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October 16, 2012          Get Health & Welfare News  |  Advertise  |  Unsubscribe
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Employee Benefits Jobs

Retirement Planning Consultant
for Diversified in IN

Pension Administrator
for Jack A. Cross & Associates, Inc. in CA

Vice President, Investment Consulting
for Cammack LaRhette Consulting in MA

Defined Benefit/Defined Contribution Specialist
for Benefit Planning, Inc. in CA

VP & Regional COO
for United Retirement Plan Consultants in NJ

Conversion Analyst
for Enterprise Iron in CO, NJ

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Webcasts and Conferences

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

Health Reform Brings New Litigation Risks: Learn Now How to Mitigate Them
Nationwide on October 30, 2012 presented by Thompson Publishing Group

Same-Gender Marriages: The Evolving Landscape�s Effect on Employee Benefit Plans
Nationwide on November 13, 2012 presented by Thompson Publishing Group

Self-Funded Plans: Maximizing Benefits and Minimizing Risks with Service Providers
Nationwide on November 29, 2012 presented by Thompson Publishing Group

A Special Briefing on Title I ERISA Issues
in District of Columbia on November 15, 2012 presented by WEB (Worldwide Employee Benefits Network) Washington Chapter

Free Metro Washington Financial Planning Day
in District of Columbia on October 27, 2012 presented by Certified Financial Planner Board of Standards, Inc.


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[Guidance Overview]

Critical Amendment Deadline Approaching for Defined Benefit Plans
"Sponsors of single-employer defined benefit pension plans will need to amend those plans soon to comply with a critical requirement of the Pension Protection Act of 2006 (the 'PPA').... [M]eeting this deadline is crucial because the IRS has conditioned anti-cutback relief on a timely amendment. If the cutbacks required under the PPA are implemented without a timely amendment, the plan risks disqualification, and the plan sponsor may be liable to participants and beneficiaries." (Spencer Fane)


[Advert.]

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Proposals, Testing, Administration, 5500s, 1099Rs, Plan Documents
401(k), New Comparability, 403(b), Non-qualified Plans
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Bondholders' Challenge to Stockton Bankruptcy Deal Protecting Employee Pension Obligations Could Lead to U.S. Supreme Court
"CalPERS is being challenged by bond insurers of Stockton's debt, who ... filed objections to Stockton's Chapter 9 filing, saying that because the city had not negotiated in good faith with creditors, it was not eligible for bankruptcy.... California may provide the best test run for establishing whether pensions can be impaired ... because the obligations are enshrined in not only in statute, which can be changed by the legislature, but also in the constitution, which is more difficult to change." (Financial Times)

[Official Guidance]

Social Security Announces Benefit and Wage Base Increases for 2013; Benefits Up 1.7%
"Monthly Social Security and Supplemental Security Income (SSI) benefits for nearly 62 million Americans will increase 1.7 percent in 2013 ... [T]he maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $113,700 from $110,100. Of the estimated 163 million workers who will pay Social Security taxes in 2013, nearly 10 million will pay higher taxes as a result of the increase in the taxable maximum." (Social Security Administration)

Slides From IRS Phone Forum on MAP-21, September 27, 2012 (PDF)
46 presentation slides covering construction and application of segment and 25-year average rates, effect on hybrid plans, Section 436 issues, various elections and deadlines, and transition issues. (Internal Revenue Service)

A Primer for Plan Sponsors on Qualified Default Investment Alternatives (QDIAs) (PDF)
"A [QDIA] is intended to encourage investment of employee assets in appropriate vehicles for long-term retirement savings. This [article] will help you understand how selection QDIAs that comply with the [DOL] regulations can reduce fiduciary liability for plan sponsors and help participants save for retirement." (Invesco)


[Advert.]

Join Sutherland for a Free Webinar -- October 23 -- Register Now

Sponsored by Sutherland Asbill & Brennan LLP

We will provide an overview of the 3 components of the EPCRS program, including when to determine if self-correction is appropriate versus when a filing should be made with the IRS and methods for identifying and correcting common plan errors.


17 Frightening Retirement Facts
"Investing great John Bogle, founder of The Vanguard Group and champion of the index fund, believes our nation's retirement system is headed for a serious train wreck.... One big takeaway is that many Americans are saving far too little for their retirement. And many of those individuals who are saving are making costly errors that result in poor investment returns." (Business Insider)

Disclosing Conflicts of Interest by Investment Advisers: The Slippery Concept of Materiality
"While everyone seems to admit that all investment advisors have some conflicts of interest, only the 'material' conflicts need to be disclosed ... The problem here ... is that materiality is not only in the eye of the beholder, but it's when the beholder is looking backwards. When it counts, everyone tries to determine whether the missing disclosure was material after it has caused a loss." (fi360 Blog)

Top 100 Public Plans Worse Off Than Reported
"The plans, which reported $895 billion in unfunded liabilities reflecting the actuarial size of assets, should more accurately be reporting $1.193 trillion in unfunded liabilities reflecting the market size of assets, according to the Milliman 2012 Public Pension Funding Study." (Pensions & Investments)

2012 Milliman Public Pension Funding Study Finds Top 100 Plans Funded at Only 67.8%, Not 75.1% as Reported by Plans
"During the past year, the 100 largest U.S. public pension plans (as measured by accrued liability) reported assets of $2.705 trillion and accrued liabilities of $3.600 trillion, for an aggregate underfunding of $0.895 trillion and an aggregate funded ratio of 75.1%. However, the asset values the plans use for reporting purposes reflect asset-smoothing techniques, which are designed to minimize fluctuations in contribution amounts but may deviate significantly from market value. The liabilities the plans report may not reflect current views on future investment return levels. The Milliman 2012 Public Pension Funding Study -- using actuarial principles, reported liabilities, current market values of assets, and current views on investment return -- determines that these plans have assets of $2.513 trillion and accrued liabilities of $3.706 trillion, resulting in aggregate underfunding of $1.193 trillion and an aggregate funded ratio of 67.8%." (Milliman)

Employee Ownership Update for October 15, 2012
NCEO Executive Director Loren Rodgers discusses a new PwC/NASPP study that shows multinational ESPP participation is declining; a proposal from the UK Chancellor of the Exchequer: 'Shares for Rights'; DOL allegations of overvaluation of ESOP Stock; and the premiere of a documentary on worker cooperatives. (National Center for Employee Ownership)

Overview of Required Minimum Distribution Rules Applicable to Defined Benefit Plans (PDF)
"All qualified plans must begin making payments, called Required Minimum Distributions (RMDs), by a participant's required beginning date (RBD). Most defined benefit plans begin making pension payments at a participant's RBD, rather than making just an RMD payment. However, RMD rules do apply and may be most notable when an employee earns additional benefits after reaching his RBD." (Prudential)

Employers Offer Lump Sum Payoffs to Dig Out of Pension Holes
"Corporate America has been freezing or terminating traditional, seniority-based plans for the past 30 years, and moving employees into cheaper 'defined contribution' plans, such as a 401(k). Lump sum offers are a way for companies that have or had pension plans to reduce their often huge longterm liabilities ... Equifax and NCR are among U.S. giants including General Motors, Ford and Sears that have made similar offers to thousands of former workers." (Atlanta Journal-Constitution)

List of Companies Offering Lump-Sum Pension Buyouts
"[At the link is] a list of employers that have announced that they are offering lump-sum pension buyouts to certain groups of employees, former employees, or retirees.... [Also available are] similar lists of companies that have frozen or changed their traditional pension plans and companies that have reduced or eliminated their matching contributions to employees' 401(k) plans." (Pension Rights Center)

Plan Sponsors Should Redirect Focus from Fund Performance to Increasing Deferrals
"While fund performance is important, the fund-centric focus may not be the best means of preparing participants for retirement, according to [a recent study.]... [T]he performance of underlying funds and rebalancing have far less of an effect on retirement wealth accumulation than the impact of higher deferral rates[.]" (Wolters Kluwer Law & Business)

The Modern ESOP and Fair Market Value After the End of Tax Cuts (PDF)
"[T]his article reviews the general purpose and benefits of (ESOPs) ... [and] discusses the specific tax incentives associated with implementing an ESOP that are available to the company, the selling shareholder(s), and the employees ... the fiduciary responsibilities associated with establishing and maintaining an ESOP ... the by-product benefits of an ESOP ... the current legal environment facing ESOPs and best practices to avoid common pitfalls ... [and] the future of ESOPs[.]" (Morgan, Lewis & Bockius LLP via Bloomberg BNA)

Governmental Plans: Are Your Plan Fees Reasonable?
"All plan fiduciaries, including governmental plan fiduciaries, have the duty to make sure fees paid for services are reasonable.... In 2012, the Department of Labor (DOL) finalized fee disclosure rules applicable to ERISA plans.... Although these fee disclosure rules only apply to ERISA-governed private sector plans, governmental plans should consider following these new rules as a fiduciary best practice." (Benefits Bryan Cave)

PBGC's 'Weekend Rule' Did Not Permit Plan to be Amended on Monday After Saturday Termination Date
"Amendments reducing benefit values must be adopted by a pension plan's stated termination date, not the next business day, a federal court in Kentucky has ruled. An employer terminated its plan on Saturday, Aug. 15, 2009, but two days later adopted PPA segment rates, reducing lump sum values by more than $700,000. The employer argued the 'weekend rule' for computing certain time periods extended the plan's termination date to the next business day. The court disagreed, deferring to PBGC's view that a termination date set to fall on a weekend or holiday does not slide to a weekday." [PBGC v. Town & Country Bank and Trust Co. (W.D. Ky, Oct. 4, 2012)] (Mercer)

[Opinion]

Public Pensions Underreporting Liabilities?
"[T]his study is good news as it demonstrates that the discrepancy between what was reported and what Milliman found wasn't significant. Nonetheless, it also demonstrates that too many US public pension plans are still using an unrealistically high discount rate based on rosy investment projections.... The pathetic state of state plans is far more complicated issue and requires not only a rethink on the discount rate, but also a wholesale change in pension governance and states to top up their public pension plans[.]" (Pension Pulse)

[Opinion]

LA's Pension War Goes Nuclear
"The City's two pension plans, the Los Angeles City Employees Retirement System and the Fire and Police Pension Plans, have an unfunded pension liability of $9.5 billion, representing a funding level of only 73%. However, if this liability were determined based on a more realistic investment rate assumption, the unfunded pension liability would be at least $13 billion, a funding level of only 66%. Pension contributions are also devouring the General Fund, suffocating numerous programs and services, catapulting from $350 million (9.6% of the General Fund) in 2005 to a projected $1.3 billion (26% of the General Fund) in 2017." (CityWatch)

[Opinion]

Pension Reform for Municipalities in Pennsylvania: Consolidation Isn't the Answer
"[I]t's true that a few local governments, primarily large and midsize cities like Philadelphia, Pittsburgh, and Scranton, have retirement programs that are underwater ... But it's inaccurate to paint the picture that every municipal pension plan is troubled, or 'woefully underfunded,' as some have suggested. Truth is, many communities -- large, small, rural, urban, suburban -- oversee plans that are doing OK, and in some cases, they're doing much better than OK." (phillyBurbs.com)

Benefits in General; Executive Compensation

ISS Policy Survey Previews Potential Changes in ISS Proxy Voting Policies for 2013 (PDF)
"Each year, ISS seeks feedback on emerging corporate governance, executive compensation and other issues as part of its annual policy formulation process.... [This article reports] the key findings of this year's survey.... Investors and issuers in North America and Europe agree that executive compensation is the most important governance topic for the coming year.... [N]early 75% of issuers expressed the view that ISS should use the issuer's proxy-disclosed peer group in the Pay-for-Performance Test ... [A]pproximately 67% of investors believe in a combined approach where ISS continues to develop its own peer group and provides the company's peer group as an alternative view[.]" (Meridian Compensation Partners, LLC)

Compensation for Corporate Directors Rose in 2011
"[C]ompensation for board members of S&P 500 companies shows pay increased by 8% in 2011 driven by increased board retainers and equity awards. For baseline board service -- duties and responsibilities common to directors regardless of service on committees or in other roles -- annual cash retainers rose 15% to a median $75,000 and equity compensation increased 10% to a median $131,900." (Mercer)

Eighth Circuit Rejects 401(k) Participant's Claim Under ERISA's Anti-Retaliation Rule
"[The 8th Circuit Court of Appeals] found [the participant's] claim under ERISA Section 510 -- which bars retaliation against participants for exercising rights under an employee benefit plan or ERISA -- wasn't supported by the facts. As a result, the court said, it needn't address the larger question of whether informal complaints are covered by Section 510. The circuit courts are split on that issue." [Shrable v. Eaton Corp. (8th Cir. Oct. 3, 2012)] (Mercer)

Federal Appellate Court Rules that SUB Payments are Not 'Wages' for FICA Tax Purposes
"The beauty of a SUB Plan is that it allows an employer to pay severance to former employees without those payments being subject to FICA taxation. Thus, the employer and the employee each avoid payment to the IRS 7.65% of the severance payment." (Winston & Strawn LLP)

Time to Prepare for 2013
"Some of the issues you may need to address before the end of 2012 include: Health Care Reform.... Determination Letter Filings.... Qualified Retirement Plan Amendments.... Corrections of Certain Deferred Compensation.... Evaluate Retirement Plan Service Provider Fee Disclosures.... Regular Annual Notices." (Holland & Hart)

Press Releases



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David Rhett Baker, J.D., Editor and Publisher
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