Retirement Plans Newsletter

September 4, 2015

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Compliance Specialist/Analyst
Alliance Benefit Group of Houston, Inc. [ABG]
in ANY STATE

Client Services Training & Development Coordinator
Aspire Financial Services LLC
in FL

Advisory Services Administrator
Alerus Financial
in MI

Advisory Services Operations Manager & Mutual Fund Analyst
Alerus Financial
in MI

Defined Contribution Plan Analyst
Stanley Benefit Services
in NC

Relationship Manager
The Standard
in CO

Defined Contribution Analyst
Aon Corporation
in MD

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Webcasts and Conferences

Regulatory Update and Current Hot Topics
September 9, 2015 in TX
(ASPPA Benefits Council [ABC] of Central Texas)

Past Presidents ABC Panel: Ethics in the Digital Age
September 15, 2015 in OH
(ASPPA Benefits Council [ABC] of Greater Cincinnati)

What the Healthcare Law Means for your Small Business
September 17, 2015 WEBCAST
(U.S. Small Business Administration [SBA])

Plan Sponsor Basics: Retirement Plan Correction Issues
September 22, 2015 WEBCAST
(Morgan Lewis & Bockius LLP)

Changes in the Money Market Fund Rules: The Retirement Plan Fiduciary Response
September 29, 2015 WEBCAST
(Reliance Trust)

View All Webcasts and Conferences


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[Guidance Overview]

New IRS Project Sets Its Sights on Form 5500 Non-Filers
"The IRS will compare payroll and plan data provided by employers to records provided by the Department of Labor, and will send letters to those that may have failed to file a Form 5500 for the 2011 plan year.... The wildcard in this new IRS project is the extent of the DOL's collaboration. The FAQ for the DOL's delinquent filer program provides that a plan that receives a late-filer letter from the IRS will still be eligible to participate, but a plan that receives a late-filer letter from the DOL will not." (Graydon Head & Ritchey LLP)  


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GAO Report on 401(k) Plans: Clearer Regs Could Help Plan Sponsors Choose Investments for Participants
"Employers who sponsor 401(k) plans report using a range of default investment types to automatically enroll employees in their plans based on each type's design and other attributes.... Plan sponsors responding to GAO's questionnaire and stakeholders GAO interviewed generally said that [DOL] regulations were unclear as to: [1] how sponsors could fulfill the regulatory requirement to factor the ages of participants into their default investment selection; [2] whether each default investment provided the same level of protection; or [3] whether they were allowed to incorporate other retirement features, such as products offering guaranteed retirement income, into a plan's default investment. Such uncertainty could lead some plan sponsors to make suboptimal choices when selecting a plan's default investment that could have long-lasting negative effects on participants' retirement savings." (U.S. Government Accountability Office [GAO])  

The End of Retirement Plan Sponsors?
"[Bob Collie of Russell Investments] posed the question to attendees [at his company's recent client conference]: 'Will we get sponsor out of plan?' Nearly half (47%) said an employer-free structure 'will take off' given the right regulatory framework, or flat-out 'yes' (2%). Fewer than one in five attendees felt the single-employer plan sponsor role would persist indefinitely. 'These responses underline just how important fiduciary obligations have become to plan sponsors,' Collie said. 'While the move from defined benefit to defined contribution reduced employers' exposure to investment and longevity risk, it has tended to add to their litigation risk.' " (Chief Investment Officer [aiCIO])  

When Non-Fiduciaries Hold the Fiduciary Keys
"The enquiring employee benefits manager 'works' with the plan 'consultant' to make investment recommendations for [a hospital's] ERISA 403(b) plan to the plan's fiduciary committee. This manager is [1] not a named fiduciary in the plan document, [2] not a member of the plan's fiduciary committee, [3] doesn't make any decisions regarding plan investments, and [4] doesn't serve as a fiduciary since her or his employer doesn't intend that she or he so serve. Let's step back a moment to understand this situation and its implications." (Morningstar Advisor)  

DOL Proposal Would Have Hobbled Recent Help for Investors, Fidelity Says
"On Aug. 24, when the Dow Jones Industrial Average briefly plummeted more than 1,000 points in the first six minutes of trading, the volume of calls to Fidelity Investments' toll-free numbers was 50% higher than for a typical summer Monday.... Phone representatives generally urged investors with a long-term investment plan to 'stay the course.' But if a controversial proposal from the U.S. Labor Department had been in place, [said John Sweeney of Fidelity Investments,] call-center representatives at Fidelity and other companies would have been far more restricted in what they could say after the initial 'don't panic' to customers calling about 401(k) plans and other retirement accounts." (The Wall Street Journal; subscription may be required)  


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Text of Amicus Brief by American Benefits Council to Fifth Circuit on Application of Dudenhoeffer Pleading Standards to Stock-Drop Case (PDF)
"This case is important because this Court will be only the second Circuit Court of Appeal to interpret and apply the pleading standards articulated by the United States Supreme Court in [Fifth Third Bancorp v. Dudenhoeffer]. If this Court adopts Plaintiffs-Appellees' interpretation of the Dudenhoeffer pleading standards in employer plan 'stock-drop' suits, plan sponsors are more likely to discontinue offering company stock as an investment option, as their risk of ERISA liability, or the costs of defending claims, would be too great. This is true despite clear congressional support for including employer stock funds in retirement plans." [Whitley v. BP, No. 4:10-CV-4214 (S.D. Tex. Mar. 4, 2015; on appeal to 5th Cir.)] (American Benefits Council)  

Retirement Distribution Decisions Among DC Plan Participants
"The Great Recession and more recent financial market volatility did not appear to have had an impact on the distribution decisions made by retirement-age plan participants. This finding has implications for the 'to versus through' debate in target-date fund design, as well as for the demand for in-plan versus out-of-plan retirement income programs." (Vanguard)  

Bridging the Gap Between Theory and Practice in Corporate Pension Risk Management (PDF)
36 pages. "[O]ver the past 10 years, major decisions regarding corporate DB pension plans, such as freezing of defined pension plans or transferring pension risks to insurers, have been made in a corporate finance framework at an enterprise level. Similarly, corporate pension funding policies and investment policies are being analyzed within a set of corporate finance metrics. Therefore, there is a need for actuaries to understand current corporate finance practices and be able to provide strategic and holistic solutions for corporate decision-makers. This paper surveys current literature to fill this void for pension actuaries." (Society of Actuaries)  

Best Practices in Pension Risk Management
"CFOs should consider undertaking the preparation work for an annuitization strategy, which will allow their firm to react quickly when market conditions are favorable. Preparation typically comprises: [1] Quantifying costs and financial impact ... [2] Identifying an acceptable level of costs and financial impact ... [3] Obtaining the necessary internal approvals for action ... [4] Monitoring the environment so opportunities are not missed ... [5] Implementing a strategy when appropriate." (CFO)  

Stock Market Drop Pushes Pension Index Down in August
"Losses on equity investments dominated August results, though the impact was partially offset by an increase in long bond yields. The Towers Watson Pension Index declined 2.5% for the month, to 73.6. Even with the August decrease, however, the index remains up over 2% for the year." (Towers Watson)  

AIG to Freeze Defined Benefit Plan
"The freeze will be effective Jan. 1, 2016. AIG has $4.1 billion in assets to pay out $5.7 billion in future obligations from its defined-benefit plans, meaning its liabilities are $1.6 billion. The company said it intends to focus instead on enhancing its long-standing 401(k) retirement program with additional annual contributions to workers' accounts." (The Wall Street Journal; subscription may be required)  

Ripe for Retirement: How and When Will People Retire in the Future? (PDF)
"There has been inadequate focus on the policy and program changes needed to drive retirement patterns that are sensible in light of the emerging demographic and societal patterns. This article focuses on this question, how people decide to retire, programs that help people phase into retirement and related policy issues." (Society of Actuaries)  

[Opinion]

Addressing the Retirement Coverage Gap
"The typical account balance of someone brought into the system under a mandatory saving regime would not be large. Thus, the fixed costs of administering these accounts would have a proportionately larger impact. Leakage of retirement assets out of the system (for example, if account balances are cashed out on a change of employment) would potentially undermine the effectiveness of the system. Fees -- already a major area of focus -- would take on even greater importance. These and other issues of efficiency would take on greater importance in a mandatory system." (Russell Investments)  

Benefits in General; Executive Compensation

Ohio Executive Retirement Plan Not Subject to Municipal Tax
"The SERP was a nonqualified deferred compensation plan that was intended to supplement the taxpayer's qualified retirement plan.... The Supreme Court declined jurisdiction over the substantive issue, but accepted jurisdiction over the procedural issue.... The High Court was not swayed by this argument and held that the BTA's standard of review is de novo as to both facts and law." [MacDonald v. City of Shaker Heights Income Tax Board of Review, No. 2015-Ohio-3290, (Ohio August 19, 2015)] (Wolters Kluwer Law & Business)  

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