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September 13, 2012 Get Health & Welfare News  |  Advertise  |  Unsubscribe  |  Past Issues  |  Search

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Client Service Representative
for Associated Pension Consultants in CA

DB Administrator (with DC for DB/DC combos)
for Growing TPA with national scope in ANY STATE

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Webcasts and Conferences

Best Practices for Ensuring Retirement Plan Fee Reasonableness Webinar
Nationwide on September 27, 2012 presented by Multnomah Group

MAP-21: Changes to Segment Rates Phone Forum
Nationwide on September 27, 2012 presented by Internal Revenue Service (IRS)

ERISA Advisory Council Open Meeting
in District of Columbia on September 25, 2012 presented by U.S. Department of Labor, Employee Benefits Security Administration (EBSA)

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[Guidance Overview]

IRS and PBGC Issue Guidance on Pension Funding Stabilization Issues for Defined Benefit Plans under MAP-21
"Earlier IRS guidance in Notice 2012-55 set out the initial set of segment rates required by MAP-21 for plan years beginning in 2012 (see Legal Update, IRS Issues Guidance On Segment Rates for DB Plans Pursuant to MAP-21). Notice 2012-61 provides more detailed questions and answers on these rules, including: General guidance on the application of MAP-21 segment rates, including their application to the annuity substitution rule. Measurements for which the segment rates do not apply. How the MAP-21 changes affect the interest crediting rates for statutory hybrid plans." (Practical Law Company)


Retirement Income Solutions Summit: Chicago Oct. 9, NY Oct. 11

Sponsored by Pensions & Investments

Free registration for qualified plan sponsors. Sponsored by Pensions & Investments - learn how to develop a defined contribution plan that helps ensure your participants lifetime income.

[Guidance Overview]

Summary and Analysis of Defined Benefit Plan Funding Stabilization Guidance Under MAP-21 (PDF)
"[IRS Notice 2012-61] expressly confirms that the current law rules apply in valuing lump sums for funding purposes. In general, that means that the value of a lump sum is determined by valuing the annuity on which the lump sum is based. The annuity is, of course, valued using the stabilized interest rates.... [T]his guidance announces for the first time that the hybrid plan regulations proposed in October of 2010 (dealing with the market rate of return rule and other hybrid plan issues) will not be effective for plan years beginning before January 1, 2014. This is a positive development that had not been announced either formally or informally before the issuance of this guidance." (American Benefits Council)

California Gov. Jerry Brown Signs Bill to Trim Public Pension Costs
"Labor leaders criticized the new law as an attack on retirement security and collective bargaining, while conservative groups said it makes barely a dent in the funding shortfalls that face the state's public retirement systems.... The new law requires public employees hired starting next year to work longer before they retire with full benefits. The measure also caps benefits for the highest earners and requires that employees eventually pay at least 50% of the contribution toward their retirement plan." (Los Angeles Times)

U.S. Pension Funds Have Lowest Real Estate Returns
"Property investments generated an average net annual return of 5.7% for U.S. pension funds from 1990 through 2009, according to research by [a] Netherlands-based university. That compares with 7.2% for Canadian funds and a typical return of more than 7% for other funds. The average cost of managing U.S. pension funds' real estate investments is 64% higher than for Canadian funds, which have the second-highest costs, the study showed." (Pensions & Investments)

Savings From California Pension Rollback May Take Years
"The broadest rollback in public-employee pension benefits in California history may bring little short-term savings to the strapped state and local governments, a municipal finance consultant said. A bill signed by Governor Jerry Brown today caps pension benefits and requires new employees to pay for half of their pension costs. The same savings will be sought from current employees through bargaining with their unions to lower costs as much as $55 billion over 30 years. 'There will be an impact in the long term, in 20 or 30 years when most of the employees are in the lower benefit tier, but not before then,' said Irwin Bornstein, a consultant based in Laguna Hills, near Los Angeles. 'That's in the long run.'" (Bloomberg)


Learn, Network and Sell at the SPARK Forum Retirement Industry Conference

Sponsored by SPARK

Join the industry's top record keepers, asset managers, TPAs, advisors, marketing and sales executives for unequaled educational and networking opportunities. Gain insights into the latest market trends, business strategies, regulatory and legislative issues, and product developments.

New Age-Based Savings Guidelines Advise Having 8 Times Your Salary by Retirement
"In the set of age-based targets released Wednesday, Fidelity says employees should have the equivalent of their annual salary in savings by age 35 in order to reach the first benchmark en route to that goal. To stay on pace, individuals should then plan to have saved twice their salary by 40, four times' salary by 50, five times by 55 and six times by 60." (The Washington Post; free registration required)

Maximizing Retirement Account Balances
"For the six in ten older households who have retirement accounts, a median balance of $100,000 will be a useful supplement to Social Security (and any other income sources such as pensions). It might generate $4,000-5,000 per year if used as a regular income source. That's hardly generous, but these balances are expected to continue to grow in the future and become an even larger source of retirement income. But why do four out of ten older households not have a retirement account at all?" (Vanguard)

The Tax Benefits and Revenue Costs of Tax Deferral (PDF)
"[T]he insights gained from contemplating the exclusion of employer-provided health insurance, the mortgage interest deduction, and other similar provisions in the tax code do not apply to deferrals of tax, such as the deferral of taxation that is granted to compensation in the form of employer-provided defined benefit (DB) and defined contribution (DC) retirement plans, or to compensation contributed to individual retirement accounts (IRAs). Tax deferrals are neither exclusions nor deductions. The tax benefits and the revenue costs of a deferral are not a simple function of an individual's marginal tax rate at the time of the deferral." (Investment Company Institute)

CalPERS Posts Savings in Contract Expenses
"CalPERS is expected to save more than $657,000 on its contract expenses this fiscal year based on voluntary reductions by some of the pension fund's vendors.... 'I am pleased to report today that 75 of our vendors stepped up to the plate by reducing their fees five percent or more,' said Anne Stausboll, Chief Executive Officer of CalPERS.... Expenses have steadily declined in recent years for contracts valued at more than $100,000. The fund had 144 of these larger contract relationships in fiscal year 2009-10 and paid approximately $299 million for services. At the close of the most recent fiscal year, CalPERS contracts of $100,000 or more shrank to 119 vendors and $262 million in fees. (California Public Employees' Retirement System)

Committee Renews Demand for Documents Involving Secret Delphi Pension Deal
"Members of the U.S. House Committee on Education and the Workforce today sent a letter to Treasury Secretary Tim Geithner and Pension Benefit Guaranty Corporation Director Joshua Gotbaum requesting documents and communications regarding the Obama administration's involvement in closed door deals that resulted in Delphi union employees receiving more favorable treatment than their non-union coworkers.... A recent media report alleges the Treasury Department played a leading role in negotiations that resulted in the termination of the Delphi plans. Another report suggests members of President Obama's Auto Task Force made decisions that benefitted their previous employers and possibly themselves." (U.S. House Education and the Workforce Committee, Subcommittee on Health, Employment, Labor, and Pensions)


Statement of Rob Feckner, President of CalPERS Board of Administration, on Signing of Pension Reform Act
"'The cost analysis produced by CalPERS professional staff estimates the law will save between $42 billion and $55 billion over the next 30 years. This doesn't include billions of dollars in additional potential savings that are expected from other retirement systems in California. We expect the changes will also reduce abuse and add protections for members and taxpayers.'" (California Public Employees' Retirement System)


Fidelity 401(k) Price-Fixing Scheme Cost Retirement Savers Plenty
"Anyone who believes that the marketplace for 401(k) plan services has been competitive over the past three decades or that there have not been widespread systemic abuses in the retirement savings industry, should study closely what Fidelity admits it did for four years from 2004 through 2008—until Forbes drew attention to the practice and Fidelity relented. By the way, it is likely that Fidelity was not alone in these practices and that they may continue at other 401(k) administrators." (Forbes)

Benefits in General; Executive Compensation

[Guidance Overview]

December 31 Is IRS Deadline to Correct Section 409A Tax Rule Violation Due to Severance Conditioned on Release of Claims
"The IRS clarified that it believes that a release contingency for payment of severance or other deferred compensation could violate Section 409A of the Internal Revenue Code if not drafted correctly. Section 409A governs taxation of deferred compensation and has strict rules that prohibit employees and other service providers from choosing the tax year of their compensation at the time the payment is to be made. The IRS believes that release contingencies could violate Section 409A because employees could manipulate when they are subject to tax on the severance or other payment by either returning the release right away or waiting until the next tax year." (DLA Piper)

Sixth Circuit Affirms Decision Finding Entities With Any Control Over Funds Are Fiduciaries
"The Court specifically rejected PBA's argument that it could not be a fiduciary because it lacked discretionary authority over plan assets, explaining that it merely has to exercise any authority or control over plan assets to be a fiduciary. It also explained that any language in a contract purporting to limit its fiduciary status did not override its functional status as a fiduciary. Thus, because PBA, as a third-party administrator, had the power to write checks on the plan account and exercised that power, it was an ERISA fiduciary to the extent that it did so." [Guyan International Inc. v. Professional Benefits Administrators Inc. (6th Cir. No. 11-3126, August 20, 2012)] (Seyfarth Shaw LLP)

The DOL's Move to Increase ERISA Audits
"The Department of Labor has announced that it plans to 'substantially increase the number of ERISA compliance audits it conducts each year.' That announcement may strike fear into the hearts of many HR professionals, particularly those responsible for this area.... The DOL conducts more than 3,000 audits each year, [says a consultant, who reports that] in 70 percent of the audits they find some sort of failure, either in the operation of the plan or in the interpretation of the plan provisions. There are exorbitant amounts of money fined against plan sponsors[.]'" (Human Resource Executive Online)

When Has an Employee Provided Sufficient Notice of the Need for FMLA Leave?
"[This Third Circuit] case follows a growing line of cases that seems to put the onus on employers to ask the questions necessary to determine whether the FMLA is applicable. The lesson here? Stay in touch, ask questions (especially when the request is vague or ambiguous) and insist that the employee maintain contact with you (pursuant to your call-in policies) to communicate the timing and duration of his or her absence. Keep in mind: employees are not required to specifically state 'FMLA' as a reason for their absence; rather, the FMLA puts the responsibility on employers to decide whether FMLA is in play, and to inquire further if there is any ambiguity in the leave request." [Lichtenstein v. University of Pittsburgh Medical Center (3rd Cir. No. 11-3419, August 3, 2012)] (FMLA Insights)

Press Releases

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