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January 18, 2013          Get Health & Welfare News  |  Advertise  |  Unsubscribe
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Employee Benefits Jobs

Compliance Research Analyst - Health/Welfare & Retirement Plans
for MidAmerica Administrative & Retirement Solutions, Inc. in FL

Senior Benefits Analyst
for Leading Fortune 500 Manufacturer in GA

Conversion Consultant
for Aspire Financial Services in FL

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Webcasts and Conferences

Employee Plan Compliance Resolution Systems (EPCRS) 2013
Nationwide on February 12, 2013 presented by McKay Hochman Co., Inc.

2013 First Quarter Update
Nationwide on February 20, 2013 presented by McKay Hochman Co., Inc.

2013 First Quarter Update
Nationwide on February 21, 2013 presented by McKay Hochman Co., Inc.

Phone Forum: Changes to Employee Plans Compliance Resolution System (EPCRS)
Nationwide on February 21, 2013 presented by Internal Revenue Service (IRS)

2013 Updates from U.S. DOL's Office of Chief Accountant and Los Angeles Regional Office
in California on January 29, 2013 presented by Western Pension & Benefits Council - Orange County Chapter

View All Webcasts and Conferences


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[Guidance Overview]

Retirement Plan Correction Programs Updated
"It was described as 'imminent' for at least two years. There were countless joking references to 'geologic time.' Now, Treasury and the IRS have finally released a complete update of the comprehensive system of correction programs known as the Employee Plans Compliance Resolution System (EPCRS).... The programs have evolved over more than 20 years into an extensive and widely used framework for correction." (Warner Norcross & Judd LLP)


[Advert.]

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Sponsored by DATAIR Employee Benefit Systems, Inc.

Proposals, Testing, Administration, 5500s, 1099Rs, Plan Documents
401(k), New Comparability, 403(b), Non-qualified Plans
(888) 328-2474Sales@DATAIR.comwww.DATAIR.com


Changes to State Pension Plan Are Legal, Florida Supreme Court Rules
"Florida's changes to its public-employee pension system didn't violate government workers' constitutional rights, the state Supreme Court [has] ruled ... Lawmakers properly moved to change future pension benefits and require workers to contribute to their retirements to save $1 billion and help close a budget shortfall ... Florida lawmakers backed Republican-led changes to the pension system to deal with a $3.6 billion budget gap. They approved a measure requiring workers to contribute 3 percent of their pay and eliminated the system's cost-of-living adjustment for employees retiring after the law took effect." (Bloomberg)

Survey Reveals Top 10 Priorities for Corporate Pension Plan Sponsors
"[C]orporate pension plan sponsors view controlling funding status volatility as the top priority in pension management for the fourth year in a row. Plan sponsors identified the need to implement a liability driven investing (LDI) strategy as the second most important priority for their organizations, up two spots from last year's poll. Providing senior management and board members with a long-term pension strategy rounded out the top three priorities for plan sponsors in 2013." (SEI)

More DB Plans Using Glide Paths
"According to [a recent] survey, 67% of [DB] plans use funded status, 28% use funded status and interest rates, and 6% use interest rates. More than half (56%) have consultants manage their glide paths; 39% have actuaries do so. The survey also found 70% of pension plans use liability-driven investing (LDI). Among those that do not, 56% said it is because their plans are significantly underfunded." (PLANSPONSOR.com)

DC Participants Want Employer Help in Saving for Retirement
"Defined contribution plan participants want employers to play an active role in helping make saving for retirement easier ... Of the 1,396 DC plan participants surveyed in October, 74% say they want clear examples on how their savings will pay off in the future. Seventy-one percent also want employers to increase their savings rate by one percentage point every year." (Pensions & Investments)

401(k) Investors Want Automatic Savings Increases and More Help in Making Retirement Decisions
"74 percent of employees surveyed want clear examples that will show them how their savings will pay off in the future; 71 percent want employers to increase their savings rate by one percent automatically each year; and 62 percent of employees 25 and younger said they want their employers to show them how to spend less so they can save more, compared to 53 percent of all employees surveyed[.]" (State Street Center for Applied Research)

Expect Lower Discount Rates (and Higher Liabilities) for 2012 Pension Disclosures
"Pension discount rates continued to drop during 2012 and plan sponsors should prepare for yet another potential upward spike in balance sheet liabilities for the fiscal year ended December 31, 2012.... Additional plan funding (above the IRS minimum requirements) may be appealing in 2013. Not only will it increase the plan's funded status, but it will also help lower your pension plan's PBGC variable rate premiums.... If you haven't adopted an LDI investment strategy yet, now may be a good time to revisit this policy." (Van Iwaarden Associates)

Judge Wants Hawker Beechcraft to Give More Notice of PBGC Settlement
"A judge on Thursday held off approving a deal between Hawker Beechcraft Inc. and [the PBGC] to scrap two underfunded Hawker pension plans, saying ... that he wouldn't approve the pension pact until certain union members affected by the plan get proper notification of what's going to happen to their benefits once PBGC takes over. 'You need the union,' Judge Bernstein said. 'It's the squeaking wheel that gets the oil.' The judge's concern was over a group of about 70 employees -- among the highest paid union employees in the so-called "salaried" pension plan -- that will see a reduction of benefits once PBGC takes over." (DowJones Daily Bankruptcy Review)

Retirement Accounts Draw Attention of U.S. Consumer Financial Protection Bureau
"The U.S. Consumer Financial Protection Bureau is weighing whether it should take on a role in helping Americans manage the $19.4 trillion they have put into retirement savings, a move that would be the agency's first foray into consumer investments.... The bureau's core concern is that many Americans, notably those from the retiring Baby Boom generation, may fall prey to financial scams ... [T]he consumer bureau -- established by the 2010 Dodd-Frank Act -- sees itself as a potential catalyst for promoting a coherent policy across the government[.]" (Bloomberg)

Middle Class Could Face Inadequate Resources During Retirement (PDF)
"Future retirees are predicted to have only slightly more retirement income than today's retirees. Median retirement income is projected to be $34,500 (in 2012 dollars) for future retirees, a 20% increase from current retirees. Medical expenses will wipe out the small retirement income gains for future retirees." (AARP)

Target-Date Mutual Funds Help Young Workers Set Up Smart 401(k)s
"Not enough young people who are eligible for a plan participate in one, and even those that do participate save only about 5% of their pre-tax income. Most advisers say that 10% is a minimum savings target. But twenty-somethings finally seem to have got the message when it comes to the importance of owning stocks, diversifying, and staying away from plan loans." (TIME)

The NHL Goes Back to the Past (Pension-Wise)
"The NHL was somewhat ahead of its time in 1986 when it switched to a DC-only style retirement plan. However, the players in this recent round of bargaining pushed hard for a pension plan, and succeeded.... While it is interesting to see an institution as prominent as the NHL buck a clear trend in the retirement space, it goes without saying that this is probably not the beginning of a sea change in retirement benefits back to defined benefit plans." (Benefits Bryan Cave)

Are Defined Benefit Plans Relevant? Ask the NHL!
"The league has provided a defined contribution (DC) plan since 1986, but downward financial markets have put the hockey players on thin ice, and they've argued that a DB plan is the only way to make sure they have adequate retirement income. The DB plan offers full retirement benefits at age 45, with reduced benefits available at age 35. Players are eligible for the plan after playing one game, but for full benefits, they must play in 160 games (about two seasons)." (Retirement Town Hall)

Pension Funding Index, January 2013
"The funded status increased by $53.7 billion during December 2012, ending a volatile year on a positive note for the 100 largest corporate defined benefit pension plans measured by the Milliman 100 Pension Funding Index (PFI). Historically low interest rates were the dominant factor in the $74.4 billion deficit increase during 2012. While higher-than-expected investment returns produced a solid $90.4 billion gain, pension liabilities increased by $164.8 billion. The funded ratio was 76.4% as of December 31, 2012, down from 78.7% at the beginning of the year but still above the historical low funded ratio of 70.5% set in May 2003." (Milliman)

Cypen & Cypen Newsletter for January 17, 2013
Covers employee benefit developments with an emphasis on governmental plans. Topics in this issue include: Report on US Pension Investment Consultants a Bombshell; IRS Announces Annual Inflation Adjustments for 2013. (Cypen & Cypen)

Emerging Markets, LDI and ESG Strategies Were Investor Favorites in 2012
"[Environmental, social and governance (ESG)] and socially responsible investing have seen increased interest in the last year among all institutional investors, especially public pension plans, said Michele Giuditta, associate director at Cerulli. Foundations remain the largest segment using ESG strategies.... Of money managers surveyed, 45% said they had received 'several requests' on ESG and SRI strategies in the last year, while 30% said they received one or two requests." (Pensions & Investments)

Annuity and Lump-Sum Decisions in DB Plans: The Role of Plan Rules
"[A]nnuitization rates vary significantly across these different plan types, which makes any attempt to combine the annuitization rates across these different plan types uninformative. Combining all the plans across the years 2005-2010, workers who made their payout decision between ages 50 and 75 had a minimum job tenure of five years, a minimum account balance of $5,000, and had an annuitization rate of 65.8 percent. But within this group of workers, those who had no plan restrictions on a lump-sum distribution had an annuitization rate of only 27.3 percent." (EBRI)

Annuity Choice Driven by Pension Plan Rules
"Why do some retiring workers with a pension choose to take a stream of lifetime income, while others cash out their entire benefit in a lump-sum distribution? Amidst growing concerns about workers outliving their retirement savings, this has emerged as a key issue -- and it depends to a large extent on whether the individual pension plan allows or restricts lump-sum distributions ... A better understanding of these decisions stands to shed light not only on the outcomes for traditional pensions, but also for defined contribution plans, where [lump-sum distributions] are the rule rather than the exception." (Employee Benefit Research Institute)

In a Low-Yield World, the 4% Annual Withdrawal Rule is No Longer Safe
"The safety of a 4% initial withdrawal strategy depends on asset return assumptions....Calibrating bond returns to the January 2013 real yields offered on 5-year TIPS, while maintaining the historical equity premium, causes the projected failure rate for retirement account withdrawals to jump to 57%.... [F]ailure rates if today's bond rates return to their historical average after either 5 or 10 years ... are much higher (18% and 32%, respectively for a 50% stock allocation) than many retirees may be willing to accept." (Michael Finke, Wade Pfau, and David Blanchett)

[Opinion]

Third Party Fiduciaries: Separating Myth from Reality (PDF)
"These [Third Party Fiduciary] arrangements are set up by companies that provide their own money management -- typically Insurance Companies or Mutual fund companies. They do this because they want to offer a fiduciary service in their product that makes them more marketable. But they cannot and will not be acknowledged fiduciaries to the plan because they have so many conflicts of interest that they would invariably violate the Prohibited Transaction rules of ERISA for virtually every plan they serve." (Unified Trust Company, N.A.)

[Opinion]

Text of Comments to Financial Stability Oversight Council on Proposed Money Market Mutual Fund Reforms (PDF)
"We are very concerned that the Proposed Recommendations will adversely impact money market funds, and as a result will also negatively impact tens of thousands of retirement plans and millions of plan participants.... Collectively, the Proposed Recommendations would limit the use and availability of money market funds for retirement plans because they would require plan record keepers to make significant and cost prohibitive changes to their record keeping systems. Record keepers are unlikely to undertake making the required changes." (The SPARK Institute)

Benefits in General; Executive Compensation

SEC Approves Compensation Committee and Advisers Independence Listing Standards for NYSE, NASDAQ
"The amended, and now final, rules make only a few minor clarifications and no major changes. The amended rules clarify that... [t]he compensation committee will not be required to conduct the required independence assessment as to a compensation adviser that acts in a role limited to (a) consulting on a broad-based plan that does not discriminate in favor of executive officers or directors of the company, and that is available generally to all salaried employees; and/or (b) providing information that is not customized for a particular issuer or that is customized based on parameters that are not developed by the adviser, and about which the adviser does not provide advice." (Winston & Strawn LLP)

April 15 Deadline for Filing FICA Refunds for Severance Pay
"Employers that have made severance payments due to reductions in force, plant shutdowns or similar conditions should consider filing protective FICA tax refund claims. Only a limited period of time is available to file. In general, the statute of limitations for tax refund claims is three years. As a result, April 15, 2013, is the due date for taxpayers for filing a refund claim with respect to the 2009 calendar year. A refund claim cannot be filed with respect to severance payments made before 2009." (McDermott Will & Emery)

[Opinion]

Very Few Senators and Representatives Have Experience with Major Benefits Legislation
"As the 113th Congress begins its work ... it is perhaps not surprising that the nuances of employee benefit plans and their tax treatment might not be an area of expertise for many on Capitol Hill.... [Y]ou might not be surprised to learn that no member of the current Senate was in office when Medicare, or even ERISA was signed into law. But ... just three of the current 100 members of the Senate were there when Sec. 401(k) became law, and only 10 were there when the Tax Reform Act of 1986 became a reality. Fewer than half of the Senate were in their current office when the Pension Protection Act of 2006 passed. The implications for policy making in the midst of that kind of turnover are significant for employers and employees alike." (Nevin Adams via EBRI)

[Opinion]

Retiree Health, CalSTRS Need Attention from California Legislature This Year
"CalSTRS, the teachers' retirement system, needs billions of dollars in new money to stabilize its slowly draining assets. Unlike its larger cousin retirement fund, CalPERS, the teachers' system can't independently mandate rates charged to its members' employers. It must rely on the Legislature for more funding. Meanwhile, the state's unfunded liabilities for retiree health benefits continues to grow. Only a handful of unions have agreed to pay ahead on the anticipated obligations for their members. The state essentially operates on a pay-as-you go basis." (The Sacramento Bee)

Press Releases

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