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November 26, 2012          Get Health & Welfare News  |  Advertise  |  Unsubscribe
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Employee Benefits Jobs

Part Time On Call Retirement Planning Consultant
for Diversified in CA, HI, MO, NC, UT, WA

Payroll Auditor
for Trust Fund in NY

Senior Account Manager - Consultant
for The Allocation Company, Inc. in LA, NM, OK, TX

Health & Group Benefits Actuarial Analyst
for Milliman in TX

Defined Benefit Systems Analyst
for Milliman in TX

Retirement Plan Associate
for The SPARK Institute in NC

401K Conversion Analyst
for Insperity in TX

Retirement Plan Account Coordinator
for InvesTrust Retirement Specialists in OK

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Webcasts and Conferences

Ethics for Benefits Lawyers
Nationwide on December 18, 2012 presented by ABA Joint Committee on Employee Benefits

Ethics for Benefits Lawyers
Nationwide on December 18, 2012 presented by ABA Joint Committee on Employee Benefits

7th Annual Target-Date Funds Forum
in Massachusetts on February 25, 2013 presented by Financial Research Associates


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[Official Guidance]

Text of IRS Rev. Proc. 2012-50 Allowing Governmental Plans to File Determination Letter Requests in a Cycle Later Than Cycle C (PDF)
"This revenue procedure modifies Rev. Proc. 2007-44 ... to provide that the sponsor of an individually designed governmental plan within the meaning of Section 414(d) ... may elect Cycle E (instead of Cycle C) as the second remedial amendment cycle for the plan by filing a determination letter application for the plan during the one-year submission period for the second Cycle E (February 1, 2015 through January 31, 2016) instead of the second Cycle C (February 1, 2013 through January 31, 2014). This modification applies only to the second remedial amendment cycle." (Internal Revenue Service)


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[Official Guidance]

Text of IRS Notice 2012-70 Extending Deadline to Amend a DB Plan to Satisfy Section 436 (PDF)
"[T]he deadline to adopt an interim amendment for Section 436 is extended to the latest of: (a) the last day of the first plan year that begins on or after January 1, 2013, (b) the last day of the plan year for which Section 436 is first effective for the plan, or (c) the due date (including extensions) of the employer's tax return for the tax year ... that contains the first day of the plan year for which Section 436 is first effective for the plan. However, if an application for a determination letter for an individually designed plan is filed on or after February 1, 2013 (or, in the case of a plan described in section 104 or 105 of PPA '06, as amended, the first day of the plan year for which Section 436 is first effective for the plan, if later), the restated plan submitted with the application must incorporate an amendment with respect to Section 436.... [T]his notice also provides that a plan amendment adopted with respect to Section 436 that eliminates or reduces a Section 411(d)(6) protected benefit does not cause the plan to fail to meet the anti-cutback requirements of Section 411(d)(6) if the amendment is adopted by the deadline described above and the elimination or reduction is made only to the extent necessary to enable the plan to meet the requirements of Section 436." (Internal Revenue Service)

[Official Guidance]

Present Value of PBGC Maximum Guarantee for 2013 Annuity Starting Dates
"These values apply to benefits with annuity starting dates in 2013. The 2013 table was developed using the 417(e) segment rates for August 2012 (1.13%, 3.71%, 4.52% respectively) for plan years beginning in 2013 and the 417(e) applicable mortality table for 2013." (Pension Benefit Guaranty Corporation)

CFTC Eases Pay-To-Play Rules for Bank Swaps with Government Pension Plans
"The Commodity Futures Trading Commission said ... it would not enforce pay-to-play restrictions on banks selling swaps to the pension plans. The restrictions apply to dealers that have made political contributions to municipal officials in the two years before a trade. The CFTC said its decision was intended to harmonize limits on political contributions from the SEC and Municipal Securities Rulemaking Board." (Pensions & Investments)

Obama Announces Elisse Walter to Take SEC Chairmanship
"President Obama will designate Elisse Walter chairman of the Securities and Exchange Commission next month when current Chairman Mary Schapiro steps down. The SEC announced earlier Monday that Schapiro would leave her post on Dec. 14, a move widely anticipated by the industry and markets." (Fund Industry Intelligence)

Study Questions Effect of Tax Breaks on Retirement Savings
"[R]esearchers conclude that tax breaks do not increase the overall level of savings by much, and do not tend to change the behavior of most workers -- particularly the less wealthy, who often need the most help in preparing for retirement." (The New York Times; free registration required)

California State Teachers Retirement System May Increase Contribution Requirements
"After years of ignoring pleas for a rate hike, the Legislature approved a resolution last August ... that asks CalSTRS to meet with 'affected stakeholders' and present three options for a long-term funding solution by next Feb. 15. A phased-in rate increase would not begin for several years, if it follows scenarios suggested earlier this year. And splitting a rate hike between teachers and employers may be a difficult legal and political task, complicated by new pension reform legislation." (CalPensions)

Plans, Providers Proactive on Fee Disclosure Regulations
"In its latest survey, NEPC found the median total plan fee was 55 basis points [for the 15-month period ending March 31, 2012], three basis points lower than the survey for the year ended Dec. 31, 2010 ... Total plan costs include investment management, trust and custody, record keeping and communications.... NEPC estimated that the median annual cost for record-keeping, custody and trust services per participant was $92 in the latest survey, down from $103 in the previous survey[.]" (Pensions & Investments)

Keeping Your 403(b) Program Under Control
"[A]s the IRS ramps up its audit activity with 403(b) plans, chances are that more IRS auditors will be asking 403(b) sponsors about internal controls for their plans.... Any disconnects between the plan document and your internal procedures could highlight either document or operational defects to an IRS auditor." (Business of Benefits)

Cypen & Cypen Newsletter for November 22, 2012
Covers employee benefit developments with an emphasis on governmental plans. Topics in this issue include: Census Bureau Reports Increase of 13.2 Percent for State and Local Government Funds in 2011; Recession Pressures on Public Pensions; How Social Security COLA Adjustments Work; Target-date Funds Popular, but Misunderstood; and Pennsylvania State Auditor Recommends That Governor Be Removed From Board of Trustees. (Cypen & Cypen)

Investment Decisions in Retirement: The Role of Subjective Expectations
"The rapid transition from defined benefit (DB) pension plans to defined contribution (DC) plans has a potential benefit of offering pension holders greater control over how their pension accumulations are invested.... Based on [a] model with subjective expectations, we estimate a welfare loss of up to 12% compared to investment under rational expectations, if actual returns follow the same distribution as in the past 50 years. The policy implication is that there is considerable scope for welfare improvement as a result of consumer education regarding stock market returns. However, the welfare loss is much smaller if individuals are not very risk averse or if actual returns follow the same distribution as in the past 10 years." (University of Michigan Retirement Research Center)

American Airlines Says Too Many Pilots Will Retire If Allowed to Take Pensions As Lump Sum
"American Airlines filed a motion ... in U.S. Bankruptcy Court to take away a pilot's option to collect his or her pension as a lump sum rather than in monthly payments.... American said that option would be too attractive for pilots once they can again exercise that option. They can't while American is in bankruptcy, but they could do so when American emerges (probably in 2013).... The motion is part of a complex set of interrelated maneuverings designed to avoid having to terminate the pension plan and dump it on the Pension Benefit Guaranty Corp." (DallasNews.com)

Roth 401(k) Usage on the Rise
"[T]he most frequent users of Roth contributions are Generation Y, whose year-over-year increase was slightly higher (16%) than the overall book-of-business. More than one-tenth (14.3%) of Generation Y now contribute Roth dollars when the feature is available, compared with 9.4% of Generation X and 5.8% of Baby Boomers." (PLANSPONSOR.com)

Best Buy's 401(k) Meltdown
"As hard as times are for investors in Best Buy's shares, far grimmer is the plight of the 110,000 employees participating in the company's approximately $1 billion 401(k) plan. Not only do they have to worry about possibly losing their jobs if the company can't right itself, their so-called retirement plan is heavily invested (17%) in company stock. Assuming the company stock in the plan has lost half its value this year, employee retirement assets have likely taken a near 9% hit.... To add insult to injury, Best Buy's 401(k) participants have been paying over a million a year to financial advisors involved in the design and administration of an optimal retirement plan for them[.]" (Forbes)

Kentucky Reform Recommendations Include Cash Balance Plan for New State Employees
"A new cash balance plan for new state hires in Kentucky is among the reform recommendations for Kentucky Retirement Systems, issued ... by the state's Public Pensions Task Force. Other recommendations include eliminating the cost-of-living adjustment unless the pension plans are 100% funded, requiring employers to pay the full actuarially required contribution to the Frankfort-based pension system starting July 1, 2014, and resetting the amortization period to 30 years beginning in 2014 from the current 30-year period that began in 2007." (Pensions & Investments)

Gearing Up to Comply with GASB's New Accounting Standards for Public Sector Pension Plans and Sponsoring Employers (PDF)
"This Public Sector Letter summarizes the key components of the new standards, which make significant changes to pension accounting and financial reporting for pension plans. These changes include the following: New Accounting Standards Differ by Plan Type ... Divorce of Pension Accounting from Funding Measures ... Introduction of a New Measurement: Net Pension Liability (NPL) ... Discount Rate for Calculating Total Pension Liability." (The Segal Group, Inc.)

Will Boeing Deny Pension Survivor Benefits to Same-Gender Married Couples?
"Boeing Company told union negotiators that it plans to deny pension survivor benefits to married same-[gender] couples in Washington because federal law does not require that it provide the benefit.... Boeing joined other major corporations with ties to Washington in advocating for the passage of the marriage equality law earlier this year[.]" (Advocate.com)

Another Pension Bites the Dust: A Lesson From the Hostess Brands Bankruptcy
"[W]hen Hostess Brands entered bankruptcy liquidation, it became the latest in a long list of companies to terminate its plan. To top it off, while the existing retirees may still be protected by the government backstop, younger Hostess employees aren't so lucky. A 45-year-old, for instance, will be able to get no more than $13,960.20 a year from the guarantee." (AOL Daily Finance)

UK Private Employer Pension Deficits Getting Worse
"[T]he ability of the UK's top 350 companies to support their defined benefit (DB) pension obligations -- which promise staff a pension based on salary -- is still far below pre-recession levels. And the situation didn't appear to be getting any better. PwC said its Pensions Support Index, which tracks the overall level of support provided to DB schemes out of 100, had fallen to 74 -- well below the 88 level achieved in early 2007." (The New York Times; free registration required)

Russian Parliament Reduces Amount Private Employers Must Contribute to Retirement Savings
"The law approved on Friday will reduce the contributions that employers pay into mandatory retirement saving accounts on behalf of employees, from the present 6 percent of salary to 2 percent, beginning in 2014.... [President Vladimir Putin] has ruled out raising the retirement age from its present 60 for men and 55 for women, a step that many economists have advocated as the most effective solution to the rising burden of pensions." (The New York Times; free registration required)

[Opinion]

No Need for Universal Mandatory DC Plans
"Sen. Tom Harkin, R-Iowa, proposes to improve pension coverage and retirement security by building a chair. That is, he would add a fourth leg to the shaky proverbial three-legged stool that defines the current retirement system to shore it up.... But creating a new plan would be a mistake. There is no need for it. What's needed is action to bolster the existing system." (Pensions & Investments)

[Opinion]

Manage Conflicts of Interest, or the Regulators Will
"[W]hile it is both noble and worthwhile for the financial services industry and investment advice profession to continue promoting a culture of fiduciary responsibility and ethical conduct from within, moral suasion must be backed by structural protections that favor investors. The most effective and immediate path to improved investor protection is to uncover and eliminate or mitigate conflicts of interest. New legislation and regulation may move down this path, but there are issues that can be addressed right now." (Investment News; free registration required)

Benefits in General; Executive Compensation

[Guidance Overview]

How Leaves of Absence Affect Employee Benefits Administration
This article describes various federal and state laws requiring an employer to grant leaves of absence for employees, as they affect employer-sponsored retirement plans and health & welfare plans. (Littler Mendelson P.C.)

ISS Issues 2013 U.S. Corporate Governance Policy Updates
"Investors continue to rank executive compensation as the top corporate governance topic. The 2013 Updates to the pay-for-performance evaluation undertaken in advance of an advisory 'say-on-pay' vote on executive compensation refine how the subject companies' peer groups are selected, adjusting the criteria in an effort to include within the relevant peer group companies that have more in common with the subject company. The 2013 Updates also add the concept of 'realizable pay' to the qualitative analysis for large cap companies." (Vorys, Sater, Seymour and Pease LLP)

Press Releases

SEC Chairman Mary Schapiro to Step Down Next Month
U.S. Securities and Exchange Commission



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