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May 11, 2012 Get Health & Welfare News  |  Advertise  |  Unsubscribe  |  Past Issues  |  Search

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Webcasts and Conferences

401(k) Rekon Advisor Symposium - Chevy Chase
in Maryland on June 7, 2012 presented by 401(k) Rekon

401(k) Rekon Advisor Symposium - Tory
in Michigan on June 7, 2012 presented by 401(k) Rekon

Webcast: Digital Signatures and the New Age of Communications
Nationwide on May 30, 2012 presented by National Institute of Pension Administrators

Retirement Plan Compliance Issues On The IRS's Radar Screen Webinar
Nationwide on May 15, 2012 presented by Chang, Ruthenberg & Long

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[Official Guidance]
Text of Official Notice to Pension Plan Participants; PBGC Takes Over Responsibility for Payments at Large Law Firm of Dewey & LeBoeuf (PDF)
"PBGC is taking this action because your plan meets the criteria for termination under federal pension law. In general, this means that your employer is unable to keep up the plan and the plan may not have enough money to pay all the promised benefits. PBGC has determined that the plan should terminate as of May 11, 2012. As of that date, you will not earn any further benefits from the plan." (Pension Benefit Guaranty Corporation)

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[Guidance Overview]
Despite Husband's Beneficiary Designation, Second Wife Not Entitled to Annuity When Husband Never Divorced First Wife
"If the participant never divorced his first wife, then she would be his surviving spouse under the plan. As such, her status as the participant's surviving spouse would take precedence over the participant's express election of the second wife as his spouse and beneficiary. This is because the first wife never waived her rights to receive spousal benefits as required by ERISA Section 205." (Wolters Kluwer Law & Business / CCH)

[Guidance Overview]
DOL FAQs Address Retirement Plan Fee Disclosures (PDF)
"DOL acknowledges that it may be unduly difficult or expensive to bring such disclosures into compliance ... before the Regulations' respective effective dates [so the agency stated that] it generally will take no enforcement action against a covered service provider or plan administrator who has acted in good faith based on a reasonable interpretation of the Regulations and who also establishes a plan for complying with the requirements ... in future disclosures.... The Bulletin provides additional guidance with respect to the following topics:" (Sutherland)

[Guidance Overview]
Describing Plan Administration Expenses When Making Participant Fee and Investment Disclosures
"Plan administrators annually must furnish an explanation of any fees and expenses for general plan administrative services (e.g., legal, accounting, recordkeeping), which may be charged against a participant's individual account, as well as the basis on which such charges will be allocated (e.g., pro rata, per capita) to, or affect the balance of, each individual account. The DOL explained that the annual administrative expense disclosure may be expressed in terms of an amount, formula, percentage of assets or a per capita charge, but must be written in a manner calculated to be understood by the average plan participant. How specific the disclosure must be depends on the facts and circumstances of the service and the fee or expense being disclosed." (SunGard Relius)

[Guidance Overview]
DOL FAQs Clarify Participant-Level Disclosures, 'Good Faith' Standard for Enforcement Purposes
"The [ERISA section 404(c)] disclosure conditions—which were effective for plan years beginning after November 1, 2011, and are therefore already in effect for many plans—generally operate by reference to the participant disclosure rules. With the delay in the initial disclosure date, it was unclear whether the failure to provide the initial disclosures after the effective date of the section 404(c) changes would be considered noncompliance with the section 404(c) rules. DOL has now clarified that a plan need not furnish the participant disclosure information before it must be furnished under the new regulation to maintain section 404(c) status." (Morgan Lewis)

[Guidance Overview]
Foreign Parent Company Was Properly Joined in PBGC Suit Against U.S. Subsidiary's Pension Plan
"The [U.S. District Court for the District of Columbia found that] PBGC's claims against Asahi were not based on the pension plan's termination or underfunding, but were predicated solely on Asahi's status as a member of the controlled group through its acquisition of Metaldyne. The court [ruled] that, notwithstanding the absence of any affirmative conduct by Asahi with respect to the U.S. subsidiary's pension plan, personal jurisdiction for the purpose of determining liability under ERISA attached once Asahi became a member of the Metaldyne controlled group." (Haynes and Boone)

The Case for Indexing as an Investment Strategy vs. 'Active' Investment Management
"This ... research paper explores both the theory behind indexing as an investment strategy and the evidence to support its use in investor portfolios. The research compares actively managed funds with unmanaged benchmarks weighted by market capitalization. It shows that the average U.S.-domiciled actively managed fund has underperformed a style benchmark with greater volatility over long time periods. The paper also finds that reported performance statistics can change markedly once survivorship bias is accounted for, and that persistence among past winners is no more predictable than the flip of a coin." (Vanguard)

Should You Choose a Lifetime Annuity at Retirement?
"The lifetime income annuity, what many insur.ance companies call a SPIA (Single Premium Immediate Annuity) is one tool that can help cover your expenses. Quite simply, in exchange for one, upfront, lump-sum payment, the insur.ance company provides you with a guaran.teed monthly paycheck. The payments can be for a specific time period (e.g., five years) or for life. Essentially, the lifetime payment option allows you to create your own pension from your savings." (Fox Business)

Panel of Investment Advisers Recommends Annual Savings Rate of 10% to 16% Over Entire Career
"The Position Paper concludes that for many, target income replacement ratios should be higher than the 70-75% conventionally accepted as a rule of thumb. The higher ratio is to account for the projected cost of healthcare in retirement, and traditional financial planning concerns such as personal health, children education needs, and the cost of caring for elderly relatives. Regardless of target income ratio, the six panelists call for consistent contribution levels in the range of 10% to 16% of pay over a 30-year or 40-year career." (Retirement Advisor Council)

Income Tax Strategies as You Get Older: Retirement Tax Tips at Ages 59-1/2, 69-1/2 and Beyond
By prominent attorney Natalie Choate. "Many tax moves regarding retirement benefits are dictated by age. The 'big years' are age 59-1/2 (everybody knows that) and also, surprisingly, age 69-1/2. Here's a review of age-based tips ... If you inherited a traditional retirement plan from your spouse, don't roll it over to your own IRA until you are over 59-1/2. Leave it in your deceased spouse's plan and withdraw funds from it penalty-free if you need money." (Morningstar)

Actuarial Techniques to Manage Pension Risk (PDF)
Slides used in a presentation by a prominent actuarial firm with a large public plan practice, from the 2010 National Conference on Public Employees Retirement Systems. (Gabriel Roeder Smith & Company)

2012 Industry Survey of Target Date Funds (PDF)
"Flows into target-date funds continued to cool off in 2011, though they remain one of the most consistent sources of new assets in the industry. While net assets rose only 11% to $378.5 bil.lion in 2011, compared with a year-over-year rise of 33% in 2010, much of that difference can be attributed to 2010's superior market performance." (Morningstar)

Employer Outreach Methods Failing to Engage Employees in Retirement Savings
"Employers and their employees in the U.S. hold different perspectives on how to achieve retirement preparedness through 401(k) plans ... [D]espite efforts by employers to educate workers on the 401(k) offering, most workers remain disengaged and unprepared financially for retirement.... Relatively few 401(k) participants have the desire to manage their workplace savings plan ... [and] many employers are doubling down on outreach efforts that have not been effective[.]" (Society for Human Resource Management)

Federal Government Rolling Out Roth Option to 3.3 Mil.lion Employees This Week
"The sign-up rate for workplace Roth accounts in the federal government's huge Thrift Savings Plan (TSP) could be higher than in the private sector because of a twist on the Roth benefit that will be available to military personnel stationed in combat zones. Military personnel are granted a 'combat zone tax exclusion' for any month served in a combat zone, meaning their pay for that month is excluded from gross income subject to income tax.... While the TSP is ready to receive Roth contributions as of this week, availability to federal workers depends on rollouts by more than 100 government payroll offices." (Reuters)

Reviewing Your 401(k) Plan's Hardship Distribution Procedures
"Once the plan document sufficiently provides for hardship distributions, the main traps for the unwary administrator are the failure to follow the terms of the plan and the failure to adequately document the decision to grant (or deny) the request for a distribution. Your documentation of each decision should include: The participant's application with the participant's written representations as to the hardship involved and whether other resources have been exhausted; and Your determinations regarding (i) whether the participant has an immediate and heavy financial need, (ii) whether the need can be met by other resources reasonably available to the participant, (iii) whether the amount to be distributed is not in excess of the amount needed, and (iv) the source of the distribution." (Chang, Ruthenberg & Long PC)

Text of Comments by ASPPA on Use of 401(k) Plan Forfeitures as Safe Harbor Contributions
"ASPPA respectfully requests that the IRS consider issuing additional guidance clarifying that forfeitures can be used to fund ADP safe harbor contributions. Furthermore, ASPPA requests that the IRS consider issuing additional guidance clarifying that forfeitures may be used to fund ADP safe harbor contributions that are qualified automatic contribution arrangements." (ASPPA)

Benefits in General; Executive Compensation

ERISA Advisory Council to Examine Disability Coverage, Retirement Income and Beneficiary Designations (PDF)
The Advisory Council on Employee Welfare and Pension Benefit Plans (also known as the ERISA Advisory Council) meeting will be held on June 12-14, 2012 in Washington, DC. "The Advisory Council will study the following issues: (1) Managing Disability Risks in an Environment of Individual Responsibility; (2) Current Issues Regarding Income Replacement During Retirement Years; and (3) Current Challenges and Best Practices Concerning Beneficiary Designations in Retirement and Life Insur.ance Plans." (Employee Benefits Security Administration)

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Lois Baker, J.D., President
Holly Horton, Business Manager

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