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DOL Announces Online Filing Tool for Plan Sponsors to Report Service Providers That Fail to Comply With Fee Disclosure Rule
"The U.S. Department of Labor's Employee Benefits Security Administration announced today that plan sponsors seeking fiduciary relief for a service provider's failure to comply with the department's plan-level fee disclosure rule will be able to use a new online filing system, replacing the option of electronically sending notices to a previously established email address. The online filing tool will better assist plan sponsors who file electronically by ensuring that all required information is submitted, and providing immediate confirmation that notices have been received by the department. 'The revised submission procedures should provide plan sponsors a greater level of confidence that their requests for fiduciary relief have been received and will be efficiently processed and reviewed,' said Assistant Secretary of Labor for EBSA Phyllis C. Borzi."
(Employee Benefits Security Administration)
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Limits on Annuity Contributions Annoy Investors
"As of Friday, Prudential Annuities has suspended the ability of policyholders with 14 types of benefits to make further contributions. And because the size of the annuity payment is based on how much is in the annuity, policyholders who had planned to add to their accounts will get payments that are far lower than they had expected. Annuity experts predicted that other insurers would take similar steps because they also made promises before the financial crisis that they now cannot keep."
(The New York Times; free registration required)
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Pension Reform: CalSTRS Gets Hope But State University Employees Largely Unaffected
"What CalSTRS regards as its 'most significant reform issue' was not in the pension reform bill signed by Gov. Brown last week. But a long-sought first step toward closing a huge gap in the teachers' pension fund is in a companion measure. Most of the 44,000 employees on the 23 campuses of the CSU system will continue to make a low pension contribution, 5 percent of pay. The state Finance department lost another round with labor-backed educators."
(CalPensions)
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Termination of Letter Forwarding Program May Affect VCP Submissions and Plan Terminations
"The correction of certain operational failures under the Voluntary Correction Program (VCP) may affect former participants by, for example, requiring corrective allocations or distributions. In those cases, the VCP submission must indicate the method that will be used to locate and notify those individuals of the failure and the correction. Many submissions designate the IRS letter forwarding program as one or more methods that will be used for that purpose. As a result, an IRS agent may contact the plan administrator to revise the proposed correction method in a pending VCP submission, particularly if no alternative method of locating former participants has been proposed. Alternative methods will have to be proposed in all new VCP submissions."
(Benefits Bryan Cave)
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IRS Updates Guidance and Forms Related to Filing Form 8955-SSA
"With the elimination of the signature requirement on Form 5558 for obtaining a Form 8955-SSA filing extension, the extension process is now the same as obtaining a Form 5500 extension. In contrast, filers of Form 5330 must still sign Form 5558 when requesting an extension."
(Thomson Reuters / EBIA)
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IRS Will No Longer Provide Letter-Forwarding Services for Missing Plan Participants
"The IRS's letter-forwarding program has been a useful tool for locating missing retirement plan participants. Plan sponsors and administrators that have relied on this tool will need to revise their administrative procedures for locating missing participants to take into account that the IRS program is no longer available for that purpose. The Social Security Administration letter-forwarding program is still available, but unlike the IRS program that was free for requests involving 49 or fewer recipients, it charges $25 per letter."
(Thomson Reuters / EBIA)
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Sears Holdings to Offer Lump Sum, Adds to Pension Contribution
"The company has not announced who will qualify for the lump-sum payments, said [a] spokeswoman ... The fair value of the company's U.S. defined benefit plan was $4.1 billion as of Jan. 28, with a funded status of 66.3%. Sears had expected to make about $314 million in pension contributions in 2012, but increased the contribution to reach the 80% threshold to meet requirements in the Pension Protection Act of 2006 to offer a lump sum."
(Pensions & Investments)
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1.8M Ohio public pensioners to see changes
"Big changes are ahead for nearly 1.8 million workers, retirees and family members covered by Ohio's five public pension funds. State lawmakers cleared a package of bills this week aimed at shoring up the systems' finances and keeping them solvent. The result is adjustments to benefits, premiums and eligibility requirements, including in some cases the age and service levels at which participants will be eligible to retire."
(NewsandSentinel.com)
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Retirement Savings a Far-Off Concern for 'Generation Z'
"[A recent] study looked at Generation Z, those between the ages of 13 and 22, and their parents. Personal and financial attitudes and preferences were measured against each other. More than 70 percent of Generation Z's parents believe saving for retirement cannot begin too early. Just 43 percent of their children feel the same."
(Shreveport Times)
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Under Certain Circumstances, Fiduciaries Can Choose Investments for Participants and Still Be Protected
"Is there a fiduciary obligation to tell participants that they have made an unwise investment choice? Well, the short answer is no, there is not. That is the nature of defined contribution plans. There is a fiduciary obligation to provide appropriate diversity and sufficient options for investment. And there is a responsibility to provide some type of educational component to participants. But a plan sponsor should not substitute their own opinions with respect to appropriate retirement investing for the choices made by participants."
(Employee Benefit News)
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Getting Beyond Referral-Based Recruiting for Investment Advisors
"Research from the Oechsli Institute showed that affluent female clients were more concerned than their male counterparts with having a personal relationship with their advisor. Listening ranked 12 points higher in importance among affluent women. Having an advisor who had a breadth and depth of industry knowledge scored 17 points higher and having the family's interest at heart was 10 percentage points higher."
(On Wall Street)
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The New York Times Company Offers Retirees Lump Sum Alternative to Monthly Pension Payments
"The New York Times Company, which like many of the nation's newspaper publishers is dealing with large pension obligations, is offering former employees the option of taking a lump sum payment for their pensions instead of a monthly payout. The company made the announcement in a securities filing released on Friday morning. According to the filing, about 5,200 former employees of the Times Company who have vested in the pension plan can continue to receive a pension when they retire or can accept a lump-sum payment in cash or to roll into a retirement plan. The participants must choose an option between Sept. 24 and Nov. 2."
(The New York Times; free registration required)
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Hedge Funds and DC Plans: Happy Together?
"In the past couple of years, plan sponsors have become intrigued by illiquid investments like private equity, hedge funds, derivatives and direct real estate, as uncorrelated, diversified counterpoints to the volatile traditional markets. But because it can be difficult to value these complex products—much less explain them to participants who may not even understand a basic equity fund all that well—these asset classes, if its accurate to describe them as such, can't be part of the regular investment menu. Many managers don't think they even fit into off-the-shelf target date funds."
(Institutional Investor)
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October 15 Deadline for Roth Conversions Nears
"For clients who made Roth IRA conversions last year, Oct. 15 is the last day that they can undo those conversions via a Roth re-characterization. If the value of the Roth individual retirement account has declined substantially, it often makes sense to re-characterize the conversion to recoup the tax paid on value that no longer exists, perhaps with an eye on reconverting in the future."
(Investment News; free registration required)
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Financial Advisors Can Help Employers Make Sense of Fee Disclosure
"The requirements are an opportunity for financial advisers ... as employers will be looking for help in understanding the new formulas for fee information that they are required to explain to their employees. Here are five suggestions to consider in light of the new requirements: 1. Manage sponsor expectations.... 2. Address participant confusion head on. ... 3. Don't let your clients have a "moving" experience. ... 4. Help the employer piece it together.... 5. Make sure that your windows aren't broken."
(Investment News; free registration required)
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Do Stronger Age Discrimination Laws Make Social Security Reforms More Effective?
"Supply-side Social Security reforms to increase employment and delay benefit claiming among older individuals may be frustrated by age discrimination.... [This study tests] whether stronger state-level age discrimination protections enhanced the impact of the increases in the Social Security Full Retirement Age (FRA) that occurred in the past decade. The evidence indicates that, for older individuals who were 'caught' by the increase in the FRA, benefit claiming reductions and employment increases were sharper in states with stronger age discrimination protections."
(University of Michigan Retirement Research Center)
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Encouraging Disabled Individuals to Return to Work: Does It Encourage Workers to Apply for Disability?
"The number of American adults receiving benefits from the Social Security Disability Insurance (SSDI) program has increased dramatically over the past several decades. A proposed solution to rising program costs is to change program rules to encourage fully or partially recovered SSDI beneficiaries to return to work.... [The authors find] that a 7 percentage point (30%) increase in the real relative [Substantial Gainful Activity threshhold] (on par with the 1999 increase from $500 to $700 per month) was associated with a 4.7% increase in applications."
(University of Michigan Retirement Research Center)
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2012 Mid-Year Poll of DB Plan Investment Managers (PDF)
"Pension plan sponsors faced a challenging first half of 2012 with continued market volatility and record low interest rates, both of which impacted pension funding and contribution schedules. The average funded status of U.S. corporate pensions fell 2.9 percentage points in July to 68.7 percent - the lowest since 2007.... Almost two-thirds (64 percent) of pension plans surveyed are either closed or frozen, meaning that new employees cannot participate in this retirement benefit; however, only 1 percent of plans having begun the termination process. More participating plans (39 percent) said the pension was between 81-90 percent funded; 27 percent currently fail to meet the U.S. funding minimum requirement of 80 percent."
(SEI)
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U.K. Government Discouraging Employers From Offering Cash Bonuses to Employees Who Switch from DB to DC Plans
"In recent years companies across the UK have closed their final salary schemes to new members as the cost of funding them has rocketed on the back of increasing life expectancy and lower expected long-term investment growth. Many employers have also tried to further reduce their liabilities by tempting the existing members out of these final salary schemes and into alternative personal pension schemes. To get existing final salary members to transfer out of the scheme, companies have offered them enhanced transfer value packages. Although these packages may look attractive upfront, they do not always properly compensate members for the pension benefits they are giving up. One particularly controversial aspect of these incentive packages has been the cash payments made to those willing to transfer. However a government-backed voluntary code of practice, launched in June, now prohibits the payment of such cash incentives."
(Money Observer)
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Enrolled Actuaries Report, Fall 2012 (PDF)
Articles in this issue include: Back to School for Multiemployer Actuaries, De-risking Pension Plans, Voluntary Correction Programs, Dealing with ERISA, and The Making of a Good QDRO.
(American Academy of Actuaries)
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[Opinion]
Running on Empty: The Road to Retirement
"[A]s traditional pensions have disappeared from the private sector, replacement plans have proved woefully inadequate. Fewer than half of the nation's private sector workers have 401(k) plans, and more than a third of households have no retirement coverage during their work lives, according to the Center for Retirement Research at Boston College. The center also found that among people ages 55 to 64 who had a 401(k), the recession and slow recovery left the typical worker with just $54,000 in that account in 2010, while households with workers in that age group had $120,000 in all retirement accounts on average. That is not nearly enough."http://www.nytimes.com/2012/09/16/opinion/sunday/the-road-to-retirement.html
(The New York Times; free registration required)
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[Opinion]
Prospects for Success of State-Run Retirement Plan for Employees of Private Employers: Just California Dreamin'?
"The state's legislature recently passed a bill laying the groundwork for the California Secure Choice Retirement Savings Program (SCP) -- a government-sponsored retirement-savings vehicle that would be offered to employees of every California company that doesn't have a workplace retirement plan.... The mere fact that California lawmakers decided to push forward with the plan at all underscores growing worry in policy circles about the nation's looming retirement savings gap and the need to do something about it."
(Reuters)
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[Opinion]
404(a)(5) Fee Disclosure: Communicating Difficult Concepts to Participants
"As industry professionals preparing for participant fee disclosure, we tend to focus the majority of our attention toward creating a paper notice that complies with all of the new regulatory requirements (as we understand them). Consequently, we've invested relatively little time considering how the notices will be perceived by participants, and the most effective methods of helping them understand the same. As a 24-year veteran in the participant education industry, [the author] can personally attest to the confused, skeptical characteristics of many retirement plan participants."
(Fiduciary Plan Governance, LLC)
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Benefits in General; Executive Compensation
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Executive Compensation and Corporate Governance in the U.S.: Perceptions, Facts and Challenges
"While average CEO pay increased substantially through the 1990s, it has declined since then. CEO pay levels relative to other highly paid groups today are comparable to their average levels in the early 1990s. In fact, the relative pay of large company CEOs is similar to its average level since the 1930s. The ratio of large company CEO pay to firm market value also has remained roughly constant since 1960. This suggests that similar forces, likely technology and scale, have played a meaningful role in driving CEO pay and the pay of others with top incomes."
(National Bureau of Economic Research; purchase required)
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IRS Ruling Explains How Recharacterizing Wages as Expense Reimbursements Fails to Satisfy Accountable Plan Rules
"The IRS emphasizes that prohibited recharacterization can occur even when an employee has deductible business expenses, if expense reimbursements are paid in lieu of wages that the employee would have received if the employee had not incurred business expenses. Equally helpful, the ruling also confirms that an employer who has historically expected employees to pay their expenses out of after-tax income can effectively start over, reducing the compensation paid to employees and then instituting an accountable plan, provided reimbursements are only made to employees who actually incur and substantiate qualifying expenses."
(Thomson Reuters / EBIA)
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Home Depot Goes Big with Child Care Center
"In 2009, Home Depot was looking at the spectrum of dependent care solutions. On one end, it considered national discounts for dependent care and at the other, onsite dependent care. Implementing onsite child care at the more than 2,000 Home Depot locations across the U.S. wasn't viable, but a child care facility at the corporate office in Atlanta—which houses 5,000 staff—was possible. In addition, the facility is open to all Home Depot employees in the Atlanta area, not just those who work at the head office."
(Employee Benefit News)
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Proskauer ERISA Litigation Newsletter, September 2012
"[This issue examines] the application of ERISA pre-emption to state-law misrepresentation claims by medical providers against ERISA plans or their insurers. The Fifth Circuit, which has issued several of the leading appellate decisions on ERISA pre-emption of provider claims, recently granted en banc review of such a claim in the Access Mediquip case. Oral argument is set for September 19, and the en banc ruling will likely have wide-ranging implications regarding the scope of ERISA pre-emption in the context of medical-provider claims."
(Proskauer Rose LLP)
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IRS Revisits Pay Arrangements That Attempt To Convert Taxable Wages Into Nontaxable Expense Reimbursements (PDF)
"The IRS recently issued Revenue Ruling 2012-25 that reiterates its long-standing position that the tax-free, accountable plan treatment is limited to reimbursements of bona fide business expenses. Specifically, the ruling explains that employers cannot restructure compensation packages to obtain tax savings, which result in paying the employees the same gross amount, regardless of the amount of deductible employee expenses the employee actually incurs."
(Groom Law Group)
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[Opinion]
Rising Profits and Executive Compensation at Children's Hospitals Threatens Public Trust
"Freestanding children's hospitals (FCHs) are reporting record profits and paying their executives millions, all while soliciting for community donations. FCHs have an opportunity to be leaders in healthcare by adopting new standards of transparency and new guidelines for executive salaries, while addressing rising costs and aggressively pursuing innovation in patient safety. If they do not enact these reforms, Congress should reconsider the not-for-profit status of these institutions and the large government subsidies they receive. Moreover, FCHs risk damaging the longstanding trust of doctors and hospitals among their donors and communities."
(HealthAffairs Blog)
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