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April 15, 2013          Get Health & Welfare News  |  Advertise  |  Unsubscribe
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Employee Benefits Jobs

Client Service Representative
for Associated Pension Consultants in CA

Account Services Representative
for Verisight, Inc. in CA

Reviewing Actuary
for Hooker & Holcombe, Inc. in CT

Litigation Associate
for Boutique Employee Benefits Firm in DC

Enrolled Actuary
for Third Party Administration Firm in NC

Participant Service Center - Defined Benefit Pension Plan Administrative Outsourcing
for Savitz Organization in PA

Defined Benefit Analyst, Data Specialist
for The Savitz Organization in PA

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Webcasts and Conferences

Ethics Case Studies One
Nationwide on April 25, 2013 presented by McKay Hochman Co., Inc.

Kitchen Table Economics Forum With Panelist EBRIís Dallas Salisbury
in District of Columbia on April 16, 2013 presented by Washington Post

View All Webcasts and Conferences

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[Official Guidance]

May 13 IRS Phone Forum: What You Need to Know About the IRS Final 401(k) Questionnaire Report and Next Steps
"The 401(k) Compliance Check Questionnaire Final Report covers plan form and operational issues compiled from data provided by 401(k) plan sponsors.... [Speakers] will highlight significant findings and next steps (including outreach, guidance and compliance projects). They'll also discuss a new self-audit tool to help 401(k) plan sponsors avoid costly mistakes. If you have a specific matter that you would like to be addressed, please email [IRS] at ep.phoneforum@irs.gov by May 6, 2013." (Internal Revenue Service)


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[Guidance Overview]

Plan Sponsors in Puerto Rico Required to File Restatements and Certain Amendments with Treasury (PDF)
"[S]ponsors of qualified retirement plans are required to adopt certain specific amendments to meet the new tax qualification requirements imposed by the P.R. Internal Revenue Code of 2011 ... Amendments must be adopted no later than June 30, 2013 (for plans using as plan year a calendar year) or the last day of the first plan year beginning on or after January 1, 2012 (for plans using as a plan year a year other than a calendar year)[.]" (McConnell Valdes)

Will the Federal Government Shrink Your IRA?
"[The proposed retirement savings cap] is based on the amount needed to generate an annuity payment of $205,000 a year for a 62-year-old worker in a traditional, defined-benefit pension plan. If interest rates rise, annuities could get cheaper, meaning the cap could shrink. Going back to late 2006, for example, annuities paying that amount cost as little as $2.2 million for someone age 65[.]" (The Wall Street Journal)

Budget Proposals for Savings: A Deterrent or Not?
"Scott Macey, president and CEO of [ERIC], says the budget proposal does not consider unintended consequences.... 'Policymakers should keep in mind that most monies saved in retirement accounts are tax deferrals, and will eventually be subject to taxation. There are also complex rules which limit the amount that highly compensated workers can contribute to retirement plans, as well as detailed rules that assure comparable treatment of all participants in plans. This proposal appears to be a way to pay for other Administration spending priorities, with no real sound policy justification.' (PLANADVISER.com)

The Future of Adviser Benchmarking
"The value of benchmarking doesn't lie in the simple comparison of mechanical numbers but rather in the ability to glean insight from the experience of the industry: Are we growing as fast as our competitors? When is it time to hire another adviser? Are our teams at capacity or are we being inefficient? Are we preparing the ownership group for the succession of the founders? How do we pay the partners/owners" (Investment News; free registration required)


Learn, Network and Sell at the SPARK National Retirement Industry Conference - June 16-18, Washington DC

Sponsored by SPARK (Society of Professional Asset Record Keepers)

Join top industry recordkeepers, asset managers, TPAs, advisors, marketing and sales executives for unequaled educational and networking opportunities. Learn the latest market trends, business strategies, regulatory and legislative issues, and product developments.

Actuarial Valuation of the CalSTRS Defined Benefit Program, as of June 30, 2012 (PDF)
"The valuation indicates that the DB program had [1] [An unfunded actuarial obligation (UAO)], on June 30, 2012, of $71 billion, an increase ... of $6.5 billion from the June 30, 2011 valuation, and an increase of $400 million from what was anticipated as of June 30, 2011, when the prior valuation was adopted. [2] A funding ratio of 67 percent, a decrease of 2 percentage points from last year. [3] A Normal Cost of 18.276 percent, a decrease of 0.023 percentage points from the 8.299 percent Normal Cost determined in the prior valuation. [4] A UAO of $20 billion in the benefits associated with the plan in effect as of July 1, 1990." (CalSTRS)

CalSTRS Benefit Enhancements Resulted in Big Part of Pension Debt
"If not for pension and benefit increases as the stock market boomed more than a decade ago, CalSTRS would be one of the nation's best-funded large retirement systems ... Instead... [the] funding level dropped from 69 percent in the previous year to 67 percent, while the 'unfunded liability' ... increased from $64.5 billion to $71 billion.... 'If we were still operating under the 1990 benefit structure, the plan would be about 88.4 percent funded instead of 67 percent,' Mark Olleman of Milliman told the CalSTRS board last week." (CalPensions)

Administration Proposes to Exempt Non-U.S. Pension Funds from Income Tax on U.S. Real Property Investments (PDF)
"At the moment, there are few details about the proposed tax exemption, which is estimated to cost the US government $2.1 billion in tax revenue over 2014-2023. It is also part of a budget package which will certainly not survive in its proposed form. But tax proposals of this sort often reappear in subsequent tax legislation, so non-US pension plans with US real property or immoveable investments should continue to monitor US tax legislation for this exemption." (Groom Law Group)

Public Pensions Get a Grip on Future Costs
"Not long after the biggest financial crisis in four generations, cries began in earnest to close these systems to new hires and replace them with defined contribution, or retirement savings, plans. Rather than make that drastic move, though, New Jersey responded by cutting cost-of-living adjustments for all employees; increasing employee contributions into their pension plans; and, for new hires, increasing age or tenure eligibility levels and average salary periods, and reducing the benefit factor." (Institutional Investor)

DC Plans Better Prepared for Economic Downturn Than in 2008
"Defined contribution industry experts say many DC plans are better equipped to deal with the next economic downturn than they were in 2008.... That means seeking multiple ways to achieve diversification, such as reducing allocations to company stock, trimming reliance on equities, reviewing target-date fund glidepaths and exploring alternative investments. It also means enhancing education efforts so participants are thinking about retirement readiness, rather than just asset accumulation." (Pensions & Investments)

'Emergency Czar' to Address Detroit's Pension and Retiree Health Care Problems
"Given that pension liabilities represent 14% of the city's total long-term obligations and retiree health-care liabilities totaling $5.27 billion account for 38% of the obligations, sources said pension and post-retirement benefits are one of the biggest issues Mr. Orr must face." (Pensions & Investments)

Why Pension Funds Are Hooked on Private Equity
"More and more, pension funds are allocating their resources towards alternative investments like private equity. But is this a good idea? At first blush, it may seem dangerous for pension funds to invest in risky, illiquid assets ... In fact, on average, private equity has outperformed the broader market." (TIME)

Avoid These Big Mistakes in Your Employer's 401(k)
"[F]inancial advisers say some people may be making mistakes with their 401(k)s that could hurt them now and cost them precious income in retirement ... 1. Under- or over-contributing.... 2. Ignoring fees.... 3. Taking a 401(k) loan to pay off debt." (The Wall Street Journal)

What Type of Professional Advisor is Right for My Retirement Plan? (PDF)
"The benefits of conducting a formal RFP search include: [1] The opportunity to align goals with the advisory services and business models available; [2] Fiduciary risk mitigation (because the search demonstrates the application of a deliberate process); [3] Better understanding of fees for services; [4] Detection of trends; [5] Benchmarking information; [6] Inherent fairness of process." (Retirement Advisor Council)

CalSTRS Finalizes Divestments from Manufacturers of Illegal Guns
"Following the [initial] vote, CalSTRS staff met with officials of the gun manufacturers and asked them to stop making guns illegal in California, such as assault weapons and certain handguns and rifles. The companies refused. CalSTRS' holdings in gun manufacturers are relatively small: around $2.9 million total invested in two companies, Smith & Wesson and Sturm Ruger, through index funds." (Pensions & Investments)

Pension Assistance Project Provides Legal Help in Western States to Pension Participants and Beneficiaries
"One out of two American workers has some kind of employer-sponsored retirement plan, such as a traditional pension, 401(k), or profit-sharing plan. These plans are a vital source of income, helping people to maintain their independence in retirement. But what happens when a retirement plan turns from a source of income into a source of frustration?" (FOXReno.com)

SEC Advisory Group Pushes for Enhanced Target-Date Fund Rules
"The five additional recommendations from the committee are: [1] developing a glidepath illustration based on risk; [2] having standard methodology for all illustrations; [3] requiring fund prospectuses to disclose risk assumptions; [4] requiring warnings in marketing materials that funds are not guaranteed; and [5] enhancing fee disclosure of costs over the lifetime of the investment." (Pensions & Investments)

When Is the Right Time to Retire?
"Here's how to decide when it's the right time to retire: Examine your financial resources.... Develop a plan... for how you will spend your time.... Coordinate with your spouse.... Schedule enough to do." (U.S.News and World Report)

Fitch Says Kentucky's Pension Reform Still Has Uncertainty
"'The changes passed by the Kentucky legislature should allow the state to better manage its underfunded pension liability and have come sooner than many expected,' Eric Kim, Fitch Ratings' director of U.S. Public Finance wrote ... 'But, in our view, the overall challenges to the state remain, and the plan exerts additional budgetary pressure.' The reform requires the state to begin fully funding its actuarially calculated annual required contribution (ARC) into the Kentucky Retirement System by 2015 ... The state has taken breaks or underfunded its retirement plan for years, which has led to its status as one of the worst-funded systems in the country." (Governing)

The Interplay of Wealth, Retirement Decisions, Policy and Economic Shocks
"The decision to retire depends on a number of factors including earnings and health shocks, demographic characteristics, preferences, pensions, and social security.... [I]ncreasing the [eligibility age of retirement] results in sizeable responses to the age of retirement but does not affect health outcomes very much. A 20 percent reduction in wealth induces households to delay retirement by one year, on average, with poor households being relatively unaffected." (University of Michigan Retirement Research Center)

Barriers to Later Retirement: Increases in the Full Retirement Age, Age Discrimination, and the Physical Challenges of Work
"[This study finds that] stronger state age discrimination protections increase employment and hiring for older workers caught by increases in the FRA [and] that physical challenges pose a barrier to extending work lives, although some workers with physically-demanding jobs are able to mitigate these demands -- either at new jobs or with the same employer. However, for the most part stronger age discrimination protections do not appear to contribute to older workers' ability to mitigate physical challenges at work." (University of Michigan Retirement Research Center)


Municipalities in Bankruptcy: Public Pension Plans and Retirees Will Share the Pain
"CalPERS' debt that once was considered a sacrosanct obligation now looks like just one of many unsecured debts owed by Stockton, San Bernardino and hundreds of other government insolvent government entities. As Judge Klein emphasized ... 'The city is going to have a difficult time confirming a plan over an objection and claim of unfair discrimination without being able to explain that problem away.' These are code words for from now on CalPERS and retirees with pension spikes are going to be sharing bankruptcy losses just like every other municipal bankruptcy creditor." (Chriss Street and Company)


Comments to Ways & Means Tax Reform Working Group on Preserving Tax Incentives for Retirement Plans (PDF)
"There have been a number of proposals put forth as alternatives to the current tax treatment for retirement plans. However, there is substantial evidence that changing the tax treatment and/or lowering contribution levels will result in lower retirement savings and fewer workers being offered retirement plans by their employers." (The SPARK Institute and 19 other Trade Associations)


On Making 403(b) Contributions Automatic: Why Money and Power Work Against It
"There is much opposition to the 'Make It Automatic' idea and for the only two reasons that matter -- money and power.... A true financial planner who does the right thing for their clients will never be threatened by 'automatic enrollment' as their clients will always value them more than as just an 'enroller'" (The Teacher's Advocate)


401(k) and the Financialization of Retirement: Interview with Theresa Ghilarducci
[Video, with transcript.] Excerpt: "[T]he whole [401(k)] structure at almost every point has a fatal flaw. And so now older workers are going into retirement with not enough money to maintain their living standards and actually not enough money to live as well, relatively as well as their parents or grandparents.... It's as if the country said, okay, for the next 35 years, you have to pull your own teeth or you have to do your own electrical wiring or you have to do your own home building." (The Real News Network)


Results of DB Restrictions Shows Folly of Limiting 401(k) Tax Advantages
"Has anyone in the administration considered the possible impact on employer support for 401(k) plans if the tax deferral of contributions to 401(k)s and IRAs is limited to those accounts with $3.4 million in assets or less? Mr. Obama and his advisers should examine the history of defined-benefit plans, which have almost disappeared in the private sector. One trigger for the decline in DB plans was legislation passed in 1987 that capped the maximum salary on which a tax-exempt pension benefit could be based at $235,800 per year." (Investment News; free registration required)


CalPERS Board Must Restore Fiscal Responsibility
"First [CalPERS] convinced legislators that it had made so much money during the dot-com boom benefit payments could be increased by up to 50 percent 'without it costing a dime of extra taxpayer money.' That estimate was off by more than $20 billion and counting.... Later, CalPERS manipulated its funding policy and market predictions to provide easy payment plans after the stock and real estate markets cratered.... But the most negligent decision was basing current benefit costs on an 80 percent funding goal instead of always working toward 100 percent funding of the retirement promises entrusted to their care." (San Jose Mercury News)


Can This Retirement System Be Saved?
"Averting a retirement crisis in the U.S. requires fresh thinking, not to mention political will. Ideas range from a restructuring of Social Security to beefing up employer-sponsored retirement plans to creating a new tier of mandated retirement accounts. Vanguard Group founder Jack Bogle, Senior Adviser to the Treasury Secretary Mark Iwry, former SEC Commissioner Harvey Pitt and others share their thoughts on what needs to be done." (Bloomberg)


Public Pensions in Bankruptcy Court
"While a Supreme Court decision would help clarify an important area of the law, a drawn-out court case is the last thing Stockton needs. The way to get the city back on its feet is for city officials, creditors and retirees to negotiate a fair settlement quickly. Sophisticated investors and bond insurers have to recognize that they made terrible decisions when they lent the city money during the bubble years and will have to take big losses. Retirees, especially those who were awarded unsustainably generous pensions and health care benefits, should also come to the table by forming a committee, as the bankruptcy judge recently suggested." (The New York Times)


Day of Reckoning Approaches for State of California, Local Governments and School Districts
"The [CalPERS] board is set to vote ... on recommended accounting changes that would raise employer pension contribution rates by 20 percent on average over the next six years. Added to pension rate increases already scheduled, school districts and state and local governments could be hit with pension cost hikes of between 40 and 50 percent by 2020. For the state of California alone, pension contributions for state workers and non-teacher school employees would climb from $5.1 billion to $7.4 billion." (Sacramento Bee)


Comments to SEC on Standards of Conduct and Other Obligations of Broker-Dealers and Investment Advisers (PDF)
"Because it is not possible to determine the effects of possible SEC reforms without taking into account the interaction with possible DOL reforms significantly affecting the same conduct and the same IRA market, the responses to the SEC Request will virtually all be incorrect as soon as the DOL acts, thus rendering the SEC's administrative record unhelpful.... [T]here is complete overlap between the two projects with respect to investment services provided to IRA owners. Since IRA assets were approximately $4.9 trillion as of the end of 2011, the degree of overlap between the two projects is enormous." (Davis & Harman LLP)


Retirement Planning Begins at Work: Federal Government Should Not Undermine It
"'For tens of millions of American workers, planning for retirement begins with participation in an employer-sponsored defined contribution arrangement like a 401(k) plan,' said Lynn Dudley, American Benefits Council senior vice president, retirement and international benefits policy ... 'To preserve this essential workplace tool for retirement planning and savings, we urge lawmakers to avoid enacting any policies that would undermine or disrupt the system for current and future participants.'" (American Benefits Council)


Recommendations of Investor-as-Purchaser Subcommittee to SEC on Rules Pertaining to Target Date Funds (PDF)
"In addition to improving the marketing material provided to investors, the [SEC] should seek to ensure that retirement plan consultants also receive the information they need to make sound decisions about which target date funds are included on the menu of retirement plan options and offered as default investments in those plans. The goal should be to ensure that the information provides an accurate and easily comparable depiction of fund risk, does so in a manner that is objective, is not easily gamed, and is sufficiently flexible to apply to different methods of managing risk and to allow for continuing innovation among target date funds." (Investor-as-Purchaser Subcommittee, SEC Investor Advisory Committee, via American Benefits Council)


Me Against Myself: The Challenge of Deciding When and How to Save for Retirement
"[W]e're not in fact very good at making and acting on these forecasts [of lifetime earnings and consumption]. We struggle with self-control. More mathematically, we're hyperbolic discounters. That felicitous phrase means that we place an unduly high value on consumption today and an unduly low value on consumption in the future, short-changing our older selves and those who may depend on us." (Vanguard)

Benefits in General; Executive Compensation

ERISA Reporting and Disclosure Guide for Retirement, Health and Welfare Plans (2013 Edition)
"The Guide is useful in: [1] Identifying forms to be filed and distributed annually. [2] Developing controls for compliance, including an internal calendar for reporting and disclosure. [3] Determining and coordinating reporting and disclosure items for actuaries, attorneys and accountants to prepare. [4] Identifying special reporting and disclosure requirements for plan installation, amendment, termination, etc. [5] Evaluating administrative considerations in establishing a new or supplemental plan. [6] Advising on responsibility for compliance with the reporting and disclosure rules." (PricewaterhouseCoopers)

Workers Want Better Benefits Communication
"Individuals whose employers offer benefits are nearly unanimous (98%) in saying it's at least somewhat important to understand the benefits provided to them by their employer, and a strong majority -- 73% -- say it's very important.... Only 60% of those surveyed said [their employer's communication is] fairly or very effective, and 9% said it's not at all effective." (Wolters Kluwer Law & Business)

Press Releases

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