ASPPA

Executive Compensation Product Advisor
National Rural Electric Cooperative Association [NRECA]
in VA

Sr. Retirement Compliance
The National Rural Electric Cooperative Association [NRECA]
in VA

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Unsafe Safe Harbor 401(k) Plans - and Other Oddities
September 23, 2014 WEBCAST
(NIPA [National Institute of Pension Administrators])

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[Guidance Overview]

DOL Opens the Door to the Questioning of Brokerage Windows Under 401(k) Plans
"Possible DOL rulemaking or other guidance on brokerage windows could have a wide-ranging effect. Among those potentially affected could be plan sponsors, recordkeepers who promote or liaise with brokers in making brokerage windows available to plan sponsors, brokers who offer or facilitate the use of brokerage windows, sponsors of funds that are offered through brokerage windows and privately offered or other alternative investments that plan participants might be able to access only through a brokerage window." (Dechert LLP)  

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[Guidance Overview]

DOL Pronouncements Regarding Missing Participants and Brokerage Windows (PDF)
"[The authors] suggest that plan fiduciaries review their plan policies for missing participants, and amend them if needed to conform to the DOL's most recent guidance. [They] also encourage plan administrators to thoroughly document the steps taken to locate and make distributions on behalf of each missing participant.... DOL [may] use the public record generated by the RFI to amend, alter or broaden the application of a number of ERISA statutory and regulatory requirements. The most obvious and likely most significant change would be the application of the fiduciary rules to investments purchased through a [self-directed brokerage account]. DOL may also use the information provided to alter the Form 5500 reporting requirements, impose new benefit statement content requirements, and add additional disclosure obligations under the service provider and participant disclosure regulations." (Groom Law Group)  

[Guidance Overview]

New DOL Guidance on 'Missing Participants'
"While this guidance applies to terminated defined contribution plans ... [b]est practices would suggest that the initial four steps should also be taken if a fiduciary decides to canvass eligible participants.... [It] is arguably equally appropriate for the four steps in locating missing participants to be used by defined benefit plans, at least prior to plan termination. Finally, it should be noted that the DOL guidance is quite clear that these decisions regarding steps to take and distribution methods are fiduciary decisions and not mere administrative decisions." (Seyfarth Shaw LLP)  

[Guidance Overview]

Take Advantage of Section 457(b) Catch-Up Contributions
"The maximum special catch-up amount is the LESSER of [1] Twice the current year's maximum, or $35,000 for 2013 or [2] The underutilized maximum amounts for prior years. Determining the underutilized limitation can be quite a challenge. The computation requires an analysis dating back to years beginning after December 31, 1978. From that initial year through years in effect prior to 2002, amounts contributed to ALL employers for whom a participant has performed services must be taken into account[.]" (Belfint Lyons & Shuman, CPAs)  

Warranties and Guarantees Come to the 401(k) Game: Can Insurance Really Put the Client First?
"[I]nsurance on 401(k) plans has long been seen as yet another layer of fees, obfuscation and dubious value in a defined-contribution-plan industry rich in murkiness and the opportunism it provokes. But the get-to-the-point means of outsourcing the legal liability associated with fiduciary care is on the rise because investment management firms -- alive to new legal perils inspired by a re-energized Labor Department -- have begun to offload more of their fiduciary status[.]" (RIABiz)  

[Advert.]

PSCA's 67th Annual National Conference, Sept 15-18,Turnberry Isle, Miami

Attend PSCA's 67th Annual National Conference, Expanding Perspectives - Adapting to your changing landscape September 15-18, at Turnberry Isle, Miami. Join plans sponsors and industry leaders in General Sessions, Workshops and Roundtables centered around you and your plan. Register NOW!

The Power of the 'All-In' 401(k) Fee
"When fees aren't clear or comparable, it can be difficult to impossible for plan sponsors to determine the reasonableness of fees.... Under an all-in fee approach, all administrative, recordkeeping and investment expenses are summed into a single, total amount. This approach 'normalizes' the numerous fee arrangements used by 401k service providers, including compensation paid to providers from plan investments, making it easier for the sponsor to compare fees provider by provider." (Employee Fiduciary)  

The Shift from Defined Benefit Plans to Defined Contribution Plans
"There are several reasons for this shift, but the consequences are clear. The typical elderly age-65 employee in the United States is not prepared to retire with adequate retirement income. This problem has some urgency due to: Changing demographics. Increasing health care costs. The long-term health of the Social Security system. The aftermath of the financial crisis and housing markets." (Practical Law Company)  

PBGC Celebrates 40 Years of Protecting Pension Benefits of the Nation's Workers and Retirees: A Look at the 1980s
"The decade started with 35.9 million private-sector workers (46 percent of all private-sector workers) being covered by a pension plan. As of Sept. 30, 1980, we were responsible for about 50,000 people. That decade saw our assets grow along with our responsibilities. We went from being responsible for about 50,000 people to more than 250,000 people. Our assets exceeded $1 billion for the first time." (Pension Benefit Guaranty Corporation [PBGC])  

Considering a Phased Retirement Option: Reasons to Go Slowly
"This recent Reuters article paints a rosy picture of the phased retirement offering that the federal government is extending to its employees. It sounds like a great win-win. The government saves money; employees get to continue to save for retirement, but also get to cut back on hours. However, the article goes on to lament the 'slow' employer response ... What the article fails to discuss is that tax code nondiscrimination rules make phased retirement a hard sell for many employers." (Benefits Bryan Cave)  

Women Showing Greater Commitment to Retirement Savings
"[T]he average retirement savings balance for women was up 17 percent from a year ago and 71 percent from 2009. The gap between the average balance between women and men narrowed to 37.8 percent in the second quarter from 40.5 percent in 2010.... [T]he average salary deferral rate for women continues to trail men, 5.37 percent to 5.70 percent of compensation, respectively. However, the deferral rates for women have remained fairly steady since 2010 while the rates for men have declined." (MassMutual)  

Generation X Workers: Retirement Reality Bites Unless Answers Are Implemented (PDF)
54 pages. "Sixty-one percent of Generation X workers are confident that they will be able to someday fully retire with a comfortable lifestyle; however, among them, only 14 percent are 'very confident.' ... Thirty-four percent of Generation X workers expect their standard of living to decrease when they retire. Eighty-three percent of Generation X workers are concerned that Social Security will not be there for them when they are ready to retire. The majority of Generation X workers (54 percent) plan to work past age 65 or do not plan to retire. Most Generation X workers (62 percent) envision a phased transition into retirement[.]" [5-page 'Fact Sheet' is also available.] (Transamerica Center for Retirement Studies)  

California City Looks to Quit CalPERS But Fears It Can't Afford To
"Officials in Villa Park are considering pulling the tiny California city from CalPERS, saying the monthly costs of the state's giant public pension system are crippling the municipal budget. But Villa Park fears that pulling out of its contract with [CalPERS] could be prohibitively expensive because of a termination fee that could exceed the city's annual budget.... 'Getting out of Calpers is like getting out of jail,' said Rick Barnett, mayor of Villa Park, population 5,800." (Reuters)  

[Opinion]

Text of Letter from American Academy of Actuaries to IRS Requesting Guidance on the Highway and Transportation Funding Act of 2014 (HATFA) (PDF)
"With respect to 2014 plan years, we urge that Notice 2012-61 be reissued with 2013 and 2014 replacing 2011 and 2012. The situation with respect to 2014 and HATFA is analogous to the situation with respect to 2012 and implementation of the MAP-21 provisions. The guidance in this Notice was timely, practical and flexible and we see no reason to deviate from this on virtually identical issues.... At a minimum, guidance should permit application of the new law for Section 436 on a prospective only basis. Not permitting this would create substantial compliance and/or administrative issues for sponsors with benefit restrictions currently in place." (American Academy of Actuaries)  

[Opinion]

Are Public Pensions Basically Ponzi Schemes?
"The conflicts-of-interest within the public employee plan structure and the longevity liability have, in some states, created very obvious looming crises.... Given the hard-to-avoid temptation to turn public employee pensions in a pay-to-play re-election bonanza, does it make sense to ban them? ... We already have working models on how to handle the conflict-of-interest problem. Implementing these requires no contract negotiations and, in some cases, executive rather than legislative action.... Worse than incompetence, however, is the proven record of fiduciary failure. Politicians just cannot avoid the temptation of conflicts-of-interest" (Fiduciary News)  

[Opinion]

Who's Minding Public Pensions?
"Nearly 60% of government pension funds surveyed in 2010 by [NASRA] were controlled by boards in which beneficiaries of the pension system -- that is, active government workers and retirees -- held at least half of all seats. In addition, pension boards often include elected officials who depend heavily on public-sector unions for campaign funds. Is it any wonder, then, that the boards have produced some disastrous results?" (Steven Malanga, in the Los Angeles Times)  

[Guidance Overview]

Developments Impacting Benefits for Same-Sex Spouses
"Employers should continue to review their benefit plans and policies with respect to benefits extended to employees' same-sex spouses. Year-end amendments may be required for qualified retirement plans to comply with the IRS guidance on Windsor. The recent DOL guidance may require employers to change their policies with respect to FMLA-protected leave to care for a same-sex spouse with a serious medical condition. In addition, employers with self-insured plans may want to consider whether to extend spousal coverage to same-sex spouses in light of [Roe v. Empire Blue Cross Blue Shield] and other challenges that will likely follow." (McDermott Will & Emery)  

Tax Problems Sometimes Arise When Giving Employees Choice of Benefits
"If the employee gives up the right to receive additional 457(b) distributions in the future in exchange for an additional current health insurance subsidy, the IRS views this as an assignment of income and has stated on several occasions that such a choice would result in current taxable income to the employees who elect the additional health insurance subsidy -- even though they are not now receiving any cash and have elected to receive what appears to be a nontaxable benefit." (Focus on Public Benefits)  

New York Court Upholds Executive Pay Caps as State Updates EO 38 Guidance (PDF)
"On July 29, Suffolk County Supreme Court Justice Emily Pines ruled in Concerned Home Care Providers, Inc. v. New York State Department of Health [DOH] that the DOH has authority 'to regulate the financial assistance provided by the State in connection with public health care activities.' Upholding the DOH regulations, the court emphasized that the regulations do not cap the executive compensation or administrative expenses of entities that receive state funds or state-authorized payments, but only limit the amount of money coming from state sources that can be used for those purposes.... [On August 13], an Albany Supreme Court justice delivered a setback to the state in a third case questioning the legality of EO 38. In Leading Age New York et al. v. Shah, Judge George B. Ceresia Jr. denied the state's motion to dismiss a challenge to EO 38 by several statewide associations of health care providers, allowing the case to continue." (Buck Consultants at Xerox)  

Section 457A Is Bad, But Proposed Section 409B Would Spell Doom for Deferred Compensation and Stock Options
"[If] it became law, new [Internal Revenue Code] Section 409B would effectively eliminate deferred compensation and stock options for all U.S. taxpayers. Yes, that's right, stock options (and SARs) too. Unlike 409A or 457A, proposed Section 409B defines deferred compensation to include 'any plan that provides a right to compensation based on the appreciation in value of a specified number of equity units of the service recipient or stock options,' extending its intended reach to stock options, SARs, and potentially, certain other stock-based compensation awards." (Winston & Strawn LLP)  

ACA Raises Taxes on Insurers with Big Pay Packages
"On average, the insurers owed $1.3 million more in taxes per executive. So-called 'performance pay,' which is no longer deductible for health insurers, accounted for more than $204 million of the compensation awarded. Executive pay rose to an average of $5.4 million per person in 2013, up from $5.1 million in 2012." (Kaiser Health News)  

Inspira to Speak at Winning IRA Rollovers Conference in Boston
Inspira

Retirement Advisor Council Elects Board Members Ryan Mullen and Barbara Delaney
Retirement Advisor Council

Aon Active Health Exchange Expands Coverage Options to Include Wide Range of Elective Benefits in 2015
Aon Hewitt

Trinity Benefit Advisors is Latest Firm to Join United Benefit Advisors
United Benefit Advisors

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