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November 21, 2012          Get Health & Welfare News  |  Advertise  |  Unsubscribe
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Employee Benefits Jobs

Trust Accountant for 401(k)/Defined Contribution Plans
for R.J.L. Pension Services, Inc. in FL

Manager System & Data National Penn Capital Advisors
for National Penn in PA

Employee Benefits Plan Administrator
for MERIT BENEFITS GROUP, Inc. in IL

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Webcasts and Conferences

Preparing for a Pension Risk Transfer - Webcast
Nationwide on December 12, 2012 presented by Mercer


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Out-of-Town Relatives of Hurricane Sandy Victims Can Use Newly Liberalized Rules for Hardship Withdrawals and Plan Loans (PDF)
"It is important to note that, in addition to hardship distributions and loans to affected participants, the Announcement provides potential relief for Sandy-related hardships of lineal ascendants or descendants of plan participants as well as spouses and dependents. In other words, if the plan allows it, a plan participant who lives in another part of the country can assist a son, daughter, parent, grandparent or other dependent who lived or worked in the affected areas by taking out a plan loan or hardship withdrawal under the guidance." (Groom Law Group)


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Determining Whether Your Retirement Plan Has Incurred a Partial Termination
"Affected participants become fully vested as a result of a partial termination. Therefore, it is better to recognize a partial termination event when it occurs, rather than to realize that one has occurred in the past and that your plan has not paid out affected participants on a fully vested basis.... First, there needs to be some employer-initiated action that decreases plan participation (for example, a plant closing or a series of layoffs).... Second, even if there is employer action that decreases participation, there is no partial termination unless the reduction is permanent and significant." (Chang Ruthenberg & Long)

The Impact of Long Vesting Periods on State and Local Workers (PDF)
"Public sector defined benefit plans provide short-tenure workers with little or no pension benefits. One reason is that these plans have long vesting periods -- the years of service needed to qualify for any benefit. The longer the vesting period, the less likely an employee will remain long enough to vest. This effect helps explain why nearly half of workers depart without any promise of future benefits." (Center for Retirement Research at Boston College)

Why It's Time to Combine Your Retirement Investments
"The Bureau of Labor Statistics tells us that in 2009 nearly 17% of the 72.5 million participants in 401(k)-type retirement left their savings in their old employers' plans.... If your money is sitting out there in some account that's not being guided correctly, it's a waste of your money and you're likely losing value. Plus, retirement is goal-oriented. The planning process becomes a lot harder when you don't know what you have and where it's going." (Physicians' Money Digest)

The Fiscal Cliff and Its Potential Effects on Retirement Plan Participants
"[T]his article [compares] the effect on 401(k) plan participants of three [possible] alternatives: (1) an increase in marginal tax rates (which could take place either if Congress simply 'lets the fiscal cliff happen' or if in 'solving' the fiscal cliff Congress increases marginal tax rates); (2) a reduction in the limit on 401(k) plan contributions; and (3) a combination of a decrease in marginal tax rates and a reduction in limits (an approach that has been a part of some comprehensive tax reform proposals)." (October Three)

Delayed Retirement Means an Aging Work Force
"Although tenure is often thought of as positive, it has the potential for conflict. Some of the adverse effects of employees working longer than they or the organization had anticipated include: Depleting the next generation of workers, who may look elsewhere for opportunities if they see their prospects for advancement being put on hold. A drop in productivity if some employees continue working merely because they cannot afford to retire. A cost increase in benefit programs in tandem with health and disability plan usage, which can be expected from an aging work force." (PLANADVISER.com)

ERISA Requirements for Disclosures Related to Brokerage Accounts (PDF)
"What do the disclosure rules require for individual brokerage accounts? And to whom should the disclosures be delivered? In some cases, a plan chooses a single broker-dealer to provide the brokerage accounts; the participant's only choice is whether to invest through a brokerage account or not. In other cases, the plan does not designate a broker-dealer, but a participant who wants to use a brokerage account is able to choose his own broker-dealer. The latter case raises the question of who should get the disclosures -- the participant or the plan fiduciary?" (Financial Services Institute)

IRS Letter Ruling Addresses Deductible Contribution Limit for Two DC Multiemployer Plans
"The limit on deductible contributions under Code Sec. 404(a)(3)(A) to two defined contribution multiemployer plans was to be applied by aggregating the compensation of the employees who were beneficiaries under both plans as if all such employees were employed by a single employer under Code Sec. 413(b), taking into account only those employees who had allocations other than elective deferrals, according to an IRS letter ruling." (Wolters Kluwer Law & Business)

Pension Accounting: The Mark-to-Market Treadmill
"[T]his paper [explains] the why and how of pension funding volatility, using May 2012 as an example to demonstrate how pension accounting works and what impact it may have on asset allocation decisions.... [I]magine you are the Chief Financial Officer (CFO) of the combined S&P 500 companies ... This is what May 2012 would have meant to you. Going into the month, your pension plan had a deficit approaching $250 billion. By the end of the month your deficit grew by 73% to more than $430 billion[.]" (JPMorgan)

Handling Frozen Pension Plans: Terminate or Merely Immunize From Further Liabilities?
"When a defined benefit pension plan is frozen, plan sponsors may wonder whether to terminate the plan or to immunize the plan's liabilities with matching assets at a lower cost. New research ... shows the costs of these strategies are similar. However, other factors, such as the cost of purchasing a group annuity for participants or administrative time, may influence a plan sponsor's decision." (The Vanguard Group, Inc.)

[Opinion]

Economists Agree: No Empirical Basis for Reducing the Social Security COLA (PDF)
"[T]he annual Social Security cost-of-living adjustment (COLA) should be based on the most accurate measure possible of the impact of inflation on beneficiaries. For this reason, [the authors] oppose proposals to reduce the Social Security COLA by tying it to a chained consumer price index that does not directly measure the actual expenditures of beneficiaries. Such a move would lower the COLA by an estimated 0.3 percentage points per year, translating into a 3 percent benefit cut after 10 years and a 6 percent cut after 20 years." (Economic Policy Institute)

[Opinion]

On Money Market Funds, False Promises and Faulty Premises from The Wall Street Journal
"There's little evidence to support the Journal's claims that its favored proposal for money market funds -- forcing them to float their per-share price -- would enhance financial stability. As the financial crisis demonstrated, floating-value funds are not immune to runs. Instead, this 'solution' would deprive investors and the economy of an efficient, diversified, well-regulated, and transparent tool for cash management, and a crucial channel for financing businesses, state and local governments, and nonprofit institutions." (Investment Company Institute)

[Opinion]

Going Over the Pension Cliff?
"[B]efore employers pay higher premiums, the PBGC should explicitly state the assumptions and models used by the agency to calculate the deficit. Having said this, today's 'incredibly low interest rates' reflect weak economic growth around the world and could signal trouble ahead.... If debt deflation hits, the PBGC, private and public pension funds will be in deep trouble. It's equally irresponsible to think that historic low rates are about to head much higher." (Pension Pulse)

Benefits in General; Executive Compensation

[Official Guidance]

U.S. Department of Labor Issues Compliance Guidance for Employee Benefit Plans in Wake of Hurricane Sandy
"The guidance provided in this statement applies to employee benefit plans, plan sponsors, as well as service providers to such employers, located on October 26, 2012 in one of the counties or Tribal Nations that have been identified as covered disaster areas because of the devastation caused by Hurricane Sandy.... The Department recognizes that some employers and service providers acting on employers' behalf, such as payroll processing services, located in designated affected areas will not be able to forward participant payments and withholdings to employee pension benefit plans within the prescribed timeframe. In such instances, the Department will not, solely on the basis of a failure attributable to Hurricane Sandy, seek to enforce the provisions of title I with respect to a temporary delay in the forwarding of such payments or contributions to an employee pension benefit plan to the extent that affected employers, and service providers, act reasonably, prudently and in the interest of employees to comply as soon as practicable under the circumstances." (Employee Benefits Security Administration)

Do I Have a Top Hat Plan?
"A recent decision from the federal district court for the Eastern District of Kentucky considered the percentage of the total workforce invited to join the plan (less than 1%) and the nature of the plan members' employment duties (generally high ranking management personnel) to determine that the plan constituted a top hat plan.... [The court rejected] an argument that the plan did not qualify as a top hat plan because a few plan participants were not 'high ranking management personnel' ... holding that so long as the plan was maintained 'primarily' for the purpose of providing the deferred compensation for the top hat group, the plan met the 'top hat' group requirement." [Cramer v. Appalachian Regional Healthcare, Inc., No. 5:11-49-KKC (E.D. Ky, Oct. 29, 2012)] (BenefitsNotes, a blog by Leonard, Street and Deinard)

Miller Chevalier Focus on Employee Benefits, November 20, 2012
This issue includes: SIIA Appeals Decision Upholding Michigan Tax on Claims Paid under Employer-Sponsored Plans; IRS Announces Qualified Plan Relief for Hurricane Sandy Victims; IRS Invites Public Comments on Furnishing Form 1099-C upon Expiration of Non-Payment Testing Period; Agencies Issue Additional Guidance on PPACA's Pay-or-Play and Waiting Period Provision. (Miller & Chevalier Chartered)

2012 Year-End Benefit Plan Compliance Checklist and Reminders for Employers
"[The authors] offer the following summary of some of the more significant requirements employers should keep in mind ... Final Pension Protection Act amendment to reflect Code Section 436 funding-based benefit restrictions ... Cycle B determination letter applications due January 31, 2013 ... Self-correction of significant errors ... QDIA Notice ... 401(k) Automatic Enrollment Notice ... 401(k) Safe Harbor Notice ... $2,500 limit on employee contributions to health FSAs ... Notice regarding state health insurance exchange ... Increased Medicare tax on high-income filers ... Section 409A Correction Deadline for Deferred Compensation Plans." [Editor's note: this excerpt omits several others.] (Verrill Dana LLP)

Plan Administrator's 'Consultation' with Self-Funded Disability Plan's Sponsor Did Not Create Structural Conflict of Interest
"We know that an ERISA plan administrator both administering and funding the plan is operating under a 'structural conflict of interest.' This 'structural conflict of interest' may lower the deference a trial court will give to the plan administrator's benefits decision. So, ERISA plans frequently delegate a plan administrator different from the funding source of the plan to eliminate this structural conflict of interest. But what happens if the plan administrator 'consults with' the plan (with a separate funding source) in making benefit decisions? Is that enough to create a structural conflict of interest anyway?" [Day v. AT&T Disability Income Plan, 2012 WL 5359628 (9th Cir., Nov. 1, 2012)] (Lane Powell PC)

Changing Sources of Income Among the Aged Population
"[T]he large shift over the past two decades in the composition of the income of the aged (65+), increasing the role of earned income and reducing the importance of income from their own assets ... can be attributed to delayed exit from the labor force by workers at older ages. [The authors] attribute the increase in work time to a rise in the proportion of more educated workers who choose to continue working, changes within the pension system that previously encouraged early retirement, and a decline in the availability of retiree health insurance. The increase in work time is concentrated among the highest income groups and those with the most education, suggesting that it is largely voluntary." (Center for Retirement Research at Boston College)

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