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April 3, 2013          Get Health & Welfare News  |  Advertise  |  Unsubscribe
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for Associated Third Party Administrators in CA

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Webcasts and Conferences

Protecting Retirement Plan Fiduciaries from Liability Webinar
Nationwide on May 8, 2013 presented by Winston & Strawn

National Employers' Health Benefits Communication Summit
in District of Columbia on June 26, 2013 presented by National Business Group on Health

SPARK National Conference
in District of Columbia on June 16, 2013 presented by SPARK Institute

National Health Insurance Exchange Summit
in District of Columbia on May 1, 2013 presented by Health Care Conference Administrators (HCCA)

National Health Insurance Exchange Summit Archived/Live Webcast
Nationwide on May 1, 2013 presented by Health Care Conference Administrators (HCCA)

3nd Annual Advanced Forum on Managed Care Disputes & Litigation
in Pennsylvania on May 9, 2013 presented by American Conference Institute

National Advanced Compliance and Benchmarking Forum on Minimizing Legal Risks in the Design, Implementation & Administration of Employee Benefit Plans
in New York on May 30, 2013 presented by American Conference Institute

DCIO Market Share Summit
in Florida on June 25, 2013 presented by Financial Research Associates

The Affordable Care Act and Elder Care
in California on April 16, 2013 presented by Western Pension & Benefits Council - San Diego Chapter

View All Webcasts and Conferences


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[Guidance Overview]

PBGC Proposal Exempts More Than 90% of Plans from ERISA Reportable Events' Requirements
"The proposal is intended to: [1] Reduce unnecessary reporting requirements by plans that are financially sound; [2] Target the PBGC's resources to plans that are at substantial risk of default; [3] Simplify reportable events notice requirements." (Practical Law Company)


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[Guidance Overview]

Design and Operation of Newly Created Pre-Approved 403(b) Programs
"[T]he IRS has announced that it will not provide a mechanism for individual determination letters. This means two things: (1) An employer cannot request a determination that the employer has properly adopted a pre-approved plan, and (2) The only way an employer can have reliance that the form of the plan complies with 403(b) is to properly adopt a pre-approved plan. Eligible employers that do not adopt a pre-approved 403(b) plan document will not know whether there is a plan defect unless and until the IRS determines one exists under audit." (SunGard Relius)

GAO Report Finds 401(k) Companies Often Mislead Account Holders
"Money management firms frequently offer workers misleading and self-serving information about how to handle their retirement savings when they change jobs ... Departing workers are often encouraged to roll their accounts into individual retirement accounts, or IRAs, run by the firms that already manage their retirement money, even when it would be best for employees to keep the money in a 401(k), the GAO investigation concluded. Having workers move their money into IRAs typically allows money management companies to harvest bigger fees for handling the retirement money, the report said." (The Washington Post)

Text of GAO Report: DOL and IRS Could Improve the Rollover Process for Participants
"GAO found that service providers' call center representatives encouraged rolling 401(k) plan savings into an IRA even with only minimal knowledge of a caller's financial situation. Participants may also interpret information about their plans' service providers' retail investment products contained in their plans' educational materials as suggestions to choose those products. Labor's current requirements do not sufficiently assist participants in understanding the financial interests that service providers may have in participants' distribution and investment decisions.... GAO recommends that Labor and IRS should take certain steps to reduce obstacles and disincentives to plan-to-plan rollovers." [Editor's note: The report includes seven specific recommendations for DOL and Treasury actions, including "finalize the agency's initiative to clarify the [ERISA] definition of fiduciary" and "develop a concise written summary explaining a participant's four distribution options and listing key factors a participant should consider when comparing possible investments, and require sponsors to provide that summary."] (U.S. Government Accountability Office)

Fee Leveling in DC Plans: Disclosure Is Just the Beginning
"[S]imply knowing the base amount or formula stated by the recordkeeper is often not sufficient to truly understand the impact of fees in a retirement plan. It's also essential for plan sponsors to consider the different types of fees that occur in retirement plans: plan-level service fees, participant-level service fees, and investment fees. These fees interplay in ways that can have dramatically differing effects from participant to participant." (Retirement Town Hall)


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Faith in Advisers Soared After Financial Crisis
"A third of the investors surveyed in mid-February said they had reached out to a financial adviser during the crisis and a quarter said they rely on their adviser more than in the past ... Of those investors that use a financial adviser, 90% ranked them as helpful during the crisis, more so than any other option." (Investment News; free registration required)

China's Social Security Fund Ends 2012 Up 27.5%
"The assets of China's National Council for Social Security Fund ended 2012 at 1.109 trillion yuan (US$178.9 billion), up 27.5% from the year before ... [T]he fund --launched on Aug. 1, 2000, to oversee a 'social security strategic reserve' as well as funds for individual accounts -- enjoyed an investment return of 7% for the year, or 64.5 billion yuan." (Pensions & Investments)

The New Face of The Fiduciary
"The sleeping giant woke up in late December, when the DOL put its fiduciary standard on its list of regulatory priorities for 2013, and marked July 2013 as the expected release of a second notice of proposed rulemaking. The uncertainty around the future rules of the industry has always been a concern -- the SEC's fiduciary standard is still being debated and FINRA's attempt to force brokers to disclose recruiting bonuses is a controversial one -- but bringing the power of the Dept. of Labor into the mix could be a game changer.... The DOL's proposal would have a major effect on both registered reps and RIAs. Unless exemptions are made, brokers would have to act as fiduciaries in retirement and IRA accounts, giving up their current compensation model." (WealthManagement.com)

Morgan Stanley Escapes Suit Over Hospital's Pension Investments
"In a 2-1 decision, the court said the lawsuit failed to allege facts supporting its claim that Morgan Stanley Investment Management, which oversaw the pension plan's fixed-income portfolio, knew the mortgage-backed securities it bought were ill-advised investments. Those investments caused the pension plan to lose $25 million, the complaint said. Circuit Judge Jose Cabranes wrote that the lawsuit failed to allege any circumstances surrounding the decline in the securities' price to allow a plausible inference that the mortgage investments were no longer sound." (Thomson Reuters)


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Text of Majority Opinion in Morgan Stanley Case: Plaintiffs Failed to Allege Sufficient Detail as to Breach of Fiduciary Duty Claim Over Investments (PDF)
"Saint Vincent's alleges that Morgan Stanley 'exposed the Plan to excessive risk due to an egregious over-concentration in high-risk mortgage securities,' ... and 'failed to monitor the Plan's investments to protect the Plan from economic harm,' ... None of [the] alleged 'warning signs,' however, gives rise to a plausible inference that Morgan Stanley knew, or should have known, that the securities in the Portfolio were imprudent investments, or that Morgan Stanley breached its fiduciary duty by not selling those investments at whatever unspecified prices existed during the unspecified period in which it was imprudent to maintain those unspecified investments." [PBGC, et al. v. Morgan Stanley Investment Management, Inc., No. 10-4497-cv (2d Cir. April 2, 2013)] (U.S. Court of Appeals for the Second Circuit)

Text of Dissenting Opinion in Morgan Stanley Case: Sufficient Detail Was Alleged as to Breach of Fiduciary Duty Claim Over Investments (PDF)
"Against the backdrop of strong statutory protections and the [DOL's] judgment that 'unnecessarily high pleading standards' should not be permitted to render such protections moot, the majority in effect embraces a heightened pleading standard which threatens to do exactly that. ERISA should not be gutted by the judicial imposition of a pleading standard with no basis in law.... While the majority rejects the significance of Plaintiffs' alleged 'warning signs,' I would find that, when taken together, these allegations support the reasonable inference that MSIM's choices failed to meet ERISA's requirements." [PBGC et al. v. Morgan Stanley Investment Management, Inc., No. 10-4497-cv (2d Cir. April 2, 2013) (Straub, dissenting)] (U.S. Court of Appeals for the Second Circuit)

City Bankruptcies Loom Over Public Pension Plans
"Stockton's single biggest debt is the $900 million it owes over the next decade to [CalPERS] ... Pension obligations are one of the biggest problems for most struggling municipal governments, and the issue in general puts federal bankruptcy law -- which gives bankrupt institutions a lot of leeway in restructuring their finances -- in tension with state laws (including California's) that require pension funding to take precedence." (MarketWatch)

Stockton and San Bernardino, a Tale of Two Bankruptcies
"Stockton has kept current on its payments to CalPERS ... even as it has defaulted on some bond payments and declared its intention to wring concessions from Wall Street creditors. Thus CalPERS has supported Stockton's bankruptcy filing, while the so-called capital-market creditors have opposed it.... In San Bernardino, none of this has happened.... San Bernardino's Wall Street creditors -- some of them the same as in Stockton's case -- have supported its quest for bankruptcy eligibility, because the city is treating them and CalPERS equally. And in another mirror image to Stockton, CalPERS is opposing San Bernardino's request for bankruptcy protection." (Reuters)

Pension Finance Update, April 1, 2013 (PDF)
"The first quarter of 2013 was welcome news for pension sponsors ... [T]raditional 'Plan A' [improved] by 2% during March and 7% for the year, while 'Plan B' improved less than 1% last month and is up about 2% for the year. Note, however, that this is the fourth consecutive year of positive first quarter experience for pension sponsors, and in the three preceding years, this experience was erased during difficult second and third quarters." (October Three)

Canadian Pension Plan Solvency Improves in the First Quarter of 2013
"[Defined benefit] plan sponsors in Canada have seen a marked increase in their solvency funding in the first quarter of 2013 thanks to a combination of company contributions, a strong equity market and a slight increase in interest rates ... The median pension solvency funded ratio -- or the ratio of the market value of plan assets to liabilities -- is approximately five percentage points higher at March 31, 2013 than at the start of the year." (Aon Hewitt)

Exhaustion of Administrative Remedies Not Required under Plan's Terms for Participant Not Yet Eligible for Payment
"Because the applicable 'Claims Procedure' section of the Plan started with the words 'To file a benefit claim under the Plan,' and the participant did not want to take her benefit but merely to 'know what her benefits would be if and when she chose to pursue early retirement,' the plan terms were a 'bit baffling' to the [court] ... The Second Circuit therefore joined the Eleventh and Seventh Circuits [in] concluding that exhaustion of administrative remedies before pursuing a lawsuit would not be required when participants 'reasonably interpret the plan terms not to require exhaustion and do not exhaust their administrative remedies as a result'[.]" [Kirkendall v. Halliburton Inc., 2013 WL 23838 (2d Cir. Jan. 29, 2013)] (James E. Arnold & Associates LPA)

Helping DB Plan Sponsors Sleep at Night: Steps for Reducing Risks
"[T]he combination of several factors -- including market volatility, low interest rates and recent legislation -- has created significant challenges for DB plan sponsors. Fortunately, the pension industry is helping plan sponsors manage these risks with a number of innovative approaches [including] Plan design changes ... Liability-driven investing ... Dynamic asset allocation ... Risk transfer... to plan participants [or] to an insurance company[.]" (The Principal Blog)

Do Demonstrations of Income Projections Affect Retirement Saving? (PDF)
"[E]ducational initiatives, such as the treatments used in the field experiment, are not a silver bullet that could solve the nation's retirement saving problem. Only a small percentage of individuals [in this study] respond to the [educational brochures] so the overall effect on saving is modest, though those who do respond boost their saving by a sizable amount." (Center for Retirement Research at Boston College)

Complexity as a Barrier to Annuitization: Do Consumers Know How to Value Annuities?
"[I]ndividuals have difficulty valuing annuities, and this difficulty -- rather than a preference for lump sums -- can help explain observed low levels of annuity purchases. Although the median price at which people are willing to sell an annuity is close to median actuarial values, ... people are willing to pay substantially less to buy a larger annuity, a result not due to liquidity constraints or endowment effects. Strikingly, [the authors] also learn that individual responses to the buy versus sell decisions are negatively correlated, an effect that is stronger for the less financially sophisticated[.]" (Pension Research Council, Wharton School of the University of Pennsylvania; free registration required)

Gen X and Gen Y Financial Advisors Outperforming Boomers
"Gen X and Gen Y planners had an average of $8 million more in [assets under management] in their practices compared to their baby boomer counterparts ... [Y]ounger advisors are relying on technology to automate more tasks such as portfolio rebalancing; they're also meeting with clients via Skype instead of in person ... The savings in time allows younger planners to spend more time building their businesses[.]" (On Wall Street)

Ontario Teachers' Pension Plan Gets 13% Return for 2012
"The Ontario Teachers' Pension Plan, one of Canada's top investors, said on Tuesday it had a 13.0 percent rate of return on its investments in 2012, bringing net assets to a record high C$129.5 billion ($127.4 billion). With a fourth straight year of double-digit returns, the global dealmaker, which administers the pension plan for public-system teachers in Canada's most populous province, said it would expand its thrust into emerging markets as it seeks acquisitions across asset classes that will add long-term value and income to the underfunded pension plan." (Reuters via Yahoo News)

Pension Plan Advisors Predict Top Gains in Emerging Market Stocks
"Consultants who advise companies on how to manage their employees' retirement plans expect emerging market stocks to outperform in a lower-return environment over the next several years ... 60 percent of the firms recommended cutting exposure to risk assets, including stocks.... 81 percent also suggested adding inflation-protected securities, including Treasury Inflation-Protected Securities, to retirement portfolios." (Reuters)

Younger Investors Take Investing Cues From Parents
"When it comes to staying in touch with younger investors, face-to-face or phone contact trumps social media outlets like Facebook, Twitter or LinkedIn. That, according to a new survey ... is just one of the findings that financial advisors need to keep in mind when looking to attract and keep clients in their 20s and 30s.... Of the respondents, 69% said they believe their parents approached investing the right way versus 31% who said their parents did not; 65% of respondents said they invest in ways similar to their parents versus 35% who said they do not; and 65% said they think their parents? investment approach still works today versus 35% who said it does not." (Financial Planning)

[Opinion]

Target Date Funds: Structurally Unsound
"The presence of serious structural flaws in the current generation of [target date ('TD')] mutual funds suggests that most but not all such funds should be avoided by plan sponsors and investors, or at the very least used with extreme caution. Though a worthy idea, the TD fund concept appears to have been implemented hastily and poorly, on average. As with the 401(K) plan itself, the TD mutual fund has arguably become a vehicle for asset gathering by mutual fund managers, with only secondary emphasis on improving participant retirement security." (Marc Fandetti via SSRN)

[Opinion]

Ill-Informed Judgment on Stockton Pensions in Bankruptcy
"Stockton making their $900 million payment to CalPERS will not secure benefits in a plan with an $87 billion deficit that has made no significant inroads into curbing benefit accruals.... Without a process in place like we have in the private sector with the PBGC[,] CalPERS can pretty much claim the right to do anything.... If a judge rules that CalPERS won't get all of their $900 million then it's still anyone's guess what Stockton retirees will get." (Burypensions)

[Opinion]

Are Public Pension Plans on the Road to Recovery?
"Many systems are still burdened with significant shortfalls, which put governments in the awkward position of having to either reduce funding for other priorities to support pensions, or to defer payments, leading to greater problems in the future. Moreover, what it means for a pension system to be 'well-funded' remains controversial, as new accounting standards set to take effect soon will cause most systems to appear worse off than at present. So how to make sense of these mixed signals? Are public pension systems on the road to recovery?" (Public Sector Inc.)

Benefits in General; Executive Compensation

[Guidance Overview]

Proposed IRS Regs Address Deduction Limit on Compensation Paid by Health Insurance Providers
"Issues addressed by the regulations include: [1] Application of the term 'covered health insurance provider'; [2] Attribution of deferred deduction remuneration and other types of compensation to an employer's taxable year; [3] Treatment of grandfathered amounts." (Practical Law Company)

[Guidance Overview]

IRS Issues Proposed Regulations Under Code Section 162(m)(6), Applicable to Covered Health Insurance Providers
"The Proposed Regulations go on for over 100 pages. However, among the more critical (and complicated) provisions ... are those providing extensive rules for the attribution of deferred compensation, non-qualified plan benefit accruals, equity-based compensation, and even severance pay.... [U]nlike the other provisions of Code Section 162(m), the determination of whether the $500,000 deduction cap applies ... is made in the year in which the individual performed the services, not in the year the amounts are actually paid." (Winston & Strawn LLP)

[Guidance Overview]

Summary of IRS Proposed Regs on $500,000 Deduction Limit (PDF)
"The proposed regulations confirm ... that the deduction limit only applies to deferred compensation attributable to services performed in taxable years beginning in 2010, 2011 and 2012 if (1) the employer was a [Covered Health Insurance Provider ('CHIP')] in the year the services were performed to which the deferred compensation is related, and (2) the employer is a CHIP in the year the compensation is otherwise deductible. However, the regulations reject the clarification requested ... that the deduction limit not apply to the 2010-2012 period if the provider is not a CHIP in 2013 regardless of whether it becomes a CHIP in a subsequent year." (American Benefits Council)

Better Benefits Communication Pays Off
"Three out of five employees who would strongly recommend their company said that benefits were an important reason why they remained there.... [But] a separate survey [found that] employees also don't give their companies very high marks for the effectiveness of their benefits communication. Only 60 percent said it's fairly or very effective, and 9 percent say it's not at all effective." (Society for Human Resource Management)

Verizon Retirees Win 2013 Executive Compensation Change
"Retirees of Verizon Communications Inc. have launched their 15th annual proxy campaign to call upon major shareholders at one of America's largest publicly traded companies to vote for retiree resolutions that limit 'excessive Executive Golden Parachutes' ... As its proxy statement discloses, Verizon agreed to substantially reduce the payouts of performance-based stock that its senior executives can earn for below-average stock returns. After the retirees filed their proposal, the company's board of directors approved a reduction in the amount of the Performance Stock Unit payout so that it became more closely aligned with the retirees' proposal." (MarketWatch.com)

How to Support a Deduction for Reasonable Compensation
"A ruling by the U.S. Tax Court on March 25, 2013, provides a helpful analysis of 10 factors considered by the Court in deciding that amounts deducted as compensation paid to a sole shareholder-employee, his officer-wife, employee-brother and employee-daughter were not reasonable." [(K & K Veterinary Supply, Inc. v. Commissioner, T.C. Memo 2013-84 (U.S. Tax Court Mar. 25, 2013)] (Benefits Bryan Cave)

March Madness: What Do Early Proxy Season Results Suggest?
"[D]espite strong 2012 shareholder returns, companies made increases in target direct compensation commensurate with last year's (mid-single digits). And they've taken a hard line on bonuses, with actual bonus levels significantly lower than in 2011, including a significant number of below-target payouts. In terms of say-on-pay results, and acknowledging just how early we are in the cycle, 2013 is looking much like 2012: a handful of failures, but shareholder approval levels generally 90% or above." (Towers Watson)

Press Releases

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