Plan Administrator/ Analyst
for PlanTech, LLP in AL

DB/DC Pension Administrator
for Feldman Benefit Services, Inc. in NJ

Vice President, Business Development
for Prudential in CT

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IRA Amendments: Ready, Set, Whoa!
Nationwide on August 8, 2012 presented by Convergent Retirement Plan Solutions, LLC

CFDD

 

[Guidance Overview]

What To Do with the Plan-Level Fee Disclosures by Service Providers (PDF)
"The plan fiduciaries must be satisfied that they have received the disclosures from all covered service providers who are required to provide the information. The fiduciaries must read, understand, and evaluate the information in order to determine that the fees identified in the disclosures are reasonable and that the services being provided and paid for are appropriate and necessary for the administration of the plan. This does not mean that every plan should pay the lowest possible amount for services, but rather that the fiduciaries must determine that the fees being paid are reasonable with respect to the quality of necessary services being provided." (Bryan Cave)

Retirement Plan Professionals: Attend the ASPPA Annual Conference   [Advert.]

Get ready for what lies ahead for the retirement plan industry in 2012 by attending The 46th ASPPA Annual Conference: Attend more than 70 interactive sessions on hot topics shaping the industry & network with over 1,500 retirement plan professionals.

Two More Truths About Public Employee Pensions
"[T]he main reason we reached this level of underfunding is because states failed to top up their pension plans, relying heavily on investment gains to get them back to a fully funded status. Now that pension myths are confronting reality, hard choices lie ahead.... [To the Five Truths cited in a recent Huffington Post article, the author adds] 6) US states need to consolidate public pensions and introduce major governance reform to bolster public pension plans.... 7) Well governed defined-benefit plans are infinitely better than any defined-contribution plan." (Pension Pulse)

Local Government Bankruptcies Could Result If Unions' Challenge to Rhode Island Public Pension Plan Succeeds
"Rhode Island Treasurer Gina Raimondo championed an overhaul last year of one of the nation's worst-funded public pensions, setting out a road map for states and cities by curbing benefits and delaying retirements. Now the revamp, which took effect this month, is facing a legal challenge from unions. If successful, the lawsuit could produce fiscal 'devastation' by spurring more municipal bankruptcies in a state already on the verge of falling back into recession, according to Raimondo, a 41-year-old Democrat. While the court action may take months or years, it's being closely watched as it may provide guidance in other states where similar legal battles have arisen ... Rhode Island is also unusual because, unlike in California, where court rulings have sided with labor to protect benefits, there is little precedent to guide the outcome[.]" (Bloomberg)

Pension Reform Seeks Pension Funding Stabilization, Higher PBGC Premiums
"Although employers that choose to apply the new interest rates will have smaller minimum funding contributions for the next several years, contributing less to DB plans can create other issues, such as higher PBGC variable rate premiums and significantly higher minimum funding contributions in future years." (Employee Benefit News)

Maybe 'Time Is On My Side' for the Rolling Stones, But Not Most Baby Boomers
"Prior to 2008, many baby boomers assumed they were set for retirement. They would fund those golden years by tapping into their homes if they hadn't saved enough in their 401(k) plans. But home equity no longer looks like a safe Plan B for a fast-growing group of pre-retirees and seniors. About 3.5 mil.lion homeowners are underwater on their mortgages, meaning they owe more than their properties are worth ... The rate of foreclosures is lower for homeowners under age 50, while the 50+ population experienced a much higher rate of growth in foreclosures from 2007 to 2011." (Reuters)

401(k) Plans, International Plan Compliance Among 'Hot Issues' for IRS
"The 401(k) plan compliance area and international issues are among the top priorities for IRS Employee Plans Examinations (EP Exams), Monika Templeman, director, EP Exams, said [at a recent conference] ... In 2010, the Employee Plan Compliance Unit (EPCU) sent out a comprehensive questionnaire to approximately 1,200 401(k) plan sponsors. 'The questionnaire was so comprehensive that it actually is a really good review of the issues that can be raised in 401(k) plans,' said Rhonda Migdail, EP Technical Guidance and Quality Assurance, IRS Office of Employee Plans.... The EPCU sent letters to eight specific geographic areas across the world and found that there is a lack of understanding concerning the need to pay tax on worldwide income, specifically for early distributions subject to the tax." (Wolters Kluwer Law & Business / CCH)

Retirement Plan Communication in an Auto Features World (PDF)
"Findings indicate that the evolution of communications has not kept pace with the evolution of plan design. In fact, the more automatic features organizations have implemented, the more strongly they believe participant communication has not evolved accordingly. Compared to plan sponsors who have implemented only one automatic plan feature, those who have implemented the complete bundle of all three auto features are 56% more likely to feel that communication strategies have not kept pace with the evolution in plan design. That said, plan sponsors are divided as to whether, or how much, communication should be retooled for plans with auto features in place." (Lincoln Financial Group and Retirement Made Simpler)

Five Ways the Recession Changed 401(k) Plans
"Until 2007, 401(k) participants had been gradually improving upon each of these behaviors. But that progression stopped during the recession, and in some cases even reversed. Here is how the recession impacted 401(k) plans: Account balances declined.... Less saving.... Lower participation.... Less risky assets.... More borrowing and early withdrawals." (U.S. News & World Report)

Most Workers Continue 401(k) Savings; Most Unemployed Withdrawing
"The percentage halting contributions was only slightly lower than in the first quarter of 2010 when it was 1.1%, according to the study, Defined Contribution Plan Participants' activities, First Quarter 2012. Likewise, the withdrawals from defined contribution plans for the first quarter remained at 1.2% of participants, the same level as the previous year. Only 0.4% took hardship withdrawals during this time, the same as in the first quarter of 2011. Loan activity edged down slightly with 17.9% of participants having outstanding loans compared to 18.4% at the end of 2011. This is still above the 15.3% who had outstanding loans at the end of 2008." (Financial Advisor)

Poverty Rates Rising for Older Americans Without DB Plans
"The percentage of households with members in DB plans dropped to 43% in 2010 from 48% in 2006. If those households had no DB income, there would be 4.7 mil.lion more households classified as poor or near-poor, in 2010, or 39% more than in 2006. 'Near poor' is defined as up to 200% of the federal poverty level. In 2010, the poverty level was $10,458 for a single elderly household and $13,180 for two people." (Pensions & Investments)

Socially Responsible Investment Not Necessarily Wise Addition to Federal Employees' Thrift Savings Plan
"Giving Thrift Savings Plan [TSP] beneficiaries a socially responsible investment option would present challenges for TSP's current stock portfolio, according to a new report.... The hypothetical addition of a fund tracking the best-performing U.S.-based SRI stock index did not increase TSP's returns and lower volatility at the same time. Such an addition would overlap with TSP's existing stock portfolio and would not provide a substantial opportunity for additional portfolio diversification, GAO found." (GovExec.com)

DC Plan Participants Stay the Course
"The vast majority of defined contribution plan participants continued to sock away money for their retirement in the first quarter of the year, according to the latest quarterly report from the Investment Company Institute.... Just 1% of the plan participants surveyed stopped contributing to their DC plan accounts, unchanged from the year-ago quarter. Also unchanged: the percentage of participants who took withdrawals. In the first quarter, 1.2% took withdrawals, with 0.4% taking hardship withdrawals." (Financial Planning)

Retirement Security Data Brief: Retirement Plan Assets
"The retirement savings of American households took a big hit when the stock market crashed in 2008. Since then, however, a good portion of these losses has been reversed. This fact sheet reports the value of assets held in retirement accounts and defined benefit plans and how they have changed since 2007—before the stock market crash and the Great Recession." (Urban Institute)

The IRA Investor Profile Traditional IRA Investors' Withdrawal Activity, 2007 and 2008 (PDF)
"Fewer than one in five traditional IRA investors took withdrawals in any given year.... Withdrawal activity increased with investor age, in part reflecting the rules that govern traditional IRA distributions.... Lower-income traditional IRA investors were more likely to have taken withdrawals, compared with higher-income traditional IRA investors.... Traditional IRA withdrawal amounts tended to rise with investor age through age 64, before falling off among older investors.... Younger traditional IRA investors taking withdrawals tended to withdraw less than $6,000, but the withdrawals often were the majority of the account." (Investment Company Institute)

CFP Board Announces New Guidelines for Disciplinary Sanctions
"Certified Financial Planner Board of Standards, Inc. ... announced that its Board of Directors has approved the organization's first-ever Sanction Guidelines, which will be used by the Disciplinary and Ethics Commission and staff when determining sanctions for particular CFP Board violations.... The Sanction Guidelines identify the sanction guideline for violations of the Standards of Professional Conduct and policy notes for the DEC to consider when imposing the appropriate sanction. However, the DEC is not bound by the Sanction Guidelines, which are intended, along with anonymous case histories, to guide the DEC in its decision making." (Certified Financial Planner Board of Standards)

Adding a Socially Responsible Index Fund to the Federal Employees' Thrift Savings Plan Presents Challenges
"When compared to the past performance of the [Federal employees' Thrift Savings Plan (TSP)] stock portfolio, the addition of a hypothetical [socially responsible investment (SRI)] index fund tracking the best-performing U.S.-based SRI stock index would not have both increased returns and lowered volatility in any allocation scenario that GAO tested. Specifically, over the last 20 years, if TSP had included such an SRI index fund in its existing stock portfolio, it could have resulted in (1) lower returns and lower volatility, (2) lower returns and higher volatility, or (3) higher returns and higher volatility, based on GAO's analysis of evenly distributed portfolio allocations." (U.S. Government Accountability Office)

The Retirement Crisis and a Plan to Solve It: Introducing 'USA Retirement Funds' (PDF)
"By ensuring that every American has access to a retirement plan at work and making participation automatic, we can drastically reduce the retirement income deficit and promote retirement security.... Because USA Retirement Funds would be licensed and overseen by a board of trustees, employers would not have any fiduciary responsibilities in selecting, administering, or managing the funds. Employers' only obligation with regard to the USA Retirement Funds would be to automatically enroll employees, ensure that employee contributions are processed, and make modest contributions.... USA Retirement Funds are intended to supplement, not supplant, DC Plans. Employers could certainly offer both a USA Retirement Fund and a DC Plan for their employees." (Sen. Tom Harkin, Chair of Committee on Health, Education, Labor and Pensions)

[Opinion]

Pension Rights Center Applauds Senator Harkin for Bold Proposal to Solve Nation's Retirement Crisis
"Today the Pension Rights Center applauded Senator Tom Harkin, chairman of the Senate Health, Education, Labor, and Pensions Committee, for his new report, The Retirement Crisis and a Plan to Solve It. 'Senator Harkin's bold report identifies the causes of the retirement crisis and proposes imaginative and realistic solutions to the address the crisis,' said Karen Friedman, the Center's executive vice president and policy director.... The Senator's proposal for USA Retirement Funds, a new system of privately-run pension plans, requires that individuals who are not covered by an employer-sponsored retirement plan be automatically enrolled in regulated privately-run retirement funds, in which ... [i]nvestment and life-expectancy risks would be shared by employees and retirees; and [t]he administrative burden on employers would be limited to ensuring that contributions are transmitted to the funds." (Pension Rights Center)

[Opinion]

Increase in Tax on Dividends Means Reduction in Asset Value for Most Retirement Plans and IRAs
"While it may not seem obvious to most of us that an increase in the dividend tax rate would affect 'tax-deferred' retirement accounts, it absolutely will. This is because dividend taxation occurs in taxable brokerage accounts. Since IRAs, 401(k) and other retirement accounts consist of mostly stock mutual funds, these shares are priced to reflect their after-tax value to investors, which ultimately is reflected in the value of retirement accounts for senior citizens and others.... [T]he dividend tax rate would nearly triple! The impact on retirement accounts would be very significant indeed. Whether you hold stock in a taxable brokerage account or a retirement plan, the sharp tax increase means that stock prices will be negatively affected." (Tallahassee.com)

[Opinion]

GM Retirees' Dilemma: Pension or Buyout
"The former General Motors white-collar employees have been given a choice between a lump sum payout of their retirement account or a guaran.teed monthly annuity check for the rest of their lives. According to recent published accounts, there is much agonizing over which lever to pull. Anxiety caused by analysis-paralysis is being replayed across all of big-company America as the baby boomer bubble moves into retirement. Corporations see this as a way to rid themselves of the loose cannons on their decks -- their underfunded pension plans." (Silicon Valley MercuryNews)

[Opinion]

Five Truths About Public Employee Pensions
"The debate over public pensions and retiree health benefits is vital ... However, Harold Schaitberger's recent piece misrepresents ... the realities facing state and local governments. Here are five truths about state and local pensions. 1) Public pension funds face real funding challenges in a majority of states.... 2) The funding gaps have real impacts on taxpayers and states' budgets.... 3) Policy makers must be responsible stewards of their pension plans.... 4) There are no simple fixes.... 5) States need to make sure retirement benefits are there for retirees and affordable for taxpayers." (The Huffington Post)

[Opinion]

Text of Letter from Sen. John Kerry to DOL Regarding Q&A-30 in FAB 2012-02 (PDF)
"[Sen. Kerry writes to express his concerns] about Q&A-30 of the recently issued Field Assistance Bulletin 2012-12 and to request that [the DOL[ consider withdrawing Q&A-30 and instead pursue this issue in the traditional context of a formal rule-making.... [The Senator's] concern is that Q&A-30 ... does not provide interpretive guidance with respect to the disclosure regulations, but instead sets forth new rules that were not previously contained in any guidance issued by the Department." (American Benefits Council)

[Official Guidance]

Listing Standards for Compensation Committees and Disclosure Regarding Compensation Consultant Conflicts of Interest: A Small Entity Compliance Guide
"This guide was prepared by the staff of the U.S. Securities and Exchange Commission as a 'small entity compliance guide' under section 212 of the Small Business Regulatory Enforcement Fairness Act of 1996, as amended (SBREFA).... Small entities that have equity securities listed on an exchange and that are not smaller reporting companies would generally need to comply with any new standards adopted by the exchange pursuant to Rule 10C-1 if they wish to maintain their listing on the exchange." (Securities and Exchange Commission)

Employee Stock Plans 2012: Mid-Year International Reporting Requirements
"This Commentary highlights some of the principal mid-year reporting requirements for employee stock plans that U.S. companies most commonly encounter when offering these programs to their employees in selected jurisdictions worldwide. A chart summarizing these items appears at the end of this Commentary." (Jones Day)

Amicus Brief of American Benefits Council and Four Others Supporting Deference to Plan Administrators on Interpretation of Plan Provisions (PDF)
"This case—which has now been to this Court three times and to the U.S. Supreme Court once—raises issues of grave concern to amici and their members.... Contrary to the principle of deference that has long prevailed in this area, plaintiffs and their amicus seek to replace the construction of the Plan given by the Plan Administrator with the views of individual ERISA Plan participants; they claim insubstantial 'conflicts' that could be asserted with respect to virtually any ERISA plan; they attempt to ignore the Plan's content based on disclosure documents; and they claim entitlement to a remedy with no basis in the governing statutory and equitable standards.... If a plan administrator's construction can be denied deference based on the considerations plaintiffs and their amicus raise, it is hard to imagine a case where deference would apply." [Conklin v. Frommert, 2nd Cir.] (ERISA Industry Committee, the American Benefits Council, the Chamber of Commerce of the United States of America, and the Business Roundtable)

EBSA Announces 162nd Meeting of the Advisory Council on Employee Welfare and Pension Benefit Plans (PDF)
"The three-day meeting ... will run from 9:00 a.m. to approximately 5:30 p.m. on August 28 and 29 and from 8:30 a.m. to approximately 4:30 p.m. on August 30, with a one hour break for lunch each day. The purpose of the open meeting is for Advisory Council members to hear testimony from invited witnesses and to receive an update from [EBSA]. The Advisory Council is studying the following issues: (1) Managing Disability Risks in an Environment of Individual Responsibility; (2) Current Challenges and Best Practices Concerning Beneficiary Designations in Retirement and Life Insur.ance Plans; and (3) Examining Income Replacement During Retirement Years in a Defined Contribution Plan System." (U.S. Department of Labor, EBSA)

Employer Rules for Withholding the New 0.9% Medicare Tax
"The statue requires employers to withhold the additional Medicare tax on wages it pays to an employee in excess of $200,000 beginning in 2013. The employer's withholding obligation arises even though an employee may not actually be liable for the additional Medicare tax because, for example, the employee's wages or other compensation together with that of her spouse (when filing a joint return) does not exceed $250,000." (PriceWaterhouseCoopers)

Employer 'Mistake' Leads to FMLA Retaliation Claim
"[The employee] was led to believe that she had coverage under FMLA when county officials mistakenly told her that she qualified for 'family care' leave after three months of continuous employment. The district court denied the county's motion to dismiss Medley's FMLA retaliation claim, quoting a [5th Circuit decision] which held that 'an employer who ... makes a definite but erroneous representation to his employee that she is an "eligible employee" and entitled to leave under the FMLA, and has reason to believe that the employee will rely upon it, may be estopped to assert a defense of non-coverage' if the employee reasonably relied on the misrepresentation to her detriment." [Medley v. County of Montgomery, No. 12-1995 (E.D. Pa, July 16, 2012.)] (Thompson SmartHR Manager)

DOL Obtains Judgment to Restore Funds to Employee Benefit Plans of Indiana Construction Company
The DOL had alleged that employee contributions and loan repayments were withheld from the salaries of employees of Trotter Construction Company, Inc. and Trotter Development Group, NC, LLC, and were not remitted and not timely remitted to the 401(k) Plan. Further, the DOL had alleged that the companies withheld and failed to remit employee premium contributions to the Trotter Group Health Plans. During the course of the investigation, the defendants restored $16,705.99 to Trotter Construction Company, Inc. 401(K) Plan participants and $3,161.28 to participants of the Trotter Group Health Plans. The court ordered the defendants to restore an additional $269.28 in lost opportunity costs to participants of the Trotter Construction Company, Inc. 401(k) Plan; and an additional $19,236.33 to the Trotter Health Plans for the welfare benefit plan premiums that had been withheld from participants' payroll but had not been remitted to the plan providers, and lost opportunity costs on those premiums. [Solis v. Trotter, S.D. Indiana (No. 11-cv-00881)] (Employee Benefits Security Administration)

Employee Benefits in Private Industry and State and Local Government, March 2012
"In March 2012, among workers in private industry, medical care benefits were offered to 41 percent of workers in service occupations and 87 percent of workers in management, professional, and related occupations. In private industry, medical care benefits were offered to 24 percent of part-time workers and 86 percent of full-time workers. Twenty-three percent of part-time workers had access to paid sick leave, compared with 75 percent of full-time workers." (U.S. Bureau of Labor Statistics)

Benefit Cost Concepts and the Limitations of Employer Costs for Employee Compensation Measurement
"Although [Employer Costs for Employee Compensation (ECEC)] has many uses, of which comparing relative compensation costs among benefit categories is not the least among them, those hourly costs can be, on average, much lower than what an employer pays when providing access to the benefit—access costs—or when workers with access actually participate in a benefit plan—participation costs. This article demonstrates how the ECEC benefit cost statistics and the [National Compensation Survey] benefit incidence statistics can be used together to obtain measures of benefit costs that reflect differences in the incidence of benefits. Specifically, benefit access rates can be applied to ECEC benefit cost statistics to obtain a measure that shows how offering access to a benefit might affect the employer's hourly labor costs. Similarly, participation rates can be applied to the ECEC benefits data to obtain a measure of the average benefit cost per participant." (U.S. Bureau of Labor Statistics)

New GASB Analyst Guide to Governmental Financial Statements
(Governmental Accounting Standards Board (GASB))

Guardian Launches Two New Voluntary Benefit Offerings
(Guardian)