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April 8, 2013          Get Health & Welfare News  |  Advertise  |  Unsubscribe
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DC Administrator
for Matthews, Gold, Kennedy & Snow in AZ

Senior Benefits Consultant
for Hub International Midwest Limited in IL

DB CSM Team Manager
for J.P. Morgan in IL

Assistant Vice President, Director Retirement Benefit Plans
for TJX Companies in MA

Onboarding/New Client Implementation Associate
for The Benefit Practice in CT

Director, Performance Planning and Analysis (Pension Risk Transfer Service Delivery)
for Prudential in PA

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Webcasts and Conferences

"Form 5500 Workshop 2013: Issues and Answers" - Appleton
in Wisconsin on May 7, 2013 presented by SunGard Relius

"Form 5500 Workshop 2013: Issues and Answers" - Detroit
in Michigan on May 7, 2013 presented by SunGard Relius

"Form 5500 Workshop 2013: Issues and Answers" - Bloomington
in Illinois on May 9, 2013 presented by SunGard Relius

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[Official Guidance]

Text of IRS Defined Benefit Listing of Required Modifications and Information Package: 2013 Revision (LRM) (PDF)
"This information package contains samples of plan provisions that have been found to satisfy certain specific requirements of the Internal Revenue Code and the Cumulative List of Changes in Plan Qualification Requirements (Notice 2012-76, 2012-52 I.R.B. 775).... We have prepared this package to assist sponsors who are drafting or redrafting plans to conform to applicable law and regulations, and we hope that it will be a key factor in enabling us to process and approve master and prototype plans more quickly... Underlined material reflects changes to the June, 2007 version of this LRM (as revised in August, 2007). Where a sample plan provision has been substantially revised or is new, the entire provision has been underlined. Boldface type indicates that the text of an LRM provision has been revised or the provision is new." (Internal Revenue Service)


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[Guidance Overview]

PBGC Reproposes Reportable Event Rules (PDF)
"Aside from limited foreign entity and de minimis exceptions, relief for small plans for quarterly contribution delays, and the liquidity shortfall exception for larger plans that encounter an inability to pay benefits when due, the list of events to report will look like this: [1] Loan defaults; [2] Failure to make required contributions; [3] Application for funding waiver; [4] Inability to pay benefits when due; [5] Insolvency; [6] Liquidation[.]" (Buck Consultants)

[Guidance Overview]

DOL Target Date Fund Tips for Plan Fiduciaries
"[S]teps plan fiduciaries should take with respect to a target date fund include: [1] Establishing a process for gathering the key information required to decide on a target date fund. [2] Establishing a process for the periodic review of selected target date funds.... [3] Understanding the fund's strategies and risks, its underlying asset classes and whether the glide path is to retirement or through retirement[.]" (Towers Watson)

[Guidance Overview]

Bringing Some Sanity to Calamity: 403(b)'s New Document Rules
"When considering these new plan document rules and the new EPCRS together, there is a massive volume of sometimes difficult detail in the guidance. Much of it is thoughtful, some of it controversial and ... some of it innovative.... And for those of us wonks, sadly, it's all very interesting as well. The most striking aspect of this effort, however, is what seems to be a newly institutionalized view that 403(b) plans are, in fact, much different than 401(a) plans, and often demand much different treatment." (Business of Benefits)

Obama's Budget Would Cap Romney-Sized Retirement Accounts
"'Under current rules, some wealthy individuals are able to accumulate many millions of dollars in these accounts, substantially more than is needed to fund reasonable levels of retirement saving,' [a White House] statement said.... IRAs have evolved from a retirement-planning technique into an estate-planning tool for some wealthy families because tax laws allow the accounts to be passed on to heirs, said Ed Slott, an IRA specialist and certified public accountant[.]" (Bloomberg)


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Obama's Budget Targets COLAs, Federal Retirement Benefits
"President Obama's 2014 budget proposal will include a less generous formula for calculating federal retirees' cost of living adjustments, and ask federal employees to make higher contributions to their retirement pensions, a senior Obama administration official has informed members of Congress.... Advocates for federal retirees warned against accepting arguments in favor of the chained CPI." (GovExec.com)

Obama Budget Would Cut Entitlements in Exchange for Tax Increases
"White House officials said ... that Obama's budget would cut Medicare and Social Security and ask for less tax revenue than he has previously sought.... Obama proposed changing the cost-of-living calculation for Social Security in a way that will reduce benefits for most recipients, a key Republican request that he had earlier embraced only as part of a compromise." (The Washington Post)

Text of GAO Report: Timely Action Needed to Address Impending Multiemployer Plan Insolvencies
"GAO examined (1) actions that multiemployer plans in the weakest financial condition have taken to improve their funding levels; (2) the extent to which plans have relied on PBGC assistance since 2009, and the financial condition of PBGC's multiemployer plan insurance program; and (3) options available to address PBGC's impending funding crisis and enhance the multiemployer insurance program's future financial stability." (U.S. Government Accountability Office)

Successful 401(k) Plan Design: Putting the Em-PHA-sis on the Wrong Syl-LA-ble
"[M]any plan sponsors are not emphasizing what really drives retirement plan success for participants. While much of the attention has understandably been on fees, the most important drivers are deferral rates and plan design." (The Retirement Plan Blog)

The Seven Biggest Retirement Planning Mistakes
"1. Not Having an Income Plan.... 2. Not Understanding Tax Diversification.... 3. Not Eliminating Debt.... 4. Electing Social Security Early.... 5. Stopping Work Too Soon.... 6. Underestimating the Impact of Health Care Costs and Inflation.... 7. Not Insuring Your Retirement Plan." (Prudential)

Stockton Bankruptcy: Roll Back Pension 'Spiking'?
"A problem facing bond insurers who want to cut CalPERS debt is the view, perhaps legally correct, that the pension fund is only a 'conduit' or trustee for funds that actually belong to the members of the pension system.... If so, negotiations to roll back pensions improperly boosted through various 'spiking' methods (usually adding to the final pay on which pension amounts are calculated) would have to include hundreds of scattered retirees." (CalPensions)

Pension Underfunding Grows Despite Stock Market Rally
"The cumulative liability among defined benefit pension plans sponsored by companies in the benchmark Standard and Poor's 500 index increased to $1.56 trillion in 2012 from $1.38 trillion the year before, outpacing the growth in assets. As a result, the overall funding ratio -- a measure of a plan's assets divided by its commitments -- for all plans fell from 79.7 percent to 78.1 percent ... The issue of pension funding will grow in importance to both corporations and investors alike as the oldest members of the baby boom generation retire and draw down assets." (Reuters)

Downward Trend in Maryland Residents' Ability to Retire
"[This] research attributes the downward trend in workers' financial security in retirement to three factors: ... [1] From 2000 to 2010, the availability of employer-sponsored retirement plans in Maryland declined by eight percentage points, from 67% to 59%. [2] A shift away from traditional ... mandatory, [DB] plans, to 401(k)-type [DC] plans. Only 36% of workers aged 25-44 have a DB plan as their primary employer-sponsored retirement plan, compared to 43% of workers aged 45-54 and 53% of those aged 55-64.... [3] A lack of participation in voluntary defined contribution plans." (Schwartz Center for Economic Policy Analysis)

Sixth Circuit Reverses Statutory Pre-Judgment Interest Rate Applied to Pension Benefit Award
"The Sixth Circuit found the trial court's 'mechanical application' of the statutory rate, without considering case-specific factors, to be an abuse of discretion because the statutory interest rate failed to adequately compensate the plaintiffs for the lost time value of their pension benefits and failed to prevent the defendant employer's unjust enrichment." [Schumacher v. AK Steel Corp. Retirement Accumulation Pension Plan, No. 1:09-cv-794 (6th Cir. Mar. 28, 2013)] (Haynes and Boone, LLP)

Getting Beyond Ordinary: Managing Plan Costs in Automatic Programs (PDF)
"[T]his white paper ... [1] Illustrate[s] ways that costs can be managed when adopting automatic program features by altering plan design components; [2] Demonstrate[s] how foundational plan design components and automatic programs can interact to drive success in achieving specific plan objectives; [and] [3] Provide[s] a decision-making guide for revisiting plan design elements and designing a plan to optimize success within the budget available[.]" (T. Rowe Price)

Retirement Security Data Brief: Retirement Plan Assets After the Market Crash and Great Recession (PDF)
"When the stock market eventually bottomed out in the first quarter of 2009, retirement accounts had lost about $2.7 trillion, 31 percent of their peak 2007 value. Despite the ongoing turbulence in the stock market, retirement account balances have increased since 2009 -- surpassing $10 trillion for the first time ever in the first quarter of 2013 ... The impact of the stock market crash was even more dramatic for defined benefit pensions -- whose assets declined 37 percent from their peak 2007 value. In contrast to retirement accounts, defined benefit pensions have not fully recovered from the crash and Great Recession." (Urban Institute)

U.S. Corporate Pension Fund Health Improves in Q1
"According to the UBS Pension Fund Fitness Tracker, using data from 500 U.S. corporations' defined benefit plans, the typical funded status improved to 82%. A typical plan's portfolio returned 4.7% during the quarter, while the discount rate increased 10 to 15 basis points, resulting in a 1.6% decrease in liabilities." (Pensions & Investments)

Seven Obstacles to Rolling an Old 401(k) into a New One
"Here's why it's difficult to keep your money in the 401(k) system: ... Plan administrators are not always required to allow former employees to leave funds in the 401(k) plan... 401(k) rollover waiting periods.... Complex 401(k) verifications.... Lengthy paperwork requirements.... Excessive processing time.... Potential to trigger fees and taxes.... Pervasive marketing of IRAs." (U.S.News and World Report)

Bankrupt San Bernardino to Resume Payments to CalPERS in July
"The city's obligation to CalPERS is $25.5 million for fiscal 2013, which ends June 30, according to the pension fund's data. While that's just 0.3% of all employer contributions to the retirement system, pension fund and city documents show it's about 21% of San Bernardino's revenue. San Bernardino has told CalPERS that its payments will resume with the start of fiscal 2014 on July 1[.]" (Pensions & Investments)

The Changing Causes and Consequences of Not Working Before Age 62 (PDF)
"This study considers nonworking older adults and their channels of support before qualifying for Social Security benefits. Using 18 years of data from the Health and Retirement Study, [the authors] ... explore the effects of various factors on the likelihood of being a nonearner and observe the consequences of not working during one's 50s with regard to poverty, age of Social Security claiming, and overall retirement satisfaction. Finally, [they] analyze how these relationships have changed over time, particularly after the Great Recession." (Urban Institute)

Social Security's Fiscal Year 2014 Annual Performance Plan and Revised Final FY 2013 APP
"The Annual Performance Plan for FY 2014 and Revised Final Performance Plan for FY 2013 (APP) ... establishes FY 2013 agency-level performance measures and targets, as well as those proposed for FY 2014. The APP is also part of the agency's annual budget request[.]" (Social Security Administration)

Enrolled Actuaries Report, Spring 2013 (PDF)
Articles include: Strengthening the PBGC and Multiemployer Pension Plans; Private Employers Should Have the Option for Higher Normal Retirement Age; IRS Issues Guidance for 403(b) Plan Document Compliance; IRS Releases New Phone Number for VCP Submission Status Updates; and PBGC Seeks Public Comment on Information Collection. (American Academy of Actuaries)

IRS Issues Final Report on Section 401(k) Compliance Check Questionnaire
"As highlighted in the IRS's 2013 Work Plan ... and this final report, 401(k) plan compliance is a top operating priority for the IRS's Employee Plans office. Plan sponsors and their providers will want to review the report's findings to stay up-to-date with the IRS's compliance and enforcement activities." (Thomson Reuters / EBIA)

Detroit City Workers Worried About Pensions Amid Budget Cuts
"[C]hanging the city's pension plan would require a ruling by a bankruptcy judge, which may be overruled by the state constitution. 'In law, nothing is a sure thing,' [said Douglas Bernstein, a Bloomfield Hills attorney]. 'We're setting up a showdown over what takes precedence -- a bankruptcy judge or a state's constitution.'" (United Press International)

[Opinion]

Obama Budget's Cap on Tax-Favored Savings Is a Retirement Plan Killer
"[ASPPA] vigorously oppose[s] this proposal not only because it would unfairly punish good savers, but because it is a 'plan killer.' As business owners reach the cap, they will lose their incentive to maintain a plan, and either shut down the plan or greatly reduce benefits. This would leave workers with a greatly diminished plan or without any plan at all." (American Society of Pension Professionals & Actuaries)

[Opinion]

Obama Wants to Limit Retirement Accounts
"Complaining that 'some wealthy individuals are able to accumulate many millions of dollars in these accounts,' the Obama administration announced a plan to cap the total sum of any individual's retirement accounts at $3 million. Stashing cash beyond that point, the administration insists, builds sums 'substantially more than is needed to fund reasonable levels of retirement saving.' The administration's argument seems to be based on the use of the word 'million,' implying that only nasty rich people would want to accumulate such a hoard. But is that true? How much is enough for 'reasonable levels of retirement saving.'" (Reason.com)

[Opinion]

403(b)izarre: Make It Automatic
"While many school employees think they are buying a sleek, sexy and sporty vehicle, in fact they are being sold a lemon. The 403(b) program is mired with problems, but it can all be mostly fixed by moving to an 'automatic' transmission.... The 'Make It Automatic' program ... is increasingly in use today in the private sector, backed by very specific laws and regulations. Not only is it baked into law, it's backed by very prominent behavioral economists with decades of research." (The Teacher's Advocate)

[Opinion]

Lifting the Social Security Wage Base Cap: The People's Choice for the People's Pension
"Social Security, the most transparently self-financed program of the federal government, is not increasing our budget deficit. The most recent trustees' report shows sufficient funds to pay full benefits until 2033.... If we wanted to adopt a cautious policy measure that would eliminate the shortfalls predicted 20 years down the road, we could eliminate the cap on earned income subject to Social Security taxes[.]" (Nancy Folbre in The New York Times)

[Opinion]

California Pension Reform Fell Far Short
"It's now clear that the pension bill Gov. Jerry Brown signed last September was not reform. It was merely a tweak. The legislation made only small moves toward containing future pension costs and did nothing to unburden taxpayers from hundreds of billions of dollars of debt created by past underfunding of public-sector retirement systems across California." (San Jose Mercury News)

[Opinion]

Bankruptcy Ruling Not a Clear Win for Stockton, Nor for CalPERS
"The creditors had urged [Judge Christopher] Klein to reject the bankruptcy plea because, they said, Stockton had refused to treat its pension obligations as debts to be reduced through bankruptcy, thus discriminating against private bondholders by forcing them to take big haircuts. But the details of Klein's ruling imply that the city and CalPERS may not prevail on the pension issue when he weighs the city's plan to deal with its debts -- a plan that now excludes CalPERS as a creditor." (Sacramento Bee)

[Opinion]

Federal Judge Green-Lights Stockton Bankruptcy
"Stockton hasn't asked for relief from its pension costs, despite the fact that its pension provider (CalPERS) is the city's largest creditor. Apparently Stockton prefers to lean more heavily on its unsecured bondholders -- the city suspended debt service payments on several of its bonds. If the courts eventually allow pension benefits to be included, bondholders might not have to bear as much weight and might reduce their potential losses. How can investors avoid bonds that could entangle them in such situations?" (Alliance Bernstein)

[Opinion]

The Secret Public Pension Money Grab?
"[T]he real crisis in U.S. public pension funds isn't their pathetic funded status, it's their lack of proper governance. In most cases, they pay peanut salaries and get monkey results which only come to the forefront when a financial crisis hits, exposing their flawed investment strategies and flimsy governance. As far as striking a balance between public disclosure and investment results, there are plenty of ways to do this properly using an independent third party administrator and timely risk reporting." (Pension Pulse)

[Opinion]

Rhode Island's Scary State Treasurer
"The fees related to conservative investing range from 1 basis point (one one-hundreth of a percent) to about half a percent. The high-risk alternative investments [the Rhode Island State Treasurer has] steered the pension into charge exponentially greater fees -- fees of about 2% plus 20% of profits or more. Do the math and you'll agree, the fees the pension will pay have skyrocketed." (Forbes)

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