[Guidance Overview]
DOL Issues Model MAP-21 Supplement to the Annual Funding Notice for Pension Plans
"FAB 2013-01 includes a model supplement to the model annual funding notice as well as additional guidance on other aspects of the notice requirement.... The MAP-21 Supplement includes an information table that shows how the MAP-21 interest rates affect the plan's: Funding Target Attainment Percentage ... Funding Shortfall [and] Minimum Required Contribution."
(Practical Law Company)
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[Guidance Overview]
403(b) Plan Sponsors Can Mitigate Risk By Taking Proactive Steps Under New EPCRS Guidance
"[T]he IRS is developing a determination letter program for 403(b) plans. Once this program is introduced, the IRS will provide a remedial amendment period to allow plan sponsors to amend their plans retroactively. This guidance suggests that late adopters can likewise use the model provisions, without worrying about subsequent guidance."
(Porter Wright Morris & Arthur LLP)
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IRS Issues 403(b) Plan Fix-It Guide
"Although these types of failures are not necessarily new (i.e., they could have occurred in prior years), the IRS is slowly bringing 403(b) plans under more scrutiny as the dollars being contributed to these types of plans continue to increase. The IRS is developing more expertise in this area and is training more agents to be able to identify the particular differences between 401(k) plans and 403(b) plans, and the specific nuances and legal requirements of operating 403(b) plans."
(McDermott Will & Emery)
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[Guidance Overview]
The Benefits of Mandatory Retirement Plan Distributions to Former Employees (PDF)
"Mandatory Distributions [1] Help reduce plan expenses ... [2] Reduce the administrative burden of keeping track of and providing disclosures to former employees. [3] Reduce fiduciary responsibility by eliminating accounts of former employees.... Providers that specialize in automatic rollovers have documents and procedures that facilitate compliance with the safe harbor.... Both fiduciary and non-fiduciary advisers can be compensated by automatic rollover providers for referrals."
(FredReish.com)
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SEC Charges Illinois with Fraud Over Pensions; State Settles by Promising Better Disclosures
"Federal authorities announced Monday that Illinois has agreed to settle a securities-fraud charge that accused the state of misleading investors about the financial health of its public-employee pension systems, which are now $96.7 billion short of what's needed to cover promised retirement benefits. In a cease-and-desist order issued by the [SEC] Gov. Pat Quinn's administration admitted no wrongdoing in the way state officials borrowed money to pay pension obligations through $2.2 billion in municipal bond sales from 2005 to early 2009."
(The Washington Post)
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Illinois Settles with SEC Over Pension Funding Disclosure in Bond Offerings
"'Time after time, Illinois failed to inform its bond investors about the risk to its financial condition posed by the structural underfunding of its pension system,' said George S. Canellos, acting director of the Securities and Exchange Commission's Division of Enforcement, in a statement. The state neither admitted nor denied the findings in the order, which carried no penalties or fines."
(Pensions & Investments)
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Pension Finance Update as of February 28, 2013 (PDF)
"After a strong January, pension sponsors suffered a minor pullback in funded status during February, with both "model" plans we track seeing small liability increases edging out even smaller asset growth. Despite the pullback, sponsors remain ahead so far in 2013: our traditional 'Plan A' remains up 5% on the year, while 'Plan B' has improved 2%."
(October Three)
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Roth or Regular: Which 401(k) is Best?
"If you're between 25 and 60, things are a lot grayer as tax and income situations vary widely. And tax laws could change drastically by the time you retire, so there isn't a perfect plan for deciding on Roth, traditional, or blended contributions. You can, however, diversify to mitigate tax risks."
(U.S.News and World Report)
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Americans Concerned About Retirement Security: Time for a DB Comeback?
"[A] whopping 85% of Americans surveyed are concerned about their retirement prospects.... 83% of Americans surveyed report favorable views of pensions (also known as defined benefit or DB plans) and 82% indicate they believe that those with DB plans are more likely to a have a secure retirement."
(Retirement Town Hall)
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Deducting Losses on IRA Investments
"Consideration should be given as to whether claiming the deduction for the loss makes good financial sense. The answer will not be the same for every client, as factors such as the amount of the loss and the period over which the account could grow should be taken into consideration."
(Appleby Retirement Consulting Inc.)
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The Ten "Don'ts" of 401(k) Investing
"[1] Don't Wait to Start.... [2] Don't Assume Everything Will be Perfect.... [3] Don't Fail to Plan.... [4] Don't Put Off Saving if Your Company Doesn't Match.... [5] Don't Just Keep Contributing the Same Amount Every Year.... [6] Don't Assume You'll Need Less Money When You Retire.... [7] Don't Assume You Won't Live Long.... [8] Don't bring a knife to gun fight.... [9] Leave Your Retirement Savings in the Company's IRA When You Retire.... [10] Don't Panic, Be Patient."
(Fiduciary News)
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401(k) Fees Still Widely Misunderstood
"[R]oughly the same percentage -- half! -- of participants said that they still do not know how much they pay in plan annual fees and expenses, according to a recent survey ... Those in the dark are more likely to be women and less likely to have household incomes of $150,000-plus.... At least there was some progress. One out of five (22%) participants ... said they believed they didn't pay any fees or expenses compared to 38% in the survey done before fee disclosures went out."
(Forbes)
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New York Suspends Pension Contributions to Plan Covering Employees in Arts Organizations
"[T]he city has questions about whether its share of the pension costs, projected to be about $17 million for the fiscal year ending June 30, was overstated because of irregularities in pension calculations. Under an arrangement that dates from 1962 the city pays into a pension system that covers some workers in dozens of day care centers with city contracts as well as dozens of cultural institutions."
(Reuters, via The New York Times; free registration required)
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Cities in New York State Seek Revenue Sources Other Than Property Taxes
"If Syracuse raises property taxes 1 percent, the city would get about $300,000 in revenue. Its pension bill is rising by $15 million next year.... If Rochester increased property taxes 2 percent, the tax cap threshold, it would raise $3.2 million. The city's deficit is about $28 million for the fiscal year that starts July 1."
(Ithaca Journal)
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2013 Pension Funding Timing and Opportunities
"For calendar year defined benefit plans, the period January [through] April is critical: key calculations, e.g., the value of plan assets and liabilities, are made; and key trigger dates apply ... The amount and timing of contributions can have a significant effect on how much PBGC premiums are owed, whether benefit restrictions apply and, indeed, on how much must be contributed to the plan for the year."
(October Three)
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More Pension Sponsors Considering Lump-Sum Payouts
"[M]ost employers -- 84 percent -- don't plan to make changes to the benefit accruals they offer participants. Of those that are planning changes, fewer than one in five (16 percent) said they are somewhat or very likely to reduce DB pension benefits. Closing their plans to new entrants in 2013 was considered by only 17 percent of respondents, while 10 percent said they were somewhat or very likely to freeze benefit accruals for some or all participants."
(Thompson SmartHR Manager)
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Creating a New Public Pension System (PDF)
"[T]he assets that states have set aside to pay for employee pension benefits fall short of what they owe for those benefits by approximately $1.3 trillion.... [The] 2009 federal stimulus bill cost taxpayers an estimated $787 billion ... Sound pension reform meets four general criteria: (1) establish transparency with respect to the true cost of the benefits promised to public employees; (2) mandate that the pension plan sponsor pay the full cost of accrued benefits each year; (3) mandate that the pension plan sponsor pay down the unfunded accrued liability over a reasonable time horizon and (4) improve the generational equity, portability and security of benefits for public employees."
(Laura and John Arnold Foundation)
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[Opinion]
SEC Slams Illinois Over Pensions
"Underfunded pensions are a huge issue in the United States and pretty much all over the world. It's a slow motion disaster that has been in the making for a long time but it has come to forefront after the 2008 financial crisis.... What is the typical response to the 'pension calamity'? Raise the retirement age, cut benefits and switch new workers to a defined-contribution plan.... [S]witching new workers to DC plans will just exacerbate America's new pension poverty."
(Pension Pulse)
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[Opinion]
And the SEC Wonders Why Investors Think It's Spineless
"The [SEC] accused the state of Illinois of securities fraud ... The case is an SEC self-parody at its finest. The SEC didn't sue any individuals, as if the so-called fraud occurred by itself. The state of Illinois neither admitted nor denied the agency's findings, meaning the allegations remain unproven. The only penalty was an SEC order prohibiting the state from engaging in the same sorts of infractions again -- like breaking the law was somehow permissible before."
(Bloomberg)
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[Opinion]
Text of SPARK Request for IRS Guidance on Roth Conversion Issues (PDF)
"What party is responsible for tracking any amount subject to recapture tax that could result from the distribution of converted amounts during the five-year recapture period? ... Does the plan administrator or payor for the plan have any federal income tax withholding obligations with respect to in-plan Roth conversions? ... Is an in-plan Roth conversion technically considered a distribution for purposes of applying special tax treatment to any remaining unconverted stock in the plan (i.e., net unrealized appreciation treatment)?"
(The SPARK Institute)
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Benefits in General; Executive Compensation
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More on Discounted Stock Options Under Section 409A
"[T]he court has not yet determined whether the options were in fact discounted so the taxpayers may yet win on that point. However, in the meantime, the IRS has won a clear victory that discounted options are subject to Section 409A and executives are on notice that they can be the ones who suffer even if they are not the ones who set the discounted price for the options."
(Leonard, Street and Deinard)
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It Pays to Add a Statute of Limitations to Your Plan's Claims Procedure
"[A federal district court in Michigan recently] upheld a three year limitations period that was not imposed by state law, but instead contained in the employer's plan.... Because the plan document described the contractual limitation and because the summary plan description described how to get a copy of the plan document, the court said that the claimant was on constructive notice of the limitations period." [Moyer v. Metropolitan Life Ins. Co., No. 2-cv-10766 (E.D. Mich., Feb. 28, 2013)]
(Leonard, Street and Deinard)
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BLS: Employer Costs for Employee Compensation
"Private industry employers spent an average of $28.89 per hour worked for total employee compensation in December 2012 ... Wages and salaries averaged $20.32 per hour worked and accounted for 70.3 percent of these costs, while benefits averaged $8.57 and accounted for the remaining 29.7 percent."
(U.S. Bureau of Labor Statistics)
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GOP Budget Calls for Smaller Federal Workforce, Less Generous Benefits
"Rep. Paul Ryan, R-Wis., unveiled his fiscal 2014 budget blueprint ... which proposes increasing the amount [that federal government employees] contribute to their pensions and changing pay and benefits to 'better align' with the private sector. Reforming federal compensation would save an estimated $132 billion over the next decade, claimed Ryan[.]"
(GovExec.com)
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