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September 21, 2012 Get Health & Welfare News  |  Advertise  |  Unsubscribe  |  Past Issues  |  Search

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Associate - Employee Benefits
for Perkins Coie LLP in WA

Attorney
for Sullivan, Ward, Asher & Patton, P.C. in MI

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Webcasts and Conferences

Retirement Plan Insights Seminar
in Nevada on November 13, 2012 presented by McKay Hochman Co., Inc.

Retirement Plan Insights Seminar
in Maryland on November 19, 2012 presented by McKay Hochman Co., Inc.

Defined Contribution Allocations and Annual Additions Webcast
Nationwide on September 24, 2012 presented by American Society of Pension Professionals & Actuaries (ASPPA)

Benefit Consulting for the Tax Exempt Organization Webcast
Nationwide on October 4, 2012 presented by American Society of Pension Professionals & Actuaries (ASPPA)

Investments in Daily Valued Plans Webcast
Nationwide on October 5, 2012 presented by American Society of Pension Professionals & Actuaries (ASPPA)

ASPPA Annual Conference 2012
in District of Columbia on October 28, 2012 presented by American Society of Pension Professionals & Actuaries (ASPPA)


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The 401(k)'s 'Father' Wants to Hit Reset
"[T]he 401(k) has evolved far beyond what [benefits consultant Ted Benna] envisioned three decades ago, and not for the better, he thinks. Today, he says, the system has grown far too complicated for the people it was meant to benefit—rank-and-file employees who most likely aren't sophisticated investors.... [His approach would be to] put all the money into targeted-maturity funds, which are already broadly diversified, automatically rebalance and automatically reduce risk as the participants age, making it easier for them to run their investments ... but in addition provide an open mutual-fund window for the few folks who still prefer doing it on their own." (U.S. News & World Report)


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How to Get Better Returns for Your Self-Directed 401(k)
"Here's an action plan for folks who direct and manage the investment allocation in their 401(k) plan accounts.... [J]ust allocating your account to a few of the stock funds that recently had the best performance is not proper diversification and doing so can lead to disastrous results.... [I]ndividuals should rebalance their 401(k) plan account at least once per year with the objective being to maintain their risk level and gradually reduce their allocation to stocks and lower their risk as they near retirement." (CBS MoneyWatch)

Retirement Savings Tips Every Millennial Should Know
"25-year-olds who make $25,000 a year and put 4% of their pay into 401(k)s will have $491,000 by age 65—but only $68,000 if they start saving at 55. ([These] figures assume a 2.2% company match, 3% yearly raises and 7% annual investment returns.) ... 'Millennials have been brought up in a world of smartphones and the Internet and just don't have a long-term perspective,' [says one author]. 'Some of them don't even know what a Roth IRA or a 401(k) is.'" (TheStreet.com)

Phoenix Proposes to Split Pension Costs with Employees; Could Save Taxpayers $600 Million Over 25 Years
"The plan's central provision is that new employees would pay the same amount toward their pensions as the city. Currently, employees contribute 5 percent of their pay for their pensions, as mandated by the city charter. Phoenix's contribution to the plan this year is roughly 20.1 percent of each employee's pay." (The Arizona Republic)

Spain Eyes Pension Reform With Aid Package in Sight
"Spain is considering freezing pensions and speeding up a planned rise in the retirement age as it races to cut spending and meet conditions of an expected international sovereign aid package ... The measures would save at least 4 billion euros a year ... The accelerated raising of the retirement age to 67 from 65, currently scheduled to take place over 15 years, is a done deal,... sources said. The elimination of an inflation-linked annual pension hike is still being considered." (The New York Times; free registration required)


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Aon Hewitt 401(k) Index, August 2012
"Defined contribution plan participants transferred monies from equities into fixed income investments in August ... Overall, 74% of the days in August had transfer activities that favored fixed income funds representing $277 million in total inflows or 0.2% of total assets. However, when company stock activity is excluded, total equity outflows amounts to just $122 million (0.1%) of participant balances.... In net outflows, company stock funds lost $155 million (49%), small U.S. equity funds lost $93 million (29%), and mid-U.S. equity funds lost $23 million (7%) for the month." (Aon Hewitt)

CalPERS Freezes Pay of Investment Executives, Cuts Bonuses
"The California Public Employees' Retirement System, the largest pension in the U.S., reduced bonuses 12 percent for investment officers after stocks dragged down returns. Most also went without pay raises. The pension distributed $3.6 million in performance bonuses among 55 investment officers, down from $4.1 million last year, according to CalPERS data. The sums are based on investment results over three years, including a 1 percent return last year and 21.7 percent a year earlier." (Bloomberg BusinessWeek)

U.S. Retirement Assets Down 2.6% in Second Quarter of 2012
"U.S. corporate defined benefit and defined contribution plans had combined assets of $6.391 trillion as of June 30, down 2.6%, from the previous quarter, according to the [latest] Federal Reserve Flow of Funds report ... The second-quarter drop followed two consecutive quarters of increases. However, total assets were 1% ahead of the second-quarter amount from the previous year." (Pensions & Investments)

Questions for Senior Management to Ask to Make Sure that 401(k) Fiduciary Duties Aren't Ignored in the Attempt to Manage Costs (PDF)
"Will the company encounter challenges regarding controlling workforce costs, maintaining productivity, attracting and retaining (up-and-coming) talent if substantial numbers of employees must delay retiring due to lack of funds?... Have the fiduciaries documented how they are defining their duties of loyalty, prudence, and disclosure? Have these definitions changed over time to reflect current research[?] ... Are your fiduciaries using a fact-based approach—or are they 'flying by the seat of their pants'—in making and evaluating their decisions, their advisors' recommendations, and the performance of their vendors' products and services?" (Investment Horizons, Inc.)

Canadian Pension Plans See Investing Opportunities in Alternative Assets
"A soaring number of Canadian pension plans are shifting their investment strategies this year to embrace real estate and other alternative assets as they struggle to cope with the challenges of a world with entrenched low interest rates. A [recent] survey ... suggests a majority of plans have given up waiting for higher interest rates—which would boost returns and reduce their long-term funding liabilities—and are making structural changes to their investment approach." (The Globe and Mail)

Variable Annuities: A Retirement Plan Design with Less Contribution Volatility
"Many pension plans, including multiemployer plans, have had their funded status deteriorate due to the difficult and volatile investment markets of recent years. Many multiemployer pension plans have had to increase contributions and reduce benefits. For some plans, this has made collective bargaining more difficult, reduced participant pay increases, and caused some employers to struggle to stay competitive. This has left many trustees wondering if there is a more sustainable and less volatile way to provide participants with lifelong benefits." (Milliman)

Senate Panel Discusses Ways to Improve Pension Structure
"Some proposed features of future pension plans include the following: Some argued that participation in an employer's pension plan should be mandatory, while others advocated for voluntary participation only. Several panelists emphasized that the plans need to be professionally managed; doing so would relieve employers of some of their fiduciary responsibilities.... The pension structure should provide for shared responsibility among employers, employees, and the government for lower-income workers. Many panelists said the focus should be on defined benefit versus defined contribution plans, as they have lower risk for employees.... Measures should be included to ensure financial transparency." (Littler Mendelson LLC)

Video and Transcript of Senate HELP Committee's Roundtable Discussion: 'Pension Modernization for a 21st Century Workforce'
2 hours, 34 minutes. Witnesses included Aliya Wong, Executive Director of Retirement Policy, U.S. Chamber of Commerce; Susan L. Breen-Held, Consulting Actuary, Principal Financial; Richard Hudson, Consulting Actuary, Cheiron; Karen Friedman, Retirement USA; John Adler, Retirement Security Campaign Director, SEIU; Andrew G. Biggs, Resident Scholar, American Enterprise Institute; and David Madland, Director of the American Worker Project, Center for American Progress. (U.S. Senate Committee on Health, Education, Labor & Pensions)

[Opinion]

The Dysfunctional 'DB vs. DC' Pension Debate: Why and How to Move Beyond It (PDF)
"Traditional DB and DC pension plans have both become dysfunctional, as have attempts to 'prove' that one is superior to the other. Far better that we should devote our energies to designing a new breed of pension plans, adapted to twenty-first-century realities. Such plans strike an intelligent balance between the dual goals of adequacy and affordability." (University of Toronto's Rotman International Centre for Pension Management)

[Opinion]

Private Retirement Benefits in the 21st Century: A Path Forward
"[T]his white paper [offers] a path on initiatives and reforms that build on existing institutions and approaches to bolster the voluntary employment-based retirement benefits system and enhance retirement security for workers.... R]ecommendations include ways to encourage employers to create and maintain retirement plans, to encourage workers to save more, and to identify ways to make retirement assets last for future retirees." (U.S. Chamber of Commerce)

[Opinion]

2008 Revealed Flaws in Modern Portfolio Theory
"There are many reasons to celebrate 2008—mostly because it highlighted the dangers of everyone slavishly following modern portfolio theory with its deceptively flawed assumptions of constant volatility and correlation. By ignoring what we call 'the evil twins' of correlation and volatility, the theory simply ignored grave potential dangers." (Pensions & Investments)

[Opinion]

Smaller DB Plans Struggling with Alternative Investments
"[S]maller plans have to think 'outside the box' when adopting an investment strategy into alternatives. They need to reconsider their approach with fund of funds, focusing on seeding mandates in hedge funds and private equity, looking to find smart, hungry emerging managers who will offer them lower fees, better performance and an equity stake where they can really prosper. Smaller plans can do this alone or in a group with other smaller plans looking to get into alternatives." (Pension Pulse)

[Opinion]

Employer-Sponsored Plans Are at 'Heart' of Modern Pension System, Play Integral Role in U.S. Retirement Policy, Economy
"To forge a retirement system for the future, the Council suggests a number of improvements to manage risks, reduce costs, eliminate administrative burdens and improve coverage: Promote financial and investment education.... Encourage electronic communication and disclosure.... Provide fiduciary safe harbors for employer plan sponsors.... Facilitate flexible retirement strategies and plan designs.... Continue to stabilize funding obligations.... Conduct a thorough review of pension insurance premiums." (American Benefits Council)

[Opinion]

Pension Woes Mount As States Forsake Real Reforms
"Since 2009, more than 40 states have reported enacting some manner of changes to their pension systems to save money. However, these changes do nothing and make governments spend more of their budgets on their pension system ... Many states have pursued feeble strategies to take care of their pension problems but have been met with fierce opposition from union lobbyists." (National Center for Policy Analysis)

Benefits in General; Executive Compensation

Year-End Deadline for Section 409A Document Compliance Correction (PDF)
"[R]eview your deferred compensation plans and agreements NOW to be sure they have the 'magic language' to be in compliance with Code Section 409A by year-end. Failure to make a simple document correction by December 31, 2012, could result in stiff tax penalties to unsuspecting employees." (Alston + Bird LLP)

Tax Planning for Nonqualified Deferred Compensation: Does Deferral Make Sense With Higher Tax Rates Ahead?
"Is it better to take the compensation now, pay current taxes at lower ordinary income rates than those expected in the future, reinvest the net amount, and then sell it later at capital gains rates? Or is it better to defer the income and taxes on it today and pay a greater total amount of taxes when it is distributed in the future? The answer depends on three factors: the calculation of current and future tax rates for both ordinary income and capital gains the investment return on the compensation deferred the growth of the alternative investment(s) for the after-tax amount of the compensation without deferral" (myStockOptions.com)

Sixth Circuit Splits from Federal Circuit, Decides Severance Payments Are Not Taxable as FICA Wages (PDF)
"Employers that have made severance payments meeting the requirements for [supplemental unemployment compensation, or 'SUB'] payments as set forth in Internal Revenue Code Section 3402(o) should file claims for refund for FICA taxes paid with respect to these payments. The statute of limitations for filing claims for refund for timely filed 2009 Forms 941 will expire on April 15, 2013.... Employers that have already filed claims for refund and have received a notice of disallowance from the IRS (or have signed a Form 2297) should consider filing suit as soon as possible (or, alternatively, seek the IRS's agreement to extend the statute of limitations using Form 907).... It is particularly important for taxpayers in the Sixth Circuit (Kentucky, Michigan, Ohio, and Tennessee) to preserve their rights because of the favorable decision in Quality Stores." [United States v. Quality Stores, Inc., No. 10-1563 (6th Cir. 2012)] (Sutherland)

Press Releases

Pentegra Retirement CEO Announces Retirement
Pentegra Retirement Services



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