[Official Guidance]
Premium Rates Updated for MAP-21 on PBGC Web Site, Includes Rates for 2013
"The per-participant flat premium rate for plan years beginning in 2013 is $42 for single-employer plans and $12 for multiemployer plans. Variable-rate premiums For plan years beginning in 2013, the variable-rate premium for single-employer plans is $9 per $1,000 of unfunded vested benefits (UVBs) and is capped at $400 times the number of participants. Plans sponsored by small employers (generally fewer than 25 employees) may be subject to an even lower cap. Multiemployer plans do not pay a variable-rate premium."
(Pension Benefit Guaranty Corporation)
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PBGC Makes '4062(e)asier'
"By not pursuing smaller plans and those of creditworthy sponsors, the PBGC is recognizing that, even under the statutory framework, it may not make sense in all circumstances to force a funding of a plan where the risk that the plan sponsor will turn the plan over to the PBGC is minimal. This is responsive to some practitioner concerns that 4062(e) liability was being assessed in some circumstances where the plan in question posed little to no risk to the PBGC."
(Benefits Bryan Cave)
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PBGC Changes 4062(e) Enforcement, Exempts Financially Sound Plans (PDF)
"PBGC said it is applying its new approach to its financial assurance program under Section 4062(e), but the agency is not creating 'new financial soundness standards.' In the accompanying FAQs, PBGC said the standards it will be using include 'common financial measures of financial soundness such as credit ratings, credit scores, indebtedness, liquidity, and profitability.'"
(Bloomberg BNA via Keightley & Ashner LLP)
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PBGC Announces Targeted Enforcement Policy for ERISA Sec. 4062(e) Cessation-of-Operations Rule (PDF)
"PBGC says creditworthy companies still have to report Section 4062(e) events. PBGC's announcement does not expressly state that small employers need not report.... Plan sponsors need to consider the impact of potential Section 4062(e) liability on business decisions such as transfers of operations and asset sales to avoid triggering inadvertent obligations for their underfunded plans."
(Buck Consultants)
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Pension Amendment to Illinois Constitution Fails
"With about 90 percent of the vote reported ... the proposed amendment had support from 56 percent of Illinoisans who voted on the measure. But that fell short of the two criteria needed for passage.... With lawmakers stalemated on how to fix a severely underfunded pension system, the amendment would have required a three-fifths vote of the Legislature -- instead of a simple majority -- to increase pension benefits for public employees. Illinois pension systems are in a financial mess, and some critics say legislators too often grant better benefits without worrying about the cost. The amendment was intended to rein in lawmakers who might ram a pension increase through the General Assembly."
(Chicago Sun-Times)
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Shrinking Number of Traditional Pensions May Not Be All Bad
"To be sure, those pensions tend to work well for highly compensated employees and for people fortunate enough to stay with the same employer most of their careers. But many workers have not been so lucky, mainly because high pay or lengthy tenure have always been more the exception than the rule."
(The Washington Post; free registration required)
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Developing an Alpha Beta Allocation for Your Company's Pension Plan
"By using a combination of index and actively managed investments, known as a 'core/satellite allocation,' a sponsor can diversify across a wide variety of asset classes and strategies while focusing on target return, volatility, and diversification. The starting point, setting goals for the portfolio, allows for monitoring of the results[.]"
(Retirement Town Hall)
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Drinker Biddle ERISA Newsletter for Retirement Plan Service Providers, November 2012 (PDF)
Articles include: [1] DOL Advances (and Then Retreats) on Brokerage Windows -- What May be Next? [2] 408(b)(2) Disclosures -- Now What? [3] A Ripe Opportunity for Advisers -- The Benefits of a Service Provider Agreement; [4] The DOL is Paying Attention to that Additional Compensation -- You Should Too; [5] DOL Service Provider Investigations; [6] Next Steps for Service Providers to "Open" Multiple Employer Plans.
(Drinker Biddle)
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MAP-21 May Make QSERP/SERP-Swap Strategy Viable Again
"MAP-21 should revive the availability of the ... [QSERP] strategy of shifting accrued or future benefits from a non-qualified retirement plan -- where contributions are not immediately deductible, cannot accumulate tax-free, are available to creditors, and cannot be rolled over -- to a qualified retirement plan -- where contributions are immediately deductible, can accumulate tax-free, are not available to creditors, and can be rolled over (and that is only a partial list of the advantages). What make this strategy legal is that most plan sponsors have additional room with the Internal Revenue Code's non-discrimination in benefits test."
(Winston & Strawn LLP)
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FTSE 350 Pension Underfunding Growth Resumes
"[T]he accounting deficit of defined benefit pension schemes in the UK increased over the month of October. According to Mercer's latest data, the estimated aggregate ... deficit for the defined benefit schemes of the FTSE350 companies stood at 55bn GBP (equivalent to a funding ratio of 90%) at 31 October 2012. This compares to a deficit figure of 42bn GBP at the end of September (funding ratio of 93%) and a figure of 61bn GBP at the end of December 2011 (funding ratio of 89%)."
(Mercer)
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CalPERS Reports 4.3% Return for Quarter on Strength of Public Equity Investments
"[P]ublic equities, the pension fund's largest asset class with $118.6 billion, posted a 7% return for the quarter. That return was just slightly below the pension fund's custom benchmark of 7.1%. Fixed income, the second-largest asset class at $43.2 billion, posted first-quarter returns of 3% compared to 2.4% for the custom benchmark."
(Pensions & Investments)
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Get Your (Social Security) Tricks on Route 66: Picking the Best Starting Date
"Financial advisers and their clients and intrigued by the idea that one spouse may be able to claim a reduced [Social Security] retirement benefit early while the other spouse delays claiming benefits until they are worth more later, maximizing their joint lifetime benefits. In between the extremes of collecting reduced benefits at the earliest age of 62 and maximum benefits at 70, there's room for a little magic in between."
(Investment News; free registration required)
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Plan Sponsors Use Annuity Settlements to Lighten the Pension Load
"There [has] been a steady stream of annuity deals since the 1980s, but the combined value of the Verizon and GM transactions eclipses the total value of annuity settlements in the U.S. over the past 20 years, says Jay Dinunzio, a senior consultant for employee-benefits brokerage Dietrich & Associates. Similar deals might not be available to all big pension plans that are looking to shrink their liabilities. That's because the insurance industry's capacity to absorb such large deals could be constrained by credit ratings and capital concerns."
(The Wall Street Journal Health Blog)
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AARP Proposals Aim to Promote Retirement Savings (PDF)
"This Research Report proposes retirement saving reforms designed to help boost saving among low- and middle-income households.... [P]roposals [are grouped] under five themes: (1) making saving easier, (2) making saving more rewarding, (3) strengthening the market infrastructure for saving, (4) providing private information to savers, and (5) improving public education for saving."
(AARP)
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National Retirement Risk Index Surges, Hits Both Young and Old
"The latest update to the Boston College Center for Retirement Research's National Retirement Risk Index (NRRI), underwritten by Prudential Financial (NYSE: PRU), reveals a nine percentage point jump to 53 percent of households at risk of being unable to maintain their pre-retirement standard of living in retirement.... Between 2007 and 2010, the retirement risk index for households between ages 50 and 59 rose by more than a third, increasing from 32 to 44 percent. The index also increased from 53 to 62 percent for 30-to 39-year-olds; the higher levels of risk for younger households reflect the increase in the Social Security full retirement age and the need for retirement income to last over longer life spans."
(Prudential)
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Benefits in General; Executive Compensation
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Year-End Amendment Deadline Under Section 409A Approaches for Severance Plans
"If severance benefits are treated as deferred compensation for Section 409A purposes, there are two alternatives for correcting defective provisions relating to severance benefits and releases: The arrangement can be amended to provide that payment will be made on a specified date, such as the 90th day after the employee terminates employment, or The arrangement can be amended to provide that if the period to sign the release spans two calendar years that the severance benefit will always be paid during the second calendar year."
(Miller Johnson)
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Corporate Directors' Pay Increases for Service on Compensation and Governance Committees
"[Mercer's] analysis of directors' compensation shows pay rose in 2011 for directors serving on compensation or governance committees at S&P 500 companies, yet pay remained stable for audit committee members.... Median baseline board compensation for directors at S&P 500 companies was $216,700 in 2011. Baseline board compensation included retainers and annual equity grants paid to each director for general board service, as well as fees for attending meetings of the entire board."
(Mercer)
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Press Releases
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