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July 2, 2012 Get Health & Welfare News  |  Advertise  |  Unsubscribe  |  Past Issues  |  Search

Employee Benefits Jobs

Compliance Analyst
for The Newport Group in FL

Retirement Plan Administrator
for TPA Firm in TN

Marketing Product Manager
for Aspire Financial Services in FL

ERISA Attorney
for Rodey, Dickason, Sloan, Akin & Robb, P.A. in NM

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Webcasts and Conferences

401(k) Plans: Benchmarking & Disclosure
in Texas on July 11, 2012 presented by WEB (Worldwide Employee Benefits) Houston Chapter

COBRA and HIPAA Compliance Workshop
in Georgia on July 10, 2012 presented by U.S. Department of Labor, Employee Benefits Security Administration (EBSA)


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Congress Passes Highway Bill Including Pension Changes; Funding Rules Relaxed But PBGC Premiums to Increase
"Instead of using the current method of calculating pension liabilities with two-year corporate bond interest rates, plan executives can now use a 25-year average corporate rate that is within a 10% range. That range will grow 5% per year, which will reduce the amount of relief available to sponsors each year. The new formula would raise the interest rates used to calculate liabilities to 6.7% from the current effective rate of 5.3%. That new calculation formula is expected to immediately raise the funding levels of corporate defined benefit plans ... The bill calls for increasing flat-rate premiums to $42 per participant next year from $35, and then further hikes in later years. Variable-rate premiums, which would still be calculated by current interest rates, would also increase by a formula based on a plan's funding level." (Pensions & Investments)


Don’t Miss the Premier Plan Sponsor Conference of the Year!   [Advert.]

Sponsored by PSCA (Plan Sponsor Council of America)

Join DC industry experts at PSCA’s 65th Annual National Conference. You’ll learn new perspectives, groundbreaking views, and innovative insights all focused on one thing: helping American’s retire better. Register by July 20 for a $200 discount.


[Official Guidance]

Text of Conference Committee's Description of Transportation Bill Including Pension Changes (PDF)
The description of pension changes begins on page 27. (United States Congress)

Highway Bill Brings Rise in Pension Risk
"[The pension provisions of the] just-passed highway bill ... could force costs upward for American businesses. For one thing, sponsors will be able to stretch out their cash outlays to buoy underfunded defined benefit plans over time. As a result, tax-deductible contributions will be smaller in the next few years, taxable income will be higher and federal tax coffers will go up by an estimated $9.4 bil.lion over the next 10 years. In addition, [PBGC] insur.ance premiums ... will be higher to the tune of roughly $10 bil.lion in the coming decade. The news is troublesome for numerous reasons." (Pension Risk Matters)

Moench Presumption of Prudence Applies at Pleading Stage, Eleventh Circuit Decides
"The [Eleventh Circuit] ruled that allowing participants to continue investing in employer securities pursuant to the ESOP's terms was presumptively prudent. While the court did not adopt a specific standard for rebutting the presumption, the court held that plaintiffs failed to plead that Home Depot, the employer, suffered the requisite dire financial condition and affirmed the dismissal of their claims for breach of their duty of prudence. The Eleventh Circuit also dismissed plaintiffs' claims that defendants breached a duty of loyalty by making misrepresentations or omissions, holding that statements made in SEC filings were not actionable under ERISA and defendants were not required to disclose non-public information regarding the company's financial condition to plan participants." [Lanfear v. Home Depot, Inc. (11th Cir. May 8, 2012).] (Sidley Austin LLP)

Actuaries Play Key Role in Addressing Worldwide Retirement Tsunami
"Governments worldwide are faced with the challenge of how they will fund the retirement of an ageing population, according to the Actuaries Institute Australia President David Goodsall ... 'With the increase in life-spans we all know a massive problem is heading our way. How are we going to fund the future needs of an ageing population?' ... However, some governments have already made good progress in tackling this issue. In the UK, for example, they are contemplating linking the social security pension age to life expectancies. The Australian Government has also made some tough decisions, raising compulsory contribution rates for workers from 9 to 12% of salaries and increased the Age Pension age from 65 to 67. 'We appreciate every country is different and we can't simply adopt a "one size fits all" global solution.'" (Scoop Media)

Providers Showed You Their 401(k) Fees: Now, What Should You Do About It?
"Here are some scenarios plan fiduciaries may have to deal with, and some suggested next steps for each: 1. Nothing was sent by the service provider ... 2. Inadequate disclosure was sent ... 3. Good disclosure was provided[.]" (Osler, Hoskin & Harcourt LLP)

China's Looming Pension Crisis Spooks Workers
"China faces a pension crisis as its population ages, and that prospect is starting to alarm Chinese workers who are already struggling to pay for education, healthcare and housing. By the time those people who joined the workforce in the 1980s retire, there will be two workers for every retiree, compared to the current ratio of 6:1[.]" (The Wall Street Journal Health Blog)

How Should Euro Zone Pension Funds Handle Market Uncertainty?
"The inclement economic atmosphere in the euro zone threatens to turn into a tempest, despite the rather murky and incomplete progress towards a solution in last week's EU summit. But [Euro zone pension funds] must nonetheless find a safe harbor within the boundaries of the currency union, to avoid the risk that billions of euros worth of assets held in another currency will not match billions of euros worth of future liabilities." (Institutional Investor)

Pension Bond Insurer Might Contest Stockton, Calif., Bankrup.tcy
"A potential big loser in the bankrup.tcy filed by Stockton last week, an insurer backing a $121 mil.lion Stockton pension bond issue, is warning that it may contest the city's eligibility for bankrup.tcy.... 'Since the City Council has not engaged in any meaningful effort to initiate revenue enhancement, asset sales or pension reform, it is questionable whether the City has taken all steps necessary and available to meet the stringent eligibility criteria for filing a bankrup.tcy petition under chapter 9,' the Assured Guaranty statement said." (CalPensions)

'Investor Fatigue' Setting in As Boomers Tire of Stock Game
"For those with $5 mil.lion to $25 mil.lion in net worth, excluding their home, a bare majority at 52% said they enjoy investing and would not want to give it up. Those with less money are even less likely to enjoy playing the market, with only 43% of those with $1 mil.lion to $5 mil.lion calling it enjoyable and only a third of those with $1 mil.lion or less enjoying investing.... More than half of those with less than $5 mil.lion worry whether they will have enough money for retirement and whether they will be able to retire on schedule." (Investment News; free registration required)

Cost to Leave CalPERS 'Astounding,' Says Lincoln, Calif., City Manager
"Leaving the California Public Employees' Retirement System could mean a price tag of between $60 and $80 mil.lion for the city [of Lincoln, CA]. In fiscal year 2011-12, the city contributed $1.9 mil.lion into CalPERS for its employees.... The cost to leave CalPERS was received by the city last month ... and the city was given two scenarios: freeze compensation increases for city employees or city employees receive compensation increases until they retire. 'Frozen compensation would be an astounding $58 mil.lion (to leave CalPERS),' [the city manager] said. 'Alternatively using projected compensation, we could leave for $79 mil.lion.... Given the cost and that I don't believe we have $60 or $80 mil.lion to contribute, I cannot recommend that we pursue this any further[.]'" (Lincoln News Messenger)

Derisking Pension Funds: Why GM Is a Leader
"Federal pension legislation passed in 2006 has put tremendous pressure on corporate defined benefit pension plans.... As a result, the average funded ratio in the S&P 1500 is around 75%, and overall unfunded pension obligations are nearly $500 bil.lion. At the same time, the law requires more aggressive actions by most plan sponsors to amortize their underfunding over seven years toward a target of full funding. These factors will cause required pension contributions to double over the next 10 years.... GM is known to be a sophisticated manager of its pension liabilities and is a thought leader in this industry, so in coming weeks corporate boards will be occupied with the question 'What are we doing?' And numerous other corporate sponsors will soon follow suit in considering all their derisking options." (Pensions & Investments)

American Airlines Pilots to Vote on Freezing Defined Benefit Plan
"Pilots at American Airlines will vote on a company proposal that would freeze their defined benefit pension plan. The proposal would also terminate the pilots' money purchase defined contribution plan and direct its assets and all future contributions into an existing 401(k) plan. The board of the Allied Pilots Association on Thursday approved putting to a membership vote the airline's June 25 offer to freeze the DB plan and contribute 14% of pay into the 401(k) plan.... Pilots would also get a 13.5% equity stake in the company, increasing its voice on the creditors committee for parent AMR Corp., which is under Chapter 11 bankrup.tcy protection." (Pensions & Investments)

Federal Employees to Be Able to Work While Receiving Pensions
"Congress passed [the highway and student loan bill, which includes provisions that] will allow retirement-eligible federal employees to work part time ... Legislators agreed to drop a pension contribution hike that was put forward by Republicans in both chambers ... Republicans also had proposed determining pension rates based on federal employees' five highest paid years, rather than the high-three calculation used now ... The phased retirement provision has received widespread support in both parties; it is also favored by labor unions. Under the plan, federal employees nearing retirement can work part time while receiving partial annuities and earning additional retirement benefits proportional to the amount of time they work." (Government Executive)

Valuing Variable Annuities with Guaran.teed Minimum Lifetime Withdrawal Benefits
"This paper examines variable annuities (VA) that include a guaran.teed minimum withdrawal lifetime benefit (GWLB). For a risk-averse retiree ... the basic VA/GWLB is unlikely to induce systematic withdrawals early in retirement, while it also provides useful protection in the case of extreme longevity. The typical VA/GWLB increases utility compared to not annuitizing, though its money's worth ratio is slightly lower than not annuitizing. The individual's portfolio mix elected within the VA has the greatest impact on the valuation of the product, mattering much more than fees or mortality. Having a GWLB prompts riskier portfolio choices up to the point where insurers must restrict the risky share so as to protect solvency." (Pension Research Council, Wharton School of the University of Pennsylvania; free registration required)

Cypen & Cypen Newsletter for June 28, 2012
Covers employee benefit developments with an emphasis on governmental plans. Topics in this issue include: Public Pension Plan Investment Return Assumptions; Five Things To Keep in Mind About Public-sector Pensions; GASB Approves New Pension Accounting and Financial Reporting Standards; Longevity Risk and Retirement; Guam Seeks To Avoid the Way of the Northern Marianas. (Cypen & Cypen)

Retirees Share What They Did Wrong and Right in Preparing for Retirement
"One of the most surprising findings in this year's [Consumer Reports of retirees and those near retirement] was that 56 percent of people were not drawing down their savings in retirement. Instead, they were living on interest, Social Security, pensions and other income.... Retirees also shared the best steps they took toward a secure retirement. The top answer was staying in a job that had a traditional defined-benefit pension plan." (Buffalo News)

[Opinion]

War on Pensions Moves to New Target: Those Already Retired
"[A] few years ago, ... the very idea that a state or municipality could change pension contribution requirements—in the middle of an employee's career—was shocking.... Now we're about to see the next level of state and municipal pension warfare: changes in benefits for those already retired.... The Pension Benefit Guaranty Corporation guarantees corporate pensions—up to a limit.... But the PBGC does not guaran.tee state or municipal pension plans! And that's the crux of the state and municipal pension wars. State taxpayers have to come up with the money to fund the pensions—at the expense of other state expenditures for things like education, social services, and infrastructure." (Chicago Sun-Times)

[Opinion]

Public Workers Shouldn't Be Forced Into 401(k)s
"But, despite the difficult economy and investment environment, the California Public Employees Retirement System (CalPERS) earned an average of 8.4 percent interest annually on its investments in the 20 years between 1991 and 2011. It's proven a solid, successful system that can weather economic storms, thanks to its diverse array of investments and focus on the long term. So why do rumors persist that a pension overhaul being debated and discussed in the state Legislature will shape CalPERS into a more 401(k) like system? And why are there celebrations in San Diego and San Jose, where pension reform measures passed on the ballot will prove to be a loss for middle-class workers and for those local economies? If retirees—and our economy—are forced to rely on 401(k)-quality performance, the outlook for California is bleak." [The author is president of the Los Angeles Police Protective League, which represents 9,900 LAPD officers.] (Long Beach Press Telegram)

[Opinion]

Highway Bill Includes Good News and Bad News for Pension Plan Participants
"[The Pension Rights Center is] concerned that giving employers a pass from making contributions in today's low-interest economy might exacerbate the problem of underfunded plans. This decision should have been made on its own merits and not in the context of revenue-raising. There is, however, one bright spot in this legislation: to help protect workers and to provide more balance to the bill, Congress included one of the Pension Rights Center's long-time priorities -- the establishment of a new Participant and Plan Sponsor Advocate at the Pension Benefit Guaranty Corporation[.]" (Pension Rights Center)

[Opinion]

Statement of Business Roundtable on Pension Stabilization Provision in Transportation Bill
"'Characterizing the PBGC as a 'premium' does not change the fact this is a new tax on businesses ... This will amount to an unnecessary cost to employers at a time when the PBGC has said it will be able to guaran.tee benefits for the foreseeable future.' The PBGC stated in a November 2011 report that there is no chance it will run out of money before 2020, and its financial position would improve for the following 10 years. The provision would increase PBGC premiums by approximately $9 bil.lion." (Business Roundtable)

[Opinion]

Text of Speech by SEC Commissioner to National Association of Public Pension Attorneys: 'Pension Funds as Owners and Investors: A Voice for Working Families'
"State and local government employee retirement funds had total financial assets of $2.8 tril.lion at the end of 2011. This immense pool of capital is funded by employee contributions, employer contributions, and investment earnings. A majority of such funds is invested in the stocks and bonds of U.S. corporate issuers, with substantial investments also made in venture capital and private equity funds and other asset classes. These investments make public pension funds a significant source of capital for American business. Importantly, another benefit of pension fund capital is that pension funds typically invest with a long-term perspective. This 'patient capital' is essential for true capital formation and an important contribution to stability in a capital markets environment that is often all too focused on quarterly returns." (Commissioner Luis A. Aguilar, Securities and Exchange Commission)

Benefits in General; Executive Compensation

Proposed Tightening of Section 83 'Substantial Risk of Forfeiture' Rule Could Mean Changes for Other Deferred Comp Rules (PDF)
"The definition of 'substantial risk of forfeiture' for purposes of the deferred compensation rules in Code Section 409A, although broader than the definition under Section 83, also provides, in part, that compensation is subject to a substantial risk of forfeiture if the right to the deferred amount is conditioned on either the performance (but not the refraining from performance) of substantial future services (i.e., a length-of-service requirement) or the occurrence of a condition related to the purpose of the compensation (e.g., a performance requirement) and the possibility of forfeiture is substantial.... Although its position is unknown at this point, the IRS ultimately may expand the regulations for Sections 409A and 457(f) to mirror the positions in the proposed Section 83 regulations." (Buck Consultants)

IRS Proposes Regs to Allow Local Lodging Deduction
"Whether local lodging expenses paid or incurred in carrying on a taxpayer's trade or business as an employee are deductible depends on the facts and circumstances, one of which is whether the expense is incurred to satisfy a bona fide requirement imposed by the employer. Prop. Regs. Sec. 1.162-31(b) contains a safe harbor (and numerous examples illustrating the safe harbor) allowing a deduction for expenses for local lodging to attend business meetings and conferences[.]" (Journal of Accountancy)



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