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July 10, 2012 Get Health & Welfare News  |  Advertise  |  Unsubscribe  |  Past Issues  |  Search

Employee Benefits Jobs

ERISA Attorney
for The Benefit Practice in CT

Sr. Retirement Benefits Specialist
for Recology in CA

Conversion Analyst
for Pension Corporation of America in OH

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Webcasts and Conferences

401(k) Rekon Advisor Symposium - Plano
in Texas on August 7, 2012 presented by 401(k) Rekon

401(k) Rekon Advisor Symposium - Raleigh/Durham
in North Carolina on August 9, 2012 presented by 401(k) Rekon

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[Official Guidance]

Text of IRS Notice 2012-47: July 2012 Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates (PDF)
IRS-updated figures for pension plan administration as prescribed by Code sections 412, 417, 430 and 431. (Internal Revenue Service)

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[Guidance Overview]

Pension Funding Relief and PBGC Premium Increases in Final Highway Legislation (PDF)
"For the past six months or so, the business community has lobbied for targeted changes to the Pension Protection Act's (PPA's) minimum funding rules (and benefit restrictions) to adjust for periods of abnormally low or extremely high interest rates so as to remove the distortions caused by the current low interest rate environment. The final highway bill includes a rule that would adjust the relevant interest rates for any period to the extent that the rate for that period is not within a specified range of the average 'segment' rates for the preceding 25-year period (ending September 30 of the calendar year before the calendar year in which the plan year begins)." (Groom Law Group)

[Guidance Overview]

Pension Interest Rate Stabilization, PBGC Premium Increases in New Law
"For many single-employer pension plan sponsors, MAP-21 will sharply reduce required contributions for plan years beginning in 2012. Plan sponsors intending to minimize current contributions should work closely with their actuaries as future years' contributions can be expected to increase significantly as the effect of the corridor wears off. The new law also is expected to significantly raise a plan's funded ratio in 2012 and allow many plans to avoid various restrictions on benefits[.]" (Milliman)

[Guidance Overview]

The Impact of the Final 408(b)(2) Regulation on TPAs
"The cover story [in the summer issue of Plan Consultant magazine], by Joseph Faucher, Bruce Ashton, and Fred Reish, is all about what TPAs need to know about 408(b)(2), the new, final disclosure regulations the industry has been anxiously awaiting for months. It's an important topic, something that will have a discernible impact on most retirement plan professionals from recordkeepers to advisors." [To view the story, click on its title, which you'll see in the text of the linked article.] (American Society of Pension Professionals & Actuaries)

Termination of Delphi Pension Plans: Text of GAO Testimony to Subcommittee on TARP, Financial Services and Bailouts of Public and Private Programs, House Committee on Oversight and Government Reform (PDF)
"The Delphi Corporation was a global supplier of mobile electronics and transportation systems that began as part of GM and was spun off in 1999. Delphi filed for bankrup.tcy in 2005, and in July 2009, PBGC terminated Delphi's six defined benefit pension plans and assumed trusteeship of the plans. Because of the resulting differences in participant benefits, questions have been raised about how PBGC came to terminate the plans, whether treatment for certain Delphi workers was preferential, and the role of Treasury in these outcomes. GAO's testimony describes key events related to the termination of Delphi pension plans and the reasons for GM providing retirement benefit supplements to certain Delphi employees, and Treasury's role in those events." (U.S. Government Accountability Office)

10-Minute Enrollment: Scaling Back Meeting Content to Drive Higher Enrollment Rates
"Traditional enrollment meetings are typically scheduled in 45- to 60-minute blocks, with time allotted to suitably review an employer's retirement savings plan, including eligibility rules, employer match formulas, loan availability-even distribution options. During this comprehensive review of plan benefits, enrollment can become a secondary focus, and as a result, the objective of enrolling employees is not always achieved.... [H]igher success rates ... occur when enrollment meetings are shortened to 10 minutes—focused only on why employees should be in the plan, not on a comprehensive review of plan benefits. Subsequent targeted communications can address the retirement savings needs of specific employee segments, and are most effective when they get the right message to the right person at the right time." (Diversified via 401kHelpCenter.com)

What Happens to Your Target-Date Fund When You Retire?
"Even investors who are clear on what target-date funds can and cannot do might be fuzzy on the logistics of how these funds work.... [D]ifferent target-date series take different tacks when funds reach their target dates. Some fund companies convert the assets to a retirement-income fund at the target year, while others do so years after the target date is reached. Still others maintain the assets in the original fund and keep the same name, even if the target date has passed." (Morningstar)

Greying China Could Be Left in the Red
"The number of Chinese aged 60 or over may more than double to 438 mil.lion between 2010 and 2050, according to the United Nations.... A higher retirement age is one idea proposed by the country's State Council to counter a huge pension fund shortfall.... Chinese pensions don't seem high in absolute terms, but they are reasonably generous relative to salaries. An average pensioner in Beijing receives $360 a month, half of the average working wage in the city, according to official figures. To fund pensions, employees contribute 8 percent of their pay to the pension pool, and employers contribute another 20 percent. And people can retire young—women as early as age 50. That means they can easily receive their pension for more years than they work." (Reuters)

IRS Proposes Rules to Help Retirees Make 401(k) Payments Last Longer
"Even if they've been diligently socking away money in their 401(k) plans, employees who are about to retire are no doubt nervous about their financial futures.... Believe it or not, the IRS wants to help. The [IRS recently] proposed guidance [that] seeks to allow employers to offer soon-to-be retirees a wider range of choices with regard to how they receive their 401(k) retirement benefits." (Business Management Daily)

How 401(k) Plan Sponsors Can Best Teach Employees to Quit Emphasizing Income
"[W]hy do two popular 401k options encourage investors to invest for income when most fiduciaries know (or should know) of the dangers of doing so? It seems older investors still hang their hat on the 'spend the income, preserve the capital' adage of their Depression-Era parents and grandparents while younger investors have 'tuned-out' of long-term investing altogether. A 401k plan sponsor who merely follows the wants of his naive employees tempts the fate of fiduciary liability." (Fiduciary News)

Why Americans Won't Day-Trade Their 401(k)s
"[D]ay-trading retirement funds is extremely unlikely to actually become a Thing. People just don't have the time or the self-discipline to do something like that—especially once you find out what's involved. Because most 401(k) plans deliberately make it very difficult to do this kind of thing, these plans can only really be put into effect if you have two or even three accounts to trade. And if this kind of activity catches on, chances are the fund administrators will put an end to even the existing loopholes. These accounts are designed for buy-and-hold retirement funds, not for trading." (Reuters)

Alternative Assets Tracked in 'Global Alternatives Survey, 2012'
"The Global Alternatives Survey ... follows trends in the investment of alternative assets by institutional investors around the world and provides authoritative rankings of investment managers in the main alternative asset classes. In previous years these included real estate; private equity fund of funds; fund of hedge funds; infrastructure and commodities but now, in its ninth year, also includes direct hedge fund and private equity managers. In the past the report focused exclusively on pension funds' use of alternatives assets, but now includes data for Sovereign Wealth Funds, Insurers and Endowments & Foundations in an attempt to gauge how various institutional investors are investing in alternative assets." (Towers Watson)

Tax Revenues Mean Uncle Sam Is Winner Under Interest Rate Stabilization Law
"As executives at corporate defined benefit plans figure out whether they gained more than they lost in pension legislation approved by Congress June 29, one clear winner emerges: Uncle Sam. If plan executives take advantage of the bill's longer-term interest rates for calculating pension funding obligations, giving them a chance to save on contributions in the short term, the federal government could see tax revenue increase more than $9 bil.lion over 10 years as tax-exempt contributions dip. Another $9 bil.lion will flow to the Pension Benefit Guaranty Corp. through increased premiums." (Pensions & Investments)

Companies Win Cut in Pension Contributions; Participant Advocates Say Saving the Plans Is Bigger Worry
"A new law will let companies contribute billions of dollars less to their workers' pension funds, raising concerns about weakening the plans that millions of Americans count on for retirement. But with many companies already freezing or getting rid of pension plans, many critics are reluctant to force the issue. Some expect the changes ... to have little impact on the nation's enormous $1.9 tril.lion in estimated pension fund assets. And it is more important, they suggest, to avoid giving employers a new reason to limit or jettison remaining pension benefits by forcing them to contribute more than they say they can manage." (The Washington Post)

Pension Funds Split Over Trimming Risk from the 401(k) Menu
"Trends ranging from target-date funds to behavioral science were supposed to reduce the number of investment options in 401(k) plans, on the theory that people do better if they have professional management, automatic asset allocation and limited choices. Yet sponsors keep piling on the options—to an average of 22 last year, up from 12 in 2001 ... And still employees avoid making investment decisions. So the debate is shifting a bit, as some experts question whether plans are offering enough low-risk selections." (Institutional Investor)

Top 100 Corporate Plans' Funding Falls 2.3 Percent in June
"The combined funded status of the 100 largest U.S. corporate pension plans studied by Milliman fell 2.3 percentage points in June as liabilities continue to mount from a declining discount rate, according to the actuary's monthly report. Related Content stories Milliman: May funding ratio decline wipes out 2012 gains Milliman, UBS reports show corporate DB funding climb Milliman: Investment gains, stable discount rate buoy corporate funded status The funded status as of June 30 was 75.6%, down from 77.9% at the end of May and 78.7% at the end of 2011." (Pensions & Investments)

NASA Offers Buyouts to Goddard Space Flight Center Employees
"NASA will offer buyouts or early retirement packages to 117 employees at Goddard Space Flight Center, according to Federal News Radio.... The Greenbelt, Md., workers will have until July 20 to accept the proposal ... In 2011, NASA offered buyouts to more than 600 employees nationwide." (Government Executive)

Are New Suitability Rules Bridging the Gap Between Suitability and Fiduciary?
"Today marks the first day under FINRA's updated suitability rule. The update is particularly notable for its timing, while we are waiting for a uniform fiduciary standard for broker-dealers and investment advisors and a potential self-regulator for investment advisors, and because of the way the rule seemingly holds broker recommendations to standards more in line with fiduciary standards." (fi360 Blog)


Maryland Pensions Are Mismanaged
"Maryland's pension problems are a legacy of the Glendening administration's mishandling of investments and deferral of contributions, the Ehrlich administration's capitulation to the teachers' unions, and the O'Malley administration's failure to face facts, capitulation to various rent-seekers, and efforts to use risky investments to reach unattainable targets. They are a cumulating drag on the state's ability to provide essential public services and will reach crisis stage when the GASB's new accounting rules become effective and bond rating agencies take note of the magnitude of the Maryland pension deficit." (Baltimore Sun)

Benefits in General; Executive Compensation

Terminated Executives Entitled to Payment Under Equity Awards Due to Problem in Plan Administration
"The US Court of Appeals for the Eighth Circuit held on July 5, 2012 that former executives were entitled to payments under performance share and restricted stock awards, despite their employer's determination that the executives forfeited their awards on their employment termination. The court's holding was based in part on its conclusion that the individual making that determination did not have authority to administer the plans. The decision in Schaffart v. ONEOK, Inc. highlights the importance of carefully drafting plan terms and ensuring that the persons making plan decisions have proper authority to administer the plan." [Schaffart v. ONEOK, Inc., Nos. 10-3862, 11-1062 (8th Cir. July 5, 2012).] (Practical Law Company)

Still More Compensation Limits for Financial Institutions
"The Board of Governors of the Federal Reserve System, the Office of the Comptroller of the Currency, and the Federal Deposit Insur.ance Corporation jointly issued proposed rules that would require all financial institutions to comply with the complicated and severe bank capital standards from the Basel Committee on Banking Supervision to the Basel capital framework ('Basel III'). Unlike some parts of Dodd-Frank (e.g., Section 956), it applies to all financial institutions, regardless of their size. The proposed rules would implement a new capital conservation buffer framework, limiting payment of capital distributions and certain discretionary bonus payments to executive officers and key risk takers if the banking organization does not hold certain amounts of common equity tier 1 capital in addition to those needed to meet its minimum risk-based capital requirements." (Winston & Strawn LLP)

Speakers Ask IRS for Clear Rules, Respect For States in Governmental Plan Rulemaking
"The Internal Revenue Service should avoid asking public retirement system administrators to enforce IRS rules that are unclear, uncertain, and impractical, public pension attorneys told IRS and Treasury Department officials at a regulatory hearing ... aimed at clarifying the definition of 'governmental plan' under Section 414(d) of the tax code ... Public retirement system administrators are most concerned that any IRS rules that would draw a brighter line between governmental and nongovernmental plans be 'clear, certain, and practical[.]'" (Bloomberg BNA)

Annual Statistical Report on the Social Security Disability Insur.ance Program, 2011
"Disability benefits were paid to over 9.8 mil.lion people. Awards to disabled workers (998,980) accounted for over 89 percent of awards to all disabled beneficiaries (1,114,060). In December, payments to disabled beneficiaries totaled about $10.4 bil.lion. Benefits were terminated for 653,877 disabled workers. Supplemental Security Income payments were another source of income for about 1 out of 6 disabled beneficiaries." (U.S. Social Security Administration)

Changes in IRS Nonbank Trustee Program (PDF)
"[As a result of a recent audit by] the Treasury Inspector General for Tax Administration [of] the Internal Revenue Service (IRS) Employee Plans oversight program for nonbank trustees and custodians (NBTs) ... the IRS undertook to ... [s]trengthen its processes for evaluating new applications to serve as an NBT.... [and expand] its audit program for NBTs ... Because the audits revealed a high level of compliance with applicable tax requirements, the Inspector General recommended, and the IRS agreed to consider, reducing the audit resources dedicated to NBTs and shifting them to the regular IRS retirement plans audit program." (Sutherland)

Fourth Circuit Takes Expansive View of Equitable Relief for Plan Participants Against Fiduciaries
"Courts have traditionally interpreted ERISA Section 502(a)(3) as providing a very narrow opportunity for recovery, because the recovery had to be equitable, not legal, in nature; thus, claims for compensatory damages typically have not been not available. In Amara, the Supreme Court opened the door to a more expansive interpretation of 'equitable relief,' specifically including surcharge and equitable estoppel as possible remedies available under ERISA Section 502(a)(3). [In this case over an insur.ance company's denial of benefits for an ineligible dependent mistakenly enrolled in an employer's life insur.ance plan, the participant] argued that the equitable remedies of surcharge as well as equitable estoppel should be available ... to allow monetary compensation caused by MetLife's fiduciary breach. The Fourth Circuit Court of Appeals agreed[.]" [McCravy v. Metropolitan Life Ins. Co., 2012 U.S. App. Lexis 13683 (4th Cir. July 5, 2012).] (Wombyle Carlyle)

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