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October 29, 2012          Get Health & Welfare News  |  Advertise  |  Unsubscribe
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Employee Benefits Jobs

Part Time On Call Retirement Planning Consultant
for Diversified in CA, HI, MO, NC, UT

Pension Administrator
for Alliant Insurance Services, Inc. in NY

Director, Transamerica Research Foundation - Healthcare
for Transamerica in MD

Director - Relationship Manager
for Charles Schwab & Co., Inc. in AZ, OH, TX

Investment Consulting Senior Manager
for Charles Schwab & Co., Inc. in OH

Pension Analyst
for Benefit Plans Plus, L.L.C. in IL, MO

Pension Administrative Assistant
for Mercer Advisors in AZ

Senior Client Executive
for Diversified in IA, IL, MN, MO

Plan Administrator
for Dana Consulting Group in IL

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Webcasts and Conferences

SBCs for Employer Health Plans Revisited: Compliance for Major Medical, HRAs, and Other Plans
Nationwide on October 24, 2012 presented by Thomson Reuters / EBIA

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San Bernardino, Compton Stop Paying CalPERS
"For financially struggling local governments, an unauthorized halt or delay in payments to the pension fund is not something CalPERS wants to become widely viewed as a workable option. CalPERS can offer some relief in hardship cases. But stretching out payments is limited aid for a deeply distressed local government, hit by falling tax revenue in a down economy and, in some cases, years of alleged overspending and mismanagement." (CalPensions)


Explore advantages and disadvantages of cash balance plans!

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Showdown Coming on Whether New Pension Law Ends Abuses in Contra Costa, California
"The Contra Costa retirement board members are being told by their lawyer that new state legislation requires them to finally end abusive and costly pension spiking practices they have allowed for years. The new law ... prohibits counting most payments at termination for unused vacation and sick leave as income when computing pensions. It takes effect Jan. 1, so board action could spark an end-of-the-year retirement rush by older county workers who want to grab fatter pensions before the rules change. Some labor representatives on the retirement board are balking at implementing the new law. And the Deputy Sheriffs Association has issued a veiled threat to sue on the grounds that the change would unconstitutionally violate past promises." (Silicon Valley MercuryNews)

Investing for Cash Balance Plans
"According to the Bureau of Labor Statistics, about one in three private industry employees covered by a defined benefit plan is enrolled in a cash balance plan. While the devil is in the details,... many investment allocations for cash balance plans are not ideally aligned with the nature of the cash balance liability." (Pensions & Investments)

Los Angeles Gears Up for Ballot Battle Over Proposed Changes in Pension Formula for New Employees
"A referendum, if 250,000 signatures are collected by the end of the year, will spice up the political campaign to replace the city's Democratic mayor as public pensions have become a hot political topic in California and across the nation. The overhaul backed by the leaders of the second-largest U.S. city includes raising the retirement age for new non-safety workers to 65 from 55 and new formulas to reduce their pension payments. New hires also face higher contributions to help with unfunded pension liabilities. The changes are estimated to save Los Angeles $4 billion over 30 years, with savings of $30 million to $70 million over the next five years." (The New York Times; free registration required)

Pension Buyouts: Who Wins and Who Loses?
"If your employer offers you a lump-sum cash-out, it's really placing two bets: (1) That the assets in the pension trust will perform worse than the assumptions the IRS allows your employer to use when calculating lump-sum payments. Currently, the effective interest rates used for this purpose are around 4 percent to 5 percent per year. So employers are betting that their pension assets will consistently earn less than these percentages in future years. (2) That you and your co-workers will live longer as a group than the average life expectancy. Cashing you out now reduces their exposure should you live a long time. This is an important point -- lump-sum cash-outs are based on average life expectancy." (CBS MoneyWatch)

Are Your Employees Worried About Retirement?
"Are people really concerned, or is this just an echo from all those negative articles about the 'retirement crisis?' Do people even know how much they need to retire? And, if they are concerned, how can we convince them that their defined contribution plan is the single, best way to save for retirement?" (Plan Sponsor Council of America)

Tax Consequences of Plan Disqualification for Highly Compensated Participants
"The highly compensated participant argued that only the portion of the benefit that accrued during 2004, which was the only year for which the statute of limitations was still open, could be included in his income. The IRS argued that ... even though the benefits had accrued over a number of years,... the participant should be taxed on the entire vested benefit in the year the plan was disqualified. The court agreed with the IRS: Because the participant had never paid tax on any of the accrued benefit, the entire vested benefit was included in income in that year." [Yarish v. IRS, U.S. Tax Court No. 24096-08 (Oct. 4, 2012)] (BenefitsNotes, a blog by Leonard, Street and Deinard)

Defined Benefit Pension Plan Distribution Decisions by Public Sector Employees
"[O]ver two-thirds of public sector workers under age 50 separating prior to retirement from public plans in North Carolina left their accounts open and did not request a cash distribution from the pension system within one year of separation. Furthermore, the evidence suggests many separating workers, particularly those with short tenure, may be forgoing important benefits due to lack of knowledge, understanding, or accessibility of benefits. In contrast to prior research in the private sector, we find no evidence of a bias toward cash distributions for public employees in North Carolina." (National Bureau of Economic Research; purchase required)

The Revenue Demands of Public Employee Pension Promises
"Without policy changes, contributions would have to increase by 2.5 times, reaching 14.1% of the total own-revenue generated by state and local governments. This represents a tax increase of $1,385 per household per year, around half of which goes to pay down legacy liabilities while half funds the cost of new promises." (National Bureau of Economic Research; purchase required)

Linking Benefits to Investment Performance in U.S. Public Pension Systems
"This paper calculates the effect that introducing risk-sharing during either retirement or the working life would have on public sector pension liabilities. [The first model considers] the introduction of a variable annuity for the retirement phase, modeled on the Wisconsin Retirement System, in which positive benefit adjustments are granted only if asset returns surpass 5% but benefits cannot fall below their initial levels. This change would reduce unfunded accrued liabilities by around 25%, and would lower the annual contribution increases required to target full funding in 30 years by 11%. If there is no minimum benefit guarantee, the impact of introducing variable annuities is substantially larger: the unfunded liability would fall by over half and required annual contribution increases would fall by 44%." (National Bureau of Economic Research; purchase required)

Funded Status of Some United Kingdom DB Plans Declines in 2012
"In the UK, the funded status for DB schemes has, despite fluctuations, remained broadly level over the period until September when there was a sharp improvement to 92%. Those in the US have declined from 75% to 73% while those in Canada have declined from 87% to 83%. The cause of movement in each market is primarily declining discount rates combined with lacklustre asset performance[.]" (Mercer)

Illinois Rally Defies Warning of Pension Insolvency
"Debt sold by Illinois issuers is rallying the most in 20 months in the face of a warning that the state's pensions may run out of money and drain funding from education, infrastructure and local aid.... Debt-holders in the lowest-rated U.S. state by Moody's Investors Service are willing to take the risk because ... Illinois is one of seven states with the strongest legal provisions for paying debt service on its general obligations[.]" (Bloomberg BusinessWeek)

Survey of DC Plan Executives Finds Interest in Guaranteed Income Distribution Options
"Among DC plans without in-plan retirement income solutions, the biggest reasons for inaction were waiting for 'products to mature and gain broader adoption' (60%) and waiting for clearer fiduciary protection from the DOL (39%), the survey said. Other popular reasons were high fees (35%) and the lack of portability across record-keeping platforms (18%). Respondents were asked to provide their top two reasons." (Pensions & Investments)

More Employers Using Auto-Escalation of 401(k) Employee Contribution Rates
"Experts have long bemoaned the 3 percent contribution as far too low. They say people need to sock away 12 to 17 percent of their earnings to accumulate enough to retire on, numbers that are not unusual in Dutch and Australian retirement plans. But because employees rarely change whatever default rate their employer sets, the theory goes, plan sponsors will have to raise that rate for them." (Institutional Investor)

Fiduciary Liability Risks for Registered Investment Advisors
"[S]ome financial careerists may be woefully unaware of the risks they face as ERISA fiduciaries.... RIAs face both personal and professional liability. Whether tasked with discretionary authority over how to allocate an ERISA plan portfolio or giving advice with limited control over assets, these investment professionals have a lot to lose." (Pension Risk Matters)

Huge South Korea Pension Fund Needs More Contributions, New Investments
"The world's third-largest state fund by assets is generating more than $2 billion a month in new net funding as contributions outpace payments, but by 2034 that will end as South Koreans retire and the working age population falls. By 2050, there will only be 1.5 people in work to support each pensioner, down from seven now, as birth rates have plunged from six babies per woman in the 1960s to just over one." (Reuters)

New Research Shows Retirees Are Drawing Down 401(k)s Sooner
"A new analysis by JPMorgan Chase & Co. of 1.8 million retirement plan participants concluded that last year, just 17% of them continued to hold assets in their 401(k) three years after retirement, down from 19% in 2008. The data suggest that more retirees are taking their money and bailing from their plan even sooner after they stop working than used to be the case." (Investment News; free registration required)

Tips for Avoiding Retirement Plan Beneficiary Designation Problems
"Here are six mistakes that can be avoided with proactive planning: Not naming a beneficiary.... Not listing contingent beneficiaries or contemplating disclaimers.... Lacking specifics in beneficiary designations.... Failing to keep designations up-to-date.... Failing to keep beneficiary designation forms on file.... Not considering the financial or emotional readiness of beneficiaries." (Investment News; free registration required)

Choosing the Optimal Level of Retirement Income: A Moving Target
"Trying to figure out how much money an individual or couple needs to live on in retirement is, to put it mildly, a complicated business.... [T]rying to hit that target can feel like aiming at a bulls-eye that is not only moving, but moving fast, and zig-zagging away from the bouncing, moving vehicle in which you find yourself." (Nevin Adams via EBRI)

Sixth Circuit's Fiduciary Duty Decision Is Good News for ERISA Section 3(38) Investment Managers (PDF)
"One of the many responsibilities of an ERISA Section 3(38) Investment Manager is the selection, monitoring and replacement of investment alternatives including a Qualified Default Investment Alternative (QDIA).... The benefit of establishing and adhering to a formal QDIA process is a reduction in fiduciary liability the benefits of which can be illustrated in a recent decision by the Sixth Circuit Court. According to the Court, a plan fiduciary does not breach their fiduciary duty when a participant's account balance is transferred to a QDIA without explicit consent." (FRA / Plan Tools)

Supreme Court Denies Review of Second Circuit Cases Adopting Moench Presumption for Fiduciaries of ERISA-Governed Plans
"The U.S. Supreme Court recently refused to grant certiorari for two 2011 Second Circuit stock drop decisions that had adopted the 'Moench presumption' for determining whether fiduciaries imprudently invested assets in employer stock.... As extended to 401(k) plans, this presumption makes it more difficult for a plaintiff to prevail in a lawsuit against a plan fiduciary based on claims that the fiduciary acted imprudently in offering employer stock as an investment option in a 401(k) plan." (Ballard Spahr)

Regulation Z and Qualified Plan Contributions
"Can loan originators participate in a qualified plan if they have received income from loan originations and the company is using income from loan originations to fund the qualified plan?... With the release of Bulletin 2012-02, the [Consumer Financial Protection Bureau] has expressed the view that the compensation rules permit employers to use profits derived from loan originations to contribute to qualified plans." (McKay Hochman Co., Inc.)

GASB's New Pension Accounting and Financial Reporting Standards (PDF)
"This [article] offers a detailed explanation of the changes that apply to public pension plans and to the employers (and nonemployers) who contribute to the plans. In addition, it concisely summarizes the key changes in four tables[.]" (Gabriel Roeder Smith)


Why 401(K) Plans Don't Work In This Market
"Fees surrounding 401(k) plans have been a hot topic lately and they should be. Mutual funds, even today, are often structured to share fee revenue with record keepers and advisors. Record keepers and advisors have nothing to do with the investments in the fund and all fees collected by these two groups are basically overhead costs to the investors." (Seeking Alpha)

Benefits in General; Executive Compensation

December 31, 2012 Deadline for Amending Deferred Compensation Plans and Agreements: Timing Conditioned on Employee Action (PDF)
"The recent IRS guidance focuses on those severance and other deferred compensation plans and agreements that condition the payment of deferred compensation on the employee's taking some action -- typically, executing a non-competition agreement, a non-solicitation agreement, or a release of claims. These arrangements are most likely found in: employment agreements; severance plans and separation agreements; change-in-control arrangements; performance pay arrangements; and equity incentive arrangements." (Reid and Riege, P.C.)

ISS Unveils Proposed 2013 Policies Focusing on Say-on-Pay Analysis
"It remains to be seen whether the proposed changes will address the criticisms of ISS's methodologies on peer groups and pay for performance. The peer group change continues to use industry codes even though the illogical peer group results investors complained about were produced by ISS's use of those codes. Additionally, many of the details around the realizable pay calculation are yet to be determined, making it difficult to assess." (HR Policy Association)

Class Action Lawyers Achieve Victory in Executive Compensation Litigation
"[S]hareholder derivative and class action litigation over executive compensation matters is on the rise and the plaintiffs' bar continues to develop new theories. Unfortunately, their latest theory involves efforts to derail annual shareholder meetings because of allegedly inadequate [proxy statement] disclosure issues." (Winston & Strawn LLP)

Miller Chevalier Focus on Employee Benefits, October 24, 2012
This issue includes: Health and Welfare: Upcoming Healthcare Reform Deadlines and Effective Dates; Qualified Plans: Upcoming Amendment and Disclosure Deadlines; Executive Compensation: Section 409A: Relief Period for Release-Contingent Payments Coming to a Close. (Miller & Chevalier Chartered)

First Circuit Enforces Plan-Imposed Limitations Period for Benefits Claims
"The First Circuit is among a growing number of jurisdictions that have enforced plan-imposed limitations periods. A plan-imposed limit may be useful to avoid lengthy statute of limitations periods or to create a uniform limitations period for a plan that operates in multiple states.... Plan-imposed limitations periods have been challenged based on plan or insurer conduct, ambiguous or misleading statements, or inadequate notice." [Santaliz-Rios v. Metropolitan Life Ins. Co., 2012 WL 3734344 (1st Cir. 2012)] (Thomson Reuters / EBIA)

Gabriel Roeder Smith's NewsScan for October 26, 2012 (PDF)
This issue includes the following articles: GASB Responds to Questions Regarding the New Pension Standards; CBO Releases Social Security 2012 Long-Term Projections; ICMA-RC/SLGE Issues Brief on Public Sector Retirement Plan Changes; SGLE Releases Issue Brief on Wellness Programs for Public Employees; and Pew Research Center Finds More Americans Concerned About Financing Retirement. (Gabriel Roeder Smith)

October ERISA Advisory Council Meeting Rescheduled for Next Month
The ERISA Advisory Council meeting scheduled for October 30-31 will be held on November 26-27. The location of the rescheduled meeting will be announced at the linked page. (Employee Benefits Security Administration)

Press Releases

AHIP Launches New Health Care Spending iPad App
America’s Health Insurance Plans (AHIP)

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