Benefits Specialist
for BTHR Solutions in LA

Retirement Planning Consultant
for Diversified in MI

Senior Benefits Consultant
for NextEra Energy/Florida Power & Light in FL

Staff Attorney
for State of South Dakota, Bureau of Human Resources in SD

Chief Executive Officer (CEO)
for Taft-Hartley Benefit Fund in NY

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[Official Guidance]

PBGC Interest Assumptions for Paying Benefits from Terminated Single-Employer Plans for October and Fourth Quarter 2012 (PDF)
"The fourth quarter 2012 interest assumptions under the allocation regulation will be 3.07 percent for the first 20 years following the valuation date and 3.00 percent thereafter. In comparison with the interest assumptions in effect for the third quarter of 2012, these interest assumptions represent no change in the select period (the period during which the select rate (the initial rate) applies), an increase of 0.12 percent in the select rate, and a decrease of 0.66 percent in the ultimate rate (the final rate)." (Pension Benefit Guaranty Corporation)

[Advert.]

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[Guidance Overview]

California Pension Reform: A Preliminary Analysis (PDF)
"AB 340 imposes many reforms on the pension and retirement systems provided by public employers. The effective date for most changes under the bill is January 1, 2013.... The outline of the changes is clear. Many details are not. This memorandum describes [in detail] the basic elements of the bill and explores a number of questions under it. There are many questions that will have to be answered by employers and administrators who will have to implement this new legislation in what will be a very short period of time." (Hanson Bridgett LLP)

Ohio Lawmakers Give Final OK to Public Pension Reforms
"The changes will mean increased pension contributions down the line for teachers, cops and firefighters. The bills also raise retirement eligibility ages, set new guidelines for cost-of-living adjustments and establish a new formula to calculate benefits. Each system will undergo a unique combination of adjustments. The bills, for the most part, will not affect current retirees. The reforms also do not increase pension contribution rates for public-sector employers." (Cleveland Plain Dealer)

California's Publicly-Managed Retirement Plan for Private Employees Could Serve as a National Model
"As the federal Thrift Savings Plan (TSP) demonstrates, pooling reduces administrative costs and can boost net returns by a percentage point ..., a seemingly small difference that can increase the size of a retirement nest egg by one-third. Pooled pension funds are also able to achieve higher risk-adjusted returns than 401(k) account holders because institutional investors are better able to take advantage of professional expertise and because combining the savings of workers who retire at different times reduces the need for liquidity." (Economic Policy Institute)

New Jersey Pension's Secondary Market Approach to Hedge Fund Allocation
"Although it is not unusual these days for a pension fund to dump its fund-of-funds managers and invest directly in hedge funds, it's less common for another pension fund to scoop up those same assets for its own portfolio. But that's exactly what is happening at the $49 billion Massachusetts Pension Reserves Investment Management Board, which is cashing out of four of the five fund-of-funds managers it now invests with to go directly into hedge funds. And the $69.4 billion New Jersey Division of Investment, which oversees investments for the state's public workers, is picking up some of those investments. It's a novel move for a pension fund[.]" (Institutional Investor)

American Airlines to Freeze Pension Plans in November
"To be frozen on Nov. 1 are pension plans for flight attendants, ground crews and mechanics, as well as the pilots' A plan. The pilots' B plan, which is a defined contribution plan, will be terminated Nov. 30. Also beginning Nov. 1, American announced it would match employee contributions to its existing 401(k) plan of up to 5.5% for all but the airline's pilots. Employees currently not enrolled in the 401(k) plan will be automatically enrolled." (Pensions & Investments)

Millennials Keen on Impact Investing
"Over the next several decades, as baby boomers age and transfer their wealth to the next generation, an unprecedented $41 trillion will change hands, according to researchers from the Social Welfare Research Institute at Boston College, whose report focuses on the 55-year period between 1998 and 2052. These young inheritors are, for the most part, Millennials—the generation born between 1978 and 2000. As it turns out, this group's attitudes about social responsibility, private capital, and the intersection between the two do indeed appear to differ from those of their parents, perhaps starkly." (Institutional Investor)

Pension Plan Sponsors Combat Volatility And Low Interest Rates; Many Prefer Not To Terminate
"Of the 110 [surveyed] U.S. and Canadian plan sponsors, more than half (55 percent) have closed the plan to new entrants, meaning that new employees cannot participate in this retirement benefit. However, given the hypothetical option of terminating a fully funded plan, more than half (56 percent) of plan sponsors said they would not terminate, as the pension remains too critical a part of their organizations' employee benefits structure. Last year, almost half (46 percent) of participating plans were more than 90 percent funded, but this year only 28 percent said the plan was that well funded. More poll participants (37 percent) said the pension is now between 81-90 percent funded. In the U.S., 27 percent of participating pensions currently fail to meet the federal funding minimum of 80 percent." (SEI)

MAP-21 Interest Rate Guidance Issued by IRS
"There had been concern that traditional defined benefit plans offering lump sums would be required (to some extent at least) to reflect Tax Code section 417(e) rates in valuing benefits for funding purposes. 417(e) uses first, second and third segment rates, but it uses spot rates instead of 24-month average rates. In the current environment of rapidly declining interest rates, those spot rates are significantly lower than the 24-month average; and, obviously, the difference in the two rates is much greater when you apply the MAP-21 25-year floor to the 24-month average. Thus, if sponsors were required to use 417(e) rates to value lump sums, much of the funding relief provided by MAP-21 would be eliminated." (October Three)

Securities Law Trap for 401(k) Plan Fiduciaries
"the Sixth Circuit Court of Appeals found the potential for a breach of ERISA fiduciary duty where a company's summary plan description (SPD), which ERISA requires all companies to distribute to participants in their qualified retirement and 401(k) plans, incorporated by reference certain SEC filings, which filings were alleged to be inaccurate. Thus, the plaintiff's lawyers were able to add ERISA fiduciary duty claims to a lawsuit alleging inaccuracies in a company's SEC filings. (As [the author has] said many times before in this blog, plaintiffs' lawyers can be clever. Their livelihood depends on dreaming up stuff like this.) This is an important issue for every public company that makes available a company stock fund investment option in its 401(k) or retirement plan." (Winston & Strawn LLP)

Sixth Circuit Reverses Dismissal of ERISA Class Action Where SEC Filings Were Incorporated Into Benefit Plan Communications
"[T]he Sixth Circuit appears to be the first circuit court to hold that expressly incorporating SEC filings by reference into an SPD is a fiduciary act that can give rise to ERISA liability. In doing so, the Sixth Circuit may have significantly increased the risk of exposure of fiduciaries to ERISA liability, as companies may often incorporate outside materials into their SPDs. At a minimum, the ruling will likely give plaintiffs an additional argument to use to attempt to defeat motions to dismiss in ERISA class actions." [Dudenhoefer v. Fifth Third Bancorp (6th Cir. No. 11-3012, Sept. 5, 2012)] (Jenner & Block)

Finding Missing Participants Without the IRS Letter-Forwarding Program (PDF)
"Although the IRS will no longer be forwarding letters to missing participants, the Social Security Administration continues to offer a letter-forwarding program for situations in which a missing person is due 'a sizeable amount of money,' among other reasons.... The Department of Labor (DOL) in Field Assistance Bulletin 2004-02 suggested a number of other options for locating a missing participant or beneficiary before determining that such individual cannot be found and disposing of his/her account balance when terminating a defined contribution plan." (Buck Consultants)

Maximize Your Retirement Savings—Tips on Using the Fee and Investment Information From Your Retirement Plan
"While there are a number of factors to consider in making sound investment decisions, start with the information provided by your plan. Your plan administrator should provide you with key information about certain investment options offered by the plan every year. This information is provided in a format that allows you to compare the investment options. To help you use the investment-related information provided by your plan, this publication describes some of the key information you will receive from your plan and provides tips on using this information in evaluating your investment choices in your plan." (Employee Benefits Security Administration)

[Opinion]

Chicago Teachers' Retirement Benefits Are Extravagant
"A Chicago teacher who retired in 2011 after 30 or more years of service time could expect an annual pension payment of $77,496. For context, the average Social Security benefit—which requires a much higher employee contribution into the system—would likely be in the range of $25,000 to $30,000 per year for a worker with a similar salary history. Another way to think about the Chicago teacher pension system is to examine the employer's 'normal cost,' meaning the cost of additional benefits that accrue each year to current teachers. In 2011, the risk-adjusted normal cost was 46 percent of wages. ... In other words, for every dollar of salary paid to Chicago teachers, the city also incurred a cost of 46 cents for the future pension benefits they accrued in 2011. By contrast, the employer cost of a typical 401(k) plan in the private sector is about 4 percent of wages." (The Heritage Foundation)

The Sixth Circuit's Affirmance of Quality Stores Splits the Circuits as to the FICA Tax Treatment of Severance Pay
"This split between the Sixth Circuit and the Federal Circuit over the FICA tax treatment of SUB pay is based, largely, on differences in each court's view of whether and how section 3402(o) of the Internal Revenue Code—the provision requiring income tax withholding on SUB payments as if they were 'wages'—should be applied for FICA tax purposes when the Code is actually silent on the issue of FICA tax treatment." (Miller & Chevalier Chartered)

CEOs Extend Pay Gap Over Finance Chiefs
"When it comes to base salary, there is an interesting distinction within the S&P 500 between the 100 largest companies and the 'Other 400' ... CFOs in the former group are steadily falling away from their bosses, with the salary ratio declining from 54.7% in 2009, to 52.1% in 2010, to 50.7% in 2011. Within the Other 400, the opposite is true. CFO salary compared to CEO salary has climbed from 50% in 2009, to 51.5% in 2010, to 54.2% in 2011." (CFO)

Pappalardo Joins Segal Rogerscasey Advisors Solutions Group
Segal Rogerscasey

The Standard Appoints Relationship Manager for Colorado and Southern Idaho
The Standard

AXA Equitable Introduces Fiduciary Educator(SM)
AXA Equitable

New Board Members, Officers Announced by IRI
Insured Retirement Institute (IRI)