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Employers at the Intersection of Public and Private Exchanges Webinar
Nationwide on January 22, 2013 presented by Employee Benefit News

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NIPA (National Institute of Pension Administrators)

 

[Guidance Overview]

DOL Issues Amendments to Abandoned Plan Guidance (PDF)
"Ordinarily, a termination of the plan would mean that the bankruptcy trustee is responsible for multiple functions that they are likely unfamiliar with, including reporting, document amendments, and correction of operational failures. The proposed rule would allow a bankruptcy trustee to be a QTA, or appoint a financial organization as QTA under the abandoned plan program. The abbreviated plan termination process would, in the DOL's view, increase the retirement security of participants and beneficiaries by reducing expenses and expediting distributions, while at the same time limiting the bankruptcy trustee's fiduciary liability in terminating the plan." (Ascensus)

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Learn the advantages of establishing an ESOP!

Review the main employee stock ownership plan (ESOP) provisions of the IRC, and evaluate the tax advantages a shareholder of a closely held corporation may receive by establishing one.

[Guidance Overview]

Plan Document Review Strongly Recommended in Light of New IRS Cumulative List
"Sponsors of individually designed Cycle C plans, and their advisors, should carefully review the 2012 Cumulative List to ensure that their plan documents and determination letter applications address the issues the IRS has identified for review. Due to the small number of new items that could affect 401(k) plans, and the specialized nature of those items, many 401(k) plans that were already up-to-date with items on the 2011 list may discover that they do not have to make any documentation changes in response to the 2012 list." (Thomson Reuters / EBIA)

[Guidance Overview]

DOL Proposes Expanded Procedures to Expedite Distributions from Plans of Bankrupt Plan Sponsors
"According to the preamble, the IRS has advised that it will not challenge the qualified status of plans terminated using the abandoned plans procedure, or take any adverse action against a QTA, a participant or beneficiary, or the plan, so long as the QTA ensures that the survivor annuity rules are met, benefits are properly vested upon termination, and participants and beneficiaries are notified of their rollover rights. Based on this indirect guidance, more trustees may decide to forgo the final determination letter, further accelerating the termination process." (Thomson Reuters / EBIA)

CalPERS Slams San Bernardino for 'Sham' Bankruptcy and 'Criminal' Behavior
"[T]he largest U.S. pension fund filed court papers denouncing the financially troubled California city of San Bernardino for what it called a 'sham' bankruptcy and accused the city of 'criminal behavior' in withholding payments to the pension plan. The filing by the California Public Employees' Retirement System, or CalPERS, came 10 days after San Bernardino officials traveled to Sacramento to plead with top CalPERS executives for more time to make its payments." (Reuters)

CalPERS Statement on Filing of Objection to San Bernardino Bankruptcy
"CalPERS requested that the City be given additional time to adopt a real pendency plan to solve its financial difficulties and is encouraging the court to press the City to improve its management and accounting procedures.... The City of San Bernardino filed its petition on August 1, 2012 and has yet to pay CalPERS approximately $7 million in post-petition debts." (California Public Employees' Retirement System)

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Incenting Retirement: Navigating the Legal Issues - January 17, 2013

Many companies are directed to reduce headcount: whether it is reducing the number of active employees or deferred vested participants. But to implement that directive requires navigating numerous potential legal issues. Discounted pricing for BenefitsLink readers.

CalPERS Comes Out Swinging in Fight for Overdue Pension Contributions
"The bland bureaucracy that dispenses pension checks to half a million Californians has taken on a new identity: fierce and unyielding champion of government retirees. Facing an unprecedented legal fight over the cash it receives from member cities and counties, CalPERS has come out swinging. It has gone to court to keep the dollars flowing, while portraying itself as the only thing standing between helpless retirees and greedy Wall Street types and irresponsible politicians who would grab their pensions." (Sacramento Bee)

Senior Pilots Battle American Airlines Over Whether Pensions Can Be Cashed Out in Lump Sum
"The pilots' A Plan, a defined-benefit plan, gives pilots the option to take their pension as a lump sum rather than as an annuity. That option has been on hold since American filed for bankruptcy Nov. 29, but would again be available when American emerges from bankruptcy. American has asked U.S. Bankruptcy Judge Sean Lane for the right to kill that option.... But the senior American Airlines pilots, all hired before Nov. 1, 1983, are objecting, saying the change isn't needed and that they have an ironclad promise from 1983 -- Supplement B to their contract -- that the airline would never touch their benefits.... Both the PBGC and the unsecured creditors committee have filed motions supporting American's proposal to cut out the lump sum." (DallasNews.com)

Millennial Employees Eager to Increase Retirement Preparedness
"Millennials, the youngest generation in the workforce today, are highly motivated to save for retirement and would plan ahead if they knew more about retirement benefit options from their employers, according to a new study ... [T]hese consumers, recognize that contributing to their retirement is a must, even in an economic recession. In fact, 83 percent say that seeing what can happen to people who don't save enough for retirement makes them want to save more." (On Wall Street)

Santa Rosa Pension Costs, Debts Continue to Climb
"Santa Rosa's pension costs are continuing to climb and probably will for several years despite state and local reform efforts, but officials say healthy investment returns and lower benefits for new workers may eventually help rein in costs. The city recently learned that its largest annual retirement cost, its payment to the California Public Employees Retirement System, is set to increase by about $1 million next year, to $20.4 million." (PressDemocrat)

California Pensions for New Employees Drop Back Toward Pack
"California has the nation's highest-paid state workers. Pensions could have been added to the lucrative list. State pensions were boosted by the same forces cited in the series that pushed up pay. But while the high wages, overtime and lump sum payouts ... may continue, pensions for new hires will be cut beginning Jan. 1." (CalPensions)

Preparing for a Pension Risk Transfer
"Plan sponsors must identify their risk management/transfer options and engage with insurers to understand pricing and capital commitment. Brennan suggested sponsors develop an in-house cost/economic liability study, identify the appropriate discount rate for calculation of pension liabilities as well as the most recent mortality assumptions." (PLANSPONSOR.com)

ICI Report Says Transition from Pensions to 401(k)s Won't Lead to Poverty
"A common story line is that yesteryear's retirees lived large, with lifelong pensions from defined benefit plans. Today's seniors, reduced to 401(k)s and other mainly self-funded defined contribution plans, may find themselves clipping coupons and buying in bulk to survive.... [According to the Investment Company Institute,] the move from a defined benefit world to a defined contribution world 'is unlikely to reduce retirement preparedness.'" (Financial Planning)

How Employers Can Do Better in Promoting Employee Retirement Readiness
"[A]uto-enrollment is a first step that often leads to participants taking advantage of their provider's offer to make asset allocation decisions for them.... Default decisions in auto-enrollment for auto-increases should be raised so that workers are eventually seeing combined contributions of 12 to 15 percent going toward their retirement." (Human Resource Executive Online)

Should Americans Be Insuring Their Retirement Income?
"[H]ow can you protect your money from market downturns, but also provide adequate growth to reach your retirement goals? This paper explores the advantages of insuring retirement income, just as you insure other valuable assets. It examines the financial risks today's retirees face, and provides a case study on the potential impact of leaving funds for retirement unprotected. In addition, the paper touches on some of the products that can be used to insure retirement assets and provide guaranteed income that can last a lifetime." (Prudential Retirement)

Tax Elasticity of Labor Earnings for Older Individuals
"This paper studies the impact of income and payroll taxes on intensive and extensive labor supply decisions for workers ages 55-74 ... [The] estimates suggest that an age-targeted tax reform that eliminates payroll taxes for older workers would decrease the percentage of workers dropping out of the labor force by 1 percentage point, a 4% decrease." (Case Western Reserve University Research Paper Series in Legal Studies)

Proposed Changes to DOL Abandoned Plan Rules Could Be Light at End of Tunnel for Employees of Bankrupt Employer
"[E]mployees at Penn Specialty Chemicals, a small company that went bankrupt in 2008 ... were supposed to receive their 401(k) savings when the company collapsed. Instead, the bankruptcy trustee has withheld distributions, pending approval from the [IRS]. While the employees have waited, administrative fees on their accounts have piled up. During 2009 and 2010, for example, $111,463 in fees was charged against the roughly $4 million that the accounts held.... [The DOL has] proposed a rule that it says will prevent cases like this from dragging on." (The New York Times; free registration required)

Consider 2012 Conversion to Roth IRA to Lower Future Income Tax
"With the increase in Medicare taxes that goes into effect in 2013 and the high likelihood of increased tax rates in one form or another as a result of the 'fiscal cliff' negotiations, individuals may want to consider accelerating income into 2012 to avoid additional income tax exposure in 2013 and beyond.... The amount converted is subject to federal income taxation in the year of conversion (except for any non-taxable basis in the converted amount), and, therefore, the participant must have funds available to pay the taxes due." (Haynes and Boone, LLP)

Calculating Multiple Beneficiary and 'Much Younger Spouse' Required Minimum Distributions from IRAs
"[A] retiree who owns multiple IRAs can take his annual required minimum distribution (RMD) for all of the accounts from any one or more of them. He does not have to take each particular IRA's RMD from that particular IRA. Does this rule continue to apply after death? ... Is it still possible to use the Joint and Last Survivor Table when the beneficiary is a trust for the spouse rather than the spouse individually?" (Natalie Choate for Morningstar Advisor)

Employee Survey Says a Change in 401(k) Tax Breaks Could Discourage Savings
"As politicians search for a way to avoid the fiscal cliff, the tax benefits awarded to defined-contribution retirement plans such as 401(k)s look like a tempting source of new revenue. But a recent survey shows changes in the tax treatment of 401(k) plans could discourage employees from saving and lead some companies to discontinue plans.... 91% of those surveyed say the fact that employees' 401(k) contributions are excluded from current income tax is either very important or somewhat important in their decision to contribute to the plan, and 73% say employees contribute more to the plan than they would otherwise because of the tax situation." (Treasury & Risk)

Moody's Downgrades Illinois Credit Outlook, Cites Pension Funding Pressures
"While the report reaffirmed the state's A2 credit rating on general obligation debt, it lowered the credit outlook from stable, putting at the top of its concerns the state's unfunded pension obligations. 'If the Legislature in coming weeks or months enacts significant pension reforms, they are almost certain to be challenged, given the state's constitutional protection of retiree benefits,' the report said." (Pensions & Investments)

Report Finds Public Pension Valuation Numbers Wanting
"The problems [the Public Company Accounting Oversight Board] found include the following: Insufficient testing of controls over how pension plan assets are valued; Testing of controls that were imprecise and therefore did not allow for an assessment of the risk of material misstatement by plan auditors; Failure to properly test the valuation of pension plan assets; and/or Relying on management or the person(s) who performed the reviews without seeking an independent assessment as to why 'variances from other evidential matter' were occurring." (Pension Risk Matters)

Despite Reforms, New Jersey Pension Plan May Be in Deep Trouble
"This year, the state contributed $1 billion toward pension costs, but by 2018, it will have to come up with about $5.5 billion a year -- roughly 40 percent of what it now spends on public education. There is no apparent source of that much money in the state's $31 billion annual budget." (The New York Times; free registration required)

[Opinion]

The Train Wreck Ahead for Sonoma County
"From 2001 to 2010, the county spent $302 million on pensions, but ended the decade with a $330 million liability and $515 million in pension bond debt. Added together, the average cost was $114.5 million per year, 10 times more than the previous decade. These numbers may sound shocking, but the reality of the situation is much, much worse because these numbers are based upon accounting gimmicks and overly optimistic investment return assumptions." (PressDemocrat)

McGraw Wentworth Benefit Advisor, December 2012 (PDF)
"This final issue of [the] Benefit Advisor for 2012 reviews the important developments that affected employee benefit programs this year. It also reviews the year-end housekeeping issues that organizations should revisit annually." (McGraw Wentworth)

AARP Returns to Hard Line Against Benefit Cutbacks
"AARP now appears to have veered back to a hard-line position of opposing any cutbacks in Medicare or Social Security and is seeking to keep those programs off the bargaining table altogether.... If the Chamber of Commerce is the lead voice of business leaders on the right in opposing increased taxes in the deficit talks, AARP plays a similar role on the left in opposing benefit cuts. It hopes to meet or make contact with the office of every member of Congress before a deal is done." (The New York Times; free registration required)

Seventh Circuit Affirms Penalties for Employer's Failure to Produce Requested Plan Documents
"The court noted that documents such as the internal guidelines requested in this case may not always be subject to ERISA's disclosure requirements. But citing a document as the basis for a claim denial elevates the document to the status of a plan document that must be provided upon request." [Mondry v. American Family Mut. Ins. Co., 2012 WL 5938681 (7th Cir. 2012)] (Thomson Reuters / EBIA)

Cypen & Cypen Newsletter for December 13, 2012
Covers employee benefit developments with an emphasis on governmental plans. Topics in this issue include: Switch From DB To DC May Not Be Best Solution; A Six-point Plan To Address Accelerated Exodus From DB Plans; Why Saving for Retirement May Be Good for Women's Health; and Health Care Costs Loom as Largest Investors' Retirement Worry. (Cypen & Cypen)

Tegrit Group Supports ASPPA and Save My 401k!
Tegrit Group

Tegrit Group � Each One Reach One!
Tegrit Group

Improved Diagnosis: Health Care Costs Projected to Increase More Slowly
Buck Consultants, A Xerox Company

Cammack LaRhette Consulting Hires Denise M. Burns, CFA As Vice President, Investment Services
Cammack LaRhette Consulting

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