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BenefitsLink Retirement Plans Newsletter

January 23, 2013          Get Health & Welfare News  |  Advertise  |  Unsubscribe
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Employee Benefits Jobs

Vice President, Total Rewards
for Sobeys in LOCATION OTHER THAN U.S.

Retirement Plan Services Administrative Officer
for Security National Trust Company in WV

Retirement Plans Administrator
for Oregon University System in OR

Trading & Corrections Associate
for Aspire Financial Services in FL

Nationwide Financial Operations Director
for Nationwide in OH

Executive Relationship Manager
for New York Life Retirement Plan Services in MA

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Webcasts and Conferences

NCEO/Beyster Institute Employee Ownership Conference
in Washington on April 24, 2013 presented by National Center for Employee Ownership (NCEO) and the Beyster Institute

Preconference Sessions - NCEO and Beyster Institute Employee Ownership Conference
in Washington on April 23, 2013 presented by National Center for Employee Ownership (NCEO) and the Beyster Institute

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Florida Supreme Court Upholds Prospective Changes to State Retirement Benefits (PDF)
"In a long-awaited decision, the Supreme Court of Florida ... overturned a trial court decision which had held unconstitutional various benefit changes made in the 2011 legislative session. The case ... reinstated an employee contribution in the previously non-contributory plan, a reduction in the DROP accrual rate, and a sharp reduction in the COLA for that portion of retirement service earned after the effective date of the law." [Scott v. Williams, No. SC12-520 (Fla., Jan. 17, 2013)] (Klausner, Kaufman, Jensen & Levinson, via NCPERS)


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Rating Company Says Florida Supreme Court Decision Upholding Pension Changes Is Positive for State and Local Governments
"Fitch does not plan on taking any imminent rating actions as a result of the Supreme Court decision as the effects of the state's pension reform are already embedded in our current Florida ratings. With this decision, Fitch expects that the state legislature may propose additional reforms, possibly including a measure requiring new employees to participate in a 401(k) type pension plan rather than the current defined benefit plan." (Reuters)

Ending California's Numbers Game for Pension and Retiree Healthcare Liabilities
"Two rules changes -- by Moody's Investor Services and [GASB] -- set to take effect this year and next, will require that pension funds make more conservative investment projections and disclose liabilities more clearly.... Thanks to a combination of excessively generous contracts, unrealistically rosy investment projections, and lowballing of future costs, the state's government-employee retirement and health plans are chronically underfunded. Unlike many states, where pension and health-care shortfalls loom in the future, California is seeing shortfalls in current budgets." (City Journal)

Fiduciary Fitness Requires Training, or At Least the DOL Thinks So
"While there is no express ERISA requirement that fiduciaries be trained, the DOL seems to take the view that training is evidence of a fiduciary properly exercising his or her duty of prudence.... The first step is deciding who to include. Basically, a fiduciary is (1) anyone with discretionary authority over the management or administration of an ERISA plan, (2) anyone with discretionary authority over the management or disposition of its assets, or (3) anyone who provides investment advice for a fee. (Individuals in category (3) should have their own training already.)" (Benefits Bryan Cave)

How Do Public Pensions Invest? A Primer
"[1] Public pension funds have a clear division of labor for making investment-related decisions. Fiduciary standards apply to each key role in the investment process. [2] Public pension funds have rational and systematic processes for setting asset allocation in a diversified portfolio, estimating expected investment returns, and evaluating investment performance. [3] The board of trustees of each public DB pension fund determines the acceptable level of risk that is prudent for their plan given its particular circumstances. They then adopt an asset allocation that is designed to maximize returns within the established level of risk. [4] The level of risk assumed by public pension funds, as indicated by the percentage of assets invested in equities, is consistent with other institutional investors and with many prudent individual investors." (National Institute on Retirement Security)


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Can Pensions Get Better Returns on Bonds?
"In the lower-than-low interest rate environment ... since the recession, most individual investors have grown accustomed to an uncomfortable trade-off -- to reap significant income from their portfolios, especially from their bond holdings, they have to take on a lot more risk. But ... some hedge funds and money managers are now advising pension funds on a strategy that they say will let those funds have their low-risk cake and snack on high returns, too. The strategy is called 'risk parity,' and ... it's not the kind of maneuver an investor can easily duplicate on his own." (MarketWatch)

Fourth Quarter 2012 Pension Plan Experience
"During the third quarter of 2012, the funded status of the model pension plan examined in each issue of [the linked publication] increased by two percentage points: from 73 percent to 75 percent. This increase was driven by a liability decrease of 2 percent. Plan sponsors should examine changes in their own defined benefit plans' assets, liabilities and funded ratios both from the vantage point of accounting and funding metrics." (Sibson Consulting)

Additional Guidance Needed to Ensure DB Funding Requirements Are Consistent and Reasonable for Federal Defense Contractors
"DOD contractors are among the largest sponsors of defined benefit pension plans in the United States and factor pension costs into the price of DOD contracts.... GAO assessed how (1) contractor pension costs are determined; (2) DOD ensures the contractor pension costs it pays are appropriate; (3) DOD contractors' defined benefit pension plans compare with plans sponsored by similar companies; (4) pension costs have affected DOD contract costs and the factors that contributed to these pension costs; and (5) the harmonization of CAS with ERISA will affect the amounts DOD will pay in pension costs in coming years.... GAO recommends that the Secretary of Defense clarify responsibility for and guidance on assessing pension reasonableness and determining discount rates for pension cost projections." (U.S. Government Accountability Office)

24% of Canadian Pre-Retirees Not Confident of Having Financially Comfortable Retirement
"Twenty-four percent of Canadian pre-retirees (working, age 50-65 with at least $50,000 in investible assets) are not confident that they will be able to live comfortably in retirement and about half of Canadian pre-retirees expect to have a lower standard of living compared with their existing lifestyle[.]" (LIMRA)

Revamped SEC Website Offers Goodies to Investors
"The SEC's home page has emerged from the static mold of the 1990's to offer a more consumer-friendly layout.... [The] site doesn't really (yet) contain all the bells and whistles of a comprehensive education site (nor should it, since that might give the appearance the government is endorsing a particular investment style). What is does contain are the kinds of simple platitudes that uninitiated investors will appreciate. It also emphasizes such things as 'the Role of the SEC' and 'Avoiding Fraud' -- two topics no compliance department in its right mind would permit on a financial service provider's website." (Fiduciary News)

[Opinion]

The Last Remaining Store of Real Wealth
"CalPERS had assets valued at $233 billion on June 30 2012, with a 1% return in the fiscal year ending June 30 2012 (i.e. fiscal year 2011). Still, 7 months later, January 17 2013, its assets are worth $253 billion. Also, CalPERS boasted a 1% return on its assets in the fiscal year ending June 30 2012, but a 13% return in the calendar year 2012. That means they made what, 24%-25% in the second half of the year? And the COO claims this was 'simply reflective of the return of the market'?!" (Business Insider)

[Opinion]

Why Are 'Demographics' Important to the Selection of Target Date Funds? (PDF)
"The 5 to 10 years prior to the target date are critical for profits since that's when account balances are their highest. It's also critical to participants because lifestyles are at stake. There is a conflict of interest. Fund companies say the wide dispersion of equity allocations at target date is because of demographics -- undersavers need more risk than the wealthy. Don't believe it." (Target Date Solutions)

Benefits in General; Executive Compensation

[Guidance Overview]

NYSE and NASDAQ Compensation Committee and Compensation Advisers Listing Standards
"The SEC's final rules mandate that compensation committees will be required to include only "independent" directors. In determining an individual's independence, the applicable securities exchange or association is required to take into account relevant factors ... The new NYSE and NASDAQ listing standards require boards to consider a director's compensation sources and affiliations, in addition to satisfying the stock exchanges' existing categorical independence standards." (Pepper Hamilton LLP)

[Guidance Overview]

SEC Approves NYSE and NASDAQ OMX Rule Changes Relating to Compensation Committee Independence Standards (PDF)
"These new listing standards should not prove onerous for NYSE- or NASDAQ-listed companies. Standing compensation committees composed of independent directors was already a requirement for NYSE-listed companies and is a common practice among NASDAQ-listed companies. The most significant new listing standard is the requirement that compensation committees, prior to retaining an adviser, evaluate the independence of the adviser against six specific independence factors. Although this requirement is not effective until July 1, 2013, many public companies have already undertaken such evaluation of their advisers." (Meridian Compensation Partners, LLC)

Proskauer ERISA Litigation Newsletter, January 2013
Includes articles discussing: "[1] the role of expert evidence in class certification issues arising in ERISA litigations, and identifies particular areas where the Comcast ruling may have significant implications for ERISA practitioners.... [2] cost-control strategies for employers as they struggle with retiree-medical expenditures in the era of the ACA ... with practical advice for employers hoping to reduce retiree-medical costs while minimizing abrupt changes to coverage." (Proskauer Rose LLP)

ERISA Advisory Council to Meet March 1
"The purpose of the open meeting, which will run from 1:30 p.m. to approximately 4:30 p.m. Eastern Standard Time, is to welcome the new members, introduce the Council Chair and Vice Chair, receive an update from the Assistant Secretary of Labor for the Employee Benefits Security Administration, and determine the topics to be addressed by the Council in 2013." (Employee Benefits Security Administration)

Employee Reward Strategies for the 21st Century (PDF)
"Employees' concerns about their financial security have reached the point that many are willing to sacrifice current rewards for retirement income that doesn't vary with investment returns.... While defined benefit plan sponsors will be heartened by this heightened appreciation for a traditionally undervalued benefit, the growing number of defined contribution-only sponsors ... need to recognize just how important security has become to employees and how ill-equipped many people feel to manage entirely on their own." (Towers Watson)

Press Releases

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