Retirement Plans Newsletter

September 18, 2014

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Webcasts and Conferences

Network Adequacy: Seeking Balance
September 26, 2014 in DC
(Alliance for Health Reform)

Workplace HSA Programs: What Employers and Advisors Need to Know
October 16, 2014 WEBCAST
(Thomson Reuters / EBIA)

2014 Webinar: IRA Beneficiary Distributions
October 16, 2014 WEBCAST
(Ascensus)

2014 Webinar: IRA Reporting
October 28, 2014 WEBCAST
(Ascensus)

View All Webcasts and Conferences



[Official Guidance]

Text of IRS Final Regs: Additional Rules Regarding Hybrid Retirement Plans
"This document contains final regulations providing guidance relating to applicable defined benefit plans. Applicable defined benefit plans are defined benefit plans that use a lump sum-based benefit formula, including cash balance plans and pension equity plans, as well as other hybrid retirement plans that have a similar effect. These regulations provide guidance relating to certain provisions that apply to applicable defined benefit plans that were added to the Internal Revenue Code (Code) by the Pension Protection Act of 2006, as amended by the Worker, Retiree, and Employer Recovery Act of 2008... In general, these regulations provide guidance with respect to certain issues under Sections 411(a)(13) and 411(b)(5) that are not addressed in the 2010 final regulations and make certain other changes to the final regulations under Sections 411(a)(13) and 411(b)(5). In addition, these regulations provide guidance with respect to one issue under the 133 1/3 percent rule of Section 411(b)(1)(B) for defined benefit plans that adjust benefits using a variable rate that could be negative." (Internal Revenue Service [IRS])  


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[Official Guidance]

Text of IRS Proposed Regs and Request for Comments: Transitional Amendments to Satisfy the Market Rate of Return Rules for Hybrid Retirement Plan
"These proposed regulations would permit an applicable defined benefit plan that does not comply with the requirement that the plan not provide for interest credits (or equivalent amounts) at an effective rate that is greater than a market rate of return to comply with that requirement by changing to an interest crediting rate that is permitted under the final hybrid plan regulations, without violating the anti-cutback rules of section 411(d)(6)." (Internal Revenue Service [IRS])  

[Official Guidance]

Text of IRS Proposed Regs: Removal of Allocation Rule for Disbursements from Designated Roth Accounts to Multiple Destinations
"This document contains proposed amendments to the regulations that address the tax treatment of distributions from designated Roth accounts under tax-favored retirement plans. The proposed regulations would limit the applicability of the rule regarding the allocation of after-tax amounts when disbursements are made to multiple destinations so the allocation rule applies only to distributions made before the earlier of January 1, 2015 or a date chosen by the taxpayer that is on or after [September 18, 2014]. These regulations would affect administrators of, employers maintaining, participants in, and beneficiaries of designated Roth accounts under tax-favored retirement plans." [Agency/Docket No. REG-105739-11] (Internal Revenue Service [IRS])  

[Official Guidance]

IRS Notice 2014-54: Guidance on Allocation of After-Tax Amounts to Rollovers (PDF)
"This notice provides rules for allocating pretax and after-tax amounts among disbursements that are made to multiple destinations from a qualified plan described in Section 401(a) of the Internal Revenue Code. These rules also apply to disbursements from a Section 403(b) plan or a Section 457(b) plan maintained by a governmental employer described in Section 457(e)(1)(A). Section VI of this notice provides transition rules." (Internal Revenue Service [IRS])  

[Guidance Overview]

Handout for IRS Defined Benefit Plan Update Webinar, September 18, 2014 (PDF)
52 presentation slides. Agenda: [1] Guidance on recent legislation: HATFA, Notice 2014-53, and Cooperative and Small Employer Charity Pension Flexibility (CSEC) Act; [2] Other recent and pending guidance; [3] Common issues arising in examinations. (Internal Revenue Service [IRS])  


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The QDIA Decision: Does Your Strategy Align with Plan Goals and Demographics? (PDF)
16 pages. "This paper is intended to discuss how plan demographics and sponsor goals may influence the QDIA selection process, and covers the following points: [1] Selecting an appropriate type of QDIA (i.e., single balanced fund or suite of TDFs) in light of plan demographics and sponsor goals; [2] If the fiduciary decides to use TDFs, selecting specific target date fund investment strategies that best fit plan demographics and sponsor goals; and [3] Given the DOL' s guidance for plan sponsors to consider custom glide path alternatives, the demographics that may suggest a need for customization." (Jeffrey S. Coons, of Manning & Napier; in collaboration with Fred Reish & Bruce Ashton, of Drinker Biddle & Reath LLP)  

The PBGC Variable Rate Premium: Should Plans Make the Switch?
"[C]onsultants can estimate the variable rate premium amounts under both options for both the 2014 and 2015 plans. Does the plan sponsor save over the course of two years by switching methods? ... Just remember, the standard method uses volatile spot interest rates. If there is another dip in the market, the plans may face higher costs under the standard premium funding target method and won' t be able to switch back to the alternative premium funding target until 2019." (Milliman Retirement Town Hall)  

Longevity May Give DB Sponsors Gray Hair, If Actuaries Have Their Way (PDF)
"In Notice 2013-49, IRS issued the static mortality tables to be used for calculating lump-sum distributions for 2014 and 2015. If the [Society of Actuaries'] proposed generational tables are adopted by IRS, lump sums will become more expensive, but probably not before 2016. However, employers that purchase group annuities may see a slight decrease in the premium paid for such annuities. Generational tables should reflect the payout stream more accurately than static tables, thereby lowering any premium cushion." (ERISAdiagnostics via Thompson Pension Plan Fix-It Handbook)  

Solutions, Not Bailouts: Congressional Hearing Probes Solutions for Frozen and Multiemployer DB Plans
"The hearing -- held Sept. 17 by the Select Revenue Measures Subcommittee of the House Committee on Ways & Means -- was largely devoted to talking about two specific issues: [1] nondiscrimination testing issues impacting plans that had been 'soft' frozen (i.e., closed to new hires); and [2] the funding and structural challenges confronting multiemployer plans." (American Society of Pension Actuaries [ASPPA])  


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Is It Time for a Checkup for Your 401(k) Plan?
"A good starting place for a compliance tune up is to see if you can answer some basic questions about your plan ... After you get past these, some basic questions about plan administration come into play:... Think of your 401(k) plan as a well maintained car. It needs a check up on a regular basis to keep running smoothly." (Fox Rothschild LLP)  

GAO Report Shines Light on IRAs: Popular and Ripe for the Picking
"The report provides some fascinating information about the number of people who have IRAs, as well as the staggering amounts that some people have accumulated in them.... The government realizes that IRAs are ripe for the picking.... There are a lot of people with IRAs.... Mitt Romney' s IRA has company!" (Slott Report)  

Designing Balanced DC Menus: Consider Capital Preservation Strategies
"In evaluating options ... plan sponsors should consider potential nominal and real return, volatility, risk of loss and other factors. Weighing trade-offs among these elements will guide prudent decision-making.... [S]hort-term, low-duration and low-risk bond strategies warrant careful consideration, particularly as an MMF alternative.... [B]ond strategies rank second only to stable value among options geared toward preserving capital within DC plans." (PIMCO)  

Evaluating the Merits of Active Management
8 pages. "While the theoretical debate is likely to continue, in practice ... there are, in fact, several factors investors must take into consideration: Some active managers make more active decisions than others.... Overall portfolio coordination is critical for actively managed multi-asset class portfolios.... Relative Performance should be viewed within its environmental context." (Manning & Napier)  

Text of Eleventh Circuit Opinion Upholding Alabama City's Hike in Pension Contributions (PDF)
"Plaintiffs argue that Gadsden firefighters who have complied with the statutory requirements possess a 'vested' right to a 6% employee contribution rate. This argument relies on the assumption that there exists an implied promise not to raise the employee contribution rate once a firefighter becomes eligible for retirement benefits. We can find neither hide nor hair of such a promise.... [T]he City did not alter plaintiffs' pension benefits; instead, it altered their pension obligations. This distinction -- between pension benefits and pension obligations -- is warranted by the well-worn difference between earned and anticipated compensation under the Contract Clause." [Taylor v. City of Gadsden, No. 13-13885 (11th Cir. Sept. 16, 2014)] (U.S. Court of Appeals for the Eleventh Circuit)  

Proposed Revisions to the Social Security Special Minimum Benefit for Low Lifetime Earners
"The special minimum benefit, an alternative primary insurance amount (PIA) intended to increase benefits for long-term low-wage earners, is projected to be functionally obsolete for retired workers beginning with those who will become eligible for benefits between 2017 and 2023.... This brief uses projections from Version 6 of the Modeling Income in the Near Term (MINT6) microsimulation model to show how various proposed minimum benefit policy levers could affect aged beneficiaries." (Office of Retirement and Disability Policy, U.S. Social Security Administration [SSA])  

[Opinion]

Red Flags Surround CalPERS' Costly Hedge Fund Gamble
"Hopefully, there will be no unpleasant surprises related to pulling the money safely back into the state pension over the next year. The more public pensions that follow CalPERS' lead and run (as opposed to walk slowly) for the door, the greater the probability they'll find it's locked. Structural illiquidity (lock-ups) and illiquid investments are commonplace in hedge funds." (Edward "Ted" Seidle, in Forbes)  

Benefits in General; Executive Compensation

ERISA at 40: Successful Middle Age or Midlife Crisis? (PDF)
40 presentation slides. Topics: [1] A brief look at ERISA's achievements and midlife challenges; [2] Challenges to retirement plans; [3] Plan investments; [4] The future of employer stock in qualified plans post-Dudenhoeffer; [5] Multiemployer plans; [6] Effect of ERISA on health and welfare plans; [8] "Qualified" nonqualified plans -- a look at nonqualified plans in the ERISA era. (Morgan Lewis)  

What's a Fair Sharing Rate for CEO Pay?
"Comparing an organization's sharing rate to an industry sample or peer group can be a good indicator of whether the organization is a relative bargain in terms of providing a return on a company's investment in executive compensation. To help provide some benchmarks with regard to typical sharing rates in U.S. companies, we reviewed both earned and realizable pay for a sample of 360 chief executive officers in the S&P 1500, as well as the shareholder value created by the same companies over the three-year period from 2011 to 2013." (Towers Watson)  

Press Releases

The Commercial Repayment Center Portal (CRCP) Coming Soon
Centers for Medicare & Medicaid Services [CMS]

CalPERS Names Ted Eliopoulos Chief Investment Officer
CalPERS [California Public Employees' Retirement System]

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