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BenefitsLink Retirement Plans Newsletter
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[Guidance Overview]
Summary of Final DOL Regs on Service Provider Fee Disclosures (PDF)
"The final rules modify the interim rules by providing that frozen 403(b) annuity contracts or custodial accounts that are subject to ERISA will not be considered covered plans and are not subject to the fee disclosure rules [if the plan sponsor] had no obligation to make, and did not make contributions (including employee salary reduction contributions) to such contracts or custodial accounts after January 1, 2009; the contract or account was issued to a current or former employee before January 1, 2009; [and other prescribed conditions are met]."
(Prudential)
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Official Summary of the 2012 Annual Reports of the Social Security and Medicare Boards of Trustees
"The long-run actuarial deficits of the Social Security and Medicare programs worsened in 2012, though in each case for different reasons. The actuarial deficit in the Medicare Hospital Insur.ance program increased primarily because the Trustees incorporated recommendations of the 2010-11 Medicare Technical Panel that long-run health cost growth rate assumptions be somewhat increased. The actuarial deficit in Social Security increased largely because of the incorporation of updated economic data and assumptions. Both Medicare and Social Security cannot sustain projected long-run program costs under currently scheduled financing, and legislative modifications are necessary to avoid disruptive consequences for beneficiaries and taxpayers."
(Social Security Administration)
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What It Says: The 2012 Social Security Trustees Report (PDF)
"The 2012 Trustees Report shows that Social Security is 100 percent solvent until 2033, but faces a moderate long-term shortfall. In 2011, Social Security had a surplus—revenue plus interest income in excess of outgo—of $69 bil.lion. Reserves are projected to grow to $3.1 tril.lion by the end of 2020. Then, if Congress takes no action in the meantime, reserves would start to be drawn down to pay benefits. In the highly unlikely event that Congress does not act before 2033, the reserves would be depleted and revenue coming into the trust funds from workers' and employers' contributions would cover about 75 percent of scheduled benefits (and administrative costs, which are less than 1 percent of outgo)."
(National Academy of Social Insur.ance)
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Glide Path Strategies to Reach Funding Goals
"Like a GPS for defined benefit plans, an effective glide path strategy (GPS) offers plan sponsors a valuable, multi-period guide to reaching funding goals while gradually de-risking the pension portfolio. The end result is a balanced solution, incorporating often-competing return, risk, contribution and time frame objectives."
(J.P. Morgan)
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Florida Governor Signs Measure to Reduce State's 401(k) Contributions
"[The bill will] lower contribution rates for optional retirement programs at colleges and universities.... This will save the state and local governments an estimated total of more than $175 mil.lion in the upcoming year[.] The measure will bring the investment plan's costs to state and local governments more in line with those of the defined benefit ... plan."
(PLANSPONSOR.com)
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U.S. Postal Service Reform Being Considered in Senate Would Affect Pay and Benefits
"Measures that would prohibit collective bargaining at the U.S. Postal Service, require retirement-eligible employees to retire, and increase the amount workers contribute to their health benefits and life insur.ance are among the 39 amendments the Senate plans to vote on as part of the 21st Century Postal Service Act (S. 1789). Other amendments would limit executive pay at USPS, remove language scaling back workers' compensation benefits, and curtail the amount agencies can spend on government conferences."
(Government Executive)
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Sample of Enhanced All-In Fee Report
"[This sample annual fee report] has been enhanced to provide additional fee information in accordance with the Department of Labor's (DOL) rules under ERISA section 408(b)(2).... This fee disclosure document is comprised of three components: (i) a Summary Fee Report that provides a consolidated view of [the] plan's fee information; (ii) [the] enhanced All-in Fee Report, which contains the detailed fee information ...; and (iii) an Appendix containing important information required by the DOL fee disclosure regulation."
(Vanguard)
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Operational Changes in Defined Benefit Plans for Plan Sponsors to Consider in 2012: Making Lump Sum Payments
"This year, 2012, marks the first year that the 417(e) interest rate required to calculate the minimum present value of a DB pension is equal to the interest rate used to calculate its liability for [PPA] minimum funding purposes (ignoring the 24-month averaging). In the past, the lump sum was based in part on 30-year Treasury rates, which often resulted in the payout of lump-sum amounts greater than the corresponding liability funded for in the plan's funding target. With this no longer the case, the settlement of lump sums might be an attractive way to eliminate longevity risk from DB plans."
(Milliman)
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Operational Changes in Defined Contribution Plans for Plan Sponsors to Consider in 2012
"Many plan fiduciaries may not be aware that it is both a fiduciary breach and prohibited transaction to allow the plan to pay more than what is considered reasonable expenses. In practice, how does a fiduciary determine if plan fees are reasonable? If you've taken your plan out to bid within the last three years, you should have current market information and documentation for your due diligence files to support the fees you are paying, or have taken action by going back to your service provider(s) to negotiate lower fees on behalf of plan participants."
(Milliman)
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Creating a Hybrid DC Retirement Plan (PDF)
"The authors believe that recently issued retirement plan regulations have given employers an option that captures the best of DB and DC plans and represents a win-win for employers and employees. The authors call this type of plan the Low Volatility Pension Plan (LVP)."
(Buck Consultants)
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Small but Significant 401(k) Fixes Urged at House Hearing
"'There is no need for dramatic changes, but measures should definitely be considered to make it easier for employers, particularly small businesses, to offer a workplace savings plan to their employees,' [Judy A. Miller of ASPPA] advised, noting that some complications are statutory and some are regulatory."
(Society for Human Resource Management)
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GAO Report on Defined Contribution Plans: Approaches in Other Countries Offer Beneficial Strategies in Several Areas
"GAO was asked to examine, for selected countries' DC systems, (1) how are service providers overseen by regulatory agencies; (2) what key strategies are used to improve fee disclosure to participants; and (3) what key strategies are used to reduce fees? GAO selected Australia, Chile, Sweden and the United Kingdom based on, among other factors, the importance of the DC plans to the country's retirement system and the use of strategies to address service providers' fees."
(Government Accountability Office)
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City Leaves Tennessee's Defined Benefit Plan, Switches to Its Own Defined Contribution Plan
"[C]ity and elected leaders say [the move to a 401(a) retirement plan with a 457(b) supplement to accommodate voluntary employee contributions will] give the Model City more predictable and stable retirement costs.... Over the past decade, Kingsport's contribution rate to TCRS has doubled to about $6 mil.lion annually—or slightly more than 16 percent of its payroll."
(timesnews.net)
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Benefits in General; Executive Compensation
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[Guidance Overview]
JOBS Act FAQs Address Pay-Related Disclosures
"Since the enactment of the Jumpstart Our Business Startups Act on April 5, the SEC staff has been busy posting FAQs to assist companies in interpreting the new law. The most recent round includes guidance on the act's scaled pay disclosure provisions. These 17 FAQs also clarify the definition of 'emerging growth company' and address other questions of general applicability."
(Mercer)
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Analyze Compensation Programs to Reveal Business Risks
"The new corporate governance environment and legislative imperatives have ratcheted up complexity and transparency to a new level, placing much greater demands on the HR function and the board's compensation committee. In addition, companies face continued changes in proxy disclosure rules, which provide investors and other stakeholders with a far more detailed understanding of the committee's decision-making processes."
(PricewaterhouseCoopers LLP)
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Preparing for a Future that Includes Aging Parents
"Experts say any serious plan for caring for aging parents must begin—not with discussions about money—but with a legal document designating someone as having 'power of attorney.' That paperwork grants authority to another individual to handle decisions if a loved one can't make them as a result of illness or memory loss.... Once the legal paperwork is done, families can turn to an array of sources for legitimate advice on boosting savings, buying appropriate insur.ance and maximizing home equity. For example, many employers offer workplace benefits that include free financial planning services."
(NPR)
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Press Releases
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