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BenefitsLink Retirement Plans Newsletter
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[Guidance Overview]
IRS Notice Suggests Changes to Normal Retirement Age Rules for Governmental Plans (PDF)
"The Notice ... leaves open several questions related to normal retirement age for governmental plans, including: Should an additional rule be provided under which retirement after 20 or 30 years of service may be a reasonably representative normal retirement age for qualified public safety employees and would this also be reasonable for other categories of governmental employees? What information is available to assist the IRS and Treasury in determining the earliest age that is reasonably representative of the typical retirement age for governmental employees?"
(Gabriel Roeder Smith & Company)
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California Counties Deciding to Stop 'Picking Up' Employee Pension Contributions
"Yolo County along with many other local governments in California began, more than a decade ago, the practice of paying employees' share of pension contributions to CalPERS. The theory was that by taking on those contributions, which are a percentage of employees' salaries, cities and counties could help hold the line on future salary inflation. That backfired after 2008-09, when CalPERS suffered a 24 percent investment loss and began boosting required pension contributions."
(The Modesto Bee)
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How Is Economic Hardship Avoided by Those Retiring Before the Social Security Entitlement Age?
"[Four] out of five people who have zero earnings at pre-entitlement ages are able to find a way to lift their incomes over the poverty line. For men, pension and annuity income is important while for women, spousal income helps most to get them over the line. Reaching the early retirement entitlement age at 62 also has a significant impact on poverty avoidance."
(The National Bureau of Economic Research; paid subscription or individual purchase required to retrieve full text)
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Will San Jose and San Diego Voters Approve Pension Changes Lowering Future Accruals?
"The San Jose measure would give current workers the option of switching to a lower pension or staying in the current plan and paying off pension debt with annual contribution increases of 4 percent of pay, capped at 16 percent or half the debt cost. The San Diego proposition could impose a six-year freeze on the amount of pay used to calculate pensions and would switch all new hires, except police, to the 401(k)-style individual investment plans now common in the private sector."
(Calpensions)
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States Scaling Back Worker Pensions to Save Money
"For years, state governments lured workers with the promise of lucrative pensions that provide nearly the pay that employees earned on the job. But after years of budget crunches, nearly every state has revamped public retirement benefits in an effort to shrink the long-term obligations that are billions of dollars short of what is needed to cover benefits. The moves have triggered a legal and political battle over whether states are reneging on their promises to millions of public-sector workers."
(The Salt Lake Tribune)
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Another Reason for Offering Annuity-Type Distributions From 401(k) Plans: Cognitive Impairment of Older Participants
"The battle to get annuities into 401(k) plans has been hard-fought, and it's not over yet. Insur.ance companies see a need to get 'lifetime income products' into retirement plans, and have had some success making the case that most plan participants aren't prepared to create an income plan on their own.... But [one economist] pointed to an as-yet-unheard argument for including them in D.C. plans: the decline in cognitive ability as we get older."
(insurancenewsnet.com)
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When Should Workers Take a Pension Buyout?
"In deciding whether a lump sum is a good deal, [a retirement expert] advises retirees to consider three key factors: Mortality.... Interest rates.... The amount you're getting."
(Reuters)
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Road Trip: Traversing the Country in a Yellow VW Bus to Advocate 401(k) Reform
"On April 16, [Chad Parks, CEO and founder of The Online 401(k),] and his team set out for six weeks in an orange 1970s VW bus, on a mission to shoot a documentary about Americans' soured retirement dreams and 401(k) miscues, [to be entitled] 'Broken Eggs: The Looming Retirement Crisis in America.' They'll also be hunting for solutions to the crisis—ideas for how we can successfully navigate our way to a comfortable retirement."
(Daily Finance)
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[Opinion]
A Policy Argument for Treating Individual 403(b)(7) Custodial Accounts As Distributable Assets Upon Plan Termination
"The IRS's ongoing position is that an individual 403(b)(7) custodial account cannot be distributed from a 403(b) plan upon its termination, while a 'fully paid' annuity contract is permitted to be distributed [because] it will not deem the custodial account to be an annuity for these purposes. This has the practical effect of preventing termination of any 403(b) plan which is funded with individual custodial accounts. As time wears on, and this position begins to get long in the tooth, its 'unworkableness' becomes more and more apparent as it causes difficulties beyond the actual plan itself."
(Business of Benefits)
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Avoiding Surprises in Pension Contribution Liability: How Public Employers Can Anticipate and Evaluate 'Pension Risk' (PDF)
"The most significant risks include investment, inflation, and longevity risk. Left unmanaged, adverse experience from any of these can cause the retirement system to drift into a costly and perhaps unsustainable position. Certain circumstances may increase the likelihood that this may occur, including: Significant investment losses; Volatility in contribution rates; and Contribution levels that are inadequate when compared to the level of benefits promised to members."
(Gabriel Roeder Smith & Company)
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'Institutionalizing' DC Plans: Reasons Why and Methods How (PDF)
"Using DB plans as the institutional model for retirement, institutionalization of DC plans can encompass a broad spectrum of practices, including: Managing toward a financial target (e.g., income replacement percentage); Recognizing the role of funding (in DC plans, funding equates to contribution levels) in achieving the financial target; Use of institutional investment vehicles that enable scale pricing (separate accounts, collective trusts); Improving diversification by offering exposure to alternative asset classes; Managing risk—specifically risk to achieve an income target through the DC account [and more]."
(Defined Contribution Institutional Investment Association)
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Press Releases
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