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BenefitsLink Retirement Plans Newsletter

October 23, 2012          Get Health & Welfare News  |  Advertise  |  Unsubscribe
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Employee Benefits Jobs

Compliance Manager - Retirement
for TRI-AD in ANY STATE

Associate Retirement Plan Administrator
for Harbridge Consulting Group (a BPAS Company) in NY

Enrolled Actuary
for Matthews Benefit Group, Inc in FL

Defined Benefit Calculation Analyst - ACG
for Diversified in MA

Defined Benefit Plan Administrator
for Growing Westchester County NY Actuarial and Administration Firm in NY

Pension Administrator
for Total Benefit Services, Inc. in CA

Retirement Plan Administrative Assistant
for Total Benefit Services, Inc in CA

Retire Secure Employee Benefit Specialist
for Principal Financial Group in MA

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Webcasts and Conferences

Ethics Case Study
Nationwide on October 25, 2012 presented by McKay Hochman Co., Inc.

Rehires, including HEART and USERRA
Nationwide on January 23, 2013 presented by McKay Hochman Co., Inc.


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In-kind Contributions to Defined Benefit Plans
"The market turmoil of recent years has had a significant impact on the financial health of employer sponsored defined benefit pension plans ... The practical effect of ... low interest rates has been to increase the extent to which many plans are underfunded. According to recent industry surveys, the plan funding ratio for many plans remains less than 80%.... For some companies, using cash to fund an improvement in a plan's funded status is not an available option." (Groom Law Group)


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2012 Q&As: PBGC Meeting with ABA Joint Committee on Employee Benefits, May 9, 2012 (PDF)
17 pages. Topics addressed include Premiums; PBGC Governance; Standard and Distress/Involuntary Plan Terminations; PBGC Reporting and Penalties; ERISA Sections 40652(e), 4063 and 4064; Multiemployer Plan Issues; and extensive summary of Litigation. Excerpt: "The responses reflect the unofficial, individual views of the government participants as of the time of the discussion, and do not necessarily represent the official position of PBGC." (Joint Committee on Employee Benefits, American Bar Association)

Gaps Exist Between Plan Sponsors and DC Plan Consultant Recommendations
"The gaps exist in a range of issues from the number of investment options to the assessment of fiduciary liability to the strategies to help DC participants achieve strong investment results, according to [a new] survey of investment consultants and DC plan executives. The gap reflects ... the slow transition by DC plans to emphasizing an outcomes-based goal from an asset-accumulation goal[.]" (Pensions & Investments)

Often Overlooked When Diversifying Assets: Long-Term Changes in Asset Class Correlations
"[S]tatic diversification across multiple asset classes is not sufficient. An adequately diversified portfolio should also be diversified over time and over different economic regimes." (Investment News; free registration required)

Calm Down: Three Common Investor Mistakes All Retail and 401(k) Investors Should Avoid
"Common Mistake #1: Trying to 'beat' the Market ... #2: Trying to 'play it safe.' ... #3: Trying to 'time' the Market ... If we could condense all three of these common investing mistakes into one word, that word would be 'emotion'." (Fiduciary News)

What Is the Correct Standard of Prudence in Employer Stock Cases? (PDF)
"[I]nvestment in common stock can be judged on a uniform basis in accordance with a well-crafted retirement portfolio and can ultimately be deemed a prudent investment.... [G]iven the trend of increasingly substantial litigation costs and the need to review the overall performance of a retirement investment only with a 'precipitous decline,' clearly the proper standard courts should use to analyze employer stock cases in ERISA litigation is a fiduciary presumption of prudence, as fluctuations in the market will likely always occur." (SNR Denton via John Marshall Law Review)

Transparency in 401(k) Fees May Lead to Churning
"Historically, the allocation of 401(k) administrative fees among [various] parties involved a bundled, revenue-sharing model in which investment fees paid for some administrative expenses. Now that the lid is off on who is getting what, there is a heightened chance some plan sponsors may unbundle the process.... Whether or not the transparency leads to some churn is open to debate." (Treasury & Risk)

U.S. to Expand Probe of Crediting of Veterans' Military Service by New York City Pensions
"The U.S. Attorney's Office in Manhattan said in a statement on Monday that it was broadening an existing investigation into benefits for police officers to include retirees from any city agency who collect a pension from the city.... Under a 1994 anti-discrimination law dealing with veterans who return to work, an employer must take into account the compensation that the service member would likely have earned had he or she not performed military service[.]" (The New York Times; free registration required)

TIAA-CREF Opens 'Socially Responsible Investing' Bond Fund
"To date, the world of socially responsible investing (SRI) has been largely focused on equities, while 'green bond' proponents have struggled to get a market off the ground. But the budding market got a boost in late September when TIAA-CREF, the New York City-based retirement plan provider with $481 billion in assets under management, announced the launch of its Social Choice Bond Fund, an actively managed mutual fund, seeded with $50 million in start-up capital." (Institutional Investor)

50,000 Employees Have Chosen to Participate in New Roth Option Under Federal Employee Thrift Saving Plan
"As of Sept. 30, a total of 51,354 federal employees had invested about $48.7 million into Roth ... The number is in keeping with the steady increase officials projected: At the end of August, about 20,000 federal employees had invested about $13 million in the Roth plan. The TSP Roth option, unveiled in May, allows beneficiaries to invest money that already has been taxed and cannot be taxed again upon withdrawal, unlike traditional TSP investments." (GovExec.com)

Women Worried About Retirement But Not Planning Ahead
"[E]ven though two-thirds of women were not confident that they would be able to live their chosen retirement lifestyle, only 26% spend time investigating financial products that could help them.... LIMRA found that only a third of women said they were actively involved in monitoring and managing their retirement savings compared with 46% for men. Almost a third, 32%, had done no retirement planning at all compared with 28% for men." (Financial Planning)

Funding Study Finds Public Pension Plans Are Not Systematically Underreporting Liabilities
"Although much negative attention has been given to the state of pension plans in the United States, the findings of the Milliman study indicate that on the whole the plans are aware of their funding shortfalls, and are using reasonable investment return assumptions to perform measurements of their liabilities." (Retirement Town Hall)

Court Rules Cash Balance Plan Not Allowed to Reduce Pre-Conversion Early Retirement Subsidy
"Under ERISA's anti-cutback rules, a converted cash balance plan may not reduce a participant's early retirement subsidy as provided under a pre-conversion defined benefit plan, even though the participant did not satisfy the conditions for the subsidy until after the conversion, the [Sixth Circuit] Court of Appeals ... has ruled. On remand, the district court must make a factual determination as to whether the plan did actually reduce the participant's benefit." [Falllin v. Commonwealth Industries, Inc. Cash Balance Plan (6th Cir.)] (Wolters Kluwer Law & Business)

A Look at Private-Sector Retirement Plan Income After ERISA, 2011 (PDF)
"ERISA was primarily aimed at 'assuring the equitable character' and 'financial soundness' of defined benefit (DB) pension plans ...The movement away from employer-managed DB plans toward employee-directed DC plans -- or, in the case of assets transferred to an IRA, toward accounts outside of the employer plan system -- has raised concerns [focused] on whether Americans will have adequate retirement resources and whether they have the ability to manage assets prior to and in retirement.... [T]his paper examines the role that private-sector pensions historically have played in providing retirement income." (Investment Company Institute)

More People in Their 30s and 40s Worrying about Financing Retirement
"[C]oncerns about retirement financing are now more heavily concentrated among younger and middle-aged adults than among those closer to retirement age -- a major shift in the pattern that had prevailed at the end of the recession. In 2009 it was 'Gloomy Boomers' in their mid-50s who were the most worried that they would outlive their retirement nest eggs. Today, retirement worries peak among adults in their late 30s -- many of whom are the older sons and daughters of the Baby Boom generation." (Pew Research Center)

Study Shows Retirement Worries Growing Among Younger Americans
"Younger Americans in their late 30s are now the group most likely to doubt they will be financially secure after retirement, a major shift from three years ago when baby boomers nearing retirement age expressed the greatest worry.... As a whole, retirement worries rose across all age groups -- roughly 38 percent of U.S. adults say they are 'not too' or 'not at all' confident that they will have sufficiently sized financial nest eggs ... That's up from 25 percent in 2009." (The New York Times; free registration required)

Very Few People Expect to Retire Completely
"A recent BlackRock and Boston Research Group poll of 1,002 workers with retirement accounts at work and 1,035 retirees who previously participated in a 401(k) or similar type of retirement plan found that workers are expecting to pay for and experience retirement in a way that contrasts with the lifestyle of current retirees.... Many current workers plan to stay on the job until their mid or late 60s.... Only 15 percent of current workers envision a retirement that involves not working at all." (U.S. News & World Report)

Baltimore County Pension System Ruled Age-Discriminatory
"A federal judge has ruled that Baltimore County's pension system discriminates against beneficiaries because older workers were required to pay more toward their retirement than younger workers.... In a statement, EEOC regional attorney Debra Lawrence said the county provided no financial justification for the practice." (Baltimore Sun)

403(b) Plan Compliance Checklist (PDF)
"This checklist is a 'quick tool' to help you keep your plan in compliance with many important tax rules.... If you answered 'No' to any of the above questions, you may have a mistake in the operation of your 403(b) plan. This list is only a guide to a more compliant plan, so answering yes to each question may not mean your plan is 100% compliant. Many mistakes can be corrected easily, without penalty and without notifying the IRS." (Internal Revenue Service)

Retirement Plan Fiduciary Compliance Checklist (PDF)
This article lists areas of review that retirement plan fiduciaries may want to consider in fulfilling their fiduciary responsibilities. Includes specific items under general headings of Investments, Administration, Plan Audit, Participant Communications, and Limiting Liability. (T. Rowe Price)

Customizing a Target Date Glide Path: Thoughts and Considerations (PDF)
"Although intuitive, investment for retirement is not about realizing the highest total return time after time. Investment for retirement is about setting a realistic asset goal at retirement that would be sufficient to supplement a lifetime of income ... The danger is that the desired outcome is not realized at the end of a working career. The three most obvious risks are investment risk, inflation risk and shortfall risk due to under-funding or living too long." (Chao & Company, Ltd.)

Potential Effects on U.K. Public Employee Pension Benefits If Proposed Reforms Are Enacted
"[A]nalysis suggests that the [U.K.] Coalition Government's proposed reforms to the NHS, Teachers, Local Government and Civil Service pension schemes will reduce the average value of the benefit offered across all scheme members by more than a third, compared to the value of the schemes before the Coalition Government's proposed reforms. Across the four largest public service pension schemes the value of the schemes reduces, on average, from 23% of a scheme member's salary before the reforms to 15% of a scheme member's salary after the Coalition Government's proposed reforms." (Pensions Policy Institute)

International Law Firm's Report Says Pension Plan Trustees Could Face Liability by Ignoring Potential Impact of Climate Change
"The report on fiduciary duty of trustees of pension ... funds 'indicates there are significant legal risks in the event of financial losses caused by climate change impacts, both physical and regulatory,' according to a statement from The Asset Owners Disclosure Project, an independent global not-for-profit organization focused on protecting retirement savings from the risks posed by climate change. AODP commissioned the law firm of Baker & McKenzie 'to study the evidence for trustee obligations over climate change,' a statement about the report said." (Pensions & Investments)

Benefits in General; Executive Compensation

'Top 250' Report on Long-Term Incentive Grant Practices for Executives, 2012 Edition (PDF)
"Key findings ... include the following: (1) For the second consecutive year, stock options are outnumbered by long-term performance shares,... while the use of time-based restricted stock awards and long-term cash plans remains largely unchanged. (2) Stock options continue to decrease in prevalence ... but are not expected to go away ... (3) Two-thirds of companies use only one or two long-term incentive grant types, with stock options being the sole long-term incentive vehicle at only three percent of companies. (4) Use of TSR as a long-term performance measure increased by 18 percent, while revenue declined in popularity. (5) Vesting periods are split with about half of stock options and restricted stock awards granted with three year vesting periods, and half with vesting periods greater than three years." (Frederic W. Cook & Co., Inc.)

Federal Court Applies Dodd-Frank and Sarbanes-Oxley Act Whistleblower Protection to Employee's Complaints About Qualified Pension Plan
"The [Connecticut District] Court concluded that Kramer had a 'reasonable belief' that the pension plan matters implicate federal securities laws.... '[I]n order to obtain the protections of section 1514A, the conduct at issue need not have actually constituted a violation of the SEC rules or regulations -- by the language of the whistleblower provision, the whistleblower need only have reasonably believed that it was a violation.'" [Kramer v. Trans-Lux Corp., No. 3:11-cv-01424-SRU (D. Conn. Sept. 25, 2012)] (Winston & Strawn LLP)

Press Releases

NBCH Hosts Annual Employer Benefits Conference
National Business Coalition on Health

Colorado Health Plan Ratings Released
Colorado Business Group on Health



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