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January 7, 2013          Get Health & Welfare News  |  Advertise  |  Unsubscribe
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Employee Benefits Jobs

Sr. Plan Administrator
for American National Insurance Company in TX

Senior Level Retirement Plan Compliance Consultant/TPA
for Locally owned and nonproducing Compliance Consulting/TPA Firm in OK

Internal Wholesaler
for CPEhr in CA

Actuarial Specialist
for Kravitz, Inc. in CA

Defined Contribution Micro Manager
for The Angell Pension Group, Inc. in ANY STATE

Defined Contribution Manager
for The Angell Pension Group, Inc. in ANY STATE

Analyst, Plan Design & Assessment
for Tyco in NJ

Sr. 401(k) Recordkeeper
for Ingham Retirement Group in FL

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[Official Guidance]

IRS Chart of Significant Changes to EPCRS (PDF)
This chart lists changes to the Employee Plans Compliance Resolution System introduced by Rev. Proc, 2013-12, identifying the section where they are to be found, and describing the change from prior procedures (e.g., Rev. Proc. 2008-50). (Internal Revenue Service)


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[Official Guidance]

Topical Index to Rev. Proc. 2012-13 (EPCRS) (PDF)
23-page index prepared by the IRS. (Internal Revenue Service)

[Guidance Overview]

New EPCRS Makes Changes in 401(k) Match Correction
"Under the previous procedure, the corrective match contribution needed to be in the form of a qualified nonelective contribution (QNEC). Under the new procedure, the corrective matching contribution does not need to be a QNEC. Instead, the corrective matching contribution may be subject to the plan's vesting schedule." (SunGard Relius)

[Guidance Overview]

The New 403(b) EPCRS Rules: It's, Um, Complicated
"Be prepared to work hard when you need to take a 403(b) plan through the new EPCRS process under Rev Proc 2013-12 ... especially if you have to use the VCP process, or are defending an audit under CAP. It is going to be complicated.... This is not necessarily the fault of the drafters of the Rev Proc. They were stuck with a very difficult task: to try to make something which is fundamentally different from a 401(a) plan still fit uniformly into the 401(a) correction scheme." (Business of Benefits)

[Guidance Overview]

IRS (Finally) Releases Updated Voluntary Correction Procedures, Including 403(b) Corrections
"[Changes include]: [1] Any correction method which requires a qualified non-elective contribution (QNEC) cannot be cured by utilizing unallocated forfeitures available under the Plan. [2] Matching contributions on corrections for excluded participant deferrals can now be subject to the Plan's regular vesting schedule (previously, matching contributions had to be fully vested). [3] Late Adopters of 403(b) plan documents are eligible for a 50% reduction in the voluntary correction fee if the application is filed on or before December 31, 2013." (Leonard, Street and Deinard)


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[Guidance Overview]

IRS Issues Update to System for Correction of Plan Failures
"[T]he new revenue procedure provides that plans subject to section 403(b) can generally correct failures in accordance with EPCRS in substantially the same manner that is available for qualified plans. The revenue procedure also provides that the IRS will accept submissions related to funded governmental Code section 457(b) plans on a provisional basis outside of EPCRS through standards that are similar to EPCRS. This process is not available with respect to Code section 457(b) plans maintained by a not-for-profit organization." (Sidley Austin LLP)

[Guidance Overview]

IRS Releases New Employee Plans Compliance Resolution System (EPCRS)
"The most significant change to the VCP submission procedures is that all VCP submissions made on or after April 1, 2013 are required to include a completed Form 8950 (incorporating VCP application information) and Form 8951 (with VCP compliance fee information). Much of the information requested for VCP submissions under the old EPCRS is now incorporated into the Form 8950 and duplicative items captured by Form 8950 are eliminated from the new EPCRS. These forms are currently available only in draft form and may not be used until the IRS issues the final forms[.]" (Practical Law Company)

[Guidance Overview]

IRS No Longer Accepting Working Copy Submissions of Plan Documents for Determination Letter Purposes
"Under the IRS's determination letter procedures [as revised by Rev. Proc. 2013-6], individually designed plans must be restated when they are submitted for determination letter applications. Prior to Rev. Proc. 2013-6, for this purpose, submission of a working copy of the plan in a restated format would suffice as long as the plan sponsor separately submitted the executed amendments that were integrated into the working copy." (Bloomberg BNA)

[Guidance Overview]

Implementing In-Plan Roth Transfers
"The employer can operationally permit participants to accomplish the transfers prior to formally amending the plan. As the amendment would be an optional change, the deadline to adopt such an amendment should be the last day of the plan year in which the amendment is effective. However, it is not known at this time whether the IRS will extend the general amendment deadline." (SunGard Relius)

[Guidance Overview]

In-Plan Roth Conversions Liberalized by Fiscal Cliff Legislation (PDF)
"[T]he Act permanently expands the in-plan Roth rollover provisions ... to permit vested amounts that are not otherwise distributable ... to be transferred to a designated Roth account maintained within the plan.... Transfers result in taxable income in the year of the conversion ... And, unlike the relief provided for 2010 in-plan conversions of otherwise distributable amounts, individuals cannot elect to spread the tax hit over two years. Notably, the new 3.8% tax on net investment income of higher income taxpayers should not apply to this income." (Groom Law Group)

[Guidance Overview]

Fiscal Cliff Legislation Includes Expansion of In-Plan Roth Conversions
"One of the few revenue generators in the legislation [ ('ATRA') ] is an amendment to the Tax Code that expands the availability of 'in-plan Roth conversions' in employer-sponsored retirement plans.... Under ATRA, 401(k), 403(b) and governmental 457(b) plans that include a Roth contribution feature may now offer employees the option of converting any pre-tax amounts held in the plan, including elective deferrals, to after-tax Roth amounts in a taxable 'in-plan Roth conversion,' regardless of whether such amounts are otherwise 'distributable' under the Tax Code. This will greatly expand the potential for taxable conversions of pre-tax amounts to Roth amounts, although it remains to be seen whether this option will in fact generate the amount of tax revenue ($12 billion over the next 10 years) that Congress anticipated when 'scoring' the legislation." (Spencer Fane)

[Guidance Overview]

In-Plan Roth Conversions and the American Taxpayer Relief Act of 2012 (PDF)
"Will amounts converted, that are not currently eligible for distribution and rollover, continue to be subject to the distribution rules that applied pre-conversion? Note that, for in-plan Roth conversions made under the pre-Act rules, the plan's distribution rules for rollover accounts generally apply, post-conversion.... [U]ntil the IRS issues any guidance, plan administrators and record-keepers might need to consider establishing a tracking and/or record-keeping mechanism to distinguish (a) any in-plan Roth conversions made from amounts not currently eligible for distribution and rollover from (b) in-plan Roth conversions that are/were made from amounts eligible for distribution and rollover." (Transamerica Center for Retirement Studies)

Roth Opportunity Expansion Makes Work for Planners, Employers
"One might think of lots of good policy reasons for this expansion (like reducing plan leakage; giving participants greater flexibility for retirement planning), but Congress did not pass this law for good policy reasons. It passed it to raise revenue, plain and simple.... There are definite tax advantages for many plan participants, but it's important for someone who understands the vagaries to analyze whether or not conversion makes sense in individual situations. Plan sponsors whose plans don't currently provide for Roth accounts should also be busy determining whether or not to add the Roth option to their plans. If they opt to do so, a plan amendment and a summary of material modifications will be need to be prepared." (Benefits Bryan Cave)

No-Strings-Attached Roth 401(k) Conversion Is Good Deal -- for Select Few
"Congress's decision is a win only for a narrow group of individuals: Younger workers who are building their 401(k) accounts and who can afford the upfront tax bite of the conversion.... For older investors ... the upfront tax bite usually outweighs the advantage of having tax-free income in retirement." (Workforce; free registration required)

Moody's Proposal for Pension Liabilities Could Affect Credit Ratings of Local Governments
"The proposal would involve several key changes to be made to the reported liabilities of state and local government pension plans. These would include adjusting liabilities to reflect a 5.50% discount rate using a uniform assumed liability duration of 13 (an assumption which would result in an approximate 13% increase in liabilities for every decrease in discount rate of 1%); using market value of assets rather than any smoothed value reported by the plan; amortizing any resulting unfunded actuarial accrued liability over a 17-year period on a level-dollar basis; and allocating liabilities for cost-sharing plans according to proportionate share of total plan contributions." (Retirement Town Hall)

DC Plans Cutting Costs Using 'Big Stick' of Fee Disclosure
"New federal fee-disclosure regulations have enabled defined contribution plan executives to cut costs in multiple ways, ranging from negotiating lower fees for existing investment options to bargaining for less expensive institutional shares as well as collective trusts ... The heightened confidence among plan executives to negotiate better terms with record keepers also has led to plans reducing their reliance on complex revenue sharing and adjusting their arrangements to rebate money to participants or receive additional services from record keepers." (Pensions & Investments)

Ford Uses Bond Sale to Finance Contributions, Derisking Plan
"Ford Motor Co., Dearborn, Mich., sold $2 billion in 4.75% 30-year notes Jan. 3, mostly to finance accelerated contributions to its worldwide defined benefit pension plans this year and continue derisking its pension obligations ... Even though no contribution was required for 2012, Ford expected to make a total of $3.4 billion in contributions to its worldwide funded pension plans ... Ford's U.S. pension plans had ... an 81% funding ratio, while its non-U.S. plans had ... a 76% funding ratio." (Pensions & Investments)

2013 Annual Plan Deadlines (PDF)
"[This detailed 9-page] chart provides [to employers] an explanation of key plan events for Section 401(a) and 401(k) defined contribution plans and the deadline for each." (ING)

Pension Changes Prompt Mass Retirements Among Ohio Public Employees, Some Are Re-Hired Immediately
"Public employees defected in droves in December ahead of reforms to the state's biggest pension plan, although some elected officials returned to double dip. Richland County Recorder Sarah Davis has experienced a whirlwind of activity in the past couple of months. She won reelection in November, retired on New Year's Eve, was named interim recorder Thursday and is expected to be sworn in sometime soon for that full term she won in the fall. Davis said five other county recorders temporarily stepped down to avoid changes that would have damaged the value of their pensions." (Chillicothe Gazette)

Wisconsin Gov. Walker Says State's Pension System Is the Only One in the Country That's Fully Funded
"Is Wisconsin's pension system the only one in the nation that's fully funded? ...For the official 2010 and 2011 Wisconsin figures, we turned to a report by the Wisconsin Retirement System's actuarial consultant, which annually calculates the funded ratio. The firm, Gabriel Roeder Smith & Company, reported 99.8 percent funding for year-end 2010. And for year-end 2011, the firm put the Wisconsin fund's funded ratio at 99.9 percent, according to its latest report. The report showed the Wisconsin system at 99 percent or greater since 2003.... It's slightly below 100%, but so close that a respected research organization rounds it up. And no other plan covering general state employees can make that claim." (PolitiFact.com)

Is Your Employer's 401(k) a Good Deal?
"Although it almost always makes sense to contribute enough to get your company match, whether you should put more than that into the same basket depends on how much you're being charged in administrative fees, the quality of the investments available, and other factors. Alternative baskets for your retirement savings include individual retirement accounts and variable annuities, both of which also can shelter tax-deferred earnings." (The Wall Street Journal)

Fourth Quarter Corporate DB Plan Funding Unchanged
"According to the UBS Pension Fund Fitness Tracker, utilizing data from 500 U.S. corporations' defined benefit plans, the typical funding ratio remained flat at 77%, increasing by less than one percentage point, despite what the firm states was tremendous volatility in assets and liabilities. The typical plan returned 0.7% on all investments in the fourth quarter." (Pensions & Investments)

Accounts of Most New 401(k) Participants Include Target-Date Funds
"Most experts will tell you that the most important decision in retirement saving is deciding how much to save, not how those savings will be invested -- and yet, for years, much of the education and discussion about retirement saving has been focused on investing.... [T]arget-date funds, as well as their older counterparts, the lifecycle (risk-based) and balanced fund(s), have become fixtures on the defined contribution investment menu. For a large and growing number of individuals, these 'all-in-one' target-date funds, monitored by plan fiduciaries and those that guide them, are likely to be an important aspect of building their retirement future." (Nevin Adams via EBRI)

The Top Four Trends Guiding 401(k) Professionals
"Twenty years ago it was common practice for a company to engage one person or firm to act as a stockbroker, life insurance agent, property/casualty/health insurance broker and oversee the company's 401(k) plan. Today, after 'surviving' 408(b)(2), 404(a)(5), the Pension Protection Act and accepting the general acknowledgment that Americans are critically underprepared for retirement, it has become an industry 'best practice' to retain a firm or adviser who focuses 100% of his attention on the 401(k) plan and the participants of those plans." (MarketWatch.com)

[Opinion]

The Millionaire Cop Next Door
"Who are America's fastest-growing class of millionaires? They are police officers, firefighters, teachers and federal bureaucrats, who, unless things change drastically, will be paid something near their full salaries every year -- until death -- after retiring in their mid-50s. That is equivalent to a retirement sum worth millions of dollars." (Forbes)

[Opinion]

Five Ways to Strengthen the 401(k)
"Here are a few common-sense reforms that could make a dramatic difference in the long-term well-being of our retirement system and our retirees. [1] A focus on fees.... [2] Mandates for savings.... [3] Defined investment options for workers.... [4] Restricting distributions.... [5] Meeting the need for reliable retirement income." (Investment News; free registration required)

[Opinion]

How Much Hedge Fund Exposure Makes Sense?
"[The authors'] research suggests that a well-diversified, moderate allocation to hedge funds reduces the likelihood of a 20% peak-to-trough loss for the overall portfolio. This feature is particularly useful today, when extremely low bond yields make substantial investments in higher-returning assets crucial to funding long-term spending goals, and equity volatility remains daunting for many investors." (Alliance Bernstein)

Benefits in General; Executive Compensation

[Guidance Overview]

2012 Q&As: DOL Meeting with ABA Joint Committee on Employee Benefits, May 9, 2012 (PDF) (PDF)
32 pages. Topics addressed include 403(b) Distributions; Deferred Annuities in Defined Contribution Plans; Medicare; Electronic Delivery; Health Savings Accounts; and Participant Investment Directions. "The responses reflect only unofficial, nonbinding staff views as of the time of the discussion, and do not necessarily represent the official position of the DOL. Further, this report on the discussions was prepared by JCEB representatives, based on their notes and recollections of the meeting." (Joint Committee on Employee Benefits, American Bar Association)

[Guidance Overview]

Fiscal Cliff Bill Affects IRAs, Roth 401(k)s, Coverdell ESAs (PDF)
"This legislation revives a number of expired or expiring tax provisions, and seeks ways to generate federal tax revenues through new taxpayer incentives.... IRA Qualified Charitable Distributions Extended, Transition Period Allowed ... In-Plan Roth Rollovers Expanded ... Permanence for Coverdell ESA Account Provisions ..." (Ascensus)

Best Practices and Proxy Firm Policies Take Center Stage for 2013 Executive Compensation
"Pay for performance will be the name of the game in the 2013 proxy season, with many companies expected to provide alternate pay for performance disclosures, and both proxy advisory firms have incorporated alternate disclosures into their analysis.... Dodd-Frank comp regulations await key personnel changes at deadlocked SEC ... New leadership in key congressional committees may signal greater willingness to explore Dodd-Frank changes." (HR Policy Association)

A Soft Landing from the Fiscal Cliff for Employee Benefits
"This legislation significantly expands the ability for participants to convert non-Roth accounts within 401(k), 403(b), and 457(b) governmental plans to Roth accounts without withdrawing amounts from the plan. This provision is expected to raise 12.2 billion over 10 years to offset the loss of revenue stemming from the sequestration delay. The Fiscal Cliff legislation also addressed the tax exclusions for employer-provided educational and adoption assistance, which were both scheduled to expire at the end of 2012, re-established the parity between mass transit and parking fringe benefits that expired at the end of 2011, and addressed dependent care assistance benefits." (Ogletree Deakins)

[Opinion]

Health and Retirement Priorities for the 113th Congress: U.S Chamber of Commerce Looks at Year in Review and Year Ahead (PDF)
"Although the Chamber is committed to reforming the nation's health care system to lower costs, improve quality and access, and build a more value-driven system, the Patient Protection and Affordable Care Act (PPACA) does not accomplish these goals.... The Chamber supports repealing the employer mandate to not only protect existing jobs, but to spur the creation of new jobs by removing much of the fear and uncertainty employers are experiencing.... The Chamber intends to work with Congress and other interested parties in finding solutions to longterm funding issues in the multiemployer pension plan system.... The Chamber believes that raising the PBGC premiums, without making comprehensive reforms to the PBGC or the defined benefit system, amounts to a tax on employers that have voluntarily decided to maintain defined benefit plans." (U.S. Chamber of Commerce)

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