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June 26, 2012 Get Health & Welfare News  |  Advertise  |  Unsubscribe  |  Past Issues  |  Search

Employee Benefits Jobs

Sr. Manager Retirement Education Sales
for Charles Schwab in TX

Retirement Plan Sales Consultant
for Trinity Pension Consultants in OH

Vice President, Client Transition
for Prudential in CT, IA, NJ, PA

Product Director, Stable Value
for Prudential in NJ

Enrolled Actuary
for Cash Balance Actuaries, LLC in ANY STATE, MN

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Webcasts and Conferences

Brokers Should Prepare for “Hyper Mode”—An EBA Podcast with Craig J. Davidson, CEBS
Nationwide on June 29, 2012 presented by Davidson Marketing Group -- FutureOffice Network


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

[Guidance Overview]

Minutes of GASB Meeting Elaborate on Upcoming Revised Pension Accounting and Financial Reporting Standards
Scroll down the linked article for the heading, "Minutes of Meeting, June 27-29, 2011." Excerpt: "The Board tentatively agreed that: ... The scope of the Exposure Drafts should not be expanded to include other postemployment benefits (OPEB) or pensions that are not provided through a qualified trust.... The Board tentatively agreed that ... The long-term expected rate of return [as described in] the Exposure Drafts' provisions (which would have required the use of a 30-year index rate ... ) should be modified to instead require that the rate represent a yield or index rate for tax-exempt general obligation bonds that have a maturity of 20 years and an average rating of AA/Aa or higher." (Governmental Accounting Standards Board)


New! Plan Document Software Module   [Advert.]

Sponsored by ftwilliam.com

Wolters Kluwer Law & Business - ftwilliam.com has implemented lots of feedback and our own innovative ideas into a newly designed plan document software module. Join our webinar on July 10th for a sneak peek at our enhancements and what’s coming.


[Guidance Overview]

How to Tell Whether Your Adviser is Working in Your Best Interest: A Fiduciary Guide for Individual Consumers
"It is important to understand whether the adviser is acting as a fiduciary, meaning that the adviser is working solely in your best interest, and is not conflicted by compensation arrangements that may encourage him to steer you into investments that are more profitable for him. Asking the following questions, up front, will help you protect yourself and your assets." (Employee Benefits Security Administration)

[Guidance Overview]

Will Fee Disclosures Makes Sense to Retirement Plan Participants?
"Over the past several months, most employers and their service providers have built a good understanding of the participant fee disclosure requirements and how to comply. Now, as the race to compliance readiness is nearing its end, an important and evolving consideration has come to the fore. That is, are participants actually going to understand the information reported on the fee disclosure notice?" (Multnomah Group)

[Guidance Overview]

Eliminating Prohibited Payment Options in Bankrup.tcy: IRS Proposes Exception to Anti-Cutback Rule
"[T]he proposed regulations address the constraint imposed by Code section 436(d)(2) which—as added by the Pension Protection Act of 2006—requires single-employer defined benefit plans to provide that no prohibited payment will be made while the plan sponsor is in bankrup.tcy.... To resolve the competing interests, the regulations propose a limited exception to the anti-cutback rule by which a plan sponsor in bankrup.tcy would be permitted to amend the plan to eliminate a single-sum distribution (or other optional form providing for accelerated payment) if certain conditions are satisfied." (Deloitte via BenefitsLink.com)

Assistant DOL Secretary Phyllis Borzi Invites Public to Share Experiences with Investment Advisers
"Many financial advisors may be working in your best interest but, unfortunately, there are some who are not and may take advantage of the trust that you and your loved ones place in them.... What has been your experience with getting financial advice? If you have a story or a tip to share with others, send it to MyFinancialAdvisorStory@dol.gov. Your contributions will help inform how we work to protect consumers in the future. (Please note that this is a general request to hear your experiences and this email address is only set up for that purpose.)" (Employee Benefits Security Administration)


Managing your 401(k) Plan: A Day in the Life of a Healthy 401(k) in 2012   [Advert.]

Sponsored by Lorman and BenefitsLink.com

Live audio conference: identify and address major trends and challenges facing 401(k) plan sponsors in maintaining a benefit plan that will meaningfully prepare their employees for retirement. Discounted price for BenefitsLink readers.


Easy Fix for Retirement Problems: Work Longer
"If you're a baby boomer who has been planning to retire at your full retirement (currently 66), waiting until 70 is only four years longer. And during those four years, 'magic' can occur. In addition to giving your investments more time to grow, you get a big boost in Social Security income, which increases by 8% for each year past your full retirement age that you postpone the start of benefits." (Reuters via FoxBusiness.com)

Credit Strategies Attracting More Pension Funds
"Consultants are steering pension fund clients into leveraged loans and other forms of credit, investments that can cut across asset classes to take advantage of the global need for financing.... 'Given current market environment ... there is a compelling case to consider bank loans,' [the Hewitt EnnisKnupp consulting firm] noted in a May report ... In the current low-yield environment with the risk of rising interest rates, bank loans 'offer a favorable spread, with seniority in capital structure and provide a hedge against rising rates."'" (Pensions & Investments)

The Fiduciary's Role in the Termination of Single Employer DB Plans
"The fiduciary's challenge arises from the structural tension between the fiduciary's ERISA obligations to act only in the best interests of the plan's participants, and the plan sponsor's legitimate business goals.... To resolve the tension between these competing goals, to bring the termination to a successful close as efficiently as possible, and to avoid even a perceived conflict of interest, the fiduciary must have a carefully crafted and well thought out fiduciary process.... [T]his article sets forth a checklist of plan sponsor and fiduciary action.... [and then] expands on the fiduciary's risks and responsibilities in bringing the termination to a close." (CAMRADATA; free registration required)

Most Employers and Service Providers Prepared for 401(k) Participant Fee Disclosures
"A vast majority (69%) of 401(k) plan providers and third party administrators feel prepared to meet the new fee disclosure requirements that go into effect Aug. 30, but ... 24% say they have not finalized the communication processes needed to meet the new regulations, and 5% say they still need help understanding the U.S. Department of Labor requirements. In addition, almost 13% of respondents say have made no preparation for the questions they are likely to get from plant participants once they receive the fee notices." (Financial Advisor)

GASB Vote Places Unfunded Pension Liabilities on Government Balance Sheets
"Unfunded pension liabilities will begin appearing on the balance sheets of U.S. state and local governments that provide defined benefit pensions under provisions of two GASB standards approved Monday.... Statement No. 68 will require governments with defined benefit pension plans to disclose a 'net pension liability' on their balance sheets. That liability equals the difference between the total pension liability and the value of assets set aside in a pension plan to pay benefits. The statement calls for immediate recognition of more pension expense than is currently required. This includes immediate recognition of annual service cost and interest on the pension liability, plus the effect of changes in benefit terms on the net pension liability." (Journal of Accountancy)

What 401(k) Plan Sponsors Can Expect from Service Provider Fee Disclosures
"July 1, 2012—a date of clarity or a date of confusion? The alert 401k plan sponsor and fiduciary will recognize this day as the effective date of the section 408(b)(2)—the DOL's Fee Disclosure Rule. Less certain, though, is whether the new disclosure rule actually helps or merely addles 401k plan sponsors and their plan's participants. [This author interviewed] several firms who fall under the definition of a 408(b)(2) 'service provider' and asked them what they intend to do regarding disclosure. Unfortunately, these disclosures appear to promise only a mixed bag, leaving some 401k plans sponsors befuddled." (Fiduciary News)

Advisors View Annuities as Appropriate for Clients' Retirement Planning
"Fifty-five percent of advisors whose clients typically have less than $500,000 investable assets believe annuity products should be included as part of their financial portfolios, according to a recent LIMRA study.... [In] 2011, more advisors believed the benefits of guaran.teed income products outweighed the benefits of non-guaran.teed income solutions than did in 2009, 56 percent versus 40 percent. In addition, six in 10 advisors say guaran.teed income solutions, like annuities, are well received by their clients." (Insur.ance News)

New Mexico Public Pension Plan Lowers Benefit Formula for New Hires, Reduces COLAs
"[T]he Public Employees Retirement Association [PERA] of New Mexico adopted changes to its plan, costing members a percentage of cost of living increases, to keep its funds solvent.... The Board approved a 2 percent compounding, COLA for all current and future retirees effective July 1, 2013. This reduction will result in an immediate $1.4 bil.lion reduction to PERA's $5 bil.lion unfunded liability and set PERA on a path to fully eliminate the unfunded liability.... The Board approved a new tier for hires after July 1, 2010 with plan benefit reductions for both general and public safety members [and] approved extending the waiting period to receive a COLA for all active and future members from the current two years after retirement to seven years after retirement, or age 65, whichever is sooner." (Alamagordo Daily News)

Judge to Review Pension Concessions by Providence, Rhode Island Retirees
"A lawyer representing city retirees in Providence is expected to tell a judge they have approved a deal freezing automatic pension hikes and restructuring health benefits—a victory for Mayor Angel Taveras that is expected to keep the state capital out of municipal bankrup.tcy.... About 80 percent of the retirees voted in favor of the tentative agreement [which] agreement eliminates pension cost-of-living increases for 10 years, caps pension benefits and shifts retirees age 65 and older to Medicare. The pension overhaul is expected to save an estimated $18.5 mil.lion and the health benefit changes about $4.2 mil.lion in the coming fiscal year, according to the city." (Boston.com)

A Different Kind of Problem: Postal Service's Pension Plan Is 105 Percent Funded
"The U.S. Postal Service has overfunded its federal pension obligations by ... $13.5 bil.lion, [as of the end of] the federal fiscal year ending Sept. 30, 2011, according to a report issued Monday by the agency's inspector general [that shows a $269 mil.lion present value liability and $282 mil.lion in assets]. The inspector general suggested reverting the surplus money to the Postal Service. But the Office of Personnel Management is not permitted to return surplus contributions to federal agencies. That would require an act of Congress." (The Washington Post; free registration required)

Public Pensions Face Larger Deficits Under New Accounting Rules
"State and local governments coping with years of underfunding and weak investment returns will be forced to clarify the extent of pension deficits under rules ... that will widen the gaps for some plans. The measures adopted by the Governmental Accounting Standards Board alter methods of calculating liabilities and assets by the retirement systems. The changes will mean pensions for public workers in Illinois, New Jersey, Indiana and Kentucky have less than 30 percent of assets needed to meet liabilities, according to the Boston College Center for Retirement Research." (Bloomberg)

'Shall I Be Your Fiduciary?'—The Marketing Problem for Registered Investment Advisors
"Two recent surveys offered seemingly very different takes on the wisdom of marketing 'fiduciary.' [One] indicates that the fiduciary distinction is the number one reason why clients choose an RIA.... [but another] recent study that found that marketing the words 'fiduciary' and 'fee-based' are losing propositions with investors. 'Fiduciary' being too confusing and coming across as legalese, while any mention of the word 'fee' has too negative of a connotation (think airline baggage fees)." (fi360 Blog)

Insured Retirement Institute Research Will Identify Broker-Dealer Regulatory Burdens
"[The purpose of the] research initiative [is] to identify regulatory burdens facing broker-dealers that impede their ability, and financial advisors' willingness, to sell lifetime income products. IRI intends for the research to support its efforts to pursue a one-stop, national insur.ance agent licensing system, as well as reforms to address other regulatory hurdles. 'We are focused and committed to working with policymakers to reduce barriers to attaining lifetime income so that all Americans may enjoy a financially secure retirement,' IRI President and CEO Cathy Weatherford said. 'This includes identifying and removing regulatory red tape and other obstacles that are preventing the broker-dealer community from making insured retirement strategies more readily available.'" (Insured Retirement Institute)

ERISA-Exempt Government Plans Can Learn Much from Tussey v. ABB Case
"Although governmental plans are not subject to ERISA, all are subject to a combination of State and common law fiduciary rules—many of which (including California's) contain language identical to the standards of ERISA.... Unfortunately, because of limited resources, the fiduciaries of many smaller and medium-sized public plans remain somewhat uninformed of the potential consequences of violating their fiduciary duties." (Focus on Public Benefits)

[Opinion]

Will New Accounting Rules Roil Public Pension Funds?
"[The author applauds] these new GASB rules because they increase the transparency of state and local pension funds, which in turn should make them a hell of a lot more accountable. Is there a risk that some politicians will jump on the opportunity to attack public pension funds, looking to dismantle them? Of course there is which is why unions and public pension funds should fight back with their own campaign, making the case for boosting public pensions. But the biggest problem with public pensions funds in the United States lies with a governance model that breeds corruption and mediocrity.... Importantly, they need to create independent investment boards that operate at arms-length from state and local governments." (Pension Pulse)

[Opinion]

Fixing California's Public Pension Crisis
"The Legislature should ask the voters to amend the state Constitution this fall, enacting once and for all the three most important features of Gov. Jerry Brown's 12-point pension reform plan: requiring all public employees to pay half the cost of their retirement plans; requiring future employees to share the risks associated with their plans with taxpayers; and tying state and local retirement ages to federal retirement ages." (Los Angeles Times)

[Opinion]

Text of Group Letter from 15 Associations to DOL Protesting Brokerage Window FAQ in FAB 2012-02 (PDF)
7 pages. "[The authors] believe the positions set forth in Question and Answer 30 ... have potentially enormous costs and adverse effects on the retirement plan system—costs and impacts that we believe need to be further developed and considered as part of a public notice and comment process.... [T]he Administrative Procedure Act, Executive Orders 12866 and 13610, as well as the guidance in OMB's Good Guidance Practices Bulletin, require that the Department withdraw the answer to Q&A-30. To the extent that the Department believes that the position set forth in Q&A-30 continues to deserve consideration, it should propose the guidance, in conjunction with a cost/benefit analysis, and invite public comment as is required for any 'supplement' to a regulation." (American Benefits Council and 15 Other Trade Associations)

Benefits in General; Executive Compensation

[Official Guidance]

Text of IRS Rev. Proc. 2012-29: Sample Language for Section 83(b) Election; Examples of Resulting Taxes (PDF)
"This revenue procedure contains sample language that may be used (but is not required to be used) for making an election under Section 83(b) of the Internal Revenue Code. Additionally, this revenue procedure provides examples of the income tax consequences of making such an election." (Internal Revenue Service)

[Guidance Overview]

SEC Adopts New Rule and Disclosure Requirements on Compensation Committees
"The new rule, adopted as Exchange Act Rule 10C-1, directs stock exchanges to establish listing standards that require each member of a listed issuer's compensation committee to be an 'independent' member of the board of directors. The new rule does not require a listed company to formally designate a compensation committee; however, in the absence of a designated compensation committee, the listing standards must apply to the directors, or group or committee of directors, who oversee executive compensation matters. As in other instances, the SEC generally defers to the specific definition of 'independent' to be adopted in the listing standards of the applicable stock exchange." (Vorys, Sater, Seymour and Pease LLP)

[Guidance Overview]

SEC Issues Final Regs on Compensation Committee Independence Requirements Under Dodd-Frank
"[T]he final regulations require the stock exchanges to issue listing standards requiring a listed corporation's compensation committee to take into account the independence of compensation consultants, legal counsel and other advisers before any of these service providers can be engaged by the committee. There are real dangers if this is not done on a formal basis." (Fox Rothschild LLP)

Text of IRS Rev. Rul. 2012-19: Dividends and Dividend Equivalents on Restricted Stock and Restricted Stock Units (PDF)
"Issue: Whether dividends and dividend equivalents relating to restricted stock and restricted stock units (RSUs) that are performance-based compensation under Section 162(m)(4)(C) of the Internal Revenue Code must separately satisfy the requirements under Section 162(m)(4)(C) to be treated as performance-based compensation." (Deloitte via BenefitsLink.com)

SEC Adopts Final Rules Implementing Dodd-Frank Provisions on Independence of Compensation Committees and Their Advisers (PDF)
"The Commission received 58 comment letters on its proposed rules, which were published in March 2012. The final rules reflect a number of changes in response to these comments, as discussed below. In several areas, the changes reflect the Commission's cognizance of the economic effect of the rules and the burden they may place on cost and competitiveness." (Alston + Bird LLP)

Executives Would Choose Fixed Pay Over Potentially Larger Bonus
"[A] recent PricewaterhouseCoopers and London School of Economics study ... found only 28 percent of executives indicating they would opt for a more ambiguous pay package with a potentially higher bonus over a clearer, fixed pay package.... [T]he findings should remind HR leaders of the value executives place on the 'sure thing,' [said a management consultant]. 'This comes into play in annual and long-term incentive plan design when companies are determining how to set some basic value floor, whether it's where to set threshold performance levels, or providing a core level of less-variable equity incentives like time-vested restricted stock[.]'" (Human Resource Executive Online)

IRS Guidance Clarifies When Dividends Are Qualified Performance-Based Compensation
"[R]evenue ruling [2012-19] addressed ... plans that granted eligible employees restricted stock or restricted stock units (RSUs).... [D]ividends and dividend equivalents with respect to the restricted stock and RSUs granted to the employees [which] were payable before the stock vested regardless of whether the performance goals were met ... were includible as applicable remuneration for purposes of applying the $1 mil.lion limitation." (Journal of Accountancy)

SEC Final Regs Will Change the Way Compensation Committees Work with Outside Counsel
"The SEC's final rules do not require a Compensation Committee to retain independent legal counsel. However, the SEC rule provides that a Compensation Committee is required to conduct the independence assessment ... with respect to any compensation consultant, legal counsel or other adviser that provides advice to the compensation committee, other than in-house legal counsel. Wow. In corporate America, most Compensation Committees still seek and receive advice from executive compensation partners at the company's regular corporate law firm. Many Compensation Committees have retained independent legal counsel in recent years, but certainly not the majority of them. Those Compensation Committees who have not retained independent legal counsel will need to grapple with [questions discussed in this article], just as they once did for their compensation consultant." (Winston & Strawn LLP)

EBSA's Consumer Assistance Web Page
Includes a well-organized set of links to participant-focused EBSA publications and information, and links to an online form to use to ask a question about benefits, submit a compliant about a possible denial of benefits, or report a problem with a pension or health plan. Excerpt: "We are here to provide you with quick information about our programs and services, provide answers to your questions, and to assist you if you believe you have been denied a health or retirement benefit inappropriately. We have a staff of Benefits Advisors ready to help." (Employee Benefits Security Administration)

Lockheed Contract Wins Approval of Union Bargainers: Trading Retirement Plan Cutback for Health Plan Enhancement
"A bargaining committee for the union machinists on strike at Lockheed Martin's fighter jet plant in Fort Worth has recommended that members vote for a new contract that would eliminate traditional pensions for newly hired employees, according to a summary posted Monday on the union's Web site. That is a victory for the company, the nation's biggest military contractor, which had pushed for the pension change to cut costs as military budgets decline. Lockheed agreed, in turn, to add a health insur.ance option that covers out-of-network services. The company would also extend the contract to a fourth year, with pay raises totaling 11 percent over the four years." (The New York Times; free registration required)

Supreme Court to Wade into ERISA Subrogation Dispute
"The Supreme Court agreed Monday to determine whether an employee benefits plan is subject to equitable limitations when it demands reimbursement of benefits paid a covered employee who recovers money from third parties." (Courthouse News Service)

Supreme Court Grants Certiorari: Can Equitable Principles Override Plan's Terms Requiring Reimbursement by Participants?
The issue presented in this case: "Whether the Third Circuit correctly held -- in conflict with the Fifth, Seventh, Eighth, Eleventh, and D.C. Circuits—that Section 502(a)(3) of [ERISA] authorizes courts to use equitable principles to rewrite contractual language and refuse to order participants to reimburse their plan for benefits paid, even where the plan's terms give it an absolute right to full reimbursement." [U.S. Airways, Inc. v. McCutchen (3rd Cir. 2011).] (SCOTUSBlog)

Independent Contractor Misclassification: States Are Cracking Down
"[A]lthough the [DOL] and the IRS have increased their efforts to curtail the use of misclassified independent contractors (ICs), state legislators and regulators have taken a leading role in cracking down on companies that continue to classify workers as ICs without properly documenting or structuring their relationships with these individuals. Indeed, companies that use freelancers, consultants, per diems, long-term temps, and other contingent workers may be unaware that their greatest exposure is from violating state laws, not federal statutes." (Law Firm Of Pepper Hamilton LLP)

Enrolled Actuaries Report, Summer 2012 (PDF)
Articles include: Laser View of Longevity; New Scale Offers an Updated Snapshot of Life Expectancy; PBGC Trends and Perspective; Tales From Beyond Normal Retirement; Fiduciary Responsibility: Understanding the Risks; Working with Auditors; and Plan Termination: End or Beginning? (American Academy of Actuaries)

Press Releases



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