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October 15, 2012          Get Health & Welfare News  |  Advertise  |  Unsubscribe
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Client Service Representative
for Associated Pension Consultants in CA

Supervisor, Retirement
for Amalgamated Life in NY

Advisor Marketing Manager
for New York Life Retirement Plan Services in MA

Retirement Plan Coordinator
for Hefren Tillotson in PA

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Webcasts and Conferences

Rehires, including HEART and USERRA
Nationwide on October 24, 2012 presented by McKay Hochman Co., Inc.

Pensions and Corporate Finance: How to Avoid Buyer's Remorse
Nationwide on November 15, 2012 presented by FTI Consulting

Terminating 401(k) and Other Defined Contribution Plans
Nationwide on October 17, 2012 presented by McKay Hochman Co., Inc.

Let’s Talk! Healthcare, the Economy and Retirement Webcast
Nationwide on October 17, 2012 presented by Wells Fargo


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[Guidance Overview]

Checklist for Required 2012 Puerto Rico Tax-Qualified Plan Amendments and Compulsory Determination Letter Filing with PR Treasury
"Sponsors of qualified retirement plans covering employees who are bona-fide residents of Puerto Rico, or who perform labor or services primarily within Puerto Rico, regardless of residence for other purposes (Puerto Rico Employees), are required to amend their plans before the end of the 2012 plan year (December 31, 2012, for a plan with a calendar plan year) in compliance with qualification requirements of the Puerto Rico Internal Revenue Code of 2011[.]" (Groom Law Group)


[Advert.]

The latest on employee benefit issues + Top IRS & DOL Speakers

Sponsored by ASPPA

Explore employee benefit issues with colleagues and local, regional and national government representatives from the Internal Revenue Service and the Department of Labor!


Handout from IRS Phone Forum on VCP Correction Methods for 401(k) Plan Failures (PDF)
59-page slide presentation. "This outline illustrates Voluntary Correction Program (VCP) correction methods for 401(k) plan failures. These correction methods are consistent with the following core correction principles contained in Section 6 of Rev. Proc. 2008-50: [1] Full correction includes all taxable years, whether or not the taxable year is closed. [2] The correction method should restore the Plan and its participants to the position they would have been in had the failure not occurred." (Internal Revenue Service)

Supreme Court Denies Cert in Citigroup Case Applying 'Moench' Presumption of Prudence by Stock Plan Fiduciaries
Certiorari has been denied with respect to the Second Circuit's decision in the stock drop case of Gray v. Citigroup Inc., which applied the "Moench" presumption of prudence to Citigroup's plan fiduciaries. The issues presented by that case, as described on SCOTUSBlog, were: "(1) Whether, under Section 1104(a)(1)(B) of [ERISA], a fiduciary of a plan that invests in qualified employer securities who knows, or should have known, that it is imprudent to invest in the employer's securities is permitted to take no steps to protect plan participants and beneficiaries unless the employer is in a 'dire situation' or near bankruptcy; and (2) whether, under Section 1104(a)(1)(B), a complaint by a plan participant against a fiduciary of such a plan need only plead facts making plausible the conclusion that the fiduciary failed to act with 'care, skill, prudence, and diligence,' or whether instead the complaint must plead facts making plausible the conclusion that the fiduciary knew, or should have known, that the employer was in a 'dire situation' or near bankruptcy." (SCOTUSblog)

ERISA Risk Management and Action Items for Last Quarter of 2012: Disclosure-Driven Challenges
"So far in 2012, there is a common disclosure thread to the demands facing employers and those responsible for administering their Employee Retirement Income Security Act plans. Generally, the greatest risks relate to monitoring the ERISA investment programs for 401(k) and other retirement plans, plus tending to upcoming requirements imposed by the Affordable Care Act now that the Supreme Court has upheld ACA's constitutionality." (Paul, Hastings, Janofsky & Walker LLP)

Study Shows $1.2 Trillion Gap for Public Pensions
"The largest 100 public pension funds have around $1.2 trillion of unfunded liabilities, about $300 billion above the nearly $900 billion they reported themselves ... The pension systems reported a median funding level of 75.1 percent. The [Milliman] study ... finds an aggregate level of funding of 67.8 percent." (The New York Times; free registration required)

DC Plan Participants Don't Understand Risks and Allocations
"[Recent] surveys illustrate, at least for target-date funds, that participants are well-intentioned -- investing in a diversified portfolio while reducing risk as they grow older -- even if they're not well-informed." (Pensions & Investments)

DB Plan Lump-Sum Payouts Move Into Fast Lane
"The increase in lump-sum payment offers to vested participants in defined benefit plans comes after this summer's highway law allowed more plan sponsors to offer lump-sum payouts than were permitted under the Pension Protection Act. It also included future hikes in premiums.... Employers see cutting the number of participants results paying less in premiums." (Pensions & Investments)

Public Pension Plans and Short-Term Employees
"[C]omplete reliance on delayed vesting and final earnings plans results in minimal benefits for most short-service public employees. Hence, the recent trend towards hybrid arrangements is a positive development not only for risk sharing between taxpayers and participants but also for a more equitable distribution of benefits between short-term and career employees." (National Bureau of Economic Research; purchase required)

State Judges and Public Pension Laws: Classic Conflict of Interest
"The public employees most lightly touched by a pension reform signed by Gov. Brown last month are the judges, whose court rulings on public pensions can affect their own pensions and retirement income. [U]nlike others covered by the reform, current judges are not expected to pay half the normal pension cost, and new judges do not get a lower pension." (CalPensions)

U.S. Improves Slightly in Global Pension Ranking
"The United States moved up one place in a global comparison of 18 of the world's pension systems, but the sustainability of the system is at risk due to a rise in government debt and a fall in the household savings rate." (Mercer)

The $300,000 Difference: Stepchildren Not Considered 'Children' for Purposes of Beneficiary Form
"[The Fifth] Circuit Court of Appeals ruled that a plan administrator didn't abuse her discretion in concluding that stepsons weren't 'children' under the terms of their stepfather's employer retirement plan.... [Hunter had] named his wife ... as primary beneficiary but didn't name a contingent beneficiary. After she died in 2004, he didn't update his plan beneficiary form." [Herring v. Campbell, No. 11-40953, Aug. 7] (Investment News; free registration required)

Fifth Circuit Concludes Denial of Death Benefits to Stepchildren Was Legally Correct
"While plan documents cannot be expected to anticipate every potential controversy, there are some situations -- like beneficiary claims by stepchildren -- that are so predictable that they really should be addressed.... (In the context of health and welfare plans, clear drafting about the eligibility of stepchildren can be crucial, especially in light of health care reform's age 26 mandate.) This case also offers a reminder that the federal circuit courts have different ways of articulating the abuse of discretion standard. Courts in the Fifth Circuit regularly apply the two-step approach described in this case, but other circuits describe the analysis somewhat differently." [Herring v. Campbell, 2012 WL 3176474 (5th Cir. 2012)] (Thomson Reuters / EBIA)

Clients Ask Advisers About Annuities More Than Any Other Product
"With today's 10-year Treasury rates hovering at around 1.6% and with equity markets being relatively volatile, annuities have become a costly proposition for insurance companies, causing many to discontinue rich product benefits. But the demand continues to surge[.]" (Investment News; free registration required)

Baltimore County Considers Issuing Bonds to Raise Funds for Pension Contributions
"Baltimore County officials say they can close a gap in pension funding while saving taxpayers hundreds of millions of dollars. But their planned strategy is one that carries considerable risk, experts say. County Executive Kevin Kamenetz has proposed borrowing $255 million through pension obligation bonds and repaying the money over the next three decades." (Baltimore Sun)

Private Employers in U.K. to Begin Freezing Salaries to Pay for Mandatory Pension Coverage
"The Department for Work and Pensions set up its auto-enrolment scheme this month. The policy obliges companies to enroll all staff into work pensions and is designed to give up to 11 million employees a private pension for the first time.... Estimates from the department suggest that companies will look to save 2.6 billion GBP of the annual cost of the pensions by capping wage rises for their staff.... Although auto-enrolment began this month, it will be years before all companies use the scheme. The Government has staggered its roll-out, starting with the largest firms. Small and medium-sized businesses have until 2018 to start, depending on their size." (Business Insider)

Illinois Voters to Weigh Constitutional Amendment Limiting Ability of Legislature to Enhance State Employee Pensions
"After a period of dire warnings and scandal, voters will decide next month whether to change the Illinois Constitution so that it's harder to improve retirement benefits for public employees. The amendment would require a three-fifths vote instead of a simple majority when legislators want to increase retirement benefits.... The amendment is supposed to encourage consensus and keep the majority party from ramming a bill through the Legislature. But it's not clear how much the amendment could help." (STLtoday.com)

TVA Pension Fund Shortfall Increases Electricity Bills
"Less than 20 years ago, the fund had an overabundance of around $2 billion. Before 2008, the utility didn't contribute for at least six years.... TVA officials have said one of the main reasons for last year's $234 million rate hike that increased bills by 2 percent was the $300 million it placed in the pension fund." (dJournal.com)

Almost All Companies Have Resumed Making Matching Contributions to 401(k) Plans
"The percentage of companies that made the matching contribution, when provided for in the plan, increased to 95.5 percent (up from 91 percent in 2010). Small companies in particular are bringing back the match, with 92.8 percent of organizations with fewer than 200 participants making the match in 2011 vs. 83.3 percent in 2010. The percentage of eligible employees making contributions to the plan also showed improvement, increasing from 76.9 percent in 2010 to 79.5 percent." (Society for Human Resource Management)

Hostess Brands, Inc. Proposes Suspension of Pension Plan Contributions for Union and Nonunion Employees
"Hostess, in a plan filed with the U.S. Bankruptcy Court in New York, said it would stop contributing to the Interstate Bakeries Corp. (IBC) Defined Benefit Plan -- which had $56 million in assets and $84 million in liabilities as of June 2, 2012 -- for two years and will restart the contributions in 2015. The suspension is intended to reduce Hostess' debt and permit the company to restructure and emerge from Chapter 11." (PLANSPONSOR.com)

Are 401(k)s Still Part of the Package?
"With a more risk-controlled focus, companies are back in the 401(k) business.... The driver ... has been a refocusing on risk control in uncertain times, as well as a rebalancing of employee responsibility for retirement investments and health care." (Business Examiner)

A Look at Fiduciary Responsibilities for a Plan with Self-Directed Brokerage Accounts Only
"Fiduciaries for plans that allow a participant to select his/her own brokerage provider will, at a minimum, need to review and monitor the selection of the brokerage provider. Obviously, complying with the disclosure requirements becomes more difficult with more brokerage providers." (SunGard Relius)

Corporate Plans Lag Behind Public Pensions in Choosing 'Socially Responsible' Investments
"Corporate retirement plans in the United States are much less likely to employ socially responsible investing strategies in their portfolio investments than are public pension plans ... Concerns about ERISA and fiduciary roles, along with 'lack of interest' and 'performance tradeoff,' were most often cited as the reasons corporate plan investors are not adopting this approach." (Thompson SmartHR Manager)

PBGC Interest Assumptions for Paying Benefits From Terminated Single-Employer Plans for November 2012
"The November 2012 interest assumptions under the benefit payments regulation will be 0.75 percent for the period during which a benefit is in pay status and 4.00 percent during any years preceding the benefit's placement in pay status. In comparison with the interest assumptions in effect for October 2012, these interest assumptions are unchanged." (Pension Benefit Guaranty Corporation)

Benefits in General; Executive Compensation

[Guidance Overview]

Review Compensation Arrangements by Year End to Determine if Amendments Are Needed to Comply with Code Section 409A
"The most common scenario is a severance arrangement that conditions payment on the employee executing a release of claims in favor of the employer. The issue can also arise in the context of an offer letter, employment agreement, change-in-control agreement, nonqualified deferred compensation arrangement, noncompetition agreement, nonsolicitation agreement, or equity arrangement." (Perkins Coie LLP)

California's Retiring State Workers Cash in Accumulated Unused Vacations for Big Bucks
"An analysis of the last three years of government salary data shows state employees are continuing to store up massive banks of vacation, instead of heading to Big Sur or hitting the slopes at Lake Tahoe. They're cashing in by retiring with whopping final paychecks worth, in some cases, more than $500,000 in unused time off.... [I]n the private sector, employers cap vacation accruals and make workers take their time off before they can accumulate more." (Los Angeles Newspaper Group)

Stockpile of Unused Time by Los Angeles City Workers Could Be Costly
"As a snapshot in time, there are currently about 5.3 million hours of unused vacation time, 13.8 million hours of accrued sick leave, and 3.3 million hours of accumulated overtime on the books for sworn and civilian city employees. Those hours are not an immediate obligation of the city, but employees are entitled to the time or pay because of the hours they work." (Los Angeles Newspaper Group)

Press Releases



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