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April 18, 2013          Get Health & Welfare News  |  Advertise  |  Unsubscribe
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Employee Benefits Jobs

Employee Benefits Paralegal
for Ice Miller LLP in IN

Senior Compliance Analyst
for Insperity in TX

Retirement Rollover Specialist
for LPL Financial in NC

Advisor - Customer Servicing Desk
for LPL Financial in NC

Defined Benefit Administrator
for The Retirement Plan Company, LLC in ANY STATE, OH, SC, TN

Retirement Plan Consultant
for Retirement Plan Services, LLC in MO

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Webcasts and Conferences

Mastering New Compliance and Best Practices for Hiring People with Disabilities
Nationwide on April 30, 2013 presented by Thompson Interactive

The Supreme Court's Upcoming Rulings on Same-Sex Marriage: Preparing for the Employee Benefit Plan Implications
Nationwide on May 14, 2013 presented by Thompson Interactive

How Will Health Care Reform Impact You in 2013 and 2014?
Nationwide on May 17, 2013 presented by Lorman Education Services

Individual and Small-Group Lives: Mapping the Trail Ahead Webinar
Nationwide on May 16, 2013 presented by HealthLeaders-InterStudy

ERISA and Your Health Care Reform Strategy
Nationwide on June 18, 2013 presented by Davidson Marketing Group -- FutureOffice Network

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[Guidance Overview]

403(b) Plans: Making Corrections After Loss of Sponsor's Tax-Exempt Status
"[If] contributions were made to the organization's 403(b) Plan after loss of tax-exempt status and tax-exempt status is not reinstated or is only reinstated prospectively, the 403(b) Plan sponsor may voluntarily correct the eligibility failure through the IRS's [EPCRS]. The benefit of correcting the employer eligibility failure is that all money that was contributed to the 403(b) Plan while the employer was ineligible ... will retain its tax-favored status, all contributions may remain in the applicable annuity contracts and custodial accounts and the organization may avoid potential penalties." (Proskauer's ERISA Practice Section Blog)


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[Guidance Overview]

IRS Issues Procedures for Securing Favorable Opinions on Pre-Approved 403(b) Programs
"Note that any Section 403(b) plan in existence today is an individually designed plan. Nonprofit organizations that purchased 'model' Section 403(b) plans from vendors in the past still have individually designed plans because, prior to the Revenue Procedure, there was no legal mechanism under which a vendor could offer a prototype Section 403(b) plan." (McDermott Will & Emery)

[Guidance Overview]

New Opinion and Advisory Program for Pre-Approved 403(b) Plans
"The new procedures for 403(b) plans are similar in many respects to the procedures ... for qualified plans under IRC section 401(a). However ... an employer that adopts a pre-approved 403(b) plan will not be able to apply for an individual determination letter for the plan. The IRS has stated that, at this time, it does not intend to create a determination letter program for 403(b) plans." (Morgan Lewis)

[Guidance Overview]

Justice Department Charges Employer, Pension Plan With Violating USERRA Reemployment Rights
"[The Justice Department has filed] a lawsuit charging County Employees' and Officers' Annuity and Benefit Fund of Cook County ... and Cook County with willfully violating the Uniformed Services Employment and Reemployment Rights Act of 1994 (USERRA) by refusing to allow an employee to make catch up contributions to the employer's pension plan when she returned from military leave." (Solutions Law Press)

[Guidance Overview]

How 'Safe' Are ERISA 401(k)/404(c) Safe Harbors?
"[P]lan sponsors confronted with potential liability claims immediately claim that they are absolutely immune from any liability due to said safe-harbors. The mood quickly changes when the truth about 401(k)/404(c) safe harbors is explained." (The Prudent Investment Adviser Rules)

What Would Be the Effect on the Deficit of Using the Chained CPI to Index Benefit Programs and the Tax Code?
"CBO and the staff of the Joint Committee on Taxation estimate that switching to the chained CPI-U on a governmentwide basis starting in calendar year 2014 would reduce the deficit by a total of $340 billion over the next 10 years. Such a change would decrease federal spending on mandatory programs (direct spending) by $216 billion and increase federal revenues by $124 billion over the fiscal year 2014-2023 period." (Congressional Budget Office)

Cumulative List of Non-U.S. Pension Funds Exempted by FATCA Intergovernmental Agreements
"The U.S. is in the process of entering into Intergovernmental Agreements (IGAs) with a number of countries that each list ... specific pension plans of that other country that will be treated as exempt from under the Foreign Account Tax Compliance Act (FATCA), i.e. will be treated as 'exempt beneficial owners' rather than Foreign Financial Institutions subject to FATCA's reporting and withholding regime.... [This page provides a] link to a cumulative list of those specific pension-related exemptions for each country that has entered into an IGA with the United States[.]" (Groom Law Group)

PBS 'Frontline' to Air 'The Retirement Gamble' April 23
"For most Americans, traditional retirement is now a pipe dream: Six in 10 people believe they'll have to delay retirement, just 14 percent are very confident they'll be able to live comfortably once they stop working, and 17 percent believe they'll never retire at all. Who is to blame?" (PBS)

Litigation Attacks on Church Plans: What Sponsoring Employers Need to Know Now
"[T]wo class action firms with ERISA class action experience filed lawsuits against three tax-exempt health care systems in Michigan, Pennsylvania and California. Each of those health care systems is affiliated with the Catholic Church. The lawsuits claim that these systems' pension plans -- which are operated as ERISA-exempt church plans -- are in fact subject to ERISA.... The suits also claim that the operation of the plans in question as church plans violates the Establishment Clause of the First Amendment. These cases could have a profound effect on all church plan sponsors, regardless of whether they have previously obtained favorable church plan rulings from the IRS." (Drinker Biddle)

Moody's Announces Stricter Approach for Analyzing State, Local Government Pensions
"These changes reflect the rating agency's view that pension obligations are a significant source of credit pressure for governments and warrant a more conservative view of the potential size of the obligations. As a result of this new approach, Moody's has also placed the general obligation ratings of the cities of Chicago, Cincinnati, Minneapolis, and Portland, OR, and of 25 other US local governments and school districts on review for possible downgrade." (Moody's)

Pension Liability's Greater Role in Ratings Could Lead to Downgrades by Moody's
"Pension obligations will play a larger role in credit rating of state and local governments by Moody's Investors Service ... The first move under the new approach was to place the general obligation bond ratings of Chicago, Cincinnati, Minneapolis, Portland and 25 other governmental units on review for possible downgrade, due to large net pension liabilities relative to their rating category." (Pensions & Investments)

Moody's Announces New Ratings Rules for Public Pensions; Ratings of 29 Cities to be Reviewed
"These changes reflect a view that pension obligations are 'a significant source of credit pressure for governments and warrant a more conservative view of the potential size of the obligations,' according to a press release announcing the new rules. As a result of the new approach, Moody's immediately placed on review the general obligation bonds for 29 municipalities that have large adjusted net pension liabilities." (Governing)

Montana Senate Advances Pension Plan Overhaul
"The bills ask both employees and employers to pay more into a system that faces a $4 billion projected shortfall in 30 years. Supporters say the bills will balance the pension systems, bringing stability to state finances and fixing a problem that has hounded lawmakers for years. Opponents, meanwhile, wanted to scrap the plan altogether for new employees." (The Montana Standard)

California City Tells CalPERS It Will Quit Pension Fund
"Canyon Lake in southern California is a city of 11,000 people. But its decision to quit the powerful CalPERS -- America's largest public pension fund with $256 billion of assets under management -- could presage much larger problems for the system as it battles with Wall Street bondholders in the bankruptcy cases of California's San Bernardino and Stockton." (FoxBusiness.com)

Would Rising Interest Rates Crack Your Nest Egg?
"[S]ome investors and economists believe that interest rates will rise sooner rather than later from today's bathyspheric lows. That would be a big relief, of course, for retirees and others who are looking to live off the income from bonds, annuities, and other interest-yielding investments. But what would it do to the value of their stock and bond holdings?" (MarketWatch)

CalPERS Said to Buy 345 New York City Apartments for $400 Million
"The California Public Employees' Retirement System bought 345 apartments in two adjacent Manhattan towers ... gaining rentals in New York as lease rates approach a peak.... Manhattan apartment rents rose in March at the fastest pace in six months as limited for-sale inventory fueled competition among tenants. The median monthly rent climbed 6.7 percent from a year earlier to $3,195, while new-lease signings jumped 10 percent" (Bloomberg)

Why 4% Annual Withdrawals are Still Safe
"Safe withdrawal rates are based on the absolute worst case scenario.... What are the chances you will live to 95?... You can adjust your spending.... Look at your budget closely, and there are many things that can be cut.... Social Security will still serve as a solid foundation.... Every metric is interrelated.... Low expected returns won't last forever." (U.S.News and World Report)

IMF Says U.S. Public Pension Funds Increasing Risk to Dangerous Levels in Search of Yield
"The Global Financial Stability Report states that vulnerabilities are growing in the U.S. credit markets while pension funds and insurance companies are moving into more risky assets.... Public DB plans have gone from fully funded in 2001 to a 28% shortfall at the end of 2012. In that same time period, weaker funded plans have increased their allocations to alternatives to 25% from virtually zero, which exposes plans to more volatility and liquidity risks, according to the report." (Pensions & Investments)

Cypen & Cypen Newsletter, April 18, 2013
Covers employee benefit developments with an emphasis on governmental plans. Topics include: [1] A Misguided "Solution" To a Nonexistent Problem; [2] Milliman Revised Study Reflects 30-Year Projection of Open Defined Benefit Plan and Impact of Closing the Defined Benefit Plan To New Members Effective January 1, 2014, Including Projected Blend Rates for the Next 30 Fiscal Years; [3] the Retirement Gamble -- Why You Cannot Afford To Retire; and [4] When Pension Systems Are Under Pressure, You Need To Look at the Backstop. (Cypen & Cypen)

Target Date Mutual Fund Assets Up, Costs Down
"Assets in target date mutual funds have tripled since 2008 ... [increasing] from $160 billion at the end of that year to $481 billion at year-end 2012. Concurrently, expenses have dropped. The median expense ratio for those funds fell from 118 basis points (1.18%) to 104 basis points (1.04%), down almost 12%, while the asset-weighted average expense ratio declined from 67 basis points (0.67%) to 58 basis points (0.58%) in that four-year period, down more than 13%." (Financial Planning)

Seventh Circuit Decides American United Life Was Not a Fiduciary
"[T]he 7th Circuit found that [American United Life Insurance Co. (AUL)] was not an ERISA 3(21) fiduciary just because it winnowed the universe of 7,500 mutual funds to offering about 400 on their platform for selection by a plan sponsor.... Key to this decision is that the plan sponsor chooses the final line-up, and regardless of whether AUL has the ability to change the investments offered at their discretion, if they don't exercise that discretion, then they are not a 3(21) fiduciary." (Plan Tools, LLC)

Snapshot of Projected Federal Spending for Military Retirement Pay
"Spending for military retirement pay and survivors' annuities will rise by more than 30 percent over the next decade, CBO projects. About two-thirds of that growth will occur because those benefits are adjusted annually for inflation. The remaining growth will stem from increases in the initial benefit for new retirees[.]" (Congressional Budget Office)

PBGC Boooklet: 'What Is a Pension?'
"PBGC protects pensions. So, what is a pension? To most people, a pension is a retirement arrangement in which your employer promises you a regular payment from day you retire, for as long as you live.... When people say 'pension' they mean a defined benefit owed to a retiree. Though for many current and future retirees, a pension is the cornerstone that supports retirement security, financial well-being, and peace of mind." (Pension Benefit Guaranty Corporation)


Public Pension Funds Likely to Ignore IMF Warnings of Excessively Risky Investments
"Is the IMF right to warn U.S. public pension funds of the risks of plowing into alternatives which include real estate, private equity and hedge funds? Yes but this warning will fall of deaf ears. The reality is most U.S. public pension funds suffering from chronic deficits and still holding on to their rate-of return fantasy are increasingly betting on alternatives to get them out of their pension hole." (Pension Pulse)


Don't Scrap Pennsylvania's Defined Benefit Pension Plan
"The Pennsylvania Legislature is considering a proposal to dismantle the pension system provided to public employees in Pennsylvania in favor of individual 401(k)-type accounts. Not only would this change undermine the ability of middle-class Pennsylvanians to be self-sufficient in retirement, it would threaten the quality of education and public services in the state by making it even harder to keep qualified and experienced employees." (Pittsburgh Post-Gazette)


CBO Testimony: Using the Chained CPI to Index Social Security, Other Federal Programs, and the Tax Code for Inflation
"The chained CPI grows more slowly than the traditional CPI does: an average of about 0.25 percentage points more slowly per year over the past decade. As a result, using that measure to index benefit programs would reduce federal spending for Social Security, federal employees' pensions, Medicare, Medicaid, and various other programs.... If all uses of the traditional CPI in mandatory programs and the tax code were switched to the chained CPI starting in calendar year 2014, mandatory spending would be reduced by a total of $216 billion between fiscal years 2014 and 2023, and federal revenues would be increased by $124 billion." (Congressional Budget Office)


Mr. President, Keep Your Hands Off My 401(k)!
"While you may find yourself unconcerned about Romney's financial future, what about yours? Do you want the government creating a disincentive for your employer to participate in a 401(k), thus eliminating that option for you? ... [U]ntil the federal government reconciles the shrinking worker pool and the rising number of baby boomer retirees, working adults are wise to take steps, through 401(k) accounts or IRAs, to ensure that their retirement is not solely dependent on Social Security." (JournalTimes)


Why You Should Care About Your Employees' Retirement Plans
"The fact that defined benefit plans have become increasingly rare does not mean that company retirement plans are less important to employees.... The benefit plans you offer have an increased importance to your employees in an environment where home equity and savings accounts are tapped. This situation, however, also puts a burden on your company to act wisely in designing a competitive retirement package." (Forbes)


Dividend-Paying Stocks Could Save Your Retirement
"Advisors facing the daunting task helping today's retirement-bound clients should consider structuring retirement portfolios with increased allocations to dividend-paying equities in order to capture higher returns offered through a combination of dividends and price appreciation. Historically, almost half of the 10 percent annual return from stocks has come from dividends[.]" (Financial Advisor)

Benefits in General; Executive Compensation

Germany to Enact Say-on-Pay Rules by Summer
"Debate in Germany gathered pace after Swiss voters on March 4 backed pay limits including a binding annual shareholder vote on executive compensation at listed companies and a ban on big payouts for new hires and for managers when they leave. German opposition parties hailed the Swiss referendum.... [Merkel's party agreed] to seek legislation that would give shareholder meetings of listed German companies the 'mandatory task' of making binding pay recommendations to the supervisory board, according to a government statement at the time." (Bloomberg BusinessWeek)

Executive Compensation Design: Some Early Reflections on the 2013 Proxy Season
"So far, it's been a relatively quiet proxy season, with continuing high levels of shareholder support for say-on-pay votes and continuing incremental changes in pay design and pay levels. However, one potentially troubling trend ... is growing conformity, which may call for a shift to more tailored approaches to executive pay." (Towers Watson)


Text of ERISA Advisory Council Report to DOL on Beneficiary Designations in Retirement and Life Insurance Plans (PDF)
"The Council recommends that DOL (1) develop educational materials to help plan participants understand the importance of beneficiary designations, how they work and the importance of updating them when life events occur, (2) develop suggestions and guidance for employers, plan administrators and service providers on how to improve plan design and administrative practices to diminish disputes in the area of payments based on beneficiary designations, and (3) issue guidance for plans, plan administrators and plan fiduciaries in several areas that would aid in the resolution of beneficiary disputes." (ERISA Advisory Council, via The SPARK Institute)


How to Fix Our Broken Proxy Advisory System
"Limit proxy voting requirements of mutual funds and pension funds so that those institutions will be the sole arbiters of when it makes sense to vote using active analysis of the question at hand.... End extraneous proxy requirements such as Say-on-Pay votes." (Mercatus Center, George Mason University)

Press Releases

Now Available: IRI 2013 Fact Book
Insured Retirement Institute (IRI)

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