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BenefitsLink Retirement Plans Newsletter

November 15, 2012          Get Health & Welfare News  |  Advertise  |  Unsubscribe
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Employee Benefits Jobs

Retirement Planning Consultant
for Diversified in IN

Nationwide Financial Operations Director
for Nationwide in OH

DB Actuarial Analyst
for Midwest Actuarial Consulting Firm in

Defined Contribution Employee Benefit Plan Administrator
for Pension Administrators, Inc. in IL

Retirement Plan Administrator
for Bates & Company, P.A. in FL

Pension Administrator
for Pension Administration Firm in CA

Compliance Analyst
for The Newport Group in FL, NC

Actuarial Analyst
for Milliman in TX

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Webcasts and Conferences

Reducing the Cost of Retiree Health—Strategies and Issues Under ERISA Webcast
Nationwide on December 5, 2012 presented by McDermott Will & Emery LLP

A Frank Discussion with the Director of Employee Plans Examinations Webcast
Nationwide on December 18, 2012 presented by American Society of Pension Professionals & Actuaries (ASPPA)

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[Official Guidance]

IRS Employee Plans News, November 14, 2012 (PDF)
Articles include: Internal Controls Are Essential -- Encourage sponsors to review their plan annually to avoid mistakes; Employer Matching Contributions -- Meet your plan's match formula even if a participant stops making salary deferrals; Benefit Restriction Notices -- Requirements and sample notices for single-employer defined benefit plans; Lifetime Annuity Guidance -- Highlights of recent phone forum on how plans can offer annuity options for retirees; and Missing Participants or Beneficiaries -- Recent changes to the letter forwarding program. (Internal Revenue Service)


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Disclosures Get Little Participant Attention; E-Communication May Help, Groups Say
"Results of a 'snapshot' survey released Nov. 8 by PSCA indicated that an average of 1.4 percent of participants asked questions about their disclosures, and 95.9 percent of the 176 responding plan sponsors said they observed no change in participant behavior following the mailing of the fee disclosures." (Bloomberg BNA)

Participants of All Ages Prefer to Receive Retirement Plan Information on Paper
"More than six in ten (62%) respondents currently receive their retirement plan documents in paper format only. An additional 27 percent receive them both on paper and electronically. Only 7 percent receive these documents electronically only. If forced to choose only one method for receiving retirement plan documents, three-quarters (75%) of all respondents ages 25+ prefer paper over online communications." (AARP)

What's the Price of Retirement Confidence?
"While an overwhelming majority (88%) of affluent Americans ... (among those with investable assets of $250,000 or more) 'feel confident' they will have saved enough for the life they want in retirement, far fewer Americans with less than $250,000 in investable assets (57%) ... have confidence in their retirement savings. In this survey, a majority (61%) of the working affluent with $250,000 or more in assets had a household income of less than $150,000." (Wells Fargo)

Surprise! 401(k)s Rode Out the Great Recession Just Fine
"Despite economic difficulties, access to retirement savings plans increased over the past five years. The percentage of employers offering 401(k) plans rose from 72% in 2007 to 82% in 2012. During the same five-year period, the number of companies offering traditional defined-benefit pension plans decreased from 19% in 2007 to 16% in 2012." (Investment News; free registration required)


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Relative Attractiveness of Annuitizing Pension Liabilities Decreased in October
"The Dietrich Pension Risk Transfer Index decreased from its prior month level of 81.99 and sits at 79.85 as of November 1. The decrease in the index was driven by lower pension funding levels, coupled with a 14 basis point reduction in annuity discount rate spreads. The annuity discount rate proxy embedded within the index dipped to 2.50%." (PLANSPONSOR.com)

Geithner, FSOC Mandate More Money-Market Fund Reforms
"The FSOC's three alternative recommendations include: Requiring MMFs to trade under a floating new asset value (NAV), thereby removing their current status fixed to a stable NAV of $1.00. Permitting MMFs to maintain a stable NAV, while holding a capital buffer of up to 1 percent of the fund's assets and requiring a marginal percentage be withheld from immediate investor redemption. Permitting MMFs to maintain a stable NAV, while holding a 3 percent buffer of the fund's assets for explicit loss-absorption, as well as additional measures, including diversification of fund investments. Following a 60-day public comment period, FSOC will issue a final recommendation to the SEC, requesting, once again, that the agency take action. If the SEC fails to do so, FSOC could exercise its authority to declare MMFs systemically important and place them under the oversight of the Federal Reserve." (Association for Financial Professionals)

LGBT Persons in Relatively Good Financial Health, Study Finds; Major Concerns Are Retirement and Social Security Survivor Benefits
"While the study finds significant differences in the financial experience of Lesbian, Gay, Bisexual and Transgender Americans, it highlights a mutual sense of confidence in the future and overall good financial health, counterbalanced by significant concerns about retirement and equality of financial rights." (Prudential)

The 2012 Roland|Criss Fiduciary Symposium [Videos]
"Retirement plan sponsors' efforts to understand and comply with the new fee disclosure rules ... are producing vital lessons. Valuable clues are emerging about what does and does not work. The purpose of this meeting was to provide leadership at a time when confusion about the compliance requirements for plan sponsors is widespread." [Videos of each of the sessions are available at the link.] (Roland|Criss)

Target-Date Funds Grow in Popularity But Few Consumers Understand Them
"In 2010, 7 in 10 401(k) plans offered target-date funds (TDFs) within their employer-sponsored retirement plans and more than a third (36 percent) of 401(k) participants invested in TDFs1. Yet a recent LIMRA survey found only 16 percent of consumers said they were familiar with TDFs.... [The] survey found that fewer women were likely to say they were familiar with TDFs as men (10 percent vs. 22 percent). Consumers under 50 and those with household incomes of $100,000 or more were the most likely to be familiar with TDFs (20 percent and 30 percent, respectively)." (LIMRA)

Excessive Caution Threatens Retirement Savings
"[A recent survey of] adults ages 21 to 50 in the U.S. with at least one investment account ... found that 61% believe investing in stocks is very important or important to helping them achieve their retirement savings goals. However, although half the investors (51%) surveyed say they have roughly the same tolerance for risk they had before the financial crisis, 37% indicate they are now refraining from investing in stocks because of current economic or market conditions." (PLANADVISER.com)

Business Group Says Illinois Public Employee Pension System 'Unfixable'
"The Civic Committee of the Commercial Club of Chicago told its members in a memo that even current retirees' benefits must be cut and other drastic action taken to prevent pension-program bankruptcy, the memo said.... The memo said workers putting money into the retirement accounts will never see the payback they were promised." (San Francisco Chronicle)

Employers Doubt Retirement Readiness of 401(k) Participants
"More than half of respondents surveyed (56%) reported employee participation levels at or above 80% this year, compared to 50% two years ago. The higher participation rates are primarily the result of employers using automatic enrollment, with nearly two in three respondents (65%) now using this feature, compared to 51% in 2009.... Despite these efforts, the survey reveals significant employer concern that their DC plans are both underutilized and misunderstood by their employees." (Wolters Kluwer Law & Business)

Savers Show Continued Commitment to Retirement Saving During First Half of 2012
"Commitment to contribution activity in the first half of 2012 continued at the high rate observed in the first half of 2011. Only 1.6 percent of DC plan participants stopped contributing in the first half of 2012, compared with 1.6 percent in the same period in 2011, and 1.7 percent during the first half of 2010. DC plan withdrawals in the first half of 2012 remained low and were in line with the prior year's first half activity.... Loan activity edged down slightly by the end of June 2012, although it continues to remain elevated compared with four years ago[.]" (Investment Company Institute)

Toyota Agrees to $25.5 Million Settlement with Maryland Pension Fund, Other Investors Over Stock Drop
"Toyota Motor Corp. agreed to pay $25.5 million to settle an investor lawsuit led by the $36.3 billion Maryland State Retirement and Pension System, Baltimore, over the company's alleged failure to disclose information on unintended acceleration problems that caused the stock to plunge in 2010, according to court documents." (Pensions & Investments)

The U.S. Public Pension Crisis as Exemplified by Pennsylvania
"Pennsylvania has approximately 3,200 public pension plans, which represents about 25% of all such plans in the United States. Compared with other municipal pension plans nationally, Pennsylvania's are quite small ... with about two-thirds of them covering 10 or less workers, and an estimated 1/3 of those plans covering three or fewer municipal workers. Having so few workers covered by PA municipal plans results in much higher plan expenses at about three times the administrative costs of plans covering 500 or more workers." (fi360 Blog)


What 30 Years of 401(k) Mistakes Teach Us
"401(k) plans have since become the single largest financial asset most average working class Americans will ever have, and, they're the most mismanaged. Although there have been dozens of mistakes, here are the most critical mistakes we've all made and what can be done to reinvent these savings vehicles, to create a new generation of Americans who can be properly prepared for their long awaited retirement years." (MarketWatch.com)


Britain's Retirement Savers on a Pension Cliff Edge
"We could be about to witness it first-hand if the bond bubble pops. In a sad irony, those who may suffer the worst will be in company pensions, which are supposed to protect savers' money, through so-called lifestyle funds. These types of pension automatically sell off supposedly volatile shares and buy secure bonds for anyone nearing retirement. This is a rational investment strategy that has been turned upside-down by the Bank of England. If bonds were once a safe haven, they aren't any more." (Daily Mail)


Conflicts Abound at American Airlines' Pension and 401(k) Plans
"The airline sold American Beacon Advisers in 2008 to two private equity firms for $480 million. That's right -- American sold the affiliate it created to manage employee pensions for almost half a billion and then with its pensions failing, tried to dump $10 billion in unfunded pension obligations onto the PBGC. Talk about heads we win, tails pension participants and the government loses." (Forbes)


Reforming the 401(k)
"In 2008 ... the securities industry lost over $2 trillion in workers' hard-earned 401(k) and IRA savings. This loss was problematic enough for the millions of American families who watched their balances plunge in horror, but the number that really drives home the need for reform is the more than $120 billion that the industry took home in compensation and commissions the same year it lost $2 trillion in savers' wealth." (Demos)


Text of Comments to FASB on Accounting Standards Codification Entitled 'Compensation -- Retirement Benefits' (PDF)
"Current economic events have further revealed a fundamental flaw in the Standards regarding the applicable discount rates used to measure pension obligations.... The erroneous measurement has resulted in the Standards creating economic conditions, rather than accurately reflecting those conditions. By erroneously causing pension obligations to be significantly overstated, the Standards are triggering artificial reductions in equity on company balance sheets." [Ed. note: the American Benefits Council also submitted a similar letter to the SEC chairman.] (American Benefits Council)

Benefits in General; Executive Compensation

Employee Benefits in the Aftermath of Hurricane Sandy (PDF)
Topics include: Ways to help affected employees; Relief from benefit plan filing deadlines; ERISA plan funding requirements; and Wish List for additional relief. (Buck Consultants)

CBO Report on Costs of Military Pay and Benefits in the Defense Budget
"Of [the Department of Defense's] $150 billion request for compensation in 2013, more than $90 billion would go to basic pay, food and housing allowances, bonuses, and various types of special pay. Another $16 billion would go to accrual payments that account for the future pensions of current service members who will retire from the military (generally after at least 20 years of service). In 2012, DOD paid 34 cents for each dollar of basic pay for active personnel and 24 cents for each dollar of basic pay for reserve personnel." (Congressional Budget Office)

Compensation, Retirement and Benefits Trends Report for 2012-13
"Looking ahead, employers plan to maintain compensation, health and welfare benefits and retirement levels. This stability marks an improvement from the drastic cuts made during the crisis and its immediate aftermath. Many employers are looking at the competitive landscape and shifting to pay-for-performance to drive compensation decisions. Further, companies are increasing their focus on employee retention by offering more retirement and benefit choices and differentiating compensation levels to motivate employees -- a sign that employers are committed to finding a balance between controlling costs and sustaining and nurturing the workforce." (Verisight and McGladrey, LLP)

Press Releases

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