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BenefitsLink Retirement Plans Newsletter
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[Guidance Overview]
DOL's Recent Guidance on New Participant Fee Disclosure Regulations Is a 'Must Read'
"The Department of Labor recently issued Field Assistance Bulletin 2012-02 (FAB 2012-02), which provides additional guidance in the form of frequently asked questions (FAQs) on the participant fee disclosure regulations. FAB 2012-02 ... clarifies the fast-approaching deadlines for the required disclosures and makes clear that extensions of the deadline will not be available." [Article includes a chart of deadlines and action steps, as well as detailed discussion of the requirements.]
(Littler)
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Attend the 2012 Western Benefits Conference [Advert.]
Designed for retirement, health, welfare & benefits professionals, with particular emphasis on practical issues important to plan sponsors & their advisors. Speak with nationally-renowned speakers & government representatives and more!
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Advantages and Disadvantages of DC to DB Rollovers
"This Spotlight presents an overview of some of the advantages and disadvantages of DC to DB rollovers, from both the employer's and the employees' perspective. The decision to offer DC to DB rollovers is by no means straightforward, depending on the weight the plan sponsor places on the positive and negative attributes. The Spotlight concludes with an overview of some ambiguities about DC to DB rollovers that employers should be aware of if they are considering offering the option."
(Sibson Consulting)
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Net Assets in Variable Annuities Reach All-Time High
"Industry-wide first-quarter annuity sales topped $53.1 bil.lion—down slightly more than 2.5 percent from $54.5 bil.lion during the previous quarter.... '[C]onsumers are turning to income annuities as a source of lifetime income to attain financial security during retirement. The historic level of variable annuity net assets shows that insured retirement strategies are, more and more, becoming the savings vehicle of choice for many consumers,' [said Cathy Weatherford, IRI President and CEO]."
(Insured Retirement Institute)
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Are GM-Like Pension Offers a Good Deal?
"Over the next few weeks some 42,000 white-collar General Motors retirees will take a crash course in actuarial math.... those retirees now get a second chance to decide how they want to take their retirement benefits. Here are some questions they—and anyone weighing a lump sum buyout or a private annuity—should ask[.]"
(Reuters via FoxBusiness.com)
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Funded Status of U.S. Pensions Declines to Lowest Recorded Level
"The funded status of the typical U.S. corporate pension plan in May fell 6.5 percentage points to 69.8 percent, its lowest level since BNY Mellon began tracking this information in December 2007. The decrease was driven by the worst monthly decline in U.S. equity markets in 2012 and lower interest rates, which sent liabilities higher ... the two trends combined to erase all of the gains that had been recorded in the first quarter of 2012. Assets for the moderate risk U.S. corporate pension plan in May fell 3.9 percent as U.S. equity markets declined 6.2 percent and international developed markets dropped 11.5 percent on uncertainty regarding the Greek debt and related euro zone issues ... Liabilities rose 5.1 percent as the Aa Corporate discount rate fell 31 basis points during the month to a record low of 3.98 percent[.]"
(BNY Mellon)
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South Dakota State Pension System Faces Deficit in Millions
"[T]otal market value of the public pension system's investments was down about 1.5 percent from where it began on the July 1 start of the current fiscal year ... The trustees run the system on an assumption that investments will grow an average of 7.75 percent annually. If the investment values bounce back sufficiently to get back to zero growth by the June 30 end of the fiscal year, the system will have a deficit of $77 mil.lion. If the values instead further erode and finish the fiscal year at a negative 2.5 percent, the red ink will total about $273 mil.lion. Either way the system will be below the 100-percent funded ratio necessary for SDRS retirees to receive a full 3.1 percent cost of living adjustment in 2013."
(The Daily Republic)
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Gloomy Attitudes Toward Retirement in Both U.S. and Europe
"People in the United States and Europe are increasingly pessimistic about their financial prospects for retirement, as cash-strapped governments face pressure to cut social programs and raise retirement ages, according to the results of a survey released Thursday.... The survey also found strong support for reform of government pension programs, with 42 percent favoring some combination of benefit cuts and higher taxes, and 27 percent favoring keeping benefits unchanged but raising taxes to pay for them. At the same time, almost half of those surveyed, 47 percent, were opposed to raising retirement ages."
(The New York Times; free registration required)
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San Jose Unions Sue to Block Voter-Approved Pension Reform
"San Jose police officers and firefighters Wednesday made good on promises to legally challenge San Jose's voter-approved pension reform with a pair of lawsuits filed in Santa Clara County Superior Court. San Jose voters Tuesday approved Measure B by a nearly 70-percent margin. ... But unions maintained the measure violates court rulings that prohibit government employers from reducing workers' pension benefits during their career without offering something comparable in return."
(San Jose Mercury News)
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The Growing Problems With 401(k) Withdrawals
"In recent years, employees have become more adept at saving. But now many employers are concerned that retirees are botching the job of making sensible withdrawals. Frightened about market uncertainty, some retirees are reluctant to take any withdrawals at all. Other plan participants are raiding their savings, quickly depleting the assets. A decade ago, the withdrawal problems were not big concerns because there was not much money at stake."
(TheStreet.com)
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Efficiency Panel Targets State Pensions, Health Plans in Florida
"In its final meeting, the ... Government Efficiency Task Force on Wednesday advanced a series of proposals aimed at saving more than $3 bil.lion in state spending, including capping salaries used to determine pension payments, requiring worker contributions and moving toward plans more like the private sector's 401(k)'s. The recommendations covered the full spectrum of state activities, ranging from reducing the cost for workers' health insur.ance to state contracts, real estate and the operation of state universities and prisons. But recommendations on the $126 bil.lion state pension fund could have far-reaching consequences for the nearly 1 mil.lion workers, including 320,000 retirees, who rely on it."
(The Gainesville Sun)
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No Progress on Illinois Pension Reform As Credit Agency Pans State
"The only news to come out of Wednesday's closed-door talks involved plans to survey suburban and downstate school districts about their finances and abilities to shoulder more of the pension tab and to reconvene the talks sometime between June 19th and 21st."
(Chicago Sun-Times)
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Illinois Officials Disagree on Pension Reform Approach
"Illinois officials emerged from a closed-door meeting Wednesday divided over the next steps in solving the state's most pressing financial issue: somehow closing an $83 bil.lion funding gap for its retirement systems. The top Democrat and Republican in the Senate and the House Republican leader argued for quickly adopting a proposal that has the widest support before continuing to negotiate. But Gov. Pat Quinn and House Speaker Michael Madigan are insisting on a more comprehensive solution that would include a transfer of pension costs to school districts, a proposal that scuttled negotiations last week."
(Bloomberg Businessweek)
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The Future of Social Security: 12 Proposals You Should Know About
"With more people living longer, Social Security faces increasing financial challenges. Estimates indicate the program will be able to pay full benefits for the next 20 years, but only 75 percent after that. Here are summaries of 12 options being talked about in Washington. Each summary is accompanied by two opinions ... commissioned from experts whose views typically represent different sides of the issues."
(AARP)
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Consumption, Retirement and Social Security: Evaluating the Efficiency of Reform that Encourages Longer Careers (PDF)
"[The authors] find that individuals, on average, may be persuaded to lengthen their careers by about 1.5 years; that many households can benefit from the new program (in the sense of having positive equivalent variations); and, that overall federal government income tax revenues per household could rise on average by about $15,000.... [This] hypothetical reform lowers the payroll tax only relatively late in life, that is to say, close to retirement. The reform would actually raise the payroll tax earlier in life slightly - making it revenue neutral for the Social Security system.... [This hypothetical] policy ... narrowly focuses its tax reduction at the retirement-decision margin."
(University of Michigan Retirement Research Center)
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GM Plan's Offloading of Plan Assets Into Annuities Has Questionable Timing
"GM is making this move at arguably one of the worst possible times. That's because it is basically locking in pension obligations at discount rates that are near historical lows. ... Lower rates mean higher obligations, and GM has seen its discount rate fall to 4.15% at the end of 2011 from 4.96% a year earlier."
(Retirement Town Hall)
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IRS Clarifies Form 8955-SSA Reporting Issue
"In response to a letter sent by SunGard to the IRS ... The IRS resolved a conflict between the line 6 instructions to the Form 8955-SSA and its electronic filing system (FIRE) error codes."
(SunGard Relius)
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Rejection of Attempted Bankrup.tcy of Northern Mariana Islands Pension Plan Puts Plan's Trustees in Difficult Spot
"[After ruling that a pension plan cannot file for bankrup.tcy, a U.S. District Court Judge in Hawaii] said that the trustees of the [Commonwealth of the Northern Mariana Islands] plan 'should be praised, not criticized, for commencing this case.' As he explained: 'The trustees find themselves in an intolerable position. The Fund for which they are responsible is caught between an irresistible force—obligations to retirees which it cannot pay—and an immovable object—the government, which has persistently failed to pay its debt to the Fund. The trustees' attempt to find a solution to this dilemma is creative and praiseworthy even though I am inclined to rule that it cannot succeed.'"
(National Council on Teacher Retirement)
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[Opinion]
Kansas Public Pension Reform Poised for Success
"Lawmakers and Gov. Sam Brownback came together on a plan that responsibly addresses the Kansas Public Employees Retirement System's [KPERS] long-term underfunded liability by boosting employer and employee contributions, changing benefits and tapping gambling revenue. Though the reform won't solve all the financial challenges facing KPERS, Kansas now has a credible strategy to close the $8.3 bil.lion gap between expected revenue and promised benefits through 2033."
(Wichita Eagle)
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[Opinion]
Bringing Private Employees Into California State-Run Pension Plan Would Be Madness
"The Assembly should reject a bill that ... would establish a pension plan for an estimated 7 mil.lion California workers who lack access to workplace retirement benefits.... [This bill] could create a 'multibillion-dollar liability' for the state, despite the bill's attempt to shield taxpayers, financial officials said."
(The Press-Enterprise)
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[Opinion]
GM's Pension Move Is a Lemon
"Retirees who take the lump sum will have to figure out how to make the money last in retirement on their own—not an easy task. Retirees who end up with an annuity from Prudential will no longer be protected by the Pension Benefit Guaranty Corporation, which insures pensions up to specified limits when underfunded plans terminate. Instead, their private annuities will be backed by State Guaranty Funds, which provide more limited protections when insur.ance companies fail."
(Pension Rights Center)
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Benefits in General; Executive Compensation
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Fourth Circuit Tweaks Statute of Limitations Rules for ERISA Benefit Claims
"ERISA itself does not contain a statute of limitations for filing a lawsuit for benefits, nor does it specify when such a claim begins to accrue.... [Recently] the Fourth Circuit affirmed the District Court (E.D. Va.) which allowed the plan's language to trump the forum state's limitations statute, even if the plan's time limit was shorter, and even if the accrual date under the plan language was invalid." [Belrose v. Hartford, 2012 U.S. App. Lexis 7506, 4th Cir. April 13, 2012.]
(Womble Carlyle)
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AEGON Retirement Readiness Survey
"This first-ever AEGON Retirement Readiness Survey of 9,000 people across nine countries was conducted with the aim of understanding the prevailing attitudes toward retirement and the levels of financial readiness among the current working generation in Europe and the United States.... Of those surveyed, 90% were still employed and 10% had already retired.... Survey findings point to a broad range of actions available to individuals, employers and governments to better prepare for a world in which people live longer than at any time in history." [Extensive findings and analysis are on the linked page.]
(AEGON)
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Press Releases
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