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BenefitsLink Retirement Plans Newsletter
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[Guidance Overview]
$35.2 Mil.lion Joint and Several Liability on Fiduciaries In Case of Excessive Fees and Imprudent Investments
"The U.S. Federal District Court for the Western District of Missouri determined that plan fiduciaries breached their fiduciary duties by failing to monitor recordkeeping costs, negotiate rebates, and prudently select and retain investment options. This is a federal district court decision and it differs from positions taken by some federal circuit courts which are precedential, but whether this decision is judicial activism or a new trend will need to play out over time."
(Haynes and Boone)
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Brokerage Company Agrees to Pay $630,000 to Retirement Plans
"Morgan Keegan and Co. Inc. has agreed to pay $633,715.46 to 10 pension plans covered by [ERISA]. This agreement follows an investigation by the U.S. Department of Labor's Employee Benefits Security Administration that [asserted] the full-service brokerage company violated federal law when it recommended certain hedge funds of funds as investments to its ERISA-covered employee benefit plan clients. These recommendations resulted in the hedge funds of funds paying Morgan Keegan revenue-sharing and other fees."
(Employee Benefits Security Administration)
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Pension 'Spiking' Continues in California Largely Due to Historical Court Decision
"In 1997 the [California] state Supreme Court issued a unanimous ruling in a suit filed by Ventura County deputy sheriffs that opened the door for more spiking. The court said that in addition to the salary any cash commonly received in a pay grade or class for other things, such as uniform allowances and unused vacation time (but not overtime), must be counted toward pensions ... Later court rulings made the Ventura decision retroactive[.]"
(Calpensions)
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Two-Thirds of Pension Plans Now Using Liability-Driven Investment Strategies
"The survey results reflect a central tension in the current [Liability-Driven Investments, or "LDI"] discussion, between plan executives increasingly sold on the need to hedge their pension liabilities, but hesitant to accept the costs of better matching those bond-like liabilities now, with bond yields near historic lows."
(Pensions & Investments)
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In the Final Analysis, Asset Allocation Is Not Very Important to Financial Security in Retirement
"Financial advice tends to focus on financial assets, but other levers may be more important for most households.... The first section [of this paper is a] simple Excel spreadsheet exercise that provides a stylized example of the tradeoff between returns and time spent in the labor force. The second section uses data from the Health and Retirement Study (HRS) on pre-retirees aged 51-64 to see how the gap between retirement needs and retirement resources is affected by working longer, taking out a reverse mortgage, controlling spending, and shifting all assets to equities with no risk. The third section uses a simple dynamic programming model to calculate a risk-adjusted measure of the value for the average household of moving from a typical conservative portfolio to an optimal portfolio. The answer from all three exercises is the same: the focus on asset allocation is misplaced."
(Center for Retirement Research at Boston College)
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Backlog Reduced for Starting Federal Pensions But Many Retirees Still Waiting
"OPM has struggled for decades to process federal retirees' pension claims quickly and accurately. As a result, tens of thousands of new retirees wait months to receive their complete annuities — some wait more than a year — and in the meantime they struggle to get by on reduced interim pensions. Some of those interim pensions are less than half of what retirees are owed."
(Federal Times)
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Joint Committee on Taxation Report: 'Present Law and Background Relating to the Tax Treatment of Retirement Savings'
"The Committee on Ways and Means has scheduled a public hearing on April 17, 2012, on Tax Reform and Tax-Favored Retirement Accounts. This document, prepared by the staff of the Joint Committee on Taxation, provides a summary of the present law tax rules applicable to retirement savings arrangements, discussions of selected proposals and economic issues relating to retirement savings, and data on qualified retirement plans and IRAs."
(The Joint Committee on Taxation)
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Inherited IRAs Dodge a Bullet; Tax Deferral Opportunity Continues
"Inherited individual retirement accounts made news earlier this year when the Senate Finance Committee proposed to make heirs empty them within five years of the benefactor's death. The measure, which was abandoned shortly thereafter, would have upended a system that is highly advantageous to families. Under current rules, heirs get to stretch withdrawals from an inherited IRA across their own life expectancies, meaning the assets could potentially increase in value, tax-deferred, for decades."
(The Wall Street Journal)
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One Tax Deferral Per Customer, Please: How IRA Deduction Is Denied Due to Retirement Plan 'Active Participant' Status
"The law in this area is clear. If, for any part of a taxable year, a taxpayer or the taxpayer's spouse is an 'active participant' in a qualified plan under section 401(a), IRA deductibility is subject to income limits. For 2012, the in-come phaseout range for deducting a contribution to a traditional IRA is $92,000 to $112,000 for those married and filing jointly, and $58,000 to $68,000 for those who are single."
(Investment News)
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Thrift Savings Plan Roth Option Delayed for Pentagon Employees
"The Federal Retirement Thrift Investment Board, which oversees the TSP, said earlier this week that not all federal agencies have completed the transition required to implement the Roth 401(k) and some would need additional time after May 7. The Roth option will be available to Marine Corps members in June; to Defense and Veterans Affairs Department civilians in July; and to Army, Navy and Air Force service members by October; according to the Defense Finance and Accounting Service, which cites complicated pay systems as the reason for the delay."
(Government Executive)
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[Opinion]
Retirement Income: New Annuity Strategies Should Be Welcomed
"Today, it is left to retirees themselves to maximize retirement income and minimize risk from accounts. Several products and strategies have been put forward to help retirees. [The author suggests] a new strategy. At this time of development and experimentation, it is critical that the federal government not pick winners, but stay focused on the broader goals of removing obstacles and encouraging lifelong income flows from retirement accounts."
(Pensions & Investments)
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Benefits in General; Executive Compensation
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Press Releases
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