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BenefitsLink Retirement Plans Newsletter

April 16, 2013          Get Health & Welfare News  |  Advertise  |  Unsubscribe
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Employee Benefits Jobs

Retirement Planning Consultant
for Transamerica Retirement Solutions in IN

Retirement/ 401(k) or Health and Welfare Benefits Business Analyst
for Chesapeake Benefit Partners in VA

Assistant Manager, Retirement Services
for The Lafayette Life Insurance Company in OH

Plan Administrator
for Nationwide Financial in OH

Account Executive - Group Benefits
for The Plexus Groupe in IL

ERISA Consulting Associate
for July Business Services in ANY STATE

Retirement Planning Consultant
for Transamerica Retirement Solutions in CA

Manager, Implementation
for Lincoln Financial Group in IN

Senior Account Manager - Retirement Plan Administration
for Ohio National Financial Services in OH

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Webcasts and Conferences

Form 5500 for Health and Welfare Plans: Preparation and Filing Basics
Nationwide on April 11, 2013 presented by Thomson Reuters / EBIA

Free Webinar: Managing Family and Medical Leave Moving Beyond the Basics
Nationwide on May 21, 2013 presented by Davidson Marketing Group -- FutureOffice Network

"Form 5500 Workshop 2013: Issues and Answers" - Denver
in Colorado on May 14, 2013 presented by SunGard Relius

"Form 5500 Workshop 2013: Issues and Answers" - Dallas
in Texas on May 15, 2013 presented by SunGard Relius

"Form 5500 Workshop 2013: Issues and Answers" - Minneapolis
in Minnesota on May 16, 2013 presented by SunGard Relius

"401(k) Plan Workshop 2013: Tax Reform and the 401(k) Plan" - Denver
in Colorado on May 15, 2013 presented by SunGard Relius

"401(k) Plan Workshop 2013: Tax Reform and the 401(k) Plan" - Dallas
in Texas on May 16, 2013 presented by SunGard Relius

"401(k) Plan Workshop 2013: Tax Reform and the 401(k) Plan" - Minneapolis
in Minnesota on May 17, 2013 presented by SunGard Relius

View All Webcasts and Conferences

We also publish the BenefitsLink Health & Welfare Plans Newsletter (free): Subscribe


Major Changes Proposed for Employer-Provided Retirement Benefits (PDF)
"The proposal calls for instituting an overall cap on the amount individuals may accrue under all types of retirement plans .... Also of interest to employee benefit plan sponsors are provisions of the budget proposal that call for changes to PBGC premiums and the elimination of the exclusion for dividends paid on stock held by ESOPs. Other retirement-related proposals would affect IRAs, including a proposal for mandatory workplace IRAs for employers that do not sponsor another retirement plan." (PricewaterhouseCoopers)


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.

401(k) Rollover Study Triggers Call for Action to Protect Plan Participants
"One of the biggest steps is updating a 37-year-old fiduciary standard that was developed in a very different marketplace, said Phyllis C. Borzi, assistant secretary of labor for [EBSA]. 'We believe our work regarding the definition of fiduciary is key to addressing conflicted investment advice and related problems your report identifies,' Ms. Borzi said in a letter to the GAO." (Pensions & Investments)

Before It's Too Late: A Retirement Security Newsletter from Phyllis Borzi, April 15, 2013
"The Government Accountability Office (GAO) was asked to study the challenges 401(k) plan participants may face when separating from their employers and deciding what to do with their plan savings.... [It] found that concerns that participants were being encouraged to choose rollovers to individual retirement accounts (IRAs) in lieu of options that could be more in their interest are well-founded." (Employee Benefits Security Administration)

When Rolling Over, Make Sure You Don't Get Squished by Costs
"Investing pros agree that cashing out retirement savings is hardly ever wise. But there are benefits to both of the other alternatives: IRAs typically offer a wider range of investment options, while 401(k) plans offer lower costs, particularly if they are sponsored by a big employer. Those cost savings can be significant in the long run." (The Wall Street Journal)

Retirement Saving Tips for Couples
"Your income-earning structure and AGI greatly affect your ability to take tax deductions for IRA contributions, for example, while access to employer-sponsored retirement plans can influence how much, if any, of your savings you may want to direct to IRAs." (U.S.News and World Report)


ACI's 2nd National Employee Benefit Plans Forum - May 30-31 - New York, NY

Sponsored by ACI (American Conference Institute)

ACI is pleased to present its 2nd National Advanced Compliance and Benchmarking Forum on Minimizing Legal Risks in the Design, Implementation & Administration of EMPLOYEE BENEFIT PLANS. Discount code BEN200 for BenefitsLink readers.

Poland's Private Pension Funds 'Giant Mistake', Minister Says
"The Polish government will work to correct 'a giant mistake' that is the country's private pension system, introduced in 1999 and responsible for the bulk of Poland's public debt, its finance minister said Tuesday. The government in recent years has wrestled with privately managed pension fund companies, which receive a percentage of gross salaries and invest it in the capital market. The system has so far failed to deliver on its promise of high pensions[.]" (The Wall Street Journal)

CalPERS May Ask for 50% Contribution Hike Over 6-Year Period
"Alan Milligan, the fund's chief actuary, recommends that the biggest U.S. pension stop spreading out losses and gains over 15 years and instead set rates based on how much is needed to reach 100 percent funding within 30 years.... [CalPERS] is about 26 percent short of meeting its long-term commitments. The state and cities contributed $7.8 billion in the last fiscal year, almost four times more than a decade earlier." (Bloomberg BusinessWeek)

Many Say Congress Should Allow PBGC to Set Premiums
"[T]he PBGC is stuck hemorrhaging cash and desperately needs to be fixed ... It has an accumulated net deficit of $34 billion. Among its structural problems, the agency has been unable to charge sufficiently high premiums that would offset the cost of unfunded pensions from going under.... 'Whenever you have public sector backing for private sector risk taking, it's a recipe for disaster,' said Bradley Belt ... who served as the director of the PBGC under President George W. Bush." (Business Insider)

When DB Plans Are Under Pressure, Look at the Backstop
"If you assume an (aggressive) 7.5% and fail to achieve that, what happens? Who steps in to act as backstop? If you assume a (cautious) 3% and fail to achieve that, who is the backstop? The answer to that question has implications both for how a pension system ought to be funded and for how it ought to be invested." (Russell Investments)

The Two Least Understood Investment Rules That Most Hurt 401(k) Investors
"[A]cademic research suggests the optimal portfolio size is between 30 and 50 stocks ... Beyond this number, the cost of diversification tends to eat away at the portfolio's investment performance.... [T]he average number of holdings in the typical mutual fund far exceeds this optimal portfolio.... Why do so many retirement investors believe they should buy more than 2-3 mutual funds, which in themselves are already diversified portfolios?" (Fiduciary News)

Employee Ownership Update, April 15, 2013
NCEO Executive Director Loren Rodgers discusses the proposed repeal of the ESOP dividend deduction, FASB deferral of private company valuation data disclosures, upcoming GEO and NASPP surveys on equity compensation plans, and worker cooperatives in a difficult economy. (National Center for Employee Ownership)

Ninth Circuit Issues Expansive Ruling Interpreting 401(k) Plan Fiduciary Duties
"[T]he Ninth Circuit affirmed a judgment that, with one exception, found that the plan fiduciaries had properly discharged their fiduciary duties under ERISA. The opinion addresses the propriety of common investment options and practices (retail mutual funds, a unitized stock fund, short-term investment funds, and revenue sharing) as well as ERISA's statute of limitations and investment safe harbor[.]" [Tibble v. Edison Int'l, No. 10-56406 (9th Cir. 2013)] (Sidley Austin LLP)

MAP-21 and De-risking Considerations (PDF)
"The impact of current interest rates is greatly muted under MAP-21.... [M]any plan sponsors since the onset of MAP-21 have had multiyear contribution projection studies performed [in order to] to understand the level contribution amount needed to smooth out contribution requirements over several years instead of dealing with the contribution spikes inherent with MAP-21 minimum requirements." (Milliman)

Employers Move Aggressively to Derisk Defined Benefit Plans
"After experiencing steep funding shortfalls in their defined-benefit retirement plan obligations three times in a row over the past generation, corporate plan sponsors are finally fighting back, with an array of innovative weapons designed to reduce their pension liabilities.... These tactics join more-traditional approaches, such as freezing and closing pension plans. Taken together, they constitute a sea change in pension-plan treatment. Just in time, too." (CFO.com)

Retirement Account Cap in Obama Budget Buoys Life Insurance and Annuity Products
"Wealthy investors have long included life insurance as part of a strategy to limit taxes and pass on wealth to their heirs. The cap proposed in Obama's budget would push more assets into life insurance and annuities as investors seek to limit taxes[.]" (Financial Planning)

Private Equity Returns an Annualized 11.46% Over 10 Years for CalPERS
"Private equity was the most lucrative asset class for CalPERS, returning an annualized 11.46% net of fees for the 10 years ended Dec. 31 ... However, private equity also cost the retirement system the most fees of any asset class, $494 million -- about half of what CalPERS paid external managers -- in the state's fiscal year ended June 30." (Pensions & Investments)


Text of ASPPA's Proposals to Enhance the Private Retirement Plan System
"The proposals in this document are intended to enhance the retirement security of American workers, both active and retired, through expanded coverage, simplification, tools to address longevity issues and improved disclosure." (Government Affairs Committee, American Society of Pension Professionals & Actuaries (ASPPA))


The Great Pension Derisking?
"[I]t's important to keep in mind that while derisking makes perfect sense for corporations, the long-term effect of cutting DB plans isn't positive because it ultimately weakens retirement security for millions of workers anxious about retirement and at risk of succumbing to America's new pension poverty. This is why ... we need to separate pensions from businesses and have retirement money managed by large, public, well governed professional pension funds that can invest across public and private markets." (Pension Pulse)


How to Rescue Retirement: It's Simple, and It's Not Chained CPI
"Unfortunately, the two sides in this so-called debate are 'cut' and 'cut more' ... Yet none of these positions are rooted in the reality of the collapsing U.S. retirement system. Obama's approach toward Social Security not only is wrong in its diagnosis and prescriptions, but it will be disastrous in its consequences.... A more realistic assessment reveals that the solution to America's retirement crisis lies in the opposite direction -- expanding Social Security, not cutting it." (In These Times / Institute for Public Affairs)


The Massive Failure of 401(k) Education (PDF)
"Most of the content and techniques used in today's 401k education came from 1980s mutual fund sales materials and presentations. They were designed for financially aware people who were interested in mutual funds to supplement their traditional pension plans. Does that sound like today's typical company employee?" (Ackley Associates)


Comments to the House Ways and Means Committee's Pensions and Retirement Tax Reform Working Group: ESOP Policy and Regulation (PDF)
"Thirty-five plus years of data by reputable experts in retirement savings is very convincing that ESOPs provide, in the vast majority of instances, assets that are better than other employer sponsored retirement plans.... [D]ata in some instances have the average ESOP account balance at nearly $200,000 per participant compared to the $75,000 range of other defined contribution plans." [Editor's note: includes a detailed summary of ESOP history and supportive tax policy.] (The ESOP Association)


ERIC Urges Ways & Means Committee Working Group to Proceed with Caution on Any Tax Reform Changes to Employer Retirement System
"'Changing the current tax treatment of employer-sponsored plans would jeopardize the retirement security of tens of millions of workers, impact the role of retirement assets in the capital markets, and create challenges for future generations of retirees in maintaining their quality of life,' states Kathryn Ricard, ERIC's Senior Vice President for Retirement Policy." (The ERISA Industry Committee)


President's Budget Says ESOPs Too Risky and Bad for Employees(!)
"In justifying a repeal of a tax incentive Congress enacted in 1984 permitting C corporations to have a tax deduction for dividends on ESOP stock paid to employee accounts, the President's budget says that ESOPs are too risky and employees working in corporations with more than $5 million in gross revenue a year cannot understand how their work 'impacts' the company where they work. Such a statement is ridiculous." (The ESOP Association)


Comments to the House Ways and Means Committee's Pensions and Retirement Tax Reform Working Group: Tax Reform Proposals Affecting Employer-Sponsored Retirement Plans
"The tax incentives for retirement savings are unique in that the tax incentive is a deferral, not a permanent exclusion.... The tax incentive for employer-sponsored retirement plans is also unique in that nondiscrimination rules, as well as dollar limits on contributions, and a limit on the amount of compensation that can be included in determining benefits, assure the plans do not discriminate in favor of highly compensated employees.... Access to a retirement plan at work is the key to successfully preparing for retirement. Consequently, modifications to the current incentives ... should be evaluated based on whether or not the changes will encourage more businesses to sponsor retirement plans for their employees." (ASPPA, NAPA, ACOPA, NTSAA and CIKR)

Benefits in General; Executive Compensation

[Guidance Overview]

Recordkeeping Challenges Arise in Proposed Regs on Health Insurer Pay Deduction Limit
"Taking effect for years beginning in 2013, the limit applies first to compensation that is both earned and deducted in the same tax year (e.g., salary). If these amounts are below the annual $500,000 limit, the remaining deductible amount could be carried over to any deferred compensation attributable to services for that year. For example, if an individual receives $400,000 in salary this year, and also earns $100,000 in nonqualified deferred compensation this year, to be paid in, say, 2018, that individual has 'deferred deduction compensation' of $100,000 that can be deducted when paid in 2018." (Towers Watson)

Rising Work-Life Balance Concerns Tied to Employee Turnover Worldwide
"More than one in four employees (27 percent) at organizations that are not perceived to support work-life balance plan to leave their companies within the next two years ... That's compared to only 17 percent of those at companies that ranked among the top quartile for support of employees in achieving a reasonable balance between work and personal life. For an organization with 10,000 employees, a 10 percentage point reduction in turnover over two years would result in savings of $17.5 million[.]" (Hay Group)

Reinhart Employee Benefits Update, April 2013 (PDF)
Articles include: Annual Benefit Statement for Calendar Year Defined Contribution Plans with Plan-Directed Investment; DOL Issues Informal Guidance for Fiduciaries Regarding Target Date Funds; IRS Establishes Pre-Approved Document Program for 403(b) Plans; HHS Issues Final Regulations on Details and Payment Parameters for Reinsurance Program; Departments Issue Proposed Regulations Implementing the 90-Day Waiting Period Limit. (Reinhart Boerner Van Deuren s.c.)

CEO Compensation Increases Slowed in 2012
"[T]otal pay for CEOs increased just 1.2% in 2012, down from the 6.7% median increase CEOs received in 2011.... While salary increases declined slightly last year -- from 3.0% in 2011 to 2.8% in 2012 -- annual bonuses paid to CEOs dropped by 16% at the median, compared to 2011, when bonuses were relatively flat. Target long-term incentives, the largest component of executive pay in major companies, were up 5.6% at the median in 2012." (Towers Watson)

CFOs Should Play a Central Role in Setting Incentive-Compensation Practices
"When it comes to establishing incentive-compensation targets and weighting the measures used to calculate payouts, CFOs who are not heavily involved in the process -- especially where non-executives are eligible for bonuses -- are making a mistake.... The so-called 'Say on Pay' votes apply only to the compensation packages of a company's chief executive, CFO, and three other most highly paid officers. But ... Say on Pay for senior executives has opened the door to greater investor scrutiny about a whole range of incentive-compensation issues." (CFO.com)


Life Insurance Industry Reacts to 2014 Federal Budget Proposal
"The [corporate owned life insurance (COLI)] proposal would impose new taxes on life insurance used by businesses small and large. Many businesses use COLI to protect against financial or job loss stemming from the death of owners or key employees. COLI is also used to ensure business continuation. In addition, COLI is a widely-used funding mechanism for employee and retiree benefits. Congress affirmed the benefits and tax treatment of COLI and assured its responsible use in bi-partisan legislation enacted in 2006." (American Council of Life Insurers)

Press Releases

CalPERS Earns 'A' Grade in Asset Owners Disclosure Project 2012 Climate Change Survey
CalPERS (California Public Employees' Retirement System)

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