lump Sums Are Likely to Be More Expensive in 2017

"Although many DB plans will likely use the November or December rates as their 2017 lump sum payment basis, the October rates are good indicators of what 2017 lump sum costs might look like. This [article] shares a brief update of the impact these rates could have on 2017 lump sum payout strategies.... [A table and chart] compare the November 2015 rate basis (used by most plans for 2016 lump sums) to the October 2016 basis."

What's the Impact of 2017 IRS Retirement Plan Limits?

"High-paid participants will now have more of their compensation 'counted' towards qualified plan benefits and less towards non-qualified plans. This could also help plans' nondiscrimination testing if the ratio of benefits to compensation decreases.... Plans may see marginally worse nondiscrimination testing results (including ADP results) if more employees with large deferrals or benefits become HCEs. It could make a big difference for plans that were previously close to failing the tests."

What's the Impact of the 2016 IRS Retirement Plan Limits?

"A flat qualified compensation limit could have several consequences. These include: [1] More compensation counted towards SERP excess benefits ... [2] Lower-than-expected qualified pension plan accruals for participants whose pay is capped ... [3] [E]mployers may find that more of their employees become classified as HCEs.... [4] Plans may see marginally worse nondiscrimination testing results (including ADP results) if more employees with large deferrals or benefits become HCEs. It could make a big difference for plans that were previously close to failing the tests."

OPEB Funding Policy Opportunities

"[E]mployers should consider that ANY funding policy [for OPEB (Other Postemployment Benefits, usually retiree medical)] is better than nothing -- and even a modest level of pre-funding will improve the plan's funded status and balance sheet impact.... To the extent that investment returns can help fund future benefit costs, an OPEB trust with higher expected returns can help reduce your calculated OPEB liability.... Employers should harness this increased scrutiny to compel stakeholders (e.g., employers, employees, and taxpayers) to collaboratively review OPEB terms and create a strategy to prudently prefund these promises."

First Pensions, Now OPEB: New GASB 74 and 75 Will Transform OPEB Reporting

"Although the implementation dates are almost 3 years away, employers should take action now to prepare. Some questions to ask include: [1] How can I develop and implement an OPEB funding policy over the next few years? ... [2] What plan benefit adjustments and investment policy changes are available to lower my long-term OPEB liability? ... [3] What is my strategy to educate stakeholders about OPEB promises and their potential financial impact under the new GASB 74/75 requirements?"

Pension Lump Sums Much More Expensive in 2015

"If you're still considering a lump sum payout window, you'll want to carefully weigh the additional costs of the 2015 lump sum rates compared to 2014. Even with lower interest rates pushing up lump sum costs, there are still incentives to 'right-size' a plan now.... [P]lan sponsors should consider annuity purchases and additional plan funding as ways to reduce long-term plan costs/risks."

DB Plan Sponsors Should Prepare Now for Higher Year-End Liabilities

"[P]ension accounting discount rates are down by almost 90 basis points since December 31, 2013. Fortunately, many plans have experienced solid investment returns so far during 2014. This will take some of the sting out of the liability increases, but it likely won't be enough to entirely offset the effect of lower interest rates and the new mortality tables. The higher liabilities will affect both the year-end funded status of the plan and also the 2015 pension expense calculation."

What's the Impact of the 2015 IRS Retirement Plan Limits?

"Plans may see better nondiscrimination testing results (including ADP results) if there are fewer participants at the low end of the HCE range, especially those with big deferrals. It could make a big difference for plans that were close to failing the tests. Fewer HCEs means that there are fewer participants who must receive 401(k) deferral refunds if the plan fails the ADP test."

Top Five Take-Aways from the GASB OPEB Accounting Exposure Draft

"Most of the proposed GASB 67/68 pension changes are carrying over to OPEB -- which is not surprising.... Goodbye community-rating exception to the implicit subsidy liability.... All plans will now use the Entry Age Normal (level percent of pay) actuarial method to allocate liabilities between past and future service periods.... Disclosure of the Net OPEB Liability's [NOL's] sensitivity to changes in medical trend (+/- 1%), discount rate (+/- 1%), and combinations thereof. This means a total of 9 different NOL measurements.... Calculation of an Actuarially Determined Contribution (ADC) and development of a funding policy."