[Guidance Overview]
PBGC Announces New Enforcement Approach That Reduces Impact of ERISA Section 4062(e) on Financially Sound Employers
"Although the rules for determining what constitutes a 4062(e) event are in flux, the PBGC's new informal enforcement approach will include a risk assessment as a mitigating factor in assessing how to proceed with respect to a 4062(e) event.... The new approach apparently categorizes plan sponsors into three classes based upon their financial strength. After determining that a 4062(e) event has occurred, the PBGC will now classify the employer-plan sponsor as a 'strong company,' 'moderately strong company' or a 'weak company.'"
(McDermott Will & Emery)
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[Guidance Overview]
First Steps to Modernizing DC Annuitization: QLACs and Revenue Ruling 2012-3 (PDF)
"This ... article discusses the technical application of the proposed [qualified longevity annuity contracts] regulation and the ruling on annuity starting dates.... Because distributions are paid out under the terms of the underlying annuity contract rather than under the terms of the plan document, major complications are avoided that would otherwise arise from efforts to include appropriate annuity language in the document's benefit structure. Instead, the plan document can provide general plan language concerning investment authority and in-kind distributions.... [Further, the] guidance effectively sets the stage, under standard DOL and state contract rules, for the 'nervous administrator' of a plan to delegate to annuity companies the role of administrator."
(Robert J. Toth Jr., Esq.)
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[Guidance Overview]
Disclosing Changes under the 408b-2 Regulations
"With the exception of changes to the contract and the investment disclosures, a Covered Service Provider does not need to provide additional disclosures until the contract is extended or renewed. [This] technical update ... discuss[es] the timing of the disclosures for changes."
(SunGard Relius)
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Alabama Senate OKs New Pension Plan for New State Hires
"Most state employees would have to work until they are 62 to begin receiving benefits, according to the [bill]. [C]orrectional officers, firefighters and law enforcement officers [could] retire at age 56 if they had at least 10 years of service. Currently, a state employee may retire after 25 years of service, no matter the age of the employee, or retire at 60 after 10 years of service and begin receiving benefits. Most employees would see their contribution rates lowered from 7.5 percent to 6 percent if the proposal [is signed by the governor]."
(The Montgomery Advertiser)
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Web Based Plan Design System. Simple and Affordable. [Advert.]
Use LIMITED CENSUS DATA and a FIVE MINUTE UPLOAD to create a side-by-side analysis of various retirement plans: Integrated, Age Weighted, New Comparability, Cash Balance, and 401k. At a glance, assess financial and tax advantages and identify an optimal solution. Learn more.
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Another Question is Answered in the Who's the Employer Q&A Column
Enrique and Carmen each has a 100%-owned Sub-S corporation. A limited liability company (LLC) is owned 90% by Enrique and 10% by Carmen. Each receives guaranteed payments (no salary) from the LLC. Each Sub-S corporation also has a few part-time employees who are also paid from the LLC. Are all three (the two corporations and the LLC) a controlled group? An affiliated service group?
(BenefitsLink.com)
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New Law Implements Changes to Virginia's Retirement System
"Gov. Bob McDonnell has signed into law sweeping changes to Virginia's retirement system, including reduced pension benefits for employees with less than five years of service and an entirely different type of retirement plan for state and local employees hired after Jan. 1, 2014."
(Richmond Times-Dispatch)
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Cook County Pension Fund Should Hike Contributions, Exec Contends
"Cook County Annuity & Benefit Fund, Chicago, needs drastic pension reform, including an increase to employee and employer contributions, to prevent the pension fund from becoming insolvent in 2038, according to a report by county Commissioner Bridget Gainer, chairwoman of the county's pension oversight committee.... The funded status has dipped to 60% from 90% in the last 10 years, according to the report."
(Pensions & Investments)
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Bil.lion-Dollar Florida Battle Shows Challenge of Throttling Back Future Pension Accruals
"A court order forcing Florida to forgo $1 bil.lion it planned to take from state workers to shore up its budget is the latest sign of how difficult it can be to reduce government-backed retirement benefits. Of 41 U.S. states that made significant pension changes in 2010 and 2011, at least 13, or almost 30 percent, have faced court challenges, according to the National Conference of State Legislatures."
(Bloomberg.com)
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Pension Guru Points Way to Painful, But Balanced, Future for Local and State Governments
"We ... have been telling you that a velvet revolution under way in public pensions — i.e., steps toward reform are being voluntarily taken by the majority of cities in the great state of California. But ... while this revolution will reduce the pension bills many decades down the road, it won't do much of anything to reduce the tremendous liability state and local governments are facing now (some $4 tril.lion for pension and retiree health benefits). So for a reality check, and a road map on how to dig out of this hole, we turn to public pension guru Girard Miller[.]"
(The Orange County Register)
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The Impact of The Broker-Dealer Fiduciary Standard on Financial Advice
"It has been suggested that the imposition of a fiduciary standard on registered representatives would result in significant changes in how broker-dealers conduct business by limiting a representative's ability to recommend commission investments, provide advice to middle-market clients, and offer a broad range of financial products. We take advantage of differences in state broker-dealer common law standards of care to test whether a relatively stricter fiduciary standard of care impacts the ability to provide services to consumers. We find that the number of registered representatives doing business within a state as a percentage of total households does not vary significantly among states with stricter fiduciary standards."
(Michael S. Finke and Thomas Langdon)
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SIFMA's Fiduciary Comments Are Matter of Interpretation
"The most recent focal point in the ongoing debate on what a universal fiduciary standard of care will look like and how it will be implemented centers around SIFMA's proposed framework and the reaction to it from a group of consumer and professional organizations."
(fi360 Blog)
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Corporate DB Funded Status Climbs to 81% in March
"The funded status of a typical corporate defined benefit plan increased 1.8 percentage points to 81% at the end of March, sparked by a continuing increase in assets and a drop in liabilities, according to BlackRock's monthly pension funding update. Assets increased 0.3% for the month, while liabilities decreased 2%."
(Pensions & Investments)
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Boomers' Eagerness May Limit Their Retirement Security
"By collecting benefits before their normal retirement age, nearly three-quarters of all current Social Security recipients are receiving reduced benefits and limiting their retirement security.... Those collecting Social Security at age 62 will reduce their benefits by 20 to 30 percent depending on their normal retirement age, which could amount to hundreds of thousands of dollars in lifetime payouts[.]"
(Insured Retirement Institute)
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Investment Costs Hit Retirees Twice
"[I]t's as critical for retirees (people spending money) to think about how costs hit their portfolios as it is for people who are still saving. In fact, you might say that by taking a bite out of both income and wealth over time, costs actually hit retirees with a 'double whammy.'"
(Vanguard)
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Expert Q&A on Fiduciary Training
"Many corporate officers do not feel comfortable with their level of understanding of even basic issues regarding plan governance. Frequently, plan documents do not accurately reflect day-to-day plan administration. In both of these circumstances, corporate officers and boards of directors could be exposed to potential ERISA liability for matters over which they inadvertently exercise improper control or for which they really do not have any functional control."
(Proskauer Rose LLP)
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Ninth Circuit Issues Significant Post-Amara Ruling on Equitable Remedies (PDF)
"[T]he U.S. Court of Appeals for the Ninth Circuit ... in Skinner v. Northrop Grumman Retirement Plan B ... held that employees who received an SPD that did not adequately explain that their benefits would be offset were not entitled to equitable remedies under Section 502(a)(3) of ERISA. In so doing, the Ninth Circuit became one of the first circuit courts to actually analyze reformation and surcharge as equitable remedies under Amara."
(Proskauer Rose)
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Floor Price Protection in ESOP Companies
The current excerpt from the Employee Ownership Report is Floor Price Protection in ESOP Companies, an article summarizing the issues raised by providing a floor price in an ESOP context. (The National Center for Employee Ownership
(NCEO))
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[Opinion]
IRS Stalls in Approving Proposed Change in Design of California Pension Plan: Why, Mr. President?
"[T]hree years have gone by [since a ruling was requested from the IRS allowing government employees to electively switch from the current defined benefit plan to a combination of a hybrid retirement plan and an increase in pay], and the assumption of Orange County Supervisor John Moorlach and other county leaders is that the delay is pure politics, with the Obama White House siding with union activists who want to preserve the defined-benefit pension status quo whatever the fiscal wreckage it causes."
(U-T San Diego)
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[Opinion]
Will State Pension Crisis be the Tipping Point for the U.S. Economy?
"The thing that pushes the United States over the tipping point just might be the exploding state pension crisis.... It is clear that many states are now teetering on the brink of bankrup.tcy as a result of pension promises made to employees, the enormous bill for which is just beginning to come due.... [B]ankrupt states with huge pension obligations will look to the federal government to make up the difference. Are we prepared to offer a rescue to these states that will make the bailouts of the last few years look insignificant by comparison?"
(The Hill)
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Benefits in General; Executive Compensation
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[Guidance Overview]
Form 8938 And FATCA: Considering Some of The Issues for 2011
"[I]ndividual U.S. taxpayers and their employers have been wrestling with issues in how to fill out new Form 8938, the individual reporting form under FATCA (Code section 6038D), which is due with the individual's income tax return for 2011, with extensions, concerning their participation in foreign pensions, deferred compensation and equity-based compensation plans."
(Groom Law Group)
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Avoiding 409A Pitfalls in Severance Agreements (PDF)
Slides from a presentation on 409A. Topics discussed include: structuring severance benefits to be exempt from Section 409A; separation from service requirements to commence severance; six-month delay considerations for severance benefits payable to specified employees; and postemployment benefits and reimbursements.
(Morgan Lewis)
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Press Releases
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