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BenefitsLink Retirement Plans Newsletter

June 18, 2012 Get Health & Welfare News  |  Advertise  |  Unsubscribe  |  Past Issues  |  Search

Employee Benefits Jobs

Participant Service Center Representative
for New York Life Retirement Plan Services in MA, NJ

Pension Administrator
for Associated Pension Consultants in CA

Client Service Representative
for Associated Pension Consultants in CA

Defined Benefit and Defined Contribution Specialists
for Los Angeles TPA Firm in CA

Pension Analyst
for The Angell Pension Group, Inc. in ANY STATE

RPS - Training Manager
for Lincoln Financial Group in IN

Compliance Specialist
for T. Rowe Price in CO

401k Administrator
for CPEhr in CA

401(k) / New Comparability Plan Administrator
for Actuarial Consulting Services in NJ

Relationship Manager
for DailyAccess Corporation in TX

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Webcasts and Conferences

"Fundamentals of 401(k) and Other Qualified Plans" - Kansas City
in Kansas on July 18, 2012 presented by SunGard Relius

401(k) Rekon Advisor Symposium - Boston
in Massachusetts on July 17, 2012 presented by 401(k) Rekon

Employee Leaves of Absence and Benefits Compliance: Legal Rules and Compliance Traps
Nationwide on June 14, 2012 presented by Thomson Reuters / EBIA


We also publish the BenefitsLink Health & Welfare Plans Newsletter (free): Subscribe

PBGC Requiring Password Change for Electronic Premium Filings
"Federal information security regulations require [the PBGC] to strengthen the password requirements for My PAA (My Plan Administration Account), which is used by practitioners to electronically file premiums to the PBGC.... [A]ctive account holders will receive an email about the change; and you do not need to rush to change your password. You may continue to access My PAA according to your normal schedule; and My PAA will prompt you to change your password at the appropriate time." (Pension Benefit Guaranty Corporation)


Supreme Court Decision on Health Care   [Advert.]

Sponsored by Fidelity

What are the implications for you and your organization? Find out in our free report – and sign up for a special webcast


Another Question is Answered in the Who's the Employer Q&A Column
"What can I do to change my open MEP so it will get around the Advisory Opinion? My preference, of course, is to do as little as possible." (BenefitsLink.com)

Investment Advisors Look to Build Expertise in Retirement Income
"[A recent survey] found that advisors are dedicating more time to learning about retirement income strategies with more than 98% saying they are trying to build their expertise in the subject matter.... Respondents reported they are turning to a variety of sources, including online materials and books (68%), industry peers (52%), fund companies (49%) and accredited courses (45%). 'Most advisors are trying to tackle the retirement income challenge, but many feel the investment industry has not provided the right tools to set a standard for how this should be done,' [said a spokesman]." (Financial Planning)

Your Target-Date Fund Could Be Riskier Than You Know
"Let's say you're 63 years old and trying to figure out how to invest the money you've managed to put aside over the years. One portfolio manager plans to put 63 percent of your retirement money in bonds. Another says that the first manager has it wrong and that a 63-year-old ought to have 63 percent of a retirement portfolio in stocks. Who's right? ... This is not some kind of trick question. It's what you'd actually be facing if you were choosing between Wells Fargo's 2015 target-date mutual fund and T. Rowe Price's 2015 fund." (The New York Times; free registration required)

Buried JP Morgan Report Warns of Municipal Bond Crisis Due to Pension Liabilities
"[I]t's no secret that nation's public pension funds are in big trouble, holding large 'unfunded' liabilities owed to public workers once they retire. But most politicians (New Jersey Gov. Chris Christie is an exception) will tell you the problem is fairly containable, that there are simple fixes—such as raising taxes on the rich or pruning benefits. Not so, warns a 'strictly confidential' report JP Morgan issued last year." (New York Post)

Some 401(k) Plans Let You Take the Wheel with Brokerage Account Option -- If You Dare
"A survey by consulting firm Aon Hewitt shows that 29 percent of plans offered a self-directed feature last year, up from 18 percent in 2008. The bigger the plan, the more likely the option: Of the plans on Vanguard's platform, 23 percent of those with 5,000 or more participants offer a brokerage window, compared with 11 percent of Vanguard-serviced plans overall. That doesn't mean your typical investor is eager to get behind the steering wheel. While 23 percent of Vanguard's 401(k) participants are offered a brokerage option, only 1 percent use it, the firm says. Fidelity says 38 percent of its participants have a brokerage window, but that only 2.4 percent use it." (U.S. News & World Report)

What is the Impact of Financial Advisors on Retirement Portfolio Choices and Outcomes?
"Broker clients allocate contributions across a larger number of investments than self-directed investors, and they are less likely to remain fully invested in the default option. However, broker clients' portfolios are significantly riskier than self-directed investors' portfolios, and they underperform both benchmarks. Exploiting across-fund variation in broker compensation, we find that broker clients' allocations are higher when broker fees are higher. Survey responses from current plan participants support our identifying assumption that the portfolio choices of broker clients reflect the recommendations of their brokers." (National Bureau of Economic Research)

IRS Guidance Addresses Affordability Test for Employer-Sponsored Coverage under PPACA (PDF)
"The preamble to the final regulations states that commentators suggested that the determination of affordability for coverage of related individuals should be based on what the employee must pay for family coverage, and not for self-only coverage. If that change is made, significantly more individuals will be eligible for the premium tax credit. However, that change could also subject many more employers to the shared responsibility penalty." (Buck Consultants)

Boston Pushes to Increase Pensions for Retired City Workers, Bucking National Trend
"As cities and states across the nation take aim at public employee pensions, Boston City Hall is engaged in a very different debate: how much to increase retirees' checks.... Unlike 70 percent of public sector workers nationally, municipal retirees in Massachusetts are not eligible for Social Security, which increases to keep up with inflation ... Public employees in Massachusetts contribute a share of each paycheck to the pension system, with the workers who make more than $30,000 putting in 11 percent. That is a much larger share than in many other states, which may explain the decision by some Massachusetts pension systems to increase payouts." (Boston.com)

9/11 Pension Boosts for Time Spent on 'The Pile'
"More than 700 retired [New York] cops and firefighters have switched their pensions to a special 9/11-related disability status since the state permitted them to do so in 2006 ... Under the laws, it is automatically presumed that a retiree's cancer, heart or lung ailments are 9/11-related, even if there are other possible causes, such as smoking.... City Hall officials feared the measures would cost $50 mil.lion annually, placing a major strain on the pension system.... While the total cost to date is not known, and will remain so for years, early projections appear to be far lower than the city's initial estimate ... One insider pegged it at about $10 mil.lion annually." (New York Daily News)

Illinois Suburb's Last-Day Raises for Police and Firefighters Last a Lifetime
"Over the past 20 or so years, about 40 veteran Lansing [Illinois] police officers and firefighters were given salary boosts by the village as they were retiring, spiking their individual pensions by at least $6,000 each in the first year alone. All together, at least $2.5 mil.lion in added pension payouts have been distributed since this taxpayer-funded perk was created in 1993. But it turns out the sweetener, which could cost Lansing taxpayers millions of dollars more in coming years, may not even be legal." (Chicago Sun-Times)

Defined Benefit Plans Slow Their Slide
"[A] new survey from the New York-based consulting firm Towers Watson shows clear signs that traditional pensions have lost as much ground as they're going to lose and are now at a stable plateau. Of the employers that still enroll new hires in some sort of defined benefit plan—admittedly, a minority of the respondents—68 percent said they had 'made a formal decision' to keep offering the plan for the next two to three years." (Institutional Investor)

New 401(k) Rules Make Low Expenses of RIAs Look Higher Than Those of Brokers
"[U]nder the new rules, there is no requirement that participants will be notified about compensation to broker-dealers who may be receiving 12(b)-1 fees ... Instead, the entire plan expenses will be included in a general category and written out as an expense ratio—but the specific costs won't be spelled out.... But the compensation breakdown for RIAs is a completely different story on the participant disclosure forms. While the broker compensation is being hidden in a general category, the RIA compensation is specifically front-and-center in its own line item or category. The compensation will also be clearly spelled out in participants' quarterly statements." (RIABiz)

Plan Would Trim Milwaukee's 'Backdrop' Pension Payments
"Milwaukee County's budget-busting 'backdrop' lump sum pension payments would gradually shrink under a plan that would save an estimated $16 mil.lion.... The backdrop was part of a lucrative package of pension enhancements approved more than 11 years ago that have been partly blamed for the county's lingering budget woes. The county's annual pension costs have risen from a nominal amount in 2000 to more than $63 mil.lion expected next year." (Milwaukee Journal Sentinel)

California's Bad Bet Makes JPMorgan's Look Minor
"[In 1999,] California legislators ... decided that investment gains would cover 100 percent of the cost of retroactive pension increases they granted that day to hundreds of thousands of state workers. The politicians made the wrong bet—and the result has been a penalty to California's budget that has averaged $2 bil.lion a year ever since and that will cost the state billions more for decades to come." (Bloomberg)

Bank That Held Plan Funds Not Liable for TPA's Theft of Plan Assets
"The Sixth Circuit [found] that the bank that held plan funds was not an ERISA fiduciary with respect to the plans, and that ERISA preempted state-law claims asserted by the TPA's bankrup.tcy trustee and former clients. (The sole owner and operator of the TPA was convicted of embezzlement and died in prison[.]) The bankrup.tcy trustee (acting on behalf of the plans to recover the lost funds) and former clients alleged that the bank knew or should have known that the TPA was misappropriating plan funds based on questionable activities in the accounts." [McLemore v. Regions Bank, 2012 WL 2052950 (6th Cir. 2012)] (Thomson Reuters/EBIA)

Wisconsin Retirees Fear More Changes to Public Pension System
"Without a strong rebound in the investment market, Wisconsin's public pension system may need a larger infusion of taxpayer money, further reductions in benefits for retirees—or both—to maintain the long-range stability of a fund considered one of the nation's strongest. Meanwhile, some retirees are nervous about a special report due June 30 on possible changes that could shrink the pension pool by allowing employees to opt out or choose alternative plans." (LaCrosse Tribune)

West Virginia Public Employee Retirement Funding Method Comes Up Short
"[West Virginia cities] must find $976 mil.lion in coming years if they want to keep promises made to their retiring firefighters and police, according to the study by Michigan-based Gabriel, Roeder, Smith & Co. Cities that took the cheaper route 20 years ago face the daunting task of keeping retirement funds solvent after years of failing to do enough to shore them up. A big problem is they didn't invest enough money upfront, so they haven't been able to take advantage of two decades of market growth." (Charleston Daily Mail)

GM Pension Changes Leave Retirees' Money Unprotected, Group Says
"The General Motors Retirees Association is protesting GM's plan to buy out pensions of up to 42,000 U.S. salaried retirees and move other retirees to an annuity program controlled by Prudential Insur.ance Co. of America. The association calls GM's decision 'galling' and says it threatens retirees' financial security." (The Detroit News)

DC Plan Participants Hold Steady on Investments During May 2012
"Transfer activity among participants in 401(k) plans remained low in May despite poor equity performance, Aon Hewitt's monthly 401(k) index report shows. Only 0.022% of balances transferred on a net daily basis during the month, one of the lowest levels of transfers recorded in the history of the index. 'This is surprisingly low given the market movement,' said Pamela Hess, director of retirement research at Aon Hewitt.... 'It really seems people are numb at this point to market volatility.'" (Pensions & Investments)

DOL Guidance on Brokerage Accounts Stuns Plan Sponsors
"The Labor Department's attempt to clarify upcoming defined-contribution fee-disclosure regulations amounts to creating a new regulation for brokerage accounts without using the proper process, industry experts contend. 'This is coming out of left field,' said Edward Ferrigno, vice president for Washington affairs at the Plan Sponsor Council of America." (Investment News)

Investment Advisers Object to Proposed New Regulatory Organization
"For the members of the independent advisory industry, the idea of being overseen by an SRO composed of their chief competitors doesn't sit easily. Such an arrangement, they argue, would level the playing field downward, eliminating advantages RIAs hold, notably their high fiduciary standards that put clients first." (Institutional Investor)

USPS Offers Combination of Part-Time Work and Pension Payments to Retirement-Eligible Postmasters
"Postmasters who are eligible for retirement ... can apply to become postmaster relief employees and work reduced hours as noncareer employees. Postmaster relief employees ... will be paid $11.76 per hour and can still receive annuity payments from their former, full-time roles. Their annuities will not increase under the program, however." (Government Executive)

ERISA Advisory Council Hears Testimony on Annuities in Retirement Plans
"[Olivia S. Mitchell, an economist at the Pension Research Council and Boettner Center for Pensions and Retirement Security at the University of Pennsylvania's Wharton School in Philadelphia,] suggested strategies for maximizing the value of annuities, including purchasing multiple annuities in different states and purchasing annuities around age 70." (Bloomberg BNA)

Little-Known Fixes for IRA Problems
By Natalie Choate. "There are lots of ways a client's retirement benefits can get messed up—and even more ways to fix the problems. Here are some of the remedies, mostly for IRA mistakes, with emphasis on those fixes most people have never heard of." (Morningstar Advisor)

Retirement Plans' Fiduciaries Liable to Plans for $36.9 Mil.lion
"In a recent decision, the United States District Court for the Western District of Missouri held that the plan fiduciaries for two defined contribution plans were jointly and severally liable to the plans for $36.9 mil.lion. The court found that the fiduciaries ... Failed to monitor recordkeeping costs; Failed to negotiate rebates for the plans; Selected more expensive share classes for the plans' investment platform when less expensive share classes were available; Agreed to pay an amount that exceeded market costs for plan services in order to subsidize the corporate services provided to [the plan sponsor]; Failed to distribute float income solely for the interest of the plans; [and] Transferred float income to the plans' investment options instead of the plans.... This case has several lessons for plan fiduciaries." (McDonald Hopkins LLC)

Text of Comments by the American Benefits Council to the IRS on Determination of Governmental Plan Status (PDF)
"As Treasury and the IRS recognize in the [advance notice of proposed rulemaking ('ANPRM')], the proposal builds on years of prior interpretations and case law on this topic. Any final rule should not act to 'pull the rug out' from under entities that have relied on prior rulings and interpretations. For many governmental plans, reliance on longstanding DOL guidance permitting the inclusion of a de minimis number of private sector employees in their plans and reliance on other definitions of 'political subdivision' in Treasury regulations are two examples where this could occur under the approach taken in the ANPRM." (American Benefits Council)

Text of Comments by the Annuity Illustration Work Group to the National Association of Insur.ance Commissioners on Annuity Consumer Guides (PDF)
"Overall the documents need updating for new product designs, the structure can be simplified for better clarity, there are some instances of generalization that are not completely accurate, and there are instances of inconsistent terminology. The format and organization of these guides could benefit from revision. Consistency of format and presentation would enhance readability, especially if a consumer receives multiple guides or an agent is referencing multiple guides. Also, if information that is repeated in every guide is presented only in the general guide, the shorter additional guides could focus more on specifics of that product. The guides do not cover the full range of annuity products currently in the market." (Annuity Illustration Work Group (AIWG) of the American Academy of Actuaries)

[Opinion]

Adviser Oversight Bill Needs Overhaul
"Congress finally has recognized that investment adviser oversight is sorely lacking, putting the financial security of millions of Americans at risk. That is commendable, but the solution being deliberated by lawmakers to address the SEC's weakness as an advisory regulator -- funding constraints that are unlikely to change—has significant shortcomings and shouldn't be supported." (Investment News)

Benefits in General; Executive Compensation

Say-on-Pay Tempers Shareholder Proposals for Second Year
"Although the number of shareholder resolutions filed so far in 2012 is up slightly from 2011 ... the say-on-pay vote continues to be the preferred mechanism for sending shareholder messages to companies.... [A]s of May 21 of this year, 160 Fortune 200 companies had held their annual meetings, and the number of shareholder proposals received per company increased from 1.4 in all of 2011 to 1.5 so far in 2012." (HR Policy Association)

Employers Often Can Designate FMLA Leave in Longer Increments Than the Actual Leave Taken
"We have a policy that requires employees to use paid leave at the same time as FMLA leave. However, paid leave can be taken only in one-half day or full day increments. If an employee needs two hours of FMLA leave (e.g., to receive medical treatment), can an employer require that the employee use paid leave and FMLA leave in increments provided for under the employer's policy? In other words, can the employer require the employee to use one-half day of paid leave and one-half day of FMLA leave?" (FMLA Insights)

Philadelphia Paid Sick Leave Law Takes Effect July 1
[F]ull-time workers at employers with 11 or more employees will accrue 56 hours of paid sick time each calendar year, while employees of a smaller business will accrue 32 hours of paid sick time. Employers, of course, may select a higher limit. The law mandates that employees accrue a minimum of one hour of paid sick leave for every 40 hours worked in Philadelphia." (Ballard Spahr)

Flex Schedules, Leaving Early on Fridays Are Most Prized Summer Benefits
"Three out of four (75 percent) HR managers interviewed said their company offers flexible schedules during the summer, and more than six in 10 (63 percent) noted that workers are allowed to leave early on Fridays." (Society for Human Resource Management)

Two Approaches to Internal Markets
This excerpt from the July-August 2012 Employee Ownership Report, available for the next two months (and then replaced by a new article), discusses alternative approaches to providing an internal market allowing employees to buy and sell shares to each other. (National Center for Employee Ownership)

The Employee Ownership 100: America's Largest Majority Employee-Owned Companies
The NCEO has posted the mid-2012 update of its Employee Ownership 100, a list of the largest employee-owned companies in the U.S. (National Center for Employee Ownership)

Employee Ownership Update for June 15, 2012
NCEO Executive Director Loren Rodgers discusses the 2012 Employee Ownership 100, a decision requiring a net loss in a stock drop lawsuit, Apple CEO Tim Cook's decision to give up his restricted stock dividends and have them paid on employee-held stock, a lost employee stake at Ireland's Eircom, a new director at the CEPI, and a half-price offer on the NCEO's Know Your ESOP Quiz. (National Center for Employee Ownership)

Press Releases



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Lois Baker, J.D., President
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