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[Official Guidance]
Pre-Approved Defined Benefit Plans: Revised IRS Application Forms and LRMs
"On February 1, 2013, the IRS began accepting applications for opinion and advisory letters for pre-approved defined benefit (DB) plans for the second 6-year remedial amendment cycle. Sponsors and practitioners should use Form 4461-A (Rev. 3-2013), Attachment 1-A, and Form 8717-A (Rev. 2-2013) when submitting a pre-approved DB plan to the IRS."
(Internal Revenue Service)
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[Guidance Overview]
403(b) Pre-Approved Plan Documents: Required Provisions
"This [article] focuses on provisions which must be in the [403(b) plan] documents. Previously, the IRS had announced that it would not issue opinion letters for plans which contained provisions applying only to churches or related organizations (including provisions relating to retirement income accounts). The final procedure removes this restriction. This means that churches can use pre-approved plan documents without subjecting themselves to requirements that otherwise would not apply."
(SunGard Relius)
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[Guidance Overview]
European Taxes on Cross-Border Pension Investments: Should Your Plan File for Refunds? (PDF)
"[S]ome European tax advisors believe there may be a basis for a claim that taxes by EU countries that discriminate against non-EU (such as U.S.) pension funds compared to local funds may be impermissible ... As a result, U.S. plans with EU investments may wish to consider filing claims for refund of taxes on the basis of such nondiscrimination laws."
(Groom Law Group)
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Six Tips for DB Lump Sum Cash-Out Success (PDF)
"1. Position the lump sum cash-out option as a positive opportunity.... 2. Provide effective communication to participants.... 3. Take steps to ensure you have correct and complete data.... 4. Be prepared to explain your business rationale to a variety of stakeholders.... 5. Understand your role as a fiduciary.... 6. Work with a provider who is up to the challenge."
(Mercer)
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Practitioner Views on Section 415 Limits May Need to Be Reconsidered
"[An] informal written response ... in this year's IRS Gray Book question and answers ... about applying the Section 415 limit to a benefit calculated to be $400,000 at age 65 indicated that some IRS officials expect actuaries to apply the Section 415 limit before applying plan benefit factors for early retirement and joint-and-survivor annuity benefits[.]."
(Bloomberg BNA)
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Passive Investments: Model Portfolios to Fuel Growth (PDF)
"Excluding IRAs, annuities, other retail investments and non-reported DB plans offered by nonprofit organizations, approximately $2.7 trillion of the nation's retirement plan assets are held in passive investments. The real message here is not that retirement plans hold $2.7 trillion in passive investments, but rather that the shift to passive investments is still embryonic. The continued growth of passive investments will have a meaningful impact on the industry in many ways, including the increased use of model portfolios managed by advisors."
(The Center for Due Diligence)
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Public Pensions Risks Vary Widely for Local Government
"Since the downturn, almost all states and most local governments have changed the benefits and financial structures of their pension plans. But 'in most cases,' [a Fitch Ratings report said], 'pension reforms have only affected new hires, in which case the budget benefits accrue only gradually'."
(Reuters via Yahoo News)
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Activist Investors Find Allies in Mutual, Pension Funds
"Aggressive shareholders such as Carl Icahn and Bill Ackman, who agitate for change at companies they believe to be sub-par, are increasingly getting a hearing with institutions ranging from the most staid mutual fund to the state-run pension fund."
(Reuters)
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Moody's Says New York Pension Smoothing Proposal Is 'Stopgap with Long-Term Risks'
"The plan, part of the state budget approved last month, allows for local governments and schools to essentially pay a flat rate for pension costs over 12 years, avoiding the steep cost increases that the municipalities have faced.... The report says that cash-strapped localities such as Nassau and Rockland counties would have immediate benefit from the program, but other municipalities should enter the initiative cautiously."
(Democrat and Chronicle)
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IRA Contributions Continue To Grow
"Contributions increased across the board for all age groups but rose more for older investors -- up to an average of 6 percent for those in their 60s -- from $4,674 in 2009 to $4,960 in 2012. The lowest contributions were made by those in their 20s, reaching $3,235 in 2012 from $3,154 in 2009."
(Financial Advisor)
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Bad Investment Behavior in 401(k) Plans: Many Self-Directed Accounts Missed Market Rally
"Yes, stocks have been on a real tear lately, but guess who hasn't been along for the ride: The millions of 401(k) investors who 'moved to safety' after the 2008-2009 market and never felt comfortable enough to move back to stocks. Participants in 401(k) plans ended 2012 with less than half of their assets invested in stocks, down from 59 percent at the end of 2006 ... That's despite the fact that the S&P 500 stock index rose 6.4 percent over that period and has more than doubled since it hit bottom in March 2009."
(Reuters)
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Baby Boomers Getting Gloomier About Retirement
"The generation that changed the world, often simply from sheer headcount, is worried about its retirement years ... The percentage of baby boomers who are confident in their financial preparations for retirement declined to 37% ... Moreover, 61% of boomers do not expect their financial situations to improve over the next five years."
(Financial Planning)
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Baby Boomers' Retirement Planning Confidence Trending Downward
"The percentage of Boomers who are confident in their financial preparations for retirement has dropped each year since the report's inception -- from 44 percent in 2011 to 37 percent in 2013. Moreover, the majority of Boomers, 61 percent, do not see their financial situation improving in the next five years."
(Insured Retirement Institute)
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How to Make Retirement Possible on a Small Budget
"Perhaps you will find yourself among the 28 percent of Americans reaching retirement with very little money saved, with only a small Social Security check to carry you through. If this is the case, you'll have to be creative to make retirement work. But you'll find a way. One option, if you enjoy trying new things and approach life with a spirit of adventure, would be to retire overseas."
(U.S.News and World Report)
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Retirement: Plan Ahead for These Five Nasty Surprises
"Here are some retirement 'shocks' or surprises, and how to plan for them if you're not yet retired; or how to deal with them if you are retired. [1] Job loss/loss of benefits.... [2] Unexpected medical expenses.... [3] You end up raising your grandchildren.... [4] Your adult children come back home. Or your sister and brother-in-law move in because they lost their jobs.... [5] The market drops and so does your retirement savings."
(USA TODAY)
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Publisher Agrees to Pay $4.5 Million for Failed Pension Plan
"Augsburg Fortress Publishers will pay $4.5 million under a pending settlement to end a lawsuit over its failed pension plan. The settlement would pay about a quarter of the pension plan's benefits for almost 500 employees and retirees of the Minneapolis-based publishing arm of the Evangelical Lutheran Church in America (ELCA) ... The lawsuit accused the publisher of allowing the plan to fail and not disclosing its troubled condition."
(Milwaukee Business Journal)
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Senate Confirms White to Head SEC, Making Her First Ex-Prosecutor to Lead Watchdog Agency
"[Mary Jo] White told the Senate Banking Committee last month that she would aggressively pursue enforcement and hold accountable 'all wrongdoers -- individual and institutional, of whatever position or size.' As SEC chairman, she will also lead efforts to complete and enforce complex regulations called for by Congress in response to the 2008 financial crisis."
(Minneapolis - St. Paul Star Tribune)
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Federal Employee Retirement Applications Continue to Surge
"OPM received 10,183 new claims in March, more than double the 5,000 applications the agency expected to come in last month. Still, OPM managed to reduce the claims backlog by 11 percent between February and March, processing 14,683 claims during that time. The backlog now stands at 36,603 retirement claims -- a 40 percent reduction since January 2012, but a 1.5 percent increase from January 2013."
(GovExec.com)
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Moody's Says New York's Pension Contribution Deferment Plan Has Long-Term Risks
"New York's new plan to allow financially strained municipalities to partially defer their pension payments carries a long-term risk that won't outweigh the short-term relief ... Such a move would increase the unfunded pension liabilities of participating local governments and could hurt their credit outlook, according to Robert Weber ... Without the legislation, local governments would have had to contribute an average 20.9 percent of salaries for ERS, 28.9 percent for PFRS and 16.5 percent for the Teachers Retirement System (TRS) in fiscal 2014. The new law will allow localities in fiscal years 2014 and 2015 to pay a fixed rate of 12 percent for ERS, 20 percent for PFRS and 14 percent for TRS."
(Governing)
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Pension Funding of S&P 500 Companies Drops in 2012
"Of the 308 companies in the S&P 500 that have defined benefit pension plans, 94% had underfunded plans in 2012, the same amount as the previous year ... The median funding ratio was 76.9%, down from 78.1% in 2011. The drop in funding ratio despite a median 11.8% rate of return for 2012, up from 3.8% in 2011, was due to a drop in the median discount rate to 4.16% in 2012 from 4.16% the previous year."
(Pensions & Investments)
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Reforming the Taxation of Retirement Income
"This article [examines] the three major sources of retirement income: Social Security, employment-based retirement plans, and personal savings ... [and] considers how retirement income is generated, sets forth the applicable federal income tax treatment, and proposes reforms to make the pertinent tax rules more sensible.... [R]ecommendations [include] simplifying how Social Security retirement benefits are taxed, bifurcating defined contribution plan withdrawals into capital gains and ordinary income components, repealing certain exceptions to the early distribution penalty, reducing the delayed distribution penalty and adjusting the age at which it is triggered, and changing the residential gain exclusion to avoid unanticipated problems with reverse mortgages."
(Richard L. Kaplan of the University of Illinois College of Law)
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Fiduciaries Seeking Control in a Changing World
"Periods when markets and the economic environment are in a state of flux can be an ideal time for your investment committee to review what your institution can control. Confirm your investment objective... Strive for transparency.... Manage 'portfolio leakage'.... Manage the fees associated with any investment program.... Review any potential conflicts of interest.... Assess how your committee spends its time.... Set meeting agendas and document decisions in meeting minutes."
(Vanguard)
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[Opinion]
Obama Budget Calls for Limit on Retirement Accounts
"[T]he Obama budget document ... will include a new proposal to limit the total amount an individual can put aside in tax deferred retirement savings like 401Ks and IRAs to an amount sufficient to generate an annual income in the golden years of less than $250,000 per year. Why do it? According to a senior administration official ... wealthy taxpayers can currently 'accumulate many millions of dollars in these accounts, substantially more than is needed to fund reasonable levels of retirement saving.' Who says?"
(U.S.News & World Report)
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[Opinion]
Florida Cities Should Reform Now for Pension Sustainability
"Cities in Florida are asking the Legislature to think big and support more comprehensive pension reforms that will make municipal police and firefighter pensions sustainable, secure and sound well into the future.... [S]ome Florida municipalities are headed for their own version of a fiscal cliff -- and will be unable to meet current and future obligations to their retirees."
(Orlando Sentinel)
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[Opinion]
Expansion of Social Security: A Plan to Increase Retirement Security
"Retirement security is often thought of as three-legged 'stool' consisting of Social Security, employer retirement plans, and private savings. Social Security has been far more stable and successful than the other two legs of the stool. The reliance on these other legs of the system has resulted in a retirement security crisis for most Americans, shifting costs and risks onto individuals, even as the benefits of these programs go overwhelmingly to upper-income earners.... Instead of compounding failure by expanding private benefits, a category that includes rapidly-disappearing defined benefit pensions, employer-provided 401(k)s and individual retirement accounts (IRAs), we should substantially expand the successful, purely public Social Security program."
(New America Foundation)
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[Opinion]
Persistently Low Interest Rates: Corporate America's Pension Time Bomb?
"[I]nterest rates are the main driver of pension liabilities. This is because the duration of liabilities is longer than the duration of assets, which in plain English means any decline in interest rates will widen pension deficits because liabilities will grow much faster than assets."
(Pension Pulse)
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[Opinion]
In Little Rock, Protecting Retirement Security through a Pension
"At a time when many American workers are headed toward retirement insecurity because of a right-wing attack on traditional pensions, the city of Little Rock, Ark., is trying to do right by its public service workers.... Under the proposed system -- which would go into effect next January for current and future employees -- workers will make a contribution to their retirement fund of 4.5 percent of their pay, up from the current 3.5 percent. The city would contribute 9 percent, up from 7 percent.... [T]he consultant said this will actually be cheaper for the city than requiring employees [to] join the state's [defined contribution] retirement system."
(AFSCME)
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Benefits in General; Executive Compensation
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[Guidance Overview]
New York State Agencies Again Revise Proposed Regs Limiting Use of State Funds for Administrative Expenses and Executive Comp by Service Providers
"Although the regulations are scheduled to go into effect on July 1, limits on administrative expenses and executive compensation are not effective until the 'first day of each provider's respective reporting period'.... The definition of 'executive compensation' has been broadened to include distributions to shareholders or partners when such distributions represent compensatory or guaranteed payments.... The definition of 'administrative expenses' and 'program services expenses' now exclude 'that portion of the salaries and benefits of staff performing policy development or research,' which will result in expenses qualifying as such to not count toward a covered provider's maximum allowable expenditures on administrative expenses."
(Proskauer Rose LLP)
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Another Important Company Victory in the Proxy Injunction Lawsuit Wars
"[W]hile U.S. public companies filing proxies seeking shareholder approval on their say-on-pay and equity plan approval votes are not out of the woods and need to be ever vigilant in making sure that their proxies are accurate and satisfy the applicable legal requirements, the decisions in the proxy injunction cases are decidedly breaking in their favor, which is in the interest not only of companies but of investors who do not need more inconsequential compensation disclosure minutiae or to have their investments taxed by annual legal fees settlements." [Paul Noble vs. AAR Corp., No. 12 C 7973 (N.D. Ill. Apr. 3, 2013)]
(The Conference Board)
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Press Releases
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