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for Prudential in NJ

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Retirement Plan Summit 2012 - University of Baltimore - Merrick School of Business
in Maryland on October 12, 2012 presented by University of Baltimore - Merrick School of Business

Retirement Plan Summit 2012 - New York Law School
in New York on September 28, 2012 presented by New York Law School

"Brokerage Accounts and 404a-5: Making Sense of the Rules" Web Seminar
Nationwide on August 9, 2012 presented by SunGard Relius

Pension Factor 2012 Webinar Replay
Nationwide on August 3, 2012 presented by National Institute on Retirement Security

CFDD

 

[Guidance Overview]

DOL Withdraws Q&A-30 on Brokerage Accounts
"What does this mean for plans using brokerage windows? It means that the plan need not try to comply with the 'safe harbor' of Q&A 30. This should vastly simplify the task of providing disclosures to such plans. However, it also means that the DOL remains concerned with participant-directed plans which do not have DIAs (such as a plan that only offers brokerage accounts). It also reminds plan fiduciaries the selection and monitoring of a brokerage window or account provider is a fiduciary act for which the fiduciary is responsible." (SunGard Relius)

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[Guidance Overview]

DOL Reverses Position on Broker Window Investment Disclosures
"In direct contradiction of the participant fee disclosure rule, FAQ 30 [had] required investment-related disclosures if a 'significant number' of participants invested in any one broker window investment. It raised a new fiduciary duty regarding the 'failure to designate a manageable number of investment alternatives.' Finally, it raised significant questions about a duty to monitor brokerage window investments by participants under a prudence standard. FAQ 39, replacing FAQ 30, clearly states that a broker window investment is not a designated investment alternative under the participant fee disclosure rule.... The Department promises to engage in discussions and to undertake rulemaking if it determines that is necessary." (Plan Sponsor Council of America)

[Guidance Overview]

DOL Revises FAQs Clarifying Treatment of Brokerage Windows
"Field Assistance Bulletin No. 2012-02R [1] Clarifies that fiduciaries of plans covered by these rules that offer brokerage windows, self-directed brokerage accounts or similar arrangements are not required to treat these arrangements as designated investment alternatives (DIAs) requiring disclosures to plan participants where the underlying investment funds are not designated as DIAs by the plan.[2] Cautions that a plan fiduciary [who] fails to designate investment alternatives to avoid disclosures under the regulation may raise fiduciary duty questions under ERISA Section 404(a) ... [and is] still bound by ERISA Section 404(a)'s statutory duties of prudence and loyalty to participants and beneficiaries who use the arrangement, including monitoring the 'nature and quality of services provided in connection with the [arrangement].'" (Practical Law Company)

Labor Department Drops Brokerage Window Provisions
"The DOL clarified that brokerage windows are not considered designated investment alternatives and that the regulation doesn't prohibit the use of these brokerage accounts. The agency said that plan fiduciaries, however, still have a duty of prudence and loyalty to participants who use the brokerage window—including taking into account the nature and quality of services provided." (Pensions & Investments)

Pension Deficits Account for 4.8% of Market Value for European Multinationals
"New data issued by Mercer has highlighted the scale of pension risk facing multinationals in Europe. According to the consultancy, while corporate earnings have increased since 2008, Defined Benefit ... pensions are still causing a significant dilution of company earnings and are now larger relative to market capitalisation than in 2006. Pension expense now accounts for around 10% of earnings and pension deficits represent 4.8% of market cap in 2010/11 compared to 2.9% in 2007/8." (Mercer)

Police, Fire Disability Fund Can't Recoup Overpayments by Withholding Cost-Of-Living Increases
"A Multnomah County [Oregon] judge has ruled that Portland's public safety disability fund can't recoup the nearly $3 mil.lion that the fund mistakenly overpaid in pension benefits to retirees by withholding cost-of-living increases. Multnomah County Circuit Judge Henry C. Breithaupt, a former tax lawyer, has found that such a withholding violates Oregon wage laws. His decision stems from a class action suit brought by five police and fire beneficiaries." (The Oregonian)

Updating Your Retirement Savings Calculations
"Before you worry about which mutual funds are best for you, focus on the act of saving. Choose to spend some quality time selecting the right contribution amount for now and developing a long-term saving strategy that involves future contribution increases." (U.S. News & World Report)

Experts Advise 401(k) Plan Sponsors on 408(b)(2) Fee Disclosure Template
"[I]n some cases, the 408(b)(2) fee disclosure has only confused 401k plan sponsors.... Quite a few experts fear the DOL may have 'missed the boat.' 'Every report is different. The goal of fee disclosure was to compare apples-to-apples,' explains [a consultant] ... In promulgating the Rule, the DOL initially promised to offer a disclosure template. That never materialized, and service providers were left to their own creativity." (Fiduciary News)

Changing Gears: GM's Pension Risk Transfer Strategy Gains Traction (PDF)
"General Motors has received significant press coverage since early June about their decision to implement a sizeable pension risk transfer strategy. This event occurred as most defined benefit pension Plan Sponsors were seeking to control cash contribution and financial statement volatility amidst a challenging legislative and accounting change backdrop. Plan Sponsors face three primary obstacles in their quest to control this volatility: (1) low interest rates; (2) volatile capital markets; and (3) demographic uncertainties. The GM decision indicates that some Plan Sponsors are now willing to pay a premium to reduce this uncertainty." (CAPTRUST Financial Advisors)

Federal District Court Finds ERISA Plans Invested with Madoff Not Covered by Securities Investor Protection Act
"If you've been wondering about whether the qualified plans invested with Bernard L. Madoff Investment Securities LLC would be able to recover some of their losses through the $500,000 maximum made available by the Securities Investor Protection Act of 1970 (SIPA) to customers of failed brokerage firms, the U.S. District Court for the Southern District of New York has answered 'no' in an opinion issued on July 25, 2012.... The Court reasoning was that because assets in an ERISA-regulated plan are held and owned by the plan's trustees, and not by the participants, the participants could not pursue recovery as a 'customer' under SIPA." (The Pension Protection Act Blog)

ERISA Plans Given More Time to Comply with Swap Clearing
"The Commodity Futures Trading Commission (CFTC) is adopting regulations to establish a schedule to phase in compliance with the clearing requirement under new section 2(h)(1)(A) of the Commodity Exchange Act (CEA) ... As previously proposed, a swap between two Category 1 Entities must comply with the clearing requirement no later than 90 days after the publication of the clearing requirement determination in the Federal Register. A swap between a Category 2 Entity and a Category 1 Entity or another Category 2 Entity must comply within 180 days, and all other swaps must be submitted for clearing no later than 270 days after the clearing requirement determination is published in the Federal Register. Category 2 Entities previously included employee benefit plans under ERISA, but under the final rule, these plans will not be included in Category 2." (PLANSPONSOR.com)

Is It Time to Consider a Cash Balance Plan?
"Compared to the hundreds of thousands of 401(k) plans in existence, cash balance plans remain a relative drop in the bucket. According to the 2012 National Cash Balance Research Report published by Kravitz Inc., the number of cash balance plans increased 21% last year. The most recent IRS data from 2010 shows 7,064 active cash balance plans. Just ten years ago in 2001, that number was 1,337. However, the report found that growth of cash balance plans continues to outpace the growth in any other type of retirement plan." (Business Finance)

Are Advisors Making All the Wrong Moves When Preparing Clients for Retirement?
"'The paradigm needs to shift: the whole idea of a balanced portfolio with asset allocation—modern portfolio theory—with systematic withdrawal is nuts,' says Erin Botsford, a financial planner and author of 'The Big Retirement Risk: Running Out of Money Before You Run Out of Time.' 'That's the way people have been doing business for 40 years. That all works when the markets go up, but it falls apart when the markets fall flat or go down. I think as financial advisors, we put our clients at huge risk when we continue to operate that way,' she said." (On Wall Street)

New Jersey Lawmakers Approve Law to Overcome State Supreme Court's Ruling Exempting Judges from Pension Reform
"New Jersey lawmakers voted on Monday to change the state constitution, in a swift retort to a decision by the state's Supreme Court that judges were exempt from last year's pension reform. The resounding bi-partisan approval by both houses of the legislature allows the measure to be put before voters in November. If approved by voters, the change would clarify that the legislature has the authority to pass laws that take amounts from judges' salaries to put toward their benefits." (The New York Times; free registration required)

Adviser SRO: It Could Be the SEC After All
"An acceptable self-regulatory organization should be accountable to Congress and the public, required by law to be transparent, experienced in performing the task required, economical to operate and free from inherent conflicts of interest. The SEC possesses all these qualities, the Financial Industry Regulatory Authority Inc. none of them." (Investment News; free registration required)

Are Multiemployer Plans Understating Their Liabilities?
"IRS rules require [multiemployer plans] to use actuaries' 'best estimate' of future investment returns to discount their pension liabilities, whereas single-employer plans, which once also used this method, now use IRS published rates based on corporate bond yields. "With my method, the obligation is 30 percent higher," [says David Zion, a highly regarded accounting analyst at Credit Suisse]. And he contends the actuaries' estimates understate multiplans' liabilities because they overstate likely returns, whereas single-employer estimates are closer to the likely mark because their discount rates are more realistic. Yet, he adds, a pension promise is the same no matter who is making it." (Institutional Investor)

Sen. Harkin's Plan to Boost Retirement Savings: Praised and Criticized
"Harkin said workers would be able to access the savings plan and pool their assets through their employers' payroll withholding system. A board of trustees consisting of qualified employee, retiree and employer representatives would oversee the funds. Though the trustees would be acting as fiduciaries, employers wouldn't be held to fiduciary responsibility in choosing, administering or managing the funds. Employers would be responsible only for enrolling workers automatically and making sure employees' contributions are processed." (AARP)

New Pension Funding Interest Rates Require Employer Action
"Although employers who choose to apply the new interest rates will have smaller minimum funding contributions for the next several years, contributing less to defined benefit pension plans can create other issues, such as higher PBGC variable rate premiums and significantly higher minimum funding contributions in future years. Additionally, employers should consider how these changes may impact employee communications and funding and investment strategies." (Bloomberg BNA)

Tips on Investing by Defined Benefit Plans
"At the maximum funding level, the rational portfolio allocation is to be 90-100% in bonds which matches the interest rate sensitivity of the liability. Such an allocation preserves the high level of funding without risking a loss of the hard-earned increases that moved the level of funding so high in the first place. Since [a frozen] the plan eventually should be 90-100% in bonds, then a path from the current portfolio to that final portfolio needs to be mapped. Ideally the path will involve gradual changes in the allocation as the funded status improves rather than a sudden change from no bonds to 100% bonds all at once." (The Vanguard Group, Inc.)

DOL Provides Help for Tardy Vendor Fee Disclosures
"'When efforts to resolve the disclosure failure with their service provider are ineffective, plan sponsors will be able to take advantage of an easy-to-use, online tool that will guide them through the information that must be submitted to the department and provide immediate confirmation that their notice has been received. Of course, plan sponsors who wish to submit a paper notice may continue to do so,' [Assistant Secretary of Labor for EBSA Phyllis C.] Borzi explained[.]" (Society for Human Resource Management)

[Opinion]

Public Pension Plans Rely on Speculative Investment Predictions
"Pension boards, usually dominated by those unions and elected officials, set the rates after obtaining recommendations from actuaries and investment advisers. Unfortunately, these experts, at best, make educated guesses that often prove wrong. Investment shortfalls are part of the reason California taxpayers now owe at least $250 bil.lion—$20,700 per household—for unfunded public pension liabilities across the state. How are these investment forecasts derived?" (Contra Costa Times)

[Opinion]

Is Consolidation of Localized Public Employee Pension Plans Feasible?
"While consolidation [of multiple small local public-employee plans] would most probably be a good thing, it is not something that can be forced by the US Congress, due to states' rights under the Constitution. It will be up to the various state legislatures to accomplish this.... But what is in the best interests of plan sponsors, workers and taxpayers? Here, there is no doubt ... that larger, more transparent and more accountable defined-benefit plans are much better than having hundreds of smaller, dispersed plans all over the place, many of which are badly managed and chronically underfunded." (Pension Pulse)

[Opinion]

Bidwell and the 'Darker Side' of the QDIA
"Markets do go down, and employees tend to trade investments in defined contribution plans at inopportune moments.... ERISA Section 404 demands that the funds be invested in such a way to minimize the risk of large losses, not to optimize gains for adequate retirement. Optimization may be a laudable public policy position, but a fiduciary standard it is not.... But for the QDIA reg granting relief, choosing a default investment fund based on equities could cause fiduciaries some exposure." (Business of Benefits)

[Opinion]

Text of Comments from American Benefits Council to Treasury and IRS Requesting Guidance under Pension Funding Interest Rate Stabilization, Including Addressing Lump Sum Distributions (PDF)
"[O]ne issue dwarfs all others. It is critical that guidance from Treasury and the Service not undo substantially all the effects of funding stabilization for a very large number of plans by modifying the current-law regulatory rules for valuing lump sum distributions for funding purposes. In this regard, we ask for no guidance, since current law works very well. Any different guidance would have a devastating effect on companies across the country, as explained further below, and be directly inconsistent with (1) Congressional intent, (2) the principles underlying the Pension Protection Act of 2006 ... and (3) the principles underlying the final regulations." (American Benefits Council)

Is This Pay Package Good Enough?
"Job-hunting CFOs may have an innate sense as to whether a compensation offer feels right, but how can they know for sure? Here are some tips for getting comfortable with the decision.... [Evaluate the offer] using the following three comparative measures.... external equity, or how the offer aligns with similar-level positions at comparable companies.... internal equity, or how the offer compares to similar-level roles inside the new employer ... personal equity, or what the executive is currently making, if employed, or was making in his or her previous job, if in transition." (CFO)

Employment Cost Index Increased During Second Quarter 2012
"Compensation costs for civilian workers increased 0.5 percent, seasonally adjusted, for the 3-month period ending June 2012, the U.S. Bureau of Labor Statistics reported today. Wages and salaries (which make up about 70 percent of compensation costs) increased 0.4 percent, and benefits (which make up the remaining 30 percent of compensation) increased 0.6 percent." (U.S. Bureau of Labor Statistics)

Increase in 'Global Nomads' and High Medical Premiums Create Challenges for Expatriate Benefits
"While the number of employees on international assignments has remained relatively stable over recent years, the percentage of 'global nomads' (employees who move from country to country on multiple assignments) and long-term expatriates has increased, causing challenges for employers when it comes to providing expatriate benefits. Thus, provision of expatriate benefits remains a key priority for multinational companies—85% of survey respondents have specific procedures in place to monitor the success of expatriate benefit programs. Employers are eager to ensure that their expat benefits programs not only support business and HR strategies but also meet their assignees' needs." (Mercer)

Fourth Circuit Expands Equitable Relief Under ERISA Section 502(a)(3)
"The McCravy court's decision adopted the position argued repeatedly (and largely unsuccessfully) by the Secretary of Labor's amicus program since the Supreme Court's 2002 Great-West v. Knudson decision. If adopted by other circuits, the McCravy decision would authorize much greater relief, including monetary relief, against those violating numerous provisions of ERISA." (Schiff Hardin LLP)

HighRoads Launches Mobile App for Health Care Reform Compliant Summary of Benefits & Coverage Materials
(HighRoads)