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[Guidance Overview]
Kraft Settles Claims of 401(k) Mismanagement
"Kraft will pay $9.5 mil.lion to settle claims that it mismanaged employees' retirement plans, causing accounts to plummet by more than $80 mil.lion in seven years. In a 2006 complaint against Kraft Foods Global, employees claimed that the food conglomerate violated its fiduciary duties by including a 5 percent 'cash buffer' in its company stock funds."
(Courthouse News Service)
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[Guidance Overview]
IRS Addresses Agreements to Rehire Retirees
"To retain employees eligible for early retirement subsidies — particularly those with specialized skills or knowledge — plan sponsors often look to phased retirement options ... One such option has been allowing participants to retire and begin receiving their benefits with the understanding that they will be rehired a short time later. The IRS' private letter ruling should serve as a warning against this practice."
(PLANADVISER.com)
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[Guidance Overview]
PBGC Provides Premium Penalty Relief for Certain Delinquent Plans (PDF)
"The PBGC is now providing a voluntary compliance program to encourage compliance with the premium payment requirements by covered plans that have never paid required premiums. PBGC will waive premium penalties, including information penalties, for any plan if the plan administrator: Contacts the PBGC; Pays past due premiums; and Files required information. However, the relief does not apply to late payment interest charges."
(Prudential Pension Analyst)
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[Guidance Overview]
'Reasonable Interest Rate' Debate Continues
"Employers and plan administrators will be better able to administer plan loans and meet the prohibited transaction exemption, since the IRS has given them a clearer picture of what constitutes a 'reasonable rate of interest.' ... [W]hile the IRS did not address which specific interest rate(s) it considers ideal, it did provide methods on the best way to calculate a reasonable interest rate for a plan, as well as three examples illustrating them."
(Thompson / SmartHR Manager)
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[Guidance Overview]
Common DC Plan Mistakes: Failure to Defer from 'Compensation'
"Often times, plans use different definitions of compensation for different purposes; therefore, it is important for plan sponsors to apply the proper definition when dealing with deferrals and allocations. A plan's definition of compensation must satisfy applicable rules for determining the amount of contributions, and plan sponsors must follow the plan document's definition of 'compensation' in the operation of the plan."
(Spencer Fane)
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Florida Public Worker Pension Funding Change Tossed by Judge
"'All indications are that the Florida Legislature chose to effectuate (the measure) in order to make funds available for other purposes,' [the judge] said. She ordered the state to reimburse employees the 3 percent that was deducted from their pay over the past year and to restore the cost of living adjustment to the pension fund."
(Bloomberg)
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Florida Judge Rules Law Mandating State Employee Contributions Is Unconstitutional
"Florida law requiring state employees participating in the $114 bil.lion Florida Retirement Systems to contribute 3% of their pay was struck down ... by a state court judge.... [who] stated in the ruling that the law constitutes 'an unconstitutional impairment of plaintiffs' contract with the State of Florida, an unconstitutional taking of private property."
(Business Insurance; free registration required)
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Text of Florida Decision Striking Down Law Requiring Employee Contributions to State Employees' Retirement Plan (PDF)
"This Court cannot set aside its constitutional obligations because a budget crisis exists in the State of Florida.... [T]his Court finds that certain provisions of Senate Bill 2100 constitute an unconstitutional impairment of Plaintiffs' contract with the State of Florida, an unconstitutional taking of private property without full compensation, and an abridgment of the rights of public employees to collectively bargain over conditions of employment."
(State of Florida, Circuit Court of the Second Judicial District)
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DOL Faces Bi-Partisan Pushback Against Proposed Fiduciary Standard
"Fifty-five House Republicans have joined 30 House Democrats in requesting that the Department of Labor significantly narrow its definition of 'fiduciary' in a rule the agency is currently drafting that would impact the sale of retirement products."
(LifeHealthPro)
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Financial Services Industry Trade Groups Rip Fiduciary Standard
"Three financial services industry trade groups [IRI, SIFMA and FSR] are signaling to the Department of Labor (DOL) that they will fight tooth-and-nail to sustain the current exemption of the sale of retirement investment products from a fiduciary standard."
(ProducersWeb)
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Apple Leading Charge in All-ETF 401(k) Plans
"The iPhone and iPad developer has the bulk of its 401(k) assets in ETFs, according to a Bloomberg report ... Although the 401(k) market is still dominated by traditional mutual funds, ETFs are changing the dynamics of the retirement plans market."
(NASDAQ)
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Fewer California State Workers Took Pensions in 2011
"California Public Employees' Retirement System data show 10,671 state workers applied for a service retirement in 2011, down nearly 8 percent from the year before. For January and February of this year, a combined 2,703 state employees submitted their retirement papers, a 17 percent decline from the same period in 2011."
(The Sacramento Bee)
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2012 Study of Indexing in DC Plans (PDF)
"Given the substantial number of plans which fall into this category (88% of plans have less than $200 mil.lion in assets), the increasing popularity of index investing and new fiduciary regulations that require companies to ensure the reasonableness of investment expenses; the practical decision to replace index mutual funds with ETFs will likely serve as the 'breakout' point for ETFs in retirement plans."
(Invest n Retire)
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Illinois' Public Pensions Worse Than Numbers Show
"Illinois' pension problems could be worse than the numbers show. Years of under funding or borrowing to pay the annual pension obligation, coupled with a recent change in how liabilities and assets are calculated, have led to the problems."
(The Southern)
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Erie's Saint Vincent Health Center Considers Pension Plan Change
"Saint Vincent Health System, scrambling to reverse more than $23 mil.lion in losses since 2009, wants to save money by changing its employee pension plan. Hospital officials have asked the Internal Revenue Service to recognize Saint Vincent's pension plan as a 'church plan.' If the change were to be granted, Saint Vincent would not have to pay insurance on the plan or fund it to a specific level."
(GoErie.com)
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New Pension Plan Passes Wyoming House and Senate
"Senate File 97 would require state employees hired after August 31, 2012 to work until 65 instead of 60 to receive full benefits at same time reducing their pension. [The bill's sponsor] says change is necessary to raise funding."
(KGWN TV)
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Wall Street Fees Surged As New York State Pension Fund Sagged
"According to a report released today by the Independent Democratic Conference (IDC), fees paid to Wall Street firms managing the [New York] State Pension Fund surged 163 percent during the last five years even though pension fund investments faltered. The report states the fee increases cost almost $758 mil.lion while the pension fund had a net negative investment return during that time."
(Patch.com)
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New Jersey Pension Reform Lawsuit Tossed
"A federal lawsuit brought by New Jersey public employee unions in an attempt to overturn last year's pension and benefit reforms has been tossed out of court."
(Asbury Park Press)
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Smart Strategies for Taking Required Minimum Distributions
"After years of delaying income tax on your 401(k) and IRA contributions, Uncle Sam comes to collect in retirement. Distributions from 401(k)s and IRAs become required after age 70 1/2, and you must pay income tax on each withdrawal. Here are some strategies for taking required minimum distributions that will help you preserve as much spending power as possible."
(Chicago Tribune)
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Support Drops for Kansas 401(k)-Style Pension Plan for Public Workers
"[Kansas] Gov. Sam Brownback's support has kept alive a proposal to start 401(k)-style pension plan for new Kansas teachers and government workers even as other Republicans in the Legislature lose interest. Public employee groups, their allies and increasingly skeptical GOP legislators have all but killed chances that Kansas will start a retirement plan similar to ones now common for private companies as a way of controlling the state's long-term pension costs."
(Statesman Journal)
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Target Date Funds in 401(k) Retirement Plans
"Individual responsibility for portfolio construction is a central theme for defined contribution pensions, yet the rise of target-date funds is shifting investment decisions from workers back to employers. A complex choice architecture including automatic enrollment, reenrollment, and fund mapping, is increasing the number of participants defaulting into employer-selected target-date funds."
(Pension Research Council; free registration required)
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Longevity Insurance for IRAs?
"With longevity insurance, the company is promising to pay a stream of annuity payments beginning at a fixed time (typically age 85) and lasting for life. Thus, these contracts are governed by the defined benefit minimum distribution rules, and that's the problem: The defined benefit rules allow the IRA owner to purchase many types of annuity contracts inside the IRA, provided that the annuity payments start no later than the participant's required beginning date, i.e., April 1 of the year after the year the participant reaches age 70 1/2."
(Morningstar Advisor)
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Pension Funds Continue Modest 2012 Improvement
"Milliman ... released the results of its latest Pension Funding Index, which consists of 100 of the nation's largest defined benefit pension plans. In February, these pensions experienced a $20 bil.lion improvement in pension funding thanks to a $24 bil.lion improvement in asset value that offset a $4 bil.lion increase in the pension benefit obligation.... The asset-driven improvement continues the modest rally that has so far characterized 2012."
(Retirement Town Hall)
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Pension Plans: Are Big U.S. Firms Betting on a Bull Market with New Accounting Step?
"There has been a significant but mostly unnoticed shift in the way big U.S. companies account for the pensions on their books. On the face of it, this appears to be little more than a change in arcane bookkeeping procedure. But it could be a sign that corporate America is betting on rock-bottom interest rates and a continuing economic rebound through this year and next."
(International Business Times)
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The Milliman 100 Monthly Pension Funding Index
"This monthly index projects the funded status for pension plans included in the Milliman Pension Funding Study, reflecting the effect of market returns on plan assets and the impact of interest-rate changes on plan liabilities. The monthly Pension Funding Index offers an ongoing assessment of the often volatile movements that have come to characterize corporate pension funding."
(Milliman)
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Will You Be Unmarried During Retirement? (PDF)
"Those in retirement alone often face an even greater financial burden than married couples, who can leverage economies of scale by coordinating savings, investment and Social Security benefit strategies, and also by sharing costs before and during retirement. The fact is, even if you are part of a couple now, there's a strong likelihood that you will find yourself single at some point during retirement."
(BMO Retirement Institute)
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Pensionomics 2012: Measuring the Economic Impact of Defined Benefit Plan Expenditures
"A new national economic impact study finds that DB pension benefits have a significant economic impact: 6.5 mil.lion American jobs and $1 tril.lion in economic output. The analysis finds that the benefits provided by state and local government pension plans have a sizable impact that ripples through every state and industry across the nation."
(National Institute on Retirement Security)
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Trends in Defined Benefit Plan Management: Preparing for a Pension End-Game
"The number of open defined benefit (DB) plans continues to decline in the wake of volatile markets, low interest rates, rising PBGC premiums and uncertain legislation. Whether the DB plan is open or closed, many organizations are focused on de-risking while they evaluate alternatives for maintaining or terminating the plan. [This article] explores one solution for settling a portion of liabilities that may be financially attractive with little workforce disruption."
(Mercer)
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Stockton, CA Teeters on the Edge of Bankrup.tcy
"The city's pay-as-you-go approach for retiree health benefits is foundering amid shrinking revenues and rising health care costs. To start socking away money for future costs now, [the City Manager] said, 'we would have to dedicate about 30 percent of our payroll to fund this — there's just no way.'"
(ContraCostaTimes)
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A Pension Plan That Works for All
"What [New York Gov. Andrew] Cuomo is proposing — and what the public employee unions are fighting tooth and nail — is actually a better deal for many workers than the current system.... The state and city universities have been living under a retirement system very similar to Cuomo's reform plan since the mid-1960s."
(New York Daily News)
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Pension Funds Are Hot for Long/Short Strategies
"[P]ension funds are continuing to incorporate long/short hedge fund strategies into their overall global equity and fixed-income portfolios, rather than keeping hedge funds segregated in a separate asset class."
(Pensions & Investments)
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What's So Wrong with Roth 401(k) Plans?
"The number of companies offering Roth 401(k) plans has grown rapidly since the retirement plan became a permanent part of tax law in 2006. Employees, however, aren't quite as enamored."
(The Wall Street Journal)
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Pension Funds Are For-Profit
"California's Constitution clearly states the California Public Employees' Retirement System's (CalPERS) singular motive is to make profits.... However, CalPERS board members are not content to merely try to maximize profits. Instead, CalPERS board orders account managers to deviate from the profit system in favor of environmental, social, and corporate governance (ESG) principles."
(OpenMarket.org)
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Testing the 4%-a-Year Retirement Rule
"The next five years could determine whether a rule of thumb for retirees' withdrawals from their portfolios remains valid in these turbulent times, says ... [a] financial planner in Southern California [who is] the creator of the 4% rule for retirement withdrawals."
(The Wall Street Journal)
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Governmental Pension Woes Worsening?
"No matter what happens with pension assets, it is fair to conclude that states need to implement pension reforms. Pension expenses cannot continue to grow fivefold in a low return environment, it's a time bomb waiting to blow up. And the same concerns are being voiced in the private sector."
(Pension Pulse)
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[Opinion]
As Pension Crisis Looms, Golden Years Fade to Black
"Getting pension systems to work as they should will be one of the toughest tests governments face in the next several decades. It demands something they are notoriously bad at: thinking ahead....The crux of the problem, which has barely even begun to be recognized, is that projected incomes in retirement need to grow, not fall."
(Bloomberg)
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[Opinion]
Public Pensions, Private Equity, and the Mythical 8% Return
"Public pension plans should not invest in private equity deals. These deals lack both transparency and the discipline of market forces. Private equity investments allow elected officials to assume unrealistically high rates of return for public pension plans and to make correspondingly low contributions to such plans. This is a recipe for inadequately funded pensions, an outcome good for neither public employees nor taxpayers."
(Oxford University Press)
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Press Releases
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