Defined Contribution Consultant/Analyst
for AON Hewitt in NJ

Pension Analyst
for Third Party Administrator in MI

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"ERISA Workshop 2012" - Dallas
in Texas on October 24, 2012 presented by SunGard Relius

"ERISA Workshop 2012" - Houston
in Texas on October 25, 2012 presented by SunGard Relius

"ERISA Workshop 2012" - Nashville
in Tennessee on October 25, 2012 presented by SunGard Relius

"ERISA Workshop 2012" - New Orleans
in Louisiana on October 26, 2012 presented by SunGard Relius

 

The Implications of Funding Relief (PDF)
"While the goal of the legislation was to free up cash for employers to spend elsewhere and increase tax revenue by reducing the amount of tax-deductible contributions, a secondary impact may be a sizable shift in asset allocation away from liability-hedging assets. In addition, this law, the most significant among multiple recent installments of funding relief, may set a precedent that leads to a potential reevaluation of the importance of risk when setting pension investment policies." (Towers Watson)

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Stockton Bankruptcy: Bond Insurers vs. CalPERS
"Bond insurers arguing that Stockton is ineligible for bankruptcy because it did not attempt to negotiate a pension debt reduction with CalPERS, among other failings, may get their day in court in January.... In July, [U.S. Bankruptcy Judge Christopher Klein, who is presiding over the case in Sacramento,] said the federal bankruptcy law prohibits interference with the debtor's political or governmental powers, property and revenues.... The main point for CalPERS, which says it is an 'arm' of state government, is not whether labor contracts are overturned but the federal limits on bankruptcy court power[.]" (CalPensions)

Illinois Teachers Pension Fund Cuts Assumed Rate of Return to 8% from 8.5%
"[T]he new assumed rate ... will increase the retirement system's long-term unfunded liability to 57.6% from the current level of 54.8%. Illinois' required annual contributions beginning in 2014 will increase as a result of the lower assumed return rate, to $3.37 billion compared to $3.07 billion using an 8.5% return assumption." (Pensions & Investments)

Annuities and Retirement Happiness
"[This] analysis examines retirement satisfaction over the last decade, including the cushioning effects of annuities.... Key findings [include:] Retirement satisfaction has steadily declined over the last decade. Satisfaction is highest among those with high levels of wealth and income who are very healthy and annuitize their income. Among retirees with similar wealth and health characteristics, those with annuitized incomes are happiest.... Despite variations, the satisfaction effects of annuitized income and general decline in retirement satisfaction are long term and extend across all respondents." (Towers Watson)

Shift from DB to DC by Public Pension Plans Could Impact Private Equity
"[A] shift from defined benefit plans to defined contribution plans for countless state and local employers will likely mean fewer dollars for the private equity industry. What happens then will depend on whether new monies will be available from other sources or instead cause a contraction in long-term deployment of assets by general partners." (Pension Risk Matters)

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UK Considers Tapping Pensions to Help Home Buyers
"Britain will allow parents to use money locked up in pension schemes to help their children obtain mortgages and buy their own home, Deputy Prime Minister Nick Clegg said ... Parents would be able to use a quarter of the value of their pension savings—normally untouchable until they retire—as security for a cash deposit for their children's mortgage.... Party aides said they expected around 12,500 Britons might take advantage of the scheme, pledging an average 10,000 pounds from their pensions for mortgage deposits." (The New York Times; free registration required)

Failure to Keep Adequate Records Shifted Burden of Proof onto Employer in Suit Over Multiemployer Pension Plan Contributions
"In a case like this one, in which ERISA-protected benefit plans seek to enforce remittance requirements, burden-shifting occurs only when a fiduciary seeking remittance of unpaid benefit contributions shows both that some employees performed covered work that was not reported to the benefit plan and that the employer neglected to maintain adequate records[.]" [Central Pension Fund of the International Union of Operating Engineers v. Ray Haluch Gravel Co., No. 11-1944 (1st Cir., Sept. 12, 2012)] (U.S. Court of Appeals for the First Circuit)

OECD Countries' Pension Assets Surpass $20 Trillion
"New inflows helped push pension fund assets in OECD countries to all-time highs, but poor market conditions and a low interest-rate environment generally hurt performance during the year, according to [a report published by the Organization for Economic Co-operation and Development]. Among nations, pension funds in Denmark performed the best on average, returning 12.1% in 2011. At the other end of the spectrum is Turkey, down 10.8%." (Pensions & Investments)

Benefits Manager Was Not Acting as Fiduciary When Communicating Participant's Anticipated Retirement Benefit
"The gray area between discretionary and ministerial functions has been a fertile source of litigation. In this case, the manager may have been the mastermind of the strategy to get the participant greater benefits, but he lacked the discretionary authority to carry out that strategy, so he lacked the discretion necessary to be a fiduciary." [Tocker v. Kraft Foods N.A., Inc. Ret. Plan, 2012 WL 3711343 (2nd Cir. 2012)] (Thomson Reuters / EBIA)

New Guidance on MAP-21's Pension Funding Stabilization Provisions
"With the release of IRS Notice 2012-61, plan sponsors of single-employer defined benefit plans were provided with just-in-time guidance to meet the September 14th deadline for plan year 2011 contributions and were granted certain safe harbor flexibility rules to finalize the certification of plan year 2012 funding ratios." (Retirement Town Hall)

Cypen & Cypen Newsletter for Sept. 20, 2012
Covers employee benefit developments with an emphasis on governmental plans. Topics in this issue include: Florida State Retirement System (FRS) Tells State To Put Up More and Expect Less; the Future of Defined Benefit Plans Will Change Dramatically for the Better; Employee Who Terminated His Employment From FRS-covered Agency and Took Total Distribution Had No Vested Right To Renewed Membership in FRS. (Cypen & Cypen)

Lost Plan Participants? IRS Letter Forwarding Plan Not An Option Anymore
"[E]mployers may no longer use the Program to locate missing participants owed money as a result of correcting an operational failure under the Employee Plans Compliance Resolution System (EPCRS). However, in a bulletin posted on its website, the IRS stated that in future guidance on EPCRS, it intends to provide an extended correction period for plan sponsors and administrators affected by this change in the Program." (Chang Ruthenberg & Long)

Who Has Retirement Benefits in Private Industry in 2012?
"Nearly two-thirds of private industry workers in March 2012 had access to some form of retirement plan, typically either a defined-benefit plan, such as a pension, or defined-contribution plan, such as a 401(k). Forty-eight percent of workers chose to participate in a retirement plan.... Workers in large establishments (500 workers or more) had a retirement participation rate more than twice that of workers in small establishments (fewer than 100 workers)." (U.S. Bureau of Labor Statistics)

Suggestions for Regulatory Next Steps to Accommodate DC Annuities
"[Treasury Regulation] 1.401(a)-31 Q&A 17 makes it clear that you can roll money over from a distributed annuity.... However, it is has never been entirely clear that you can roll funds into a QPDA. Making this clear would increase the ability to consolidate and 'port' these benefits, and to switch out of a contract that becomes unfavorable or from an insurer that becomes financially weak. The complications for this, however, lie in the securities laws, and whether or not this annuity would need to be a registered product." (Business of Benefits)

States See Pension Crisis Looming Despite Cuts
"Since 2009, 45 states have rolled back pension benefits for teachers, police, firefighters and other public workers, including cuts by Michigan and California this month.... In Ohio and elsewhere, politically potent unions have locked arms with state officials over the pension cuts. But the new laws have trimmed just $100 billion out of the $900 billion gap between what the states and their workers put into their retirement plans and what the states owe in retirement benefits." (Fox News)

[Opinion]

Proposed State-Sponsored Retirement Savings Program a Win-Win for Californians
"Loving the state's public pension plan or hating it has nothing to do with SB 1234 and its aim of making an affordable and efficient retirement savings program available to private sector workers who currently have no available options to them.... What the California Secure Choice Retirement Savings Program is a sorely needed public-private partnership to allow private employers to offer a retirement plan that is affordable, easy to administer and professionally managed—at no cost to taxpayers. It would address California's profound need for private-sector retirement income with a modest program offering modest benefits based on conservative investment returns. It would tap private insurance—not public coffers—to protect against the remote possibility that those conservative returns are not achieved." (AppealDemocrat.com)

Conquering Retirement: Should You Take a Lump Sum?
"In the past, companies offered lump sums to older workers to entice them to retire early, and because in some situations, the payouts don't have to include the full value of the pension. Today, many companies are offering lump sums because they can calculate the payout using a higher interest rate than they have in the past, which reduces the size of the payouts.... [Y]ou can get a good idea of how well you'd be able to manage a lump sum by asking yourself the following questions." (The Wall Street Journal)

[Opinion]

Los Angeles Pension Peril
"Right now, Los Angeles spends about $1.2 billion a year to fund its three pension plans. If those plans produce their projected investment return over the next five years, Los Angeles will be paying $2 billion a year in 2017. And that's if the pension funds earn an annual rate of return of 7.75%, which is almost surely unrealistic, especially given that about a third of the systems' investments are in fixed-income assets that are today paying historically low interest rates. To achieve an overall return of 7.75%, the pension funds would thus need returns of roughly 15% a year on the equities they buy. That's preposterous." (Los Angeles Times)

[Opinion]

Ex-Morgan Stanley Broker Tells Advisors to Grow a Spine
"Today, the pressure is so great to preserve the client's capital. Advisors want to do what's right, but they're not going to do that. The clients hear about the fiscal cliff, Europe and the Middle East, and they're bombarded. Advisors play along. They've been beaten into submission." (Investment Advisor)

Who Has Benefits in Private Industry in 2012? (PDF)
"Health, retirement, and paid leave benefits made up more than three-fifths of private industry employer-provided benefit costs in June 2012.... For example, paid holidays are offered to 77 percent of private industry workers overall and about 90 percent of full-time and high-wage workers. Medical care and retirement benefit availability show similar patterns." (Securities and Exchange Commission, via The SPARK Institute)

Employee Satisfaction Linked to Benefits Choices
"[W]hile fewer than half of employees are very satisfied with their company's employee benefits package, more than 70% who are confident in their benefits selections are very satisfied. Fewer than 4 in 10 employers (37%) say their benefits communications are effective in helping employees make the right choices about benefits." (Treasury & Risk)

Public Sector Plan Fiduciary Risk-Management Strategies (PDF)
"[T]he 2008 stock market decline and its direct and indirect consequences for public sector benefit plans may have fundamentally and permanently changed the way those plans are viewed, structured and managed.... [E]very action of plan sponsors, trustees and staff of public sector retirement and health plans is under the public's microscope." (The Segal Group, Inc.)

Setting CEO Compensation (PDF)
"Committees must evaluate several factors when making decisions on CEO compensation.... (1) Company Performance ... (2) Individual Performance ... (3) Alignment with Pay Decisions for Other Executives ... (4) Market Data and Expected Trends ... (5) External Messaging ... [and] (6) Internal Messaging." (Meridian Compensation Partners, LLC)

Inconsistent UK Government Policy on Executive Pay Giving Private Companies a Competitive Edge
"The [UK] government's focus on using shareholders to oversee executive pay is compromised by failure to apply the changes to all types of organisations ... Partnerships, private companies, the UK divisions of multinationals, private equity and hedge fund firms and all represent a larger proportion of the senior executive labour market but it isn't clear that the government's standards will apply to them. It's entirely likely that, if not, some executives will opt out of the scrutiny that comes from working in a listed company. The extent to which this fractures the market, we will have to wait and see." (Mercer)