NIPA (National Institute of Pension Administrators)

Relationship Mgr II
for The Standard in DE

Internal Sales - Qualified Plans
for Dedicated Defined Benefit Services, LLC in CA

401K Internal Wholesales Support
for Aspire Financial Services in CO

401(k) Administrator
for San Diego based TPA firm in CA

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New H.R. Hotline Launches - A Product of FutureOffice Network
Nationwide on August 8, 2012 presented by FutureOffice Network

ERISA Basics: "Nuts and Bolts" of 401(k) Plans - An Overview
Nationwide on October 18, 2012 presented by ABA Joint Committee on Employee Benefits

CFDD

 

Class Action Challenges Propriety of 412(e)(3) Annuities for ERISA Defined Benefit Plans
"On August 1, 2012, a putative class action lawsuit was filed in the District of Connecticut challenging the propriety of certain insur.ance contracts used to fund defined benefit plans described in section 412(e)(3) of the Internal Revenue Code. Because [it appears] that the complaint is attacking the appropriateness of the product, as well as the specifics of the product that the named defendant sold, it is a lawsuit that potentially could have industry-wide implications. In addition, as plaintiffs in some of the ERISA revenue-sharing lawsuits have attempted to do, the complaint alleges that the insur.ance company that sold the annuities acted as an ERISA fiduciary of the plans. This lawsuit thus extends the attack on insur.ance companies, as seen in the revenue-sharing class actions, that attempts to convert service providers into fiduciaries." [U.S. Telemanagement, Inc. v. Fidelity Security Life Insur.ance Co. et al., No. 3:12-cv-1110 JBA (D. Conn.)] (Sidley Austin LLP)

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Pension Plan Changes Pose Challenges for Lawmakers
"Lawmakers have become acutely familiar with the financial challenges caused by pension underfunding, and they're certainly aware of the political difficulties involved in trying to change pension formulas. But the legal hurdles involved in changing pension benefits can be formidable as well." (Governing)

How To Make Your 401(k) Last Forever: The Pension Rollover
"Employees have always been able to take all or part of their 401(k) retirement account balances and buy a commercial annuity to guaran.tee lifetime payments. But there's renewed interest in a lesser-known, potentially cheaper option to guaran.tee lifetime payments—the DC to DB rollover. To make this move, you have to work for a company that offers both a 401(k) defined contribution plan and a traditional defined benefit pension plan, and offers the option to roll assets from the former (the DC plan) to the latter (the DB pension). When you leave the company or retire, you transfer 401(k) assets to the pension plan, and the pension plan converts the rollover amount to an annuity that is actuarially equal to the amount you transferred, guaranteeing you additional lifetime payments in excess of your basic pension checks." (Forbes)

How Important Is Asset Allocation to Americans' Financial Retirement Security?
"Financial advice tends to focus on financial assets, but other levers may be more important for most households. This [report examines] a stylized example of the tradeoff between returns and time spent in the labor force.... how the gap between retirement needs and retirement resources is affected by working longer, taking out a reverse mortgage, controlling spending, and shifting all assets to equities with no risk.... [followed by calculation of] a risk-adjusted measure of the value for the average household of moving from a typical conservative portfolio to an optimal portfolio. [The] answer from all three exercises suggests that the focus on asset allocation is misplaced." (Pension Research Council, Wharton School of the University of Pennsylvania; free registration required)

Fifth Circuit Reverses Award of Benefits to Stepchildren in Absence of Valid Beneficiary Designation (PDF)
Participant died without a valid beneficiary designation; the Thrift Plan document provided for distribution of benefits to various relatives. The Plan Administrator interpreted the term "children" as used in the plan to mean biological or legally adopted children. The Fifth Circuit Court of Appeals ruled that the district court erred when it set aside the Plan Administrator's decision and granted judgment for the deceased's stepchildren, because (1) the Plan Administrator's interpretation of the term "children" was legally correct; and (2) nothing in the plan or ERISA required the Plan Administrator to incorporate the concept of equitable adoption into the plan's definition of "children." [Herring v. Campbell, 5th Cir. No. 11-40953 (August 7, 2012)] (U.S. Court of Appeals for the Fifth Circuit)

Illinois Pension Hole Deepens
"A retirement funding hole long pegged at $83 bil.lion could hit nearly $93 bil.lion by next summer if changes are not made, [Illinois Governor Pat Quinn's] administration projects. In turn, pension payments are gobbling up so much of the state budget so quickly that state government could be spending more on basic annual pension payments than it does on education within four years." (Chicago Tribune; free registration required)

Despite Costs, Pension Investments Get Exotic
"[R]etirement systems with at least $1 bil.lion in assets had raised their stake in real estate, private equity, and hedge funds from 10.7 percent in 2007 to 18.3 percent by the end of 2011. The big question is whether such aiming at higher returns is worth the fees.... [T]he $24.5 bil.lion South Carolina Retirement Systems paid $344 mil.lion in fees in 2011 alone, up from just $22 mil.lion in 2005. For those staggering fees, the system earned an annualized (and before-fees) return of 3.1 percent for the three years ending June 2011[.]" (CBS News)

Critics Blast Proposed California State Retirement for Private Workers
"Opponents of a bill that would create the nation's first state-run retirement program for private-sector workers testified Wednesday that California taxpayers cannot afford to take on the potential for billions of dollars in new liabilities at a time when the state's public pension systems already are facing massive shortfalls. Businesses, insur.ance companies and financial services firms criticized ... [a bill that] would establish the California Secure Choice Retirement Savings Program for nearly 7 mil.lion low-income workers whose private employers don't offer retirement plans." (AP via the Daily Republic)

Die Broke—on Purpose: An Unconventional Retirement Plan
"Three economists from leading universities have found that 'a substantial fraction of persons die with virtually no financial assets—46.1% with less than $10,000—and many of these households also have no housing wealth and rely almost entirely on Social Security benefits for support.' ... Dying broke probably sounds just awful. But it doesn't have to be. In fact, it should almost be a goal to which we all aspire. For many of us, a perfect financial life would be one in which we amassed exactly the amount of money we'd need in life, and in which we ran out of money the day we died." (AOL Daily Finance)

Determining if Entity Holds ERISA Plan Assets Flowchart
"This ERISA plan assets flowchart is designed to provide a high-level overview of the exceptions to the DOL's plan assets regulation [in order to determine] whether an entity, such as a hedge fund, private equity fund or other collective investment vehicle or issuer, that is not itself an employee benefit plan subject to ERISA, is treated as holding assets of investing employee benefit plans." (Practical Law Company)

Heavyweight ETF Providers Lobbying for 401(k) Inroads
"ETFs can satisfy the need for more investment choices, supplying targeted exposure as well as broad-based tools. Lower fees are another major highlight of the ETF debut into the 401(k) industry. Investors are just catching on to how much capital it can take to run the existing retirement accounts and how much this can eat into principle." (ETF Trends)

Sixth Circuit Revisits Moench Presumption in Two Stock Drop Cases
"The recent actions by the Sixth Circuit may not slow down the adoption of Moench by other circuits. However, it suggests a warning shot across the bow to go a bit slower, perhaps. Not only should the courts err on the side of allowing plaintiffs their day in court, but in reading between the lines, the Sixth Circuit seems to be saying that more attention should be paid by plan fiduciaries to determining whether there is a connection between seemingly random fluctuations in company stock price and corporate survival. The lack of any boundaries in defining a 'dire situation' seems to have troubled at least some on the bench of the Sixth Circuit." [Schmalz v. Sovereign Bancorp Inc. (E.D. Pa., 4/17/12) and Schmalz v. Sovereign Bancorp Inc. (E.D. Pa., 4/17/12)] (fi360 Blog)

Labor Department Offers Further Guidance on Participant Disclosure Requirements
"In addition to the guidance relating to 403(b) plans, the Revised Bulletin also clarifies that the Regulation applies to a plan that allows for both participant-directed investment of employee contributions and trustee-directed investment of employer contributions. However, the investment-related disclosure obligations apply only to the designated investment alternatives into which participants may direct their investments (not the portion of the plan's assets that are actively managed by the trustee)." (McGuire Woods LLP)

Some Assembly Required—Putting Together An ESOP Program
"Due to the almost mythological descriptions of ESOPs in the commercial press, it is important for a client to read and understand at least the very basic principles: first, that it is a broad-based, nondiscriminatory retirement plan; and second, that ESOPs are very complex, bringing with them significant tax incentives and planning flexibility, but often with a commensurate price to achieve those benefits." (Chang Ruthenberg & Long)

Clean Up on Aisle 403(b)
"It is 2012, but some 403(b) plans are looking back to the past—2009 to be exact. Why? 2009 is now an open year for Internal Revenue Service (IRS) audits—and notably the first year the final 403(b) regulations became effective. So, 403(b) plan sponsors who have been selected for audits are helping test the waters to determine both the success of the Service's pre-2009 outreach efforts and the extent to which an employer may have encountered difficulties in implementing the 403(b) regulations." (PLANSPONSOR.com)

[Guidance Overview]

IRS Clarifies Treatment of Performance-Based Restricted Stock and Restricted Stock Units (PDF)
"Revenue Ruling 2012-19... clarifies that, to be excludible from the $1 mil.lion deduction limit, the payment of dividends or dividend equivalents must be conditioned on meeting the requirements applicable to performance-based compensation under Section 162(m). Performance goals may be the same as, or differ from, the goals applicable to the underlying restricted stock or RSU awards. If dividends or dividend equivalents are payable whether or not their performance goals are met, the dividends or dividend equivalents must separately satisfy the requirements under Section 162(m) to be treated as performance-based compensation." (Buck Consultants)

[Guidance Overview]

IRS Finalizes Rule on Entertainment Use of Business Aircraft
"The final rules, which fall under tax Code Section 274, do the following: determine how much of the expense of running a corporate airplane can be deducted; affect how employers tabulate income inclusion for personal use of the company plane; and subject security-related travel to the Section 274 deduction disallowance." (Thompson)

Relative TSR Is the Top Metric for Performance-Based Equity Compensation
"According to new research ... nearly 600 US companies have adopted Relative [Total Shareholder Return, or 'TSR'] plans since 2005, including more than 140 new plans in the last two years. Under Relative TSR plans, final award payouts are typically tied to relative stock price returns against a peer group or a stock market index. These findings make Relative TSR the most prevalent performance metric for equity compensation programs today." (Aon Hewitt)

Police Pension Fund Sues Over CEO Pay Deal
"A Louisiana pension fund is suing Simon Property Group for not seeking shareholder approval when it raised chief executive David Simon's compensation last year. In a lawsuit filed with the Delaware Court of Chancery, Louisiana Municipal Police Employees Retirement System or LAMPERS, accused the company and its board of exceeded its authority by granting the CEO shares worth $120 mil.lion to stay on until 2019." (The New York Times; free registration required)

Recent Court Decisions Suggest Changes to Stock Plan Design to Reduce Litigation Risk
"[A] Delaware court decision from the last week of June, Seinfeld v. Slager, when added to some decisions before it, suggests that companies should seriously consider spinning-off a directors stock incentive plan from, or amending, the company's regular omnibus stock plan to protect officers, directors and the company against the costs and headaches of shareholder derivative litigation over executive compensation." (Winston & Strawn LLP)

What Are The Potential Tax Increases In 2013 That May Affect Stock Compensation?
"Unless you were already definitely planning to sell company stock or exercise options soon, many experts would say that the likelihood of higher tax rates ahead should not be the sole reason for taking these actions before the end of 2012." (myStockOptions.com)

NAGDCA Announces 2012 Media Award Recipient
(National Association of Government Defined Contribution Administrators)

ING U.S. Extends Relationship as Service Provider for Spirit AeroSystems Retirement Savings Program
(ING Retirement)