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November 12, 2012          Get Health & Welfare News  |  Advertise  |  Unsubscribe
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Employee Benefits Jobs

Senior Employee Education Consultant
for PNC in PA

Retirement Plan Services Representative
for Capital Group Companies in CA

Retirement Plan Services Representative
for Capital Group Companies in IN

National Sales Director - 401(k)
for Mutual of Omaha in ANY STATE, NE

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Webcasts and Conferences

Department of Labor 401(k) and 403(b) Retirement Plan Audits
in California on November 15, 2012 presented by No. Calif. Chapter of Certified Employee Benefits Specialists (ISCEBS)

NBCH 17th Annual Employer Health Benefits Conference
in District of Columbia on November 12, 2012 presented by National Business Coalition on Health

Year�End Action Items for Benefits and Compensation Webinar
Nationwide on November 15, 2012 presented by Winston & Strawn

Common Plan Governance Issues (NY CLE Program)
in New York on November 28, 2012 presented by WEB (Worldwide Employee Benefits Network ), New York Chapter


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Outcome of Election Puts Retirement Savings Tax Incentives In Jeopardy
"President Barack Obama's re-election ... has retirement industry experts preparing for further action on the regulatory front.... The top item on that list is a reproposed fiduciary rule from the Department of Labor, followed by a proposed rule on lifetime income projections on plan participant statements." (Pensions & Investments)


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Explore employee benefit issues with colleagues and local, regional and national government representatives from the Internal Revenue Service and the Department of Labor!


Retirement Income Options Attract Attention of DC Plan Sponsors
"Defined-contribution executives are surprisingly interested in retirement income options ..., according to a survey ... But their interest comes with a major caveat. When asked if they would be more likely to offer an in-plan solution if the Labor Department issued 'clearer fiduciary protection,' 73% of plan executives said yes." (Investment News; free registration required)

IRS Issues Final Regulations on Limited Exception to Anti-cutback Rules for Plan Sponsors in Bankruptcy
"The regulations contain minor changes and updates from the regulations proposed on June 20, 2012, including: [1] The language addressing the notice and hearing requirement for plan amendments was modified to clarify that a failure to notify a particular participant or beneficiary does not automatically invalidate the amendment. [2] The IRS declined to impose additional conditions on the prospective elimination of the single-sum distribution option (or other optional form of benefit that includes a prohibited payment), such as a condition that the plan must offer annuity distribution options that provide substantial survivor benefits." (Practical Law Company)

Audit Rings Unfunded Pension Liability Alarm Bells in San Rafael, California
"The audit of the Marin County Employees Retirement Association ... indicated San Rafael's unfunded pension liability climbed to $154 million as of a year ago -- $7 million more than the year before and up from $89 million in 2007. Modest reforms recently approved by the state will have no impact on the tab facing city taxpayers for current employees, a mounting overall unfunded liability that totals $178 million when using optimistic investment assumptions and including the additional cost of retiree health care. Using more conservative investment assumptions ... the city's unfunded liability exceeds $500 million." (Marin Independent Journal)

Outsourcing Pension Costs Hits Snag in Costa Mesa, California
"Soaring public pension costs have helped renew interest in an old issue: attempts to cut government costs by contracting for services. Along with the work, governments can outsource some of the risky long-term debt of pensions and retiree health care. Bankrupt San Bernardino, more than $5 million behind in payments to the California Public Employees Retirement System, is considering outsourcing police services." (CalPensions)

Retirement Plan Participation Drops Over 18-Year Period
"The participation rate rose from 38.8% in 1992 to 40.6% in 2007, but then fell to 37.9% in 2010. 'Americans lost a tremendous amount of wealth between 2007 and 2010, and the percentage of families that participated in an employment-based retirement plan and/or owned an IRA decreased as well,' said Craig Copeland, [Employee Benefits Research Institute] senior research associate." (Financial Advisor)

New Required Fee Disclosures to Plan Participants Mean No More Secrets
"71% of plan participants think they don't pay any fees to invest in their 401(k) plans, according to an AARP survey released last year. But [a consultant] predicts that within a couple of years many plan participants, not just 'mutual fund mavens,' will be concerned about fees.... The vendors currently aren't providing guidance and are disclosing information in different ways in the absence of standards.... 'It's like the blind leading the blind leading the blind,' he says." (Financial Advisor)

John Bogle Says Fiduciary Duty Comes Down to 'Simple Mathematics'
"Fiduciary duty, [Vanguard founder John] Bogle said, 'comes down to a simple mathematical calculation: How the rewards of investing are divided between the providers of financial services and their clients who put up their capital. Why? Because for investors as a group, gross returns in the financial markets, minus the costs of financial service providers, equals the net returns that are actually delivered to investors.'" (BenefitsPro)

Pension Costs and Retirement Decisions in Plans That Combine DB and DC Elements
"[This study examines] the effect of [a] hybrid design [in the Oregon Public Retirement System, which combines a DB and DC plan] on employers' costs and employees' retirement-timing decisions.... [A]verage retirement benefits are 49% higher in the hybrid plan than they would have been in a traditional DB plan.... [A]s an employee's DC benefit increases above her DB benefit, so does the probability that she retires before the normal retirement age.... [There is] evidence of peer effects in that employees respond more strongly to their own retirement incentives when more of their coworkers face similar incentives. The retirement waves that result from employees seeking to avoid declines in pension benefits are likely to impose significant administrative costs on employers." (National Bureau of Economic Research; purchase required)

The New Success Metrics for Employees' Retirement Readiness (PDF)
"For employers and retirement plan sponsors, the recession ... created an entire paradigm shift in how retirement benefits were being designed, managed and communicated. Today, three years after the recession, employers face significantly greater risk than in the past. There is an overall movement to tighten employers' fiduciary responsibility ... The new environment requires a well-rounded retirement plan and communication strategy that not only educates employees on their benefits, but gets them to use them effectively." (Benefits Magazine via Financial Finesse)

More Americans Getting Worried About Retirement Finances
"In the prior Pew survey, it was respondents in their mid-50s who were the most worried that they would outlive their retirement nest eggs. This latest survey found that 'retirement worries peak among adults in their late 30s -- many of whom are the older sons and daughters of the Baby Boom generation.' ... The survey found that, among adults between the ages of 36 and 40, 53% say they are either 'not too' or 'not at all' confident that their income and assets will last through retirement. In contrast, only about a third (34%) of those ages 60 to 64 express similar concerns, as do a somewhat smaller share (27%) of those 18 to 22 years old." (Wolters Kluwer Law & Business)

Wyoming State Pension System Is Healthy
"Thom Williams, executive director of the [Wyoming Retirement System], told a group of state workers and retirees ... that the Legislature should resist any efforts to move to a 401(k)-style defined-contribution retirement plan. 'The problem is [defined contribution plans] are not a reliable means for providing retirement security,' he said. 'These defined contribution plans oftentimes result in people running out of money.'" (Wyoming Tribune Eagle)

Women Willing to Ask for Help With Retirement Savings
"A study released last month by LIMRA found that even though women are more concerned than men about risks that they face in retirement, about one-third of them had done no retirement planning.... [W]ith an engaged planning process and a retirement income plan that layers traditional retirement savings with guaranteed income, female clients can move into retirement with greater confidence that they won't outlive their assets -- even in this climate of low interest rates." (Investment News; free registration required)

Stable-Value Fund Fee Data Elusive Despite DOL Regs
"Plan sponsors and advisers are finding that though they can easily get a handle on expense ratios and operating costs for mutual fund products, obtaining that level of detail for certain types of stable-value options has been difficult. This is largely because the primary disclosure rules apply only to investments with returns that aren't fixed." (Investment News; free registration required)

Did the PBGC Egregiously Aggregate?
"Private-equity and similar funds sometimes invest in portfolio companies that may have significant liabilities under ERISA and the corresponding provisions of the Internal Revenue Code. A lurking question that has persisted is whether, if a fund's ownership interest exceeds certain percentage thresholds, the fund and its portfolio companies are aggregated under the so-called 'controlled group' rules as a single employer. The implications can extend to other matters, such as nondiscrimination testing and COBRA responsibility. For many noncorporate funds, the analysis can turn in part on the critical threshold question of whether a particular investment fund is a 'trade or business' for these purposes. If not, it may be the case that aggregation is not required, regardless of the extent of the fund's ownership of its portfolio companies.... A recent decision by a Massachusetts federal district court ... directly addresses the PBGC's 2007 letter [which held that the private equity fund there at issue was a trade or business]." [Sun Capital Partners III v. N.E. Teamsters and Trucking Industry Pension Fund, Civ. Action No. 10-10921-DPW (D. Mass. Oct. 18, 2012)] (Bloomberg BNA)

Federal Court Allows ERISA Fiduciaries to Seek Contribution From Other Fiduciaries
"[This case] is yet another example of the continuing disagreement within the federal courts over the scope of the rights of fiduciaries to sue one another. While this disagreement persists, fiduciaries will face continued uncertainty over both their potential liability to other fiduciaries as well as their potential rights to recover against other fiduciaries.... [This case] is also notable for providing a detailed analysis of how a federal court interprets ERISA's silence on a matter when developing federal common law." [Guididas v. Community National Bank Corp., No. 8:11-cv-2545-T-30TBM (M.D. Fla. Nov. 5, 2012)] (Jenner & Block)

Is There a 'Mini-Me' ERISA Section 3(38) Investment Manager?
"Some providers of investment products assert ... that they are an investment manager as defined in section 3(38) of [ERISA]. However, in their contracts ... they make a critical distinction: They say that they're a 3(38) investment manager -- but only at the level of a mutual fund or at the level of a retirement plan platform, not at the level of the retirement plan itself. Is that a legally tenable distinction? Is there such a thing as a 'mini-me' version of an ERISA section 3(38) investment manager?" (Morningstar Advisor)

10 Things 401(k) Plans Won't Tell You
"For more and more Americans, the quality of one's retirement comes down to the quality of one's 401(k). That's a lot of pressure to put on plans that started out as a source of extra cash for individuals who were already guaranteed a secure monthly retirement income.... [1] We weren't meant to carry the weight of your future ... [2] We have no clue how much cash you'll need in retirement.... [3] and figuring it out isn't high on our agenda.... [4] The system isn't working for employees -- or employers." [And six more.] (MarketWatch.com)

The Interplay of Wealth, Retirement Decisions, Policy and Economic Shocks
"The decision to retire depends on a number of factors including earnings and health shocks, demographic characteristics, preferences, pensions, and social security.... [This study finds] that increasing the [early eligibility age of retirement] results in sizeable responses to the age of retirement but does not affect health outcomes very much. A 20 percent reduction in wealth induces households to delay retirement by one year, on average, with poor households being relatively unaffected." (University of Michigan Retirement Research Center)

London's Local Governments Face Pension Time-Bomb
"[A recent report] said that by 'shopping around' for the most favourable actuarial assumptions, local government pension schemes were understating the real value of their pension liabilities and repeatedly deferring funding recovery plans.... Many public sector and private sector pension schemes are under pressure because people are living longer and investment returns have shrunk partly due to volatile equity markets and a sustained period of low interest rates." (Reuters)

[Opinion]

What Do We Want? Public Pension Reform. When Do We Want It? Now.
"Not only are the marks in the private sector expected to pay for most of the public employees' generous pensions, but they are also expected to foot that bill for a longer period of time. No one hits retirement age sooner and in better shape than a government worker." (The Times-Picayune)

[Opinion]

John Bogle Proposes a Reformed Pension System
"The new system must be one that will be increasingly and inevitably focused on DC plans, albeit those that can to some degree emulate the security of DB plans. (Our Social Security system and, at least for a while, our state and local government systems, would continue to provide the DB backup as a 'safety net' for all participating U.S. citizens.) It is time for reform -- a reform that serves not fund managers and our greedy financial system, but plan participants and their beneficiaries." (Financial Advisor)

[Opinion]

New Mandatory Program for Private Employers Means California Doubles Down on Pension Promising
"With relatively little national attention, California Gov. Jerry Brown last month signed into law the first state defined benefit pension scheme for private workers.... Like the typical entitlement, this one was designed with modest benefits that can be increased down the road as the program matures. Employees are automatically enrolled in the retirement accounts (unless they opt out) and contribute 3 percent of salary. Employers don't have to contribute.... With automatic enrollment, a broad participant base and basic annuity this plan resembles something between Social Security and CalPERS. That is where the danger lies." (Silicon Valley MercuryNews)

Benefits in General; Executive Compensation

45% of Companies Changing Executive Compensation
"Among companies that conducted say-on-pay votes, 61% received at least 90% of shareholder support, while 17% received between 81% and 90% support. Only 2% received less than 50% of shareholder support. Eighty-three percent of companies with less than 70% of support are making changes in their programs, while 48% of those companies who received between 70% and 90% reported making changes." (Pensions & Investments)

Same-Gender Marriage: How Does It Affect Employee Benefits?
"On November 6, 2012, three new states (Maine, Maryland, and Washington) were added to the list of those that permit [same-gender] marriage. What is the effect on employer plans covering employees in such marriages?" (Calhoun Law Group)

Deadline for Correcting 409A Deferred Compensation Arrangements is December 31
"[A]ssume an employment agreement provides for a lump sum severance payment subject to Code section 409A to be made within 90 days of separation, as long as the employee executes a general release of claims. If separation occurs on December 1st, 2012, then the employee can determine the tax year for that payment by choosing whether to deliver the executed release during either 2012 or 2013. This is a Code section 409A documentary failure. Even if an opportunity for tax year manipulation never arises, the employee could face a 20% penalty tax on the deferred sum." (Pillsbury Winthrop Shaw Pittman LLP)

Cuts in Federal Pay and Benefits Are Among Deficit Reduction Possibilities
"[C]hoices could include increasing health care costs for military retirees, decreasing the government's contribution to the Federal Employees Health Benefits Program, capping increases in military basic pay and reducing the annual across-the-board pay raise for feds. CBO estimated those changes could reduce the deficit by a total of $38 billion in 2020.... [L]imiting the TRICARE benefit for military retirees and their dependents would save the most money, at approximately $14 billion in 2020, according to the nonpartisan CBO." (GovExec.com)

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