EmployeeBenefitsJobs.com logo BenefitsLink.com logo

BenefitsLink Retirement Plans Newsletter

June 6, 2012 Get Health & Welfare News  |  Advertise  |  Unsubscribe  |  Past Issues  |  Search

Employee Benefits Jobs


Webcasts and Conferences

Executive Compensation: Strategy, Design, and Implementation
in New York on June 14, 2012 presented by ALI-ABA (American Law Institute-American Bar Association)

Say on Pay Round Two A 2012 Proxy Season Wrap-Up
Nationwide on June 27, 2012 presented by ALI-ABA (American Law Institute-American Bar Association)

Retirement, Deferred Compensation, and Welfare Plans of Tax-Exempt and Governmental Employers
in District of Columbia on September 20, 2012 presented by ALI-ABA (American Law Institute-American Bar Association)

Pension, Profit-Sharing, Welfare, and Other Compensation Plans
in District of Columbia on October 17, 2012 presented by ALI-ABA (American Law Institute-American Bar Association)

Health Insurance Exchanges—Let the Games Begin!
in Illinois on June 26, 2012 presented by WEB - Chicago Downtown

Health Benefits Laws Compliance Assistance Seminar
in Montana on July 25, 2012 presented by U.S. Department of Labor, Employee Benefits Security Administration (EBSA)


We also publish the BenefitsLink Health & Welfare Plans Newsletter (free): Subscribe

[Guidance Overview]

DOL Issues Three Advisory Opinions on Whether MEP, 403(b) Arrangements Constitute ERISA Plans (PDF)
"These Advisory Opinions consider variations of the multiple employer plan or "MEP" structure that may offer efficiencies and increased coverage in the micro-, small- and mid-plan markets. In general, ERISA compliance is thought to be more manageable if a MEP is treated as a single ERISA plan, rather than as an aggregation of separate ERISA plans of each employer. In each of the Advisory Opinions, however, the DOL concluded that the multiple employer program was not an ERISA plan, relying on and extending its past analysis of these issues in other circumstances, although the arrangement as adopted by each employer for its own employees may separately be an ERISA plan." (Sutherland)


Learn all about Definitions of Compensation and earn CE Credits!   [Advert.]

Sponsored by ftwilliam.com

Compensation is used and defined in numerous ways. Sign up for our FREE webinar and we will explore common definitions of compensation used in retirement plans for allocations and testing. We will also discuss compensation for self-employed persons.


[Guidance Overview]

Another Question is Answered in the Who's the Employer Q&A Column
Did the recent Advisory Opinion on MEPs actually say the underlying plans need to file separate 5500s, must be audited separately, and must increase the coverage amount on their fidelity bonds? (BenefitsLink.com)

[Official Guidance]

PBGC Wants Comments on Revisions to Booklet About Submission of QDROs (PDF)
"PBGC intends to revise the booklet, Qualified Domestic Relations Orders & PBGC, to describe a proposed change in PBGC's procedures that would apply when a draft domestic relations order is submitted for informal review. Under PBGC's current procedures, PBGC delays the commencement of benefits (for participants not in pay status) or suspends payment of benefits (for participants in pay status) from the date of receipt of a draft domestic relations order to up to 60 days after the date PBGC notifies the parties of the results of the review. Under the proposed change, PBGC would suspend payments for participants in pay status only upon receipt of an original signed domestic relations order or a certified or authenticated copy. PBGC is also revising or eliminating certain model language which has often led to confusion as to how the language was to be interpreted." (Pension Benefit Guaranty Corporation)

[Guidance Overview]

DOL FAQs Extend Prior Guidance Regulating Brokerage Windows (PDF)
"Although initially this FAQ seems to be focused on sponsors that offer an investment platform in lieu of a lineup of DIAs, the response expands the scope into a broader discussion of how an investment in a brokerage window can become a de facto DIA for purposes of the ERISA Section 404(a) disclosure obligation. This interpretation, championed by DOL representatives as their view of current law, goes beyond the original language of the regulations ... Based on the language in the FAQ and subsequent informal comments, it seems apparent that DOL has concerns about the use of brokerage windows and open investment platforms in defined contribution plans. (Buck Consultants)

Voters in San Jose, San Diego Overwhelmingly Approve Public Employee Pension Cuts
Voters in San Diego and San Jose approved cuts to retirement benefits for city workers. Supporters suggest this result may lead to similar ballot initiatives in other states and cities that are struggling with mounting pension obligations. (AP via The New York Times; free registration required)

Why Retirement Prospects Are Brighter Than They Seem
"Survey after survey reports that Americans are ill-prepared for retirement. Looking at people's average retirement savings balances, it appears we have set very little aside. The average retirement plan balance is way too small to support meaningful amounts of retirement income. ... But in looking at 401(k) account balances, it turns out, the story told by average numbers is not the same story told by individual savings behaviors." (US News)

Sixth Circuit Requires a Net Loss to Sue in Certain ERISA Stock-Drop Cases
"[T]he U.S. Court of Appeals for the Sixth Circuit held that a 401(k) plan participant who sued under the Employee Retirement Income Security Act (ERISA) for losses in connection with a company stock fund that suffered a drop must show losses on a net basis during the class period to have constitutional standing. This decision has great significance in addressing plaintiffs' standing and class certification in so-called ERISA 'stock-drop' cases, often filed after a company's stock price falls." (McDermott Will & Emery)

Pension Funding Index, June 2012
"The funded status of the 100 largest corporate defined benefit pension plans dropped by $90 bil.lion during May 2012 ... The deficit increased to $357 bil.lion from $267 bil.lion at the end of April, and the funded ratio fell to 78.0%, down from 82.9%. May's $90 bil.lion deficit increase was the seventh largest in the 12-year history of this study and follows a $39 bil.lion deficit increase in April." (Milliman)

Non-U.S. Parent Corporations Can Be Responsible for Pension Liabilities of U.S. Subsidiaries
"Under prior case law, the mere existence of a parent-subsidiary relationship did not give rise to personal jurisdiction in the United States in the absence of sufficient contact with the United States. However, the [decision of the U.S. District Court for the District of Columbia (Pension Benefit Guaranty v. Asahi Tec Corporation)] to allow the PBGC's claim to proceed may lead to increased exposure of non-U.S. corporations for the pension-related liabilities of their U.S.-controlled group members, particularly in the bankrup.tcy context in which non-U.S. entities typically do not file for bankrup.tcy protection along with their related U.S. entities." (Torys LLP)

Make the Most of Your 403(b) Retirement Plan at Work
"[M]ost teachers have 403(b) retirement plans, which have tax-deferral rules similar to 401(k)s—and a similarly geeky label drawn from the tax code—but are otherwise very different. These teacher-retirement plans often limit their offerings to insur.ance products, such as annuities, and they charge much higher fees than 401(k)s. But the biggest difference is the way 403(b) plans are sold. Instead of a menu of funds—with easy access to information about fees and performance—many school systems just hand out a list of sales reps." (Kiplinger.com)

France Lowers Retirement Age for Some, Making EU Uneasy
"France's government agreed to cut the pension age to 60 for some long-time workers, making good in the face of a dire economic backdrop on an election pledge the EU had warned would overburden an already creaking social welfare system.... The change, which comes into effect in November and reverses [a] 2010 reform that raised the pension age to 62 from 60, affects workers who have spent at least 41 years in labor-intensive jobs." (The New York Times; free registration required)

Reforming Russia's Bloated, Inadequate Pensions
"[Russian President Vladimir] Putin has ruled out raising the retirement age, but he will have to find other ways to make people work longer. Russia now spends some 10 percent of gross domestic product on state pensions—above the OECD average of 7.5 percent—and it will keep rising if nothing is done as more Russians retire from the workforce than enter it." (The New York Times; free registration required)

Phased Retirement for Federal Employees Would Cut Federal Spending, According to CBO Report
"In analyzing the bill, the CBO assumed that 1,000 Federal employees per year would elect phased retirement for a period of three years before electing a full retirement. (These numbers are based on the assumptions that were used by the OPM in its assessment of the proposal.) The phased retirees would continue making contributions toward their retirement plan, and their employing agencies would also continue making corresponding contributions toward the retirement plans on behalf of the phased retirees." (Deloitte)

GM Might Offer Hourly Staff Same Lump Sum Option Being Offered to Salaried Retirees
"General Motors' move to trim $26 bil.lion in salaried pension obligations by transferring them to Prudential Insur.ance may be a trial balloon to see whether it should make the same offer to hourly workers, a pension expert said Tuesday. 'Any responsible corporate plan sponsor right now in a publicly traded company is thinking about this already,' said Charles E. F. Millard, Citigroup's head of pension solutions and former director of the U.S. Pension Benefit Guaranty Corporation. 'I'm sure they're all looking at what they can do to de-risk their pension plans.'" (Detroit Free Press)

States Try to Pop Pension Woes with COLA Changes
"According to a National Association of State Retirement Administrators report ..., since 2009, 11 states have changed the cost-of-living adjustments, or 'COLAs,' to benefits for current retirees. Five states have changed them for current employees' future benefits and six have changed them for future hires. ... States are short $660 bil.lion for future pension benefits, according to the Pew Center on the States." (Reuters)

Peru Legislators Seeking to Reduce Service Provider Fees Under Privately Sponsored Retirement Plans
"Peru's government presented legislation to increase competition among private pension funds and reduce their fees by about 30 percent, Finance Minister Miguel Castilla said. Peru will also seek to subsidize pensions for the country's lowest earners and require the self-employed to pay into a state or private retirement fund ... The measures are designed to boost the number of pension holders to 50 percent of the working population from 34 percent[.]" (Bloomberg)

Ford Considered But Rejected GM's Technique of Purchasing Annuity to Offload Pension Obligations
"The second-largest U.S. automaker considered shifting its salaried pension plan to an outside company as GM is doing by purchasing an annuity with a Prudential Financial Inc. unit, Bob Shanks, Ford's chief financial officer, said ... [GM] will spend $3.5 bil.lion to $4.5 bil.lion to purchase the group annuity and offer pension buyouts to 42,000 salaried retirees.... The multi-bil.lion dollar size of the annuity makes GM's move a 'wow,' Shanks said. No annuity transaction has exceeded $1 bil.lion since the 1980s, according to insur.ance broker Aon Plc." (Treasury & Risk)

Factors You Should Consider When Deciding Between a Lump Sum and an Annuity from Your Employer's Retirement Plan
"Retirees in traditional private pension plans are increasingly being asked to choose between taking an annuity from their pension plan, in which benefits are paid to the retiree every month for life, and taking a lump sum, in which the projected value of a retiree's pension benefits over a lifetime is paid to the retiree in a one-time payment. Some retirees are also given the choice of taking an annuity from an insur.ance company, rather than from a pension plan. Deciding which option is best for you can be a challenge." (Pension Rights Center)

Complying With New Fee Disclosure Regulations Might Not Be Enough for Some Investment Arrangements
"[In] addition to the new fee disclosure requirements, [plan sponsors] should also be aware of the recent $35 mil.lion dollar judgment issued by a Missouri federal district court against a plan sponsor and its investment committee. Although the plan sponsor and the investment committee complied with all DOL regulations regarding the plan, they failed to act in the best interest of the plan's participants. Many of the errors made by the plan sponsor and its investment committee are commonly made by plan sponsors and investment committee members, so it is imperative that plan sponsors and investment committees take action quickly to avoid being sued by an energized plaintiff's attorney on behalf of plan participants." (Miller Johnson)

Fee Disclosure Rules Are 'Win-Win' for Everybody (PDF)
"If [plaintiffs' counsel] keep current with industry surveys and research relating to participant behavior, expert judgment and the inability of investment advisers to identify funds that will consistently outperform their benchmarks net of fees, aggressive litigators will have plenty of opportunity to make money. If sponsors and fiduciaries do the same and incorporate this knowledge into their procedures for running their plans, they will create a win-win situation for themselves and their participants." (Investment Horizons, Inc.)

Benefits in General; Executive Compensation

[Guidance Overview]

Proposed IRS Regs Issued on Substantial Risk of Forfeiture Analysis
"[It] is unclear how employers and employees are expected to determine the likelihood that a forfeiture condition will occur (including whether there is a requirement to retest the likelihood of forfeiture following the initial determination), as well as the extent to which such a determination will be reviewed or rejected by the IRS and Treasury." (Proskauer Rose LLP)

Managing 409A Issues in Change-of-Control Transaction
Materials from the third installment in the 409A Basics Webinar Series, which centered on managing 409A issues in change-of-control transactions. Topics discussed included: Transaction structure (due diligence, representations and warranties, business risks, and 409A compliance); Typical 409A arrangements (equity, severance, change of control, and deferred compensation plans); Restructuring deferred compensation arrangements (key terms, payment acceleration, and delay limitations); and Stock rights considerations (assumptions, adjustments, and exchanges for other compensation). (Morgan, Lewis & Bockius LLP)

Former Madoff Employee Pleads Guilty to Falsifying Form 5500s
"Craig Kugel, a former employee of Bernard L. Madoff Investment Securities LLC (BLMIS) and Primex Trading N.A. LLC (Primex), plead guilty yesterday (June 5, 2012) in the U.S. District Court for the Southern District of New York, Manhattan Division, on five counts involving conspiracy, making false statements in relation to documents required by ERISA, and subscribing to false U.S. individual income tax returns." (The Pension Protection Act Blog)

Press Releases



BenefitsLink.com, Inc.
1298 Minnesota Avenue, Suite H
Winter Park, Florida 32789
Phone (407) 644-4146
Fax (407) 644-2151

David Rhett Baker, J.D., Editor and Publisher <davebaker@benefitslink.com>
Lois Baker, J.D., President <loisbaker@benefitslink.com>
Holly Horton, Business Manager <hollyhorton@benefitslink.com>

Copyright © 2012 BenefitsLink.com, Inc. All rights reserved.

All materials contained in this newsletter are protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of BenefitsLink.com, Inc., or in the case of third party materials, the owner of that content. You may not alter or remove any trademark, copyright or other notice from copies of the content.

Links to Web sites other than those owned by BenefitsLink.com, Inc. are offered as a service to readers. The editorial staff of BenefitsLink.com, Inc. was not involved in their production and is not responsible for their content.

More useful links: