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November 8, 2012          Get Health & Welfare News  |  Advertise  |  Unsubscribe
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Employee Benefits Jobs

Defined Contribution Retirement Plan Administrator
for Third Party Administration Firm in Southern NJ in NJ

Benefits Advisor
for Silicon Valley Bank in CA

Vice-President & Regional COO - Orange County, CA
for Pension Group, Inc., a United Retirement Plan Consultants Company in CA

Consulting Support Specialist
for Northwestern Benefit Corporation of Georgia in GA

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

Executive Director
for Employee Benefits Network (WEB) in ANY STATE

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Webcasts and Conferences

Countdown to Year End - What You Need to Do to Keep Your Plans in Compliance
Nationwide on November 27, 2012 presented by ABA Joint Committee on Employee Benefits

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[Official Guidance]

Text of IRS Notice 2012-66: November 2012 Update for Weighted Average Interest Rates, Yield Curves, and Segment Rates (PDF)
IRS-updated figures under Code sections 412, 417, 430 and 431 -- the corporate bond weighted average interest rate, the three corporate bond segment rates, the 30-year Treasury securities weighted average interest rate, the three minimum present value transitional segment rates, and minimum present value segment rates required under MAP-21. (Internal Revenue Service)


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$5 Trillion Price Tag for Public Pensions
"According to a recent economic study, the cost to fully fund these promises would cost taxpayers $5 trillion over a 30-year period, or nearly $1,400 a year in higher state and local taxes and fees for every household in the country. Put another way, contributions to pay for public employees' retirement benefits now total 5.7 percent a year of all state and local taxes, fees, and other government charges. 'Government contributions to state and local pension systems must rise to 14.1 percent' to produce fully funded pension systems, the study said, and it will take 30 years to get there." (U.S. News & World Report)

A Fiduciary Approach to Providing Lifetime Income Distributions Under Defined Contribution Plans
"[P]ayments to a retiree may not commence for a number of years and then may be made over a period of several decades. The fiduciary challenge is to select a provider today that will be there in the future to make the payments, and the question is how a fiduciary acts prudently in making that selection.... While the [DOL] has provided a safe harbor regulation under ERISA for the selection of annuity providers, it does not provide a true roadmap for fiduciaries to follow.... [This article offers] a checklist of criteria that we believe constitute best practices in that process." (Drinker Biddle)

Mutual Funds and Lifetime Income Guarantees
"Mutual funds have long served as principal investment options for defined contribution plans.... There are two ways in which a fund may participate in an arrangement that provides a guarantee which the fund cannot provide itself. It may obtain the guarantee of a third party, or it may be offered in association with an insurance product that provides the guarantee." (Drinker Biddle via Mondaq; free registration required)

Sixth Circuit Declines to Apply Presumption of Prudence at Pleadings Stage in Stock Drop Case
"[The Sixth Circuit] reaffirmed its position that the Kuper presumption is not an additional pleading requirement and does not apply at the motion to dismiss stage. At the pleadings stage, the participants need only allege a fiduciary breach and a causal connection to losses suffered by the plan. The participants' allegation regarding the defendants' failure to remove the stock fund as an investment option despite their awareness of the fund's investments in the subprime mortgage market met this burden." [Dudenhoefer v. Fifth Third Bancorp (6th Cir.)] (Wolters Kluwer Law & Business)

Does Stock Market Performance Influence Timing of Retirement? (PDF)
"Media reports predicted that the stock market decline in October 2008 would cause changes in retirement intentions, due to declines in retirement assets.... While [the authors] find a weak negative correlation between stock returns and retirement intentions, further investigation suggests that this relationship is not driven by wealth shocks brought about by stock market fluctuations, but by other factors that are correlated with both the stock market and retirement intentions." (American Enterprise Institute)

401(k) Balances Grew 4 Percent in Third Quarter
"Employee 401(k) accounts grew more than 4 percent in the third quarter as a rising stock market boosted investment returns, and contributions from workers and their employers increased. Fidelity Investments [said] that the average balance of $75,900 at the end of the quarter was the highest since it began tracking the data in 2000. Three months earlier, the average account balance among the 12 million accounts that Fidelity administers was $72,800." (The Washington Post; free registration required)

Shift from DB to DC Retirement Plans Creates Generation of Workers Unable to Retire
"[L]arge numbers of baby boomers have 401(k) balances that are inadequate to fund a traditional retirement. To make matters worse, most retiring workers don't know how to turn their nest eggs into reliable retirement income. Employers also haven't provided much help by offering retirement income options in their defined contribution plans." (CBS MoneyWatch)

Cult of Investment in Equities Killed Off by Pension Funds in Great Britain
"UK pension funds are holding more bonds than equities for the first time since the so-called cult of equity in the 1950s, say leading City fund managers.... Pension funds have been slowly switching back to bonds in an attempt to beat the volatility of equity markets and receive guaranteed income streams to meet pension payments.... UK funds hold 43.2 per cent in gilts and fixed interest compared with 38.5 per cent in equities." (CNBC)

Measuring the Economic Value of Pensions: Calculation Confusion Has Implications for Social Security
"The aim of this paper is to increase understanding of the importance of pensions and Social Security as sources of income and wealth in retirement.... [Current Population Survey data from the U.S. Bureau of Labor Statistics] on pension incomes received in retirement understate the full contribution pensions make to supporting retirees. If one is to avoid understating the role of pensions, a great deal of caution is required. Pension income and wealth measures vary when they are measured for the same person, and for the same pension at different times in the life cycle." (University of Michigan Retirement Research Center)

Examining Barriers to Later Retirement: Increases in the Full Retirement Age, Age Discrimination, and Physical Challenges
"[This study addresses] three questions. First, how do age discrimination protections affect the labor market transitions of workers directly affected by increases in the [full retirement age]? Second, how do physical challenges at work influence the employment transitions of older workers for whom public policy is trying to delay retirement? And third, do age discrimination protections influence the ability of older workers facing physical challenges at work to remain employed?" (University of Michigan Retirement Research Center)

GAO Says IRS and DOL Should Coordinate Oversight of Multiple Employer Plans
"The GAO report examined (1) the characteristics of private-sector MEPs, (2) the advantages and disadvantages of MEPs and how their perceived advantages are used to market them, and (3) how the IRS and Labor Department regulate MEPs. The GAO interviewed MEP sponsors, pension experts, officials at the Department of Labor, the IRS, and the Pension Benefit Guaranty Corporation (PBGC), and analyzed the Form 5500." (Wolters Kluwer Law & Business)

Bridging the Generation Gap in Retirement Services (PDF)
"For several years, we've heard about the 'Graying of America' as Baby Boomers approach retirement. The retirement services industry is experiencing a similar type of 'graying.' Many retirement services and advisory firms blossomed after [ERISA] changed the retirement services' world forever. Some of these owners and managers (Radio Babies and Baby Boomers) have passed their businesses on to heirs or sold them to other entities. Some have held on and are now dealing with succession issues. Many of the industry experts and managers are of this generation." (Simoneaux Consulting Services)

Milliman Pension Funding Index, November 2012 (PDF)
"Pension liabilities of the 100 largest corporate defined benefit pension plans increased by $43 billion in October while their corresponding assets dropped by $2 billion, bringing the Milliman 100 PFI funded status deficit to $498 billion and a 72.6% funded ratio. This comes after two consecutive months of funded status improvements. October's funded status decline was primarily due to a decrease in corporate bond interest rates that are the benchmarks used to value pension liabilities. The funded ratio dropped to 72.6%, down from 74.5% at the end of September 2012." (Milliman)

Czech Parliament Approves Pension Reform
"The reform ... aims to help people build up pension savings to mitigate against the risk of lower state pensions in future due to an ageing population. In the short to medium term, the reform will reduce revenues for the state as people divert part of their social security contributions away from the budget." (The New York Times; free registration required)

'Adjustable Pension Plan' Provides Balanced Approach (PDF)
"The adjustable pension plan ('APP') seek to provide a middle ground ... It adjusts benefits to meet employer's need to lower their risk exposure and stabilize costs. It also provides retirement income protection for participants. At the heart of the APP is the principle of risk sharing between the plan sponsor and participants, moving away from the all-or-nothing world of traditional DB and DC plans." (Cheiron)

Why Roll Your 401(k) Into an IRA?
"The great bulk of IRA balances are rollovers from 401(k) plans. This rollover behavior is extraordinary given that participants are typically passive in their interactions with their 401(k) plan. They rarely change their contribution rate or rebalance their portfolios in response to market fluctuations or as they age.... One would think that the force of inertia would lead participants to leave their balances in their 401(k) accounts until they draw down their accumulations in retirement." (MarketWatch)

Ninth Circuit Rules ERISA's Anti-Cutback Rule Not Violated By Eliminating Transfer Provision from DB Plan
"The court explained that the U.S. Court of Appeals for the Ninth Circuit had not previously examined the 'intersection of ERISA's anti-cutback provisions' and Treasury regulation 26 C.F.R. Section 1.411(d)-4, which addresses a participant's transfer rights.... The court ... said that the Treasury regulation provided 'a clear grant of safe passage for plan amendments that eliminate transfer options (even when the elimination may have the incidental effect of reducing benefits).'" [Andersen v. DHL Retirement Pension Plan No. 2:12-cv-00439-MJP (W.D. Wash., 11/2/12)] (Bloomberg BNA)

Incumbents, Amendments Generally Get Nod in Pension-Related Races
"Among constitutional amendments on ballots, ... voters in New Jersey overwhelmingly decided to pass a constitutional amendment that allows increases in mandatory contributions from all judges' salaries. Arkansas voters passed a measure that allows cities and counties to create districts where they could levy a sales tax to back bonds for infrastructure improvements, but the tax revenue could be used to retire unfunded liabilities of closed local police and fire pension plans.... The only pension-related measures that failed were in Michigan and Illinois." (Pensions & Investments)

Federal Pensions and the Meaning of Fully Funded
"[T]he [Civil Service Retirement and Disability Fund] has an unfunded liability of $622.3 billion in fiscal 2010. This will rise to about $684.8 billion in 2023. But, and this is an important point, in 2023 that unfunded liability will decline and turn into a surplus of $716.7 billion by 2085, according to the Congressional Research Service. Why? Well, basically because at that point, there won't be any more CSRS employees. CSRS covers employees hired before 1984 when FERS came into existence and feds starting contributing to Social Security." (GovExec.com)

Investment Funds Not Liable for Portfolio Company's Multiemployer Pension Plan Withdrawal Liability
"The Massachusetts U.S. District Court ruled there was no liability because the investment funds are not 'trades or businesses' for purposes of ERISA's joint and several liability rules. This is the first court to address this issue since the PBGC Appeals Board ruled that an investment fund could be engaged in a trade or business." (Haynes and Boone, LLP)


It's Time to Take the Risk Out of Retirement Security
"According to a new report from the Center for Retirement Research, the National Retirement Risk Index has jumped to 53 percent, meaning that more than half of U.S. households are at risk of not being able to maintain their standard of living in retirement. That's an increase of nine percent -- from a 44 percent risk in 2007.... Fortunately, a growing number of policymakers are taking steps to take the risk out of retirement." (Pension Rights Center)


A Simple But Hard Way to Improve Public Pensions
"[U]nfunded liabilities are even worse than the official estimates, and public-pension funds need to adopt more realistic investment-return assumptions. It is indeed a simple reform, but [the author] never said it would be easy. Dialing back investment assumptions means admitting to higher unfunded liabilities and either paying a little more now or much more later on to retire the liabilities." (Governing)


'20/20' Cap on Retirement Savings Would Undermine Retirement Security (PDF)
"One option for deficit reduction that the National Commission on Fiscal Responsibility and Reform (co-chaired by Erskine Bowles and Senator Alan Simpson) included illustratively would cap annual total employer and employee retirement plan contributions at the lesser of 20% of the employee's compensation or $20,000. This approach should be rejected. The serious harm to retirement security that would result from this tax increase greatly exceeds any benefits from short-term deficit reduction, which are largely illusory. This dramatic cutback in the incentive to save would also send a clear message to employers and the public that the government's commitment to workplace retirement plans is waning." (American Benefits Council)

Benefits in General; Executive Compensation

2012 Year-End Executive Compensation Compliance and 2013 Planning
"It's that time of year again! Time to ensure year-end executive compensation deadlines are satisfied and time to plan ahead for 2013. [This article provides] a checklist of selected executive compensation topics designed to help employers with this process. (Benefits Bryan Cave)

Why ADEA Coverage Begins at Age 40
In a recent informal letter to a person who posed a question, the Equal Employment Opportunity Commission reviewed one aspect of Age Discrimination in Employment Act. Excerpt: "The Supreme Court found that the ADEA only protects older workers against discrimination that disfavors them as compared to younger workers, even when all of the workers are at least 40 years old.... Therefore, the ADEA would not prohibit minimum age requirements even if the minimum age requirement were set at age 40 or above, because the minimum age requirement would benefit the relatively older workers and only harm the relatively younger workers. Answering why this limitation exists requires some explanation of legislative history." (Equal Employment Opportunity Commission)

Election Brings Increased Clarity to HR Agenda
"For employers, President Obama's victory hopefully brought clarity in several key areas, especially issues surrounding healthcare reform and workplace issues involving National Labor Relations Board, Equal Employment Opportunity Commission and Americans with Disabilities Act regulations, among others.... [A]mong the major changes set for 2014 is the requirement that employers of more than 50 people provide health insurance or pay a tax penalty." (Human Resource Executive Online)

Employee Benefits Under Obama and a Mixed Congress -- Little Legislation Expected, But Heavy on Regs
"[I]t may be possible that Democrats and Republicans agree on a few [health and welfare benefits] issues, such as technical corrections to the ACA, changes to the 'use it or lose it' rule for health flexible spending accounts (FSAs), and repealing the prohibition on reimbursement of over-the-counter drugs from account based health plans.... [T]he EEOC might move forward with much awaited guidance affecting employment law and wellness programs.... [S]everal pieces of [retirement plan] regulatory guidance are anticipated in the next year, including guidance relating to the definition of fiduciary, the lifetime income project, and ERISA Section 4062(e) guidance." (Buck Consultants)

Employees Don't Understand Benefits; Improving Employee Communication Becoming Top Priority of HR Managers
"[A recent] poll found that 84 percent of HR managers said plan participants do not understand how their 'lifestyle or utilization decisions' impact the cost of benefits. In addition, just 8 percent said that they felt their employees had a good grasp on how their decisions impact the cost of benefits." (Wolters Kluwer Law & Business)

IRS Explains Tax-Favored Means for Employers to Provide Relief for Employees Affected by Hurricane Sandy
"Covered payments include amounts used to reimburse or pay reasonable and necessary personal, family, living, or funeral expenses, provided such expenses are not compensated by insurance or otherwise. Payments also may be provided to reimburse or pay reasonable and necessary expenses for the individual's repair or rehabilitation of a personal residence, or for the repair or replacement of the residence's contents, to the extent attributable to the qualified disaster, provided such repair, rehabilitation, or replacement expenditures are not compensated by insurance or otherwise. Qualified disaster relief payments also are excludable for purposes of self-employment taxes and employment taxes." (Miller & Chevalier Chartered)


How Does the 2012 Election Impact Labor, Employment and Benefits Policy?
"The Obama Administration is likely to continue to turn to the federal agencies to achieve its labor and employment agenda, albeit at an even more dramatic pace than during the president's first term. Accordingly, employers should prepare for a flurry of activity by DOL, NLRB and EEOC, with a continued focus on enforcement.... As in the current Congress, legislative attempts to control the Administration's regulatory hand are expected to falter in the Democrat-controlled Senate." (Littler Mendelson P.C.)


The Four Retirement Problems President Obama Must Solve
"Come 2033, unless Congress acts, the Social Security Trust Fund will be bankrupt; it will be unable to pay scheduled benefits in full on a timely basis. In fact, come 2033, Social Security would only collect enough tax revenue each year to pay about 75% of benefits.... Make no mistake about this: The solutions are readily known. A nip here and a tuck there could easily solve this problem now." (MarketWatch.com)

Press Releases

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