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Investors Pessimistic About Adequacy of Retirement Savings and Ability to Stop Working
"U.S. investor optimism fell to minus-8 in November, down sharply from a plus-24 reading in May, according to the Wells Fargo/Gallup Investor and Retirement Optimism Index.... [T]he index had a score of 124 at inception in October 1996 and peaked at 178 in January 2000, during the dot-com boom. Subsequently, the index went as low as minus-64 in February 2009, when the financial crisis rattled markets. The current dip in sentiment has been caused by the 'federal deficit' and divided government, unemployment, and the global economic slowdown, all of which were cited by more than 60% of respondents."
(Financial Planning)
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Nonfiduciary Was Not 'Party in Interest' But Was Liable for Participation in Fiduciary's ERISA Violation
"[The Third Circuit Court of Appeals] reviewed the underlying analysis of the Supreme Court in Harris Trust, and concluded that, while the defendant in Harris Trust happened to be a party in interest, that fact was not critical to the Supreme Court's holding that nonfiduciary liability was authorized by Section 502(a)(3). The Third Circuit noted that the Supreme Court had emphasized that, in authorizing appropriate equitable relief to remedy violations of ERISA, the text of Section 502(a)(3) does not limit the persons who can be subject to liability." [National Security Systems, Inc. v. Iola, No. 10-4154, 2012 WL 5440113 (3d Cir. Nov. 8, 2012)
(Goodwin Procter LLP)
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Case Moves Forward Against Ameriprise Financial Regarding Use of Its Proprietary Product in Its Company 401(k) Plan
"The court held that, like in those cases, plaintiffs' allegations plausibly alleged that the defendants selected affiliated funds 'to benefit themselves at the expense of participants' and that the selection process was 'flawed,' each of which it found sufficient to support a claim of breach of ERISA fiduciary duty. The court also held that the fact that defendants included a range of investment options under the plan -- which included investments managed by unaffiliated entities -- did not shield defendants from liability." [Krueger v. Ameriprise Financial, Inc., No. 11-cv-02781, 2012 WL 5873825 (D. Minn. Nov. 20, 2012)]
(Goodwin Procter LLP)
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Sixth Circuit Upholds Plan's Interpretation of Ambiguous DB Plan Spousal Benefit Provision
"The Sixth Circuit pointed out that the district court had conspicuously failed to consult the Social Security Act in ascertaining the meaning of the [plan's] terms. Regarding plaintiff's argument that ... the SPD did not contain a clarifying clause upon which [the plan sponsor's] interpretation of the Plan's offset provision rested, and that the clause was, therefore, unenforceable, the Court found that there was no conflict between the Plan and the SPD. The court explained that silence in an SPD does not create a conflict when the omitted information merely clarifies the more general language of the SPD." [Lipker v. AK Steel Corporation, 2012 U.S. App. LEXIS 22390 (6th Cir. Oct. 31, 2012)]
(Seyfarth Shaw LLP)
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Less than Half of Pre-Retirees Expect to Live Their Desired Lifestyle in Retirement
"Only 48 percent of U.S. pre-retirees (non-retired aged 55-70) believe they will be able to live the lifestyle they wish in retirement ... [T]hree in ten pre-retirees have not started any basic retirement planning. Looking at five retirement planning activities identified as critical for retirement, no single activity had been accomplished by the majority of pre-retirees surveyed."
(LIMRA)
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Fees, Flexibility Could Cut Into Mutual Funds' 401(k) Dominance
"Mutual funds continue to be the dominant investment vehicles selected by 401(k) plans, but plans' desires for lower fees and greater flexibility could expand the role of institutional products such as collective trusts, especially among plans with more than $250 million in assets ... Mutual funds accounted for 52.3% of all investment vehicles for plans of all sizes as of Dec. 31, 2011 ... The next most popular investment vehicle was separate accounts, 13.3%; collective trusts, 12.5%; and insurance products, 12.2%."
(Pensions & Investments)
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2012 Study of Risk Management Attitudes and Aptitude Among DB Plan Sponsors (PDF)
"[T]he study finds the following: greater concentration on fewer risk items; higher perceived success in managing risks overall; and, more consistency in the management of the pension risks that are deemed most important.... Weighing heavily on plan sponsors' minds is how best to improve funded status and, in turn, ensure that pension obligations are fulfilled for plan participants and their beneficiaries, as many of these obligations extend long into the future."
(MetLife)
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Younger Workers and Retirement: A 2012 Study
"[T]hese employees recognize the importance of saving for retirement. They are, however, impaired by lack of knowledge about their options and the generally widespread view that their workplace plans are complicated, intimidating and risky.... [P]lan sponsors can impact retirement plan participation and help this generation achieve financial wellness by providing rewards and incentives, coaching and guidance, and innovative ways to learn.*"
(Prudential Retirement)
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Using Behavioral Economics to Encourage Better 401(k) Decisions by Employees
"Every time an employee makes a 401(k)-related choice there is an optimal and a suboptimal decision, and poor choices can lead to lower account balances and deferred retirements. Because 401(k) plans were created as simple supplements to traditional [DB] pension plans, the consequences of suboptimal employee decisions used to be relatively minor. Over time, however, as the importance of 401(k) plans has grown, so have the consequences."
(The Segal Company)
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EU Pension Changes May Hammer UK Economy
"Recent figures from the Pension Protection Fund showed that the total deficit of British final-salary pension schemes more than doubled to 231 billion pounds within a year, hit by weak stock markets and low interest rates. The European Union's proposed changes are intended to ensure that such pensions would be covered if an employer went bust. However, [a recent] report from business lobby group the Confederation of British Industry said that the measures would cut the value of pensions and lead to 180,000 UK jobs being lost over ten years as companies seek alternative ways to fund the capital requirements."
(The New York Times; free registration required)
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[Opinion]
Do 'Pension Bonds' Increase Risk of Default by Municipalities?
"Pension bonds are indeed a red flag because it's just another 'extend and pretend' gimmick that doesn't tackle the root problem. It also adds debt to already overextended municipalities, some of which have gone bankrupt and stopped paying their pension payments."
(Pension Pulse)
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[Opinion]
Why Retirement Plan Tax Preferences Are Not as Expensive as You Might Think
"[T]he amount of revenue that the government would receive by eliminating the preferential tax treatment for retirement saving would be much less than what it might appear. To understand this, one must understand (1) how retirement plans are treated under U.S. tax law, (2) how the government actually accounts for the foregone revenue, and (3) how the government ought to account for the foregone revenue."
(Forbes)
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[Opinion]
San Bernardino's Bankruptcy Case Becomes Battle of Titans
"San Bernardino's bankruptcy effort is poised to become a battle of titans because -- unlike Vallejo and Stockton -- the city stopped making payments to CalPERS some $6.9 million ago. CalPERS claims primacy over all other creditors under California law, but Bankruptcy Court is federal.... Bond sellers and holders see this case as a showdown with CalPERS, in which they hope to do away with the retirement system's payoff primacy and gain equal footing as creditors."
(The Sun)
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[Opinion]
Solving a Retirement Crisis: It's as Simple as 123(4) for California's Public-Private Plan
"In California and elsewhere the retirement planning industry is beginning to wake up to a new 'defined benefit' plan for low- to middle-income workers or, as a legislative aide, Greg Hayes, describes it, an 'IRA in an insurance wrap.' The concept, if California S.B. 1234 overcomes not-insignificant financial and legal hurdles, promises to upend conventional thinking over the utility of 401(k)-type plans for the private-sector workforce. It also may create a shift in thinking about fiduciary responsibilities of the employers that sponsor plans."
(fi360 Blog)
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[Opinion]
New Louisiana Cash Balance Retirement Plan Increases Retirement Insecurity Without Offering Any Savings
"Though many private-sector workers face investment risks with 401(k)s, they can at least rely on Social Security to provide a guaranteed base retirement income. In addition, most 401(k) participants have the option of investing their savings in fixed-income securities, accepting a lower expected rate of return in exchange for reduced risk. In contrast, participants in [Louisiana's] new cash balance plan will not have the option of investing conservatively, though they will be protected against outright losses on investments."
(Economic Policy Institute)
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[Opinion]
Will 401(k) Plans Keep Getting Worse?
"Defined benefit plans are designed to encourage employees to exit or retire when it is optimal for the company. A 401(k) is cheaper, but it is a 'cash and carry' account that does not have the element of timing finesse. A 401(k) plan does not reward loyalty, and its value is not predictable as it fluctuates all over the place depending on the financial markets. By making workers stay until December before they can receive the company's 401(k) match, IBM is putting back, albeit with an anemic substitute, a reward for workers to stay at least until December."
(CNN)
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Benefits in General; Executive Compensation
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[Official Guidance]
IRS Eliminates Form 5500 Proposed Penalty Notices
"Beginning January 1, 2013 the IRS will discontinue sending these notices: CP 213N, Proposed Penalty Notice for Late Filing of Form 5500, Annual Return/Report of Employee Benefit Plan CP 213I, Proposed Penalty Notice for Incomplete Filing of Form 5500 The IRS is eliminating proposed penalty notices under the Form 5500 program in an effort to reduce processing costs, reduce notices and comply with notice and systems standards. Filers will continue to receive CP 283, Penalty Charged on Your 5500 Return, if a Form 5500 is filed late or is incomplete."
(Internal Revenue Service)
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EBSA Renews Charter for ERISA Advisory Council
"Not more than eight members of the [Advisory Council on Employee Welfare and Pension Benefit Plans, sometimes called the 'ERISA Advisory Council'] shall be of the same political party. Three of the members shall be representatives of employee organizations (at least one of whom shall be a representative of any organization members of which are participants in a multiemployer plan); three of the members shall be representatives of employers (at least one of whom shall be a representative of employers maintaining or contributing to multiemployer plans); three members shall be representatives appointed from the general public (one of whom shall be a person representing those receiving benefits from a pension plan); and there shall be one representative each from the fields of insurance, corporate trust, actuarial counseling, investment counseling, investment management, and accounting."
(Internal Revenue Service)
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Press Releases
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