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January 14, 2013          Get Health & Welfare News  |  Advertise  |  Unsubscribe
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Employee Benefits Jobs

Client Service Representative
for Associated Pension Consultants in CA

Account Coordinator - Retirement Services
for Plexus Financial Services in IL

Benefits Analyst
for Directors Guild of America - Producer Pension and Health Plans in CA

Supervisor Plan Regulatory Services
for OneAmerica Financial Partners, Inc. in IN

Pension Analyst
for Libman, Kadavy & Co., Inc. in OH

Benefits Specialist
for Beneco in AZ

Trading Specialist
for Beneco in AZ

Retirement Plan Specialist
for Ambrose Employer Group, LLC in CT

Defined Contribution Plan Administrator
for Retirement, LLC in OK

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[Official Guidance]

PBGC Interest Assumptions for Paying Benefits from Terminated Single-Employer Plans for February 2013
"The February 2013 interest assumptions under the benefit payments regulation will be 0.75 percent for the period during which a benefit is in pay status and 4.00 percent during any years preceding the benefit's placement in pay status. In comparison with the interest assumptions in effect for January 2013, these interest assumptions are unchanged." (Pension Benefit Guaranty Corporation)


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[Guidance Overview]

Employee Plans Compliance Resolution System Is Updated
"Certain open questions remain unanswered. The IRS continues to request comments on corrections for safe harbor notice failures, designated Roth contribution failures, and failures to implement automatic enrollment and automatic escalation in certain plan types. Rev. Proc. 2013-12 is effective April 1, 2013. However, plan sponsors are permitted to apply the provisions of the revenue procedure on or after December 31, 2012." (McDermott Will & Emery)

[Guidance Overview]

IRS Updates Retirement Plans Correction Program
"The biggest news is that 403(b) plans are now eligible for EPCRS. In particular, 403(b) plan sponsors can now use VCP to correct failure to adopt a written 403(b) plan on time. Correction procedures are also provided on an experimental basis for 457(b) plans, primarily for governmental 457(b) plans, in a new program separate from the EPCRS." (Benefits Bryan Cave)

[Guidance Overview]

The 'Best Efforts' Standard of the 403(b) EPCRS
"The IRS has been accommodating over the past several years, recognizing the problems and challenges related to the transition to those new regulations (some of which are yet to be resolved). But now, it is taking this opportunity to cause 'best efforts' compliance and correction activity for a significant number of plans." (Business of Benefits)

[Guidance Overview]

IRS Clarifies ATRA's Qualified Charitable Distribution Provisions
"An IRA distribution paid directly to a charitable organization in January 2013 can be elected by the taxpayer for 2012 QCD treatment if the distribution meets all requirements other than having been made in 2012. Taxpayers are advised to keep records to substantiate the timing of these transactions. If a taxpayer failed to take his required minimum distribution (RMD) in 2012, a January 2013 payment treated as a 2012 QCD will satisfy the 2012 RMD requirement if the amount meets or exceeds the 2012 RMD." (Ascensus)

[Guidance Overview]

California Public Employees' Pension Reform Act (PEPRA) Provisions Effective As of January 1
"California's pension reform legislation went into effect as of January 1, 2013, although certain provisions are not effective until the expiration of the relevant collective bargaining agreement. This document includes commentary reflecting [the authors'] understanding of the law, based upon numerous unofficial and informal discussions with key legislative staffers." (Chang Ruthenberg & Long)

[Guidance Overview]

Individual Brokerage Accounts: What Plan Sponsors Must Disclose to Participants
"The participant disclosure requirements for brokerage accounts should not be overlooked by plan sponsors and committees. Though the requirements are less for designated investment alternatives, there are specific items that must be disclosed -- initially and annually. It may be easy to assume that a plan's providers will automatically make the disclosures. However, the Participant Disclosure Regulation places the legal burden squarely on the shoulders of the fiduciaries -- the plan sponsor and the committee members[.]" (Drinker Biddle)

How Do You Know Where Your 401(k) Plan Is Going, If You Don't Know Where You Are?
"The primary gauge of retirement readiness should no longer the amount accumulated at retirement. Rather, it is the extent to which there is an adequate income replacement. The metrics you need to measure, historically track, focus upon, and improve the key retirement readiness metrics include: Plan participation rates; Employee contribution rates; Monthly income projected at retirement; [and] Income replacement ratio." (The Retirement Plan Blog)

Health, Education and the Post-Retirement Evolution of Household Assets
"[E]mpirical findings suggest a substantial association between education and the evolution of assets. For example, for two person households the growth of assets between 1998 and 2008 is on average much greater for college graduates than for those with less than a high school degree. This difference ranges from about $82,000 in the lowest asset quintile to over $600,000 in the highest." (National Bureau of Economic Research)

Illinois Credit Rating Takes a Hit After No Action on Pensions
"Fitch Ratings delivered its designation due to the 'ongoing inability of the state to address its large and growing unfunded pension liability,' specifically noting the outgoing General Assembly adjourned ... without taking action on pension reform. The state's credit rating was listed at the already-low designation of A but with a stable outlook. It is still rated A but now has an outlook known as 'rating watch negative'." The move could make it more expensive for the state to borrow money." (Chicago Tribune; free registration required)

Target-Date Funds Grow in Popularity as Investment Choice, But Do Your Homework
"This no-brainer option has become the retirement rage in the wake of the passing of the Pension Protection Act of 2006, which allowed employers to automatically enroll their employees in target-date funds. Since then, total target-date fund assets have jumped four-fold to $475 billion as of November 2012.... More than 80% of retirement plans managed by mutual fund giant Vanguard offer them, and nearly a quarter of participants stash all of their retirement cash in a target-date fund.... But target-date funds come with risks." (New York Daily News)

Retirement, Recessions and Older Small Business Owners
"[R]esearch indicates that the self-employed over age 50 expect to retire at older ages and have larger balances in their retirement savings accounts than their wage and salary counterparts. While these characteristics might make it easier for these older self-employed to weather recessionary financial storms, [the authors'] analysis does not reveal key differences in outcome variables during recessionary years.... [O]lder self-employed differ from their wage and salary counterparts in important ways including financial literacy, but these differences are not exacerbated or lessened during recessionary periods." (University of Kansas and University of Tennessee)

Optimal Distribution Rules for DC Plans: What Can the United States Learn from Other Countries?
"[T]his article discusses the current rules governing benefit distributions from defined contribution plans in the United States and other countries ... [and] considers how distribution rules and regulations can be used to encourage retirees to take their defined contribution plan distributions in the form of annuities or other lifetime income products.... Today, relatively few countries have distribution rules that encourage retirees to take their defined contribution plan distributions in the form of annuities or alternate lifetime income products. Ultimately, this article seeks to identify the optimal set of distribution rules to encourage individuals to select lifetime retirement income products that can insure against longevity risk." (New York University Review of Employee Benefits and Compensation)

New York Pension Fund Exercises Muscle as Qualcomm Shareholder
"[New York State's comptroller, Thomas] DiNapoli sued Qualcomm, a computer chip business, demanding to see the company's internal records on political spending. The suit ... argues that the records are necessary to help Mr. DiNapoli determine whether the state's pension funds are protected. 'Without disclosure, there is no way to know whether corporate funds are being used in ways that go against shareholder interests,' he said. The pension fund owns almost $380 million in Qualcomm stock, and Mr. DiNapoli contends that this should give him a voice in the company's business." (The New York Times; free registration required)

New Proprietary Funds Case Presents Issues of Standing, Statute of Limitations (PDF)
"A financial services company sponsoring a 401(k) plan that includes the sponsor's own mutual funds on the plan's investment menu has an inherent conflict of interest and needs to avoid even the appearance of favoring its own funds.... [Claims] recently made against SunTrust with respect to its selection of eight proprietary mutual funds ... for inclusion on the investment menu of its in-house 401(k) plan ... allege that this resulted in (i) a breach of fiduciary duty and (ii) a prohibited transaction, but SunTrust raised interesting defenses[.]" (The Wagner Law Group via 401k Advisor)

Cypen & Cypen Newsletter for January 10, 2013
Covers employee benefit developments with an emphasis on governmental plans. Topics in this issue include: Pension Board Hit With Damages and Attorneys Fees; Amounts in Applicable Retirement Plans May Be Transferred To Designated Roth Accounts Without Distribution; UBS Finds Corporate Pensions' Funding Ratio Basically Unchanged; Ditto for BNY Mellon. (Cypen & Cypen)

Fiscal Cliff Law Loosens Roth Conversions
"The Roth change is a permanent amendment to the tax code, so sponsors should not feel rushed to alter their plans in 2013 ... Employers have the option to wait until later in the year to add the program, or can wait and add the feature in future years[.]" (The Vanguard Group, Inc.)

Employers Eye Returns in 401(k)s
"[A recent study] examined 43 plans with an average asset size of $310 million between 1994 and 1999.... The plan sponsors added a total of 215 mutual funds and dropped 45. More than half the additions were of funds from an investment category that wasn't previously represented in the plan's menu.... [T]hree years after they were added, the new funds beat a random group of similar offerings only by 44 basis points. Dropped funds, on the other hand, experienced a slight improvement in their performance after being removed from the 401(k) menus, besting similar randomly selected funds by 17 basis points." (Investment News; free registration required)

Pension Costs to Rhode Island Taxpayers Creep Higher
"The required taxpayer contribution to the state pension fund would rise from a projected $380.3 million next fiscal year to $404.5 million in the budget year that begins July 1, 2014, if the Retirement Board adopts the 'employer' rates that its actuarial consultants [have] recommended[.]" (Providence Journal)

New Government Figures Show Employee Retention Climbs a Bit
"[T]he latest data on employee tenure from the January 2012 Supplement to the U.S. Census Bureau's Current Population Survey (CPS) show that the overall median tenure of workers ... was slightly higher in 2012, at 5.4 years, compared with 5.0 years in 1983. In fact ... the data ... show that those so-called 'career jobs' NEVER existed for most workers. Indeed, over the past nearly 30 years, the median tenure of all wage and salary workers age 20 or older has held steady, at approximately five years." (Nevin Adams via EBRI)

401(k) Success Impeded by 'Chasing Returns'
"Plan administrators most often choose to include, as new plan investment options, mutual funds that subsequently perform worse than their comparable stock or bond benchmark indexes, according to [a recent] study ... [which found that] when making changes to their plan's fund offerings, administrators are likely to 'chase returns' (that is, select funds with strong short-term performance records, which may indicate they are presently over-valued following a recent run-up)." (Society for Human Resource Management)

[Opinion]

CalPERS Planning to Gut a Key Cost-Control Provision of California Pension Reform
"The agency's absurd interpretation of the new law will fatten pensions for new public employees, drive up government costs and erode untold billions of dollars of savings that the governor and CalPERS previously claimed the new law would produce. The key provision is pretty simple: New employees will receive pensions based only on their 'normal monthly rate of pay or base pay'.... If new workers receive one of nearly 100 different pay premiums for everything from marksmanship and longevity to being a notary or working on a library reference desk, CalPERS has decided, the extra compensation will be counted as income when their pensions are calculated." (Contra Costa Times)

[Opinion]

The Three Surprises in 401(k)s
"Most people assume they're savvy about 401(k)s, but here are three surprises for Boomers counting on 401 (k)s as their future financial lifejackets: (1) how it got started -- accidentally; (2) how much they should regularly save to build a safe retirement nest egg; and (3) how big a bite mutual funds take out of their gains. The fact is that the 401(k) has not worked out well for millions of average Americans and one big reason is that Congress gave birth to the 401 (k), it was never intended to become a nationwide retirement system or to be used by average middle class Americans." (Forbes)

[Opinion]

The Dirty Business of Pension Divestment
"There are many stakeholders in public pensions, not just union members, and the primary concern is achieving the actuarial rate of return without taking undue risk to keep the cost of providing pensions down. If divesting means lower returns, are union members, plan sponsors and taxpayers prepared to live with higher contributions and lower benefits?" (Pension Pulse)

Benefits in General; Executive Compensation

[Guidance Overview]

2013 Benefit Limits
"The IRS and the Social Security Administration have announced the cost-of-living adjustments for various benefit plan limits for 2013. Limits affecting retirement plans [as well as] the limits for health and certain other fringe benefit plans are shown [in this article]." (Kilpatrick Townsend)

Press Releases

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