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June 25, 2012 Get Health & Welfare News  |  Advertise  |  Unsubscribe  |  Past Issues  |  Search

Employee Benefits Jobs

Implementation Partner
for Lincoln Financial Group in ANY STATE, CT, IN, TX

Qualified Plan Administrator
for SeaGate Benefits Administrators, Inc. in OH

Account Manager
for Lincoln Financial Group in ANY STATE, IL, IN

Retirement Services Sales Director
for MassMutual Financial Group in AL, GA

Operations & Withdrawal Processing Associate
for Iron Administration in IL

Senior RFP Strategist
for Prudential in CT

Sr. Manager Retirement Education Sales
for Charles Schwab in OH

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Webcasts and Conferences

"Fundamentals of 401(k) and Other Qualified Plans" - Chicago
in Illinois on July 24, 2012 presented by SunGard Relius

"ERPA Test Review - Part II" Web Seminar, A 3-part Program
Nationwide on July 10, 2012 presented by SunGard Relius

IRS Guidance on the $2,500 Limit for Health FSAs: Implementation Issues for 2013 and Beyond
Nationwide on June 21, 2012 presented by Thomson Reuters / EBIA

"Form 8955-SSA: Who, What, When, and How" Web Seminar
Nationwide on July 10, 2012 presented by SunGard Relius

"Participant Disclosures After FAB 2012-2: A Game Changer" Web Seminar
Nationwide on July 17, 2012 presented by SunGard Relius

"Death and the 401(k) Plan" Web Seminar
Nationwide on July 19, 2012 presented by SunGard Relius

"457(b) Plans for 401(k) Practitioners 2012" Web Seminar
Nationwide on July 24, 2012 presented by SunGard Relius

"ERPA Test Review - Part I" Web Seminar, A 3-part Program
Nationwide on June 26, 2012 presented by SunGard Relius

Workplace Benefits Mania Conference
in Nevada on July 17, 2012 presented by Workplace Benefits Association


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

[Guidance Overview]

IRS Identifies PPA Compliance Issues for Agents Conducting Audits
"Seeking to provide training for agents who will be auditing plans for compliance with the Pension Protection Act of 2006 (PPA), the IRS initiated a project to identify potential areas of non-compliance. Although the project remains ongoing, the IRS released a list of issues it has identified so far ... [T]he release notes that many of the identified PPA compliance issues are failures to comply with the funding rules and would, therefore, involve the potential assessment of excise taxes and penalties rather than raise qualification concerns." (Deloitte via BenefitsLink.com)


Supreme Court Decision on Health Care   [Advert.]

Sponsored by Fidelity

What are the implications for you and your organization? Find out in our free report – and sign up for a special webcast


New Accounting Rules Put Further Pressure on States Over Pension Shortfalls
"The revamped rules expected to be approved Monday by an accounting-standards group will force governments to record pension costs sooner than they did before and disclose shortfalls more prominently. The changes also will force some public pension funds to calculate retirement benefits using more conservative assumptions." (The Wall Street Journal)

Defined Contribution Sponsors Tap Collective Investment Trusts
"As time runs out for baby boomers to beef up their retirement savings, portfolio manager Daniel Oldroyd sees collective investment trusts gaining traction among defined contribution plans. Besides offering uncorrelated, actively managed assets—everything from equities to real estate to commodities—these custom solutions can have lower fees than mutual funds.... Still marketed only to qualified retirement plans, CITs also offer a flexible expense structure. Despite tough new Department of Labor fee disclosure guidelines that take effect next month, advisers expect these traditionally opaque funds to keep most of their operating cost advantage over mutual funds." (Institutional Investor)

Report by State Retirement Administrators Addresses Calculation of Assumed Investment Returns (PDF)
"As with other actuarial assumptions, projecting public pension fund investment returns requires a focus on the long-term. This brief discusses how investment return assumptions are established and evaluated and compares these assumptions with public funds' actual investment experience." (National Association of State Retirement Administrators)

Borzi: Plan Sponsors Always Have Been Responsible for Monitoring Brokerage Windows
"Industry experts have criticized the Labor Department for a May 7 guidance document that discusses brokerage accounts and other elements of new rules affecting fee disclosure between sponsors and participants.... Ms. Borzi said her agency addressed brokerage windows in plans after finding "a disturbing trend" among plan sponsors seeking to avoid ERISA responsibility by 'just giving choices.'" (Pensions & Investments)

Dramatic Rise in Debt for Chicago-Area Pension Plans
"The debt from 10 Chicago-area pension plans swelled more than 600 percent to $27.4 bil.lion between 2001 and 2010, according to a study released Monday by the nonpartisan Civic Federation. That's $8,993 for each man, woman and child in Chicago, according to the report. The shortfall comes on top of more than $83 bil.lion in unfunded pension liabilities at the state level, driving the cost up to nearly $15,000 per Chicagoan, the report shows." (Chicago Tribune)

Public Pensions to Give Clearer Picture of Finances
"Public retirement systems will have to make major changes in how they disclose their pension assets and liabilities, under new rules that the board in charge of accounting standards for U.S. state and local governments is set to approve on [June 25].... The reforms were proposed nearly a year ago to give more detail on how pensions affect governments' finances. They will replace the menu of accounting options pension funds currently use with a single system, and will likely make some pension shortfalls appear larger than under current reporting methods." (Reuters)

Wisconsin's Pension Is Strongest in Nation
"The Pew Center on the States last week found that only Wisconsin out of the 50 states has enough money set aside to meet its current obligations to pay the pensions that have been promised to public employees.... Wisconsin got those high marks for its pension funding for fiscal year 2010—before Gov. Scott Walker and Republican lawmakers required public employees to contribute more for their pension and work longer hours and more years to qualify for one.... That doesn't mean that Wisconsin is problem free—the continued effects of investment losses during the recent recession could leave many retirees in the main state system with significantly smaller payments next year. Many local governments in Wisconsin also have significant underfunding of their smaller but still significant health care promises to retirees. And Milwaukee County faces daunting challenges with its separate pension system." (Milwaukee Journal Sentinel)

New GASB Rules on Public Pension Funds Will Seek Better Disclosure
"Cities, states and the millions of Americans who work for them will soon face new accounting rules that will require many local governments to disclose pension obligations that were hidden until now, stepping up the pressure to rein in public workers' benefits.... The current rules have been criticized for making pensions look more affordable than they really are and creating incentives for governments to take undue risks with taxpayer money. In many struggling municipalities, the coming changes ... could lead to credit rating downgrades, making it more expensive to borrow. The rules do not take full effect until 2015, but some governments are likely to adopt them sooner." (The New York Times; free registration required)

Change in Social Security Offset Is Not Prohibited Cutback, 11th Circuit Rules
"The 11th Circuit Court of Appeals ruled that an amendment changing the formula for calculating the social security offset in a defined benefit plan did not violate the anti-cutback rule under ERISA section 204(g)—which prohibits plan amendments that reduce a participant's accrued benefit. The affected participants were not yet eligible for a retirement benefit under the plan, so the more favorable preamendment social security offset formula was not part of their accrued benefit, the court found." (Deloitte via BenefitsLink.com)

Give or Take a Tril.lion, Public Sector Pensions Are In Trouble
"[A recent report from the Pew Centre on the States] found that the gap between promised benefits and the money set aside to pay for them increased by 9%, to at least $1.38 tril.lion, in 2010. The gap, however, is actually more than $4 tril.lion, according to Josh Rauh of Kellogg School of Management. Pew relies on the states' own actuarial assumptions of how much money pension funds are expected to earn. For most states this rate of return is about 8%, a fantastical figure given the current low rates on cash and bonds. The Government Accounting Standards Board (GASB) will decide on June 25th whether to impose new rules that would require states to use a more realistic rate." (The Economist)

Providence Retirees Agree to Allow City to Suspend COLAs
"The retirees approved the deal overwhelmingly, according to Robert Jarvis, president of the Providence Retired Police and Fire Association. The proposal has received 80 percent support with just a few hundred votes yet to be counted, Jarvis said.... [The agreement] suspends the cost-of-living increases to their pensions for 10 years." (Providence Journal)

Underfunded Arizona Pension Funds Face Bleak Future
"Arizona taxpayers are about to start paying more to prop up four of Arizona's ailing public retirement plans. [T]he increased payments begin July 1, as the plans continue to suffer such heavy market losses that their values are far below what they owe pensioners over the long term. Administrators say that the pension system for Arizona's police officers and firefighters, for example, is in the worst shape and has little hope for a quick turnaround." (Arizona Daily Sun)

IRS to Scrutinize IRAs, Increase Collection of Penalties
"The government lets millions of dollars in tax penalties on IRAs go uncollected each year—$286 mil.lion in 2006 and 2007 alone for missed withdrawals and contributions that break the rules. The reasons range from bureaucratic hurdles to tax forms that don't provide enough information, according to a report by the Treasury Inspector General for Tax Administration, the federal tax watchdog. Now the Internal Revenue Service, which has been cracking down on secret foreign accounts and beefing up audits of high earners in recent years, is turning its attention to IRA snafus." (The Wall Street Journal)

Text of Letter from Assistant Labor Secretary Phyllis Borzi to Congress on DOL's Fiduciary Definition Project (PDF)
"While the Department was disappointed not to receive many of the suggested data elements from industry sources, we have met with industry representatives and asked them to provide whatever information they had that would be useful to our efforts. We appreciate the information that has been sent and are working diligently to review and assess it.... The Department is not yet in a position to answer questions regarding the specific studies or data we will rely on in our proposal because the economic analysis is not yet complete.... It is our intention to include accompanying proposed prohibited transaction guidance, as well as the relevant economic analysis, with any proposed regulation. All of these elements will be transparent and fully subject to the appropriate notice-and-comment rulemaking process." (Employee Benefits Security Administration (via The SPARK Institute))

[Opinion]

Pensions Eat More of the Budget of Orange County, California
"If there ever were a time for reforming public-employee pension systems in Orange County, now is that time. There is momentum, there is opportunity, and there is renewed reason for urgency.... [T]he county's services and programs for [Orange County] residents may be cut if effective action is not taken. Given that the county's annual budget is $5.6 bil.lion, the $4.4 bil.lion in unfunded pension promises is nearly 80 percent of an entire year's spending." (Orange County Register)

Benefits in General; Executive Compensation

[Guidance Overview]

Squeaky Wheel Gets Grease: Proposed IRS Regs Remove Signature Requirement for Form 8955-SSA Extension
"Plan administrators and their advisors will be relieved to have the extension procedure for Form 8955-SSA simplified to conform to the Form 5500 rule, eliminating a detail that was especially easy to overlook since the extension filing requirements for the two forms are otherwise so similar. (Several commenters had requested this change, showing how important and effective comments can be, even when they are offered outside a formal comment period.) The preamble anticipates that the IRS will revise Form 5558 and its instructions to reflect the change, presumably after the proposed regulations become final." (Thomson Reuters/EBIA)

[Guidance Overview]

SEC Finalizes Independence Standards for Compensation Committees and Outside Advisers
"Overall it is not expected the final rules will have a material impact on most companies, although some disclosure changes are required.... [T]he final rules provide that the compensation committee may in its sole discretion decide whether to retain the services of an independent compensation adviser and, in doing so, have the sole authority for the appointment, payment and oversight of such an adviser. The final rules also clarify that the compensation adviser is not required to be independent, but the compensation committee must evaluate six factors when deciding whether to hire such an adviser[.]" (HR Policy Association)

[Guidance Overview]

SEC Takes Action to Set Standards for Compensation Committees and Compensation Advisers
"While some public companies already follow procedures to reduce conflicts of interest, certain aspects of this new rule may mean that many public companies (and, particularly, their compensation committees) will need to make substantial changes to the way they review and monitor the compensation packages of their executives." (Littler Mendelson LLC)

[Guidance Overview]

SEC Mandates Listing Standards Related to Compensation Committees
"New Rule 10C-1(b)(1) requires exchanges to establish listing standards requiring each member of a listed company's compensation committee to be a member of the board of directors and to be independent. The rule does not require that exchanges adopt a uniform definition of independence. However, when developing their definitions of independence, exchanges will be required to consider relevant factors, including a director's source of compensation, including any consulting, advisory or compensatory fee paid by the issuer and whether the director is affiliated with the issuer." (Ballard Spahr)

SEC Approves Final Rule on Compensation Committees
"The final rules (i) adopt new Rule 10C-1 requiring the national securities exchanges to establish listing standards regarding the independence of compensation committee members and the retention of compensation advisers and (ii) amend Item 407 of Regulation S-K to expand disclosure regarding compensation consultants' conflicts of interest. New Rule 10C-1 requires companies to comply with new disclosures in their proxy statements for annual meetings at which directors will be elected on or after January 1, 2013." (Jenner & Block)

Employee on FMLA Won't Be Coming Back; What Should the Employer Do?
"[This question] raises two issues: 1) What are the restoration rights of an employee who has informed you they will not return after FMLA leave? and 2) Can the employer recover its share of health care premiums paid during FMLA leave?" (FMLA Insights)

Total Rewards Programs Not So Totally Rewarding
"Companies spend lots of money on their total rewards programs—the combination of pay, benefits and development opportunities that keep employees sticking around. Yet a recent survey from Aon Hewitt finds that, despite those investments, few companies seem to be getting much out of their programs so far." (Human Resource Executive Online)

First Circuit Court of Appeals Finds DOMA Partly Unconstitutional
"This article provides a brief overview of DOMA and the First Circuit's holding and discusses its impact for employee benefit plan sponsors. At this point, the impact is mostly academic, even for the plaintiffs in Massachusetts, since the court of appeals' holding stays the mandate pending further review at the district court level. Further, the First Circuit opinion indicates that final resolution of the constitutionality of DOMA rests with the U.S. Supreme Court." (McGuire Woods LLP)

297 Ways to Share the Love: SHRM 2012 Employee Benefits Research Report
"[This report] provides comprehensive information about the types of benefits U.S. employers offer to their employees. In 2012, 297 benefits were explored, covering health care and welfare benefits, preventive health and wellness benefits, retirement savings and planning benefits, financial and compensation benefits, leave benefits, family-friendly benefits, flexible working benefits, employee programs and services, professional and career development benefits, housing and relocation benefits and business travel benefits. The report also examines trends in employee benefit offerings over the last five years." (Society for Human Resource Management)

SPD Was Plan Instrument for Purpose of Identifying ERISA Plan Administrator
"This court did not address the employer's process for designating the plan administrator, but rather focused on whether the SPD is an instrument under which a plan is operated and whether it can be used to identify the plan administrator. Since the SPD is the primary vehicle for informing participants and beneficiaries about their rights and benefits under the plan and is required to list the name, business address, and business telephone number of the plan administrator, it is not surprising that the court answered both of these questions in the affirmative. However, the court's ultimate conclusion—that the plan can act as its own plan administrator—is problematic." [Cone v. Walmart Stores, Inc. Associates' Health and Welfare Plan, 2012 WL 1946503 (M.D. Ga. 2012).] (Thomson Reuters/EBIA)

Federal District Court Awards $13,750 for Five Months' Delay in Honoring Request for SPD
"The court was compelled by the employer's unresponsiveness and lack of an excuse, noting that ERISA does not require plan participants to hire attorneys or go to the lengths seen here to find documents containing accurate and up-to-date plan information. The court also considered a claim regarding the employer's failure to provide a summary of material modifications describing changes to its long-term disability plan within 210 days after the end of the plan year in which the changes were implemented. The court ruled in favor of the employer this time, stating that while the employer technically violated ERISA by not issuing an SMM within the required timeframe, the participant was not harmed by the oversight and therefore was not entitled to monetary relief." [Latimer v. Wash. Gas Light Co., 2012 WL 2119254 (E.D. Va. 2012).] (Thomson Reuters/EBIA)

SPD Affects Plan Interpretation Notwithstanding Supreme Court's Amara Decision, Fifth Circuit Rules
"[B]ecause the SPD should be drafted to be understood by participants, the court held that ambiguities in the SPD must be resolved in favor of the participant. The court acknowledged the Supreme Court's decision in Cigna v. Amara ..., which held that the terms of the SPD do not constitute the terms of the plan and thus may not be enforced under ERISA Section 502(a)(1)(B). But the court nevertheless concluded that Amara did not negate prior cases holding that summaries provided to participants should be taken into account when interpreting ambiguous plan language." [Koehler v. Aetna Health Inc., 2012 WL 1949166 (5th Cir. 2012).] (Thomson Reuters/EBIA)

Press Releases



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David Rhett Baker, J.D., Editor and Publisher
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