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BenefitsLink Retirement Plans Newsletter

February 13, 2013          Get Health & Welfare News  |  Advertise  |  Unsubscribe
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Employee Benefits Jobs

Manager Retirement Administration
for Freeport-McMoRan Copper & Gold Inc. in AZ

ERISA & Benefits Counsel, Employee Benefits
for USI Insurance in CA

Processing Specialist
for Company in New York City in NY

Sr. 401K - DC Plan Admin Specialist
for CUNA Mutual Group in WI

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Webcasts and Conferences

Plan Administrator Skills Workshop
in Texas on March 8, 2013 presented by SouthWest Benefits Association

S Corporation ESOPs - Legal Issues
Nationwide on March 12, 2013 presented by National Center for Employee Ownership

S Corporation ESOPs - Administrative Issues
Nationwide on March 19, 2013 presented by National Center for Employee Ownership

S Corporation ESOPs - Valuation Issues
Nationwide on March 26, 2013 presented by National Center for Employee Ownership

End-to-End Approval and Acceptance Processes: From Boards to Participants
Nationwide on March 27, 2013 presented by National Center for Employee Ownership

View All Webcasts and Conferences


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[Guidance Overview]

2013 Pension Plan Funding Stabilization Rates Released (PDF)
"Notice 2013-11 shows that the rates for 2013 valuations that use lookback periods communicated to date (September 2012 through February 2013) will all be constrained to the stabilized rates of 4.94%, 6.15%, and 6.76% for the first, second, and third segment rate periods, respectively. These rates are likely to apply for all 2013 valuation dates unless interest rates spike upward tremendously and entirely unexpectedly between now and October." (Buck Consultants)


[Advert.]

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Sponsored by ASPPA

The administration of ESOPs requires knowledge of unique allocation and compliance testing requirements. The ESOP Administration certificate is designed to provide education for the beginning and intermediate ESOP administrator.


[Guidance Overview]

Taking Advantage of the Updated EPCRS
"The IRS made multiple changes to the existing EPCRS that plan sponsors can take advantage of now, including: [1] New, streamlined procedures (and schedules) for submitting Voluntary Compliance Program (VCP) applications. [2] Guidance on how to correct defined benefit plan failures under IRC Section 436. [3] Revised and additional methods for correcting the improper exclusion of employees." (Practical Law Company)

[Guidance Overview]

DOL Issues Advisory Opinion on Cleared Swap Transactions under ERISA
"The Advisory Opinion addresses ... whether, with regard to a pension plan entering into a cleared swap: [1] A clearing member is a fiduciary under ERISA ... when, following default by the plan on its obligations under a cleared swap, the clearing member exercises account liquidation rights that were negotiated between the clearing member and a plan fiduciary at the outset of the transaction. [2] A clearing member or central counterparty (CCP) is a party in interest under ERISA ... [3] [Whether the] clearing member's exercise of default rights under the swap and status as a party in interest may result in prohibited transactions under ERISA Section 406(a)." (Practical Law Company)

More Employers Plan to Offer Lump-Sum Pension Payouts in 2013
"More than one-third (39 percent) of defined benefit (DB) plan sponsors are somewhat or very likely to offer terminated vested participants and/or retirees a lump-sum payout during a specified period, also known as a window approach, in 2013. By contrast, just 7 percent of DB plan sponsors added a lump-sum window for terminated vested participants and/or retirees in 2012." (Aon Hewitt)

How Some Florida Cities Are Dealing with Pension Funding Issues (PDF)
"Given that pension liabilities can be such a large portion of the municipal budget, and that most are still far from fully funded, a number of questions are raised. Specifically, what are the possible factors that led to underfunding and what can municipalities do to solve this problem? And, possibly even more importantly, what could happen if these Florida governments do not make any changes? Based on media accounts and other public records, this report outlines some of the answers to these questions." (Collins Institute and Florida TaxWatch)

Want To Make That Public Pension Look Healthier? Burn The Cash
"Literally. Because as University of Rochester municipal finance expert Robert Novy-Marx explains, the accounting standards applied to public pension funds give managers -- and the politicians who oversee them -- a huge incentive to invest in risky assets and an equally huge penalty if they don't.... While most public-sector actuaries support GASB's methodology, Novy-Marx notes, 'academic economists almost unanimously disagree'[.]" (Forbes)

Guidelines for Funding State and Local Government Pensions (2013)
"[T]here is a pressing need for widely recognized, standardized guidelines as to what constitutes a sound funding plan for a state or local government employer that offers defined benefit pensions. The GFOA and ten other national associations representing state and local governments and retirement systems developed a set of pension funding guidelines to meet this need." (Government Finance Officers Association)

Auto-Enrollment and QDIAs Succeed, But Participant Communications Don't Keep Up
"Eighty-five percent of plan sponsors reported that automatic features are especially effective in helping participants who consider themselves less educated on retirement matters. [But] the more fully organizations have embraced automatic features, the more strongly those organizations believe participant communication has not evolved apace. Plan sponsors who have implemented a bundle of automatic plan features -- automatic enrollment, qualified investment default alternatives (QDIAs) and automatic escalation -- are 56 percent more likely to feel that communication strategies have not kept pace with the evolution in plan design." (Lincoln Financial Group and Retirement Made Simpler)

Looking Beyond the Immediate Impact of the Pension Provisions of MAP-21 (PDF)
This article includes an example of MAP-21's impact on a sample plan's January 1, 2012 valuation, showing an increase in the effective interest rate used for calculating the "funding target," which substantially lowered the funding target and the minimum required contribution for the 2012 plan year. Also includes a graph illustrating how MAP-21 reduces the interest rate "sensitivity" of the funding target. (Sibson Consulting)

Plan Sponsors Expect to Add Roth Features After ATRA Changes
"[A]mong those that offer a Roth savings account but not an in-plan conversion feature, a large number said they were not expecting to add an in-plan Roth feature in the next 12 months (47 percent). Reasons for this ranged from waiting for competitive pressure and employee requests to drive adoption of such a plan to the desire to accept only low administrative complexity and cost in exchange for adding the option." (Thompson SmartHR Manager)

Chicago Mayor Reaches Deal With Police Union to Modify Pensions
"Chicago police sergeants would get a 9 percent pay raise over four years while future retirees would be required to use 2 percent of their pensions to help cover health-care benefits ... Retirement plans will consume 22 percent of the budget -- about $1.2 billion -- within four years, unless the state Legislature restructures them, including adjusting benefits and contribution rates, the mayor has said." (Bloomberg)

Offering Too Many 401(k) Options Hurts Plan Participation and Asset Allocation
"When a 401(k) plan offered only two investment options, 75% of employees participated. When 59 investment options were available, however, the participation rate dropped to 61%. Expanding on this study, [Sheena Iyengar, professor of business at Columbia University] examined the impact that more investment options had on the 401(k) participants' asset allocation. For every additional 10 investment options available, the average 401(k) participant's equity allocation fell by 3.28%. Some neglected equities altogether." (Business Insider)

Employers Offset Costs of Automatic Enrollment by Reducing Matching Contributions
"[W]hile automatic enrollment has undeniably increased plan participation and enabled employers to increase contributions to highly compensated employees without violating the applicable nondiscrimination tests, it may result in reduced retirement savings by employees who have already enrolled in the plan or would have participated absent automatic enrollment." (Wolters Kluwer Law & Business)

Rising 401(k) Balances Helping Retirements Recover But Many Need to Boost Savings Rate
"People in plans fewer than five years showed the most gains between the end of 2009 and 2012. Average account balances for this group, by age brackets, rose 143 percent for those ages 25 to 34, 121 percent among people ages 35 to 44, 106 percent in the 45-to-54-year-old group, and 93 percent among continuous plan participants ages 55 to 64." (U.S.News and World Report)

Employment Duration and Shifts into Retirement in the EU
"[S]hifts into retirement have increased during the onset of the 2009 economic and financial crisis. Income, together with flexible working arrangements, is found to be important as regards early retirement decisions, compared to retiring beyond the legal retirement age. Finally, ... institutional measures (such as, state/health benefits, minimum retirement age) could not be sufficient alone if individuals withdraw earlier from the labour market due to a weakening of their health." (European Central Bank, via SSRN)

[Opinion]

Text of Response to Questions at Senate Committee Hearing on Pension Savings: Are Workers Saving Enough for Retirement? (PDF)
"This document provides responses to questions raised by members of the Senate HELP Committee at their Jan. 31 hearing on retirement savings. [Questions include:] What percentage of Baby Boomers and Gen Xers are likely to run short of money in retirement, based on the current system/assumptions? ...Approximately 44 percent of Baby Boomer and Gen-Xer households ..., assuming they retire at age 65 ... Of those projected to run short of money in retirement, how much is the shortfall? ... [S]hortfalls for Early Boomers (individuals born between 1948-1954) vary from approximately $70,000 (per individual) for married households, increasing to $95,000 for single males and $105,000 for single females. The aggregate retirement income deficit number, taking into account current Social Security retirement benefits and the assumption that net housing equity is utilized 'as needed,' as well as uninsured health care costs, is currently estimated to be $4.3 trillion for all Baby Boomers and Gen Xers." (EBRI)

Business CEOs Call for Raising Social Security Retirement Age
"The Business Roundtable's plan would protect those 55 and older from cuts, but younger workers would face significant changes. The plan unveiled earlier this month would result in smaller annual benefit increases for all Social Security recipients. Initial benefits for wealthy retirees would also be smaller. Medicare recipients would be able to enroll in the traditional program or in private plans that could adjust premiums based on age and health status." (Times-Standard)

[Opinion]

Nine Fallacies About Government Employee Pensions
"Public-sector retirement benefits require fundamental reform, but defenders of the current system have argued vociferously against any major changes. Defenders claim that retirement benefits are not actually generous, or that paying for the benefits is much easier than economists claim. These arguments are misleading and inconsistent with standard financial economics.... Sound economic arguments will hopefully eliminate these fallacies as obstacles to public-pension reform." (The Heritage Foundation)

[Opinion]

District Court Says No to IRS About Registered Tax Return Preparers -- Are ERPAs, Enrolled Actuaries or EAs Next?
"If, as the Court says, filing a tax return was not included in the statutory framework of Circular 230 practice before the IRS, and if practice before the IRS only includes representing taxpayers who are involved in a dispute with the IRS, such as an appeal, then filing a determination letter application or an EPCRS VCP Application with IRS Employee Plans would also not be included." (The Pension Protection Act Blog)

Benefits in General; Executive Compensation

Defending Section 162(m) Executive Compensation Derivative Suits in the U.S.
"Decisions regarding executive compensation fall squarely within the discretion of a public company's board of directors. Recently, however, plaintiffs' firms have been trying to invade the board's purview by bringing shareholder derivative actions challenging such decisions.... At least thirteen such cases were filed in 2011 and 2012, seven of which were filed in Delaware.... So far this year, the plaintiffs' firm at the forefront of this movement has issued at least twelve press releases announcing investigations of companies and their boards in connection with executive compensation." (Dechert LLP)

When Outsourcing Benefits Administration, Focus on the Employee Experience
"As companies turn to business administration outsourcing (BAO) for more and varied functions, the vendors' presence becomes more apparent to the employee end-user. Companies that in the past may have partnered with BAO providers for behind-the-scenes functions -- such as open enrollment support or summary plan description creation -- are increasingly using the vendors as employees' major point of contact for all things benefits-related.... Employers should not forget that employees still need a personal touch -- they often seek guidance from someone with their best interests in mind, someone within their own organization." (Society for Human Resource Management)

Press Releases

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