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[Guidance Overview]
Prearranged Rehire of Retirees Could Disqualify Your Pension Plan
"The Internal Revenue Service has issued a private letter ruling that a pension plan would cease to be qualified under Code Sec. 401(a) if it allows workers who are under age 62 to 'retire' in order to lock in an unreduced early retirement pension benefit, and then be rehired."
(Jackson Lewis)
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[Guidance Overview]
IRS Uses Section 409A Analysis to Determine if 'Retirement' Occurs for Pension Plan Purposes
"Although Section 409A addresses a nonqualified plan, the IRS stated that Section 409A's definitions regarding termination and separation from service are consistent with the definition of 'severance of service date' under the elapsed time method of crediting service. It also cited a prior revenue ruling that concluded an employee is not separated from service if the employee continues on the same job for a different employer post-corporate transaction. Based on this authority, the IRS concluded that 'retirement' requires the employee to stop performing services for the employer, and there cannot be an explicit understanding that the employee will immediately return to service with the employer."
(Haynes and Boone, LLP)
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[Guidance Overview]
DOL Issues Final Retirement Plan Fee Disclosure Rule
"Now that the Department of Labor has released final regulations regarding required plan fee disclosures, plan administrators can expect assistance from service providers in preparing the required fee disclosures to plan participants. The final regulations under ERISA 408(b)(2) for retirement plan fee disclosures have been updated so that there is greater alignment between the disclosures that service providers make to the plan and what the plan must disclose to its participants."
(Davis Wright Tremaine LLP)
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[Guidance Overview]
What to Look for in 2012: Financial Statements
"The IASB revised its accounting standard for employee benefits (IAS 19) last year, which will require significant changes in reporting requirements in 2013.... FASB has not yet made similar changes and still allows for differing recognition techniques.... [P]lan sponsors with U.S.-based defined benefit plans must continue to determine if two sets of plan costs and disclosures may be required."
(Retirement Town Hall )
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Broker-Dealers as Fiduciaries? How the SEC Staff's Study Could Raise the Bar for Investment Advice (PDF)
"In response to the financial crisis, the SEC staff study has recommended holding broker-dealers (BDs) to a fiduciary standard, as opposed to the long-standing 'suitability' guidelines. While raising the standard has obvious ramifications in terms of BD conduct, perhaps less obvious is the fact that ... nearly every aspect of Financial Advisor day-to-day activities of both BDs and Registered Investment Advisors (RIAs) will be significantly scrutinized. The use of advancements in wealth management technology can assist Financial Advisors of both BDs and RIAs in adhering to the new fiduciary standard."
(Citi)
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Income of the Aged Chartbook, 2010
"This publication covers the population aged 65 or older. The unit of analysis here, with the exception of measures of poverty and family income of persons, is the aged unit, which is a married couple living together or a person who does not live with a spouse."
(Social Security Online)
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How To Avoid Running Out of Money in Retirement
"[This] Quantext Portfolio Planner (QPP) retirement analysis ... shows the assumptions involved ... the investments and percentage in each ... [and] the grim details or the probabilities of running out of money during the retirement years."
(Seeking Alpha)
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Tips for Preparing for 408(b)2)
This article summarizes a recent webcast about DOL disclosure regulations, with discussion of requirements and open issues by Fred Reish, of Drinker Biddle & Reath, LLP, and Larry H. Goldbrum, general counsel, The SPARK Institute.
(PLANADVISER.com)
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How Early is Too Early to Make a Matching Contribution?
"[I]s it a matching contribution if the employer makes the contribution before the participant makes the elective deferral for that pay period? ... [Regulations state] the general rule on how early a matching contribution can be made before the IRS no longer considers it a matching contribution.... Of course, as with all things where the IRS applies a facts-and-circumstances test, there is an exception to this rule."
(The Pension Protection Act Blog)
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Complexity of Design in Target-Date Funds
"The American Benefits Council ... and the Investment Company Institute ... provided [DOL] with 'a tool to assist fiduciaries of defined contribution plans with the selection and monitoring of target-date funds.' The ABC and ICI describe the tool as 'a list of potential items for fiduciaries to consider when selecting and monitoring TDFs.'"
(PLANSPONSOR.com)
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Exemption for Use of Proprietary Mutual Funds
"Recently, [DOL] published a proposed exemption for the Principal Financial Group .... The proposed exemption is important because it modifies or clarifies existing relief afforded by class Prohibited Transaction Exemption (PTE) 77-4 and permits Principal to invest client plan assets into proprietary mutual funds through target-date funds or other insurance company pooled separate accounts."
(PLANSPONSOR.com)
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Virginia Localities Await Particulars of General Assembly's Retirement System Legislation
"[C]ounty staff members are waiting to get the particulars of the law affecting the Virginia Retirement System and 10,400 Henrico [County] employees ... If the bill as described gets the governor's signature, it requires teachers and local government employees served by the VRS to contribute 5 percent of their earnings to the retirement system, while requiring localities to offset those contributions with 5 percent raises to employees."
(Richmond Times-Dispatch)
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401(k) Outsourcing: The Next Big Thing
"As [plan sponsors] ponder outsourcing 401(k) services, [they need to] understand that there are differing levels of fiduciary protections to consider, from partial responsibility to total responsibility."
(Forbes)
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401(k) vs. IRA: Workers Who Contribute To Both Save More
"[A]s companies cut down on pension plans, more workers are contributing to both Individual Retirement Accounts (IRA) and 401(k) plans. Those who contribute to both end up saving much more overall, the study showed. In addition, workers are more likely to save for retirement if they seek financial advice."
(The Huffington Post)
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N.C. Sues BNY Over $95 Mil.lion Investment in Lehman Brothers
"North Carolina officials ... accused Bank of New York Mellon Corp. of making an unauthorized $95 mil.lion investment in Lehman Brothers Holdings Inc. for the state and joking about the investment bank's precarious footing just days before it collapsed."
(Business Insurance; free registration required)
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[Opinion]
Don't Cut Pensions, Expand Them
"Though New York needs to reduce its spending, the cuts come at a particularly bad time: over a third of New York workers, both public and private, approaching retirement age have less than $10,000 in liquid assets.... New York and other states could save millions of workers from impending poverty by creating public pensions for everyone."
(The New York Times; free registration required)
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[Opinion]
The 403(b) SPARK Standard Is Not a DOL Disclosure Solution
"The SPARK standards address the basic contract information which is necessary for compliance with the [Information Sharing Agreement] requirements. There is no fee data; there is no investment data; there is no description of services. Reference to the 'SPARK Standard' as a solution to the DOL rules does present a very catchy marketing and sales hook, but one which is also very wrong."
(Business of Benefits)
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Benefits in General; Executive Compensation
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[Guidance Overview]
Increased IRS Scrutiny of Executive Compensation and Common Errors Under Code Sections 409A and 162(M)
"In [the current] climate of increased transparency and disclosure, the IRS has stepped up its audit activity with respect to taxpayers' compliance with the requirements for nonqualified deferred compensation arrangements under Code Section 409A, as well as the $1 mil.lion annual deduction limitation on certain compensation paid to 'covered employees' of publicly-held corporations under Section 162(m)."
(PricewaterhouseCoopers LLP.)
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For States, Tax Revenues Are Up, but Deferred Costs Are Waiting to Be Paid
"A huge fiscal headache for state and local government leaders is the pension and retiree medical (OPEB) debt that has accumulated in the past decade and is now coming due in many states. Over $700 bil.lion of pension underfunding and twice that much in OPEB liabilities are hanging out there waiting to be addressed. That's a $2 tril.lion liability that will hit their books as the accounting standards put these debts on the balance sheet for the first time."
(Governing)
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Eight Steps to Reduce Risk through Good Governance of Benefit Plans
"[A] sound governance process not only protects participants -- it effectively shields the employer, board of directors and other fiduciaries from liability. If the process is not followed, however, protection evaporates and the action or decision may be found not to have been made at all or may be judged by the Monday-morning quarterback standard."
(Warner Norcross & Judd LLP)
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Administration's Budget Proposals Would Limit Retirement Deductions for Upper-Income Taxpayers
"The income exclusions and deductions limited by this provision would include employer-sponsored health insurance paid for by employers or with before-tax employee dollars, health insurance costs of self-employed individuals, employee contributions to defined contribution retirement plans and individual retirement arrangements, and contributions to health savings accounts and Archer MSAs."
(Wolters Kluwer Law & Business / CCH)
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Employee Ownership Update for March 15, 2012
NCEO Executive Director Loren Rodgers discusses a report showing dismal employee engagement in the U.S., a Sixth Circuit decision breaking with other courts on the "Moench presumption," SEC challenges to pre-IPO trading in secondary markets, and IRS objections to floor price protection.
(National Center for Employee Ownership)
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Form 5500 Filing Rejections
"With the advent of EFAST2, the window for resolving filing issues, including failures to include the audits, has narrowed considerably. It now appears that the DOL is generating the 45-day letter for a missing audit within 2-3 months."
(SunGard Relius)
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The ERISA Litigation Newsletter
"[This issue's lead article] discusses the Sixth Circuit's recent decision in Pfeil v. State Street Bank & Trust, a potentially significant opinion in the field of employer-stock litigation.... [The] second article discusses whether release agreements negotiated between employers and employees are enforceable to bar ERISA claims."
(Proskauer Rose LLP)
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Press Releases
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