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November 6, 2012          Get Health & Welfare News  |  Advertise  |  Unsubscribe
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Administrative Assistant
for Shore Tompkins Actuarial Resources, LLC in IL

Attorney
for Berenbaum Weinshienk PC in CO

Plan Implementation Manager - Retirement Plan Services
for John Hancock in MA

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Webcasts and Conferences

Innovative Strategies for Communicating to ERISA Plan Participants
in California on November 15, 2012 presented by Western Pension & Benefits Council - Orange County Chapter


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[Official Guidance]

Disaster Relief Relating to PBGC Deadlines in Response to Hurricane Sandy in New York
"The disaster area consists of Bronx, Kings, Nassau, New York, Queens, Richmond, Rockland, Suffolk and Westchester counties. If IRS adds additional areas in connection with those filing extensions, any person responsible for meeting a PBGC deadline that is located in those additional areas will also be a Designated Person." (Pension Benefit Guaranty Corporation)


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[Official Guidance]

Disaster Relief Relating to PBGC Deadlines in Response to Hurricane Sandy in New Jersey
"The disaster area consists of Atlantic, Bergen, Cape May, Essex, Hudson, Middlesex, Monmouth, Ocean, Somerset and Union counties. If IRS adds additional areas in connection with those filing extensions, any person responsible for meeting a PBGC deadline that is located in those additional areas will also be a Designated Person." (Pension Benefit Guaranty Corporation)

[Official Guidance]

Disaster Relief Relating to PBGC Deadlines in Response to Hurricane Sandy in Connecticut
"The disaster area consists of Fairfield, Middlesex, New Haven, and New London Counties and the Mashantucket Pequot Tribal Nation and Mohegan Tribal Nation located within New London County. If IRS adds additional areas in connection with those filing extensions, any person responsible for meeting a PBGC deadline that is located in those additional areas will also be a Designated Person." (Pension Benefit Guaranty Corporation)

Updated National Retirement Risk Index Indicates More Americans in Trouble
"[O]ver half of households may be unable to maintain their standard of living in retirement. Between 2007 and 2010, the NRRI jumped by 9 percentage points due to: the bursting of the housing bubble (4.5 percentage points); falling interest rates (2.2 percentage points); the ongoing rise in Social Security's Full Retirement Age (1.6 percentage points); and continued low stock prices (0.8 percentage points). The hardest hit households were those nearing retirement and those with high incomes." (Center for Retirement Research at Boston College)


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Indiana State Pension Leads Nation in Facing New Reality of Low Interest Rates
"he State of Indiana's public pension fund has become the first public fund to drop its projection of future investment returns to below 7.0 percent.... Currently, most state pension funds have projected long-term investment returns ranging from 7 percent to 9 percent. Of those, 45 have been lowered since the 2008 financial crisis." (Institutional Investor)

IRS Memorandum Provides Informal Guidance on Vesting Requirements for Governmental Plans (PDF)
"A recently released memorandum from the Acting Director of EP Rulings and Agreements provides informal guidance on the vesting requirements for governmental 401(a) plans. Dated April 30, 2012, but only publicly released recently, the memorandum provides guidance to the reviewers of determination letter applications for governmental plans in the form of certain 'safe harbor' vesting provisions that will permit a favorable determination letter to be issued to a governmental plan." (Groom Law Group)

Oh, MAP-21, Our Plan Now Looks Better on Paper But We're Still Underfunded -- Now What?
"Last year, the funding level for the company's retirement plan was only 72%. Benefits were restricted, participants were grumbling, and the CFO was wondering why millions of dollars were being shoveled into a frozen defined benefit (DB) plan. Then, suddenly, the Moving Ahead for Progress in the 21st Century Act (MAP-21) swoops in and saves the day. Now the plan is at 87% funding. Whew! What a relief! Um? So what comes next?" (Retirement Town Hall)

District Court Rejects PBGC Interpretation of Controlled-Group Rules Under Tax Code and ERISA
"Previously, the [2007] PBGC [Appeals Board] Letter stood unaddressed by the courts as a troubling expression of position from a governmental agency, without necessarily reflecting a correct analysis of the law. Now, a [Massachusetts] federal district court, after labeling the PBGC Letter as 'unpersuasive' and even 'errant,' has expressly rejected the conclusions therein, in holding that the investment funds in the Sun Capital Partners case (and, by extension, the funds' other affiliates) is not responsible under the controlled-group rules for certain ERISA liabilities of one of the funds' portfolio companies." [Sun Capital Partners III v. N.E. Teamsters and Trucking Industry Pension Fund, Civ. Action No. 10-10921-DPW (D. Mass. Oct. 18, 2012)] (Dechert LLP)

Helping 401(k) Investors Choose Among Options: A Better Way
"The investment ends never justify the investment means, and plan sponsors and trustees looking to reduce fiduciary liability should know this more than anything else.... The fiduciary can best meet the needs of the beneficiaries by focusing exclusively on those needs of the beneficiaries and by pragmatically assessing the investment implications of those needs of the beneficiaries." (Fiduciary News)

Retirement Hopes Becoming More Bleak for Young Workers Amid Economic Downturn
"'We have a looming retirement income crisis in this country,' said Diane Oakley, executive director of the National Institute on Retirement Security. 'The problem is we won't see the ultimate brunt of it until 30 years down the road when it is too late to do something about it.'" (The Washington Post; free registration required)

Bonds Buoy Gains by U.S. Public Pensions in Third Quarter; Median Gain is 4.67 Percent
"U.S. public pensions ended the third quarter with a median gain of 4.67 percent as bond managers beat their benchmarks by buying riskier debt and fixed-income securities with longer maturities, Wilshire Associates said. The gains raised returns for state- and local-government pensions with assets of more than $1 billion to 8.2 percent for the 10-year period through Sept. 30, the first quarter since 2007 that funds of that size surpassed 8 percent over a decade." (Bloomberg BusinessWeek)

U.S. Corporate Pension Plan Funding Takes Step Backwards In October
"The modest funding gains of U.S. corporate pension plans in September were erased [in October], with the aggregate deficit in pension plans sponsored by S&P 1500 companies increasing by $26 billion during October, to $619 billion ... This deficit corresponds to an aggregate funded ratio of 72% as of October 31, 2012. This is slightly above the record low funded ratio of 70% seen at July 31, 2012, at which point the aggregate deficit was $689 billion." (Mercer)

October Slightly Scarier for Corporate Pension Funding
"The funded status of S&P 1500 companies' DB plans decreased one percentage point to 72% in aggregate, as studied by Mercer, while funding for the typical corporate DB plan decreased 1.4 percentage points to 73.6%, according to BNY Mellon. The declines in both reports were attributed to poor equity market returns and a modest discount rate decrease." (Pensions & Investments)

401(k) Participant Behavior in a Volatile Economy
"Using data from administrative tax records and household surveys, this paper examines how participants responded to these periods of economic expansions and contractions by documenting changes in 401(k) participation, contributions, and investment allocation from 1990 through 2010. Controlling for earnings, job changes, and other household factors, we show that 401(k) participation and contributions decline during recessions. The Great Recession could lower the 401(k) assets of the typical 30-year-old by as much as 9 percent at age 62." (Center for Retirement Research at Boston College)

Funded Status of U.S. Corporate Pensions Declines to 73.6 Percent
"Falling interest rates and a pause in the 2012 U.S. equities rally contributed to a 1.4 percentage-point decline in the funded status of the typical U.S. corporate pension plan in October ... For the year through October 31, the funded status has declined 1.7 percentage points to 73.6 percent ... Assets for the typical plan fell 0.7 percent as the equities rally in international markets failed to offset the decline in U.S. markets ... Liabilities for the typical plan increased 1.1 percent as the Aa corporate discount rate declined six basis points to 3.72 percent[.]" (BNY Mellon)

[Opinion]

Online Calculator Shows Value (and Taxpayer Cost) of Generous Public Pensions
"State and local government employees collect taxpayer-guaranteed pension benefits that are far more generous than those available to most private-sector workers. The cost of traditional defined-benefit public pensions is unsustainable and has severe financial consequences that will affect generations of Americans. Use [this] calculator ... to estimate the pension that you would collect after a career as a general government employee and to see how much money you would need to save on your own (your total annuity cost) to replicate that guaranteed income stream in the private sector." (CalWatchdog)

[Opinion]

Setting the Record Straight on the Need for Defined Benefit Pensions
"Our country's retirement crisis is serious stuff. Half of near retirees have no savings whatsoever. And this startling statistic has to do with the absence of pensions, not because of them. The real problem is that fewer and fewer middle class workers have access to defined-benefit pension plans, which are still the best avenue to retirement security." (The Century Foundation)

UK Eyes Higher Allowances for Pension Investments in Infrastructure
"Local government pension funds are allowed to invest only up to 15 percent of their assets in partnership structures, such as limited partnerships, which are common among real estate, private equity and infrastructure funds. The new proposals increase the current limit to 30 percent." (Reuters)

[Opinion]

Will California Bankruptcies Rock Municipal Bonds?
"The potential nightmare for CalPERS and other US public pension funds cannot be underestimated, which is why CalPERS is pursuing all legal means to secure these pension payments.... Indeed, bondholders aren't the only ones that should be worried. As cities slash costs and miss pension payments, taxpayers and retirees will feel the pain too." (Pension Pulse)

Benefits in General; Executive Compensation

Dodd-Frank's Impact on Compensation Administration
"In response to this new regulation, financial institutions will need to implement new compensation tools, infrastructure, data architectures and resources to meet the Federal Regulators' monitoring and reporting requirements.... [T]hey must identify covered employees, submit annual reports disclosing their respective incentive compensation plans to the appropriate Federal Regulator and describe how risk taking behavior is mitigated through policies and procedures governing these incentive plans. Financial institutions that adapt most effectively to the regulatory changes could gain a competitive advantage by reducing unnecessary costs, improving productivity and becoming more flexible and efficient in their compensation administration processes." (Deloitte)

Leave-Sharing Programs, Other Steps to Assist Employees Affected by Hurricane Sandy
"In the aftermath storms like Hurricane Sandy, generous employees often want to share their paid leave with employees adversely affected by the storm. Employers can set up leave sharing banks to allow donated paid leave to be used by employees that need time off on account of the storm. Internal Revenue Service Notice 2006-59 provides guidance for setting up these programs to avoid adverse tax consequences." (Jackson Lewis LLP)

Managing the Hidden Cost of Sick Days
"In the U.S., the average employer cost for unplanned absences is $1,000 per employee each year. This is the second-highest benefit cost to employers after medical benefits. Employers should be thinking about how to address unexpected absences, considering that American companies lose 2.8 million workdays a year from them." (The Dolan Company)

Employers May Provide Tax-Free Relief To Employees Hit By Storm
"Employers can provide benefits, tax-free, to employees who are victims of Superstorm Sandy under tax code Section 139 and Internal Revenue Service guidance, a practitioner said Oct. 30. Section 139 provides that, in the case of a presidentially declared disaster, an employer can give cash or benefits to assist employees. The payments are exempt from federal income tax and employment taxes, no substantiation is required from the employees, and the employer is able to deduct the payments[.]" (Bloomberg BNA)

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