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January 3, 2013          Get Health & Welfare News  |  Advertise  |  Unsubscribe
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Employee Benefits Jobs

Retirement Plan Account Manager
for SLW Retirement Plan Advisors in CA

Pension Administrator
for The Kagan Company in CA

Retirement Plan Services Manager
for Dixon Hughes Goodman LLP in VA

Account Associate - Sales and Service Support
for Personal Capital in CA

Investment Integrity Specialist
for The Online 401(k) in CA

Benefits Analyst
for Genuine Parts Company in GA

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Webcasts and Conferences

Washington Update 2013
in California on January 15, 2013 presented by Western Pension & Benefits Council - San Diego Chapter

Mid-Sized Retirement & Healthcare Plan Management Conference
in California on March 17, 2013 presented by University Conference Services

View All Webcasts and Conferences


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Budget Deal Lets More Plan Participants Convert to Roth 401(k)
"The budget legislation passed by Congress Jan. 1 lets 401(k) participants convert any money in their tax-deferred accounts to a so-called Roth 401(k) account, if their employer offers one, which can be withdrawn tax-free in retirement. The change is projected to raise $12.2 billion in revenue over 10 years, according to the Joint Committee on Taxation, and help defray the cost of delaying spending cuts that had been set to take effect this month." (Bloomberg BusinessWeek)


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Fiscal Cliff Legislation Eases Rules for Converting Funds to Roth 401(k) Accounts
"A provision tucked into the American Taxpayer Relief Act, which President Barack Obama signed Wednesday, will expand the opportunities for employees to transfer funds from traditional 401(k) plans to Roth 401(k)s. Employees who are in lower tax brackets now compared with when they retire will reap big tax savings from such transfers." (Pensions & Investments)

Roth Conversion Provision Might Be Worst Budget Gimmick in the Fiscal Cliff Legislation
"Buried in the fiscal cliff deal is a small provision with big political significance: The bill makes it much easier for ordinary Americans to convert traditional 401(k) retirement accounts into Roth accounts, which the Congressional Budget Office has scored to raise $12 billion over 10 years. The White House and congressional Democrats insisted on including the revenue-raiser to offset half of the sequester's two-month delay.... The only problem is that it's highly unlikely to raise that much revenue in the long term -- in fact, it's at best likely to break even and at worst be a big revenue loser, tax experts say." (The Washington Post; free registration required)

Fiscal Cliff Deal Brings New Roth Conversion Opportunity (PDF)
"The American Taxpayer Relief Act (H.R. 8) passed by the U.S. House of Representatives and the Senate contains an important provision that offers a new opportunity to convert assets in defined contribution plans (such as Section 401(k) plans), Section 403(b) plans, and governmental 457(b) plans into Roth amounts within the plan. The amount converted is currently taxable but subsequent qualified distributions from the plan Roth account are, of course, completely nontaxable. Plans are permitted to offer this new conversion right but are, of course, not required to do so." (American Benefits Council)


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Correcting a 401(k) Plan's Failure to Implement a Participant's Deferral Election
"If an employer fails to implement a participant's deferral election, what is the IRS's recommended method for correcting the failure? ... [T]he plan corrects by making a qualified nonelective contribution (QNEC) equal to the 'missed deferral opportunity' ... [which is] 50% of the 'missed deferral.' The missed deferral is the participant's deferral election applied to the compensation for the period of time for which the plan failed to implement the election. The employer also would need to include earnings with the corrective contribution." (SunGard Relius)

2013 Regulatory Limitations Poster and Compliance Calendar for Retirement Plans
The linked page contains a downloadable poster showing regulatory limits for elective deferrals and catch-up contributions for 2013, and a 2013 calendar showing recurring compliance and notice requirements for qualified defined contribution plans. (The Vanguard Group, Inc.)

Investors Want Federal Government to Enhance 401(k) Accounts
"69% [of surveyed U.S. investors] say it is extremely or very important that the president and Congress find ways to financially encourage every company to offer a 401(k) savings option and to financially encourage all Americans to participate ... A similarly high 67% say it is extremely or very important that leaders seek ways to enhance the role of the 401(k) as a retirement savings investment. Sixty-six percent say it is extremely or very important that the president and Congress should allow Americans with 401(k) retirement savings to obtain more quality investment advice and should allow Americans more investment flexibility with their 401(k)." (Gallup)

IRS Issues Proposed Regs for New Tax on Net Investment Income; Unclear Whether Tax Applies to 404(k) Dividends
"Arguably, if the participant elects to have the dividends paid to the plan and reinvested in additional employer stock, this tax should not apply because the participant will ultimately receive the value of the dividend as a distribution from the plan, which would be reported on Form 1099-R. But if the participant elects to receive the dividends directly in cash, it is possible the tax might apply because such dividends, reported on Form 1099-DIV, are otherwise taxed as 'ordinary dividends'." (Haynes and Boone, LLP)

2012 Spares Battered Canadian Pension Plans
"The Mercer Pension Health Index stands at 82% on December 31st, up 2% in the fourth quarter and 6% for the year. 'The good news is that the financial position of Canadian pension plans improved during 2012. The bad news is that plan sponsors had to do most of the heavy lifting. While the index increased by 6% in 2012, only 1% was due to economic factors. The remaining 5% was due to employer contributions to fund the deficits,' said Manuel Monteiro, Partner in Mercer's Financial Strategy Group." (Mercer)

Cypen & Cypen Newsletter for January 3, 2013
Covers employee benefit developments with an emphasis on governmental plans. Topics in this issue include: Have Pensions Better Prepared America for Retirement Than 401(k)s? Less Than Half of Pre-retirees Expect To Live Their Desired Lifestyle in Retirement; 2012 Generational Research; Social Security Update for 2013; and Study Finds Aging Does Not Impair Decision-making. (Cypen & Cypen)

Is California Governor's Pension Bill Really 'The Biggest Rollback'?
"[California Governor Jerry] Brown said the pension reform bill that took effect Jan. 1 was 'the biggest rollback of public pensions in California history'... Pension critics said Brown's bill is a 'small' or 'first' step [and that much] more needs to be done to cut the pension debt or 'unfunded liability.' ... Pension supporters have a different view. After a major market crash and recession, CalPERS and CalSTRS still have roughly 70 percent of the projected assets needed for future obligations, a funding level not regarded as dangerously low by many." (CalPensions)

Corporate Pension Plan Funding Levels Declined in 2012; Most Plans Still Considerably Underfunded
"2012 pension plan funding levels declined for the second consecutive year and remained well below healthy levels ... [according to] pension plan data for the 429 Fortune 1000 companies that sponsor U.S. defined benefit pension plans and have a December 31 measurement date. Results indicate that the aggregate pension funded status is estimated to be 75% at the end of 2012, compared to 78% at the end of 2011. Overall, pension plan funding decreased by $79 billion last year, leaving a deficit of $418 billion at the end of 2012." (Towers Watson)

Change in Average 401(k) Account Balances (By Age and Tenure), Updated as of December 31, 2012
"The EBRI/ICI Participant-Directed Retirement Plan Data Collection Project is the largest, most representative repository of information about individual 401(k) plan participant accounts. As of December 31, 2010, the EBRI/ICI database included statistical information about 23.4 million 401(k) plan participants, in 64,455 employer-sponsored 401(k) plans, representing $1.414 trillion in assets." (EBRI)

Five Lessons from My Parents' Retirement
"1. Pursue a traditional pension plan -- aggressively.... 2. Compensate for the absence of a pension plan, if you can't find one.... 3. Don't forget about health care expenses in retirement.... 4. Save like you're going to live forever.... 5. Get started early, and get serious." (MarketWatch.com)

Cities Chart Course Through Morass of Pension Underfunding
"Unpaid bills from decades of retirement promises made to public workers, combined with a lackluster economy and steep Wall Street losses, have built up a financial mountain that threatens to overwhelm budgets and operations in cities and counties across the country. While it hasn't gotten the attention of the 'fiscal cliff' in Washington, the pension crisis at City Hall could have similar effects as mayors are forced to raise taxes, cut government services or renege on retirement promises made to police officers, firefighters, teachers and other public workers." (ABC News)

From Atlanta to San Diego: 7 Cities' Pension Problems
"Atlanta: The city faces an unfunded pension liability of $1.5 billion at last estimate.... Chicago: The city's six pension funds are about 50 percent funded, and have a current unfunded liability of $26.8 billion.... Philadelphia: The city's unfunded pension liability was $4.5 billion as of July 1, 2012.... San Diego: The city's pension investments tumbled nearly 20 percent in 2009, raising its unfunded pension liability from $1.3 billion to $2.11 billion." (ABC News)

PBGC Holding $300 Million in Unclaimed Pension Benefits
"At a time when many Americans are worried about saving enough for retirement, nearly $300 million in pension benefits has gone unclaimed by U.S. workers and retirees. The [PBGC] ... said the money belongs to more than 38,000 Americans -- or their surviving spouses -- that the agency has been unable to locate." (Pittsburgh Post-Gazette)

Rethinking Optimal Wealth Accumulation and Decumulation Strategies in the Wake of the Financial Crisis
"Using annual data for stock and bond returns from 1926 through 2011, this paper first investigates the distribution of historic returns and then uses that distribution to determine optimal consumption and portfolio asset allocation for a risk-averse household facing labor-income uncertainty and longevity risk. The household is also entitled to Social Security retirement benefits.... The majority of households derive most of their lifetime consumption from labor market earnings and Social Security, with earnings from financial assets being relatively insignificant. Unless households plan to accumulate a substantial amount of financial assets and invest a substantial share of these assets in stocks, their incorrect portfolio allocations reduce their lifetime utility and lifetime consumption relatively little." (Center for Retirement Research at Boston College)

Employee Contributions to Public Pension Funds: Plan Designs, Policies and Recent Trends (PDF)
"Unlike in the private sector, nearly all employees of state and local government are required to share in the cost of their defined benefit pension. Employee contributions typically are based on a percentage of salary as specified in statute.... In the wake of the 2008-09 market decline, employee contribution rates in many states have increased." (National Association of State Retirement Administrators)

Hybrid and Defined Contribution Plans as the Primary or Optional State Retirement Benefit (PDF)
"[This article] identifies states that provide a defined contribution plan to broad employee groups (public school teachers, public safety officers, correctional officers, or general employees), or a hybrid retirement plan (that has elements beyond mandatory employee contributions to a traditional pension plan) to these employee groups.... Although exact statistics are unavailable, most public employees participating in a DB plan also have access to a supplemental, voluntary DC plan." (National Association of State Retirement Administrators)

[Opinion]

Beware of Calls by CEOs for Social Security Cutbacks
"While America's CEOs have been fretting about the fiscal cliff, millions of American workers face a financial disaster that gets much less media attention. There's a half-trillion-dollar deficit in the nation's worker retirement benefits. The Great Recession, which decimated retirement assets, played a big role in building this lesser-known cliff. They siphoned pension assets for profit-boosting purposes. When the pension deficits started to balloon, many corporations responded by slashing benefit programs.... And the same CEOs who have contributed to rampant retirement insecurity are now calling for cuts to these benefits." (TimesUnion.com)

[Opinion]

Text of Comments to Treasury Department on Hybrid Plan Regulatory Issues (PDF)
"Given the significance of the regulations and the enormous effort Treasury and IRS have devoted to finalizing them, it is critical that administrative precedents (however inadvertent) not interfere with the government's ability to resolve the issues on the merits. Experience with past rulemakings counsels vigilance lest inadvertent inconsistency hamstring the government's development of its final regulations." (American Benefits Council; Coalition to Preserve Defined Benefit Plans; ERISA Industry Committee)

[Opinion]

Text of Statement by State Budget Solutions on Treasury Department's Decision To Stop Funding Federal Employee Pensions
"On December 31, the U.S. Government reached the $16.4 trillion borrowing limit and in response, Sec. Geithner used accounting gimmicks so that the country did not default on its debt. The main gimmick suspends the issuance of new debt for two government retirement funds which will 'save' about $200 billion and avoid default for two more months. 'Secretary Geithner raid on the money-market fund in which many federal employees invest as part of Thrift Savings Plans (TSPs) is not only irresponsible, it also risks having the Bond Rating Agencies lower the U.S. credit rating.'" (State Budget Solutions)

[Opinion]

Important Issues to Consider Regarding Taxation of Retirement Contributions and Benefits (PDF)
"Workplace retirement plans improve workers' standard of living during retirement so that they depend less on government programs. Before revenue-raising proposals are considered that could inadvertently harm these plans, we ask that lawmakers consider the following issues regarding the taxation of retirement contributions and benefits: Current tax incentives for retirement are working well.... 401(k) plans represent the most disciplined source of individual savings in the United States.... While scored as a 'revenue loser,' plans are tax deferred ... Tax incentives for retirement encourage plan sponsorship." (American Benefits Council)

Benefits in General; Executive Compensation

Text of IRS Notice 1036 (Rev. Jan. 2013): Early Release Copies of the 2013 Percentage Method Tables for Income Tax Withholding (PDF)
"This notice includes the 2013 Percentage Method Tables for Income Tax Withholding. Employers should implement the 2013 withholding tables as soon as possible, but not later than February 15, 2013. Use the 2012 withholding tables until you implement the 2013 withholding tables. For 2013, the employee tax rate for social security increases to 6.2%. The social security wage base limit increases to $113,700." (Internal Revenue Service)

Fiscal Cliff Deal Affects Wide Range of Benefits and Compensation Programs
"While the legislation's most significant provisions include higher tax rates for high-income taxpayers and a payroll tax increase for working Americans, the law also includes important provisions affecting benefit and compensation programs ranging from Roth retirement plans to health care and qualified transportation benefits." (Towers Watson)

Fiscal Cliff Legislation Includes Changes in Employee Benefits and Payroll Tax Withholding
"The legislation: Does not include an extension of the 2 percent payroll tax cut ... Permanently extends employer-provided education assistance ... Permanently extends the increase in the monthly tax exclusion for transit and vanpool benefits. ... Permits participants in 401(k)s, 403(b)s and similar defined contribution retirement plans to elect to transfer amounts to a designated Roth 401(k) account." (Society for Human Resource Management)

Disability Growth Disables the Country
"Since 1991, workers on [Social Security] disability increased almost 170 percent, from 3,194,938 to 8,575,544. In the same period, the population between 18-64 increased only 26 percent, from 155,263,000 to 196,263,504. The increase is occurring despite the Americans with Disabilities Act passed in 1990 prohibiting employment discrimination and requiring businesses to make reasonable accommodations for those with disabilities." (National Center for Policy Analysis)

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