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BenefitsLink Retirement Plans Newsletter

April 12, 2013          Get Health & Welfare News  |  Advertise  |  Unsubscribe
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Employee Benefits Jobs

Part Time On Call Retirement Planning Consultant
for Transamerica Retirement Solutions in CA, MO, NC, NY, UT

Entry Level Loan & Distribution Specialist
for Scholz, Klein & Friends Enlightened Retirement Group, Inc. in TX

Retirement Communications Specialist
for CBIZ Insurance Services, Inc. in MD

Compensation Analyst:
for Verisight, Inc. in IL, MN, WI

Senior Paralegal Specialist - Employee Benefits
for University of California Office of the President in CA

Director, Retirement Key Account Management
for Prudential in TX

Pension Risk Transfer Relationship Management
for Prudential in NJ, NY

401K Administrator
for CPEhr in CA

Enrolled Actuary
for CPEhr in CA

Retirement Plan Services Participant Communications Manager
for T. Rowe Price in MD

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Webcasts and Conferences

401(k) Essentials Plus Series
Nationwide on April 18, 2013 presented by McKay Hochman Co., Inc.

Becoming an Effective Human Resources Business Partner
Nationwide on May 15, 2013 presented by Thompson Interactive

TeleHealth In The Workplace Webinar
Nationwide on April 16, 2013 presented by Oswald

Designated Roth Accounts and Roth Conversions
Nationwide on April 18, 2013 presented by McKay Hochman Co., Inc.

View All Webcasts and Conferences

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[Official Guidance]

PBGC Interest Assumptions for Benefits Payable in Terminated Single-Employer Plans, May 2013
"The May 2013 interest assumptions under the benefit payments regulation will be 1.00 percent for the period during which a benefit is in pay status and 4.00 percent during any years preceding the benefit's placement in pay status. In comparison with the interest assumptions in effect for April 2013, these interest assumptions are unchanged." (Pension Benefit Guaranty Corporation)


Attend the Women Business Leaders Forum in Austin, June 10-13!

Sponsored by ASPPA

The Women Business Leaders Forum will focus on HR hot topics, business growth for succession or sales, social media, technology and TPA trends. It will be a mix of general sessions and roundtables with plenty of time to network with your peers.

[Guidance Overview]

PBGC Proposes New Regulations Under Reportable Events Rule
"The April 3 proposed rules represent a departure from the PBGC's earlier position on these issues. In 2009, the PBGC proposed a set of rules that would have expanded reporting requirements and eliminated most waivers under section 4043. In response to concerns from the business community that such changes would burden plan sponsors unnecessarily when risks to pension plans were low, the PBGC withdrew this earlier set of proposed rules and formulated the new approach set forth in its most recent set of rules." (Morgan Lewis)

[Guidance Overview]

New Reportable Events Regs Proposed by PBGC (PDF)
"In 2009, PBGC proposed to increase the reporting requirements by eliminating many of the waivers included in the current reportable events regulations. In response to negative comments ... the PBGC has now released revised proposed regulations that would exempt many companies from making reports, as they now target the reporting requirements to those companies and plans that are at substantial risk of default. Under the proposal, electronic filing would be mandatory for all reportable events notices." (PricewaterhouseCoopers)

[Guidance Overview]

PBGC Publishes Update to Proposed Regs on Reportable Events
"The PBGC's newly issued proposed regulation includes changes to accommodate the changes to the funding and premium rules, to replace many automatic waivers with a simpler system of waivers that features 'safe harbors' for five events based on the financial soundness of the plan sponsor or the plan, and to make certain other modifications." (Sidley Austin LLP)

The Impact of a Retirement Savings Account Cap (Updated by EBRI) (PDF)
"With the release of the full budget details ... it is clear that the proposed cap would apply not only to individual accounts (such as IRAs and 401(k)s) but to defined benefit pension accruals as well.... Since the earlier EBRI analysis did not contemplate the inclusion of defined benefit accruals, it seems likely that the number of individuals affected will change." (EBRI)


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Potential Impact of the Budget Proposals on Forms 5500 and 8955-SSA
"In addition to the revenue proposals, the budget includes provisions that would authorize Treasury to require the electronic filing of certain employee benefit plan reports (e.g., Forms 5500-EZ and 8955-SSA). It is not clear from the proposal whether the electronic filing also would apply to other forms such as the Form 5558. Electronic filing of the form 5558 would help simplify the filing process and avoid unnecessary challenges preparers have in proving whether the form was filed." (SunGard Relius)

Proposal to Eliminate Code Section 404(k) Poses Concerns for ESOPs
"The provision would eliminate Section 404(k), an incentive for ESOP creation and operation that permits a C corporation to deduct the value of dividends paid on ESOP stock passed through to employees in cash, deductions used to pay the ESOP acquisition loan, or when the employee reinvests in more company stock in his/her ESOP account balance ... So far, the proposal is unclear as to how big the ESOP sponsor would have to be before this tax benefit would be denied[.]" (PLANSPONSOR.com)

Budget Proposal Would Require Small Employers to Offer IRAs
"The fiscal-2014 federal budget plan ... includes a proposal to require that small employers -- defined as those with less than $20 million in annual payroll -- automatically enroll employees in an IRA, from which they could opt out. The measure would apply to companies that offer 401(k) programs and employees who don't participate in those plans. The purpose is to stimulate retirement savings through the automatic-enrollment feature." (CFO.com)

Income Tax Planning in 2013
"The profusion of new taxes, higher brackets, phase-outs, and multiple 'threshold' levels makes income planning a high-stakes chess game.... 'Rick' stopped contributing to retirement plans a few years ago because he already had enough in his retirement plans to finance his expected retirement needs. His and his wife's income from interest and dividends is about $40,000. He's wondering if he should start contributing to a retirement plan again, and whether he should go with a 'Roth 401(k)'.... 'Patty' is single and newly retired at age 68.... She wants to spend a one-time lump sum this year (or maybe spread over a couple of years) of about $400,000 for home improvements, travel, paying off her mortgage, etc., to 'launch' her planned retirement lifestyle. What's the best source for her to take that cash from?" (Morningstar Advisor)

Borrowing Against Your Future with a 401(k) Loan
"Taking a loan from a 401(k) plan can have a devastating impact on a person's long-term financial -- and retirement -- security. Though the idea of a 401(k) loan may seem like you're borrowing money from yourself, it isn't that simple." (Pension Rights Center)

ESOP Operational Issues: Section 409(p) Testing
"[T]he mere existence of one or more disqualified persons does not by itself trigger a violation of the Section 409(p) rules. Rather, the next step is to determine whether the plan year is a 'nonallocation year'.... To have a nonallocation year, the disqualified persons ... must own 50% or more of the outstanding stock of the S corporation. For purposes of this calculation, the disqualified person's ownership outside of the ESOP is now added to his or her ESOP ownership and synthetic equity (i.e., deemed-owned shares)." (National Center for Employee Ownership)

Bankrupt California City to Resume Paying Pension Fund, But Not Bondholders
"Nearly a year after it halted contributions to America's biggest pension fund, San Bernardino will resume payments to CalPERS at the start of the new fiscal year -- but continue to not pay other creditors ... San Bernardino will not make interest and principal payments on $50 million in pension bonds issued in 2005 ... San Bernardino's decision ... will intensify the battle between the pension fund and Wall Street bondholders." (Thomson Reuters)

Facts Show the Importance of 401(k) Plan Sponsorship, Participation and Investments (PDF)
"One survey of major U.S. employers indicates that 88.4% of their employees are eligible to participate in their employer's defined contribution plan. Most companies (60.5%) provide plan eligibility to all employee types.... One survey finds that the average percentage of eligible employees with a balance in a defined contribution plan is 85.9% . An average of 79.5% of eligible employees made contributions to the plan when permitted." (American Benefits Council)

Workforce Reduction Supplemental Benefits Counted as Subsidized Early Retirement for QDRO
"The appeals court determined that the supplemental benefit was an 'employer subsidy for early retirement so that eligible participants would not have to receive actuarially reduced retirement benefits when they were effectively forced to retire before age 65.' According to the court, the employer's reason for providing the supplemental benefit -- its workforce reduction -- did not change the fact that the benefit increased a participant's pension benefits over the actuarially-calculated amount." [Gruber v. PPL Retirement Plan, No. 12-2123 (3d Cir. Apr. 9, 2013)] (Bloomberg BNA)

The Most Important and Overlooked Feature of Stable Value Funds
"It's tempting to focus entirely on portfolio yield, duration, and quality when evaluating and recommending a Stable Value fund to plan sponsor clients.... [T]here is one feature ... that is even more important: the fund's plan-level termination provision." (Employee Benefit News)

Is Fee Levelization Right for your Plan? (PDF)
"The first step of implementing such a program is for the recordkeeper to confirm the program's 'required revenue,' or administrative costs. This amount is typically quoted in terms of a percentage of assets, and is then compared to the percentage of revenue sharing available in each investment. If the fund's revenue sharing amount exceeds the required revenue, the recordkeeper provides a credit on the assets in the amount of the excess revenue received. All participants using the fund share that credit. If the fund's revenue sharing falls below that required revenue amount, an additional fee is charged in the amount of the shortfall on all assets in the fund. Both this potential fee and credit appear on the participant's quarterly statement." (Cammack LaRhette Consulting)

Get the Facts on 'File and Suspend' Strategy for Social Security Benefits
"By now most advisors have at least heard of the 'file and suspend' strategy for couples to maximize their Social Security benefits. If only all the good folks working in Social Security's offices were familiar with it, this couple would have had a much easier time. Throw in a federal pension and what used to be an easy decision can become very complex." (Morningstar Advisor)

Proposed Regs May Affect Default Risk for Borrowers with Pension Plans
"[M]any credit agreements refer to unwaived reportable events when defining the events of default. Finalization of the PBGC's proposed changes could change the borrower's risk of default under existing agreements.... [B]orrowers that have relied on the well funded plan waiver may wish to evaluate their likelihood of satisfying the standards for either the financially sound plan safe harbor or the financially sound plan sponsor safe harbor." (Pillsbury Winthrop Shaw Pittman LLP)

De-Risking on Trial? U.S. Verizon Litigation Still Active
"The 41,000 retirees whose pensions were annuitized are now permitted to sue as a class on the following three issues: (1) whether Verizon violated its fiduciary duties, (2) whether Verizon discriminated against the group of plan members whose pensions were annuitized, and (3) whether the plan's summary plan description should have described annuitization as a circumstance that could result in a loss or reduction of benefits (if the insurer was unable to pay). The 50,000 plan members whose pensions were not annuitized were also permitted to sue as a class, but on 3 different issues: (1) whether use of plan assets to purchase annuities violated the plan terms or ERISA, (2) whether plan assets were used to pay costs that should have been paid by Verizon, and (3) whether buying the annuities violated the payment restrictions applicable to plans that are less than 80% funded." (Osler, Hoskin & Harcourt LLP)

Cypen & Cypen Newsletter, April 11, 2013
Covers employee benefit developments with an emphasis on governmental plans. Topics include: [1] Total assets of major public pensions systems reach highest level since 2007 peak; [2] Money management improves after financial crisis; [3] IRS releases the dirty dozen tax scams for 2013; [4] Are Maryland workers ready for retirement? [5] Generating more governmental revenue from existing sources; and [6] DOL and IRS could improve rollover process for participants. (Cypen & Cypen)

The Dangers of a Do-It-Yourself Retirement Plan
"[When using an] [i]nvestment company 'bundled' plan ... You are limited to the investment options available under that one company's menu of options. Fees charged on the investments under management are used to offset administration expenses. Data submitted to the company about your employees and their contributions is considered to be accurate. Most will not review that data for accuracy. The plan sponsor must review all reports for accuracy to confirm that the investment company's reports tie out to their corporate records. Plan design options are often limited. Bundled providers do not provide ancillary services such as representation in IRS or DOL audit." (Benefit Resources, Inc.)

Special Considerations When a Nonresident Alien Is Named a 401(k) Beneficiary
"When naming a nonresident alien as a retirement plan beneficiary, make sure to include more information than the typical name, relationship, and date of birth. The issue here is that your human resources department must contact and verify your beneficiary ... The money that accumulated in a 401(k) is pretax, so before it goes abroad, Uncle Sam takes his cut. This means that on top of submitting a death certificate, your [beneficiary] will have to request a U.S. tax identification number and pay taxes as a nonresident alien." (Marotta on Money)

Newly Compiled Data for Target Date Mutual Funds Show Expenses Fell in 2012
"Investors in target date mutual funds in 2012 incurred an asset-weighted average expense ratio of 58 basis points, compared to 61 basis points in 2011. The expenses of these funds have fallen 13 percent since 2008, when they were 67 basis points." (Investment Company Institute)

How Obama's Budget Could Impact Investment Advisors
"Obama's 2014 budget would channel an additional $350 million to the Securities and Exchange Commission over the current year's appropriation. The SEC, which is vested with the responsibility for reviewing the practices of financial advisors, has acknowledged the limitations of the resources it can direct toward those exams, admitting that its oversight of the sector is inadequate." (Financial Planning)

Employers Boosting Employee Stock Purchase Plans as Economy Improves
"Some 51% of respondents said they intend to modify their employee stock purchase plans in the next two to three years. Of those that will modify, 31% will either introduce or increase the employee discount on stock or add a 'look back' provision.... ESPPs were viewed as a core part of a benefit package by 50% of respondents; 28% of all respondents felt employees valued the plan more than other company benefits." (Pensions & Investments)

U.K. Chorus Grows in Outcry Against Proposed Europe Pension Rules
"U.K. government authorities, industry organizations and consultants publicly criticized a European Commission proposal to subject pension funds to stricter regulations currently being applied to insurance companies.... 'Businesses trying to run final-salary pensions could be faced with bigger pensions bills to plug an astonishing 450 billion GBP funding gap. This would have a highly damaging effect for the retirement prospects of millions of U.K. workers,' according to Joanne Segars, CEO of the NAPF ... [which] represents member pension funds with combined assets of about 900 billion GBP." (Pensions & Investments)


The Effects of Executive Compensation: From Luxury Pensions to Marx's Revenge?
"Magazines like Forbes will rank America's highest paid CEOs, all part of the American plutocracy, but they won't scrutinize the total compensation which includes luxury pensions. And yet the American Accounting Association did a study a few years back and warned CEO retirement is big loser for shareholders, especially when chief's pension is based on company's late-stage performance." (Pension Pulse)


About Those Aggressive Investment Return Assumptions by Public Pension Plans
"[E]ven if we get a robust further stock market gains that help eliminate some of the huge unfunded liabilities we now see, the high projected rates of return are relentless and require continued gains in coming years. When you do the numbers you understand how unrealistic a scenario pension funds are spinning for us." (Public Sector Inc.)


Now He's After Your 401(k)
"How many times have you read financial-advice stories lecturing you to max-out on your IRA, save as much as you can in your 401(k), and even pay taxes now to change your regular IRA into a Roth IRA that will be tax-free until you die? Well, be careful how much you save. That's the message in President Obama's budget for fiscal 2014 ... Thus do our political betters now feel free to define for everyone what is 'needed' for a 'reasonable' retirement. Not to be impertinent, but does this White House definition include being able to afford summers at age 70 at Martha's Vineyard near the Obamas?" (The Wall Street Journal)


Insured Retirement Institute Applauds Senate Resolution on Retirement Saving Incentives
"It is only fitting that our policymakers would note the importance of these retirement saving incentives during a week dedicated to helping Americans live financially secure during their retirement years. We thank Senators Johnny Isakson (R-Ga.), Richard Blumenthal (D-Conn.), John Boozman (R-Ark.), Ben Cardin (D-Md.), Kay Hagan (D-N.C.), Chris Murphy (D-Conn.), Rob Portman (R-Ohio), and Jon Tester (D-Mont.) for their leadership on this important issue[.]" (Insured Retirement Institute)


The President's Budget Attack on the Supposed 'Loophole' of Saving for Retirement
"Surely there are many more issues that will need attention before this type of limitation might be implemented. The cost of implementation by government and the private sector may even challenge the $9 billion in proposed federal savings! An unintended consequence of such a limit may be that business owners whose own accounts could reach the limit, or who don't want the added administrative cost, either terminate their company plans or eliminate employer contributions to those that continue in operation. That would be detrimental to the middle class that the administration believes it is protecting." (Benefits Bryan Cave)


Why ERISA Section 408(b)(2) Is a Flop for the 401(k) Business and How RIAs Can Turn It Around
"[A] funny thing happened on the way to the Forum. While 408(b)(2) is now the rule of the land, two factors have thus far made the new regulation much ado about nothing: [1] Most 401(k) service providers have continued their mastery of obfuscation. [2] The majority of employers are still more concerned with staying in business than in understanding their 401(k) plans." (RIABiz)

Benefits in General; Executive Compensation

Creditors Can Reach Benefits under Top Hat Plan, District Court Rules
"After recognizing that the Plan was exempt from ERISA's anti-alienation provision mandate, the [federal district court in Maryland] went on to address whether the terms of the Plan controlled over Maryland's garnishment laws by virtue of ERISA's preemption section 514. In holding in favor of the creditor, the Court ... [ruled] that ERISA did not preempt state garnishment laws that simply provided a procedural device for enforcing a judgment. As to the Participant's argument that garnishment would violate the terms of the Plan, the Court held that the creditor's rights were not subject to the terms of the Plan[.]" [Sposato v. First Mariner Bank, 2013 WL 1308582 (D. Md. Mar. 29, 2013)] (Womble Carlyle)

Press Releases

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David Rhett Baker, J.D., Editor and Publisher
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