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October 31, 2012          Get Health & Welfare News  |  Advertise  |  Unsubscribe
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Webcasts and Conferences

Health Care Reform Fees for Employers and Insurers: Understanding PCOR, Reinsurance, and Health Insurer Fees
Nationwide on October 30, 2012 presented by Thomson Reuters / EBIA

Women in Retirement: Managing Longevity Webcast
Nationwide on November 20, 2012 presented by InvestmentNews


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New Notice Requirements Starting Tomorrow for Single Employer Pension Plans with Funding-Related Restrictions
"The 101(j) Notice must be provided to participants within 30 days following the date a funding-based restriction is triggered. In most cases, a restriction is triggered on either the date of the enrolled actuary's plan certification of the adjusted funding target attainment percentage (AFTAP) or the date a funding-based presumption applies under Code Section 436." (McDermott Will & Emery)


[Advert.]

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PBGC Won't Enforce Reduction-in-Force Rules on Small Businesses, Executive Director Says
"Normally, when 20% or more of a pension plan's participants are involved, it triggers a 'reportable event' so the PBGC can get involved before an employer's situation deteriorates further. Now, however, employers with fewer than 100 plan participants will not be subject to enforcement, Mr. Gotbaum told attendees at [a recent conference]." (Pensions & Investments)

How Much Priority Should Pension Benefits Get in Municipal Bankruptcies?
"So what happens if California cities facing fiscal emergencies stop paying into their employees' pension funds? ... Most pension experts cite California court decisions mandating that pension contracts with public employees must be honored. 'But you can't pay if you don't have any money,' [said a California attorney] ... 'In theory, a judge can order [cities] to pay. But what happens after that? I don't know.'" (Orange County Register)

2012 Year-End Qualified Retirement Plan Checklist
The article is a checklist for 2012 year-end amendments and participant notices required for qualified plans, including 401(k), defined benefit and governmental plans. (Benefits Bryan Cave)

Number 1 Concern of Retirees: Protect Retirement Savings From Inflation
"In a recent survey by the Society of Actuaries, retirees named inflation the No. 1 retirement risk. Even though prices have been tame lately, that anxiety is understandable. Inflation of just 2% a year can reduce your purchasing power by roughly a third over 20 years." (CNNMoney.com)

Slow Economic Recovery Adding Barrier to Saving for Retirement
"[T]he recession and slow recovery are preventing Baby Boomers from adequately saving for retirement. IRI found that during the past year, nearly 30 percent of Boomers stopped contributing to a retirement plan, and 16 percent prematurely withdrew funds from a retirement plan. Low and inadequate savings are currently pervasive among Boomers, with 22 percent having no retirement savings. Among Boomers who reported a retirement savings level, nearly 40 percent have saved less than $100,000." (Insured Retirement Institute)

Egg Baskets Are Not Enough: The Truth About Diversification (PDF)
"Simple as the idea is, most investors do not hold portfolios that are even close to being truly diversified.... [M]ost investors are not disciplined enough to implement diversification.... [and] most investors do not actually diversify their equity risk with their investment decisions; they are still exposed to one common significant shock.... static diversification across multiple asset classes is not sufficient. An adequately diversified portfolio should also be diversified over time and over different economic regimes." (Research Affiliates)

Illinois Teachers' Retirement System Bleeding Out, Experts Say
"Illinois' teacher pension system could go broke if the state does not figure out a way to fully fund the system soon, the leader of the retirement system and others have warned again. Illinois' Teachers' Retirement System is seeking $3.4 billion from the state for its portion of the pension costs for fiscal year 2014. That's about $500 million more than the system sought from the state for the previous fiscal year." (FoxIllinois.com)

Retirees in Pay Status to Begin Making Repayments to Oregon PERS
"The Oregon PERS Board of Directors has approved a 2 percent benefit reduction plan as the method of recouping just over $156 million in overpayments from those workers who retired in the 'window period' of April 2000 through April 2004. A final court order allowing PERS to proceed with the repayment plan was issued on March 14; the decision impacts about 28,000 retirees." (Oregon AFSCME)

New York School Districts to See Required Pension Contributions Jump
"School districts will see their expected contribution rate jump by nearly 40 percent next year, an increase that will likely squeeze budgets as they come together in the spring. A bulletin from the Teacher Retirement System announced last week that each district's rate would rise from 11.84% of their payroll in the current school year to between 15.5 and 16.5 percent for next year[.]" (Albany Times-Union)

France's Baby Boom Retirees Head Back Into Job Market
"A surge in the number of pensioners heading back to work has come about despite a reluctance by President Francois Hollande's Socialist government to pursue new reforms after the fierce 2010 protests that greeted those by his predecessor Nicolas Sarkozy. It also suggests that a system which has produced one of the lowest average retirement ages in the Western world -- 59.1 years compared to more than 64 in EU partner Sweden and 71.5 in Mexico -- is failing to provide many ageing French with the economic security they seek." (Reuters)

The Risks of Tapping Your Retirement Fund for a Different Use
"Retirement funds are being used increasingly for anything but retirement. Instead, 401(k)'s and individual retirement accounts are becoming money pots used to invest in business start-ups, speculate in gold and buy private equity investments. Such maneuvers come with big tax advantages. But they may also leave their users penniless in retirement, while their ability to evade taxes can cost the government." (The New York Times; free registration required)

Will Conventional Wisdom on 401(k) Fiduciary Duties Lead to Lower Profits and More Lawsuits? (PDF)
"Are 401(k) plans being managed ... with the goal of enabling employees to retire on schedule? If they are not, the stage is set for decreased profitability and unwanted, time-consuming litigation for at least two reasons: (1) Delayed retirements ... will dramatically affect a corporation's financial health by creating an older, technically out-of-date workforce; more expensive healthcare costs; and increased difficulty in retaining younger, more qualified workers due to fewer advancement opportunities. (2) Baby boomers, realizing that their retirement plans will never materialize, have a mindset that makes them easy targets for hungry plaintiffs' attorneys.... Participants' retirement readiness, however, is not a high corporate priority." (Investment Horizons, Inc.)

Milliman Report Exposes Magnitude of Governmental Pension Plans Catastrophe
"When a 'premier global consulting and actuarial' firm proves in its first Public Pension Funding study that those government pensions are doomed, it is past time for action. Milliman's study showing a 33 percent increase in pension debt over official numbers from a minute change in accounting should be enough to spur reform. However, this hidden fiscal cancer threatening to consume the American economy and sabotage essential state and local government services gets even worse when you look at pension performance since the Jan. 1, 2012 cutoff date for the Milliman data. Those latest numbers show a system collapsing faster than the experts can calculate." (State Budget Solutions)

Recent Reports Show Size of Underfunding Problem for Public Pension Plan
"To tackle public pension deficits, states need to implement much needed reforms, including sweeping governance reforms, bolstering defined-benefit plans and ensuring their long-term sustainability. The dumbest measure promotes a shift out of defined-benefit into defined-contribution plans, placing the retirement onus entirely onto workers.... [T]he shift out of DB into DC plans is a shortsighted measure that will only exacerbate pension poverty[.]" (Pension Pulse)

SEC's Gallagher Says Fiduciary Rule Needs More Study; Failure to Supervise Should Be Focus
"As [SEC] Chairwoman Mary Schapiro was stating last week her belief that the agency could issue a proposed rule to put brokers under a fiduciary mandate next year, the newest SEC commissioner, Daniel Gallagher, declared that the SEC must first determine if such a rule is 'necessary, stating the agency should focus on issuing guidance regarding failure to supervise.... '[A]ny rulemaking pursuant to Section 913 must, then, be supported by commission findings that such rules are necessary, as well as a detailed understanding and analysis of the economic consequences of such rules.'" (Advisor One)

How to Design Target-Date Funds?
Very technical article, but includes a useful introduction. "The main purpose of this article is to analyse and understand dynamic allocation in a target-date fund framework. We show that the optimal exposure in the risky portfolio varies over time and is very sensitive to the parameters of both the market and the investor's. We then deduce some practical guidelines to better design target-date funds for the asset management industry." (Lyxor Asset Management (Paris))

The United Kingdom's New Mandatory Retirement Savings Program
"On October 1, 2012, the United Kingdom launched a new retirement savings program.... [A]ll employers will be required to offer retirement plans meeting minimum requirements for their employees and to contribute to those plans.... [A]l employers who do not sponsor pension or retirement savings plans meeting specified requirements will be required to automatically enroll their employees in a new program.... [O]nce enrolled, the employees will have the option of withdrawing from the program." (Pension Rights Center)

[Opinion]

Illinois Pension Reform Amendment Falls Short of Fixing Problems
"On November 6th, voters will be asked to approve or reject a proposed constitutional amendment that purports to promote public pension reform.... Nothing in the amendment puts Illinois on track to meet growing pension obligations, which are now underfunded by at least $80 billion. The amendment addresses no new funding mechanisms, repairs or changes to the Illinois Pension Code, the law that oversees the state's pension rules." (The Huffington Post)

[Opinion]

Keep 12b-1 Basics in View When Reviewing Retirement Plan Revenue Sharing
"There seems to be a growing sense of entitlement, that somehow plans are entitled to revenue sharing, that there is some sort of innate (and perhaps legal) right plans have to the 12b-1 and service fee payments generated under these programs. It seems that a plan's 'right' to revenue sharing is too often where the conversations begin, and even seems to be creeping into some of the DOL's own approach to it." (Business of Benefits)

Benefits in General; Executive Compensation

Proposed Changes to ISS Proxy Voting Policies
This article describes current policy and proposed changes, and identifies areas on which ISS is specifically requesting comment. Excerpt: "On October 16, 2012, Institutional Shareholder Services (ISS) issued for comment several proposed proxy voting policy changes." (Benefits Bryan Cave)

ISS Issues 2013 Draft Policies for Comment
"ISS is proposing the following changes: Recommend a vote 'against' or 'withhold' from the entire board if the board failed to act on a shareholder proposal that received the support of a majority of shares cast (rather than outstanding) in the previous year. Use a company's selected peers with size constraints as an input to its peer group methodology Incorporate a comparison of realizable pay to grant date pay as part of the qualitative evaluation of pay-for-performance alignment." (Haynes and Boone, LLP)

When Disaster Strikes: Pay, Leave and Related Issues
"When a hurricane, earthquake, flood, fire or other emergency occur, numerous employment laws are implicated, including ... Family and Medical Leave Act (FMLA)... Uniformed Services Employment and Reemployment Rights Act (USERRA).... ERISA and COBRA." [Ed. note: the article includes an extensive list and a discussion of other employment-related legal implications.] (Society for Human Resource Management)

Employment Cost Index for September 2012
"Compensation costs for civilian workers increased 0.4 percent, seasonally adjusted, for the 3-month period ending September 2012, the U.S. Bureau of Labor Statistics reported [on October 31, 2012]. Wages and salaries (which make up about 70 percent of compensation costs) increased 0.3 percent, and benefits (which make up the remaining 30 percent of compensation) increased 0.8 percent.... Benefit costs [for civilian workers] increased 2.6 percent for the 12-month period ending September 2012 down from the September 2011 increase, which was 3.2 percent." (U.S. Bureau of Labor Statistics)

Sixth Circuit Finds ERISA Section 510 Does Not Protect Unsolicited Internal Complaint (PDF)
"The question in this case is whether [ERISA section] 510 extends its protections to an employee's unsolicited, internal complaint to his employer that it has violated ERISA.... The Sixth Circuit has not yet had occasion to address the issue..... [T]he Court concludes that in this case Section 510 does not protect the plaintiff's unsolicited, internal complaint -- an email to his employer threatening to report its ERISA violations to state and federal authorities -- because it was unconnected to any 'inquiry or proceeding'.... A fuller explanation is that 'an employee's grievance is within Section 510's scope whether or not the employer solicited information,' provided that the employee himself solicited information. Without the asking for information, there is no 'inquiry'." [Sexton v. Panel Processing, Inc., No. 12-10946 (6th Cir., Oct. 30, 2012)] (U.S. Court of Appeals for the Sixth Circuit)

Silicon Valley Employers Provide Lavish Perks for Employees
"Say 'employee benefits' and pensions and health care will jump to most people's minds. Maybe life and disability insurance will pop up as well. But employers in Silicon Valley are going way beyond that. They're providing housekeeping, cooking, babysitting and a host of other services as perks for their employees." (Forbes)

District Court Clarifies When Remand to the Plan Fiduciary is Appropriate
"The Court declined to order a remand, focusing on the limit of its scope of review: The Court reviews the claims administrator's decision based upon the information it had at the time. Accordingly, the Court must review the fiduciary's decision before making any decision to remand. Implicit in the Court's holding was the recognition that, if the claims administrator abused its discretion, a remand may be warranted, but if the claims administrator did not abuse its discretion, based upon the information it had at the time, its decision can be upheld, and a claimant cannot force the re-opening for further information to be considered." [Hooks v. Hartford Life and Accident Ins. Co., 2012 U.S. Dist. LEXIS 150536 (M.D. Ala. October 18, 2012)] (Wombyle Carlyle)

Hodgson Russ Employee Benefits Developments, October 2012 (PDF)
Articles include: Guidance Provided on Geographic Diversification and Single Property Transactions; Final Regulations Issued on Use of Corporate Aircraft for Entertainment; Multiemployer Pension Plan's Critical Status Does Not Preclude Employer Withdrawal; Retirees Are Not Entitled to Lifetime Benefits; and Liquidated Damages Due on Accelerated Withdrawal Liability. (Hodgson Russ LLP)

[Opinion]

Most of National Education Association's Largest Affiliates Are Awash in Red Ink
"An Education Intelligence Agency analysis of 2010-11 Internal Revenue Service filings reveals as many as eight of the National Education Association's 11 largest state affiliates do not have the financial assets to match their liabilities and total almost $400 million in combined debt. The lion's share of the union's debt comes from employee pension and post-retirement health care liabilities." (Education Intelligence Agency)

Press Releases

ASPPA Gets Ready to Save 401(k)s from Tax Reform
American Society of Pension Professionals & Actuaries (ASPPA)



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